I HAVE to admit that I was a reluctant and late convert to the idea of the Lahore Orange Line metro train project. For those readers less familiar with Lahore, this 27-kilometre path represents a northern arc that skirts the older half of Lahore, stretching from Sher Shah Suri’s GT Road, where it enters Pakistan, then travelling through some of the most congested urban real estate in the country before emerging right on the other side, just beyond Thokar Niaz Beg near the M2 motorway. Before anything else, a word of praise is due here for the Punjab government in clearing the path in record time.
Let me sidestep the concern raised about the project being hazardous to heritage sites. I will return to that in a moment. I want to pick up a concern that the Planning Commission had raised but then we hear no more of it: how will the project sustain itself financially? Now whether or not the Planning Commission has a say in a provincial matter, the Punjab government does need to explain that to the public. Pending that, here’s some numbers.
A Chinese consortium which includes China Rail and Norinco has contracted to build an elevated and underground rail line. Subsequently, it will bring in the trains and accessories under a procurement contract. All the civil works and equipment would become property of the Punjab government. Against this a loan facility of $1.6 billion would be created and this amount, together with an expected 2pc interest would be paid back by the Punjab government over 20 years to the Chinese EXIM Bank.
The Orange Line could be running to capacity in a couple of years.
Besides loan repayment, the project would also incur annual and recurring maintenance costs, on items not covered under warranty and these would be borne by the Punjab government. Finally, as is usual in arrangements of this nature, the operator (in this case the Chinese consortium) will receive a management fee for operating the scheme as per prescribed schedule, performing maintenance works and adhering to the service-level agreements which form a part of the operating contract.
According to my back-of-the-envelope calculations and pending those numbers from the Punjab government, it will be liable for upwards of $300,000 per day (most of this amount is loan repayment) — every day for 20 years.
Now let’s turn to revenue and don’t worry if you don’t follow the number crunching. Just bear with the flow. The Orange Line has a planned capacity of 250,000 passengers per day. Lahorites undertake an estimated 10 million trips per day and half of those are on public transport. Most of the remaining are on motorcycles. It is therefore not hard to conceive that the Orange Line could be running to capacity in a couple of years.
Now, to break-even at that capacity, the fare would need to be priced at Rs130. Considering the metro bus fare is Rs40 and it carries nearly 200,000 commuters each day, the Punjab government could conceivably price the Orange Line fare at Rs65 which would be half that needed to achieve break-even. That would leave a deficit of $150,000 per day or approximately Rs6bn per year. Is that material? I do not think so. Especially given that most of that could probably be recovered by real estate and advertising revenues that mass transit schemes can generate.
And even if a small deficit shows up every year, the argument is that the public goods that efficient mass transit schemes produce are worth far more. These include reduction in congestion, more dignified transport and productivity gains for citizens, a cleaner more pleasing urban environment and the list can go on.
Having said that, the Punjab government must fully address and satisfy the concerns on hazards to heritage sites like Chauburji and Shalamar gardens which have been raised by Unesco and the Lahore civil society. It must also address the Planning Commission’s concern on the process by which the contractor was selected.
I am also aware that the Sindh government is preparing to implement a big bang mass transit scheme for Karachi which envisages five bus rapid transit (BRT) lines and it would be best were that information to be put out on a website so citizens can become engaged early. For most of our history, a centralised federal structure controlled by bureaucrats from Islamabad held back the development of our cities.
The 18th Amendment and NFC award have transferred powers and funds to the provinces and unclogged the system. In the next logical step I hope to see strong city governments emerge and take the reins to turn our cities into the engines of growth that they need to become.
The writer is a business strategist and entrepreneur and has served the Punjab Board of Investment & Trade as Director General.
Published in Dawn, November 15th, 2015