Pakistan Institute of Development Economics

Exposing the Metro Bus Scheme

Exposing the Metro Bus Scheme

Publication Year : 2020
Author: Adeel Abid
Explore More : Blog
Keywords : METRO BUS, Pakistan

“You get a car. You get a car. Everybody here gets A CAR.”

The day Oprah handed cars to every single member of the 276 studio audience is perhaps one of the most iconic moments of television history. Millions across the globe watched on with envy at an extravagant giveaway the likes of which the world had never witnessed before?

But what was it about that moment that stood out? The sheer enormity of the riches being handed out of course. And it was extravagant even for the richest country in the world. Even when a mere 276 cars were handed out.

Consider this though. What if the Government of Pakistan were to replicate this giveaway in the country and give a free car to every single adult in the country? You are right of course. It would be impossible to arrange that amount of financial resources for any government. So how about a single city? Still impossible you say? How about a small section of a city? Say less than 100,000. Possible? How about if the Government also decides to pay for fuel for this small segment of the population? What would you say of such a scheme? Economic sense or folly of the highest order?

Here’s the punchline though. Such a project (or rather projects) already exist in Pakistan and that is the Metro Bus, the Orange Line and other mass transit projects developed under the last PML-N government. As an illustrative example, let’s examine the costs behind the Rawalpindi – Islamabad Metro Bus in detail to see how it compares with our hypothetical giveaway.

The Islamabad Metro Bus was constructed at a cost of approximately Rs 46 billion according to the figures released by the Government and was expected to provide transport to 150,000 commuters per day. However, even two years after the launch of the project, the average daily number of commuters stood at 80,000 only in 2016. These figures however consider one side travel only. If we were to assume that every person who used the Metro Bus to travel from home to his / her workplace or other destination also used it to travel back, that would mean an average of only 40,000 individuals traveled per day against a maximum capacity of 75,000 (150,000 divided by 2) individuals per day. These two figures are important because if we divide the total cost of the project by the number of individuals travelling per day, we arrive at the total cost of the investment per individual (assuming each passenger travels both sides) in the project.

  • Project Development Cost per individual (if buses are used at full capacity): Rs 613,000 per passenger
  • Project Development Cost per individual (using actual usage figures): Rs 1,150,000 per passenger

Coming back to our hypothetical car example, even if the Metro Bus Islamabad was operating at full capacity from day one, the development cost per individual comes to Rs 613,000 per passenger. The cost of a Mehran VX in 2014 was Rs 620,000. In other words it would have been just as cost effective to give a free car to each passenger.

What’s even more alarming is that if you take into account the actual usage figures, the cost per individual increases to Rs 1,150,000; Enough for each individual using the Metro Bus to comfortably afford a Suzuki Swift DLX which was available at a comparatively economical price of Rs 1,044,000 in 2o14.

Even more alarming is that these development costs are just the tip of the iceberg. The government also provided a subsidy of Rs 5 million per day on average over the first two years of its operation as the ticket price of Rs 20 was insufficient to meet running costs. Again, if we divide the cost of the subsidy with the number of individuals travelling, we arrive at the following figures:

  • Subsidy for running costs (assuming buses are used at full capacity): Rs 67 per individual
  • Subsidy for running costs (using actual figures): Rs 125 per individual

In other words, the Government could have provided a Suzuki Swift DLX to each of the individuals who use the Metro Bus regularly as well as providing Rs 125 for fuel and maintenance to each of them daily and still ended up saving money.

Other public transport projects built over the past five years do not fare much better either and in some cases even worse. The Lahore Metro Bus was built as a slightly lower cost of Rs 30 billion. The Orange Line on the other hand is projected to cost Rs 165 billion on completion with a capacity of 250,000 passengers  and operational costs estimated to be Rs 175 per passenger according to Dr Farrukh Saleem as stated in his article in The News. All of these figures do not include the cost of land acquisition for the projects and other ancillary costs which total tens of billions of rupees. If these are taken into account, the actual development costs of all these projects may actually be almost double the figures reported by the government.

When the per passenger development and running cost of a mass transit service exceeds that of even luxury cars, it is safe to say that the projects have been a complete disaster. The true dilemma for the present and any future governments is that it ends up wasting the high investment on the project if these projects are shut down but risks them being a huge drain on the economic resources if the projects are kept operational.  The PML-N made these projects the focal point of their last election campaign and it can be argued that the projects perhaps best represent their style of governance. Lots of fanfare but little or no substance.