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Social Cost-Benefit Analysis of Delhi Metro Essay

Key words: Transport, Air Pollution, Cost- benefit analysis and Shadow prices. Abstract:

The growing demand for public transport in mega cities has serious effects on urban ecosystems, especially due to the increased atmospheric pollution and changes in land use patterns. 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 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.

The social cost-benefit analysis of Delhi Metro done in this paper tries to measure all these benefits and costs from Phase I and Phase II projects covering a total distance of 108 kms in Delhi. Estimates of the social benefits and costs of the project are obtained using the recently estimated shadow prices of investment, foreign exchange and unskilled labour as well as the social time preference rate for the Indian economy for a study commissioned by the Planning Commission, Government of India and done at the Institute of Economic Growth. The financial internal rate of return on investments in the Metro is estimated as 17 percent while the economic rate of return is 24 percent. Accounting for benefits from the reduction of urban air pollution due to the Metro has increased the economic rate of return by 1.4 percent.

This paper forms part of the work done for a project `Economic Evaluation of Investment Projects in India’ funded by the Planning Commission, Government of India. We express our thanks to the officials of Rail India Technical and Economic Services (RITES) for providing us access to the detailed technical reports prepared by them for the Delhi Metro project. We are grateful to the participants in the workshop at the Institute of Economic Growth, Delhi-110007 for their useful comments.

About Metro Rail in Delhi

Delhi, the capital city of India, is one of the fastest growing cities in the world with a population of 13 million as reported in the Census of India Report for the year 2000. Until recently, it was perhaps the only city of its size in the world depending almost entirely on roads as the sole mode of mass transport. The total length of the road network in Delhi has increased from a mere 652 km in 1981 to 1122 km in 2001 and it is expected to grow to 1340 km in the year 2021. This increase in road length is not at par with the phenomenal growth in the number of vehicles on these roads in Delhi. The cumulative figure of registered private and government buses, the main means of public transport, is 41,872 in 1990 and it is expected to increase to 81,603 by the year 2011.

The number of personal motor vehicles has increased from 5.4 lakhs in 1981 to 30 lakhs in 1998 and is projected to go up to 35 lakhs by 2011. With gradual horizontal expansion of the city, the average trip length of buses has gone up to 13 km and the increased congestion on roads has made the corresponding journey time of about one hour. Delhi has now become the fourth most polluted city in the world, with automobiles contributing more than two thirds of the total atmospheric pollution. In this context, the decision of the Government of India to develop a mass transport system for Delhi providing alternative modes of transport to the passengers was most satisfied.


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