India has taken a bold and timely decision to go into a complete lockdown to contain the spread of COVID-19. The inevitable economic consequences which result from this situation must be tackled effectively. Surface Transport, which includes Highways, Railways and Public Transport, accounts for a bulk of people and goods movement in India and is one of the biggest sectors impacted by the lockdown. Since the sector forms the backbone of our economy, the recovery is crucial and recovery measures must be initiated urgently. Recovery measures may be in the form of macro-level interventions, as well as more local and targeted interventions which must be implemented by the transport agencies themselves. This article focuses on the latter, since public transport corporations need to build their capacity, explore alternate revenues and effectively overcome crisis situations without depending excessively on government aid and passenger revenues.
The Indian Railways, which has lost its ridership of nearly 23 Million people per day, is perhaps the worst hit. The freight business has also been affected although the transportation of essential commodities continues. At the outset, Railways should consider slashing fares on freight transport for a period of at least 30 days, post lockdown, to aid industrial recovery.
The Indian Railways must take extraordinary steps to recover. A temporary increase in the fares of premium trains such as Rajdhani, Shatabdi as well as the AC coaches of other trains which connect destinations which are well connected by air is a potential solution. The increase in fares, however, should be such that they remain marginally lower than those charged by airlines. Passengers opting for premium trains are not highly averse to paying an increased fare and hence the ridership is not very price sensitive. The number and size of food servings should be reduced to save on operating expenses, as was done by Air India in the recent past.
Railways should expedite the completion of the Dedicated Freight Corridor which would have four significant advantages. First, it would provide employment by absorbing a fraction of the workforce which has been affected by the situation. Second, by decongesting the railway network, it would give an impetus to the roll-out of private trains which will fetch higher revenues and lower operating costs. Third, it would increase freight revenues and fourth, it would establish a freight network which would remain unaffected even if interstate movement of goods on highways is disrupted in the future.
Finally, the Railways should consider undertaking Asset Monetization on priority must mainstream innovative methods to capture value using tools such as Transit Oriented Development (TOD), Joint Development, Transfer of Development Rights (TDR), Special Assessment Tax etc., all of which would contribute towards a steady revenue stream while also reducing losses and dependency during such times.
Public Transport System is the lifeline of cities and agglomeration economies. The revenues of public transport systems such as Buses and Metro Rails across Indian cities have been adversely affected due to the prevailing situation. Increasing fares is not a practical solution since ridership on public transport systems is known to be extremely fare sensitive. A hike in the fares of the Delhi Metro in 2017 led to an estimated loss of 26 Million riders as compared to 2016. The State Transport Corporations which run buses are also not insulated from the lockdown and were under financial distress even before the lockdown began. Given the price sensitivity of increasing fares and the pivotal role rendered by public transport, other avenues such as increasing parking charges and imposing congestion pricing, albeit temporarily, must seriously be considered. For instance, high-level calculations undertaken by NITI show that a 40% increase in parking charges for just one year in New Delhi can lead to an increase in parking revenues by over 100%, running into Crores, even after accounting for a 50% loss of occupancy which may be caused by the hike. This loss of occupancy is also not worrisome since it would conclusively translate into uptake of public transportation, thereby adding to their revenues in addition to a reduction in pollution and congestion. The implementation of congestion pricing may seem to be a herculean task, but is fairly achievable in a short timeframe. The Delhi Police and Delhi Government came up with an e-curfew pass system in under 24 hours for the movement of essential services and therefore, the implementation of congestion pricing through a mechanism of issuing paid passes in a similar manner may be undertaken. Public Transport Corporations, especially Metro Rails should immediately monetize the excess availability of space in and around Metro Stations and mainstream alternate revenue maximization in their policies.
Tolling revenues have dropped to zero as a result of the current crisis. In order to recover, the toll on private vehicles could be increased temporarily while ensuring that the increase does not apply to who are travelling across borders such as farmers, labourers and employees of corporates and PSUs on a daily basis, since they have a major role to play in the economic recovery. The toll on freight and logistics should be waived off for a period of 15-20 days to aid their recovery. Asset Monetization through means such as the Toll Operate Transfer (ToT) model needs to be ramped up on war footing. The ToT model allows profitable highways stretches to be given to concessionaires for a fixed period on an upfront payment, which makes revenue available to undertake new projects, thereby generating employment opportunities and demand for raw materials.
COVID-19 is wreaking economic havoc across the world. So far, India has stayed relatively isolated from the health impacts. However, the economic impact would only become clear over the next few days. For the transport sector, such times signal that sole dependence on passenger revenues is not a very healthy practice and that a dedicated pool of alternate revenue can help smoothen the negative effects. The priority should be to not just restore surface transportation but to ensure that losses suffered are alleviated to the extent possible through a set of extraordinary measures, which should be mainstreamed in future planning to deal with any crisis situation. These measures must be implemented on a war footing such that the surface transport sector is able facilitate India’s road to economic recovery.
DISCLAIMER : Views expressed above are the author’s own.