Question

Discuss the strategic considerations for MRT decisions with respect to planning, finance, management and pricing.

Transportation Engineering
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Answer 1

A good strategic plan includes metrics that translate the vision and mission into specific end points.This is critical because strategic planning is ultimately about resource allocation and would not be relevant if resources were unlimited. This article aims to explain how finance, financial goals, and financial performance can play a more integral role in the strategic planning and decision-making process, particularly in the implementation and monitoring stage.

Mass Rapid Transportation systems (MRTS)
is one of the modes of urban mobility, its importance, especially when cities are seen as a growth
node of an economic region rises significantly as inclusive growth is determined not only by
the state of transport system within a city limit, but its connectivity to its periphery, rather is
entire zone of influence. A clear appreciation of the urban context in India at this stage of her
development has the potential to inform our decision on prioritizing investment towards MRTS,
a sector which is under-invested.

(a) Planning:

MRTS projects are capital intensive and often earn an unfair criticism of their being elitist. To realise the vision of the Prime Minister of India, aptly encapsulated in “Sabka Saath and Sabka

Vikaash, it is important to realise the crucial role that MRTS can play in cities of India which are far from compact.

• One of the biggest developmental challenges and quite contrary to perception held in many quarters is to address the observed phenomenon of low pace of urbanisation in India. About 377 million Indians comprising of about 31% of the country’s population, lived in urban areas according to Census 2011. This is a smaller proportion compared to other large developing countries, e.g. 45 per cent in China, 54 per cent in Indonesia, 78 per cent in Mexico, and 87 per cent in Brazil. There is no evidence of an acceleration of urban growth rate yet. While it is true that between 2001 and 2011, India added more people in urban areas (90.98 million) than in rural (90.46 million), the annual exponential growth rate (AEGR), which had peaked during 1971-81 has in fact decelerated in recent decades and has picked up only marginally in 2001-2011. The AEGR of urban population during the 1950s was 3.5%. The 1970s saw a very high urban growth of 3.8%. The growth rate, however, came down to 3.1% in the 1980s. It went down further to 2.73% in the 1990s. The corresponding growth rate for 2001-2011 is of 2.76%.

• In addition, rural urban migration has played a rather modest role in increase in urban population and a significant part of growth in urban population is in form of emergenceof census town.

The fact that core of large Indian cities are not attracting population to the extent, their growth potential is symptomatic of a rather exclusionary character to Indian cities, notwithstanding the attempt by municipal authorities to take measures for the benefit of urban poor. There are many reasons such as strict land use pattern and regulation, artificially high prices of urban land in the core of city.

(b) Finance:

~Projection of investment requirement in urban transport in general and MRTS in particular is quite difficult as the result varies significantly with the assumption regarding the emerging portfolio of cities as well as compactness of the city which again is, to a large extent determined
by the urban planning and attendant land use regulations.

~ A further complexity is added due to the critical role played by urban transport in the economy of the country. Firstly, cities in India contribute more than 60% of its GDP. Secondly, urban transport in terms of value is a significant contributor in GDP both directly i.e. Value added in
the urban transport sector itself and secondly, it being an enabling condition for large number of economic enterprises in a city.

~Indeed a desired framework to assess the investment requirement should be to first assess the requirement of the transport infrastructure against an acceptable service level benchmark, and then make addition to the enabling role of urban transport in increasing economic productivity as well as the potential of a suitable mass rapid transit system to impart sustainability to city from environmental point of view.

• Given these limitations, one can indeed argue against any attempt to make investment projection. However, even with these complexities an estimate helps in understanding the order of the investment required which itself can give rise to policy implications

(c) Managment:  The establishment and administration of a government-owned mass rapid transit corporation (hereinafter referred to as a MRT corporation), established by a local competent authority which is responsible for the mass rapid transit system, shall be governed by the provisions of this Act; matters not fully provided for in this Act shall be governed by other laws.A MRT corporation shall provide public transport services to benefit the public with a high standard of safety, speed, comfort, and convenience.The capital and shareholding ratio of the investment in a MRT corporation owned by the government shall be determined following consultation with the municipal or county government where the transit system is located.The board of directors of a MRT corporation shall appoint transport or business management professionals to act on behalf of the President and the CEO, and report to the central competent authority via the local competent authority for subsequent reference.The President of a MRT corporation shall be responsible for the poor performance of the enterprise, and shall be dismissed from his/her duties as President and CEO for mismanagement after approval is obtained from the central competent authority after receiving report from the local competent authority.

The President, supervisors, and directors of a MRT corporation representing the government-owned shares are endowed with the identity of civil servant; a CEO and other directors can be non-civil servants.

(d) Pricing: The social benefit of MRTS projects hasThe following issues shall be reported by a MRT corporation to the local competent authority for approval, and presented to the central competent authority for future reference:
1. Articles of Association and Organization Charter of Board of Directors,
2. the salary rate for President and CEO of a MRT Corporation,
3. bond issuing, and
4. foreign loans. dictated that the objective remains to shift away from
personalized transport. While high per capita disposable income in developed nations have allowed
many of these projects to improve the prospect of financial viability even with low ridership, the
cities that attach larger values of keeping their cities attractive from tourist point of view, or have
the social policy of subsidizing the Economically Weaker Sections have subsidized the MRTS system and mere revenue realization has not been the goal of such city governments.Environmental concern in large Indian cities are much higher and besides significant health
cost, they also constrain the cities in many ways, a drop in attractiveness of city and choking traffic conditions. Together, with the policy objective of providing cheaper but faster transit to EWS of population, there are obvious limits to raising the price of ticket. Hence raising
the ridership through ensuring modal shift as well as through medium terms and long-term arrangement of allowing higher population density in the zone of influence of trunk infrastructure is a preferred course of action.