SOCIAL COST BENEFIT

ANALYSIS: DELHI METRO CASE

CBA Assignment

Submitted By:

Shefali Roy P36156

Vikram Jeet P36084

INTRODUCTION

Feasibility Report on Integrated Multi Modal Mass Rapid Transport System of Delhi
(IMMRTS) prepared by RITES recommended for three-component system comprising of Rail
corridors, Metro corridors and dedicated bus way totalling to 184.5 Km and further addition of
14 km increased to 198.5 km. The total network contains 16 sections to be implemented in a
sequence based on passenger kilometer carried per kilometer length of each section.

The first phase of DM consists of 3 corridors divided in to eight sections with a total route of
65.1 kms, of which 13.17 kms has been planned as an underground corridor, 47.43 kms as
elevated corridors and 4.5 kms as a grade rail corridor. The second phase covers 53.02
kilometers of which the underground portion, grade and elevated section are expected to be
8.93 kilometers, 1.85 kilometers and 42.24 kilometers respectively. The construction of the
first phase of DM was spread over 10 years during 1995-96 to 2004-05 while that of the second
phase, which started in 2005-2006 is expected to be complete in the year 2011. The total capital
cost of DM at 2004 prices for Phase I and Phase II was estimated as Rs. 64,060 and Rs. 80,260
million, respectively. Phase II was further extended to some areas of Noida and Gurgaon
belonging to the neighbouring states of Delhi. Phases III and IV of DM will cover most of the
remaining parts of Delhi. Table 1 provides some of these details.

NEED FOR METRO

Today, urban area experiences the drastic population growth. This population growth has two
components in it: 1) the normal population growth and 2) the movement of huge number of
working people from other parts of the countries. The increase in per capita income due to
healthy economy and the growing population in urban areas lead to steep increase in ridership
on the road (two-wheelers, autos, cars and public transport buses), thus in turn lead to
tremendous traffic congestions on the urban road. The growing demand for the transport in
mega cities has serious effects on urban ecosystems, especially due to the increased
atmospheric pollution.
An ecologically sustainable urban transport system could be obtained by an appropriate mix of
alternative modes of transport resulting in the use of environmentally friendly fuels and land
use patterns. The introduction of CNG in certain vehicles and switching of some portion of the
transport demand to the metro rail have resulted in a significant reduction of atmospheric

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pollution in Delhi. The Delhi Metro provides multiple benefits: reduction in air pollution, time
saving to passengers, reduction in accidents, reduction in traffic congestion and fuel savings.

There are incremental benefits and costs to a number of economic agents: government, private
transporters, passengers, general public and unskilled labour.

ANALYSIS OF STRENGHTS AND WEAKNESSES OF DELHI METRO

STRENGHTS

Cost-effective mode of transport for the general public of Delhi.

Reduce congestion on roads making movement easier.
Reduce atmospheric pollution to a great level making the environment healthy.
Ultra-modern technology and visually striking design, dynamic and modern, competitive
Reduce travel time: One hundred per cent punctual operations.
Safer Mode of transport for Women.
Generated large scale employment opportunities.

WEAKNESSES
Metro considerably more expensive than the bus.
Less ridership than estimated.
High development cost
Displaced many economic backward people.

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BENEFITS OF DELHI METRO ON OTHER MODES OF TRNSPORT

PRE PROJECT SCENARIO

Buses constitute for about 1.2% of vehicles on road in Delhi. The number of buses
running on Delhi roads were 42639 as on 31st march 2007. The number of buses
increases by 8%every year.
Buses currently meet the mass transport needs of Delhi. The ridership by Buses is 60%
of the total ridership. Overall about 5 million people travel by bus each day in Delhi.
The average trip length, which is about 14 kms takes about 55-60 minutes.
Delhi is predominantly dependent on road transport, with the railways catering to only
about1% of the local traffic. The ring rail network in Delhi is grossly underutilized.
Buses cater to about 60% of the total demand while personal vehicles account for 30%.

POST PROJECT
Delhi Metro aims at reducing this reliance on other modes of transportation. With the upcoming
of Delhi Metro the number of buses have reduced to 11000, as commuters prefer to travel by
metro instead of any other means due to the reasons like: heavy traffic, time consuming, high
level of exhaustion etc.

SAVINGS IN FUEL CONSUMPTION

The savings in fuel consumption is due to the diversion of a part of the Delhi road traffic to
Metro and reduced congestion to vehicles on the roads. Use of electricity for the Metro will
reduce the petrol and CNG consumption that could result in savings of foreign exchange and
will also reduce air pollution. Fuel savings arising out of the Metro could result in the savings
of foreign exchange for the Indian economy given that a very large proportion of domestic
demand for petroleum products in India is met out of imports.

DELHI METRO AS AN ECOLOGICALLY SUSTAINABLE TRANSPORTATION

SYSTEM
Fewer vehicles and the decongestion for the residual traffic on Delhi roads due to Metro could
lead to reduced air pollution. The distance saved due to decongestion is estimated by
multiplying the time saved with the speed of a vehicle in a decongested situation. An estimate
of the pollution reduction by a vehicle in this context could be obtained by multiplying the

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distance saved by the relevant emission coefficient for different pollutants for each category of
vehicle.
Estimates of reduction in distance travelled every day due to the decongestion effect
are obtained for cars, two-wheelers and buses as 9.18 kms, 7.65 kms and 69.72 kms,
respectively.
The estimates of air pollution loads due to decongestion avoided due to Metro. The
monetary value of these pollution loads are estimated using the estimates of shadow
prices of pollutants made in some recent studies in India

TABLE 2: EMISSION FACTORS OF VEHICLES AS PER EURO-II NORMS

(KG/KM)

TABLE 3: REDUCTION IN POLLUTION LOAD DUE TO DECONGESTION AND

ITS MONETARY VALUE FOR THE YEAR2011-12 WITH THE ASSUMPTION
THAT ALL VEHICLES USE EURO-II TECHNOLOGY WITHOUT METRO

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The vehicular technology complying with Euro II norms or using CNG as a fuel could have
similar effects on the air pollution in Delhi as estimated for the Metro. The monetary value of
the air pollution has reduced drastically with the upcoming of Delhi Metro

The estimated monetary value of reduction in air pollution due to coming of metro can be
explained with the help of the following table.

TABLE 4: ESTIMATES OF MONETARY VALUE OF POLLUTION REDUCTION

IN THE YEAR 2011-12 DUE TO METRO

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Costs and Benefits to the stakeholders as given in the study are:

1. The government

The government faced costs due to

Revenue losses due to displaced public buses

Initial Investment of metro
Operating and maintenance costs

The benefits to the government from the project were

Fare box revenue

Revenue from property development and advertisements near metro line area
Tax revenue for goods and services bought for operating and maintenance of metro
Saving of expenditure on road infrastructure development
Saving on capital and operating costs of displaced buses

The net benefits to the government in 2011-12 are 31760 million Indian rupees at 2004 prices.

2. The passengers

The cost to the passengers is only in terms of cost of fare of metro. The passengers pay a higher
fare for the metro than public bus transport at INR 35280 million.

The benefits to the passengers are

the saving of bus fare at INR 10460 million

saving of time spent on travelling which has been calculated as INR 22090 million
benefits due to reduction of accidents at INR 448 million

The overall benefits to the passengers is estimated as 22440 million Indian rupees.

3. The private transporters

The private transporters face loss of revenue from displaced private buses of INR 9410 million.

The benefits to the transporters is savings on maintenance and operating costs estimated at INR
6550 million.

Overall costs to the private transporters is estimated at INR 2860 million.

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4. Unskilled labour

Opportunity cost of wage as unskilled labour in agriculture is INR 48/day.

Benefits to unskilled labour:

Wage rate of INR 120/day.

Cost of unskilled labour assumed at 10% of investment and 5% of O&M costs of metro.

Total benefits to unskilled labour employed in construction and maintenance estimated at INR
316.4 million.

5. General Public

Costs to general public is in terms foreign exchange cost equivalent to 60% of initial
investment.

Benefits:

Environmental benefits of reduced pollution

Reduced fuel consumption

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 ANALYSIS

a) This CBA analysis should have been carried out using UNIDO approach technique
because here no method has been specified, since domestic prices are taken into
account but still all the aspects of UNIDO are not taken into account. Shadow Prices
and Domestic prices are used for analysis but step wise calculations are not being
shown in the study.

b) Calculation of financial profitability at market prices.

There is an ambiguity in the study whether the NPV or net benefits are calculated
are calculated by using market prices or Shadow prices.

c) The Expenses part has not been explained, not even the expenses heads are
explained, and directly net benefits are stated. This makes this study much more
opaque and ambiguous.

d) The Net Value of fixed costs and variable costs are not explained.

e) No financial report data is analysed to back the analysis. (If analysed then not stated
in report)

f) There could have been many other benefits like reduction in road-rage, faster
transfer of goods and its effect on business of people etc.

g) Adjustment for the projects impact on savings and investment.

The study does not incorporate any relevant information in this stage of UNIDO
approach.

h) The final step regarding Adjustment for merit and De merit goods etc. is not carried
out clearly in the Analysis but, it is assumed that they have taken the economic value
of decrease in pollution into account considering this step.

The study neglects both the stages of UNIDO. Under Adjustment for the projects
impact on income distribution, relation between marginal utility of income and change

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 in income has to be calculated to finally arrive at a net impact which is to be added to
present benefits calculated at stage three.

Concluding Remarks

The financial cost-benefit ratio of the Metro is estimated as 2.30 and 1.92 at 8 percent and 10
percent discount rates respectively while its financial internal rate of return is estimated as 17
percent.
The incremental changes in the incomes of various economic agents: passengers, transporters,
public and government and unskilled labour due to the Metro could be estimated by considering
the Delhi economy with and without the Metro. It is found that there are income gains to the
government, public, passengers and unskilled labour while there are substantial income losses
to the transporters because of the Metro.
The study appears to be poorly undertaken with no strict adherence to the stages laid out in the
UNIDO approach. There is no clarity on the NPV analysis and skips in total three stages of
UNIDO.