Price of Convenience – The Story of Delhi Metro is like that of a 10 rupee coin

It’s been over a year now that 10 rupee coins were circulated, but until today most people haven’t used one. To me it sounds like the story of the Delhi Metro. Why is it that these are not used that extensively even after so many years, and how can this be improved? There are three market inefficiencies that come to mind. Two are probably more commonly acknowledged than the third, but all are issues that must be addressed in order to get the maximum bang for the buck.

First, there were only 1 crore coins (10,000,000) produced for a population over 100 crore. A simple math shows that 1 in every 100 people will get to keep a coin (ignoring those who get to keep more than one). Clearly, whoever gets it, feels lucky, and this adds a souvenir value to its face value. Similar (but somewhat reverse) is true for the Metro as well. Currently, it is not accessible by most people and some of those who can, have used it a very few times only because of its souvenir value. This problem is easier to handle – by increasing the supply and making it more accessible to people who probably need them more. This may be a more expensive solution, but in time it can be achieved.

The second is the problem of pricing and subsidy. The gold rim adds to the real value of the coin vis-à-vis its face value.  This may lead some people to actually just melt it and use the alloy instead. Some people could in fact hold on to it to see its value would grow in the future. Not to mention that it starts to look like a Euro, and people like to hold on to it. All these reduce the likelihood of the coin being used what it was meant for, and the government ends up subsidizing this ‘new’ use instead. This is to say that the government is currently subsidizing the use of souvenirs, similar to what they are doing with the Metro as well.

The ticket prices are highly subsidized but some people who are actually using it for fun, are paying much less than what they should or could. At this stage, equity issue certainly comes up and the question that how does one differentiate between the real users and the ones who are using these for leisure. That is to say, how to arrive at the real price tag of the ticket. Maybe by a marked difference in the pricing of a pass vs. a one time use ticket, latter being much higher. Also, a detailed survey must be done to measure the current ridership and the socio-economic characteristics of the commuters, to know how much subsidy is actually fulfilling the original purpose of supporting the poor and needy.

But there is yet another reason, which must be addressed even if the above two problems of supply and pricing are managed. And that is the problem of the demand. Why is it that the coins for Re. 1, Rs. 2 or Rs. 5 are much more extensively used than the new Rs. 10 coin? Because the alternative of a note for these coins is much less in circulation than that for the Rs. 10 coin. Now compare a Rs. 10 coin vs. a Rs. 10 note. The key difference is that of convenience. If a more convenient alternative is easily available, then why would somebody use a less convenient option?

Same is true for the Metro as well. More and more flyovers are being built to accommodate the new and increased number of cars. As the convenience of using these cars increases without having these car users to pay the price for this convenience, it is an easy choice to make between the Metro and their car that is parked right outside for free. Currently, what Metro seems to be attracting is the crowd that used the buses or two/three wheelers earlier. So this does remove some people from the streets. But these weren’t the problematic people to start with. In fact, buses and two/three wheelers are good and must be promoted. (See diagram). The issue is how to pull out people from their cars and direct them to use the metro.

Street Space Comparison

This can be done by either making car-use less convenient or having them pay a higher price for this convenience so some might shift. What are our options? This can be done by making it less convenient to own a car by either decreasing parking supply, or increasing the price of current supply. Or this can be done by either imposing an access tax on cars to areas where metro is available (like CP, Dwarka, etc.), or increasing gas tax than can then used to cross-subsidize the metro users. At the same time, this money generated can then be used to further strengthen the metro capabilities.  Some countries like Singapore, have also tried to use the number plate ration system, but the threat with that in India is that nothing stops people from buying another car with the alternate number plates. So in the long run, this alone may not be effective. But to substantiate this policy, a tax on cars may be considered. The options are plenty, but their effectiveness may vary and therefore must be tested before implementation. Also, some policies may not be very effective alone, and may be bundled with a few others to have the desired impact.

This is clearly a very cursory view, but before setting out to solve these issues one must take these steps only after conducting an elaborate study to know what the real problem is. The real stress is actually on – Problem is!


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