Urban Mass Transit Systems, particularly Rail based systems such as Regional Rapid Rail (RRTS) are highly capital-intensive with long gestation periods. In addition, such systems incur significant recurring expenditure for operations and maintenance. However, such systems generate large economic returns over a period of time and are necessary for long term and sustainable development of any region. These systems may not be financially viable on transit (fare) based revenue alone and require other sources of revenue and government support for financial sustainability.
Most Urban Transit Systems around the world are unable to cover their operating costs from fare box revenues, let alone the capital expenditure. The capital expenditure for these projects is often financed by borrowings from external agencies and the repayment of debt impacts overall financial sustainability. Transit Agencies are, therefore, increasingly looking for ways to augment revenues from other sources – both conventional and innovative, to improve their financial sustainability.
Recovery Ratios is defined as the ratio of total revenues (fare + non fare) to the operating expenses. The figure below shows the Recovery Ratios for different rail-based mass transit systems across the world. A shortfall occurs when revenues are not enough to cover the operational costs. This is a significant impediment for maintaining service quality and addressing commuter aspirations.
Source : “The World Bank Group & Imperial College. London: The Operator’s story – Emerging Findings, 2017”
From the above, it is evident that the fare-box revenues meet the O&M expenses in only 50% of the transit systems. In about 20% of the cases, the revenues from all sources are available for servicing of debt and enhancing financial sustainability.