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Why not an introductory price of Rs 20 flat for Metro Rail….

Chennai metro rail has already spent around Rs. 15,000 crore. Though the interest cost on the handsome loans extended by Japan is low with a moratorium of 10 years and another 40 years for repayment, still the finance burden on the balance loan will be high. Such large infrastructure projects cannot get viable returns on investment for decades.

Look at the present status: of around 15,000 passengers a day using the facility at an average cost of ticket of Rs 30, revenue on ticketing alone would be Rs. 4.5 lakh per day or Rs. 16.43 crore a year. At least for a year or so, there are no immediate avenues for income from advertisements in a large scale. Add the staff cost and the cost of maintenance of the expensive facilities, including insuring these against fire, terror attacks...the ROI picture is dismal even on present ticketing costs that are much higher than the corresponding bus fares.

For instance, from Anna Nagar to Ekkattuthangal, the metro fare is Rs. 50 one way. For a commuter travelling two ways, it will be Rs. 100 per day. The corresponding cost of commuting by the government-run bus service is only Rs. 26 two ways. So, bus commuters will be reluctant to switch to metro rail. 

It is believed that the customer for the metro rail will be  users of auto rickshaws, taxis and cars. But their numbers will not run into lakhs necessary to keep the trains full  and run at frequent intervals. I remember the experience at the MRTS in the 1980s and 1990s: a similar differential 1:4 kept the expensive investments heavily under-utilised for decades. 

The immediate concern should be to build custom rapidly and make the commuter appreciate the comfort, speed and ease of travel. I suggest an introductory low pricing,  a tariff comparable to bus travel for the first year. Once accustomed to the level of comfort, the commuter would not like to lose it for lower cost.

An introductory price to attract the customer is a universal marketing practice to build custom. A couple of decades ago,  the Chicago Downtown circular train service went for a renovation and upgradation. This took several months. To attract customers again, the operator introduced an invitation price of 25 cents per ticket, a fraction of the economic cost! Commuter patronage boomed and after reaching optimum levels, the fare was revised.

Nearer home Apollo’s Pratap Reddy adopted such a practice. When the hospital was inaugurated in 1983 he found load on the dozens of sophisticated diagnostic equipment abysmally low. Remember, Apollo installed state-of-the-art medical devices like autoclaves, echo cardiograms, ECG machines, ultrasound scanners... in large scale. These were expensive equipment that become obsolete in quick time with continuous research. Reddy thought of an ingenious marketing strategy: he invited customers to register with a fee of Rs.150 promising to charge just 10 per cent on diagnostic tests. So, for an ultrasound costing Rs.1000, a member would be charged just Rs.100! With effective publicity, demand surged. Reddy ensured full use of the equipment installed and withdrew the special offer in quick time! 

Metro Rail would do well to think of such an invitation price,of even a flat price of Rs. 20 per ticket, for the first year or so and add this subsidy to the large total investment. The state has been heavily subsidising bus transport which contributes to humungous losses. In an integrated urban transport system contemplated, the metro would do well to introduce common ticketing for rail and bus transports and also reconcile to a heavy subsidy on rail transport. World over urban transport systems enjoy such subsidies. Simultaneously it should also eliminate unfair competition by taking off  bus services on parallel routes. 

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