Metro Act does not allow Centre to put fare hike on hold, Delhi CM told

The Central government has informed the Delhi Chief Minister Arvind Kejriwal that the Metro Act does not allow it to put on hold the proposed hike in Delhi Metro fares and that setting up a fresh Fare Fixation Committee (FFC) could be considered if the Delhi government agrees to give over Rs 3,000 crore every year to Delhi Metro Rail Corporation (DMRC).

Minister of Housing & Urban Affairs Hardeep Singh Puri sent a detailed response in a letter yesterday to Kejriwal in response to the latter’s letter dated September 29, 2017. Kejriwal in his letter desired the central government to give direction to DMRC to put on hold the proposed hike in fares to be effective from the tenth of this month, as recommended by the Fourth Fare Fixation Committee.

Puri responded to the Delhi Chief Minister after detailed examination of the issues raised and suggestions made by Shri Kejriwal regarding the fare hike in consultations with the DMRC. The DMRC during the discussions and in their written response to the Ministry asserted that “The Committee’s (FFC) recommendations are binding on the Metro Rail Administrations as per provisions of Section-37 of this Act (Metro Act). Neither the Central Government nor the state government or even the Board of the company has legal power to change the recommendations made by the FFC.”

Puri annexed DMRC’s written response in the matter of fare hike to his letter to the Delhi Chief Minister. DMRC is run as per the provisions of the Metro Railways (Operations and Maintenance) Act,2002.

Puri stated in his letter, “Your suggestion that this Ministry direct that the fare increase be kept on hold overlooks the fact the central government does not have any such authority. Tampering with the recommendations of FFC is legally untenable”.

Puri in his letter rebutted all the assertions made by Kejriwal which include that the Central Government can direct putting on hold the fare hike; the FFC recommended a year gap between the two fare hikes and an annual cap of 7 percent in metro fare hike. The Minister further said “Your (Kejriwal’s), suggestions and assertions contained therein (in the letter) in respect of the recommendations of the Fourth FFC were found to be both misleading and factually incorrect.”

Referring to the last metro fare hike in 2009, Puri clarified that the Fourth FFC itself recommended the fare hike, coming after an extended gap of seven and a half years, to be staggered into two instalments of which the first one was to come into force immediately i.e May this year and the second increase from the tenth of this month. Hence, it would be wrong to claim that there were two increases in fares in a short period of five months.

Regarding the cap on fare hike, Puri said, “FFC has recommended a cap of 7 percent for annual fare rise commencing from January, 2019” and it is incorrect to apply this yardstick for a fare hike under consideration seven and a half years since last fare revision.

Based on the factual information furnished by DMRC regarding Delhi Metro fare hikes in the past, Hardeep Singh Puri informed Kejriwal that based on the recommendations of the first three FFCs, the fare hike over the seven years between 2002 and 2009 was of the order of 112 percent while the revision recommended by the fourth FFC for the seven and a half years between 2009 and 2017 comes to only 91 percent.

Referring to the suggestion of putting the fare hike on hold, Puri noted that the alternative is to provide to the DMRC grants-in-aid every year over the next five years starting from 2017-18  to the tune of Rs 3,040 crore, Rs 3,616 crore, Rs 3,318 crore, Rs 3,150 crore and Rs 2,980 crore for 2021-22 to meet loan repayment liabilities to JICA, depreciation for replacements and operational expenses with no savings to DMRC.

Pointing out that as per the Metro guidelines, the operational loss is the responsibility of the State government, Puri suggested to Kejriwal that “In case the State Government agrees to provide grants–in-aid of nearly Rs 3,000 crore per annum to DMRC, then another FFC may be constituted” which may also examine the financial viability of DMRC. Puri referred to Delhi government providing such aid of Rs 1,600 crore per year to DTC apart from meeting the gross cost model expenses for the cluster buses and the sub-optimal services being provided by the DTC.

Regarding Kejriwal’s suggestion that DMRC needs to improve its productivity, DMRC in their written response forwarded to the Chief Minister stated that the fourth FFC recommended the Productivity Factor (PF) as percent  for the present and the next FFC may consider a suitable percentage of PF on the line of Hong Kong Metro. In respect of Hong Kong Metro also, the PF was kept at 0 percent initially and the new formula came into force from 2013 onwards, it said. DMRC also furnished the details of efforts for non-fare revenue mobilisation and said the FFC report factored in such mobilisation of the order of Rs 340 crore to Rs 636 crore per year during 2017-18 -2021-22, which comes to about 20 percent of the total revenue of the company.

Puri expressed concerns over a 15-month delay in completion of Phase-III of Delhi Metro and the Phase-IV running behind schedule by two and a half years on account of actions and decisions to have been taken by the Delhi government. He said the delay in respect of Phase-IV is depriving about 40 lakh people of Delhi of the benefits of metro services besides denting the much needed efforts to reduce congestion and pollution in the national capital.

Stating that the people of Delhi are looking for quality, efficient, reliable and punctual metro services, Puri noted that DMRC may be allowed to function as an autonomous company in the best interest of the citizens of the national capital so that it can continue to provide services which are comparable to the best in the world.