Three years after its launch in June 2014, ridership on Mumbai’s Metro line 1 is averaging 3.55 lakh commuters on weekdays. That is no doubt a good improvement over the 2.13 lakh commuters in February 2015 but is, nevertheless, lower than the targeted 5.13 lakh for 2016 estimated by the Mumbai Metro Rail Corporation (MMRC).
At this pace, the targets laid out in the master plan pegging daily ridership at 6.64 lakh by 2021 and at 8.82 lakh by 2031 appear challenging. However, Manish Agarwal, leader, Infrastructure, at PricewaterhouseCoopers, believes ridership may increase once other Metro lines become operational.
Agarwal pointed out this had happened in New Delhi where the number of passengers per kilometre rose rapidly as more Metro lines became operational.
“Mumbai has a stand-alone Metro line right now but as the other lines come up, and there is integration with the suburban railway stations, ridership is bound to increase,” he said.
The lower-than-anticipated volumes coupled with the fact that the operator — Mumbai Metro One (MMOPL) — has not been allowed to hike fares to the extent that it wanted, has hurt the business. MMOPL ran up losses of Rs 286.88 crore in FY16 or Rs 79 lakh a day and the numbers could be similar for FY17 too, say analysts.
Apart from ridership, high finance costs of Rs 212.25 crore — which exceeded the revenues of Rs 210.23 — and high operating cost of Rs 105.23 crore also impacted the financials. The company’s cash reserves and surplus worsened from a deficit of Rs 279.83 crore in FY15 to Rs 566.71 crore in FY16.
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Meanwhile, the promoter, Reliance Infrastructure is locked in a dispute with its public sector partner — the Mumbai Metropolitan Region Development Authority (MMRDA) — over a hike in fares. From an introductory price range of Rs 10 to Rs 20, MMOPL was allowed by the Bombay High Court in January 2015 to increase fares up to Rs 40.
However, a subsequent recommendation by a fare fixation committee (FFC) allowing MMOPL to further increase fares up to Rs 110 has been challenged by the MMRDA in the Bombay High Court.
The HC has issued a stay order on the proposed fare hikes as it hears the petitions against the proposal. The three-member FFC comprised Justice (Retd) E Padmanabhan, former law secretary TK Vishwanathan and former Maharashtra chief secretary JK Banthia.
In its annual report for 2016, Reliance Infrastructure said it invested Rs 305 crore in MMOPL, in view of the losses incurred by the Metro operator.
Ratings agency ICRA, in December 2015, had changed the outlook on MMOPL from stable to negative on its triple B plus rating and subsequently suspended its rating on the company. At that time, ICRA noted that its rating remained constrained by the lower-than-estimated actual daily passenger volume. As a result, ICRA noted, lower-than-expected revenues “has been able to cover the operating cost and only a portion of interest expense, and thus, the promoters have been providing funding support to MMOPL for meeting its debt obligations”.
The commercial operations of the Mumbai Metro started on June 8, 2014, at a final project cost of Rs 4,063.00 crore, financed with equity of Rs 512 crore, grant from MMRDA of Rs 603 crore, subordinate debt from promoters of Rs 951 crore and debt of Rs 1,997 crore.
The project was awarded in March 2007 for a concession period of 35 years with a commercial operations date (COD) of March 2012. The COD and concession period were later revised to August 28, 2013, and August 28, 2043, respectively. Reliance Infrastructure is required to maintain at least 26% shareholding for a period of 15 years from COD.
