India has built a metro rail network in 20 cities, spanning 774 km, but we are still grappling with a fundamental question: how to make this capital-intensive rapid transit system financially viable? This has taken on increased importance with Covid-19. Because, economic experts had always maintained that the viability of a metro project would depend on the solid revenues it could draw from sources other than ticketing.

The pandemic, however, has shattered that theory. First, there were waves of confinement with nil or negligible traffic. Then even the unlocked periods saw a sharp drop in ridership, which led to a drop in revenue from other businesses – property rentals, parking lots, advertising, etc.

Large metros such as Delhi and Bengaluru (called the Namma metro) have had to reduce the license fees of private parties in proportion to the percentage of ridership. The result: revenue from sources other than ticketing for the Delhi Metro fell by 48%, from Rs 506 crore in 2019-20 to Rs 245 crore in 2020-21.

For Namma Metro, other income increased from Rs 43 crore to Rs 24 crore over the same period. Figures for 2021-22 have yet to be audited, so Metros are not making them public. The financial viability of this mass transit is gaining importance as metro construction picks up pace across the country, with cities like Patna, Surat and Agra beginning construction work. In Pune, work on a 23 km long overhead line began in January, in the middle of the Omicron wave.

It is a public-private partnership (PPP) project with Tata-Siemens as the private party. Another worrying aspect is that in several new projects, the interest component of the loan is much higher than what the Delhi Metro Rail Corporation (DMRC) managed to obtain from JICA (Japan International Cooperation Agency) at the start of the construction of the metro, which was interest rate of about 2% with a repayment term of 30 years plus 10 years of moratorium. In contrast, the interest on the loan for Hyderabad Metro, a PPP project, is 11%.

Cities that have operational metros today are Delhi, the seven hubs of NCR (National Capital Region), Bengaluru, Hyderabad, Kolkata, Chennai, Jaipur, Kochi, Lucknow, Kanpur, Mumbai, Ahmedabad, Nagpur and Pune . “It’s a fact that metros aren’t supposed to be financially viable. It is for the public good. But thanks to the reckless manner in which it is being extended, many are heading for huge financial disaster,” says OP Agarwal, CEO of Delhi-based WRI-India. Most Indian metro projects have an identical financial formula – 40% government subsidy (20% each from the Center and the state where it is built) and the rest 60% mainly debt. To understand how a metro project is financed, let’s take a concrete example.

The Rs 11,400 crore Pune (33.2 km) metro project was inaugurated in March. The combined loan of two entities – EIB, Luxembourg (Rs 4,140 crore) and AFD, France (Rs 1,690 crore) – is much larger than the total equity and subordinated debt of the GoI and the Maharashtra government (Rs 1,954 crore each). Then there are other smaller segments such as land grants and taxes as well as grants from other state government entities.

To put it simply, metros in India are mostly built with borrowed money (55-60% of project cost) and repayment of the loan with high interest haunts the carrier for many years, harming its health financial. Before the pandemic, Delhi Metro was showing operating profits (Rs 758 crore in 2019-20), but once its loan amount is factored in, it is in the red. As of March 31, 2022, Delhi Metro has repaid Rs 8,199 crore of its loan, of which Rs 4,002 crore was interest only. Being a large metro in a city of about 30 million people (17 million at the 2011 census), it can still absorb financial shocks.

But what about a small metro system in a city of, say, 5 million people? “It has become fashionable in India to build metros even in small towns,” said NVS Reddy, general manager of Hyderabad Metro. “Once the loan repayment starts, the problem starts. Unless a city has at least 1 crore (10 million) population, it is difficult to sustain a metro system,” he says, adding that MetroLite (urban light rail transit system) and MetroNeo ( rubber-tyred electric coaches powered by air traction) are economical. options for Tier 2 cities.


Several experts and policy makers argue that the economic and environmental benefits of a metro outweigh their usual financial problems, which means the nation must not settle for profit and loss. Vikas Kumar, newly appointed Managing Director of DMRC, explains that the economic landscape of Delhi and its neighborhood changed once the metro was rolled out. “Areas such as Dwarka, parts of Noida, Gurgaon, Faridabad and Ghaziabad have become residential and commercial hubs due to the ease of metro connectivity. Markets in Old Delhi have also been given a new lease of life,” he says.

Being a non-polluting mode of transport, the metro also has environmental benefits. According to Kumar, in 2021 alone, around 516,000 vehicles were taken off the streets of Delhi because of the metro. While it is undeniable that the enormous benefits of the metro are significant, should India create more and more of this transport giant, which will bleed the treasury? Twenty-seven cities are already on India’s metro map (20 operational, 7 in progress). So, is the nation creating 27 deficit government bodies? Instead, shouldn’t India adopt a superior financing model to build metros without incurring losses?


GoI recently realized its madness and is now on course for a course correction by promoting budget metros – MetroLite and MetroNeo. MetroLite, whose specifications were published in June 2019, can be developed at 40% of the cost of a conventional metro. MetroNeo, which is more like a trolleybus system and can be built at 25% of the cost of a metro, is a recent concept in India.

Its specifications were published in November 2020, i.e. after the outbreak of the pandemic. MetroNeo was proposed for the city of Nashik, which has only 1.5 million inhabitants (2011 census). The Indian government has embraced these new modes because the metro is often demanded for purely political purposes — the metro as an ornament adorning the city landscape. A 12 km long Jaipur metro, built seven years ago, is a classic example of building an unsustainable and highly loss-making metro system. The city has a population of just 3 million, according to the 2011 census.

ET’s questionnaire to the Jaipur Metro Rail Corporation elicited no response. Another question that has arisen recently is why should a taxpayer in Guwahati or Chandigarh fund a metro in Jaipur or Agra even if we accept that metros should be built for the public good and not for profit? Shouldn’t the immediate beneficiaries pay the price? Agarwal from WRI India explains: “All the metros are losing money every month.

It operates through a government grant which is paid from general tax collection. Ideally, those who benefit the most from a metro network should pay more. It is a model adopted in Paris. A handful of cities in India have moved in this direction. In Bangalore, the newly constructed Hebbagodi station, part of Phase II of the metro project, is being funded by the Biocon Foundation (Rs 65 crore). Maharashtra recently reintroduced the metro tax, charging 1% on the sale of properties in four selected cities – Mumbai, Thane, Nagpur and Pune. Thus, a metro system may need to consider a strong funding model to stem losses or increase contributions from immediate beneficiaries to stay afloat.