Shoaib Rashid
New Delhi, September 12 – Delhi Chief Minister Arvind Kejriwal recently announced plans to start free travel for women passengers in the state-run bus and metro service. The reaction of women commuters was mixed. Some welcomed it for empowering women while some saw it as an election gimmick and a populist move to garner votes. The announcement then saw some stiff opposition in the form of a letter by “metroman”, E. Sreedhran, addressing the Prime Minister Narendra Modi. He urged the PM to personally intervene and stop the Delhi government from implementing their proposal. Then the Supreme Court also came down on the Delhi State government’s proposal to offer free rides to women on the Delhi Metro. The apex court said: “Do not give sops. It is public money.” Despite the resistance, the AAP government of Delhi plans to go ahead with its scheme even as it acknowledges that “it is taking time.” Some of the important questions that this proposal brings to the fore are:
1. What is the theory behind a public / private good?
2. Why subsidize metro transport?
3. Is there a flip side to subsidizing metro travel?
4. On what grounds is the proposal to offer free travel to women on Delhi’s Metro service being opposed?
5. What is the justification of the Delhi government for this “freebie”?
Even as answering these questions is imperative, there is a wider question too which begs an answer. Is free public transport for all a pipe dream (that is unsustainable in economic terms) or is it a realistic goal that governments should strive for?
Theory Behind A Public / Private Good
In economics, goods can be classified on the basis of “excludability” and “rivalrousness”. When we say a good is ‘excludable’, we imply people can be prevented from consuming them. This can be in the form of pricing, physical access, documentation requirements etc. If a good is ‘rival’, it means its consumption will affect its availability to other individuals. So, if we have a limited number of trains or buses and they are all booked or running to full-capacity, then those who wish to avail of the service at the same time will be deprived of doing so. The below matrix thus helps us understand how public transport should aspire to become a public good that is both non-excludable and non-rival. It means that we should not prevent people from consuming that service (it should be cheap and accessible) and its consumption must not affect its availability to other individuals (it should be in such abundant supply). The reality, however, is different. The metro service in India is both excludable (because of its premium pricing compared to bus service) and rivalrous (when it is congested). So in a theoretical sense, the Delhi Metro Service currently operates on the same principles of a private good. Offering free travel to women on metro can be construed to be part of the much forgotten aspiration of turning it to a public good.
Why Subsidize Metro Transport?
There are several reasons why metro transport should be subsidized. If we price the service strictly with an aim to recover the costs involved in the project as soon as possible (with zero subsidy), then the cost of travel will be so high that there will not be sufficient demand for the service and the entire investment will result in deadweight loss and turn into a failure. As the number of passengers increase the frequency of the service will also increase leading to reduced wait times. Subsidy helps the economically disadvantaged. For example, if more people use the service to access their workplace or college / university, then economic productivity and levels of education improve in the long run. Increased use of the metro will reduce vehicle pollution as well as decrease road congestion.
Is There A Flip Side To Subsidizing Metro Travel?
Many are of the firm opinion that rapid transit or metro is a private good. It should be priced according to the revenue model of private businesses where performance is rewarded and a lack thereof is punished. They argue that if all the transit lines are planned and operated below actual cost then it is difficult to evaluate the service. You cannot determine where to improve service or increase capacity. Subsidies are financially unsustainable and would be an obstacle to upgradation, maintenance and expansion plans. This position was articulated by the Supreme Court bench headed by Justice Arun Mishra over a petition filed opposing the Delhi government’s proposal. The bench observed: “You (Delhi government) will make travel free and the Central government will have to pay for it. Why do you want to destroy the Delhi Metro? DMRC annual revenue is between Rs. 6000 and Rs.7000 crores. Its loss for the last year was 100 crores. If free sops are given, there would be a direct loss of Rs.1500 crores per annum and DMRC cannot pay its long term debt obligations on time, its expansion would get hampered and its facilities and maintenance would come down.”
On What Grounds Is The Proposal To Offer Free Travel To Women On Delhi’s Metro Service Being Opposed?
A highly respected technocrat and former Delhi Metro Chief E. Sreedharan came down heavily against free travel to women on Delhi’s metro service. He dashed off an open letter to the PM in which he said: “When the first section of Delhi metro was to be opened, I had taken a firm and conscious decision that no one would be given any travel concession on Delhi Metro. This stand was taken to maximize revenues so that metro fares could be kept low so as to be affordable to ordinary citizens at the same time metro would make sufficient operational surpluses to pay back the loans taken from JAICA (Japan International Cooperation Agency). If ladies are to be given free travel concession in Delhi Metro, it would set an alarming precedent for all other Metros in the country. If the Delhi government is so keen to help lady commuters, I would suggest Delhi government can pay directly to the lady commuters the cost of their travel rather than make travel free on the Metro.”
Justification of the Delhi government
Delhi is the world’s second largest city with a population of 29 million. Offering free travel to women on its Metro transport service will be a “game changer” and give a boost to women-empowerment on an unprecedented scale. It will be an opt-in scheme and not a ticketless travel scheme that is automatically applicable to all. Replying to former Delhi Metro chief, the Deputy CM of Delhi state – Manish Sisodia wrote: “By Delhi Metro’s own admission, free ridership for women will increase women ridership by 50 percent. Delhi Metro should celebrate this rather than oppose it. Even after providing free ridership for women, DMRC daily ridership will go up by only three lakhs on a daily basis, which will still be much less than the designed capacity of 40 lakhs. The intention of the Delhi government in allowing free travel for women is to ensure women safety and to encourage the use of public transport in the national capital to reduce air pollution. It is a revolutionary step to empower women. It will open up immense opportunities for women.”
Free Public Transport : Pipe Dream Or Realistic Possibility?
Free public transport, also known as fare-free public transit or zero-fare public transport has been a topic of debate among governments and policymakers for many years. Luxembourg wants to be the first in the world to make all public transport free from March 2020. Germany is considering making their public transit system “fare-free” in a bid to reduce air pollution. Zero-fare transport is often operated as part of the shuttle services within places such as a hospital or university campus, an airport or between terminals. Another example of zero-fare transport is student transport, where students travelling to or from school do not need to pay. But transforming the public transport system of an entire city into “zero-fare” is not that simple. We have to agree with Milton Friedman when he said: “There ain’t no such thing as a free lunch.” Fred Brooks echoed the adage: “Someone can benefit for free from an externality or from a public good, but someone has to pay the cost of producing these benefits.” Obviously, this ability to fund the cost of offering free public transport depends on the strength of the government’s coffers and its ability to sustain the transport systems in terms of ridership / passenger traffic. Free public transport is not a pipe dream; neither is it something that can be implemented and sustained very easily. The Delhi government wants to create history. Time will tell if it did.
