FARE FIXATION POLICY FOR PUBLIC TRANSPORT SYSTEM

Presentation by

Dr Noor Mohammad IAS Dr.

Member Secretary

NATIONAL CAPITAL REGION PLANNING BOARD

Website: http://www.ncrpb.nic.in Fax: +91 11 2464 2163 December 2009 PLANNING BOARD NATIONAL CAPTIAL REGION
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Why Public Transport?

Defining features of urban poverty poor connectivity to jobs, services, education and recreational activity Lack of access to services leads to social exclusion barriers to work, work learning, health care, food supply etc. Improving I i access a must t but b t has h to t be b affordable
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Why Public Transport? Contd. Contd

requires less infrastructure, infrastructure consumes less fuel, causes less l pollution, ll ti Less congestion and Less accidents than private motorized p in terms of p passenger-km. g transport

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Rail vs. Road Transport

Year Mode % share in Total Transport Demand (Approx.) F i ht Freight Road Rail 1950-51 1999-2000 1950-51 1999-2000 12% 60% 88% 40% P Passenger 32% 80% 68% 20%

ROAD TRANSPORT freight traffic is likely to be in the range of 5000 to 7000 billion tonne kms by the year 2020 against 1100 bnkms in 2000. passenger traffic is likely to grow more than four times to 10,082 billion pkms in 2020. NATIONAL CAPTIAL REGION PLANNING BOARD
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Bus vs. Car/ Two wheelers

Mode Year 1995 Vehicle km (billion) Pass km (billion) Year 2000 Vehicle km (billion) Pass km (billion) Year 2005 Vehicle km (billion) Year 2010 Pass km (billion) Pass km Vehicle (billion) km (billion)

Bus Cars

18.6% 22.9%

87.4% 4.2%

17.1% 23.2%

86.5% 4.4%

15.7% 24.6%

85.4% 5.0%

14.6% 25.4%

84.2% 5.5%

Two Wheel ers Total

58.5%

8.4%

59.7%

9.0%

59.6%

9.6%

60.0%

10.3%

118 (100.0%)

984 (100.0%)

181 (100.0%)

1442 (100.0%)

280 (100.0%)

2074 (100.0%)

417 (100.0%)

2899 (100.0%)

Source: 'Vision 2020 - Transport', Prepared for the Planning Commission by Mahesh Kapoor, October 2002

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Bus vs. Car/ Two wheelers Contd.

Share of Passenger Km Share of Pass. K S Km (% ) 100 80 60 40 20 0 1995 2000 Year 2005 2010

With the th estimated ti t d 15% share h in i vehicle km, bus transport is serving 84% of passenger traffic that justifies its prime importance. But, the share bus (road based public transport) is found decreasing over the years (from 87% in 1995) mainly due to higher growth in private vehicles. Reversing this decreasing trend in bus transport as a public transport has become a necessity in solving many transport related problems. Pricing Policy is one of the major tool towards this objective

Bus

Cars

Two-Whelers

Public transport requires less infrastructure, consumes less fuel, and causes less pollution, congestion and accidents than private motorized transport in terms of passenger-km passenger km

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Cars vs Bus vs Bikes

http://vorg.ca/2585-Cars-vs-Bus-vs-Bikes

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Basics of a Transport Policy

Improvement to the urban public transport by addressing the existing issues appropriately pp p y coupled with need based investment p policy y to create infrastructure; and appropriate pp p pricing p g mechanism to sustain the investment.

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What is appropriate Pricing Mechanism ?

Affordability y to serve the urban p poor with crosssubsidy element Quality; for the passengers who value time saved and comfort level more than price. The cost of providing public transport to them need not be subsidized and can be met from the fare revenues revenues. Sustainability y so as to meet the O&M and capital p recovery with reasonable return through user fares and charges.

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What we expect from a Pricing Policy?

to generate revenue that can ensure an efficient and adequate supply of public transport service. Public transport pricing may also be expected to contribute to the reduction of congestion and environmental impact of road traffic, efficient coordination between public transport modes, d and d the reduction of poverty
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Mandate - NUTP, 2006

Those who place a premium on cost are the poorest sections of society and need to be given affordable prices. The cost for providing p gp public transport p for them needs to be subsidised by y other sections of society. However, there is another segment that values time saved and comfort more than price. This segment is comparatively better off and d would ld shift hift t to public bli t transport t if hi high h quality lit systems t are available to them. The cost of providing public transport to them need not be subsidised and can be met from the fare revenues. As such, such the central government would encourage the provision of different levels of services a basic service, with subsidised fares and a premium service, which is of high quality but charges higher fares and involves no subsidy. In brief, the objective of this policy is to ensure safe, affordable, quick, comfortable, reliable and sustainable access for the growing number of city residents to jobs, education, recreation and such other needs within our cities cities. NATIONAL CAPTIAL REGION PLANNING BOARD
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Mandate

Contd.

Eleventh Five Year Plan (2007-2012), (2007 2012), GoI The objective is to introduce mechanisms and investments towards trip reductions (frequency, Trip length) and modal shifts in favor of buses and NMVs. JNNURM and City Development Reports Mandatory Reforms: Levy of reasonable user charges by ULBs / Parastatals with the objective that full cost of operation and maintenance or recurring cost is collected within next seven years. Provision of basic services to the urban poor including security of tenure at affordable prices, Optional Reforms Encouraging cou ag g Public ub c Private ate pa partnership t es p Achievements: Rs 38,956 crores (January 2009) worth of projects were got approved and Public transport component has received considerable support (11% as on September 2007) from the total JNNURM assistance. NATIONAL CAPTIAL REGION PLANNING BOARD
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Demand Management g
Optimise Demand: Integrate land land-use use transport policy and public transport priorities. Safe pedestrian and bicycle facilities P i road Price d usage Parking policy Modal integration

Sustainability: Efficiency Economy cost effectiveness and affordability Adequacy feeder services

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Cost Components
1. Internal costs - infrastructure construction and maintenance (variable and fixed costs) - transport equipment construction and maintenance 2. External costs -Congestion

Policy Options
User charges public procurement

-accidents (material, persons, animals)

- emissions/pollution (air, water, soil, climate change, acid rain etc.)

-noise nuisance

- congestion charges - parking fees - traffic management - road safety policy (standards, traffic management, education) - risk-related insurance premiums (= specific usercharges - environmental standards (vehicles, fuels) - traffic management (e.g. speed limits) - cess on fuel - specific urban measures (e.g. parking policy, restricted access) - standards

- visual intrusion - ecosystem fragmentation

- landscape and city planning

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Components of Fare Fixation

Technical / Customer fare: estimated on the basis of input costs, it does not consider its affordability by the commuters etc. Optimal fare: is arrived at after considering system profitability, customer convenience and ridership ridership. 100% recovery of O&M cost in the short run; ; 100% recovery of capital cost recovery with acceptable profit in the long run.
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Optimal p Fare
should be at or above the Technical Fare level for financial sustainability on long term basis optimal fare shall consider the following :
be computed on regular basis for effecting changes in customer fares; Creation of contingency fund to meet all deficiencies in revenue due to fluctuating costs costs, travel demands demands, any other performance parameters etc; passenger friendly fare system; the tariff structure should ensure not only full recovery of all costs of inputs but should also cater to wild fluctuations therein, for its long term sustainability; should also not be so high g as to cause hardships p to low income commuters and in turn cause socio-political problems. NATIONAL CAPTIAL REGION PLANNING BOARD
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Cash in-Flows
Fare Box Collection Non Non-fare fare revenue
Property Development Advertisement Charges from increased FSI along the corridor Remittance by the concessionaire Congestion tax Fuel Cell Share of Local taxes/Stamp duties/ External D Development l t Ch Charges
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Implications
If fares are set below cost and operating deficits covered from budgetary resources, resources the distributional (poverty alleviation) impact will be positive. In case such deficit is not funded , the long-term effect will be to reduce the quality first and the quantity later considerable evidence, even in relatively poor countries that the poor are willing to pay more for a better service than provided at existing controlled fares with bad service. the trade-off between the controlled low price and affordability by the poor actually has to be tackled with adequate care supported by scientific management decisions. Appropriate cost reduction measures for Public Transport will help to reduce the fare level

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Fare Revision
Sustainability for the system requires periodic revision to cope up with increasing O&M and capital cost service Creates confidence among the operators; transparency in future fare levels; avoids uncertainty & Generates required cash cash-inflow inflow to sustain the system Critical Factors:
Increasing level of cost inputs Inflation level Time interval Subsidy available, if any Affordability Acceptability Simple p method & transparent p approach pp

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Fare Revision Contd.

Revised fare = Existing fare + x + y where, x=a fixed fi d % (3 t to 5%) y=a % of CPI or WPI efficiency factor Examples: 1. Toll Rates - NHAI
x=3%, y=40% of the Wholesale Price Index (WPI) Growth Rate 2 DMRC (Periodical - every two years) 2. Y= 90% of the CPI Growth Rate (10% for efficiency)

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Case of DMRC
The Delhi Metro O&M Act, 2002 provides for fixation of fare by a fare fixation committee. 1st Fare Fixation Committee was constituted in Dec 2003 to recommend fares for the sections to be opened by Dec 2004. 2nd Fare Fixation Committee was constituted in Oct 2005 t recommend to d fares f f the for th sections ti t be to b opened d by b Dec D 2005. At the request of DMRC, the Government has constituted the 3rd Fare Fixation Committee vide order dated 23rd June 2009.

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Consumer Price Index

BASE 1982=100 YEAR 2004 2005 BASE 2001=100 2006 2007 2008 2009 ** Linking Factor for 1982 to 2001 prices is 4.63. BASE 1982=100 2006 2007 2008 2009 Source : Labour Bureau Government of India 551 588 634 685 119 127 137 148 March 204 525

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Applicable Escalation on CPI

April 2005 March 2009 Escalation Apr '05 to Mar '09 Extrapolation till Mar 2010 Total escalation to arrive at March 2010 Average yearly escalation 525 685 30.48% 6.88% 37.35% 7.47%

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A comparison p
Existing Distance Zones (KMs) 0-2 2-4 4-6 6-9 9-12 12-15 15 18 15-18 18-21 21-24 24-27 27-30 30-33 33-36 36 39 36-39 >39 Mean Distance (KMs) 1 3 5 7.5 10.5 13.5 16 5 16.5 19.5 22.5 25.5 28.5 31.5 34.5 37 5 37.5 39 Fare (Rupees) Proposed Distance zones (KMs) 0-2 2-4 4-6 6-9 9-12 12-15 15 18 15-18 18-21 21-24 24.27 27-31 31-35 35-39 39 44 39-44 >44 Proposed Mean Distance (KMs) 1.00 3.00 5.00 7.50 10.50 13.50 16 50 16.50 19.50 22.50 25.50 29.00 33.00 37.00 41 50 41.50 44.00 Fare (Rupees) 8 10 12 15 16 18 19 21 22 23 25 27 29 31 32
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6 8 9 11 12 13 14 15 16 17 18 19 20 21 22

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Parameters accounted for

Ridership of 1.837 1 837 million is expected in the year 2010-11 when the Phase-II is fully operational. Maximum distance traveled shall go up to 44 KMs from 39 KMs earlier. Average lead is expected to go upto 13 KMs from 11.5 KMs earlier. Increase in the ridership is estimated @ 4% per annum.

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Estimated Revenue
Fare Box Revenue based on the revised trip p distribution arrived at after analysis & surveys and proposed fare structure will be Rs 1026 crore for 2010-11. This is based on daily ridership multiplied by factor of 340 to discount for the lower ridership on Saturdays, Sundays and certain Public Holidays. Holidays Income from Property Development, Advertisement & Kiosk is estimated 20% of Fare Box Collections. Collections The Fare Structure has been escalated @7.47% once in 2 years. The 2nd Fare Fixation Committee had also worked financials based on escalation being applied once every 2 years
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O& &M Expenses p

Staff Costs o 45 persons/KM. persons/KM o Break up: 27 Subordinate staff, 17 Supervisory staff and I Executive y as p per revised scales & p perks. o Salary o Staff Cost calculated for 164.335 KMs of Metro network excluding the Airport Line. M Maintenance i t costs t o U/G: Rs 3.70 crores/KM o Elevated: Rs 2.78 crores/KM (75% of U/G maintenance costs) o This is based on Phase-II DPR estimates which assumed a uniform figure of Rs. 3.70 crore per km for both underground as well as elevated sections.

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O &M Expenses Contd.

Energy costs
o 22.39 crore Units consumed for 75.55 KMs in 2008-09. o Extrapolating E t l ti the th above b f 164.335 for 164 335 km k @Rs. @R 4/unit 4/ it gives i th the estimated energy cost for 2010-11.

Interest & Repayment of JICA Loan is as per the Loan Agreements. 2 8 % on Deprecation has been calculated 2.8 cost of project for Phase- I & II (less cost of land) )
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Estimated O &M Expenses

YEAR 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Staff 301.99 324.55 348 79 348.79 374.85 402.85 432 95 432.95 465.29 500.05 537.41 577.55 Maintenance Expenses 487.48 523.90 563 04 563.04 605.10 650.30 698 88 698.88 751.09 807.20 867.51 932.32 Energy 197.42 212.17 228 02 228.02 245.06 263.36 283 04 283.04 304.18 326.91 351.33 377.57 Total (Rs In crore) 986.89 1060.61 1139.85 39 85 1225.00 1316.52 1414 87 1414.87 1520.57 1634.16 1756.24 1887.44

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Ai Airport tE Express M Metro t Li Line

The Airport Express Metro Line is being developed on a unique PPP model. The cost of civil structures is being borne by DMRC. The cost of systems including Rolling Stock is being y the concessionaire. borne by The concessionaire will operate the system for a 30 year period after which the same will revert back to DMRC. C

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Applicable escalation
WPI in 2003-04 WPI in 2007-08 Escalation 2003-04 to 2007-08 Average yearly escalation after deduction of 10 % for f efficiency ffi i 175.90 215.90 23% 5.12%

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Fare Structure of DTC

Past Ordinary Service Upto 4 Kms 4-8 Kms 8-12 km Low Floor L Fl AC Buses Upto 8 Kms 8-16 Kms 16-24 km Rs.10/Rs.15/Rs.20/Fare Rs.3/Rs.5/Rs.7/Ordinary Service Upto 4 Kms 4-10 Kms Present Fare Rs.5/Rs.10/-

10 km onwards Rs.15/Low Floor L Fl AC Buses Upto 4 Kms 4-8 Kms 8-12 km 12 & above kms Rs.10/Rs.15/Rs.20/Rs 25/Rs.25/
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12 km onwards Rs.10/-

24 km onwards Rs.25/ Rs 25/-

Thank You

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