Fast tracks, slow payback

Dhaka’s metro rail is operating at a daily loss of nearly 47 per cent, raising concerns about the long-term financial sustainability of the capital's high-profile mass-transit project, according to officials at Dhaka Mass Transit Company Limited (DMTCL).

The state-owned operator reports the average daily ticket sales amount to Tk 6.68 million, while daily operational and maintenance costs stand at Tk 12.5 million. This leaves a daily shortfall of Tk 5.8 million - almost half the total operating expenses.

Officials from DMTCL's revenue division said the deficit is currently being covered, at least partially, from the original development budget of the metro rail project.

The 21-kilometre metro rail line - stretching from Uttara to Motijheel - was built at a cost of Tk 334.72 billion and inaugurated in December 2022.

Officials told The Financial Express the metro rail has already reached its projected passenger volume during peak hours, limiting opportunities for further revenue growth through ridership expansion.

Peak hours are 8am-10am and 5pm-8pm.

"Metro rail has achieved the expected number of passengers during peak periods," said a senior DMTCL official on condition of anonymity.

He said fare revenue alone is not enough to cover operational costs, especially in the early years of "a system like ours".

A global pattern

DMTCL acknowledges that globally, many metro systems are not able to turn into profit-based entities solely on farebox revenue.

It gave two examples. In Berlin, only 43 per cent of operational costs is recovered through fares, with the remaining 57 per cent subsidised by the government.

In Amsterdam, 59 per cent of metro expenses is covered by public subsidies, with fare income contributing to just 41 per cent.

However, a desktop study by The Financial Express found examples of profitable metro systems, including those in Bangkok and Delhi. The Delhi metro was financed by the Japan International Cooperation Agency (JICA).

The Bangkok metro's profitability is a result of its efficiency, affordability, and the significant impact it has on the city's transportation network, drawing in more passengers and boosting revenues for the operator.

The Delhi metro suffering huge losses during the Covid-19 pandemic has not yet achieved net profits due to high financing costs, but it has reached operational profitability.

On the other hand, Lahore metro in Pakistan and Kolkata metro in India continue to operate at a loss.

Govt subsidy sought

In light of these global trends, DMTCL has formally requested the Finance Division under the Ministry of Finance to allocate dedicated subsidies for metro, describing it as an "infant service industry" needing financial support to mature.

Officials argue that a sustainable model must combine fare revenue, government subsidies, and commercial income.

Quoting international experiences, DMTCL mentioned that the financial target should be 65 per cent of revenue from fares and the remaining 35 per cent from non-fare income and government support.

However, currently, fare revenue stands at just 53 per cent, falling short of the target by 12 percentage points.

Break-even point still unclear

Asked when the metro might break even, officials said they are unable to project a time frame at this stage.

"The project is still ongoing," an official said, noting that DMTCL is yet to receive the final documentation of project assets and liabilities.

"There are multiple programmes and several sources of borrowing involved, with different repayment schedules."

The authorities are still assessing a comparative picture that includes principal amounts, interests, revenues, and maintenance costs.

Shift toward non-fare revenue

In a bid to reduce reliance on farebox income, DMTCL is shifting focus to non-fare revenue streams.

Plans are underway to develop a transit-oriented development (TOD) hub and four station plazas, which will feature retail spaces, offices, and recreational facilities, as found in many global metro systems.

"These commercial projects are expected to provide steady rental income and bring us closer to financial sustainability," a senior official noted.

Other potential revenue sources include advertising inside stations and metro cars, digital ad displays, and leasing space to retailers.

There are speculations that many market owners are opposing the establishment of shopping centres inside metro stations, especially at the Farmgate area, fearing a potential decline in their customer base once such malls become operational.

However, the Bangladesh Dokan Malik Samity, the apex body representing retailers, told The Financial Express it has no objection to the move aimed at making the metro system more profitable.

Its President Md Helal Uddin said on Wednesday that they have no objections.

"I understand the shops will mostly be fast food outlets. So we have never raised any objection to it," he said.

Experts' views

There is an ongoing debate over the high financing costs of various infrastructure projects, including the metro rail initiated by the ousted Awami League government.

During the student-led mass protests in July 2024, incidents of arson and vandalism occurred at two stations - Mirpur and Kazi Para.

Initially, repair costs were estimated at Tk 3.5 billion by the previous government. But the interim government completed the reconstruction for less than Tk 200 million.

Road Transport and Bridges Adviser Muhammad Fouzul Kabir Khan earlier stated that the practice of single-source procurement would be discontinued in favour of competitive tendering to curb favouritism and ensure transparency.

However, transport economists said the metro rail's current financial performance is not unusual for a project at its early stages. They refrained from commenting on the high financing costs, saying the matter requires a thorough investigation.

"Such projects initially incur losses, but as services expand, losses begin to narrow," Dr Mohammad Yunus, research director at Bangladesh Institute of Development Studies and a transport economist, told The Financial Express.

Echoing him, economist Dr M Masrur Reaz, chairman and CEO of Policy Exchange Bangladesh, said, "Most public metro systems incur losses in the beginning."

He emphasised that non-fare revenue - especially from TOD and station plazas - can help the metro evolve into an urban hub while improving its financial sustainability.

Dr Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue (CPD), told The Financial Express that five more metro lines are planned in the near future.

Once all lines become operational, ridership will increase significantly, which should help reduce financial losses in the future, he said, recommending a thorough cost review to prevent leakages and unnecessary expenditures.

Dr Moazzem also suggested a revision of fares in line with inflation and other economic factors, noting that the metro provides hassle-free, air-conditioned services that merit a premium price.

However, the economist was critical of integrating shopping malls on station premises, warning that such developments could create chaos and undermine the aesthetics of stations.

"Political influence may come into play in the distribution of shops, and in reality, DMTCL may lose potential earnings from these plazas," he argued.

Still, he supported limited, passenger-friendly services within the stations, such as banking booths and mobile recharge counters.

Ridership trends

On weekdays, the metro carries an average of 397,669 passengers. Weekend ridership drops to around 250,377.

Long queues during boarding and at ticket counters remain the most common complaint, DMTCL acknowledged, followed by difficulties at exit gates.

Challenges

The authorities acknowledged that they face a few challenges in operating the metro services.

One of those is long queues at counters for single-journey tickets (SJTs). Locking doors after passengers board and alight during peak hours is another challenge.

Besides, many passengers do not comply with the boarding rules.

Ticket usage

Mass rapid transit (MRT) cardholders account for 43 per cent of riders, while 24 per cent use Rapid Pass and 33 per cent use SJTs.

On weekends, SJT usage rises to over 47 per cent. The highest number of SJTs is sold at the Uttara North station, and the lowest at the Uttara South.

Busiest stations

Motijheel, the business district of Bangladesh, is the busiest metro station, handling an average of 77,175 passengers daily, followed by Mirpur-10 with 70,751 and Uttara North with 63,305.

While the metro has already improved urban mobility by reducing congestion and shortening commute times for thousands, its financial fragility poses a serious challenge.

Without a sustainable revenue strategy combining fare income, commercial earnings, and government support, it risks becoming a long-term fiscal burden instead of a transformative solution to Dhaka's transport crisis.

The metro coaches were manufactured by Kawasaki-Mitsubishi Construction (KMC) of Japan, with each coach designed for a 30-year service life.

The current fare structure was set by the administration of ousted prime minister Sheikh Hasina. The minimum fare is Tk 20, with Tk 5.0 charged per kilometre.

jasimharoon@yahoo.com