final report - mrvc.indianrailways.gov.in

www.pwc.com/in

Revenue maximizing study

in particular for non-fare

box revenues with

affordability studies

Final Report

Submitted to:

Mumbai Railway

Vikas Corporation Ltd

(MRVC)

March 2014

Revenue maximizing study in particular for non-fare box revenues with affordability studies EXECUTIVE SUMMARY

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Contents

Executive Summary ..................................................................................................................................................... 13

1. Context .................................................................................................................................................................... 71

1.1. Mumbai Railway Vikas Corporation .................................................................................................................... 74

1.2. About Mumbai Metropolitan Region ............................................................................................................. 74

1.3. Mumbai Urban Transport Project (MUTP) ................................................................................................... 78

1.4. Objectives of the study..................................................................................................................................... 80

1.5. Study's Domain and Approach......................................................................................................................... 81

2. Ideation Stage ........................................................................................................................................................ 84

2.1. Introduction: .................................................................................................................................................... 84

2.2. Review of Previous Plans and Studies ............................................................................................................ 85

2.2.1. Key Reports ................................................................................................................................................. 85

2.2.2. Railway Budget 2013-14 ............................................................................................................................. 85

2.2.3. Mumbai Suburban Rail Passenger Surveys & Analysis – by Wilbur Smith Associates (2012) ............. 86

2.2.4. Railway Vision Document - 2020 .............................................................................................................. 89

2.2.5. Concept Note for MUTP-III ....................................................................................................................... 90

2.2.6. Comprehensive Transportation Study for MMR – Lea Associates (2008) ............................................. 91

2.2.7. Consultancy Services for Development of Railway Land and Air Space - by Lea Associates (2007) .... 94

2.2.8. Improvement in Station design and engineering on Mumbai Suburban Railway section - by Lea Associates .............................................................................................................................................................. 96

2.2.9. Financial & Institutional study of railway operations in Bombay Metropolitan Region (BMR) - Symonds Travers Morgan ..................................................................................................................................... 97

2.2.10. Comprehensive Transport Plan for Bombay Metropolitan Region – Atkins ........................................ 100

2.2.11. Review of Legal Framework and DCR Regulations ................................................................................ 102

2.3. Stakeholder consultation ............................................................................................................................... 103

2.3.1. Introduction .............................................................................................................................................. 103

2.3.2. MMR Region Public Transport Operators .............................................................................................. 104

Western Railway (Mumbai Division) ...................................................................................................................... 104

Central Railway ..........................................................................................................................................................105

BEST .......................................................................................................................................................................... 106

2.3.3. City Planners & Administrators ............................................................................................................... 108

MCGM ....................................................................................................................................................................... 108

CIDCO ....................................................................................................................................................................... 109

2.3.4. Other Agencies ........................................................................................................................................... 110

RITES ......................................................................................................................................................................... 110

2.3.5. Developers .................................................................................................................................................. 111

L&T Seawoods Pvt Ltd. .............................................................................................................................................. 111


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Reliance Infrastructure Ltd (Mumbai Metro One Pvt Ltd) ..................................................................................... 112

2.4. Global best practices ....................................................................................................................................... 114

2.4.1. Introduction ............................................................................................................................................... 114

2.4.2. Key findings ............................................................................................................................................... 114

2.4.2.1. Japan..................................................................................................................................................... 114

2.4.2.2. China ..................................................................................................................................................... 118

2.4.3. Applicability for Mumbai City and Mumbai Suburban Railway System ............................................... 119

3. Fare Optimization Strategy ................................................................................................................................. 121

3.1. Background ..................................................................................................................................................... 121

3.2. Review of past financials and future projections .......................................................................................... 122

3.3. Representative framework for improving fare recoveries ............................................................................ 125

3.4. Existing Fare Structure ................................................................................................................................... 127

3.5. The focus of the present study ....................................................................................................................... 131

3.6. Commuter Survey ........................................................................................................................................... 132

3.6.1. Survey Methodology .................................................................................................................................. 132

3.6.2. Sampling .................................................................................................................................................... 133

3.6.3. Conduct of Survey ..................................................................................................................................... 137

3.7. Summary of Major Findings ......................................................................................................................... 140

3.7.1. Socio Economic Characteristics ............................................................................................................... 140

3.7.2. Trip Characteristics ................................................................................................................................... 141

3.7.3. Access and Dispersion Modes ................................................................................................................... 146

3.7.4. Preferred New Facilities by the respondents ........................................................................................... 147

3.7.5. Findings on the Survey Hypotheses ......................................................................................................... 149

3.8. Fare Optimization & Analysis ........................................................................................................................ 162

3.8.1. Structural anomalies in season tickets ..................................................................................................... 163

3.8.2. Willingness to pay extra ............................................................................................................................ 163

3.8.3. Means of ensuring the fares increases are affordable to the lower income passengers ........................ 165

3.9. Recommended interventions ......................................................................................................................... 166

Next Steps .................................................................................................................................................................. 170

4. Estimation of Potential Revenue from Non-Fare Box Sources ......................................................................... 173

4.1. Introduction .................................................................................................................................................... 173

4.2. Advertising ...................................................................................................................................................... 176

4.2.1. Current advertising business practices in the System ............................................................................. 176

4.2.2. Institutional framework and Schedule of Powers (SOP) ........................................................................ 185

4.2.3. Primary interviews with stakeholders ...................................................................................................... 187

4.2.4. Benchmarking with successful global transit systems ............................................................................ 194

4.2.4.1. Singapore Metro Rail Transit (SMRT) ................................................................................................ 194

4.2.4.2. Metro Transit Rail Corporation (MTR, Hong Kong) ......................................................................... 196

4.2.4.3. JR-East ................................................................................................................................................. 197


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4.2.4.4. Delhi Metro Rail Corporation (DMRC) .............................................................................................. 199

4.2.4.5. Learning for the City's suburban rail network .................................................................................. 201

4.2.5. Estimation of revenue potential from advertising for Mumbai Suburban Railway System ................ 202

4.2.6. Overview of Out Of Home (OOH) advertising industry ......................................................................... 205

4.2.7. Pre-requisites for enhancing revenue generation from Advertising ..................................................... 209

4.3. Station Rentals ................................................................................................................................................ 231

4.3.1. Introduction ............................................................................................................................................... 231

4.3.2. Current policy guidelines ......................................................................................................................... 236

4.3.2.1. Catering Policy 2010 ........................................................................................................................... 236

4.3.2.2. Policy for pay & use toilet 2006 ......................................................................................................... 238

4.3.2.3. Book stall policy 2004 ........................................................................................................................ 239

4.3.2.4. STD/ISD/PCO booth allotment policy .............................................................................................. 239

4.3.2.5. Automated Teller Machines (ATM) ................................................................................................... 239

4.3.2.6. Pay & Park facilities ............................................................................................................................. 241

4.3.2.7. Management of miscellaneous stalls /trolleys 2007 .......................................................................... 241

4.3.3. Learning from global urban rail/metro systems .................................................................................... 242

4.3.4. Estimation of potential from station rentals .......................................................................................... 245

4.3.4.1. Category A - Complementary Services & necessary (Pay & Park) .................................................... 245

4.3.4.2. Category B: Capture value from high footfalls without causing congestion (ATMs) ...................... 250

4.3.4.3. Category C: Other facilities (catering stalls) ...................................................................................... 254

4.3.5. Recommendations and action points ...................................................................................................... 259

4.4. Others - Indirect benefits .............................................................................................................................. 263

4.4.1. Introduction .............................................................................................................................................. 263

4.4.2. Indirect value created by the System ...................................................................................................... 263

4.4.3. Beneficiaries of the value created ............................................................................................................ 266

4.4.4. Value capture mechanisms ...................................................................................................................... 267

4.4.4.1. Congestion fees ................................................................................................................................... 267

4.4.4.2. Fuel taxes as carbon surcharge .......................................................................................................... 269

4.4.4.3. Green Cess: .......................................................................................................................................... 269

4.4.4.4. Urban Transport Tax: .......................................................................................................................... 271

4.4.4.5. Carbon credits: .................................................................................................................................... 272

4.4.4.6. Additional Property Tax: .................................................................................................................... 273

4.4.5. The Way Forward: .................................................................................................................................... 275

Next Steps ................................................................................................................................................................. 276

4.5. Real Estate Development .............................................................................................................................. 278

4.5.1. Background ............................................................................................................................................... 278

4.5.2. Overview of railway land assets in the MMR Region ............................................................................. 280

4.5.3. Challenges and Complexities ................................................................................................................... 304

4.5.4. Overview of Mumbai Real Estate Market ................................................................................................ 311


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4.5.4.1. Impact of Transit system on Real Estate market ............................................................................... 311

4.5.5. Development Plan and Development Control Regulations for Mumbai ............................................... 313

4.5.5.1. Development Plan 2014-34 ...................................................................................................................... 313

4.5.5.2. Development Control Regulations (DCR) in the MMR zone ............................................................318

4.5.6. Existing institutional arrangement & Railway guidelines ..................................................................... 323

4.5.7. Potential Estimation................................................................................................................................. 326

4.5.8. Pre-requisites for commercial development of railway assets................................................................ 341

4.5.9. Recommendations and action points ...................................................................................................... 349

5. Conclusion ........................................................................................................................................................... 356

6. Recommended Institutional Arrangement for MRVC for non-fare box sources of revenues ........................ 359

Annexure .................................................................................................................................................................... 361

Annexure-1: Lessons from Japanese Urban Rail Systems ..................................................................................... 362

Annexure-2: Detailed Report on Task-4 Commuter Survey ................................................................................... 371

Annexure-3: Advertising - India Entertainment & Media Industry ...................................................................... 372

Annexure-4: Overview of MMR Real Estate Market .............................................................................................. 379

Annexure-5: Summary of DCR of MCGM and TMC .............................................................................................. 397


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List of Tables

Table 1: Comparison of single journey fare ................................................................................................................ 13 Table 2: Select list of projects estimated over the next 10 years ............................................................................... 18 Table 3: % contribution of real estate to total revenue in major transit systems ................................................... 20 Table 4: Summary of policies and guidelines (Advertising in Mumbai Suburban Railways) ................................ 35 Table 5: Trends of different advertising media ......................................................................................................... 36 Table 6: Season Tickets - revenue contribution vs. share in daily ridership ........................................................... 63 Table 7: Average WTP across income groups, travel class and distance slabs ....................................................... 64 Table 8: Proposed interventions for fare box optimization ..................................................................... 65 Table 9: List of report analyze ................................................................................................................................... 85 Table 10: List of stakeholders .................................................................................................................................. 104 Table 11: Base fare at a minimum distance .............................................................................................................. 127 Table 12: MUTP Surcharge ...................................................................................................................................... 128 Table 13: Review of fare hikes for WR (Churchgate - Virar section) ..................................................................... 128 Table 14: Heat Map of the fare hikes between 31.12.2012 and 22.01.2013 for 2nd class MST commuters ......... 129 Table 15: Heat Map of the fare hikes between 31.12.2012 and 22.01.2013 for 2nd class SJT (or OT) commuters .................................................................................................................................................................................... 129 Table 16: Central line stations - Sample Size ........................................................................................................... 133 Table 17: Western line stations - Sample Size .......................................................................................................... 134 Table 18: Harbour line stations - Sample Size ......................................................................................................... 134 Table 19: Pilot Survey - Field Activity ...................................................................................................................... 137 Table 20: Main Survey - Activity ..............................................................................................................................138 Table 21: Gender & Age group mix in the sample....................................................................................................138 Table 22: Line wise respondents’ distribution ......................................................................................................... 144 Table 23: Summary of Access & Dispersion transport modes ................................................................................ 147 Table 24: Preference for new facilities .................................................................................................................... 148 Table 25: Willingness to pay extra for improvement on platform/station facilities: ............................................ 159 Table 26: Willingness to Pay Extra for Improvement on Train facilities: ............................................................. 160 Table 27: Willingness to Pay Extra for Reduction in Travel Times: ....................................................................... 161 Table 28: Consideration for analysis of reduction in time preference ................................................................... 161 Table 29: Season Tickets - Revenue vs. market share ............................................................................................ 163 Table 30: Average WTP across income groups, travel class and distance slabs .................................................... 164 Table 31: Non fare box operating revenue of various transit systems .................................................................... 173 Table 32: Mumbai division advertising revenue share in IR .................................................................................. 177 Table 33: Summary of commercial publicity policy governing Mumbai suburban system .................................. 178 Table 34: List of Circulars related to advertising ..................................................................................................... 181 Table 35: Level of delegation as per value of commercial contracts...................................................................... 186 Table 36: Stakeholders interaction - Advertising/ Commercial Publicity ............................................................ 188 Table 37: Advertising - Municipal Taxes ................................................................................................................. 189 Table 38: SMRT Media - Key Milestones for Innovative Concepts ........................................................................ 195 Table 39: revenue per passenger for different transits in FY 2012 ........................................................................ 202 Table 40: Mumbai suburban potential earnings by 2017 ...................................................................................... 204 Table 41: Mumbai division claims in advertising contracts ................................................................................... 210 Table 42: Mumbai division cases of License fee/penalty not recovered / short recovered .................................. 211 Table 43: Mumbai division-CR claims in advertising contracts ............................................................................. 212 Table 44: assessment for options for Master Plan formulation .............................................................................. 216 Table 45: Summary of non-negotiable parameters ................................................................................................. 221 Table 46: Comparison among existing structure, option A and option B ............................................................. 225 Table 47: Advertisement revenue generation - Indicative Implementation Plan ................................................. 228 Table 48: Categorization of station rental facilities ................................................................................................ 233 Table 49: Level of Service, J J FRUIN standards ................................................................................................... 233 Table 50: Level of services at key Mumbai suburban stations ............................................................................... 234 Table 51: Level of delegation as per value of commercial contracts ...................................................................... 235 Table 52: License fixation criteria as per Catering Policy 2010 ............................................................................. 237 Table 53: variation in license fees based on type of unit ........................................................................................ 238 Table 54: features of MoU for ATM ......................................................................................................................... 240 Table 55: MCGM - Revised parking rates (for 2014-15) ......................................................................................... 246


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Table 56: Comparisons of parking charges of Mumbai Suburban Railway, MCGM, and DMRC ....................... 246 Table 57: Railways and ULB association for parking ............................................................................................. 248 Table 58: Thane station redevelopment –proposed parking ................................................................................. 249 Table 59: ATM capacity enhancement .................................................................................................................... 253 Table 60: Spatial growth of satellite town - railway projects ................................................................................. 265 Table 61: Vehicle Insurance Premium Paid @4% & Green Cess @3 % in Mumbai (in INR Crores) .................. 270 Table 62: Revenue generation potential from Green Cess for Mumbai Suburban Rail ........................................ 271 Table 63: Projected additions to the existing vehicles traffic.................................................................................. 271 Table 64: Total Collection by the Government (Figures In INR Crores) .............................................................. 272 Table 65: estimated share of Urban Transport Tax for Mumbai Suburban Rail System @10% ......................... 272 Table 66: Estimated future property tax collections (in INR Crores) ................................................................... 273 Table 67: Estimate additional property tax collection as share of the Suburban Rail Network (flat rate tax regime) ...................................................................................................................................................................... 274 Table 68: Differential additional property tax rates - major and minor influence zone ...................................... 274 Table 69: share of the System under differential additional property tax ............................................................ 274 Table 70: List of Some of the railway owned vacant/open plots in MMR ............................................................ 282 Table 71: Railway Residential quarters (Type I to Type IV) from Churchgate to Bandra .................................... 283 Table 72: Staff Quarters from Bandra to Virar ....................................................................................................... 283 Table 73: Table showing overlapping stations between stations ........................................................................... 284 Table 74: Suburban Stations .................................................................................................................................... 285 Table 75: Matunga Workshop activities .................................................................................................................. 293 Table 76: Matunga Workshop Site Profile .............................................................................................................. 294 Table 77: Parel Central Locomotive Workshop activities ...................................................................................... 295 Table 78: Parel Central Locomotive Workshop Site Profile ................................................................................... 295 Table 79: Activities of Parel Western Railways Workshop .................................................................................... 296 Table 80: Site profile of Parel Western Railway Workshop ................................................................................... 297 Table 81: Mahalaxmi Workshop activities .............................................................................................................. 298 Table 82: Mahalaxmi Workshop site profile ........................................................................................................... 299 Table 83: Railway Car sheds in MMR ..................................................................................................................... 300 Table 84: Car shed wise rake holdings (Western Railways) .................................................................................. 300 Table 85: Types of Locos maintained in Kurla Diesel Car shed............................................................................. 301 Table 86: Types of Locos maintained in Kalian Diesel Car shed ........................................................................... 301 Table 87: Car sheds wise Rake holdings (Central Railways).................................................................................. 301 Table 88: Railway sidings in MMR ......................................................................................................................... 302 Table 89: Central Railways Goods Shed in Mumbai .............................................................................................. 303 Table 90: Sites identified with encroachments* ..................................................................................................... 306 Table 91: Sites identified with congestion outside the site .................................................................................... 307 Table 92: Sites identified with accessibility issues* ............................................................................................... 308 Table 93: the key railway stations identified as a part the DP 2014-34 for ToD strategy ..................................... 316 Table 94: Current land use classification of railway assets .....................................................................................318 Table 95: Existing FSI (MCGM) ............................................................................................................................... 321 Table 96: Distribution of identified assets according to the asset class ................................................................ 327 Table 97: Identified stations .................................................................................................................................... 328 Table 98: Identified operational assets (non - open plots) .................................................................................... 330 Table 99: Identified residential quarters ................................................................................................................ 332 Table 100: Identified operational assets (open plots) ............................................................................................ 332 Table 101: Identified residential quarters revenue potential ................................................................................. 338 Table 102: Details of Tokyu Corporation - Railway Operations ............................................................................ 365 Table 103: Tokyo Metro operating details .............................................................................................................. 368 Table 104: Residential space micro market in MMR ............................................................................................. 385 Table 105: Capital values in some of the prominent micro markets in Island City .............................................. 386 Table 106: Capital values in some of the prominent micro markets in Western Zone......................................... 386 Table 107: Capital values in some of the prominent micro markets in Central Zone .......................................... 387 Table 108: Capital values in some of the prominent micro markets in Navi Mumbai ......................................... 387 Table 109: Retail Space micro market in MMR ...................................................................................................... 392 Table 110: Summary of TMC DCR ........................................................................................................................... 405


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List of Figures

Figure 1: Mumbai Suburban Railway Network .......................................................................................................... 13 Figure 2: Past Financials of Mumbai Suburban Railway System ............................................................ 14 Figure 3: Non-fare box revenue as % of total operating revenue ............................................................................. 14 Figure 4: Financial projections for the System till 2023-24 ..................................................................................... 18 Figure 5: Estimated Capital Investment Projections over the next 10 years........................................ 19 Figure 6: Mumbai Suburban Railway Non-fare Box revenue contribution ............................................................ 20 Figure 7: Revenue contribution of advertising (Mumbai Suburban Railways) ...................................................... 23 Figure 9: PPP adjusted advertising revenue (in INR/pax) ...................................................................................... 24 Figure 8: Split of Mumbai transit OOH among transit systems .............................................................................. 24 Figure 10: Advertising value chain ............................................................................................................................ 25 Figure 11: Split of advertising revenue by different sources (Mumbai Suburban Railways) ................................. 25 Figure 12: Suburban rail ridership, real estate and station rental earning trends in Mumbai .............................. 27 Figure 13: Satellite town population growth (1991-2011) ........................................................................................ 28 Figure 14: National Housing Board Index for Satellite Towns in MMR Region..................................................... 28 Figure 15: Channel of fund flow for Green Cess levied at Central/State/City Government level ......................... 29 Figure 16: Distribution of Indian Railway's assets in the MMR region .................................................................. 30 Figure 17: Distribution trend of office market across zones ..................................................................................... 31 Figure 18: Bandra Station .......................................................................................................................................... 32 Figure 19: Mapping of Asset types (Revenue Potential vs. Ease of Implementation) ............................................ 35 Figure 20: Split of advertising revenue according to sources (Mumbai Suburban Railways) ............................... 35 Figure 21: OOH market trends .................................................................................................................................. 37 Figure 22: Bottom-up assessment of Mumbai advertising earnings ....................................................................... 38 Figure 23: Existing ATM break-up in Mumbai Suburban ....................................................................................... 38 Figure 24: Distribution of Catering Units (Unit wise and Area wise) ..................................................................... 39 Figure 25: ATM penetration per 100,000 populations ............................................................................................ 40 Figure 26: Expected revenues from pay & park ......................................................................................................... 41 Figure 27: estimated ATM earning with ATM additions .......................................................................................... 42 Figure 28: Revenue vs. Ease of Implementation (Advertising media vs. Station Rentals) .................................... 42 Figure 29: Past Financials of Mumbai Suburban Railway System .......................................................................... 60 Figure 30: Comparison of single journey fares .......................................................................................................... 61 Figure 31: Comparison of Season ticket fares ............................................................................................................ 61 Figure 32: Comparison of increase in fares (BEST vs. Mumbai Suburban Railways) ............................................ 61 Figure 34: Income wise distribution of suburban rail commuters .......................................................................... 62 Figure 33: Split of commuters based on ticket type ................................................................................................. 62 Figure 35: Structural Anomalies in Season tickets ................................................................................................... 64 Figure 36: 2nd Class MST fares vs. Income category on affordability scale ........................................................... 65 Figure 37: Summary of Potential interventions and impact on operating subsidy ................................................ 66 Figure 38: Scenario A (No fare interventions) .......................................................................................................... 67 Figure 39: Scenario B (Case-1: Current FRR is maintained) ................................................................................... 68 Figure 40: Scenario C (Case-2: Achieve FRR of 1.0) ................................................................................................ 68 Figure 41: Scenario D (Case-3: Achieve FRR of >1.0, i.e. in the range of 1.1 to 1.3) ............................................... 69 Figure 42: Mumbai Suburban Rail Network............................................................................................................. 72 Figure 43: Mumbai Metropolitan Region (MMR) .................................................................................................... 74 Figure 44: Transportation and Infrastructure - Ranking of cities ............................................................................ 75 Figure 45: Mode Share by No. of Trips – No Walk.................................................................................................... 77 Figure 46: Mode Share by Person*km – No Walk .................................................................................................... 77 Figure 47: Approach followed for the study ............................................................................................................... 81 Figure 48: Summary of passenger satisfaction survey findings - Wilbur Smith (2012) ........................................ 87 Figure 49: MUTP Phases ............................................................................................................................................ 90 Figure 50: MMR Urban Travel - Trip Purpose (2005) .............................................................................................. 91 Figure 51: Alternate Institutional Arrangements ..................................................................................................... 98 Figure 52: List of identified stakeholders................................................................................................................ 103 Figure 53: Integrated Development at O-Okayama station .................................................................................... 115 Figure 54: Osaka Station City .................................................................................................................................. 116 Figure 55: Osaka station redevelopment (Left) & Abenobashi Station (Right) ..................................................... 116 Figure 56: Tokyo Station City ................................................................................................................................... 117


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Figure 57: Past Financials of Mumbai Suburban Railway System ......................................................................... 122 Figure 58: Two step fare hikes in the Mumbai Suburban Railway System ............................................................ 123 Figure 59: Financial projections for next ten years for the System (conservative) ............................................... 124 Figure 60: Financial projections for next ten years for the System (alternate case) ............................................. 124 Figure 61: Representative economic framework for transit system ....................................................................... 126 Figure 62: Survey Methodology and Approach ....................................................................................................... 132 Figure 63: Mumbai Suburban Rail Map - Stations and Sample Size for the Commuter Survey .......................... 135 Figure 64: Survey Findings - Distribution of commuters based on education ..................................................... 140 Figure 65: Survey Findings - Distribution of commuters based on occupation ................................................... 140 Figure 66: Survey Findings - Distribution of commuters based on monthly income level ................................... 141 Figure 67: Survey Findings - Interrelation between education and average monthly income ............................. 141 Figure 68: Survey Findings - Trip purpose and frequency of travel....................................................................... 142 Figure 69: Survey Findings - Gender wise classification of travel class ................................................................. 142 Figure 70: Survey Findings - Monthly income vs. travel class ............................................................................... 143 Figure 71: Survey Findings - Ticket types ................................................................................................................ 143 Figure 72: Survey Findings - Line wise Travel length Frequency Diagram (TLFD) .............................................. 144 Figure 73: Survey Findings - Line wise classification of Access Mode ................................................................... 146 Figure 74: Survey Findings - Line wise classification of Dispersion Mode ............................................................ 146 Figure 75: Survey Findings - Access and Dispersion Modes vs. Income Group (Non-motorized) ....................... 147 Figure 76: Survey Findings - Preferred new facilities/amenities .......................................................................... 148 Figure 77: Survey Findings - Alternate mode of transport in the absence of the suburban network ................... 149 Figure 78: Survey Findings - Willingness to pay extra for existing system (for ~54% of the commuters who have expressed WTP) ......................................................................................................................................................... 151 Figure 79: Survey Findings - Access Time, Distance and Cost ............................................................................... 152 Figure 80: Survey Findings - Dispersion Time, Distance and Cost ........................................................................ 152 Figure 81: Survey Findings - Time, Distance and Cost comparisons ..................................................................... 153 Figure 82: Fare comparisons with other Modes of Public Transport..................................................................... 154 Figure 83: Comparing MST (40 trips/month) for suburban railway with BEST (non-AC).................................. 154 Figure 84: BEST vs. Suburban Rail fares ................................................................................................................. 154 Figure 85: Spend after train travel vs. affordability (2nd Class MST) ................................................................... 155 Figure 86: Spend after train travel vs. affordability (1st Class MST) ..................................................................... 156 Figure 87: Trip Frequency (No of Trips/month) ..................................................................................................... 158 Figure 88: Class wise Passenger Volume vs. Passenger Earnings (WR, Mumbai Suburban Section - 2012) ...... 158 Figure 89: Willingness to pay extra for improvement on the platform/station facilities ..................................... 159 Figure 90: Willingness to pay extra for improvement on train facilities .............................................................. 160 Figure 91: Willingness to Pay extra for reduction in travel time ............................................................................ 161 Figure 92: Maximum fare limits for the System ...................................................................................................... 162 Figure 93: Season Tickets (M.S.T.) - Actual Usage vs. Fares Charged ................................................................... 163 Figure 94: WTP Demand Curves for various Travel Class ...................................................................................... 164 Figure 95: WTP Demand Curves for various Income Groups ................................................................................ 165 Figure 96: Case-1 - Interventions for fare box optimization ................................................................................... 167 Figure 97: Case-1 - Interventions for fare box optimization - Impact on fares and operating subsidy ................ 167 Figure 98: Case-2 - Interventions for fare box optimization ................................................................................. 168 Figure 99: Case-2 - Interventions for fare box optimization - Impact on fares and operating subsidy .............. 168 Figure 100: Case-3 - Interventions for fare box optimization ................................................................................ 169 Figure 101: Case-3 Interventions for fare box optimization - Impact on fares and operating subsidy ................ 170 Figure 102: Summary of fare optimization strategies/interventions ..................................................................... 170 Figure 103: Indicative list of non-fare box revenue sources ................................................................................... 174 Figure 104: Mumbai division advertising revenues ................................................................................................ 176 Figure 105: Split of advertising revenue according to sources (Mumbai Suburban Railways) ........................... 176 Figure 106: Mumbai Division (CR) advertising earnings vs. target for the Division ............................................183 Figure 107: Commercial Publicity institutional framework ................................................................................... 186 Figure 108: Interactions with Advertisers ............................................................................................................. 190 Figure 109: Interactions with Media Agencies ........................................................................................................ 191 Figure 110: SMRT - Non fare box revenues (FY12) ................................................................................................. 194 Figure 111: SMRT - Ridership growth vs. advertising revenues ............................................................................. 195 Figure 112: MTRC - Non fare box revenues (FY12) ................................................................................................. 196 Figure 113: MTRC - Ridership growth vs. advertising revenues ............................................................................. 197


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Figure 114: JR East - Non fare box revenues (FY 12) ............................................................................................. 198 Figure 115: JR East - Ridership growth vs. digital advertising revenues .............................................................. 198 Figure 116: Revenue per passenger for transit systems for last six years .............................................................. 203 Figure 117: Bottom-up assessment of Mumbai advertising earnings .................................................................... 204 Figure 118: Expected Growth in Digital vs .Traditional Media (2013-17) ............................................................. 205 Figure 119: OOH - Trend in Market Size ................................................................................................................. 206 Figure 120: Advertising Industry Value Chain ....................................................................................................... 207 Figure 121: M-Indicator - Mobile Apps ................................................................................................................... 208 Figure 122: M-Indicator - Sample advertisements ................................................................................................. 208 Figure 123: Metro transits - Advertising Practices ................................................................................................. 222 Figure 124: Illustrative co-ordination committee at the divisional level .............................................................. 224 Figure 125: Illustrative integrated committee at Mumbai level ............................................................................. 225 Figure 126: Illustrative Institutional arrangement (entrusting MRVC with commercial exploitation of virtual media) ....................................................................................................................................................................... 227 Figure 127: Station rental earnings for Mumbai division & non-fare box earnings breakup for Mumbai division (FY 2012) .................................................................................................................................................................... 231 Figure 128: Ridership, real estate and station rental earning trends in Mumbai ................................................. 232 Figure 129: Ridership, real estate and station rental earning trends in SMRT .................................................... 242 Figure 130: Ridership, real estate and station rental earning trends in SMRT .................................................... 243 Figure 131: Ridership, real estate and station rental earning trends in JR-East Japan ....................................... 243 Figure 132: Ridership, real estate and station rental earning trends in TRTC ..................................................... 244 Figure 133: expected revenues from pay & park through corrections in parking charges ................................... 247 Figure 134: expected revenues from pay & park through corrections in parking charges ................................... 248 Figure 135: ATM on Mumbai division ..................................................................................................................... 250 Figure 136: ATM penetration per 100,000 .............................................................................................................. 251 Figure 137: estimated ATM earning with ATM additions ...................................................................................... 254 Figure 138: Unit-wise distribution of catering units (Left) & Area wise distribution of catering units (Right) . 255 Figure 139: area and rentals comparison for different catering units ................................................................... 256 Figure 140: Spatial Growth on account efficient and affordable suburban rail connectivity .............................. 264 Figure 141: Satellite town population growth trends (1991 - 2011) ....................................................................... 264 Figure 142: Population Distribution in Mumbai Metropolitan Region................................................................. 265 Figure 143: National housing Board Index for Satellite Towns in MMR Region ................................................. 266 Figure 144: Key beneficiaries of the value created by the suburban network ....................................................... 267 Figure 145: Channel of fund flow for Green Cess levied at Central/State/City Government level ...................... 270 Figure 146: Channel of fund flow for Fuel Cess (Central Road Fund Act) ............................................................ 276 Figure 147: Business districts in MMR .................................................................................................................... 280 Figure 148: Distribution of Assets across the MCGM region ................................................................................. 281 Figure 149: Distribution of assets in the MCGM region according to asset class ................................................. 281 Figure 150: Distribution of Stations across the line ............................................................................................... 284 Figure 151: Distribution of Stations across zones .................................................................................................... 291 Figure 152: Mumbai Suburban Railway Network .................................................................................................. 292 Figure 153: Matunga Workshop .............................................................................................................................. 294 Figure 154: Parel Central Locomotive Workshop ................................................................................................... 295 Figure 155: Parel Western Railway Workshop ....................................................................................................... 297 Figure 156: Mahalaxmi Workshop .......................................................................................................................... 298 Figure 157: Distribution of Sidings across zones .................................................................................................... 303 Figure 158: Bandra Station ...................................................................................................................................... 306 Figure 159: Spatial population growth in MMR (1971 and 2001) ........................................................................... 312 Figure 160: Spatial population growth in MMR (2011 and 2052) .......................................................................... 312 Figure 161: DP 2014 - 34 Growth centers in MMR .................................................................................................. 315 Figure 162: Transit Oriented Zones in Greater Mumbai ......................................................................................... 316 Figure 163: Variations of Maximum FSI in commercial areas with distance from CBD ..................................... 320 Figure 164: Variations of Maximum FSI in residential areas with distance from CBD ....................................... 320 Figure 165: FSI values across different zones .......................................................................................................... 321 Figure 166: Land use change and FSI relaxation approval process ....................................................................... 323 Figure 167: Existing Institutional Arrangement for property development ......................................................... 324 Figure 168: MoU between RLDA and MRVC.......................................................................................................... 325 Figure 169: Distribution of identified assets according to geographic zones........................................................ 328


11 PwC

Figure 170: Distribution of selected stations according to geographic zones ....................................................... 329 Figure 171: Identified stations .................................................................................................................................. 329 Figure 172: Distribution of identified operational assets (non - open plots) according to type .......................... 330 Figure 173: Distribution of identified operational assets (non - open plots) according to geographic zones ...... 331 Figure 174: Identified operational assets (non - open plots) .................................................................................. 331 Figure 175: Distribution of identified operational assets (open plots) across geographic zones ......................... 333 Figure 176: Stations - Annuity under prevailing FSIs ............................................................................................ 335 Figure 177: Stations - Annuity under enhanced FSIs ............................................................................................. 335 Figure 178: Stations - Upfront revenues ................................................................................................................. 335 Figure 179: Operational assets (non - open plots) - Annuity under prevailing FSIs ............................................ 336 Figure 180: Operational assets (non - open plots) - Annuity under enhanced FSIs ........................................... 336 Figure 181: Operational assets (non - open plots) - upfront revenue ................................................................... 337 Figure 182: Operational assets (open plots) - Annuity under prevailing FSIs...................................................... 337 Figure 183: Operational assets (open plots) - Annuity under enhanced FSIs ...................................................... 338 Figure 184: Operational assets (open plots) - upfront revenue ............................................................................. 338 Figure 185: Annuity at prevailing FSIs .................................................................................................................... 339 Figure 186: Annuity at enhanced FSIs .................................................................................................................... 340 Figure 187: Upfront revenue .................................................................................................................................... 340 Figure 188: MLIT Institutional structure................................................................................................................ 344 Figure 189: MTRC institutional arrangement ........................................................................................................ 345 Figure 190: Formation of a committee for integrated planning (Illustration) ..................................................... 345 Figure 191: Contract management approaches ....................................................................................................... 348 Figure 192: DMRC Institutional arrangements ...................................................................................................... 349 Figure 193: Land Management Cell (Illustration) .................................................................................................. 353 Figure 194: Business development wing in MRVC (Illustration) .......................................................................... 354 Figure 195: Scenario A (No fare interventions) ...................................................................................................... 356 Figure 196: Scenario B (Case-1: Current FRR is maintained) ............................................................................... 357 Figure 197: Scenario C (Case-2: Achieve FRR of 1.0) ............................................................................................. 357 Figure 198: Scenario D (Case-3: Achieve FRR of >1.0, i.e. in the range of 1.1 to 1.3) ........................................... 358 Figure 199: Japanese Railway industry snapshot ................................................................................................... 362 Figure 200: History of Japanese Railways.............................................................................................................. 363 Figure 201: JR East Station Space utilization ......................................................................................................... 366 Figure 202: India E & M industry growth trend ..................................................................................................... 372 Figure 2043: Media Segments in Advertising ........................................................................................................ 373 Figure 203: Media wise ad-pie share (FY 2012 - INR 28,694 Cr) ......................................................................... 373 Figure 205: Cost v/s target audience for OOH media ............................................................................................ 375 Figure 206: OOH - Sector wise spending ................................................................................................................ 376 Figure 207: OOH - Media Categories ....................................................................................................................... 377 Figure 208: OOH - Market share split between traditional media and transit media ......................................... 378 Figure 209: Net absorption of office space in Mumbai .......................................................................................... 379 Figure 210: Supply and absorption trends of commercial space in MMR ............................................................ 380 Figure 211: Distribution of office market in MMR according to sectors ................................................................381 Figure 212: Commercial space micro market in MMR............................................................................................381 Figure 213: Business districts in MMR ................................................................................................................... 382 Figure 214: Distribution of office space according to sectors in CBD & Off CBD, Emerging CBD and Extended CBD ........................................................................................................................................................................... 383 Figure 215: Distribution trend of office market across zones ................................................................................ 383 Figure 216: Growth of office space stock across business districts........................................................................ 384 Figure 217: Commercial lease rental trend in MMR business district .................................................................. 385 Figure 218: Capital & Rental YoY Growth rates across business districts ............................................................ 385 Figure 2208: Supply and absorption trend of residential space in MMR ............................................................. 388 Figure 221: Micro market split of launch units as on March 2012 ........................................................................ 388 Figure 219: Residential launch trend in MMR ....................................................................................................... 388 Figure 222: Ticket size split of launched units as on March 2012 ......................................................................... 389 Figure 223: Mall Space Demand and Supply in MMR ........................................................................................... 390 Figure 224: Distribution of Malls across MMR ....................................................................................................... 391 Figure 225: Distribution of retail stock (Total area 8.72 million sq. ft.) ............................................................... 392 Figure 226: Mall Space demand and supply across micro markets (2013) .......................................................... 393


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Figure 227: Mall Space Demand trend across micro markets ............................................................................... 393 Figure 229: Average mall rentals in MMR .............................................................................................................. 394 Figure 230: Popular verticals in organized retail ................................................................................................... 394 Figure 228: High street retail rentals ...................................................................................................................... 394 Figure 231: Retail lease rental trend in MMR ......................................................................................................... 395 Figure 232: Micro market real estate growth profile ............................................................................................. 396


13 PwC

Executive Summary

Background and Context

A Profile of the Mumbai’s Suburban Railway System

The city of Mumbai is the financial capital of the country, and the suburban railway network serves as the city’s life line. The network is a part of the Indian Railways (IR) under the Ministry of Railways (MOR). Two zonal divisions of IR, viz., Western Railway (WR) and Central Railway (CR), operate the railway lines in Mumbai. Mumbai’s suburban railway system is one of the most complex, densely loaded and intensively utilized system in the world. It carries over ~7.4 million passengers per day through a network over 319 km long, with a line length (track km) of over 876 km. The network operates over 2600 train services per day with a fleet of over 270 rakes (9 car equivalents which are run in 9, 12 and 15 car composition).1

The system accounts for 51% of all motorized trips in the city2. Even with this high share of commuters’ traffic, the operating revenues for the system have been declining year-on-year. Mumbai Suburban Railway’s total revenue was INR 1344 Crores in 2011-123. While the Central Railway generated revenues of ~INR 711.80 Crores from 76 suburban railway stations, the Western Railway earned ~INR 632.20 Crores from 28 suburban railway stations. Against this, their respective operating losses were INR 571.10 Cr and INR 88.54 Cr.

At current levels, fare box revenues have been insufficient to meet the challenges of managing a high-density transit system

Past studies have estimated that the suburban railway system carries an estimated 40% of Indian Railway’s (IR) daily passenger traffic (measured in terms of passengers). This represents 12% of the overall passenger traffic (measured in terms of passenger-km), and about 7% of IR’s total traffic including freight4. However, the system generates only 1.5% of IR’s total revenue, indicating a high level of cross-subsidization.

It is also observed that between 93% and 95% of the total revenues of the suburban railway system is contributed from fare-box sources, through sale of tickets. Railway fares in the city network have been one of the cheapest, while offering one of the fastest transit modes, creating significant value to commuters

Table 1: Comparison of single journey fare

Distance Slab 0 - 10 km 11 - 20 km 21 - 30 km 31 - 40 km 41 - 50 km

Suburban Rail (2nd class) 5 10 - 15 15 15 15 - 20

Suburban Rail (1st class) 45 60 - 85 85 - 110 115 - 120 120 - 130

BEST (non-AC) 6 - 15 18 - 20 22 - 25 28 - 30 35 - 40

BEST (AC) 20 -40 50 - 60 70 - 80 90 - 100 110 - 120

Auto Rickshaw 15 - 99 100 - 197 198 - 296

Taxi 19 - 124 125 - 247 248 - 371

Under construction Mumbai Metro 1 8 - 12 - - - -

Cars5 7 - 70 70 - 135 140 - 200 207 - 270 270 - 335

Source: BEST (Website), Railway fare chart, m-indicator, PwC Research & Analysis

1 Source: MRVC (Presentation "Need of Urban & Regional Rail Based Transport"; December 6, 2013) 2 Source: Comprehensive Transportation Study (CTS) for Mumbai Metropolitan Region (2008) 3 Source: WR and CR (Mumbai Division), MRVC 4 World Bank’s Project Appraisal Document for MUTP-2A 5 Assumption: Petrol price of ~INR 80 per liter and mileage of 12 km/liter.

Figure 1: Mumbai Suburban Railway Network


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At the current fare levels, there is a significant deficit between revenues and operational expenses that currently stands at one-third of the total expenses incurred by the system. This represents ~INR 660 Crores of financial gap for the financial year 2011-12. The fare recovery ratio (FRR), (i.e.) the degree to which operating revenues are sufficient to recover operating expenses for a transit agency, has declined from around 1.0 during 2004-2008 to less than 0.65 since financial year (FY) 2008-09 and it was ~0.6 in 2011-12. The major contributor to this decline in financial performance, is the increase in factor costs (electricity, manpower) as well as addition of new capacity in the system that has led to a spiked increase in overall maintenance and operating expenses

Figure 2: Past Financials of Mumbai Suburban Railway System

Source: MRVC, WR & CR (Mumbai Division)

The level of non-fare revenues in the system is low, when compared with other urban rail systems in the world

The contribution of non-fare box or non-ticketing revenues, as present in the system has been nominal (around 6% - 7%), and at levels that are substantially lower than comparable transit systems. The non-fare box revenues contribute over 10% of the total revenues in case of comparable transits.

Figure 3: Non-fare box revenue as % of total operating revenue

Source: PwC Analysis, Annual Reports of Metro Rail Systems

There is a growing need for investments and sustainable revenue enhancement measures while the financials of the suburban rail system are deteriorating

The suburban system has been challenged by the growth of the city’s population, as well as the need to address urgent congestion issues, caused by intensive use by the commuters. Even as the frequency of services are maintained at a reasonable level of 4 trains per minute, peak hour utilization are observed to be at levels over 5000 passengers per 9-car train, against a rated capacity of 1700. Such over-crowding causes safety hazards not only inside the trains, but also at stations and areas adjoining tracks, leading to increasing incidents of daily injuries and fatalities.

The current passenger carrying capacity is insufficient to meet the growing demand resulting in severe overcrowding. The network’s operating losses, does not provide any bandwidth to invest in capacity

41

(12) (49)

19

(316) (567) (626) (660) (1,000)

(500)

-

500

1,000

1,500

2,000

2,500

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

INR

Cr

Operating Expense Revenues Operating Surplus/Deficit

6.5%

13%

20%

24%

33%

41%

Mumbai Suburban Railway, Mumbai

TRTC, Taipei

DMRC, Delhi*

SMRT, Singapore

JR East, Tokyo

MTR, Hong Kong


15 PwC

augmentation on its own, and the system is dependent on budgetary allocation or concessional financing, such as through multilateral agencies.

The rail component of the “Mumbai Urban Transport Project” (MUTP), funded by World Bank has sought to address some of these issues through substantial investments in line and rake capacities, as well as through provision of technical assistance.

Mumbai Railway Vikas Corporation Ltd (MRVC Ltd), a public sector undertaking of Government of India, was created to implement the rail component of the MUTP project. The company is a joint undertaking between Ministry of Railways and Government of Maharashtra, with their respective equity contribution in the ratio of 51:49. The company is mandated to execute a number of suburban rail improvement projects for enhancing suburban rail transportation capacity thereby reducing overcrowding and meeting future traffic requirements. The company is also involved in further capacity planning and development of the Mumbai Suburban Rail system.

Reduction in over-crowding and creation of more assets and services to carry the same amount of traffic through MUTP investments, may lead to a further deterioration of the financial performance and increase in the financial gap of the railway system in the medium term. Therefore, there is a need to investigate revenue-enhancing measures both from fare-box and non-fare-box sources, in order to narrow the gap to a manageable extent, if not eliminate it altogether.

There may be a need to analyze the possibility of fare adjustment in relation to affordability and improved service quality

It is commonly felt that the low levels of fares for timely and frequent suburban rail services have positively contributed to mass movement of commuters from far-flung locations and consequently to the development of Mumbai as an economic powerhouse. However, in the context of Mumbai’s changing demographic profiles and increasing income levels, the efficacy of pursuing a “low fare policy” in isolation to other aspects impacting the commuter’s cost of living (including cost of alternate and feeder transport modes) has not been adequately tested.

Further in a congested environment like Mumbai, high levels of subsidies may send distorted economic pricing signals worsening the congestion issues. Commuters may also be willing to pay more for enhanced levels of service, caused due to the higher investments. Currently, suburban railway fares are pegged to a uniform scale of rates at a national level. However, for the reasons mentioned above, a case can be made for Mumbai-specific fare increases that are affordable to the local population, economically sustainable to help manage Mumbai's long-term commuter needs and directed to the special needs of the different commuter segments.

Considering the low levels of non-fare revenues, there is a need to explore the possibility of enhancement from such sources

As of 2013, advertising and station rentals contribute a modest amount to the suburban system’s top-line (~5-6% of the total revenues). However, this is low when compared with leading public transit systems around the world, such as TRTC (Taipei), SMRT (Singapore), JR East (Japan), MTRC (Hong Kong) and London Underground (UK). When adjusted for the low levels of existing fare box revenues, the proportional contribution of non-fare revenues will further decline.

Public transit systems create opportunities for tapping non-ticket revenues through multiple sources. Large-scale passenger movement create direct opportunities through increased potential for advertising and for additional passenger services provided through station kiosks, rental stalls, parking etc. among others. Further, land adjoining railway tracks and the air-space stations offer opportunities for real estate development in appropriate formats, which could unlock value for the railway systems. Finally, the reach and scale of suburban network has also led to the rapid development of the city and wealth creation in the influence areas, whose benefits are not captured by the suburban system, which could represent opportunities for the future.

Objectives of the Study

As a part of the MUTP-2A project funded by World Bank, MRVC appointed PricewaterhouseCoopers Pvt. Ltd ("PwC" or "the Consultant") to undertake a technical study titled "Revenue Maximizing Study in particular for Non-Fare Box Revenues with Affordability Studies" vide Letter of Award MRVC/W/168/TA3 dated 15.01.2013.

To identify ways to increase the revenue of the suburban train system, focusing on non fare box revenue,


16 PwC

To study and review the socio-economic profile of customers and examine the justification for financial

cross-support from other economic agents as well as the potential for fare adjustment in relation to

affordability and service quality.

To help in strengthening of skills in assessing non fare box revenue, and fare affordability and knowledge

obtained through the study to MRVC, and other agencies as appropriate (such as MMRDA, Ministry of

Railways, Government of Maharashtra, Western & Central Railways)

Tasks undertaken in the Study

To achieve its objectives, the study was divided in two phases with five distinct tasks

Ideation Stage: The ideation stage was planned to develop a fact-base of the current state, with the

help of primary and secondary research through the following tasks:

o Task 1: Review of Existing Studies and Literature: PwC reviewed railway statistics,

major studies and reports in related areas carried out over the last 20 years and major acts,

guidelines and regulations, in order to familiarize itself of the existing system.

o Task 2: Extensive interactions with stakeholders, including MRVC, different arms of

Western and Central Railway Suburban Divisions, city planning agencies and local bodies

including MCGM and CIDCO, other transit agencies like BEST, several private stakeholders in

the real estate and transit advertising space, in order to generate and validate hypotheses for

revenue enhancement, through various sources

During the course of the analysis phase, several formal interactions with the State agencies including MMRDA and Urban Development Department (UDD), besides interactions with other city transit systems like Delhi Metro Railway Corporation (DMRC) were also conducted.

o Task 5: Guided Study Tour:, As a part of this study, PwC was mandated to organize a

suitable guided study tour/training for the study of the fare system and the revenues generated

in the non fare box areas and other commercial activities in leading suburban metros of the

world, with a focus on the following areas:

Study of Diversification strategy for Revenue sources, especially non-fare box sources

Revenue maximization through Transit-Oriented real estate development/suburban

railway linked real estate development & advertising potential

Systems & processes to enable steady revenue stream from non-fare box sources,

institutional building and best practices etc.

Accordingly, the key urban cities of Japan (Tokyo and Osaka city) and China (Beijing and Shanghai) were selected, and a study tour was organized between June 30, 2013 and July 13, 2013. It included meetings with the major urban rail operators as well as Ministry of Land, Infrastructure and Transport (MLIT), Japan.

Analysis and Recommendations Stage:

During this stage, revenue-enhancing targets were established based on the expected financial gap over the next 10 years, and targeted measures, both from fare and non-fare perspectives were established through the following tasks

o Task 3: Estimation of potential non-fare box revenues: During this task, PwC

investigated means of enhancing non-fare box revenues, from several sources including the

following:

Advertising, including inside and outside local trains, Platforms

Rental of commercial space at stations

Commercial development at stations or on other suburban rail land


17 PwC

Indirect user charges

Pay and use amenities and other measures

PwC estimated the maximum potential achievable from various sources through multiple methods, as well as the critical success factors and interventions required for realizing these objectives. Real estate development emerges as one of the most important methods for revenue enhancement.

As part of the task, PwC in consultation with MRVC has developed preliminary concept plans at 4 selected sites in the suburban network, focused on airspace development of real estate.

o Task 4: Analysis of fare optimization and affordability studies: This task was aimed

at investigating ways of optimizing the overall levels of fares (according to what the market will

bear), while protecting the ability of lower income passengers to continue to use the rail system.

In order to do this, PwC undertook a detailed survey of commuters to establish their socio-economic profiles, estimating their ability and willingness to pay. As a result of this survey, insights were generated on possible fare optimization methods and structuring recommendations, that could be affordable to the general population. Further, several possible fare trajectory scenarios were generated for consideration.


18 PwC

Defining the contours of the study

The network is expected to cumulatively incur operating gaps of over INR 18,000 Crores over the next 10 years, which will represent a burden on the budgetary resources

Figure 4: Financial projections for the System till 2023-24

It has been observed that till 2007-08, the suburban railway system had been operating at near break-even levels. However, increasing factor costs, including employee and electricity prices, as well as increasing asset maintenance costs due to additional capital investments have led to steep operating losses in the recent years.

To estimate future projections, it was assumed that the operational cost will continue to increase at an annual rate of 7%, as projected by economic estimates, (long term outlook on inflation6) and that the revenues will grow in-line with population growth rate, assumed as 2% p.a.7 Accounting for the onetime increase in fares during January, 2013 it is estimated that the deficit during the financial year 2013-14 may be approximately INR 791 crores

This deficit is expected to increase substantially over the next 10 years and lead to a cumulative operating gap of close to INR 18,300 Crores till 2023-24 (calculated as an arithmetic sum), which will need to be financed through budgetary sources. This would also translate to a steadily declining fare recovery ratio from the current 0.60 to 0.40 by 2023-24.

An additional INR 30,000 is required to finance fresh investments through MUTP and other programs

Many further investments beyond MUTP Phase - 1 and 2 are currently being planned. While the exact extent of the investments and their costs are yet to be estimated, conservative estimates of the projects on the anvil add up to over ~30,000 Crores, (calculated as an arithmetic sum)

Table 2: Select list of projects estimated over the next 10 years

Estimated Projects Estimated Project Costs

1. Thane-Bhiwandi and Airoli-Kalwa lines ~ INR 1500 Crores

2. Electrification of Panvel-Pen and new single line on Panvel-Alibaug ~ INR 960 Crores

3. Panvel-Khopoli/Karjat doubling ~ INR 2139 Crores

6 Source: Survey of Professional Forecasters on Macroeconomic Indicators – 25th and 26th Round (RBI) 7 Population growth in MMR region ~1.5 -2.0% (@1.8% as per Project Appraisal Report for MUTP-2A Loan, World Bank)


19 PwC

4. Virar-Dahanu Road Quadrupling ~ INR 3522 Crores

5. Virar-Vasai-Panvel suburban Corridor ~ INR 5,500 Crores

6. Churchgate-Virar Elevated Corridor ~ INR 22,500 Crores

7. CSTM-Panvel Corridor ~ INR 11,000 Crores

Source: RFQ document for Churchgate-Virar Elevated Corridor, PwC Research & Analysis, News articles

The Comprehensive Transportation Study (CTS) for MMR (2008), a study undertaken by World Bank and MMRDA to formulate a comprehensive transportation strategy for the metropolitan region, also outlines the need for investments in the suburban railway system worth over ~29,113 Cr (@2005-06 prices) during 2008 – 2021 and around INR 31,418 Cr (@2005-06 prices) between 2008-2031. These investments are expected to augment capacity with over 200 line km and include some of the projects listed above.

Figure 5: Estimated Capital Investment Projections over the next 10 years

While some of the above projects are planned to be financed through private investments, servicing private capital will require creating avenues for maximization of commercial revenues and/or significant viability gap funding.

Therefore in the absence of any revenue enhancement measures, the cumulative operational deficit and investment need will represent a large financial burden on the Ministry of Railways over the next 10 years, estimated currently to be close to INR 50,000 Crores (as an arithmetic sum).

Augmentation of fare-box and non-fare-box revenues will need to be seen in the context of reducing the burden of the government towards meeting the operating and financing gaps of the Mumbai Suburban Railway System. The initial part of this study was spent in assessing the current context in greater detail through a series of stakeholder interviews, data analysis, literature reviews, and passenger surveys as well as through site visits and guided study tours. As a result of this ideation phase, several insights were gained, that helped to define the framework of the core issues, as well as possible solutions at hand, which were further elaborated to assess their ease of implementation, in order to generate targeted recommendations for the future.

Revenue Enhancement Potential from non-fare box sources

Insights gained during the Ideation Stage:

As part of the ideation phase, several reports and stakeholder interviews were conducted, in order to establish the current context of non-fare box revenues in the suburban rail network.


20 PwC

Non-fare box revenues in the suburban system are currently at a low level of INR 100 Crores

Analysis of railway statistics reveals that at present, non-fare box revenues in the Mumbai suburban network amount to a little over INR 100 Crores, with advertising forming more than 2/3rd of this revenue, rentals from station retail and catering units and other sources, forming the rest of the revenue sources.

Figure 6: Mumbai Suburban Railway Non-fare Box revenue contribution

Source: WR, CR, PwC Research & Analysis

Real Estate Development:

1. Due to its limited commercial mandate and the institutional complexities, the suburban

rail system has thus far not been able to tap any revenues from the commercial

development of railway land parcels in the city

Real Estate development has been one of the dominant sources of non-fare box revenues for successful

transit systems across the globe.

Despite having around 200 acres of surplus or monetizable land8 for commercial development in

Mumbai, not enough focus has been given in terms of monetizing these assets on a commercial basis.

Some limited efforts in this direction have included the monetization of a land parcel in the case of

Bandra and the identification of ~90 acres of land with the proposed Churchgate - Virar Elevated

Corridor. But these land plots have not been successfully brought to market till date.

The current commercial mandate for generating non-fare box revenues to suburban rail operators, WR

and CR, is limited to ticketing, advertising and station rentals (ATMs, pay & use facilities, pay & park,

etc).

Monetization of railway land through commercial development is entrusted to Railway Land

Development Authority (RLDA), an authority under Ministry of Railways at the central level. However,

land development requires the coordination with multiple agencies external to railways such as local

and state government that has so far limited its efforts.

Table 3: % contribution of real estate to total revenue in major transit systems

Transit Systems DMRC MTR Tokyu

Corporation

Hankyu Hanshin

Holdings

Mumbai Suburban

Railway

% of real estate revenue to

total non-fare box revenue

6.1%

(14% in FY

2010-11)9

43% 43% 25% 0%

Source: 2011 – 12 Annual reports of DMRC, MTR, Tokyu Corporation and Hankyu Hanshin Holdings

8 Preliminary estimates based on potential land parcels identified for commercial development according to RLDA site, bundled with Proposed Churchgate - Virar Elevated Corridor and in consultation with MRVC for some specific sites. 9 The income from other non-fare sources of revenues, for instance rentals, consultancy, etc increased substantially, however, lease revenues from real estate have declined during FY 2011-12


21 PwC

2. Literature reviews and stakeholder interactions indicate a need for a renewed thrust for

commercial development of land parcels in the city

o At the national level, the Railway Vision Document 2020 and consecutive Railway Budgets have

envisioned shift towards commercial development as a key focus area for revenue enhancement

o Several analytical studies in the past have studied various aspects of real estate development

Institutional study for BMR (STM, 1996): Real estate must be an important element of any

future business plan for railways;

CTS for BMR (1994) and CTS for MMR (Lea Associates, 2008): Focus on re-modeling of

stations for commercial exploitation and Airspace Development.

Study for Railway Land and Air Space (Lea Associates, 2007): Transit system alone

cannot stimulate real estate; there must be some location importance. In other words, there is a

need for integration of land use and transport strategies.

However, for air-space development or ToD at stations several implementation and operational

challenges have been highlighted such as at Dadar, Bandra (Suburban) and Kurla. (Improvement

in Station Design (Lea, 2005)

o At a city-level in Mumbai, policies for Transit-linked Real Estate Development of potentially high-value

parcels of land closer to railway tracks, or airspace development above operational assets have been

notably absent.

o International transit systems like MTR (Hong Kong) and Japanese metro systems have focused

on Transit-Oriented Development (ToD) as an important strategy for real estate development.

o An integrated approach to land and transport planning will be necessary for a system-wide and

viable real estate strategy.

o Recently, the city has recognized the importance of transit nodes on urban planning. ToD

around key transit nodes forms a key feature of the new Development Plan 2014-34 for the

Mumbai Metropolitan region, which is under formulation.

3. Commercial development of railway land parcels in Mumbai will come with its own set of

challenges; that need a well coordinated strategy to be surmounted.

o Commercial development of land parcels requires a coordinated approach among various agencies such

as railways, city government, state government and developers.

o Commercial development of any real estate asset in the city needs to be aligned with the Development

Control Regulations (DCR) that is governed by the Municipal Corporation of Greater Mumbai (MCGM)

or other local bodies (anchored by state/local governments) that is outside the purview of Railways.

o Further, railway land plots have traditionally been earmarked as operational land in the city's

development plan. Therefore, the success of any real estate strategy needs adequate planning support

from state and city governments.

o Since the development plan of city excludes railway land areas accessibility and infrastructure planning

activities have not accounted for such parcels. As a result, many of these sites lack access through

proper roads and may also lack connectivity to utility infrastructure, critical for commercial

development.

o Idle or surplus railway land plots with no operational activity have resulted in encroachments and land

title issues. For instance, title claims have surfaced during the transaction process of the Bandra land

plot which has resulted in delays of over five (5) years.

o A piece-meal approach to the above issues has resulted in bureaucratic delays in securing necessary

approvals and clearances for land use change, FSI increase, etc. that may take more than 12 - 24

months per parcel.


22 PwC

o Railway Land Development Authority (RLDA) has the jurisdiction for commercial development of

railway lands in India. Though guidelines for Multi-Functional Complex (MFC) are available such as

concession period, commercial structuring, model concession agreement, etc.; no adequate guidelines

or mechanisms exist for commercial development of residential colonies.

4. Land use and transport integration has helped unlock the potential from commercial

development in case of successful transit agencies

o Study of Japanese Railway industry indicate successful integration of land use planning, infrastructure

and transport development at the highest level as ministry (Ministry of Land, Infrastructure &

Transport, MLIT).

o Land-use and transport integrated urban planning can be seen in the case of Navi Mumbai (for

instance, Vashi and Belapur) by CIDCO and "Railway + Property model" of JR East, Tokyo. The

agencies indicated that this approach has helped in generating revenues eradicating the need for heavy

subsidies.

5. Revenue enhancement through commercial development would need a judicious strategy

that takes into account timing and micro-market issues

o Real estate market dynamics is intrinsically volatile with variations in absorption, lease rentals, and

tenants across micro markets and over time.

o The shape of the land parcels available with railways is typically longitudinal with highly skewed length

to width ratios. This lead to height restrictions on account to limited width and closeness to tracks and

other development constraints that can lead to discounting of realizable values.

o Demarcation between commercial and operational area in railway plots will be critical for their

potential development.

o Interactions with agencies reveal that air space development above suburban stations in Mumbai will

be challenging both from construction and financial viability points of view in comparison with green-

field development (E.g. commercial development at Navi Mumbai stations).

6. Given the market dynamics and institutional limitations, agencies have expressed

preference for commercial development through public-private partnership

o From the experience of CIDCO in Navi Mumbai, which has developed properties on five (5) stations

and has preferred Public Private Partnership (PPP) route for the 6th station, it can be observed that:

o A guided approach is not seen to be suitable for a volatile industry like real estate and a market

oriented approach involving private developers is preferable

o Government entities have limited flexibility with respect to marketing, pricing and contracting

aspects that are crucial in the real estate market

o A guided approach in the case of the first five (5) stations has resulted in high level of vacancies for

a long period, especially for large properties at Vashi and Belapur stations

o Limited funds available for investments in capacity augmentation of the system, also limits the

availability of the public funds for commercial development.

o Having recognized this, RLDA guidelines provide options for self-development, joint development and

third party development and management of properties.

7. Lack of precedence in working with agencies like railways could be a deterrent for

attracting private sector participants/developers who perceive an increased degree of risk

which may require focused attention

o Land development in Mumbai has higher potential of wind fall gains, risking greater public scrutiny

and perception risks. Well-defined risk/reward sharing is necessary at the outset before involving

private developers.


23 PwC

o Delays and uncertainty of infrastructure projects, frequent revisions to long term development plans,

and frequent amendments of DCR especially with respect to FSI could lead to greater uncertainties in

outcomes. This requires greater investment in project preparation and co-ordination with city agencies.

o Also, the lack of agreement between various government entities on development, relating to

overlapping jurisdiction is observed to be the major cause of delays and cost overruns

E.g. L&T Seawoods project, which suffered delays in clearances and approvals due to involvement of multiple agencies such as CIDCO, Central Railway, NMMC, etc having inter-agency issues, as well as changes requested in air space development over Seawoods Darave suburban station with respect to proposed CSTM - Panvel fast suburban rail corridor several years after the award of the project.

o Private participants will expect speedy clearances and approvals which will help boost the confidence of

the investors

8. MoU between RLDA and MRVC is a step in the direction of adding commercial

development as a potential source of non-fare box revenues

o During the course of this study, RLDA & MRVC have entered into a Memorandum of Understanding

MoU (Dt. 16.07.2013)10 for commercial development of Railway Land / air space above stations in

Mumbai, wherein the commercial assets so developed shall remain under the exclusive control of and

be operated and maintained by MRVC during the entire lease period. The concession period & Equity

IRR (EIRR) are proposed as 45 years and 22.5% respectively.

o The MoU focuses largely on commercial use development, but residential colony redevelopment and

residential assets are not covered under the MoU, which will need concession period of over 65 years.

However a preliminary framework has been established to fast track commercial development in

coming years

o However, in order for MRVC to succeed in its efforts, it would be necessary to resolve some of the

aforesaid challenges through involvement of state/local government or entities.

Advertising:

1. Advertising generates over 2/3rd of the total non-fare box revenues for Mumbai Suburban

Railway System

Advertising is the single largest source of non-fare box revenues as on date. If revenues from penalties

collected from ticketless travel are excluded, the contribution is as high as 75% of the total non-fare box

sources.

Figure 7: Revenue contribution of advertising (Mumbai Suburban Railways)11

10 Source: MRVC 11 This excludes the earnings from penalty collected against ticketless travel, and other miscellaneous sundry earnings


24 PwC

Source: Suburban/EMU Service Financial Data from WR & CR (Mumbai Division)

The Mumbai Suburban Railway System also generates the highest revenues from advertising for Indian

Railways as a whole, contributing around 34% of the total advertising revenues in FY 2011-12.

2. But, the revenues from advertising is very low when

compared to the other transit agencies

The system accounts for 51% of the motorized trips in the city12; however, its share in the city's outdoor

advertising market is only ~14%.

BEST carries around 4.5 million daily passengers as compared to Suburban Railway with daily

ridership of over 7.4 million, but both have equal share in

the outdoor advertising market of the city.

Further, on the basis of per-passenger advertising revenues,

Mumbai suburban rail scores among the lowest when

compared with its peer group, indicating a significant

untapped potential

Figure 9: PPP adjusted advertising revenue (in INR/pax)

Source: Annual reports of respective transits, PwC Research & Analysis

Revenue growth from advertising is almost stagnant. Target set by the railway board at zonal/divisional

level have been under-achieved for several years.

3. The advertising value chain is dominated by integrated players who are the key decision

makers

The present interactions between railways and the advertising market are limited with inventory

holders only, who are fragmented, small and have limited mandates.

12 CTS for MMR (2008)

2.1

1.56

1.02

0.99

0.68

0.59

0.26

MTR Corp, Hong Kong

London Underground

JR-East, Japan

Taipei Metro, Taiwan

MTA, New York

DMRC, India

SMRT, Singapore

Mumbai Suburban Railway

Figure 8: Split of Mumbai transit OOH among transit systems

36 59 67

49

75 90

74%

80% 75%

50%

60%

70%

80%

90%

100%

0

20

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INR

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.

advertising earnings

total non fare box earnings

advertising % of non-fare box


25 PwC

Media planners and media buying agencies which are the decision makers and influencers in the

selection of the type of media and the transit modes are currently absent in the list of customers served

by suburban railways.

Figure 10: Advertising value chain

Source: PwC Research & Analysis

Interactions with transit agencies and market participants reveal the following issues:

o Large number of smaller and local players in the suburban rail advertising space, has led to

severe fragmentation of the market

o Market players with larger appetite are either absent or have minimal presence in the network.

4. Growth in conventional outdoor media is declining and being replaced by fast growing

transit and digital advertising media

The current inventory available with railways is found to

be largely conventional outdoor media comprising

billboards & hoardings, which generate ~92% of the total advertising revenues

However, review of market reports suggest declining trend in the growth of conventional OOH market,

currently growing at only 2% p.a. 13

The advertising industry is undergoing a fundamental shift towards alternate media, such as transit

media (20% YoY), digital OOH media (35% YoY), internet &

mobile based advertising (26% YoY) 14

Going by industry trends, the conventional media may lose its

importance and value and hence there is a need to tap

opportunities from alternate media for growth.

Studies in the past have recognized the need for a better

market alignment of advertising inventory:

o Railway Vision 2020: Considers the idea of

launching a separate TV channel to disseminate

information and earn revenues and explore

merchandizing opportunity.

13 Growth rates; source: Pitch-Madison media Advertising Outlook 2013, PwC M & E Advertising Outlook 2016 14 Growth rates; source: Pitch-Madison media Advertising Outlook 2013, PwC M & E Advertising Outlook 2016

Figure 11: Split of advertising revenue by different sources (Mumbai Suburban Railways)

Source - PwC Research & Analysis, CR, WR


26 PwC

o CTS for MMR (2008): Emphasizes advertising as one of the new source of funding for

transportation system. In other words, advertising should be pro-market and adaptive to

industry dynamics to enhance revenues.

5. Interactions with existing market participants reveal key operational issues with the current

advertising practices

Market participants acknowledge that the network offers immense “opportunities to see” (eyeball

opportunities), an essential value creator for advertising

However, they have also expressed dissatisfactions regarding based on their past experience and have

largely limited plans for business expansion in the suburban rail network

Some of the key operational issues as highlighted are:

o Lack of market orientation and flexibility in inventory, pricing, etc.

o Lack of simple and time bound clearance and approval process

o Market unfriendly payment terms

o Inadequate security for the assets and investments

o Lack of grievance redressal and arbitration processes

o Contract tenor not appropriate to risks undertaken

6. Interactions with the integrated market participants who have not yet considered railways

as a medium of choice also reveal additional aspects to be addressed to achieve market

oriented outcomes

Integrated or larger players, having presence across the industry value chain, expressed willingness to

work with railways in the city if provided adequate incentives which meet their expectations

The summary of major expectations revealed from the interactions are as follows:

o Longer contract tenor of 10-15 years and stringent qualification criteria

o Mechanisms for involvement in media planning at an early stage, so that inventory can be

realistically aligned to market needs

o Better station aesthetics and choice of locations

Station Rentals:

1. Station rentals contribute to around 1/5th of the total non-fare box revenues and comprises

of various sources

Existing sources of station rental revenues comprise of ATMs, Pay & park, pay & use facilities, catering

stalls, book stalls, STD/PCO booths, shoeshine, etc. However, ATMs, Pay & park and Catering stalls are

the largest contributor in this category.

These sources can be categorized further as

o Category A: Facilities which are necessary & complementary to train services and can cater to both

commuters and external station area population. E.g. Pay & park

o Category B: Facilities which bank on higher footfalls and capture value without adding to the

congestion at the station premises. E.g. ATMs

o Category C: Station facilities that are currently provided which may need to be rationalized

considering better passenger amenities, passenger convenience and safety. E.g. catering stalls

2. Retail rental earnings in the system is not in pace with the retail market of the city


27 PwC

Rentals earnings are a function of ridership and local real estate rental price indices. However, in the

case of Mumbai Suburban Railway, the rentals are not in line with growing ridership as well as the

rental indices.

Figure 12: Suburban rail ridership, real estate and station rental earning trends in Mumbai

Source: CR and WR (Mumbai Division), PwC Research & Analysis

Interaction with officials reveal that, the license fee for existing contracts especially from catering stalls

and ATMs are not market determined.

Station platforms are flanked with tea stalls and milk stalls which were mostly awarded several decades

ago. The license fees for such facilities are revised nominally without substantial price corrections and

any open tender procedure.

Over half of the existing ATMs are awarded based on a MoU between Railway Board and nationalized

banks, which are lower than the license fee received through open tenders.

3. These sources of revenues compete with operations and passenger amenities for space.

Station areas including platforms and FOBs are highly congested at most of the stations.

Past studies have also highlighted the issue of inadequate space resulting in inconvenience to

passengers:

o Mumbai Suburban Rail Passenger Survey & Analysis (Wilbur Smith Associates,

2012): The study has highlighted the various aspects with respect to stations, platforms,

FOBs/Subways and trains causing dissatisfaction and inconvenience to passengers. Congestion,

inadequate space and platform width are the key issues highlighted by the commuters.

o Improvement in Station design and engineering on Mumbai Suburban Railway

section (Lea Associates): This study also highlights the congestion on platform and difficulty in

passenger movement due to presence of hawkers, stalls on platform area.

4. Some policies such as catering policy 2010 may have resulted in fragmentation of the market

Catering policy 2010 limits the number of major stalls to a maximum of two (2) per zone per

contractor. Hence, the larger industry players with interest in bulk contracts as found in case of Delhi

Metro, as well as branded outlets are absent from the suburban stations in the city.

Indirect Benefits:

1. The city has grown linearly along the suburban rail corridor, and recent projects, including

MUTP, are influencing the spatial and outward growth of the city

Spatial growth of the city can be attributed to several factors; however connectivity remains the largest

influencer of the way city grows.

70

80

90

100

110

120

130

140

2008 2009 2010 2011 2012

Ind

exed

an

nu

al r

eta

il r

enta

ls

Island city retail rental Eastern suburbs Retail rental Western suburbs Retail rental

Ridership Station rentals


28 PwC

The population in the peri-urban areas has grown substantially. For instance, population in the Virar-

Vasai region grew over 7 times between 2001 and 2011 following the quadrupling of Borivali - Virar

section under MUTP-1 and rake capacity enhancement.

Figure 13: Satellite town population growth (1991-2011)

Source: CTS for MMR (2008), Census 2011

2. As a result the property prices have appreciated several times in the last 10 years

The major impact has been observed in the peri-urban areas such as Thane and Virar-Vasai

Figure 14: National Housing Board Index for Satellite Towns in MMR Region

Source: National Housing Board Residex

3. While Railways and other government agencies play an important role in creating value, the

value is not captured by them

Railway, a Ministry under Central Government, has no jurisdiction to levy taxes outside railway

operations. However, the widely used value capture instruments such property taxes, stamp duties,

registration fees, etc are largely under the purview of the local and state government, with no precedent

of tax revenue share arrangement between state/local government and Railways.

Biggest beneficiaries of the value created are the private land owners near the transit nodes

4. There is a need for Railways to capture value through instruments/mechanisms designed

specifically to aid revenue augmentation

Past studies including the working group of Planning Commission on urban transport (12th five year

plan) have suggested several instruments/mechanism to capture value generated by the public

transport projects:

0.8

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Thane Vasai - Virar Navi Mumbai Mira- Bhayander Kalyan - Dombivali

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pu

lati

on

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illi

on

)

1991 2001 2011

-

100

200

300

400

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Thane Virar Vasai Navi Mumbai Mira Bhayender Kalyan Mumbai - Composite

On

scale

of

100 (

2001

2002 2007 2012


29 PwC

o The Planning Commission working group on urban transport (12th five year plan): It proposes

green cess and urban transport tax as some of the major instruments to capture value at

central/state/city government level.

o CTS for MMR (Lea Associates, 2008) had proposed development charge or one time

betterment levy as a means of source of funding transportation project. The study estimated

resources range from INR 86,000 Cr to 172,000 Cr for period 2006-31 (assuming charges at

5% and 10% for residential and non residential development).

o In March, 2013, an 11-member panel headed by additional chief secretary (home)

recommended congestion charge for the city in its 51-point action plan submitted to the

Bombay high Court.

5. However, institutional and legal frameworks will be the key hurdles in apportioning the

value captured to railways

Interaction with various officials in railways and city planners, reveal that, there will be several

claimants to the value created for the indirect beneficiaries

Also, no precedents or mechanisms exist in India to transfer the proceeds from tax revenues as

operating revenues.

However, precedents for tax/cess exist for financing of infrastructure projects wherein railways is one

of the claimants. For instance, Central Road Fund Act (based on Fuel Cess), which is piloted by central

government and not at city or state government level.

Figure 15: Channel of fund flow for Green Cess levied at Central/State/City Government level

Source: PwC Research & Analysis, Planning Commission working group report on Urban transport strategy (12th five year plan)


30 PwC

Key Findings from Analysis Stage:

As part of the analysis phase, an assessment of current inventory, regulatory framework and market were conducted, in order to estimate the potential that can be tapped with or without regulatory changes.

Real Estate Development

A) As-is and inventory assessment

Railway is one of the largest land owners (over 2,000 acres15) in the city with most of its land holdings

concentrated in the Island City, a prime real

estate area.

However, given the vast land under operational

use, only limited proportion (~10 - 20%) of land

parcels will be available for commercial

development including air space development16

The present land holdings can be classified as:

o Stations (Over 120 suburban stations)

o Operational lands

Four (4) workshops, 2 each in CR & WR

Around 11 Carsheds in MMR

9 Goods Sheds including Wadi Bunder

2 major parcel depots at Grant Road and

Currey Road in Island City

Open plots (surplus operational land with

little or no current operational usage)

o Residential colonies - around 10,000 railway

quarters in MMR region17, with many of

residential building/structures having an age of over 40 years.

o and Offices

The market attractiveness and regulatory frameworks may vary depending on the asset being proposed for

the commercial development, for instance, air space development above station vs. air space development

above workshop or carshed. Hence, there is a need to identify right mix of assets or land parcels for

commercial development.

B) Policy and Regulatory

Commercial development of railway land will be governed by RLDA guidelines, MoU between RLDA and

MRVC as well as local laws such as Development Control Regulations (DCR) for respective municipal

jurisdiction.

Key aspects of DCR reviewed that have major impact on the commercial viability are:

o Permissible land use: At present all railway land parcels fall under operational use, and hence for

the purpose of commercial development, change of land use is required. However, current DCR

15 Land area details as obtained from MCGM Land Use maps 16 Preliminary estimates based on potential land parcels identified for commercial development according to RLDA site, bundled with Proposed Churchgate - Virar Elevated Corridor and in consultation with MRVC for some specific sites. 17 Consultation with MRVC

Figure 16: Distribution of Indian Railway's assets in the

MMR region

Source - MCGM, Interactions with MRVC


31 PwC

does not have provisions for mixed land use or additional land use as in the case of air space

development above operational area.

o Permissible Floor Space Index (FSI): FSI for commercial use is 1.0 in TMC and MCGM suburban

area while it is 1.33 in MCGM Island City, but higher FSI up to 4.0 is given for notified areas only

o Further, FSI is calculated on the net land area after adjusting for mandatory recreational/open

space area, for instance, net land area is 85% of the total area in case of land plot of size between

2,500 to 10,000 sq. m.

o Mandatory parking provisions is necessary to be met and it is excluded from FSI calculations.

However, additional parking will be counted as a part of permissible FSI.

Approvals for land use change and FSI relaxation are required to be obtained from Urban Development

Department (UDD), Government of Maharashtra (GOM) and respective municipal bodies. As observed in

the case of Bandra land plot, this process takes around 12 to 18 months.

RLDA guidelines allow commercial models based on upfront premium and annual payment model;

however, upfront premium should be at least 7 times the annual payment component. Hence optimal trade-

off between upfront and recurring revenue stream (or annual payment) is required for each of the land

parcel based on financial feasibility and investment priority.

C) Real Estate Market Analysis

Analysis of Real Estate market has revealed

that Sub-urban areas are the new growth centres while Island City is more or less stagnant

The major real estate market in the city

comprises of offices, retail, residential and

hospitality. The market is observed to be

volatile and cyclic.

Commercial office space real estate

market: A phenomenon of migration

among the corporate away from the island

to the suburban and peripheral business

districts has been observed leading to

spatial restructuring. In the future the

distinction between CBD & Off-CBD, BKC

and Off-BKC and Central Mumbai may

become blurred.

Residential space real estate market: Most of the new residential units are coming up in the suburbs,

extended suburbs, Navi Mumbai and Thane with only 1% of new residential units are coming up in South

Mumbai. However, capital prices are the highest in Island City/South Mumbai.

Retail space real estate market: Island city already has quality retail space and it is more or less saturated.

But it also yields the highest rentals. Almost half of the mall space addition has been observed in the

Eastern Suburban region.

D) Complexities and challenges

There are two types of complexities found with respect to commercial development of railway land parcels.

o Macro-complexities: These are largely regulatory, legal and institutional challenges. For instance,

land use conversion in the congested area, multiplicity of agencies with overlapping jurisdiction and

approving authority, etc

o Site-specific complexities:

0%

20%

40%

60%

80%

100%

1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

Ma

rk

et

sh

ar

e i

n %

BKC & Off BKC CBD & Off- CBD Central Mumbai

Figure 17: Distribution trend of office market across zones

Source– Knight Frank Investment Advisory Report (2013)


32 PwC

o Accessibility – It was observed that several of the operational assets studied are either land

locked or have poor accessibility. Most of the operational assets are bounded by tracks and can be

approached only through access which are rendered inadequate because of various factors such as

encroachments

o Encroachments – It was observed that there are over 20 slum settlements on Railway land

parcels in the city. Generally encroachments are on the periphery of the open plots and take place

because of inadequate boundary and preventative measures.

Example – Bandra Station

Figure 18: Bandra Station

Source – Wikimapia, PwC Research & Analysis

o Congestion outside the site – Congestions are mostly observed in the vicinity of stations but

this challenge is not exclusive to station. If the site is located in a congested area getting land use

change may be difficult as the envisaged commercial development at the site will put further

pressure on already stressed infrastructure, utilities and traffic

o Size and Shape of the site – A smaller land parcel is more complex to construct compare to a

larger land parcel. Also it is desirable that the shape of the land parcel is not longitudinal

o Interference with existing operations –

Stations - With higher commuter traffic the complexities increases as the level of disruptions

caused goes up. Station like Dadar, CST and Bandra will be more complex as compared to

Byculla and Mulund

Operational Assets – Higher the intensity of operations higher is the complexity. Sites like

Parel Central Locomotive workshop, Virar Carshed, Mumbai Central carshed with high

intensity of operations will make air space development over these assets highly complex.

E) Estimation of potential

The following approach was followed in arriving at potential estimation.


33 PwC

Around 60 sites were identified and studied. It was estimated that if all these sites were put to market at

once, at a prevailing FSI, on an annuity model only assuming 4 - 5 years of construction period, it can

yield a maximum achievable potential of up to INR 600 Cr in the 5th year. This can be as high as INR

2,600 Cr in the 20th year.

On the other hand, if the sites were put to market at once, at a prevailing FSI, on an upfront premium

model, can yield a maximum achievable potential of up to INR 3,500 Cr. However, at an enhanced FSI up

to 4, the upfront premium can be as high as INR 8,000 Cr. Some of the sites are found to be financially

unviable to yield an EIRR of 22.5% for developer, at a prevailing FSI, which may become financially

viable at an enhanced FSI.

However, realization of revenues could be less than the potential for a number of reasons.

o It may be impractical to put all the land parcels in the market at once from the regulatory

perspective.

o Sudden increase in supply will disrupt the market dynamics leading to reduction in realisable

potential.

o Also, capability of railways/MRVC to handle over 60 real estate contracts and monitor construction

and operating activities will be another key constraint.

F) Pilot projects - Concept Plans for four stations/identified sites

PwC investigated and developed detailed concept plans for four sites located in Thane (E), Nahur (NGSM),

Bhandup store depot and Byculla (W), which are targeted to become pilot projects for commercial

development.

It is estimated that these four sites can together generate an upfront revenue of around

INR 90-100 Cr. However, the actual realization can be higher or lower depending on the approved FSI,

clearances and approvals from all authorities, timing of market entry and transaction appetite.


34 PwC

Summary

On mapping the four types of assets (identified) according to their revenue potential and ease of implementation based on the analysis of complexities associated, it was observed that open plots will be easier to be monetized compared to other types of assets.


35 PwC

Figure 19: Mapping of Asset types (Revenue Potential vs. Ease of Implementation)18

Source - PwC Research and Analysis

The above chart implies that the open plots (16 no.) are relatively the easiest to develop and has a potential to generate ~INR 178 per annum (in 5th year). However, air space development above stations are relatively the most difficult to develop given the high degree of operations at suburban station in the city. Also, though commercial development of residential colonies appears to be relatively easy, in the absence of railway guidelines and required incentives (for instance higher FSI), it may not be easier as compared to air space development above operational assets.

Advertising

A) As-is and inventory assessment

The present inventory or media are largely

conventional with a small presence of glow

signs and digital media (LCD/LED)

B) Policy and Regulatory

Advertising practices in Mumbai suburban

system are Governed by the “General Policy

Guidelines for Commercial Publicity” issued by

the Railway Board, some of the salient features

of which are as follows:

Table 4: Summary of policies and guidelines (Advertising in Mumbai Suburban Railways)

Theme Key Findings

Locations for advertising Stations, Inside trains (Luggage Top, Window Top & Route Map) & Outside Train

18 Revenue potential is a theoretical estimation (for 5th year on annual payment model, except in case of residential) under the assumption that all the sites will be put to the market at once.

Figure 20: Split of advertising revenue according to sources

(Mumbai Suburban Railways)


36 PwC

Media for advertising Hoarding ,Billboards, Glow signs, Kiosks, Digital Displays, Transfers

Outside station display

criteria (Hoardings)

Hoarding Classification

o Category A: (height of hoarding + 3 m) < (nearest track distance)

o Category B: All other than in Category A

Tendering Aspects o Bidding Parameter: Annual license fees

o Criteria for Reserve Price: 1.5 times the highest annual publicity earnings for

entire division during any of three preceding financial years

Contract structuring o Contract tenure: 3-5 years

o Escalation Clause: 10% p.a.

The review of policy guidelines and commercial circulars shows mismatch between the guidelines and

actual outcome (for instance bulk advertising rights) which are mainly attributed to shorter contract tenor,

fragmented market and legacy piecemeal contracts.

C) Advertising Market Analysis

The advertising industry is undergoing a fundamental shift towards alternate media, creating an

opportunity for mass transit systems.

Table 5: Trends of different advertising media

Alternate Media

Revenues (in INR Cr) CAGR

2008 2013P 2017E 2008-13 2013-17

Internet & Mobile 470 3,040 7,662 45% 26%

Transit Media 333 593 1,230 12% 20%

Radio 662 967 1,875 8% 18%

Cinema and Others 129 166 202 5% 5%

Traditional Outdoor 1,419 1,350 1,461 -1% 2%

Source- PwC Media and Entertainment Advertising Outlook 2016

Out-of-Home (OOH) advertising market which is ~ 7 % of total advertising industry in India19 is highly

susceptible to fluctuations in the economic and characterized by its volatility

Digital OOH, which is likely to grow at 35% (trends between 2012 and 2016); will significantly contribute to

the growth in the future. For instance, JR East has been able to enhance its per passenger advertising

revenues significantly riding on Digital OOH, with 66% CAGR growth in digital train ad revenues.20

19 Source: PwC Media and Entertainment Advertising Outlook 2016 20 Source: JR East, Tokyo, Japan (Meeting with JR East officials)


37 PwC

Figure 21: OOH market trends

Source: Pitch Madison Media Ad Outlook 2013

The industry is primarily driven and influenced by increasing number of agencies integrated across the

industry value chain. These players are at a better position to serve their clients thus making them more

valuable. Globally as well as at home Delhi Airport (DIAL), Mumbai Airport (MIAL), DMRC, Mumbai

Metro One, are some of the entities/companies who prefer working with such integrated players.

D) Complexities and challenges

As identified during ideation stage, there are several operational and transactional issues with respect to security, market friendly payment structure, shorter contract tenor, market fragmentation, etc. Also, several initiatives in the recent past for bulk contracts have not materialized. For instance, attempts by Mumbai Division of Western Railways and Central Railways have failed for the following reasons

Interference with the existing numerous piecemeal contracts

Existing contracts with multiple agencies resulting in a high fragmentation even at a single station

Aggressive reserve price as a fixed license fee which is to be escalated annually

E) Estimation of potential

The potential can be estimated in three ways

Based on benchmarking with global urban rail/metro systems: The network generates among the

lowest per passenger advertising revenue on purchasing power parity when compared with other transit

systems. Even if DMRC (Delhi) and SMRT (Singapore) are taken as benchmark, a potential of around INR

180 - 200 Cr can be achieved in next five years.

Based on share in OOH market: Suburban rail accounts for ~51% of the motorized trips in the city

(CTS for MMR, 2008), however, has only 14% share in the city's OOH advertising industry. As per the PwC,

Media & Entertainment Advertising Outlook 2013-17, OOH advertising market is estimated to reach USD

538 million in 2017 (~INR 3,161 Crores21) of which round 55% of the market will be shared equally between

Delhi and Mumbai. This converts to advertising revenue potential of over ~INR 200 Crores for the

suburban rail network by 2017 (E).

Bottom-up estimates: Based on proper contract management and efficient monitoring and following a

strategic road map as market aligned strategies the revenue potential of over INR 250 Crores can achieved

in the short to medium term.

21 Currency conversion rate - 1 USD = INR 58

1412 1752

1419 1848

1717 1862 1943

24%

-19%

30%

-7%

8.4%

4.4%

-30%

-20%

-10%

0%

10%

20%

30%

40%

0

500

1000

1500

2000

2500

2007 2008 2009 2010 2011 2012 2013

INR

Crs

.

OOH advertising revenues growth rate


38 PwC

Figure 22: Bottom-up assessment of Mumbai advertising earnings

Sources – PwC Research & Analysis

Station Rentals

A) Inventory Analysis

Catering stalls, ATMs and Pay & Park service form about 80% of total station rental earnings.

Pay & Park: Western Railways & Central Railways together has 40 parking lots at around 30 stations

mainly catering to two wheelers.

ATMs:

o Of existing 159 ATMs (as of June, 2013) in Mumbai

Suburban Railway Network, around 80% are awarded

to SBI and other six (6) nationalized banks via MoU

route and remaining 32 ATMs were installed through

open tender process at divisional railway.

o Recently in June 2013, Central Railways has called for

101 ATM’s in 38 suburban stations for the concession

period of 5 years. Of these 101 ATM’s, 84 sites have

already been awarded (by December, 2013)

successfully to Banks / Financial Institutions.

Catering stalls: The total available catering area on

suburban station is around 25,000 sq. ft. with ~84% of the available station rental area consume by tea

stalls only, however these tea stalls form only half of the total 405 stall and kiosks present in the system.

36%

44%

20% SBI as per MoU

Nat. banks as per MoU

others via open tender

Figure 23: Existing ATM break-up in Mumbai Suburban


39 PwC

Figure 24: Distribution of Catering Units (Unit wise and Area wise)

B) Policy & Regulations

Each of the source of rental earnings is governed by specific policy guidelines as formulated by Railway

Board and implemented by Zonal and Divisional Railway.

Cateing Policy 2010: New Catering policy was formulated under which the railways will progressively

take over the management of all catering services on platform/station (except food plazas) from IRCTC

through departmental catering in a phased mnner. The key silent features of the policy are:

o Contract tenor of five (5) years with provision for renewal after every 3 years only for minor units

o License fee fixation shall be determined based on defined set of parameters such as station

category, average number of daily passengers, number of train stoppages, type of license, unit size,

circle rates, location of the unit, etc.

o License fees are fixed by the Chief Commercial Officer for all major and minor units except for the

units under the purview of IRCTC

Pay & Park: Railway Board letter no. 95/TGI/8/P dated 15.12.1995, Commercial Circular No. 35 of 2000

and Commercial Circular No. 69 of 2006 define the policy for pay and park services, which states that the

parking facilities can be either operated by the divisions departmentally or through a third party contractor

o In case of third party contracts the contract tenure is 3 years

o Divisions empowered to fix parking charges, reserve price (Sr. DCM/DCM) with concurrence of

divisional finance and approval of DRM

o Reserve price fixation criteria - Land value, number of users, type of vehicle

ATMs: Installation of Automated Teller Machines (ATM) is primarily governed by the MoU signed on

04.08.2006 between Indian Railway (IR) and State Bank of India (SBI), and similar MoU signed on

22.11.2006 between IR and other six (6) nationalized banks. The silent features of these MoUs are:

Salient features of MoU

Contract Period 5 years

Licensee fees for category “C” stations (2006 rate) INR 45,000/sq. m. /annum

Escalation rate 5% p.a.

ATM kiosk area 6 sq. mt.

Internet Ticketing Kiosk (free of fee) 1.5 sq. mt.

Electricity connection will be provided by Railways on payment of charges by the bank


40 PwC

In addition to MoU, Commercial Circular No. 03 of 2001 outline the policy guidelines for the installation of

ATMs through open tender process, for the concession tenor of five (5) years with a provison for renewal for

additional five (5) years.

In addition to above, other policies governing the rental earnings from various sources include:

o STD/ISD/PCO booth allotment policy

o Policy for pay and use toilet 2006

o Shoeshine

o Management of misc. stalls/trolleys 2007

o Book stall policy 2004

C) Market Analysis

Pay and Park:

o With only one parking space for every 120 vehicles, sufficient demand for parking exists in the city22.

Also, the commuter survey show that around 4% of the commuters surveyed access station through 2-

wheelers indicating that there is a demand for as high as 2,00,000 parking space (equivalent to 2-

wheelers) if the results are extrapolated for the entire network.

o Also, the parking charges for the parking lots owned by MCGM are the highest in the city. This will

further drive the demand for parking in railway plots if sufficient space is made available.

ATMs:

o The subruban rail network of the city

carries over 1/4th of the city's

population daily, majority of whom

belong to service and business class.

However, its share in the city's ATM

coverage is less than 3%.

o Although in the last three years ATM

growth in India has been very high

(almost 100%)23, Indian has one of

the lowest penetrations of ATM.

o Concepts like White Label ATMs24

are being emphasized by RBI for

increasing the level of ATM

penetration per 100,000 population.

D) Challenges and Complexities

Pay and Park: Congestion in the station area, lack of sufficient land parcels with better connectivity,

very low parking charges, etc are the key issues making pay and park opportunity in the Greater

Mumbai area financially unviable. Of the 40 railway parking lots, only 15 lots are present in the MCGM

area, most of them are located in the suburban region.

22 Mumbai has only one parking lot for every 120 vehicles (Source: NDTV - http://www.ndtv.com/article/cities/mumbai-has-one-parking-spot-for-every-120-vehicles-207316) 23 World Bank 24 The white label ATMs (WLA) are owned and operated by non-banking companies and do not display any bank's branding. WLAs serve customers from all banks and will be interconnected with the entire ATM network in the country

125.8

50.9

45.6

4.3

129.0

60.2

49.6

8.9

Japan

Singapore

Hong Kong

India

2011

2008

Figure 25: ATM penetration per 100,000 populations

Source: World Bank Data

http://www.ndtv.com/article/cities/mumbai-has-one-parking-spot-for-every-120-vehicles-207316


41 PwC

ATMs: The sububan railway stations already being highly congested, any addition of ATMs inside

stations may have to compete for space with passenger convenience. However, ATMs in non-paid area

such as in ticketing area, outside station platform area, will not congest the stations.

Catering stalls:

o The sububan railway stations already being highly congested, and existing stalls as found in the

previous studies are adding to passenger inconvenience.

o License fees are not reflective of market rates as existing legacy contracts are being renewed at

nominal increase in license fees without any price corrections

o The current Catering Policy which permits maximum two major stalls per zone per contractor has

failed to attract larger, branded and organized players and it has also lead to high fragmentation.

This, also, has increased contract management activity, time and costs at divisional railways level.

E) Revenue Estimation

Pay and Park:

o The revenues from pay and park can be enhanced by price correction, capacity augmentation or

combinations of the two.

o Parking charges can be enhanced still keeping it lower than the parking rates defined by MCGM. Some

of the benchmarks that can be used are parking rates charged by DMRC in Delhi or average parking

rates proposed by MCGM.

o Further capacity addition can be planned on land plots, which are surplus or having less operation

density, near transit nodes to enhance the supply.

Figure 26: Expected revenues from pay & park

ATMs:

o Preliminary estimate suggest that around 250-300 ATMs can be added to 21 stations having higher

footfalls considering the existing level of penetration in India (8 ATMs per 100,000 population) as

benchmark.

o At an average license fee of around INR 1,47,000 per sq m based on 84 ATM sites tendered by CR

during 2013, revenues from ATMs is estimated to be around INR 88 Cr by FY 2018-19.

5.5

10

17

29

Existing Revenues (FY 12)

Only pricing corrections

Only enhanced capacity (3-4 x)

Pricing corrections + capacity

enhancement

INR

Cr


42 PwC

Figure 27: estimated ATM earning with ATM additions

Catering stalls:

o Given the priority of passenger convenience and high congestion level in station/platform area, we did

not forecast any revenue enhancement. However, some of the ways though which the potnetial can be

enhanced are as follows:

By converting legacy contract to open tender

Through correction in license fee in accordance with the market prices or as per Catering Policy 2010

By planning space for retail during station redevelopment projects

Comparison of revenue source

When the various non-fare box revenue sources are mapped against one another on both potential and ease of implementation scale, it is seen that ATM scores high on both the scale indicating that it is low hanging fruit. The high potential can be explained by the better prospects of the ATM market

Figure 28: Revenue vs. Ease of Implementation (Advertising media vs. Station Rentals)

Source – PwC Research & Analysis

Indirect Benefits

A) Instruments of value capture

5 13

25

37

52

68

88

159

259

359

459

559

659

759

0

100

200

300

400

500

600

700

800

0

10

20

30

40

50

60

70

80

90

100

2013 2014 2015 2016 2017 2018 2019

To

tal

AT

M

INR

Cro

res

ATM annual earnings (INR Crs.) Total ATM's


43 PwC

Some of the most widely use value capture mechanisms used by successful transit agencies across the globe and as proposed by various entities in India such as Planning Commission are as follows

Congestion fees – Congestion charge or congestion fee is a fee payable to use traffic congested zone

Fuel taxes as carbon surcharge – Fuel tax can be levied on private vehicles

Green Cess – Green Cess is a cess levied on new and existing private vehicle users who have or will be

benefitted from the decongested roads as a result of others using suburban rail system

Urban Transport Tax – Urban Transport Tax is a cess levied on new private vehicle users who will be

benefitted from the decongested roads as a result of others using suburban rail system

Additional Property Tax – Levying of higher rate of property tax on properties in the vicinity of

Suburban Stations (As suburban stations has the potential to increase the property values in its

vicinity)

B) Policy and Regulations

In March 2013, an 11-member panel, headed by additional chief secretary (home), has recommended

congestion charge for the city in its 51-point action plan submitted in Bombay High Court. The panel

has proposed two ideas for imposing the congestion levy

o Congestion charge to restrict the number of vehicles in certain areas such as the city's central

business districts

o Congestion pricing on certain goods in select zones

From jurisdiction point of view, central government can levy the fuel taxes and the net collection can be

transferred to Ministry of Railways.

The Planning Commission working group on urban transport (12th five year plan) in its

recommendation to Government of India has

o Implementation of Green Cess

o proposed charging urban transport tax at 7.5% and 20% of the total cost of vehicle for petrol

vehicle and diesel vehicle respectively

C) Challenges and complexities

Railways do not have the right and jurisdiction to levy congestion fee, fuel tax, green cess, urban

transport tax and property tax

Pricing of fuel, especially diesel are politically sensitive and already the prices of fuels are highly

inflated with taxes and surcharge

At present there is no institutional arrangement for allocation of proceeds to Railways

D) Revenue Estimation

Congestion fees – The estimated Congestion fees collection from the city is ~ INR 750 Cr - ~INR 1000

Cr. 10% to 20% fund allocation to Railways from the proceeds will mean value capture of INR 75 Cr to

INR 200 Cr per annum.

Fuel taxes as carbon surcharge – Based on the current fuel consumption of the city levying INR 0.5 –

INR 2 per litre of petrol and diesel can generate around INR 240 Cr to INR 580Cr per annum. 10% to

20% fund allocation to Railways from the proceeds will mean value capture of INR 24 Cr to INR 100 Cr

per annum

Green Cess – The estimated Green Cess collection from the city is ~ INR 200 Cr. 10% to 20% fund

allocation to Railways from the proceeds will mean value capture of INR 20 Cr to INR 40 Cr per

annum.


44 PwC

Urban Transport Tax – It is estimated to generate ~ INR 850 Cr per annum. Again 10 – 20 % % fund

allocation to Railways from the proceeds will mean value capture of INR 85 Cr to INR 170 Cr per

annum

Additional Property Tax – Based on flat surcharge or varying surcharge based on transit influence

zone, it is estimated to generate INR 20 Cr to INR 100 Cr.


45 PwC

Recommendations

A) Real Estate Development:

1. A thorough technical and project due diligence should be undertaken with a strong

Railway Land Management Cell for Mumbai Metropolitan Region

Given the large value of the land under the ownership of Ministry of Railways in MMR region and the fact

that the prolonged neglects lead to encroachment and/or lack of accessibility, irrespective of land has been

identified or not for commercial development, every land should be subject to area/site improvement

planning.

Irrespective of usage, guidelines to be provided for each of the land parcels, for instance, every land parcel

above 1 acre should have been integrated with the development plan with a provision for adequate

accessibility based on shape and size of the plot. This will prevent loss of land value over time due to land

locked situation.

It is recommended to have a strong "Land Management Cell" for the Mumbai Suburban

Railway with representatives from both – Mumbai Division, Central Railway and Mumbai Division,

Western Railway. This cell will be supervised by a high level committee comprising GMs and Chief

General Engineers (CGEs) of both the zonal railway. Given that responsibilities of commercial

development of surplus land parcels lies with RLDA/MRVC, they are also important members of this cell.

In the past, RLDA initiated bid process to select developers for some of the sites without proper

land-title records for the subject site or sub-division of land parcel, which has resulted in cases like

delays or legal disputes.

For instance, bids for 4.5 Ha Bandra land in Mumbai was discharged or in case of 2.14 Ha land plot

in Jamnagar, Gujarat, financial bid were not invited for want of undisputed land title records.25

With full time Estate Officers from CR, WR and RLDA/MRVC, the responsibilities of this

cell shall be

o To maintain and update land records, maps, plans

o To verify land boundaries

o To verify land records with the state revenue authority

o To verify land titles, address any disputes related to it, rights to use land under the land allotment

agreements, etc.

o To integrate land parcels in the city development plan to improve site accessibility and prevent land

locked situation.

o Identify & earmark surplus land parcels in the region for commercial development as well as pay &

park facility.

o To ensure lands free of encroachment

The cell shall also be the nodal agency to identify surplus land and entrust the same for

commercial development to either RLDA/MRVC. There should be a structured process to prioritize

identification of suitable sites for commercial development, such as

o Priority-1: Sites identified and/or entrusted with RLDA/MRVC for commercial development, for

instance,

Already entrusted with MRVC - Bhandup Store Depot, site adjacent to Thane (E) and

NGSM yard26

Two (2) Bandra land plots (~11 acres and ~5.5 acre)

25 Rajesh Agarwal, "Commercial Development of Railway Land"; IRICEN JOURNAL OF CIVIL ENGINEERING 26 Source: MRVC, RLDA (http://www.rlda.in/status-of-site.html)


46 PwC

Land parcels bundled with the proposed Churchgate-Virar Elevated Corridor

Proposed land parcels in the city under Central Railway zone

CSTM station Carnac-Bunder side area connected by D’mello Road

Wadi Bunder

Lokmanya Tilak Terminus – Adjoining railway station.

Mankhurd – Adjoining station areas.

Currey Road depot between Parel & Elphinstone Road stations.

o Priority-2: Transit-oriented development at stations and re-densification/commercial

development of surplus land in railway colonies especially colonies which are older should be

prioritized.

Illustrative list of residential colonies, that can be prioritized

Bandra (W) railway colony (>35 years)

Matunga central railway colony (>40 years)

Matunga western railway colony (>60 years)

Parel railway colony (>40 years)

Kurla railway colony (>40 years)

Suburban Stations can be prioritized for ToD/air space development based on the criteria

with respect to factors such as

Daily passenger traffic/density

Station type – Interchange stations

Intermodal transit connectivity – Robust integration with other transit modes

Station area development trends – High rate of development around station area

Integration with the ToD strategy as proposed in the City Development Plan 2014-

34. The draft DP 2034 for Mumbai has already identified 22 stations, which are

Tier-1

Western Lines Churchgate Dadar Lower Parel Bandra Andheri Borivali

Central Lines CST Kurla Ghatkopar Mulund

Harbour Lines Wadala

Tier-2

Western Lines Grant Road Mumbai Central Mahalaxmi Lower Parel Jogeshwari Malad Goregaon

Central Lines Parel Kurla Nahur

Harbour Lines Chembur

o Priority-3: Operational assets based on the recent trends of their usage, for instance, non-strategic,

declining operations/traffic, feasibility of shifting to northward of the city from the prime land in

the Island City, feasibility of consolidation of various similar operations in the network, and so on.

For instance, among the four railway workshops in Mumbai, Parel Workshop is being used for periodic overhauling of long distance trains like mail express27. The operations at Parel workshop can be consider for shifting towards the outskirts of Mumbai. The feasibility of the same can be evaluated by the proposed cell.

The proposed Land Management Cell is recommended to be put in place immediately, given that the

Development Plan 2014-34 for Mumbai City is under preparation which will be followed by tier-2 level or

local area plans.

27Interaction with Senior Western Railway officials, Mumbai Division,


47 PwC

Also, the proposed cell should have a set target to achieve due diligence of 50% of the all land parcels within

three (2) years since its inception, with identified sites for commercial development on a priority, and

achieve 100% due diligence by 5th years of its inception.

2. Collaboration with the State and Local Governments to mutually benefit as well as to

benefit the city as a whole.

Integration with Development plan: The city needs land resources for better town planning whereas

railways need better accessibility to its land and provision for infrastructure/utilities for future

development. This can be achieved by initiating integration of railway land assets with the city's

development plan and need to partner with local authorities like MCGM to be pro-railways in deciding

appropriate land use classification, earmarking suitable connectivity provisions, etc.

Additionally a quid pro quo arrangement between the local/state government and railway can be

explored. Some of the various strategies or types arrangement can be:

1. Development in accordance with the requirement of the city development plan and not only from

commercial best use perspective, however, with adequate compensation for the opportunity lost in

terms of TDRs, etc.

i. E.g.: Pay and Park, Green Zones, Residential/office, Multi-modal transit points etc

2. Exchange of development rights to the city governments in congested areas in return for higher development rights in lesser congested areas

3. Joint development model with the city governments, wherein railways and urban bodies like MCGM can enter into commercial ventures such as parking, through joint development. MCGM can also bring in higher enforcement measures to prevent illegal parking in the area to achieve its objective of decongestion and enhance the viability of parking venture.

4. Sale/exchange of assets for better consolidation - For instance, smaller isolated land plots can be exchanged for the land parcels closer to transit nodes/corridor.

Financial arrangement: Financial arrangements between railways and state/local government under

which a commitment to reinvest a part of revenue generated from commercial development for the city's

suburban railway infrastructure, as done in case of Bandra land (~11 acres).

TOD Strategy: Since most of the railway land parcels are in the vicinity of the transit nodes, railways can

help achieve the ToD vision/strategy of the local government (MCGM) to encourage high density vehicular

free developments in the vicinity of major transit nodes.

3. From the initial stage itself, it is preferable to engage private sector constructively to build

mutual confidence and trust

It is recommended to organize workshops and marketing road shows involving private sector participants

such as developers, to engage them for the pilot projects as well as future road map.

These marketing activities will also help alienate perceived risks among the developer community to deal in

properties with railways.

The clear plans should be outlined for the role and support of railways/MRVC especially during pre-

tendering and during construction, for instance,

o Pre-tendering stage support: Land due diligence, preparatory actions such as land use change,

approved FSI, connectivity issues and construction related clearances from all the relevant railway

departments (especially in case of air space development)

o Support during construction: Single point of contact (e.g. nodal railway/MRVC officer for the

project coordination and supervision) for clearances and approvals from within railways,

adherence to construction and building plans once approved, etc.


48 PwC

4. Going forward, for better value capture there is a need to develop capability, resources

and flexible commercial models (joint development, revenue share model, self

development, etc.), i.e., beyond the role of just contract management.

Necessary regulatory changes:

Commercial development, since it involves large amount of involvement and coordination with internal and

external stakeholders, will required complying with various local acts and regulations. For instance, land

use change is a must to undertake commercial development which will require approvals from state and

local government.

Internal policy/regulatory changes: The following regulatory or policy changes shall be required -

o Guidelines/circular to establish MMR region specific Land Management Cell, its composition,

functions and targets to be achieved.

o Amendment to existing guidelines/policies and MoU between RLDA and MRVC (Dt. 16.07.2013)

which shall empower RLDA/MRVC to undertake re-densification/commercial development of

residential colonies with concession period up to 99 years.

External policy/regulatory changes: The following regulatory or policy changes shall be required -

o Site specific land use change and grant of FSI will be required, and accordingly DCR shall be

amended.

o Also, DCR will be required to be amended to

To permit Flexible TDR (for instance permitting use of unused FSI in the same area

irrespective of whether it is located in the northward direction of the land or not),

To permit mix-land use (for instance, transportation/railway + commercial office),

To qualify and incentivise re-densification of residential colonies (for instance, minimum

permissible FSI of 2.5 which shall be enhanced further on case-to-case basis).

Institutional Arrangement:

The key success factors of an institution will be coordination with railways, state government, local government and private sectors/developers. The required coordination can be mapped out as follows:


49 PwC

RLDA is an authorized entity to undertake commercial development of railway land parcels in Indian Railways. However, RLDA has signed MoU with MRVC, under which MRVC can undertake commercial development of sites as entrusted to it by RLDA.As described in the above schematic, a close coordination between various entities is a minimum and mandatory requirement.

Given its unique structure (a joint venture between state and central government), market reputation, project management skills, contract management expertise and past track records, MRVC is best position to undertake commercial development in the city.

MRVC (& RLDA) will require to develop real estate market expertise, marketing and leasing capability and strengthen post-contract monitoring capability. A separate Business Development Cell, having a board level representation, can be created within the organization which shall be responsible for:

Represents MRVC in Land Management Cell

Coordinate and facilitate integration of railway land parcels in the

city's development plan

Prepare a inventory of land parcels commercially magnetisable and a

roadmap to bring these sites to market

Liaison with railways and RLDA for release of site

Liaison with state and local governments for requisite clearances and

approvals

Explore avenues and prepare a business case for collaboration with state and/or city government for

possible partnership

Master/concept planning of sites for commercial development

Bid process management, marketing and leasing of sites/properties

Private sector engagement

Post-contract management

The above list is indicative and it can be further elaborated based on the mandate given to MRVC by MoR/RLDA.

B) Advertising:

Recommendations to capture advertising potential for the Mumbai Suburban Railway System can be categorized as (a) Physical Media and (b) Virtual Media.

a. Physical Media

1. On a priority, a greater thrust should be given into inventory planning & management.

1.1. Professional market-oriented media planning

Master plans of media plans should be revisited for stations with inventories which are pro-market. It is recommended that the professional media planning agencies/consultants be contracted to prepare market-oriented holistic media plans. These plans will involve

Advertising inventory media planning

Station aesthetics

Required auxiliary support such as electricity supply,

Provision and mechanism for periodic changes in the plan

1.2. Digitization of inventory


50 PwC

In order to capture value from future industry trends, a greater focus on digital inventory will be

required, and hence media/master plans should have mandatory digital media focus. This will

require planning for necessary electricity supply and security provisions in the media plans.

For instance, by the end of 3rd year, 30% of the total advertising space in the System should be achieved by digital media comprising LCDs, LEDs, etc.

2. Also, the horizons of interactions with advertising industry value chain needs to be

widened by involving integrated players in transit advertising

More stringent eligibility criteria, for instance,

o 5 – 10 years of transit OOH advertising experience and in transportation centres like Metro

rail stations, airports, railways, seaports, bus terminals, etc.

o The average turnover of the firm in the past three (3) financial years should be at least

equal to the reserve price

o Should have developed master plans for the transit nodes (e.g. stations) and approved by

the transit authorities

Greater involvement in the media planning stage, through appropriate tendering process

(E.g. 2-stage tendering process being followed by DMRC since 2013)

o 1-stage - Qualification Stage: At this stage advertisers will be shortlisted in accordance with

the revised eligibility criteria

o 2-stage - Bidding Stage:

At this stage, the draft media plan prepared by railways (with media consultants)

will be shared with qualified bidders who will submit revised media plans as their

technical bid. This will ensure involvement of larger players, further refinement in

the media plans in-line with the market practices.

Railway's media consultant will assist railway in evaluate this media plans. With

proper weight-age to technical and financial bid, final bidder will be selected.

3. The flexible contract structure is a prerequisite to attract value creators or integrated

large advertisers

Longer contract tenor of 10 to 15 years, in-line with market expectations and practices being

followed by other successful transits (DMRC, SMRT, etc.)

Mitigation of contract risks, preferably through revenue share model to capture upside

value whereas prevents downside risks by the provision of minimum guarantee fee.

Bulk advertising rights: The suburban railway stations can be grouped such that it attracts right

set of advertisers. The grouping can be done geographically, or based on lines, or mix of stations from

both central and western railway to enhance options. The following is the illustration of such

arrangement/options.


51 PwC

4. Also, an independent arbitration & a grievance redressal process will help unlock the

potential from advertising space under disputes today as well as in future.

The current system of arbitration process comprising railway officials only is perceived to be one-

sided and not in the interest of independence. This has been hinted as one of the reason for the past

as well as ongoing court cases, causing revenue loss for railways.

A two-tier arbitration process is recommended in this case,

o Tier-I: Existing arbitration mechanism with DRM/CCM as a hearing authority.

o Tier-II: The appellate tribunal represented by a judicial chairman and other two members

nominated by each party, which will hear the cases not satisfactorily addressed or outcome

in Tier-I being appealed by one of the party.

The outcome of this 2-tier process shall be final and binding upon either parties and shall be

captured unambiguously in the contract documents.

5. A close coordination among various departments will be required to harness potential

successfully and effectively.

Though advertising portfolio lies with commercial department, it will not be possible without

effective and constructive participation or support from other departments such as Electrical, RPF

(Security) and Structural Engineering.

It is recommended to have a cross-function team/committee under division for the system which will

be responsible for coordinating and providing single point of contact to advertisers for clearances and

approvals as well as monitoring and resolving any operational issues.


Railway Board circulars shall be required for the following aspects:


52 PwC

o Permit longer contract tenor (up to 15 years)

o Focussed approach on digitization and resource mobilization, such as, adequate utilities at stations

to support digital media

o Option to enter in contract based on revenue share payment model (with minimum fee guarantee

covenants)

o Formation of coordination committee among various functions at divisional and Mumbai Suburban

Railway Network level, which shall be empowered to take decisions with respect to advertising

revenue targets and commercial aspects for the System


An institutional arrangement that promotes co-ordination among the concerned departments, facilitates absorption of market information to formulate policies and guidelines align with the market and enforce the same is required

Option A – Co-ordination at the divisional level

A coordination committee comprising of representatives from the commercial department, structure & technical department, electrical department and RPF will be formed in each of the divisions (Western Railways, Mumbai Division and Central Railways, Mumbai Division). These committees will be jointly chaired by the respective DRMs/Sr. DCMs of the two divisions.

The mandate of such committee shall be:

Pre-contracting

Assess the current situation of all the concerned departments – new opportunities, advertising

inventory, utilization of electricity and RPF resources

Assist in the preparation of master plan

Assess sufficiency of the available resources or required investments/costs if any to implement

proposed master plan.

Allocation of budget to the concerned departments

Preparation of bulk contracts

Setting time line for clearances and approvals

Provide a nodal officer per zone/contract who will act as a single point of contact for the advertiser

Post-contracting

Periodic review of master plan along with the selected bidder/advertiser

Monitoring for illegal advertising, compliance with contract, security, etc

Periodic reporting (recommended bi-weekly or monthly)

Provide market inputs

The committee will hold fortnight (or monthly) meetings where each department will give an assessment of its current situation in terms of security of assets, utilization of electricity and new inventories.


53 PwC

Option B – Co-ordination at the Mumbai level (along with interdepartmental co-ordination at the divisional level)

An integrated committee comprising of representatives from the two divisions (Western Railways, Mumbai Divisions and Central Railways, Mumbai Divisions) can be formed. This integrated committee will be chaired by the GMs/DGMs of the two zonal railways. The purpose is to bring Mumbai Suburban System into notice at a higher level, which at the moment is getting crowded out in the midst of other priorities.

The major roles & responsibilities of this integrated high-level committee shall be:

Reporting directly to the Railway Board

Set the advertising targets for the Mumbai divisions

Conduct a quarterly review meetings

Market commercial publicity in the system as one organization

Formulate Mumbai specific standard policies and guidelines which will be revised every year based on

market conditions

Division of the Mumbai Suburban system into suitable zones or catchment areas for bulk contracts and

appointment of nodal officers for each of these zones/catchment areas

Appoint professional media planning agencies/consultants for master planning

Budget estimation and budget allocation to the concerned parties

Preparation of bulk contracts that offers advertising inventories from both the divisions

Option C – MRVC as the integrated body for Mumbai Suburban Systems

In this option MRVC will act as the integrated body with representation from Mumbai Divisions of both Western and Central Railways.

Pros Cons

Existing structure

No additional resources will be required Full potential cannot be achieved

Lack of subject/market expertise

Advertising gets crowded out among freight, parcels, luggage, passenger train reservations

Lack of co-ordination among the concerned departments

Poor client servicing such as lack of single window clearance, lack of security to client assets are leading to lost opportunities

Poor grievance redressal process

Lack of market focus


54 PwC

Option-A Enhanced co-ordination among departments

Better services to clients/ advertisers

Single point of contact

Better security to assets

Pressures to continue to meet targets set by Railway Board


Less freedom in contract structuring

Inability to incur costs/ investments if not within departmental budget for instance, enhance electricity supply for digital media,

Option-B Integration at the highest level will ensure better enforcement of policies

Ability to formulate Mumbai specific policies and revenue targets

More freedom in bulk contract structuring

Ability to allocate additional budget if required as investments


Likely pressures from to meet targets set by Railway Board

Need to establish credibility to attract larger integrated players

Option-C Independent city specific organization

Contracting and post-contract management expertise

Brings in more trust among larger private players

Ability to manage long tenor contract

Better placed to bundle contracts with commercial development or station redevelopment projects to part finance capex

No control over operational assets

Difficult to manage and coordinate with field/divisional committee given no administrative authority

The above assessment of the institution options, it is recommended to have a combination of Option-B & C will be more preferable. MRVC can play a role of providing market expertise and consultative assistance to the integrated committee.

b. Virtual Media

1. Create of brand value for the System as a whole by investing in station aesthetics, adequate

signage, enhanced public information system using new technological platforms such as mobile apps,

internet, Google maps, etc.

The enhanced brand will help railways leverage it for enhancing advertising potential through

physical media as well as for merchandizing opportunity, for instance, heritage cards.

2. Capture advertising potential from virtual media such as mobile apps, internet, and social

media using real time data and passenger information

Large section of suburban rail commuters are using mobile phones or smart cell phones, and uses

apps like m-indicator which provides railway and other public time table. Railways generate and own

large real time information which it wishes to transfer to public through various public information

systems.

Platforms like mobile-apps, internet, social media which can be used as public information platforms

as well as advertising revenues.

It is recommended to outsource advertising rights along with platform creation on a fixed licensee or

revenue share model, instead of developing own apps and market the same.

A media plan should be prepared for this purpose with the help of market

experts/professionals.


55 PwC

3. It is recommended to establish an integrated body or leverage MRVC to represent Mumbai

Suburban Railway System as a whole for this purpose, with a close coordination/support

from railways to transfer real time information/data


Railway Board circulars shall be required to appoint MRVC/an integrated entity representing the System to

exploit virtual media. This body shall be empowered to

o Outsource or develop the virtual platforms and provide real time information

o Enter into advertising rights contract on fixed fee basis or revenue share basis or a model as

deemed appropriate

o Sell ticketing through online/virtual/mobile media

Also, Railway Board shall direct the

concerned railway zonal/divisional

administration to provide all necessary

administrative and information sharing

support to MRVC/a new entity


Given that MRVC already exists, its success in creating a reputation as a body representing Mumbai Suburban Railway Network on various platforms, as well as its ability to diversify to commercial development and consultancy, it is recommended to entrust the commercial exploitation of virtual media to harness advertising potential with MRVC.


PwC 56

C) Station Rentals

ATMs:

1. Having low penetration, there is a need to enhance supply of spaces for ATMs

through conventional and non-conventional means

Prioritize stations with higher footfalls having daily ridership of over 1,00,000 as a candidates

for additional ATMs based on required penetration levels (E.g. 1 ATM for every 25,000 daily

ridership)

Station which are the trip generators, such as residential areas in the Northward and the

Suburban city, should be given a priority and high penetration levels

ATM format such as Point of Sales (POS) Terminals consume relatively less space and can be

accommodated in ticketing areas (for instance, Ticketing Area at concourse level in Dadar

Station)

Location of ATM’s can be chosen strategically adjacent to areas such as ticketing area,

entry/exit and concourse areas to ensure convenience without causing to congestion.

2. Prefer open tender route to generate more value than MoU route and transfer

rights to allot or lease spaces to division only.

Open tendering route yield more lease rentals and also are closer to market. This has been substantiated in the past including recent tendering of 101 ATM sites by Central Railway during June, 2013.

3. Additionally, invite White Label ATM operators such as Tata Communications

Payment Solutions, Prizm Payment Services, etc. for bulk ATM space contract (for

instance bulk contract for 10 or more ATM spaces for a station/a group of stations)

RBI has identified 17 non-bank entities to set up White Label ATMs (WLA) in India which are

expected to ad around 1.5 lakh ATMs in the next 3 years.28

Four of the well known players in this market are Tata Communications Payment Solutions

Ltd, Prizm Payment Services Pvt. Ltd, Muthoot Finance Ltd and Vakrangee Ltd

Bulk contracts will help add more number of ATMs in the system with minimum tendering

and contracting process.

Pay & Park:

1. With MCGM revising its parking rates, railways should revisit parking rates in its

land parcels to enhance viability of parking lots in the city.

According to Parking Policy 2004 (Commercial Circular No. 39 of 2004),

o Parking rates should be fixed by Sr. DCM/DCM with the concurrence of divisional

finance and the approval of DRM.

o While fixing the parking rates, a survey should be carried out for parking charges

prevailing at other prominent locations in the city/area and it should be ensured that

parking rates fixed are normally not below the parking rates prevailing at

important/prominent places in the same city/area.

o The parking charges should be reviewed before the award of new contract as per the

above procedure.

28 Moneycontrol Bureau; April 05, 2013 (http://www.moneycontrol.com/news/business/rbi-gives-17-licences-for-white-atms-tatas-to-open-soon_847904.html?utm_source=ref_article)


PwC 57

However, the parking rates are found to be lower than prevailing rates charged by local

municipal authorities, shopping malls etc. in the city.

It is recommended that Sr. DCM/DCM should conduct a parking rate survey once a year

and revise parking charges accordingly (for instance on annual basis).

2. Identify suitable sites and underutilized land parcels to increase new supply of

parking lots

There is a demand for parking among the railway users as well as general public. However,

the supply of parking lots is not sufficient.

Coordination between commercial and technical/operations department is necessary to

identify and transfer surplus land assets for the purpose of commercial parking. The

proposed Land Management Cell (under Real Estate) can also play an important role for

this purpose.

The land parcels near stations, which are not being used currently or are under-utilized

should be released for parking with immediate effect till these land parcels are put under

different usage (including commercial development). This will also benefit railway, for

instance:

o Generation of additional revenues

o Better utilization of land assets, especially longitudinal sites least attractive for

commercial development

o Prevention of encroachment, land boundary and title issues

o Prevention of land sites getting land locked, etc.

Supply can also be enhanced in partnership with other agencies such as local government, bus

transport corporations for joint development of parking lots or multi-level parking ventures

with commercial/retail component. However, such opportunity should be assessed on a case-

to-case basis.

Catering and other retail stalls

Catering stalls are not the major contributor to revenue. It is primarily due to highly fragmented market and existence of legacy stalls. IRCTC followed market driven strategies during 2005 - 2010, however, post-2010, the catering is entrusted to departmental catering unit. However, the revenue potential from retail stalls can be enhanced if the following recommendations are implemented:

1. Revise the license fee for the existing catering stalls not awarded by IRCTC in

accordance with the Catering Policy 2010

Ensure license fees are revised according to the latest circular on catering license fee fixation

(No. C 45/15/1). Currently thisq has not been enforced effectively and the license fees are

revised nominally without price corrections.

Need a better enforcement at divisional levels, which can be achieved by having targets in

place. The recommended targets are to achieve 100% compliance, i.e., 100% of the stalls to

be awarded through open tendering process or for the existing legacy stalls to be converted

to finite contract tenor with the nearest market rate as license fee only by end of Financial

Year 2014-15.


PwC 58

2. The policy need to be amended for classification of type of stalls (for category 'C'

stations) which are more relevant for the cities like Mumbai

Classification like tea stalls, milk stalls, etc may not be relevant for cities like Mumbai. A

better pro-market classification can ensure participation from quality, branded food and

beverage (F&B) outlets as well as non-F&B retail which flourishing outside stations at a high

lease rentals.

3. Also, policy should be amended to prevent market fragmentation and to enable

bulk contracting a feasible option

The current policy prevents a contractor to have more than 2 major stalls per zone; however it

leads to fragmentation of retail market in the network. However, as practiced by other

transits, for instance, DMRC, bulk contracting has resulted in better outcome such as

participation from branded retail chains adding to station aesthetics, easy contract

management and monitoring, etc.


The existing organization structure is well versed to implement above recommendations at a division level. However, some of the changes recommended in case of Catering Stalls will need approvals from Railway Board, prior to its implementation.

Institutional Arrangement for MRVC:

Given that MRVC is well positioned to play a critical role in maximization of the non-fare box revenue for the Mumbai Suburban Railway System and based on the institutional assessment discussed above, the following institutional structuring for MRVC is recommended.


PwC 59

It is recommended to create a Business Development Division which shall be headed by an executive Board of Director. This will include three (3) business divisions:

A) Property Division: The property division shall be responsible for commercial development of land parcels. This division should have two sub-divisions:

o Commercial Development, which will be responsible for

Identification of new sites

Represent MRVC and coordinate with proposed Land Management Cell

Coordinate with state and local government

Site development

Concept planning

Site development through self or joint or third party development

Assist the successful bidder during construction stage for required coordination with railways

o Property Management, which will be responsible for

Real estate market research

Post-award contract management

Manage property developed through self or joint mode

Monitor activities for properties developed through third parties in accordance with the agreement

Assist commercial development team in concept planning and at various stages as required

B) Advertising and Retail Division: The primary functions of this division are to

o Liaison with the high-level integrated committee of WR & CR for Mumbai Suburban Railway System

o Create and develop for brand value for Mumbai Suburban Railway System

o Exploit merchandising opportunity

o Market research & interactions with advertising industry

o Commercial exploitation of virtual media such as online portals, mobile media, etc.

o Also, advertising and station rentals for the redeveloped stations if entrusted to MRVC, this department can fulfill the responsibility of contracting as well as post-contract management

C) Consultancy: MRVC brings in capabilities in the field of project and construction contract

management in both the Brownfield and Greenfield transit systems. Also, it is well positioned to

develop in-house capability for harnessing potential from commercial development and virtual

advertising media and can leverage such knowledge to provide consultancy services to other

transit agencies in India and also possibly to markets like Africa.


PwC 60

Revenue Enhancement Potential from fare box sources

Insights gained during the Ideation Stage:

As part of the ideation phase, several reports and stakeholder interviews were conducted, in order to establish the current context of fare box revenues in the suburban rail network.

1. Fare box or ticketing revenues is the single largest source of revenues for the

suburban rail operations; however, the revenues are not sufficient to meet even

operating expenses.

Fare box revenues contribute between 93% - 95% of the total revenues for the network.

However, fare box revenues are able to recover only ~60% of the operating expenses, as

against over 80% recovery rates in most of the successful transits.

2. In last 10 years, the fare recovery ratio, ability of fare box revenues to recover

operating expenses, has declined from ~0.9 to ~0.6.

Review of past financials reveals that the suburban rail operations were able to recover its

operating costs through fare box collections only.

However, with capacity addition post financial years 2007-08 under MUTP-1, the operating

expenses grew significantly outgrowing the revenues. This can be attributed to no changes in

fares till January, 2013.


Source: MRVC, WR & CR - Mumbai Division

Ridership grew considerably during the last five (5) years, increasing revenues at CARG of

4.5% between 2008 and 2012. However, the same level of growth in ridership is unlikely given

the upcoming alternate transport options under various stages of planning, for instance,

Mumbai Metro One, Metro Line 3, etc as well as capacity saturation in the existing suburban

lines.

3. The fares of suburban railway are the cheapest as compared to other modes of

transport in the city


PwC 61

Suburban rail fares are the lowest among all the public transport modes including

intermediate public transport such as auto rickshaws and taxies.

Figure 30: Comparison of single journey fares

Source: DMRC (Website), BEST (Website), PwC Research & Analysis

Even in case of season tickets, the suburban railway fares are among the lowest when

compared with transport modes within city as well as with DMRC.

Figure 31: Comparison of Season ticket fares

Source – DMRC (Website), BEST (Website), PwC Research & Analysis

4. Also, inflationary costs have forced comparable

transport modes in the city to raise fares several

times in the last few decades as compared to the

suburban rail.

Between 1993 and 2013, BEST base fares have increased

around 10 times as compared to that of 2.5 times for

suburban railway.

The fares of BEST bus have been revised five (5) times

since 2007.

Figure 32: Comparison of increase in fares (BEST vs. Mumbai Suburban Railways)


PwC 62

5. Survey of over 6,200 suburban rail commuters show improved socio-economic

profiles and affordability than what may be normally assumed

Review of past studies, and findings of the survey conducted under this study reveal that over

half of the commuters belong to mid-income group & high-income group category. Also, over

3/4th of the commuters belong to service and business occupation

Whereas, ~1/5th of the commuters belongs to "No Income" group which comprises of

students, housewives, retired personnel, social trips, etc.

Figure 34: Income wise distribution of suburban rail

commuters

Source: PwC - Prozeal Commuter Survey (2013)

The per capita income of the city has grown over 3 times between 2005-06 and 2011-1229,

indicating improved affordability of the population

The spending on widely used 2nd class monthly season ticket is far below the affordability

index of 5% to 10% of the monthly total income30. This combines with the fact that over 3/4th

of the commuters are the daily users of the suburban rail system who uses the system for 44 -

56 trips per month using monthly season tickets.

Access and dispersal modes of transport pattern shows that these modes account for more

than half of the average cost to passenger, but account for only ~10% of the trip distance and

trip time.

6. The review of fare structure and share of revenues indicates, the existence of the

structural anomalies, especially in the season tickets, which are also supported by

survey results

Survey results indicate that season ticket contributes to around 85% of the daily ridership,

29 Source: Planning Commission, Economic Survey for Maharashtra 30 Source: World Bank - several studies have been undertaken by World Bank on affordability and affordability index, including mapping of affordability index for 27 cities. It shows that typically 5% - 10% of the income can be considered a reasonable range for affordability index but varies widely across the world.

Single, 3.4% Return,

9.8%

Tourist Pass, 2.2%

M.S.T, 78.1%

Q.S.T, 6.4%

Most of the daily passengers travel using season tickets

Single Return Tourist Pass M.S.T Q.S.T

Figure 33: Split of commuters based on ticket type


PwC 63

However, review of passenger earning statements for the suburban rail operations reveals that

the contribution of season ticket is only 53% of the total fare box collections (FY 2011-12)

Table 6: Season Tickets - revenue contribution vs. share in daily ridership

OT ST

% of daily ridership 15% 85%

% share of revenues (FY12) 47% 53%

7. Given the fare revisions are the central subject and have uniform structure across

India, the city specific surcharge is being used to customized fares for the city

The existing fare structure of the Mumbai Suburban Railway includes the following

components:

o Suburban rail base fare based on distance slab, which uniform across India

o MUTP surcharge – III

o Rounding off to multiples of five (5) - Rounding off to higher multiple of 5.

This MUTP surcharge is specific to MMR region only and levied only on suburban rail

operations.

Also, CIDCO development surcharge is being levied additionally for travel on Harbour line

beyond Mankhurd.

Our interactions with officials reveal that city specific surcharge is an alternate and better

option.

8. Commuters will be willing to pay extra with increasing income as well as increased

quality of services

Past studies, such as, Comprehensive transport plan for Bombay Metropolitan

Region (Atkins), also in its consumer attitude survey, found that "as income rise, an

increased proportion of users are ready to pay for better quality services than are currently

offered."

Key Findings from Analysis Stage:

The findings of the analysis of survey results, past financials, existing fares and statistics can be summarized as structural anomalies in the present framework, willingness to pay and test for affordability

Structural anomalies in season tickets:

o Survey results shows that over 90% of the daily commuters uses rail services for 44 - 56 trips

per month. However, fare structure of monthly season tickets (MST) show high level of

discounting

o 2nd class MST fare is equivalent to 15/16 single journey tickets - discounting of ~70%

o 1st class MST fare is equivalent to 6/7 single journey tickets - discounting of ~85%

o Globally urban rail systems, including Delhi Metro, discount typically 10% - 40% on periodic

passes.


PwC 64

o Also, Model Concession Agreement (MCA) for Urban Rail System permits monthly pass fares

as equivalent to 40 single journey trips.

Figure 35: Structural Anomalies in Season tickets

Source: PwC - Prozeal Commuter Survey (2013)

Willingness to pay extra:

Commuters have expressed at least 10% willingness to pay (WTP) extra for the existing level of service, irrespective of their income group, trip distance, or travel class. Also, over 83% of the commuters stated that they will continue to use suburban railway even if the fares are hiked beyond 10%.

Table 7: Average WTP across income groups, travel class and distance slabs

Source: PwC Research & Analysis, Survey

Also, WTP extra increases to minimum 20% with incremental improvement in the quality of services and passenger amenities, such as security, better toilet facilities, cleanliness, etc.

Test for affordability

Globally affordability of transport expenditure is measured as an index equivalent to 5 – 10% of the monthly income. Only 4% of the total commuters with monthly income of <INR 5,000 uses suburban rail system (Commuter Survey 2013), against ~50% of the Mumbai’s households from this category (CTS for MMR, 2008), who usually walks to place of employment.

The lower & middle income group commuters prefer to travel by 2nd class using MST tickets. However, the monthly expenses are still below affordability index (refer the following chart), showing possibility of increase in MST fares without affecting the affordability of the lower income strata.


PwC 65

Figure 36: 2nd Class MST fares vs. Income category on affordability scale

Source: PwC Research & Analysis, PwC-Prozeal Survey and Analysis

Recommended interventions

The interventions to optimize fares or for any fare revisions should be based on certain principles which can remain consistent over a long period.

We studied the fare box profile for over next 10 years based on historic data, and propose interventions in line with the proposed objectives of the fare policy over next 10 years. The proposed interventions are based on the comparative fares of other transport modes in the city, and ensuring the affordability of the commuters.

Recommended alternatives as the objectives of the fare box optimization:

Case-1: Maintain the current Fare Recovery Ratio of ~0.6, i.e., inflation linked fare revisions

Case-2: Close the gap between revenues and expenses over the next 10 years, i.e., achieve FRR of

1.0 over the next 10 years

Case-3: Achieve surplus to (partially) meet capex requirements, i.e., achieve FRR of 1.1 to 1.3

over the next 10 years

Table 8: Proposed interventions for fare box optimization

Case Implementable Interventions

(based on insights from ideation and analysis stage)

Case-1 Option-A:

Annual fare hike of 5% in both first & second ordinary tickets;

Option-B:

One time correction in structural anomalies in season passes, i.e.

o 2nd class MST fare equivalent to 30 times single journey tickets (SJT) and

o 1st class MST fares equivalent to 15 times SJT.

Case-2 Option-A:


Option-B:


PwC 66




Annual fare hike of 5% in both first and second class ordinary tickets

Case-3 Option-A:

Annual fare hike of 20% for the first 3-4 years followed by annual fare hike 10% for

the both first and second class ordinary tickets.

Option-B:




Annual fare hike of 7% (equivalent to inflation) in both first and second class

ordinary tickets.

Source: PwC Research and Analysis

The above proposed interventions can improve financials of the suburban railway operations substantially eliminating or reducing the need for operating subsidy. These funds can further be utilized towards improving passenger amenities.

Figure 37: Summary of Potential interventions and impact on operating subsidy


Next Steps

Ushering in a new pricing regime through a transparent process, Railway Minister Mallikarjun Khrage

on February 12, 2014 announced in the interim rail budget (2014) constitution of an independent Rail

Tariff Authority (RTA) to advise the government on fixing of fares and freight

If RTA is empowered to enforce the tariff once decided in a transparent manner and after the

consultation with the various stakeholders, it can act as authority to set fares for the Mumbai

Suburban Railway Network.


PwC 67

If RTA is an only advisory body, then a case needs to be presented by MRVC/Mumbai Suburban

Railway System to RTA for the fare changes as well as liaison with Railway Board to seek fare revision

mechanism for the city.

Without RTA, still Mumbai Suburban Railway System need to create a common platform involving

stakeholders from Ministry of Railways, State & Local government, which can be empowered to decide

suburban rail fares for the city. This will be essential as Mumbai Suburban Railway carries 1/3rd of the

daily passengers of the National Carrier; however, it has localised operations within MMR region.

Conclusion

Under existing conditions, the cumulative operational deficit and investment need of the Mumbai Suburban Railway Network represent a large financial burden on the Ministry of Railways over the next 10 years, estimated currently to be close to INR 50,000 Crores (as an arithmetic sum). However, this burden can be reduced by augmenting the fare box and non-fare box revenues, as discussed in the report.

The impact of both fare box and non- fare box revenue generation on the overall investment required over the next 10 years can be assessed under the following 4 scenarios

Scenario-A:

If no fare interventions are made, with non-fare box revenue maximization including real estate (upfront payment model), the funding gap can be reduced from ~ INR 48,300 Cr to ~INR 38,300 Cr.

Figure 38: Scenario A (No fare interventions)

Scenario-B:

If the current levels fare recovery ratio (FRR) is maintained with interventions in fare structures, then with non-fare box revenue maximization including real estate (upfront payment model), the funding gap can be reduced from ~ INR 48,300 Cr to less than INR 32,700 Cr.

48300

38300

900

9100

0

10000

20000

30000

40000

50000

60000

Funding gap No fare box intervention

Non-fare box (w/o regulatory chnages)

Non-fare box (with regulatory chnages)

Additional funds required

INR

Cr


PwC 68

Figure 39: Scenario B (Case-1: Current FRR is maintained)

Scenario-C:

If the gap between operating expenses and fare box revenues is met, i.e. in other words if FRR of 1.0 is to be achieved in the next 10 years with appropriate interventions in fare structures, then together with non-fare box revenue maximization including real estate (upfront payment model), the funding gap can be reduced from ~ INR 48,300 Cr to less than INR 25,000 Cr.

Figure 40: Scenario C (Case-2: Achieve FRR of 1.0)

Scenario-D:

If the gap between operating expenses and fare box revenues is met as well as an operating surplus is target, i.e. in other words if FRR of 1.1 to 1.3 is to be achieved in the next 10 years with appropriate interventions in fare structures, then together with non-fare box revenue maximization including real estate (upfront payment model), the funding gap can be reduced from ~ INR 48,300 Cr to less than INR 16,500 Cr. Additionally the future operating surplus can also be leveraged, which can further reduce the need for additional funds to less than INR 12,000 Cr.

48300

32700

5600 900

9100

0

10000

20000

30000

40000

50000

60000

Funding gap Fare intervention (Case 1)




INR

Cr

48300

25000

13300

900 9100

0

10000

20000

30000

40000

50000

60000





INR

Cr


PwC 69

Figure 41: Scenario D (Case-3: Achieve FRR of >1.0, i.e. in the range of 1.1 to 1.3)

After fare and non-fare (except indirect benefits) interventions, there still remains a funding gap of over INR 10,000 Cr, which can be reduced further, if the sources of indirect benefits value capture (which at a conservative estimate can add another ~INR 4,000 - 6,000 Cr for railways in the next 10 years) are tapped appropriately.

48300

16500

21800

900 9100

0

10000

20000

30000

40000

50000

60000





INR

Cr

FINAL REPORT Revenue Maximizing Study in particular for Non-Fare Box Revenues with Affordability Studies

PwC 69

Annex: Summary of financing need (cumulative / arithmetic sum)

In INR Crores

(Cumulative for

period FY 2013-14 to

FY 2023-24)

Operational gap

(in brackets)

Capex financing through Budgetary Support &

Concessional Loans

Fare Box

Scenarios

Without non-fare

box interventions

With non-fare box

interventions

(without regulatory

changes)

With non-fare box

interventions

(with regulatory

changes)

Without Real Estate

Development

With Real Estate

Development

(under prevailing FSI

& guidelines)

With Real Estate

Development

(with enhanced FSI &

existing guidelines)

As is scenarios (18,300) (17,400) (16,300) 30,000 26,500 22,000

Case-1: Inflation

linked fare increase (12,700) – (8,700) (11,800) - (7,800) (10,700) - (6,700) 30,000 26,500 22,000

Case-2: FRR of 1.0

by FY 2023-24 (5,000) – 100 (4,100) - 1000 (3,000) - 2,100 28,000 - 30000 24,500 - 26,500 20,000 - 22,000

Case-3: FRR of 1.0

by FY 2016-17 and

FRR of >1.0 by FY

2023-24

3,500 – 4,500 4,400 - 5,400 5,500 - 6,500

23,500 - 26,500 20,000 - 23,000 15,500 - 18,500

20,000 - 23,000* 16,500 - 19,500* 12,000 - 15,000*

* Considering leverage based on surplus future cash flows


PwC 70

VOLUME - I


PwC 71

1. Context

The Mumbai Suburban Railway System is the mass rapid urban transit network in the Mumbai

Metropolitan Region. It is a part of Indian Railway (IR), Ministry of Railways (MOR) and

operated by IR's two zonal divisions, viz., Western Railway (WR) and Central Railway (CR). WR

operates the Western Line and CR operates the Central Line, Harbour Line, Trans-Harbour Line

as well as the Vasai Road-Diva-Panvel line. The fast commuter rail corridors on Central Railway

and Western Railway are shared with the long distance and the freight trains, while inner or slow

suburban services operate on exclusive parallel rapid transit tracks.

The suburban railway system of the city is one of the most complex, densely loaded and

intensively utilized system in the world. It carries over ~7.4 million passengers per day through a

network of over 319 km or line length (track km) of over 876 km. The System operates over 2600

train services per day with a fleet of over 270 rakes (9 car equivalents which are run in 9, 12 and

15 car composition).31

The city's suburban rail system is the cheapest and fastest mode of the transport in Mumbai. The

fares charged are the lowest among the urban rail systems across the world.32 The current

passenger carrying capacity is insufficient to meet the demand resulting in issues like

overcrowding. However, despite having the sufficient ridership, the suburban railway system is

incurring the operating losses, mainly due to subsidized fares. The fare box collections or the sale

of tickets forms the major source of revenues for the network. The non-fare box or non-ticketing

revenues are present in the system such as advertising, vendors, etc.; however their contribution

is very nominal.

The services are economically sustained from the cross subsidy of main-line long distance train

services (non-suburban/intercity services) and freight operations. The outlook of the both - cross

subsidization of the operating losses and need for additional capital funds to enhance the capacity

under the projects such as "Mumbai Urban Transport Project (MUTP)", necessitates the need for

an economically sustainable suburban rail system, particularly through non-fare box sources of

revenues.

It is, therefore, important for the sustainable operations of suburban railway operations, and

address the major financial issues prevalent in Mumbai Suburban Railway System, such as:

Passenger earnings or fare box revenues are insufficient to even meet operating expenses.

Some revenue is also generated from other Commercial activities such as advertisements

on the Station Platforms/Trains, Vendors etc.; however, these revenues are nominal.

Overcrowding (to the level of 16 passenger per sq meter during peak hour) is the major

cause of concern – need capacity expansion in the system which requires huge capital

(MUTP-I, MUTP-II & MUTP-III are the programs undertaken through MRVC to enhance

the capacity & passenger safety in the suburban network)

No cash flow visibility to fund capex or service the debt from the existing operations &

revenue sources

31 Source: MRVC (Presentation "Need of Urban & Regional Rail Based Transport"; December 6, 2013) 32 Source: World Bank, MRVC


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To sustain suburban services in the long term, it is proposed (as a part of MUTP-2A) that other

sources of revenues particularly in the non fare box areas are explored. Therefore MRVC have

appointed PricewaterhouseCoopers Private Limited ("the Consultant") to undertake this study.

Figure 42: Mumbai Suburban Rail Network


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1.1. Mumbai Railway Vikas Corporation

Mumbai Railway Vikas Corporation Ltd (MRVC Ltd), a Public Sector Undertaking of Govt. of

India under Ministry of Railways (MOR), is involved in the planning and development of the

Mumbai Suburban Rail system. The company is a joint undertaking between Ministry of Railways

and Government of Maharashtra, equity contribution in the ratio of 51:49. MRVC is responsible

to execute projects under Mumbai Urban Transport Project (MUTP) as sanctioned by the

Ministry of Railways.

The company is mandated to execute a number of suburban rail improvement projects for

enhancing suburban rail transportation capacity thereby reducing overcrowding and meeting

future traffic requirements. The company is also involved in further capacity planning and

development of the Mumbai Suburban Rail system.

1.2. About Mumbai Metropolitan Region

The Mumbai Metropolitan Region (MMR) is a metropolitan area comprising of the city of

Mumbai and its satellite towns. It is spread over an area of 4,355 square kilometers33 with a

population of 20,998,395 (Census 2011)34 and consists of Municipal Corporations and Municipal

Councils.

A. The Municipal Corporations:

1. Greater Mumbai,

2. Navi Mumbai,

3. Vasai-Virar,

4. Kalyan-Dombivali,

5. Ulhasnagar,

6. Mira-Bhayandar,

7. Bhiwandi-Nizamapur,

8. Thane

B. The nine Municipal Councils:

1. Pen,

2. Karjat,

3. Khopoli,

4. Kulgaon-Badalapur,

5. Uran,

6. Alibaug,

7. Ambarnath,

8. Matheran,

33 Mumbai Metropolitan Region Development Authority (MMRDA) 34 Census 2011

Figure 43: Mumbai Metropolitan Region (MMR)

Source: MMRDA


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9. Panvel

C. The 1,000 villages in Raigad and Thane Districts

Transport and Connectivity:

The MMR Region is connected with the economic centre of the region (Greater Mumbai) through

the Mumbai Suburban Railway System and a large network of roads. It is also well connected with

the other parts of the country through rail, road, air as well as water. The city has evolved along

the suburban rail lines and the eastern and western expressways.

The city ranks amongst the lowest in terms of Transportation and Infrastructure when compared

with the world's top 27 cities which are all capitals of finance, commerce and culture.

Figure 44: Transportation and Infrastructure - Ranking of cities35

Source: Cities of Opportunity (2012) by PwC in association with Partnership for New York City

The major transport networks in the region include:

Railways: The lifeline of the city, operated by the zonal railways - WR & CR

o Suburban Railway: Western Line, Central Line, Harbour Line, Trans-harbour

line, Vasai-Diva-Panvel Line

35 In Cities of Opportunity (2012), the Transportation and Infrastructure focuses on internal mobility and the city dweller's experience , with respect to - public transport systems, mass transit coverage, cost of public transport, licensed taxis, major construction activity, housing


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o Intercity /Main line connectivity: Major terminus/junctions include CST

Terminus, Churchgate, Mumbai Central Terminus, Lokmanya Tilak Nagar

Terminus, Bandra Terminus, Dadar Terminus, Thane, Kalyan Junction, Borivali,

Andheri, Vasai Road Junction and Virar.

Other Mass Transit Systems:

o Under construction ~11 km Versova-Andheri-Ghatkopar (Metro 1) expected to be

in operation by the end of year 2013

o Under construction Mumbai Monorail in two phases

Line 1 between Chembur and Wadala

Line 2 between Wadala and Jacobs Circle

o Proposed: Metro 2 and Metro 3

Major Roads:

o National Highways: NH 8, NH 4, NH 17 and NH 222

o Western and Eastern Expressway

o Eastern Free way

o Mumbai Pune Expressway

o Other Major Roads: Jogeshwari-Vikhroli Link Road (JVLR), Goregaon-Mulund-

Airoli Link Road, LBS Marg, Ghodbunder Road, etc.

Airports:

o Chhatrapati Shivaji International Airport

o Domestic Airport

o Proposed Navi Mumbai International Airport (NMIA)

Ports:

o Nhava-Sheva - Jawaharlal Nehru Port Trust (JNPT) near Uran

o Mumbai Harbour - Mumbai Port Trust (MbPT)

Economy:

The city of Mumbai is known as the financial capital of the country. It generates over 6% of India's

total GDP. Mumbai contributes about 33% of the country’s income tax, 60% of customs duty and

40% of the foreign trade.36

The city has undergone a spatial restructuring with respect to the business districts and

employment sectors. The Central Business District (CBD) which used to be the heart of the

36 Solutions for environmental contracts in coastal areas (www.projectsecoa.eu)


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economic activity of the city has been witnessing reduction in the demand and now comprises

mainly of companies wanting just a presence in Island City of Mumbai.37

The city is seeing population and employment growth in the suburban and northern part of the

MMR, such as growth of Bandra-Kurla Complex (BKC) as an alternate business district, Navi

Mumbai as a peripheral business district and so on.

Urban Travel Mobility:

The suburban rail system accounts for 51% of all person trips in the city according to the

Comprehensive Transport Study of the MMR Region (also known as "TranSForm") completed in

2008. However, the study also found that in terms of person-km, rail accounts for ~78% of the

motorized mode share. Hence it shows the importance of the suburban railways for the city's

transport network. This may be due to its vast coverage, convenience of travel as well as low fares

in comparison to other mode of motorized transport

Figure 45: Mode Share by No. of Trips – No Walk

Source: Comprehensive Transportation Study (CST) for MMR ("TranSForm"), 2008

Figure 46: Mode Share by Person*km – No Walk

37 Comprehensive Transportation Study of MMR(or "Transform"), 2008 - Lea Associates

50%

23% 9% 7% 7% 3%

Train Bus Taxi/ Rickshaw

Two Wheeler Car Cycle

Mo

de

Sh

ar

e

Mode


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Source: Comprehensive Transportation Study (CST) for MMR ("TranSForm"), 2008

1.3. Mumbai Urban Transport Project (MUTP)

Introduction:

Mumbai is India's financial capital and commercial centre. However, the ever increasing populace

of this city is rendering the present day infrastructure facilities inadequate. The city is facing

transport and communication related issues especially considering the growing vehicular

population, consequent traffic congestion and traffic slow down.

The biggest and most convenient public transport, the suburban local trains, also presented a

congested face affecting the city's image. Therefore, in 2002 the State Government, Indian

Railways and the MMRDA, with financial assistance from the World Bank, decided to undertake

Mumbai Urban Transport Project (MUTP) to find out long term solution to city's transport and

communication issues.

Key objectives of the project are:

Improve traffic and transportation situation in MMR and

Institutional development and strengthening

The MUTP project is being implemented in two phases currently with the assistance from

World Bank (WB) funding.

MUTP project - Rail Component

The suburban railway system of the city is the biggest and the most convenient mode of public

transport. However, the high congestions, capacity constraints, trespassing, and such issues

are affecting the quality of urban mobility. Hence, MUTP project largely focuses on the rail

component, and is being implemented through Mumbai Railway Vikas Corporation (MRVC), a

78%

10% 3% 3%

5% 1%

Train Bus Taxi/ Rickshaw

Two Wheeler Car Cycle

Mo

de

Sh

ar

e

Mode


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partnership of Ministry of Railways, Government of India (51%) and Government of

Maharashtra (49%).

MUTP Phase-138:

Phase-I of MUTP (MUTP 1) was sanctioned in March 2003, in which cost of Rail component

was USD 1 billion (Rs. 4501 crore) and the works have almost been completed.

Under MUTP-I, the extra capacity required for the suburban rail system was added to meet

growing demand and reduce overcrowding. It included the addition of Electric Multiple Units

(EMUs), increasing the length of trains and additional services. However, the ridership growth

kept pace with increasing capacity suggesting that there is substantial pent up demand for

suburban rail services in Mumbai requiring further enhancement of capacity. Also, the current

low fare level on the suburban rail system is one of the key factors contributing towards this

demand.

Summary of major works under MUTP-I39

Addition of 93 track kms

Induction of 101 new 9-car rakes

Resettlement & Rehabilitation of 15,857 Project affected households.

Running of 12-car rakes on all lines (excluding Harbour Line) by lengthening of all

platforms

Achieving 3 minutes headway on all the lines.

DC to AC conversion in all suburban section except Thane-CSTM (taken up in Phase

II)

Benefits from MUTP-I

Addition of 101 rakes (909 coaches)

Additional carrying capacity generated - 33%

Increase in vehicle KMs - 34%

Reduction in over-crowding - 20%

Introduction of 15 car services on WR

Additional corridors between Borivali-Virar on WR and Kurla-Thane on CR providing

additional path for increasing no. of trains & services

Saving in running time of suburban train and no change over of AC to DC loco and vis-

à-vis thus reduction in the journey time due to traction conversion from 1500 V DC

to25 kV AC,

Resettlement & Rehabilitation of 15000 Project Affected Households (PAHs) by

providing each family a flat of 225 sq. ft.

38 Source: MRVC 39 Source: MRVC


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Saving in Electrical Energy of more than 35% due to introduction of regenerative

braking in new technology of DC/AC rakes

MUTP Phase-II:

Following the success of MUTP Phase-I, MUTP Phase-IIA and IIB works were sanctioned in

March 2008, at a total cost of USD 1.2 billion (Rs. 5300 crore) for undertaking Suburban Railway

improvement works. MRVC is responsible for execution of Rail component works under MUTP

IIA and IIB including procurement of additional Rolling stock. MUTP 2Ais jointly funded by the

World Bank, MOR and GOM, while MUTP 2B is funded jointly by MOR and GOM.

Summary of major works under MUTP-II40

MUTP Phase II A :

EMU procurement – 72/ 12-car EMU rakes

Procurement of high-speed bogies

DC to AC Conversion

EMU maintenance facilities – CR & WR

EMU stabling lines – CR & WR

Technical Studies

MUTP Phase II B:

Resettlement & Rehabilitation

6th Line Mumbai Central-Borivali

Extension of Harbour Line from Andheri to Goregaon

5th & 6th Line Diva-Thane

5th & 6th Line Kurla-CSTM

Passenger yard remodelling

1.4. Objectives of the study

In view of the above context, the major objectives of the study are:

To identify ways to increase the revenue of the suburban train system, focusing on non fare

box revenue,

To study and review the socio-economic profile of customers and examine the justification

for financial cross-support from other economic agents as well as the potential for fare

adjustment in relation to affordability and service quality.

40 Source: MRVC


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To help in strengthening of skills in assessing non fare box revenue, and fare affordability

and knowledge obtained through the study to MRVC, and other agencies as appropriate

(such as MMRDA, Ministry of Railways, Government of Maharashtra, Western & Central

Railways).

1.5. Study's Domain and Approach

The study was comprised of the five (5) tasks, as summarized below with the brief on activities

undertaken.

Task-1 - Review of previous reports and studies: The consultant has studied various

important past studies carried over last two decades.

Task-2 - Interactions Stakeholder: It is acknowledged by the authority and the

consultant that there is a direct or indirect involvement of various agencies in the System

and hence the consultant has undertaken initial set of interactions with the both

government and private entities relevant for the study. The second set of interactions will

be carried out during the final stage of the study.

Task-3 - Estimation potential revenues: The potential from the existing and alternate

non-fare box revenue sources such as advertising, in-station retail and rentals, and real

estate development were assessed by the consultant in detail.

o The detailed concept plans for the four (4) identified sites, viz. Thane, Byculla,

Bhandup and Nahur/Mulund, for the commercial development on lease model

has been prepared and is at a various stages of approval at present.

Task-4 - Review of fares, socio economic profile of customers and affordability: As a

part of this task, the consultant has undertaken a survey of over 6000 commuters to

assess the willingness to pay, door-to-door travel pattern, socio-economic profile and

affordability to assess the impact of fare optimization.

Task-5 - Guided study tour: The purpose of this task to understand the practices followed

by major urban rail transits especially in the field of non-fare box revenues and other

commercial activities. A guided study tour was organized to major urban rail transits

from Tokyo and Osaka in Japan, and Beijing and Shanghai in China, which presents close

similarity to that of Mumbai Suburban Railway Systems in terms of ridership and

complexities.

The consultant approached the above five (5) tasks of the study in three phases as outlined below:

Figure 47: Approach followed for the study


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The report is structured as follows:

Section-1 Introduction This study introduces to study, its objectives and

various tasks undertaken during the course of study

Section-2 Ideation Stage This section comprises of the ideation stage activities

viz. task-1, task-2 and task-5

Section-3 Fare Optimization

Strategy

This section summarizes the findings of commuter

survey, review of fares and fare optimization strategy

under the task-4 of the study

Section-4 Estimation of Potential

Revenue From Non-Fare

Box Source

This section comprises of the overview of the various

non-fare box sources of revenues, with detailed

individual modules on advertising, real estate

development, station rentals and other potential, under

the task-3 of the study

Section-5 Recommendations This section summarizes the recommendations of the

study for both fare box and non-fare box sources of

revenues in order to achieve the objectives of the study.

Task-2: Interaction with Stake-holders

Task-1: Review of Previous Outputs/Studies

Task-5: Guided Study Tour to Major Suburban Systems

Task-3: Estimation of Potential Revenue from non-fare box sources

Task-4: Review of fares, Socio-economic profile of customers & affordability

IDEATION STAGE

(Options & Issues)

ANALYSIS STAGE RECOMMENDATION

STAGE


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2. Ideation Stage

2.1. Introduction:

Background

Mumbai Railway Vikas Corporation Ltd (MRVC Ltd), a public sector undertaking of Govt of India

under Ministry of Railways proposes to execute a number of suburban rail improvement projects

for enhancing suburban rail transportation capacity thereby reducing overcrowding and meeting

future requirements. This project is required to review affordability and identify means to

augment non-far box revenue for suburban operations.

The ideation stage was planned as a starting phase based on which the detailed analysis was

carried out and several rounds of consultations with MRVC and World Bank were conducted.

During the ideation stage, the following activities were conducted:

Collection of data

Finalizing detailed approach and methodology

Review of past studies conducted by MRVC and other agencies relevant to the present

study

Interactions with the stakeholders

Study of major urban rail/metro systems for benchmarking, identify key candidates &

planning for the visits to some of them for better study

There are several studies conducted in the past with respect to Mumbai Suburban Railway system

focusing on various aspects like operational, commercial (both fare & non-fare box) and

institutional. In this section we have tried to summarise the key findings & recommendations of

the previous studies & its relevance to the present study.

The Mumbai Suburban Railway System is known as a life line of the city and the city has evolved

over the time around the suburban railway lines. Multiple stakeholders such as city planning

authorities, transport operators, private developers and concessionaires and other

government/non-government agencies are involved directly or indirectly in the process of urban

transport strategy. Hence it is necessary to take opinions of the various such stakeholders. We

planned to conduct initial interactions with the identified set of stakeholders/entities at the

ideation stage, i.e. the beginning of the study and schedule interactions at a later conclusion stage

of the study. This section also summarises the views/opinions/issues cited by the various

stakeholders expressed in the first set of interactions conducted at the initiation of the study.

The study tour was conducted during the first and second week of July, 2013. The delegation,

comprising the officials from MRVC and the experts from the consultant, visited Japan and

China. The delegation was assisted by the counterparts of the consultant from the visiting

countries. This section also summarises the key findings from the study tour and applicability in

the context of Mumbai.


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2.2. Review of Previous Plans and Studies

2.2.1. Key Reports

The following table summarises the key studies/reports reviewed under task-1:

Table 9: List of report analyze

Sr. No. Key Reports Author/Consultant Submission Date

(Year)

1 Railway Budget 2013-14 Ministry of Railways 2013

2 Mumbai Suburban Rail Passenger

Surveys & Analysis

Wilbur Smith

Associates

2012

3 Railway Vision Document 2020 Ministry of Railways 2010

4 Concept Note for Mumbai Urban

Transportation Project-III

2008

5 Comprehensive Transportation Study for

Mumbai Metropolitan Region (MMR)

Lea Associates 2008

6 Consultancy Services for Development of

Railway Land and Air Space

Lea Associates 2007

7 Improvement in station design and

engineering on Mumbai Suburban

Railway section

Lea Associates 2005

8 Financial & Institutional study of railway

operations in Bombay Metropolitan

Region (BMR)

Symonds Travers

Morgan

1996

9 Comprehensive Transport Plan for

Bombay Metropolitan Region (BMR)

WS Atkins

International

1994

10 Review of Legal Framework & DCR

Regulations

2.2.2. Railway Budget 2013-14

Passenger amenities & safety aspects:

Budget recognized that passenger services have deteriorated and improvement is required. It also

emphasizes the need for more cleanliness on stations and improvement in passenger amenities.

Stressing the importance of passenger convenience, the budget planned to launch facilities like e-

ticketing through mobile phones and other sophisticated benefits. It planned for ISO certification

to be made compulsory for all base stations and a thrust in reducing carbon footprint. It also

planned to launch Wi-Fi network on select trains.


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Key commercial & amenities centric initiatives:

Railway Budget proposed several commercial initiatives & budgetary funding with focus on

passenger amenities & passenger centric developments such as:

Allocation of INR 1,000 Cr each made for railway land development authority and railway

station development authority

Identification of 104 stations for up-gradation in places with more than one million

population and of religious significance

Railways to set up six more Rail Neer bottling plants

Free Wi-Fi facility to be provided in select trains

Comments:

The additional intercity trains proposed will contribute to additional commuter traffic at Dadar &

Bandra and may lead to further demand for better amenities, eateries and outlets at station

premises. Also the proposed Wi-Fi zones on select trains, can be made available on pay & use

basis to the commuters

It seems that efforts to save travel-time are on railway’s priority. In suburban operations,

commuters often are willing to pay for reduced travel-time (e.g. Rajdhani Express in case of long

route journey). Hence, this can be leveraged to increase fares for point to point, or starting station

services.

2.2.3. Mumbai Suburban Rail Passenger Surveys &

Analysis – by Wilbur Smith Associates (2012)

This is the most recent study on Mumbai Suburban Railway network with the key objective to

assess present travel patterns of the suburban railway commuters & their preferences. It has

surveyed 13 stations each from WR & CR and 11 stations from harbour line with total sample size

of 25,000 commuters.

The major objectives of the study were:

To assess the present travel pattern of suburban rail passengers

To estimate existing peak hour and peak directional flow of passengers

To assess the crowd level in suburban trains at entry / exit points, stations and foot over

bridges (FOB’s)

To suggest measures to reduce congestion on FOBs

To know the level of commuters satisfaction on various aspects of the system

Key findings - Operational Aspects:

The survey results found that suburban railway commuters are the most dissatisfied particularly

in case of:

Stations:


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Inadequate ticketing system/infrastructure

Waiting time & long queue for ticketing

Lack of cleanliness & good maintenance

Inadequate parking space

Eateries, stalls, waiting area, etc

Amenities such as toilets, drinking water, etc

Platforms:

Inadequate facilities such as toilets, telephone

Insufficient Platform width

Inadequate lights, fans, etc

FOBs/Subways:

Inadequate Cleanliness & maintenance

Commuters expects Sidewalls on FOBs

Trains:

Lack of Cleanliness & good maintenance of coaches

Inadequate capacity/space

The following chart summarizes the stations with respect to station infrastructure based on

unauthorized entry-exit, passenger load at station premises, FOBs, etc. The study has also made

projections of ridership based on CAGR rate for each line derived based on ridership data from

past studies & its survey results in 2012.

Figure 48: Summary of passenger satisfaction survey findings - Wilbur Smith (2012)


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Comments:

Though it is the most recent study for overall Mumbai Suburban Railway network, there are

several limitations with respect to the findings.

Methodology or basis for selection of stations & sampling at each station is not disclosed.

Purpose of trip as well as Levels of Satisfaction/ Dissatisfaction may differ widely for each

of the parameters (such as seating pattern, comfort riding, etc) during peak / off-peak

period which has not been captured

The commuter preferences captured here are qualitative & are not linked to willingness to

pay.

The survey results do not show the commuter travel pattern based on1st or general class

for each of the income category.

Preferences for new & innovative ticketing systems, waiting space & branded eateries for

example need to be captured to assess attractiveness of stations with respect to trip & non-

trip purpose.

Relevance:

This being the most recent report, it will be one of the reference point for Task-3 & Task-4 of the

study

Task-3:

o Station specific commuter demographics will be useful for identifying appropriate

product offerings


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o Footfalls in station premises will be useful with respect to estimation of commercial

development potential (for product class like retail, entertainment etc)

Task-4:

o Selection of stations & sampling criteria can be based on the secondary data provided

by this study.

o Questionnaire design for our study will be based on findings of this survey with

primary focus on willingness to pay & quantification of commuter's preferences

2.2.4. Railway Vision Document - 2020

Railways Vision 2020 aims to strengthen the rail network by adding 25ooo kms with 10,000

socially-desirable lines. The capacity augmentation would primarily be undertaken by doubling

and quadrupling lines, segregating passenger & freight trains and electrification of busy routes. It

include 6ooo km of quadrupling lines in Delhi-Mumbai and Mumbai-Kolkata routes, which in

turn would host Dedicated Freight Corridors (DFC). Mumbai-Delhi DFC will be operational

before 2020.

As an initiative for environmentally sustainable development, several measures have been

proposed including introduction of new suburban trains in Mumbai with regenerative braking in

order to reduce carbon footprint. In an effort to be more customer-centric, mainline and

suburban trains will be smart and colorful. Delhi-Mumbai would also get a high-speed rail cutting

down the journey time.

New Commercial Ideas:

IR has conceptualized 50 world-class stations, benchmarked against the best in the world. These

are proposed to be equipped with large &well designed passenger circulation, concourse, waiting

space, conference halls, business centers, offices, retail, healthcare, theatres, restaurants, hotels

and education services.

IR plans to commercially utilize vacant railway land (though, not those required for operational

use) to generate sustainable revenues.

Advertising is also looked to for addition of non-fare box revenue and locations identified for

advertising includes trains (inside and outside), CCTV at stations, Multi-lingual magazines for rail

passengers, merchandising opportunities like ticket & foodstuff. Another possible idea under

consideration is launching a separate TV channel to disseminate information and earn revenues.

IR also plans to maintain parcel services as a separate business and run dedicated terminals with

parcel trains than from platforms akin to air cargo for additional revenue.

Institutional aspects:

Organizational reformation is also targeted in an effort to streamline the project-related

proposals, in an effort to deliver whole projects to meet deadlines. Categorization of projects on

priority basis will be undertaken to target time and budget expenditure. Railways aims to create

railway infrastructure and forge partnerships with private sector (through PPP) for development

of stations, high speed corridors, multi modal logistics park & optical fiber networks.


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Key takeaways:

Since the railways at the national level have envisioned the commercial development of railway

stations, the suburban network will follow the suit. Also, redevelopment of suburban railway

stations is easier as they provide pilot-test launch affecting a smaller area scenario.

Mumbai suburban railway operations can take a leaf out of the railway vision and adopt

advertising, parcel service and commercial development as non-fare sources of revenue.

For organizational reform, the existing overlap of jurisdiction between MRVC and RLDA has to be

addressed for effective functioning of railways.

2.2.5. Concept Note for MUTP-III

Key objectives for MUTP were:

To segregate suburban operations from long-distance

To bring down commuter density during peak hours on suburban trains

To enable railway system to keep up with burgeoning demand for the next 20 years

MUTP - Phased implementation plan:

The following chart summarizes the three phases of MUTP project. Phase-2 is expected to be

completed by end of the year 2014.

Figure 49: MUTP Phases

Key findings - Institutional & Commercial Aspects:


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The projects (including station redevelopment) under MUTP-III are envisaged to be implemented

mostly based on PPP model. The concept note briefly assesses the models for various types of PPP

structures such as:

Services Contract models

O&M contract models

Leasing type contract models

BOT models

DBFOT models

2.2.6. Comprehensive Transportation Study for MMR –

Lea Associates (2008)

The Comprehensive Transportation Study (CTS) for Mumbai Metropolitan Region (MMR)

articulates a vision for MMR’s future transportation as a seamless, integrated system, in which

commuters can make their journeys throughout the region safely and conveniently by various

modes of transport with strong emphasis towards public transit. It outlines long term (2031),

medium term (2021) and short term (2016) transportation strategies and guidance necessary to

attain this vision.

Key findings - Urban Travel Profile:

Existing Transportation Pattern (2005):

o Trip Purpose: The urban travel in MMR can be broadly categorized under three

categories

Figure 50: MMR Urban Travel - Trip Purpose (2005)

o Modes of Transport:

Over 40% of the workers in MMR reach their work places on foot. Amongst the

mechanized modes of travel, suburban railway is the most important with over

60% of people using it. Another 17% use bus as their main mode of

Work 47%

Education 32%

Other 21%


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transportation. A substantial share of journeys is also made by rickshaws and two

wheelers; wherein share of two-wheeler is almost double that of rickshaw.

Most of the education related trips are undertaken on foot (72.5%) while

remaining trips are widely distributed among various public and intermediate

public transport modes.

The peak hour passenger flow on suburban rail network is almost 60% of the

peak hour loadings of overall MMR region.

78% of the person trips are performed by public transit with 53% using suburban

rail and 25% using bus. However, the distribution is apparent when analyzed in

terms of person trip km travelled; public transit rises to 90% of total travel with

the suburban rail carrying the lion’s share of about 71%

o Trip Length: Travel-time for work trips varies considerably with average trip

time of 31 minutes, whereas the education trips are short with an average trip

time of 19 minutes

o Travel Spend: On an average, a commuter in MMR spends about INR 600 per

month on transport (2005)

Key findings - Socio-economic aspects:

Spatial distribution and Growth: Although Island Mumbai is the economic centre of

MMR, over time other areas viz. Mumbai Suburban, Thane, Kalyan- Dombivali, Navi

Mumbai and Mira-Bhayandar have experienced major economic growth.

Socio-Economic Scenario - future projections

o Work force in offices are expected to increase by 3 times to 6.4 million by 2031

from 2.3 million in 2005

o Female participation is 1/5th of male in the workforce; which is estimated to

increase significantly

o It is estimated that work-force in the formal sector will increase from 56%

(2005) to 70-80% (2031)

Competing Modes of Transport – Expected Impact of Metro

o The construction of proposed metro system in MMR is expected to create

significant change in pedestrian travel. When metro stations are functional, the

commuter catchment areas will be reduced because of the increased transit

coverage. This will encourage walking as the access mode of public transport.

Key findings - Commercial aspects:

New Sources of funding for Transportation System

o Development Charges: One time tax can be levied on value of new construction with

an idea to capture the land value gains on account of infrastructure creation. As per

the study if it is levied, the estimated resources range from INR 860 billion to 1720


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billion for period 2006-31. (assuming charges at 5% and 10% for residential and non

residential development)

o Advertisement Rights: Travelling commuters are prime consumer for advertising;

Hong Kong metro earns a substantial amount of revenue from advertising.

o Air Right Development: Globally, transits or railway agencies have proactive land

development divisions, with a focus on commercial real estate in order to leverage the

resource and generate sustainable revenue streams. In Holland, the Dutch Railways

are generating 40% of their annual revenues from property development. The Transit

Oriented Developments (TOD’s) in Kuala Lumpur and Tokyo are also contributing

significantly to respective revenues.

o Commercial Development of Stations Areas: The study undertook the network level

and project level financial analysis for Suburban rail network for the horizon of 20,

30 and 40 years. It found that the primarily operations were financially unviable with

only fare box revenue and they were found viable with clubbing of commercial

development.

Key findings - Institutional Aspects:

Institutional Arrangement – International Learning

Review of institutional arrangements of some of the metropolitan regions across the

globe have shown that Urban transport is increasingly being planned, managed and

funded as a region wide service.

The successful unified transportation agencies are those that were structured around

procedures to secure sustainable and predictable funding mechanisms, in addition to

service integration and rationalized priority setting.

UMMTA - Unified Mumbai Metropolitan Transport Authority

The CTS study recommends UMMTA as an institutional arrangement for the MMR

region. However, multiplicity of agencies with overlap of jurisdiction was the main

reason; UMMTA has not been formed till date as envisaged or recommended by the

report.

Comments:

The report though published in 2008, the data is of the year 2005; since then there has been a

significant change that can be observed with respect to socio-economic profile & commuter's

travel characteristics.

The study does not capture socio-economic profile & income category wise distribution, time

value of travel, etc specific to suburban railway commuters.

Institutional arrangement UMMTA as recommended is not formulated till date, given the

multiplicity of agencies with overlap of jurisdiction & their respective institutional mechanism.

Relevance to present study:

Being the most recent report, it will be the most useful report for Task-3 & Task-4


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Task-3:

Importance to the non-fare revenue sources specifically commercial development and

institutional challenges in implementation of such non-fare box sources of revenues

Task-5:

Criteria for selection of study tour location - primarily with respect to institutional

arrangement & similarity of demographics &/or commuter characteristics

2.2.7. Consultancy Services for Development of Railway

Land and Air Space - by Lea Associates (2007)

This study was undertaken to provide a broad overview of the real estate market in Mumbai

particularly in the vicinity of the railway stations identified for possible commercial development

and benchmarking them against international standards of Transit-oriented-development. Four

(4) stations, two (2) each on Western and Central lines were selected for survey and analysis

under this study.

Commercial

The analysis found that air space at Elphinstone-Parel and Kanjurmarg is more suitable for

development of offices. Elphinstone-Parel, because of its proximity to Nariman Point, emerged as

a convenient location for non-CBD offices, while Kanjurmarg capitalized on its relatively

undeveloped area and its close proximity to Hiranandani, a CBD in its own right. Mulund had

both commercial and office-space potential, though, primarily being a residential area,

necessitated a commercial-retail area nearby.

Land Parcels around the Station:

Elphinstone-Parel had reclaimed land area of 58 erstwhile mills with 602 acres, while Oshiwara

had a railway marshalling land on the east open for development. Mulund had a land parcel

owned by Central Railways on the East and a small parcel of land on west, used then for ticketing

purposes. Kanjurmarg had little area on ground and was primarily looking at air space

development.

Market Analysis:

Elphinstone-Parel were best suited for non-CBD office spaces which will boost commercial and

hospitality sector in future as the area has largely middle-income and higher-income groups.

Oshiwara was a Greenfield project and had great scope for development. Residential and

commercial surge was expected in the area.

Since Mulund was a planned suburb, it brought in customers from other suburbs and cashed on

the small-time retail and a large mall prevalent then. There was more demand for residential

space as the area had not seen burgeoning of real-estate prices. Retail and commercial space

could be exploited because commercial property market was largely unorganized and supply

limited to resale of old existing premises

Kanjurmarg was quite undeveloped and hosted people from low and middle income groups. The

area was mostly residential with little or small-time retail activity. Historically, the area was


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largely industrial, but demand for residential activity grew. As Hiranandani area prospered, there

was a spill over into Kanjurmarg as well. There was little demand for office space except BPO &

ITES because of low cost advantage. The area could be exploited offering office space and some

retail for air-space development.

Learning from case studies across the world

In areas like Hong Kong which have scarcity of land, air rights become critical for development.

This was successfully undertaken by MTR in Hong Kong which had a station design closest to

Transit Oriented Development (TOD), emerging as a critical reason for success. This happens in

a more optimized and efficient fashion when the railway authority is in charge of property

development as well.

Arlington County in West Virginia had 73% of its total commuters reaching the station on foot,

thus establishing the importance of pedestrian services and a high-density catchment area. The 3-

mile zone around the station was dedicated to office and commercial space making it a successful

experiment with everything within walking distance in the area.

MTR Singapore introduced the area licensing scheme to curb commuter movement during peak

hours, while simultaneously investing in pedestrian and bicycle facilities.

Kings Cross Station and St. Pancras exploited air-space commercially and earned revenues from

shopping complex atop the station. Both these stations along with Amtrak station at Emeryville

made use of a mixed use development around the station.

Investor risk can be reduced by policy mechanisms such as:

Encourage zoning policies with higher density land uses along- the stations

Enforcement of Development charges in a particular area to subsidize another

Cost advantage can be achieved by collaboration/cooperation between projects

Transit system alone cannot stimulate real estate development and there must be some

location/strategic importance. The density of the place matters. People use transit in more dense

places.

Comments:

Policies that curb the use of personal automobile encourage use of public transit. Also, pedestrian

activity in and around the station would encourage commercial development. However, if land

scarcity is an issue then air rights can be commercially successfully exploited, and this thrives in

inter-change stations like St. Pancras.

However, most importantly, long-term planning and public-private consultative planning has to

be the key for development. If two different institutions are in-charge of railway property and

land development, then the experiment would have its own problems. This can be minimized by

proper institutional mechanism to avoid conflict of interest among the various authorities.


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2.2.8. Improvement in Station design and engineering on

Mumbai Suburban Railway section - by Lea

Associates

This report aimed to study the present status of stations and suggest improvements in the design

for availing better facilities and estimating commercial potential. The study also reviewed DCR

and legal regulations and proposed changes for commercial utilization of railway property.

Key findings: Micro-market overview

Churchgate station was found to have an extensive commercial and business activity network

around it, leaving little potential for further development. Also, the station building houses the

western railway headquarters leaving no scope for air-space development.

Mumbai Central station building had a grand architecture but no specialized suburban entry and

a common one for both mainline and suburban passengers. Byculla was primarily a residential

and commercial area with edge platforms on both sides and no station building but a thriving

retail activity on the east side.

Goregaon had a rapid commercial development in the area. It had a land reserved for government

commercial complex in east and a best bus stand in west. These were the only two public lands

available for development. Since other land holdings in the area were mostly private,

redevelopment would be a very complex exercise.

Present status and commercial potential

Churchgate has a thriving retail activity around the station and because the modal share for

walking is as high as 68%, there is need for safe pedestrian areas. Apart from that the commuters

expressed a preference for better eateries, more information signs, more parking facility, utility

stalls and expressed concern about the cleanliness especially in toilets.

Mumbai Central sees an increasing amount of time spent by passengers on the station as the day

progresses and since, it is an interchange station, it offers retail potential for waiting passengers.

The commuters expressed a preference for station cleanliness, more ticket windows, shopping

and fast food centers. Some wanted an increase in train frequency.

Commuters in Byculla were dissatisfied with small width of platforms, less numbers of ticketing

windows, lack of information signs and insufficient water. Along with this garbage dump outside

the station was found to be an issue.

Commuters were most dissatisfied in Goregaon which had a problem of station cleanliness,

toilets, small platforms, less movement on platforms due to hawkers; old, unhygienic sewerage

issue and a non-existent solid waste management system. They expressed a preference for shops

and escalators.

Comments:

The survey brought forth major recurring issues:

Parking


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Sanitation, cleanliness

Desire for food outlets

More ticketing counters

Food & Beverage segment is majorly underutilized on stations. Commuters on almost all

segments have expressly desired more outlets which will boost further retail enterprise as people

will tend to spend more time at stations. However, unhygienic conditions, foul odor will hamper

any food enterprise on the station and hence cleanliness of the stations should be of prime

importance.

From this study and our analysis it can be said that there is retail and commercial development

potential in stations like Mumbai Central and Goregaon, as passengers spend ‘waiting time’ at

these stations, especially during evenings. This is especially true for Mumbai Central as it is an

interchange station and passengers switch from mainline to suburban.

Only a clean station can attract reputed brand names, spiraling growth.

2.2.9. Financial & Institutional study of railway

operations in Bombay Metropolitan Region (BMR)

- Symonds Travers Morgan

The study was undertaken with the key objective of analyzing the current legal, financial &

institutional framework for the suburban railway operations and proposing suitable institutional

framework & financial plan for future operations.

A). Key findings: Real Estate development strategy for BMR

Real Estate development strategy overviews the Development norms in MMR as per The

Development Control Regulations for Greater Mumbai,1991.It governs the land layout &

subdivision, floor space index, tenement density, amenity open space, transferable development

rights and regulatory approvals .

Key findings for railway land development as per the DCR, 1991

Items of operational construction by railways are excluded in DCR for development permission

which includes repairs and renovation of existing railway tracks including culverts, over-bridges,

under-passes or bridges, tunnels and side drains, goods sheds and offices, parcel offices, sub-

stations, foot-over bridges, lifting towers, signal boxes , overhead or ground level water tanks,

pipelines and pumping stations, running rooms, train examiners' offices, yard depots, permanent

way inspectors and signal inspectors' stores in railway yards and all overhead electric equipment

for traction.

Whereas residential buildings, commercial buildings, office buildings, industrial buildings, roads

and drains, hospitals, clubs, institutes, schools by railways shall not be deemed to be operational

for the purpose of exemption and require permission from the Commissioner, as laid down in the

regulations.


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Study of Mass Transit Rail System in Hong Kong & their impact on urban development states

that, station location and rail alignment radically influence the pattern of land use as property

prices adjacent to the station significantly go high. Taking this as urban planning strategy very

high plot ratio allowances were advocated in proximity of the stations (ranging 7.5 for residential

& 12 for commercial) in Hong Kong.

The study highlights that property development is a relevant mean of funding a mass transit

system as it increases operating revenues by generating additional patronage. However, use of

this method calls for a stable property market, high property value, high plot ratio and low cost of

decanting existing inhabitants.

Comments:

There is a need of greater policy emphasis for Suburban railway systems ,mainly in terms of

higher plot ratios along-side stations and speedy approvals , as alarming situation with regards to

traffic congestions on road network and practically no way out of this situation through provision

of new roads. An integrated program is required to relieve pressure of demand in MMR.

B). Review the institutional, legal & financial status of the suburban railway system

The study reviews the institutional arrangement of major suburban railway systems across the

globe and shows that most suburban railways manages to recover only about half of their

operating cost and thus require significant direct or indirect operating subsidy from the

government & almost all suburban railways need funding for their capital expenditure (rolling

stock and infrastructure).

Also the single most common characteristic of all major suburban railway systems is that strategic

control of has been transferred from national administration to a local body, even if operations

are still undertaken by a national operator. The principle reason for this has been, shifting of

financial responsibility of operating losses on local authorities along with reluctance to apply

scarce investment funds by the national administration. The report identified several alternatives

for institutional options for Mumbai suburban railways.

Five alternatives have been outlined that includes:

Figure 51: Alternate Institutional Arrangements


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The review of alternatives indicates that A1 is the most preferred while A2 & A3 also being viable

option but carry a marginally increased degree of risk.

Comments:

As mentioned in the report there is need of proper institutional arrangement for suburban railway

system, so as to avoid the conflict of interest of overlapping jurisdiction among the various

present agencies. The institutional framework of incorporating new body Bombay Rail

Development Corporation (BRDC) as recommended in the study is not formulated till date.

C). To propose institutional structures & financials for suburban rail operations in

future (Five year plan & action plan)

Based on the proposed institutional framework, five-year plan was proposed for period 1996/97 –

2001/02. The profitability is based on assurance of significant cash injection to fund the capital

expenditure program by World Bank & local banks and revenue realization by fare box.

Comments:

The report outlines the best alternative for institutional & operational framework for suburban

railway system and five year plan for the same. While the plan aims to outperform operating

expenses majorly by fare box revenues, non-fare box revenue comprising of inter-railway revenue,

advertisings, license fees for tea stalls, weighting machines, catering and miscellaneous activities,

contributes negligible (2% & 3% respectively in 4th & 5th year and no contribution in initial three

years).Also the study does not consider income from commercial development of land.

The study was published in 1996 and doesn’t consider commercial development of railway land in

terms of air-space development and Transit Oriented Development (TOD) as a potential revenue

source. There has been gradual shift since then, in realization of revenues for urban railway

systems apart from fare box revenues.

Existing WR & CR suburban services

GROUP A

Creating new body for ownership of infrastructure & its development

A1: O & M contracted to

WR & CR

A2: O & M contracted to new IR

zonal

A3: O & M by new rail operating

body

GROUP B

Infrastructure & its development continues

with IR

B1: O & M contracted to

WR & CR

B2: O & M contracted to new IR zonal


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2.2.10. Comprehensive Transport Plan for Bombay

Metropolitan Region – Atkins

The major objectives of the study were:

To assess the present travel pattern of Mumbai

To estimate growth in demand for integrated public transportation

To come up with a comprehensive plan to improve transportation standards of road and

rail

To understand the variability of commuter profile, transport use and high-growth areas

in future

Key findings - Operational aspects:

For analysis of future transportation scenario of BMR (now known as MMR), this report made

certain assumptions based on estimates. It assumed that there will be little or no growth in island

city and significant development will happen around Oshiwara and BKC. The implementation of

proposed plans would be impacted by the growth in affected areas i.e. if the area shows little

growth, then the project will become expensive to undertake like the underground CBD loop

between Churchgate and VT.

The report suggested that new suburban corridors make use of railway land thus, bringing ease in

implementation.

The report estimated that disposable per capita income would grow by 2.4% while overall travel

demand would grow by 51% thus leading to 85-86% proportion of public transport demands in

peak travel hours in 2011. This results in an increase of 47% increase in peak travel demands.

Key findings - commercial aspects:

The Report emphasized that to raise considerable sums as non-fare box revenues; development of

the airspace at some stations can be undertaken. The stations identified were: Dadar, Bandra,

Chinchpokli, and Wadi. It also envisaged utilization of airspace development for office purpose

besides retail, as it generates higher value.

Apart from sale of air rights, redevelopment of stations commercially and remodeling of stations

to use 12-car trains is estimated to contribute to increase in revenue.

Consumer attitude survey conducted by Atkins for this study, found that "as incomes rise, an

increased proportion of users are ready to pay for better quality services than are currently

offered".

Key recommendations:

Development scenario at Railway Stations:


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The report identified Bhayandar to be of prime suitability for urban development while Bhiwandi

was moderately suitable. Vasai-Virar had an impediment in form of water and transport and if

this was taken care of, it could be developed. Another area expected to have reasonably high

growth was that of Kalyan-Ulhasnagar and the corridor from Nerul to Khopoli.

Passenger amenities:

Atkins’ believed that there was value in optimization of existing railway facilities and improved

passenger access & interchange facilities would lead to growth in revenues.

It recommended the shifting of ticketing facilities to concourse/FOB level leaving platform free

for retail development.

Comments:

The growth of the city may not happen in a clearly demarcated ways as predicted by study, but

more by a diffusion or mixture of different scenarios. This means that Navi Mumbai and suburbs

would show highest growth, with a declining growth in the island city.

Apart from this, land acquisition for certain projects may delay the development and hence

projects which use existing railway land for development should be undertaken on a priority

basis.

Since these reports are dated in the past, the desirability for better services by commuters in

present scenario would have increased manifold and can be ascertained only by the recent survey

(which will be conducted under task-4 of the present study).

DRAFT FINAL REPORT Revenue Maximizing Study in particular for Non-Fare Box Revenues with Affordability Studies

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2.2.11. Review of Legal Framework and DCR Regulations


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2.3. Stakeholder consultation

2.3.1. Introduction

Background

Mumbai Railway Vikas Corporation Ltd (MRVC Ltd), a public sector undertaking of Govt of India

under Ministry of Railways proposes to execute a number of suburban rail improvement projects

for enhancing suburban rail transportation capacity thereby reducing overcrowding and meeting

future requirements. This project is required to review train fare affordability and identify means

to augment non-far box revenue for suburban operations.

Since suburban railway is the lifeline of Mumbai, any recommendations with respect to fares &

non-fares (especially commercial development) can have significant impact on direct or indirect

users of the railways & city planners & administrators, it was envisaged to seek opinions of

various key stakeholders.

List of identified stakeholders

We have identified the extensive list of all stakeholders from MMR region who can have direct or

indirect relevance to Mumbai Suburban Railway system from perspectives such as city planning &

administration, operations, transport infrastructure & connectivity, financing & users of the

railway services & facilities. The following table summarises these stakeholders.

Figure 52: List of identified stakeholders

However, only a few of these stakeholders may have significant direct/indirect influence in setting

boundary conditions to achieve the objectives of this study. Hence we have prioritized a set of

stakeholders in consultation with MRVC to seek their opinions.


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List of prioritized stakeholders

Prioritisation of key stakeholder meetings at the inception stage was done based on

Sourcing the information required

Relevance of the stakeholders from an institutional perspective

Establish the boundary conditions of the study

The following table summarises the key stakeholders & schedule of the meeting:

Table 10: List of stakeholders

Stakeholders consulted Meeting held on

Western Railway February 4, 2013

April 5, 2013

Central Railway February 5, 2013

February 19, 2013

March 20, 2013

RITES April 8, 2013

CIDCO April 10, 2013

BEST April 15, 2013

MCGM April 18, 2013

L&T Seawoods Pvt Ltd February 4, 2013

Reliance Infrastructure Ltd

(Mumbai Metro One Pvt Ltd)

April 22, 2013

2.3.2. MMR Region Public Transport Operators

Western Railway (Mumbai Division)

Brief background of the stakeholder:

Western Railway (Mumbai Division) is spread over 636.43 route km with 116 stations & handles

~ 4 million daily originating passengers with the daily average passenger earnings of ~INR 5 Cr.

It also operates the Mumbai's Western Suburban Railway line from Churchgate to Virar

comprising 28 stations spread over 60 km stretch which carries close to ~3.6 million

passengers/day. The suburban network extends till Dahanu Road which is at 124 km from

Churchgate.

Key outcomes of the meeting:

Fare revenues:

Daily average passenger earnings are to the tune of ~INR 1.7 Cr (FY12) which still

falls short of meeting operating expenses..

70% of passengers are daily users (Season Ticket) which constitutes around 55%

of total fare revenues (FY12)


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Non fare box revenue sources:

These sources of revenue are classified as sundry earnings which contributes

~10% of total revenues.

Advertising, catering stalls & ATMs are the key non-fare box revenue sources for

the western railway (suburban operations)

Key issues:

Licenses of catering units have not being renewed (in accordance with Catering

Policy 2010) despite the termination date of 2010 owing to the inconsistency

between policy and on-ground reality.

There is a significant dearth of proper benchmarking systems with little sharing

of responsibilities.

Institutional issues:

There is a lack of proper coordination among various departments. The

absence of a commercial and business-minded orientation resulting in

delays in awarding commercial contracts or monetization of identified

commercial sites (for instance advertising hoardings). This causes

significant revenue loss to the operator.

It was opined that the Executive in Chair should be empowered with a

higher degree of power to avoid delay in decision- making of contracts.

Central Railway


Central Railway (Mumbai Division) operates the Central & Harbour (including Trans-Harbour)

lines of Mumbai Suburban Railway system. It manages 76 suburban stations with daily average

passenger load of ~4 million.


Fare revenues:

Suburban passenger earnings for FY12 are to the tune of ~INR 640 Cr (FY12)

which still falls short of meeting operating expenses being only 56% of the total.

70% of passengers are daily users (Season Ticket) which contribute ~50% of total

fare revenues (FY11 & FY12)

Non fare box revenue sources:

Non Fare box revenue is classified as sundry earnings which contributes 5 - 7% of

total revenues (or ~3-4% of total working expense)

Advertising is the major source of non-fare box revenue (~60%) for the Central

Railways


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Various media are in use. However, outdoor roadside hoardings have a

greater potential to yield a significant amount of advertising revenue.

For instance, hoardings at 5 sites (Byculla, Chunabhatti, Sion, Chembur

& Tilaknagar) facing Eastern Expressway yield around ~INR 10 Cr p.a.

Other key non-fare box revenue sources for the CR are Catering Stalls and

Automatic Teller Machines (ATMs).

Maintenance

CR has operational control over Harbour line stations in Navi Mumbai/CIDCO

region whereas station maintenance & development rights are with CIDCO. At

present these two agencies are in talks to transfer maintenance of these stations

to CR.

Key issues:

Licenses of Catering units have not being renewed (in accordance with Catering

Policy 2010) owing to the inconsistency between the policy and on-ground

reality.

There are significant gaps in standardization & infrastructure along with the lack

of centralization of commercial policy at Board level. This limits the revenue

potential from advertising.

Currently advertisers are liable for infrastructure investments, obtaining required

clearances & approvals, & security of assets. In addition to this upfront payment

structure, it has limited investments or attractiveness among advertisers for

railway assets.

For instance, there were no takers for zone specific advertising rights as

directed by Railway Board. However, finally, Zonal Railways has to opt

for 3-4 tenders for advertising rights per station

Lack of flexibility in determining reserve price in accordance with market

conditions

Absence of a scalable model for new advertising media such as LEDs, LCDs, etc

despite its high revenue potential.

BEST


The BEST is a major public transport operator after suburban railways in Mumbai Island &

Mumbai Suburban region (Mumbai Municipal region). It also operates inter-city services to three

different areas beyond the Municipal limits of Mumbai city, i.e. into the limits of the bordering

corporations, viz. Thane, Mira-Bhayander & Navi Mumbai.


Routes and Passengers


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With total fleet of over 4500 buses (including 270+ AC buses), the BEST carries

over 4.5 million passengers daily on 472 routes which can be classified as follows:

Feeder Routes - It feeds the railway stations from the residential

complexes &/or Business Districts.

East-West Connectors - It runs East/West, where railways have no

presence and connect the Western Suburb with the Eastern suburb.

Trunk Routes - It runs South-North through the city, almost parallel to

the railways and competes with it.

Fare Box Revenues

The Bus transport fares are highly subsidized.

From 1st April, 2013, it has implemented annual fare revision policy based on

input costs. Earlier, fares would be revised as & when there was a rise in the

operating (especially fuel costs).

Non-fare box revenues:

Advertising is the only source of non-fare box revenue to BEST.

Advertising policies are implemented in a commercial manner. The policies

include:

Practice of ‘First Finder Scheme’ for new sites and tendering process for

prevailing sites is generally followed by BEST.

The Advertising spots which have been identified and are tendered are:

Body panels of buses,

Inside the buses ( includes back-side of seats & LCDs)

Bus stops

Contractual aspect :

Contract for advertisements differ with the placement. Those that are inside

buses are given for a 10-year lease period & those that are at bus stops and bus

body panels are given for 3-year lease period.

The rental payment schedule generally in advance (specifications mentioned in

tender documents) and on monthly basis

Commercial Development at bus depots:

BEST caters to short-distance commuters within the metropolitan region and

also where waiting time is negligible. Commuter-centric commercial

development at depots / bus-stops is not viable.

However, state transport corporations like MSRTC, where people travel for

longer distance & waiting time is considerable, retail development at bus


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terminals is a good option and is already in practice by the concerned authority

(Tenders are invited for commercial development of bus depot complex on

DBFTL basis for select bus depots in Maharashtra including one at Panvel in

September, 2012)

2.3.3. City Planners & Administrators

MCGM


Municipal Corporation of Greater Mumbai (MCGM) is a city planning & administration agency

for Mumbai city (Island city, Western suburban till Dahisar & Eastern suburban till Mulund).

Since most of the key stations, both on central & western line, fall under the MCGM municipal

region, it becomes a very important stakeholder especially with respect to FSI approvals, land use

& land use conversion, clearances & approvals for development and providing connectivity &

necessary infrastructure amenities.


City Planning & Administrative, Commercial Development aspects

City Development Plan (CDP) - Currently CDP is under revision for period 2014-2034 &

is expected to be ready by November 2013.

The revised CDP will be based on the concept of Transit-oriented-Development(ToD)

At present, Mumbai has a flat FSI policy

Example: 1.33 for island city & 1 for suburban areas with max FSI of 2

including TDRs

The revised CDP will have provisions for tapering FSI with highest near transit

node or its influence area.

Presently, existing development plan or DCR does not have provisions for commercial

use of railway land properties. However, if any are planned in future, there would be a

need for ‘change in land use’, necessary clearances & approvals including FSI relaxation

with MCGM & Government of Maharashtra. This may take at least two years of time.

However, MCGM clarified that if Railways takes MCGM into confidence and proposes the

names of stations under planning for MFC development and the railway land under

planning for commercial development, it would include them in CDP which is currently

under revision.

This will help in reducing time required for approval, from two years to less than six

months as is in the case of a normal approval process.

Co-operative Development Options

MCGM may be ready to partner with railways in exploiting airspace development

potential of railways by including municipal land & adjacent roads as land parcels.

The area over stations from first floor space onwards can be commercially exploited.


PwC 109

For instance, in case of commercial development in Andheri, combined

development can be explored over station & road running parallel to station in

the east.

Agencies can come together to cooperate for specific projects as in the case of SATIS

projects.

However, if revenue is to be generated from such joint projects (such as commercial

development) then revenue sharing formula would have to be worked out from the

development.

Advertising

If the advertising hoardings on railway properties are roadside facing (such as near

ROBs), they would need clearances & approvals from MCGM & would also be liable to

pay local taxes (as per ward-wise schedule rates).

Since the proposed commercial plans of railway stations will need clearances & approvals from

MCGM, it is better to take them on board to streamline any issues, which will ultimately ease the

implementation.

CIDCO


The City & Industrial Development Corporation (CIDCO) of Maharashtra Ltd is a special

planning agency (CIDCO) for the development of Navi Mumbai. For the growth of Navi Mumbai

region it developed Mankhurd - Belapur - Panvel railway line with Railways on 2/3rd - 1/3rd

model wherein CIDCO retained station development & maintenance rights.

CIDCO has developed commercial complexes at five railway stations on Mankhurd-Belapur-

Panvel railway line during the period 1990 to 2000. Out of these, two station complexes, viz.

Vashi and Belapur, complexes were developed above the railway platform areas with areas

admeasuring 7.5 lakh and 10 lakh sqft respectively. These two complexes were subsequently

designated as InfoTech parks - International InfoTech Parks, Vashi and International Technology

Centre, Belapur. At the same time, in the other three stations, viz. Sanpada, Juinagar and Nerul,

complexes were developed outside the platform area.


Navi Mumbai is not equivalent to Mumbai in terms of development planning & evolution

or growth pattern. Hence, the experience is completely different for agencies operating in

both these regions.

However, from an institutional viewpoint, CIDCO officials feel that the private sector

participation in end-to-end real estate development would be more preferable than a

guided approach.

Market supply-demand & necessary infrastructure facilities (for instance, parking) will

determine the attractiveness of commercial development above the stations.

The type of product-mix in Mumbai Suburban Railway stations would be different from

that in case of Navi Mumbai stations, primarily, because of lack of availability of land or

sufficient space & operational constraints.


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CIDCO & Railways are in talks to transfer station maintenance rights, related revenue

streams & costs, cost sharing of common facilities, etc for Navi Mumbai suburban

Railway stations to Railways. It is expected that transfer arrangement will be finalised by

2015.

2.3.4. Other Agencies

RITES


RITES Ltd. is a wholly owned subsidiary of Railways & is a multi-disciplinary consultancy

organization in the fields of transport, infrastructure and related technologies.

RITES Ltd is a technical consultant to Railways for the upcoming corridors in MMR region, viz.

Churchgate-Virar Elevated Railway Corridor, CSTM - Panvel & Virar - Panvel Fast corridors. As a

part of technical feasibility it has proposed station & track alignments, station air space & land

development for commercial viability & has conducted several willingness-to-pay surveys for

these corridors.


Willingness to Pay

Willingness to pay (WTP) & affordability studies with respect to income strata of

the commuters have not been done as yet.

Generally WTP is done based on the average income of the respondents.

Fare hikes within a particular tolerance range have negligible impact or no

impact on ridership. Recent fare hikes have not resulted in reduction in

ridership.

Air space development:

There may be a conflict of airspace of existing stations in western line stations

with the stations for elevated corridor as they are proposed over existing stations.

Being the consultant for new corridors for its technical & economical feasibility

assessment, RITES has expressed several reservations, such as:

The Air space above the elevated tracks will be at a considerable height

(at 15-18 metre) and therefore, will be financially unviable in general.

However, candidate sites should be evaluated on a case to case basis for

financial viability if air space is the only option.

Various factors as enumerated below restrict the financial viability of

airspace development in Mumbai suburban network (especially Western

and Harbour Lines)

Lack of vacant space adjoining stations

Increased construction costs,

Infrastructure issues (availability of water etc),


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Fire safety protocol

Competitiveness of market outside the station space

Entry-exit at such a height

Hence, RITES had specially recommended that the land parcels adjoining railway line on

the proposed Churchgate-Virar Corridor should be considered for development under the

“real estate development” component for augmenting non-fare box revenues.

2.3.5. Developers

L&T Seawoods Pvt Ltd.


L&T Seawoods Pvt Ltd, a subsidiary company of L&T Realty (L&T group company), is a SPV for

the development of Seawoods Integrated Commercial Complex cum Railway Station which is also

the first TOD project in India on PPP basis.

The project includes station redevelopment including air-space development of Seawoods-Darave

station, commercial & retail development spread over 40 acres development. Total development

potential is ~2.6 million sqft with a FSI of 1.5. The product mix includes shopping mall,

commercial, offices, multiplexes & hotels.


Since CIDCO had certain limitations with respect to marketing & pricing, it was unable to

tap the entire potential of station commercial development in Vashi-Belapur line,

especially at nodes Vashi & CBD Belapur.

Airspace development potential will be greatly enhanced if there is an area of minimum

2-4 acres around the stations.

Hypermarkets, Commercial & retails provisioning stores should enable seamless

passenger movement.

Since non-rail commuters are likely to be a major user of commercial space (E.g.: 50-60%

in case of Integrated Seawoods complex), it is imperative that support infrastructure

facility such as parking is instituted and maintained.

There has been a considerable set of challenges & issues faced by CIDCO:

Financial viability of the project has suffered because of the following reasons:

Delays and uncertainty in the proposed infrastructure project in the

region such as Navi Mumbai International Airport (NMIA).

There have been frequent amendments to FSI regulations which affect

the saleability of complexes in an area.

For instance amendments to DCR regulations & FSI relaxation in

BKC by MMRDA led to competitive over-supply in Mumbai

region which in turn led to low attractiveness & rental realisation

for commercial properties in Navi Mumbai


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Delays in clearances & approvals due to involvement of multiple agencies

(Railways & CIDCO)

Lack of agreement between different government agencies often lead to

delays & cost overruns in project implementations, often at the expense

of the developer.

Uncertainties over long term infrastructure plan for city.

Land encroachment by squatters, illegal hawkers, slum dwellers often reduces

the land area available for commercial development or any other use by Railways.

Inadequate development scale & size

TOD projects, especially air space developments are not viable at normal

FSI of 1.5, as it will lead to constrained development. Higher FSI &

flexibility of development is envisaged for good & affordable commuter

experience.

Ascertaining the current status of Real Estate is imperative as a rise in real estate

cost increases the financing cost of the project and introduces difficulties in

arranging debt from financial institutions.

Air space developments are available at a premium of 30-40% when compared to

the normal land development mainly due to the cost of foundation structure.

Often windfall gains are attributed to developers. However, developers prefer

certainty of returns provided government is ready to share risks besides giving a

guarantee on the development plan.

Reliance Infrastructure Ltd (Mumbai Metro One Pvt Ltd)


Mumbai Metro One Private Limited (MMOPL), a subsidiary company of Reliance Infrastructure

Ltd. (RInfra) is a SPV for Versova-Andheri-Ghatkopar Corridor Mass Rapid Transit System

(MRTS) in which RInfra and MMRDA hold 69% and 26% respectively while remaining 5% is held

by Veolia Transport RATP Asia. This is the first metro project awarded in the country on a PPP

basis and entails design, financing, construction, operation and maintenance of about 12 km

elevated metro with 12 stations.

The metro will provide east to west connectivity in Mumbai and will carry about 6 lakh

commuters per day. The biggest advantage would be the substantial reduction in travel time from

the current 90 minutes to about 20 minutes along with much improved and comfortable traveling

experience in The City.


On financial viability of MRTS:

Proper project cost plus contract mechanisms will be incorporated in concession

agreements for PPP projects for financial viability, as the private party has to bear all

the escalated expenses, the reasons for which may be beyond the control of the

private party (time over-runs are majorly caused due to delayed approvals).


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Presently MMOPL has a 90: 10 fare & non-fare box revenue composition and is

targeting a ratio of 80: 20.

Fare-box revenue:

Fare charged shall be revised @ 11% every fourth year but this is still insufficient to

meet the operating expenses which have been raised considerably over the last ten

years primarily due to inflation. MMOPL is in talks with concerned authorities to

look into the matter & raise the fare charges revision rates

Non-fare-box revenue:

Since Rail transit modes are highly capital incentive, all kinds of revenue generating

mechanisms should be explored:

Advertising model: Advertising is outsourced to a single outdoor media agency

(JC Deaux) by a process of competitive tendering. The contract is exclusive and is

granted for a long tenure of 7-10 years lease period.

Other major components of non-fare box targeted are:

Retail:

Small commuter-friendly retail is preferable and options are still being

explored as an elevated metro track is not very retail-friendly.

Mostly quick service restaurants,

ATM’s, mobile shops etc.

No potential commercial component as hardly anything is allowed for

Mumbai Metro

As viaduct is elevated, leasing right of ways (ROW) for some utilities are being

explored as an option.

Implementation Challenges & Issues:

Since Mumbai Metro is completely elevated and passes through extremely dense

corridor, right of way issues have been extremely challenging.

As there is no mapping of existing utilities (cables etc) running underground by

MCGM, it adds to the difficulty during execution

Mumbai Metro passes from east to west of city through different wards of MCGM.

Clearances have to be taken from each ward separately though MCGM being single

authority which becomes very time consuming; there is emphasis on need of Single

Window Clearance for speedy clearance.


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2.4. Global best practices

2.4.1. Introduction

Background

Global best practices were studied with the following focus areas:

Study of Diversification strategy for Revenue sources, especially non-fare box sources

Revenue maximization through TOD/suburban railway linked real estate

development & advertising potential

Systems & processes to enable steady revenue stream from non-fare box sources

Institution building and best practices

Evaluation and Decision Frameworks

Stakeholder engagement methods

The following sections summarises the key learning and the applicability in the context of

Mumbai City and Mumbai Suburban Railway System. The annexure-1 summarises the major

highlights of the each meetings held during this visit.

2.4.2. Key findings

The urban cities - Tokyo and Osaka in Japan and Beijing and Shanghai in China, were chosen for

study which offered a varied learning experience. The summary of the key learning is as follows:

2.4.2.1. Japan

Integration of institutions at the highest levels

The Ministry of Land, Infrastructure, Transport and Tourism, abbreviated MLIT, is a ministry of

the Japanese government which is a single ministry responsible for formulating and

implementing policies and regulations with respect to Japanese Railway industry.

The real estate or property development is one of the most important non-fare box sources of

revenue for the urban rail/metro operators in Japan. However, it derives the value from the

Transit-oriented-Development (ToD) model implemented by the operators. The successful

implementation of ToD requires policy and institutional coordination and integration between

land, infrastructure, transport and tourism, and Japan provides us with the examples of

successful integration at the highest (Ministry) level.

Urban Rail Development - Policy and Institutional Framework

Of the total 205 railway operators, 176 (0r 86%) are private railway operators (as of July 2010)

with major presence in urban mass transit systems (both suburban railway and metro). The credit

goes to "Rail + Property Development model" and Separation of Infrastructure & Operations

policy program, which has led to financially self-sufficient urban rail systems requiring no

operating subsidy from the Government.

Diversification of the revenue sources


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The sources of revenue for each of the operator, the delegation met, can be categorized as follows:

Railway Business (Transport business)

Real Estate Business

Life Style Products & Services Business (includes Retail, Hotels & Hospitality, Travel,

etc)

Other Businesses - Advertising, Consultancy and Engineering, Feeder services,

Entertainment & Communication

International Business

Commercial Development (Real Estate)

The real estate development around the key transit nodes/stations has been the major driver of

profitability for the Japanese railway operators. The Urban Development and Transit-oriented-

Development (ToD) has worked very well in Japan. The commercial development or real estate

development can be categorized as:

Station redevelopment

Stations in the city of Tokyo till late 1990s were similar to that of today's stations in

Mumbai. Today such stations have been redeveloped as illustrated in the following

example of the redevelopment of O-Okayama Station (Source: Tokyu Corporation)

Figure 53: Integrated Development at O-Okayama station

Integrated station development with mixed-use ToD

Both the cities, Tokyo and Osaka, offers examples of commercial development integrated

with the station area, providing commuter-centric amenities and convenience as well as

utilizing the air space to maximize ToD potential.

The figure below shows such an example of the ToD development of Osaka Station

(Source: JR West). The latest redevelopment of the station has been completed very

recently in 2011.


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Figure 54: Osaka Station City

Scale of development - Osaka Station City:

North Gate Building: Floor space – 210,000 sq m

Dome: Length 180m, Width 100 m, Height 25~55 m

South Gate Building: Floor space – 180,000 sq m Abenobashi Station -

Figure 55: Osaka station redevelopment (Left) & Abenobashi Station (Right)

Source: JR West Source: Kintetsu Corporation


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Private operators like Kintetsu Corporation, a company of Kintetsu Group which is a

business conglomerate comprising about 140 companies with activities centered around

the railway, has successfully completed Abenobashi Station airspace development (an

iconic example of station redevelopment based on TOD principals and mixed-use

development with station as its integral part)

Concept of the station city

With the objective of creating social value by a place together living bases for people from just a station as passing point, the concept of station city was envisaged, for instance a case of the Tokyo Station City. Tokyo Station City

Figure 56: Tokyo Station City

Source: JR East

Commercial development of operational land parcels (other than stations)

The projects like Umekita (by Hankyu Corporation) is a large scale development

involving Greenfield development

Non-real estate businesses

The major non-fare box revenue contributor on the non-real estate side is provision of life

style products and services in or near the area of maximum footfalls pooling power i.e.

stations. These include:

o Station space utilization such as in-station retail and shopping mall

o Convenience stores (JR East operates such 468 stores) and Kiosks

o Hotels and hospitality

Advertising: Innovative advertising and use of digital media - for instance, JR East has

installed over 20,000 LCD screens inside trains and using the same for the advertisement

and public information through centralized system

For operators like Hankyu Hanshin Holdings - entertainment, communication, travel and

international businesses contribute around 25% of the total revenues

Some operators have further diversified into consultancy services and feeder network

services.


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2.4.2.2. China

The urban railway systems in China are mainly operated by government owned corporations and

have very less contributions from non-fare box sources of revenues. However, the innovativeness

in the latest urban railway models and fare structure variations across the cities and operators are

the major learning from China.

Urban Railway Models:

Railways are operated by the state enterprises mainly, however recent developments show

increasing preference for BOT and alternate investment models involving direct/indirect

(through subsidies) share of land value appreciation & other benefits, for instance

Beijing Metro Line #4: Operated by the concessionaire Beijing MTR Corporation, a JV

between Beijing Infrastructure Co, Beijing Capital Group and Hong Kong MTR (49%).

The fares are subsidized where subsidy is linked to the ridership.

Shenzhen Longhua Line: Line is currently operated by Hong Kong MTR with 100%

interests and is the first metro line in China to take advantage of an alternate investment

model, wherein, Government shares revenue arising from land value appreciation with

the corporation.

Fares:

Unlike in India, there is no uniform fare structure in China. The fare structure varies across the

different cities and is determined based on distance (fixed and variable component). The

differences are due to different regional socio-economic profiles, local urban needs, and priority

of the regional government, type of operator and model, and ease of implementation.

Beijing: Fixed fare structure of RMB 2.0 since last 20 years. (RMB 25.0 for Airport

Express)

Shanghai: Base Fare (3.0 RMB) + Distance based Variable Fare

o Variable Fare = 0.0 RMB for ride < 6 km

= 1.0 RMB/km for ride > 6 km

Nanjing: Base Fare (2.0 RMB) + Variable Fare (based on No of Stations Travelled)

o Variable fares (min 0.0 RMB and max 2.0 RMB)

= 0.00 RMB for stations < 8 no

= 1.00 RMB for 8 no < stations < 12 no

= 1.00 RMB for stations > 12 no

Guangzhou: Base Fare (2.0 RMB) + Distance Slab based Variable Fare

o Variable Fare = 0.00 RMB for trip length<4 km

= 1.00 RMB/ 4 km for 4km < trip length < 12 km

= 1.00 RMB/ 6 km for 12km < trip length < 24 km

= 1.00 RMB/ 8 km for 24km < trip length


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2.4.3. Applicability for Mumbai City and Mumbai

Suburban Railway System

While the policy and economic environment influencing Japan and China are not directly

comparable to India, there is still several learning that can guide the way forward for enhancing

sustainability of the Mumbai Suburban Railway systems. Some of these are as follows:

Learning easily implementable in Mumbai:

o Maximization of space utilization in and around station area by designing

operational infrastructure for present and future commuter flows, and for

passenger convenience

o Innovations and digitization of the advertising media

o Diversification of agencies like MRVC into services like consultancy &

engineering

Learning which can be implemented with policy interventions and stakeholder

consultations

o Large scale Brownfield station redevelopment, product mix and methodology

adopted in construction and operations

o Transit-Oriented-Development is focussed on planning for effective and efficient

urban planning around transport projects, which in turn leads to unlocking of

commercial value in the project influence area which can be captured through

appropriate project structures/

o Therefore, it can be inferred that commercial development of vacant land parcels

has been successful because of close co-ordination with the local urban town

planning authorities and infrastructure agencies.

o Station re-development for commercial exploitation is a part of the urban vision

for the cities at the highest levels, and innovative project, commercial and

financial structures are possible because of such close co-ordination

o City specific fare structuring - the city of Mumbai generates around 40% of the

total passenger traffic for Indian Railways and score very high on per capita

income. Given the socio-economic profile and importance of suburban railways

in Mumbai, the uniform fare structure may not be optimal for the city and hence,

as in case of China or Japan, the city should have a separate fare structure.


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VOLUME - II


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3. Fare Optimization Strategy

3.1. Background

Mumbai Suburban Railway System generates ~93% of its revenues from fare box sources

(FY2011-12). The rest of revenues from non-fare box sources are largely from advertising

(commercial publicity. However, the total revenue of the suburban system is not able to meet

even the operating expenses and the system is facing ~40% of operating revenue deficit.

Mumbai Suburban Rail Network is currently one of the cheapest modes of transport in the

Mumbai Metropolitan Region, especially for long distance passengers. The investments

undertaken in MUTP and other measures by the Railways are expected to improve the levels of

comfort, health and safety of commuters, and reduce travel times. It is believed that these

improvements would justify consideration of increasing the overall level of suburban rail fares.

However, any increase in the fare of suburban rail network may have an impact on the economy

of the city. Studies reviewing fares have been conducted in the past by Indian Railways and

MMRDA and also presently being conducted by MRVC. While in general, several studies have

indicated that demand for suburban railway services remains price-inelastic, no study has

comprehensively tested the willingness to pay and affordability for train travel according to

income segments, and their daily travel habits and the likely behavioural outcomes due to any

increase in train fares.

The study, "Revenue maximizing study in particular for non-fare box revenues with

affordability studies", is required to review train fare affordability and identify means to augment

non-far box revenue for suburban operations under the "Task-4: Review of fares, Socio-economic

profile of customers & affordability". Under this task, the consultant was expected to

Review current fare structure & recent revisions in fares

Undertake commuter survey to update/refine available information in the socio-

economic profile of customers, current overall expenditure on transport and the

percentage of income that this represents. The surveys shall be of the size of at least total

5000 commuters from both Central & Western Railways covering all the segments and

profile of the society.

The Consultants are to review the sample size to ensure that it is sufficient to produce

statistically valid data to support any proposals for fare revision.

In relation to lower income passengers, the Consultant shall undertake surveys to

determine their ability and willingness to pay higher fares.

Based on the results on the surveys, and considerations of the overall level of fares on other

modes of public transport in the MMR, the Consultants shall make proposals for:

Possible increases in the overall level of suburban rail fares

The distribution of the overall increase across different fare and ticket types

Means of ensuring the fare increases are affordable to the lower income passengers


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3.2. Review of past financials and future projections

Financials of the Mumbai Suburban Railway Network for the past few years shows that the

revenues generated from fare box (which form ~93-95% of the total revenues) and non-fare box

sources are insufficient to meet even operating expenses.

The financials for the last ten (10) years show that the System was generating sufficient revenues

to meet its expenses during 2004 - 2008 with a fare recovery ratio (FRR) of around 1.0. However,

the FRR has declined to less than 0.65 since financial year (FY) 2008-09, primarily on account of:

Capacity addition under MUTP project such as increased number of services and

increased number of rakes - direct impact on operating expenses on account of increase

staff, fuel (electricity consumption) and maintenance expenses.

Revenues grew primarily on account of increased ridership.

No fare increase since the MUTP-I surcharge which was levied in 2003.


Source: MRVC, WR & CR (Mumbai Division)

As seen from the chart, the revenues from 2004-2005 until 2011-2012 have grown at a

compounded annual growth rate of ~5% as against ~12% for the expenses. The Project Appraisal

Document for the Loan for MUTP-2A shows that even if fares increase at inflation rate, breakeven

would be much beyond 2020-21. The financial health of the railway network is significantly

affected due to the widening deficit in the system. The fare revision, which was expected to be

inflation-linked, was not undertaken in the past till end of calendar year 2012.

With the 2-step fare revisions during the month of January, 2013, the fare revenues are expected

to increase, however the actual implications on the ridership and fare box revenues can be

assessed only with the availability of the sufficient data post-fare hike (data for at least 12

months).


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2-step fare hikes:

1. MUTP Surcharge:

The MUTP surcharge-3 was levied on the commuters with effect from (w.e.f.) January 1, 2013

on the Mumbai Suburban Railway Network, to recover a part of the loan taken under the

Mumbai Urban Transport Project (MUTP) to upgrade Mumbai's transport infrastructure.

The prevailing MUTP Surcharge-1 was levied as an 8% surcharge on the suburban train tickets

since 2003. The expected surcharge-2 and 3 due in 2006 and 2009 respectively did not take

place and therefore the planned surcharge-3 was levied directly.

2. Fare hike and rounding-off:

At a national level, Indian Railways increased the fares, that affected the Mumbai suburban

railway system by raising all fares to the next higher multiples of five (5) was implemented. This

hike became effective from January 22, 2013.

Figure 58: Two step fare hikes in the Mumbai Suburban Railway System

The preliminary revenue estimates41 suggest that there will be a one-time jump in the fare box

revenues by ~20 - 25% due to these increased fares, during the next financial year 2013-14, which

can reduce the operating deficit to certain extent. However, this increase is insufficient to meet

the operating deficit and without further fare increases, the operating deficit will continue to grow

at previous levels post FY 2013-14.

Conservatively, in the long term the expenses are expected to grow at inflation rate while the fare

revenues will grow primarily at a growth rate equivalent to growth rate of population. This will

lead to further decline in FRR from current levels of ~0.60 to ~0.40 in the next ten (10) years i.e.

FY 2013-14 to FY 2023-24. Also, it will lead to a cumulative operating subsidy requirement of

over INR 18,300 crore during this period, which can create a pressure on the budgetary support

at the expense of the need for funds for the capacity enhancements & other developmental

projects.

41 Reference - OD data from 'Mumbai Suburban Rail Passengers Survey and Analysis' (2012)by Wilbur Smith, proportion of revenue share across the ticket/class types from past passenger earnings available from WR & CR

Till December 31, 2012 Basic fare + MUTP surcharge (Phase I)

Revision in Surcharge (MUTP phase III w.e.f 1st January 2013

Rounding off to next higher Mutilple of Rs. 5 (w.e.f 22nd January 2013)


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Figure 59: Financial projections for next ten years for the System (conservative)

Given that programs like MUTP-2A will lead to enhanced capacity through additional number of

rakes and services, the operating expenses may grow at a higher rate. If historic growth in

revenues and expenses are taken into account, cumulative operating subsidy of over ~INR 26,300

Cr will be required to be met through non-suburban railway business and budgetary sources.

Figure 60: Financial projections for next ten years for the System (alternate case)


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This subsidy requirement may be much more than as projected above if the revenue growth is

lower than the historic growth. However, for the purpose of analysis and due to absence of cost

based accounting to assess the likely impact of MUTP-2A on the overall costs, the fare

optimization was carried out with respect to conservative projections considering long term

growth criteria.

3.3. Representative framework for improving fare

recoveries

Fare Recovery Ratio (FRR), a ratio of passenger fare earnings to the operational expenses, is an

important financial health barometer for any transit system, indicating the extent to which fare

revenues are able to cover operating expenses. As indicated earlier, the FRR of the suburban

system is estimated at only about ~60%42.

Cost - Revenue Economic Framework:

The typical cost elements for any transit systems include:

Operations and maintenance costs (O&M Cost)

Depreciation & Amortization

(This represents the aggregate return of capital invested through equity and debt)

Cost of Capital (Interest on debt and return on Equity)

(this represents the aggregate return on to incentivize investors)

Taxes (if any)

Considering its welfare objectives, Mumbai suburban railway system may not necessarily target to

be profitable for its equity holders (Government of India). Given that it operates not as a body

corporate, but as a ministry with direct budgetary allocations, taxes may are not relevant in

today’s operating context.

Given this context, sustainability on an economic basis can be defined in three different stages:

1) As a preliminary target, it is expected that the revenues are sufficient to at least meet its

O&M costs, which could form the baseline threshold of fare box recovery.

2) As the next target, it may be expected that the system will become self-sufficient to meet

its debt obligations, in terms of its interest and principal repayment of loans taken under

various facilities.

3) As the third target, the system should generate enough funds to fulfill its future capital

investment needs through internal accruals (i.e.) budgetary grant requests for

investments are minimized

The typical revenue elements for the transit system may include:

Fare-box

Non-fare box (including indirect benefits)

Surcharge

42 Financial statements - WR & CR


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And subsidies/grants (in case of operating deficits)

The following schematic summarizes the cost & the revenue elements along with the current

position of the Mumbai Suburban Railway System.

Figure 61: Representative economic framework for transit system

It is to be noted that the current accounting in the system is cash-based, with several elements of

the administrative costs shared with the overall division. Before a comprehensive cost-based fare

recovery can be attempted, a cost-based accounting system will need to be adopted with sufficient

separation of assets.

Some of the ways in which the fare recoveries can be improved to meet the first target of meeting

O&M expenses can be as follows:

A. Reducing avoidable expenses -

In a cost-based accounting system, several avoidable expenses or incorrectly accounted

expenses may become evident. It is recommended that the authority undertakes a commercial

due-diligence of the suburban network operations and establish the cost benchmark for

establishing the target.

B. Better utilization of assets

Better utilization and allocation of assets, improvement of asset productivity and plugging the

revenue leakages can lead to improvement in asset turnover. Establishing the cost of services

for different demand categories (e.g. by class, service type or between destinations) may throw


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up patterns of inefficient asset allocations, leading to better resource decisions. However, it is

recognized that under the current system of operations, measures like prevention of revenue

leakage through better checking facilities may either increase congestion at entry/exit points of

the stations, or involve additional technology-oriented capital investments.

C. Increasing the ridership

For a city like Mumbai, ridership has not been traditionally a constraint, but supply has been.

Therefore, increased capacity and services may trigger further demand and lead to incremental

revenues. The increase in capacity can be either through increase in the number of coaches to

existing trains, increase in frequency, reduction in the headway between two trains, or increase

in number of lines and procurement of new rakes. All of these measures involve huge capital

investments and will need to be backed by cost-benefit analysis

D. Increasing Fares

Fare revenues are directly proportional to fares and are the easiest lever available to enhance

fare box revenues. However, given the monopoly nature of the railway system and its

importance from the socio-economic aspects, there may be limitations to which the fares can be

increased. Hence appropriate fare structure shall be required specific to Mumbai Suburban

Railway System.

The mandate under the fare optimization activity under the present study, "Revenue Maximizing

Study in particular for Non-Fare Box Revenues with Affordability Studies", has been to only

consider the last aspect as above, with a focus on willingness to pay and affordability of

commuters largely in a status quo situation. Therefore, the recommendations on fare increases is

limited to the outcomes of this survey, and does not consider the cost of provision of the services,

under an overall cost recovery framework. For the completion of scientific ways of fare

structuring for the system, it is suggested that the authority carries out a separate study with

respect to the other elements as discussed above.

3.4. Existing Fare Structure

The Existing fare structure is based on Distance slabs and it starts with a minimum distance of 10

km as per the Indian Railways43.

Table 11: Base fare at a minimum distance

Class Minimum Distance for

charge

Base Fare at min. Distance

Km Rs.

Second Class(OT) 10 5

First Class(OT) 10 45

Second Class MST 10 85

First Class MST 10 280

Second Class QST 10 230

First Class QST 10 760

43 www.indianrailway.gov.in/railwayboard ("Trains at a Glance" - Coaching Directorate)


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Where, MST - Monthly Season Ticket; QST - Quarterly Season Ticket; OT - Ordinary Ticket

Source: Indian Railway ("Trains at Glance", Coaching Directorate, Railway Board)

The fare structure of the Mumbai Suburban Railway includes the following components:

Base fare based on distance slab

MUTP surcharge – III

Rounding off to multiples of five (5) - Rounding off to higher multiple of 5.

The following table summarizes the MUTP surcharge applicable to the Mumbai Suburban

Railway Network. The recent surcharge became effective from January 01, 2013.

Table 12: MUTP Surcharge

Distance

slab

(Km)

Single Journey Tickets (or

Ordinary Tickets)

Monthly Season Tickets

(MST)

Quarterly Season Tickets

(QST)

II Class (Rs) I Class (Rs) II Class (Rs) I Class (Rs) II Class (Rs) I Class (Rs)

Existing w.e.f.

1/1/13

Existing w.e.f.

1/1/13

Existing w.e.f.

1/1/13

Existing From

1/1/13

Existing w.e.f.

1/1/13

Existing w.e.f.

1/1/13

1-10 0 0 0 0 0 0 0 0 0 0 0 0

11-50 1 3 2 6 10 30 20 60 30 90 60 180

51-100 1 3 2 6 15 45 30 90 45 135 90 270

101-150 1 3 2 6 20 60 40 120 60 180 120 360

Source: MRVC

The rounding off of the fares to the next higher multiple of Rs. 5 was carried out w.e.f. 22nd

January 2103 for all the tickets. As examples, under this system, in the second class fare chart,

wherever '1' or '6' comes up as the last digit (i.e. in unit's place), the respective fares are increased

to the next lower multiple of 5. This rounding off further led to further increase in fares.

Review of recent fare revisions - (with an example of the Western Suburban

Railway Line or WR)

The increase of fares for WR as of December 31, 2012 and that effective from the January 22,

2013 can be summarized as follows:

Table 13: Review of fare hikes for WR (Churchgate - Virar section)44

0 - 20 km 21 - 40 km >40 km

min max min max min max

1st SJT 0% 13% 6% 9% 7% 9%

2nd SJT 25% 67% 25% 67% 15% 43%

1st MST 5% 16% 11% 13% 10% 12%

2nd MST 5% 21% 23% 52% 12% 43%

Share of

Passenger-km ~20.7% ~44.6% ~34.8%

44 Data Source: Wilbur Smith O-D Survey Reports, Western Railway, MRVC


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It can be seen from the table and the heat maps shown below, that the fare increase is the most

for the commuters travelling in Second Class with Single Journey Tickets (SJT), followed by the

commuters using Second Class with Monthly Season Ticket (MST).

Table 14: Heat Map of the fare hikes between 31.12.2012 and 22.01.2013 for 2nd class MST commuters

Distance (km) -> - 4.5 10.2 14.7 21.8 26.9 34.0 39.8 43.1 51.8 55.9 60.0

Name of the

Station CCG BCL

DD

R BA ADH GMN BVI MIRA BYR BSR NSP VR

Station

code

Churchgate 0% 21% 21% 21% 52% 52% 36% 23% 12% 37% 27% 27% CCG

Mumbai Central 21% 0% 21% 21% 5% 52% 52% 23% 23% 43% 37% 27% BCL

Dadar 21% 21% 0% 21% 21% 5% 52% 52% 36% 12% 43% 43% DDR

Bandra 21% 21% 21% 0% 21% 21% 5% 52% 52% 23% 12% 43% BA

Andheri 52% 5% 21% 21% 0% 21% 21% 5% 52% 52% 36% 23% ADH

Goregaon 52% 52% 5% 21% 21% 0% 21% 21% 5% 52% 52% 36% GMN

Borivali 36% 52% 52% 5% 21% 21% 0% 21% 21% 5% 52% 52% BVI

Mira Road 23% 23% 52% 52% 5% 21% 21% 0% 21% 21% 5% 52% MIRA

Bhayandar 12% 23% 36% 52% 52% 5% 21% 21% 0% 21% 21% 5% BYR

Vasai Road 37% 43% 12% 23% 52% 52% 5% 21% 21% 0% 21% 21% BSR

Nalasopara 27% 37% 43% 12% 36% 52% 52% 5% 21% 21% 0% 21% NSP

Virar 27% 27% 43% 43% 23% 36% 52% 52% 5% 21% 21% 0% VR


Table 15: Heat Map of the fare hikes between 31.12.2012 and 22.01.2013 for 2nd class SJT (or OT) commuters

Distance (km)

-> - 4.5 10.2 14.7 21.8 26.9 34.0 39.8 43.1 51.8 55.9 60.0

Name of the

Station CCG BCL

DD

R BA

AD

H

GM

N BVI

MIR

A BYR BSR NSP VR

Station

code

Churchgate 0% 25% 67% 67% 25% 25% 67% 50% 36% 15% 43% 43% CCG

Mumbai

Central 25% 0% 25% 67% 43% 25% 25% 50% 50% 25% 15% 43% BCL

Dadar 67% 25% 0% 25% 67% 43% 25% 25% 67% 36% 25% 25% DDR

Bandra 67% 67% 25% 0% 25% 67% 43% 25% 25% 50% 36% 25% BA

Andheri 25% 43% 67% 25% 0% 25% 67% 43% 25% 25% 67% 50% ADH

Goregaon 25% 25% 43% 67% 25% 0% 25% 67% 43% 25% 25% 67% GMN

Borivali 67% 25% 25% 43% 67% 25% 0% 25% 25% 43% 25% 25% BVI

Mira Road 50% 50% 25% 25% 43% 67% 25% 0% 25% 67% 43% 25% MIRA

Bhayandar 36% 50% 67% 25% 25% 43% 25% 25% 0% 25% 67% 43% BYR

Vasai Road 15% 25% 36% 50% 25% 25% 43% 67% 25% 0% 25% 25% BSR

Nalasopara 43% 15% 25% 36% 67% 25% 25% 43% 67% 25% 0% 25% NSP


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Virar 43% 43% 25% 25% 50% 67% 25% 25% 43% 25% 25% 0% VR



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3.5. The focus of the present study

The primary focus of this study has been to examine the willingness to pay and affordability of fare

increases, in general by various segments or categories of users, as well as in the specific context of

the recent fare increases, already in force. In the process of such fare revisions, there are several

questions governing the ability to implement and the acceptability of the fare change decisions:

Will the revised fare be affordable to the commuters from the low income group?

Are the fare hikes exploiting the benefit of monopoly?

Are there any alternate modes of transport available for the passengers, and at what cost?

As a percentage of the total trip costs, how do train fares compare with that of the access and

dispersion modes (i.e. what proportion of the total trip value is appropriated by feeders)?

If the fares are increased without any changes in the service quality or capacity additions, are

commuters willing to pay for the same? What will be the likely loss in ridership? Will it affect

the travel behaviour significantly?

Are the season tickets discounted appropriately? If not, what shall be discount range for

season tickets?

Considering the above key questions, the study has focussed on fare optimization primarily based

on the outcome of the commuter survey results with respect to their Willingness to Pay (WTP) and

the assessed affordability (using monthly income as one of the proxy variables). In the

optimization exercise, it also assumes some aspects of the economic decisions and the

subsidization considerations but at a broader level and recommends further investigations on

these two aspects. The study includes the following premises based on the above issues and our

survey was designed to validate or negate these hypotheses. These hypotheses have been also

devised taking into account the findings from past studies, understanding of the suburban railway

network and based on discussion with various stakeholders.

H1. At current levels of fares, demand for suburban rail services is highly price-inelastic

and any further increase in fares will not result in significant decrease in demand or

loss of ridership

H2. Fares per passenger-km in the suburban rail system are extremely low when

compared with the other modes of public transport within the city or with the other

cities

H3. Commuters are willing to pay more for the existing levels of services

H4. Mumbai Suburban Railway system forms the most comprehensive urban connectivity

network in the absence of which commuters' travel and lifestyle habits will

significantly change.

H5. Considering rising income of the general population in addition to points 1, 2, 3 and 4

above, railway fares increases are within the affordability window of different

commuter classes

H6. The pricing of the season ticket is disproportionately lower when compared with actual

usage.


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H7. Commuters are spending significant proportion of their time and cost in

accessing/dispersing from the railway network, for a much lower distance when

compared with the railway services

H8. Commuters are willing to pay significantly more for improved facilities.

3.6. Commuter Survey

Prozeal Consulting, the survey partner to the Consultant, PricewaterhouseCoopers Pvt Ltd, has

conducted the commuter survey to identify the socio-economic profile, transport expenditures, trip

characteristics and the willingness to pay with respect to affordability of the commuters. This

section gives an overview of the survey methodology and approach, sampling process and the pilot

survey. The detailed report on the commuter survey is discussed in the Annexure.

The field survey was carried out at 26 stations spread across the geography and suburban rail

network with 6,277 respondents (against planned ~6,000 respondents). The survey results are

detailed in the Annexure-2.

3.6.1. Survey Methodology

The approach and research methodology is illustrated in the following chart:

Figure 62: Survey Methodology and Approach

The key activities undertaken in conducting the commuter survey include:


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Critical reviews of the past studies and survey results such as 'Transform' by Lea

Associates, ‘Mumbai Sub Urban Rail Passenger Survey and Analysis 2012’ by Wilbur

Smith and surveys conducted recently for prefeasibility of fast railway corridors by RITES

Sampling Process

Questionnaire Design - Designing of the draft questionnaires and discussion with MRVC

to finalise the draft questionnaire for testing at a pilot scale

Pilot Test - Pilot Survey to ensure all questions are clear to the respondents and to remove

any ambiguity in questions

Data Collections - Main field survey based on revised final questionnaire

Data Analysis - Survey findings and analysis

The survey was conducted on each of the stations selected based on the Sampling Process during

peak as well off-peak hours covering various income groups, occupation groups and age groups of

commuters.

3.6.2. Sampling

The ‘Mumbai Sub Urban Rail Passenger Survey and Analysis 2012’ study conducted by Wilbur

Smith formed the basis of the sampling of this survey. The sampling was done in two stages, as

follows:

Stage 1: Identification of stations with maximum peak hour traffic

Peak hour boarding at each station (10% of the total) was obtained from the study and

then average peak hour boarding of each line was calculated.

All the stations with peak hour boarding greater than average peak hour boarding on each

line were selected

Stage 2: Clustering of selected station in stage 1 into income group for sample size distribution:

The stations selected on the basis of peak traffic were clustered on basis of monthly income

groups.

Stations so clustered on the basis of each income group were given different sample size.

Sample size selected on the basis of each income categories are

Less than INR 10,000 - 1% of total peak hour boarding was adopted

INR 10,000-30,000- 1.25% of total peak hour boarding was adopted

INR 30,000 - 1.5% of total peak hour boarding was adopted

The stations selected to carry out survey with sample size are given in table below:

Table 16: Central line stations - Sample Size

Station Name Municipality Zone Peak Hour

Boarding Samples Sample Size

Less INR 10,000

Kurla BMC 20,281 203 1%


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Dombivali KDMC 15,276 153 1%

Masjid BMC 6,804 68 1%

INR 10000 - INR 30,000

Thane TMC 25,674 321 1.25%

Greater than INR 30,000

C.S.T. BMC 22,131 332 1.5%

Kalyan KDMC 20,056 301 1.5%

Ghatkopar BMC 16,430 246 1.5%

Mulund BMC 14,798 222 1.5%

Bhandup BMC 10,559 158 1.5%

Byculla BMC 7,724 116 1.5%

Total 2,120

Table 17: Western line stations - Sample Size



Less than INR 10,000

Andheri BMC 39,072 391 1%

Goregaon BMC 16,115 161 1%

Mumbai Central BMC 14,425 144 1%

Bhayandar MBMC 14,283 143 1%

INR 10,000 - INR 30,000

Church gate BMC 31,754 397 1.25%

Bandra BMC 25,936 324 1.25%

Nalasopara VVMC 18,400 230 1.25%

Greater than INR 30,000

Dadar BMC 36,464 547 1.5%

Borivali BMC 30,804 462 1.5%

Virar VVMC 23,418 351 1.5%

Total 3,150

Table 18: Harbour line stations - Sample Size



Less than INR 10,000

Airoli NMMC 6,178 62 1%

Wadala BMC 10,778 108 1%


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INR 10,000 - INR 30,000

Vashi NMMC 13,085 164 1.25%

Greater than INR 30000

Belapur NMMC 7,337 147 1.5%

Nerul NMMC 7,949 159 1.5%

Panvel PMC 7,386 148 1.5%

Total 787

Figure 63: Mumbai Suburban Rail Map - Stations and Sample Size for the Commuter Survey


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Station wise

Survey sample size


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3.6.3. Conduct of Survey

The survey was carried out in two stages:

A) Pilot Survey

B) Main Survey

A) Pilot Survey

A Pilot Survey was carried out in order to:

Test and gather information prior to the actual survey, in order to improve the survey’s

quality and efficiency.

Validate the questionnaire designed, and survey methodology for the proposed survey.

Pilot Survey Methodology:

The supervisors and surveyors were trained for the pilot survey a week before the start of the

survey. The pilot survey was carried out on June 11, 2013 on Borivali and Dadar Stations of

Western Lines. Total of 198 commuters were interviewed during the peak as well as off-peak hours

during the pilot survey.

Total three (3) survey teams were deployed, each comprising four (4) members including one (1)

supervisor. The following table summarizes the survey activity conducted by the surveyors:

Table 19: Pilot Survey - Field Activity

Sample Size = 198 Morning Peak Hours Afternoon (Off-Peak

hours) Evening Peak Hours

Time 8:00 AM to 11:00 AM 11:00 AM to 5:00 PM 5:00 PM to 8:00 PM

Survey Team - 1 Borivali Station Borivali Station Dadar Station

Survey Team - 2 Borivali Station Dadar Station Dadar Station

Survey Team - 3 On-board On-board On-board

Key Pilot Survey Findings:

1. With respect to the Survey Methodology:

It was found that it is difficult to carry out surveys on board during peak hours. It was

decided to conduct the main survey on stations/platforms during morning and evening

peak hours while survey would be conducted on board during off-peak hours.

2. With respect to the Questionnaire:

It was observed that the Trip Origin and Trip Destination for most of the

respondents were same as Boarding station and Alighting stations.


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Most of the respondents were found to be season pass holders and is also

supported by the past surveys. Hence it was difficult for the respondents to answer

the question pertaining to "cost of the single trip", which can be calculated

internally during analysis from the boarding station and the alighting Station.

Pertaining to the findings of the Pilot Survey, the Main Survey Questionnaire was modified

by removing questions related to:

Trip Origin and Trip Destination

Cost of the trip

3. With respect to the Willingness to Pay:

Respondents are found to be most comfortable in answering the willingness to pay

questions based on percentage scale instead of absolute numbers.

B) Main Survey:

The questionnaire was finalized based on the pilot survey results and after detailed discussion with

MRVC. We sought the permission and necessary approvals from MRVC, Western and Central

Railway to undertake main commuter survey and based on the receipt of the same the survey was

carried out as follows:

Table 20: Main Survey - Activity

Duration Suburban Line

Sample Size

Proposed sample

size

Actual respondents

covered

26th June 2013 –

7th July 2013

Western 3,150 3,346

8th July 2013 –

18th July 2013

Central Line 2,120 2,139

Harbour Line 787 792

Total 6,057 6,277

The respondents covered include mix of both the genders as well as mix of different age groups.

Out of total sample surveyed, 85% were males and 15% were females.

The analysis covered the commuters belonging to a diversified age group from below 15 years to

above 85 years. The average age of the male commuters and female commuters are summarized in

the table below:

Table 21: Gender & Age group mix in the sample

% of total

sample

Average Age

(Yrs.)

Minimum

Age(Yrs.)

Maximum Age

(Yrs.)

Male Commuters ~85% 29 20 90


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Female Commuters ~15% 27 14 84

The findings of the main survey are discussed in the section 5. The survey was designed primarily

based on the results of the ‘Mumbai Sub Urban Rail Passenger Survey and Analysis 2012’ by

Wilbur Smith and according to the scope of this study. Analysis of data suggests that the sample

data is representative of the population as described by the earlier study.

Further, the study had a sufficiently wide geographic and demographic coverage of the c0mmuters

of Mumbai Suburban Railway Network spread across the MMR region

The survey was carried out at 26 stations spread across the Mumbai Suburban Railway

Network in MMR region

Its coverage include 10 stations from Western Railway Line (WR), 10 stations from Central

Railway Line (CR) and 6 stations from Harbour Line

The survey also covered the station specific sample considering the peak hour load at each

of these stations

The sample covered both the genders - male and female and the ratio of the same is found

to be approximately similar to that in the past surveys.

All income groups were covered and ~50% of the commuters are found to be earning less

than INR 10,000 per month, which is similar to the survey findings by Wilbur Smith


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3.7. Summary of Major Findings

3.7.1. Socio Economic Characteristics

Education Level of the Commuters: The Distribution of respondents as per the education

level is shown in the chart below. Most respondents are graduates (~36%) while

significant proportion (~77%) is either have education till HSC or higher.

Figure 64: Survey Findings - Distribution of commuters based on education

Occupation: The occupation wise distribution of the respondents is relevant for analysing

the willingness to pay results. Majority of the respondents are from the service and

business category (~77%) and students (20%). The other occupations together form a very

small proportion of the overall sample (~3%).

Figure 65: Survey Findings - Distribution of commuters based on occupation

Monthly Income: Majority of the respondents are from the monthly income category of

INR 10,000 - 20,000 per month, however significant proportion of the respondents

(~30%) are from the low income (<INR 10,000 per month) category.

1% 4%

18%

34%

36%

7%

0%

Illiterate

Primary

Secondary

HSC

Graduation

Post graduation

Doctorate

8%

69%

0% 2%

20%

0% 1%

Business

Service

Farmer

Worker/Labourer

Student

Unemployed

Retired


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The majority of "No Income" group respondents are mainly students who are dependent

on their parents or family for the payment of travel expense or train fares.

Figure 66: Survey Findings - Distribution of commuters based on monthly income level

Inter-relation between various socio-economic parameters:

o The monthly income of the respondents was found to be directly related to their

education and occupation. The bi-variate analysis between education and monthly

income showed that nearly 84% of the male and 100% of female respondents

having education up to primary level earned less than INR 5000 per month.

o The analysis found that the monthly income of the respondents increases with

their education level, especially for respondents with higher education.

Figure 67: Survey Findings - Interrelation between education and average monthly income

3.7.2. Trip Characteristics

Trip Purpose and Trip Frequency:

17% 25%

18%

5%

5% 5%

28%

26% 28%

37% 31%

36%

10% 10% 10%

4% 2% 4%

Male Female Overall

> 30,000

20,000 - 30,000

10,000 - 20,000

5,000 - 10,000

< 5,000

No income

INR /month

-

1

2

3

4

5

Illiterate Primary Secondary Up to HSC Graduation Post Graduation

Doctorate

Chart-8: Education vs. Avegare Monthly Income

Overall Male Female

Av

era

ge

Mo

nth

ly

Inco

me

Ca

teg

ory

Education


PwC 142

The majority of the respondents use the system to travel for work and education purpose.

These categories of commuters are regular users of the suburban railway system with trip

frequency of 40 - 50 trips per month.

Figure 68: Survey Findings - Trip purpose and frequency of travel

Travel Class:

Five types of coaches are available in the current suburban network, which are:

a. SCG (Second Class General),

b. SCL (Second Class Ladies),

c. FCG (First Class General),

d. FCL (First Class ladies), and

e. Vendor.

Second class (SCG & SCL) is the most preferred travel class by the respondents. Female

respondents mostly preferred SCL (~82.1%) and FCL (~9.6%) as travel classes

Figure 69: Survey Findings - Gender wise classification of travel class

5% 9%

86%

6% 12%

81%

66%

10%

24%

Upto 3 days 4 to 5 days 6 to 7 days

Tr

ip P

ur

po

se

(%

)

Travel Frequency (days/week)

Work

Education

Others

90%

9% 0.3%

8%

82%

10% 0.3%

0%

20%

40%

60%

80%

100%

SCG SCL FCG FCL Vendor

Female

Male


PwC 143

The preference for travel class is also correlated with income groups, i.e., with increasing

monthly incomes, respondents prefer to travel more by first class. The income wise

classification of the travel class of the respondents given below suggests that the majority

of the respondents in the income below 20,000 INR per month preferred second class

travel. 44.2% of respondents with monthly income greater than 30,000 INR used First

class. It is also observed that first class was mainly used by respondents with monthly

income greater than 20,000 INR. However, a significant proportion of mid-income

group (MIG) and high-income group (HIG) commuter travel by second class.

The "No Income" group commuters comprise of students, senior citizens, retired persons,

housewives, job seekers, trips for social means, etc. These commuters are dependent on

family or owned resources while some of them like students and senior citizens avails

highly subsidized fares.

Figure 70: Survey Findings - Monthly income vs. travel class

Ticket Type:

~78% of the total respondents use Monthly Season Ticket (M.S.T.) followed by return

journey tickets (~9.8%). Also, around three-fourth of the respondents are found to pay for

their own travel while the train travel for the rest was paid either by employer or family (or

parents).

Figure 71: Survey Findings - Ticket types

0%

20%

40%

60%

80%

100%

SCG SCL FCG FCL Vendor

No Income Less than 5k 5k to 10k

10k to 20k 20k to 30k Greater than 30k


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Trip Length Frequency Distribution (TLFD):

The following TLFD table & chart show that up to ~50% of the respondents are short

distance travelers with a trip length of < 20 km, in both the western and central lines. Also

the majority of the respondents (14%) travel within the distance slab of 10 - 15 km.

Table 22: Line wise respondents’ distribution

Trip Length Western Line Central & Harbour

Line

Overall Suburban

Railway network

0 - 10 km 23.8% 24.3% 24.0%

10 - 20 km 23.7% 26.3% 24.9%

20 - 30 km 20.9% 20.5% 20.7%

30 - 40 km 13.4% 15.1% 14.2%

> 40 km 18.1% 13.8% 16.1%

Figure 72: Survey Findings - Line wise Travel length Frequency Diagram (TLFD)

3.4%

9.8% 2.2%

78.1%

6.4%

Single

Return

Tourist Pass

M.S.T

Q.S.T


PwC 145

2%

5% 7%

5% 6%

12% 14%

13%

8% 11%

5% 6%

4% 3%

1%

3%

10%

5% 4%

16%

8% 11%

10% 9%

4%

9%

8%

1%

2%

4%

9%

5% 5%

14%

11% 11%

9%

10%

4%

8%

6%

2%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0 -

2

2 -

4

4 -

6

6 -

8

8 -

10

10

- 1

5

15

- 2

0

20

- 2

5

25

- 3

0

30

- 3

5

35

- 4

0

40

- 5

0

50

- 6

0

Mo

re t

han

60

Fre

qu

en

cy P

erc

en

tag

e o

f T

rip

s

Distance (km.)

Combined

Western Line

Central And Harbor Line


PwC 146

3.7.3. Access and Dispersion Modes

More than 60% of the respondents prefer to walk as a means to access the stations or to reach

destination from the stations. Auto-rickshaws are the most preferred mode of motorized transport

followed by buses for the purpose of access and dispersion.

Also, the preference of mode was found to be varying among male and female respondents. For

instance, in the surveyed stations, 65% of male respondents and 55.6% of the female respondents

prefer to walk to reach the station (access) while 70.3% and 69.4% of male and female respondents

respectively prefer to walk from station to their destination (dispersion).

Figure 73: Survey Findings - Line wise classification of Access Mode

Figure 74: Survey Findings - Line wise classification of Dispersion Mode

63%

2% 4%

18%

1% 1%

11%

0% 0%

64%

0% 4%

21%

1% 1% 9% 0% 0%

64%

1% 4%

19%

1% 1%

10%

0% 0%

Walk Cycle Two-wheeler Rickshaw Car Taxi Bus Off-vehicles Others

Western Line


Combined

72%

1% 1%

12%

1% 3%

11%

0% 0%

68%

0% 1%

19%

1% 2% 9% 0% 0%

70%

1% 1%

15%

1% 2%

10%

0% 0%

Walk Cycle Two-wheeler Rickshaw Car Taxi Bus Off-vehicles Others

Western Line


Combined


PwC 147

The preference for walking as a mode of access or dispersion shows declining trend with

the income group, while other motorized modes Auto-rickshaw, buses and taxi show the

increasing preference.

Figure 75: Survey Findings - Access and Dispersion Modes vs. Income Group (Non-motorized)

Table 23: Summary of Access & Dispersion transport modes

Average Access Dispersion

Distance (km) 2.8 2.0

Cost (INR/km) 4.0 3.3

Time (min/km) 5.0 5.9

3.7.4. Preferred New Facilities by the respondents

The respondents surveyed also showed desire for other new facilities to be developed on or around

the stations such as:

(1) Food Court - Fast food, Thali System, Vending Machines etc.

(2) Shops/Stores – Grocery stores, Book store, Music store, Gift shop etc.

(3) Services – Wi-Fi, ATM service, Online Ticketing etc. and

(4) Infrastructure - Malls, Offices, Parking Facilities etc.

69% 68% 69% 65%

51% 46%

78% 81%

76%

67%

59% 56%

No Income Less than 5k 5k to 10k 10k to 20k 20k to 30k Greater than 30k

Access (Non-motorized) Dispersion (Non-motorized)


PwC 148

Figure 76: Survey Findings - Preferred new facilities/amenities

The Survey results showed that 55% of the commuters preferred better service facilities like ATMs,

Wi-Fi, online ticketing etc.

The classification of the most preferred facilities was carried out on the basis of gender. As seen in

Table 18, a higher percentage of male respondents compared to females preferred facilities like

food courts and services like Wi-Fi and ATM. On the other hand, there were a higher percentage of

female respondents compared to males for facilities like shops, stores and infrastructure.

Table 24: Preference for new facilities

Male Commuters Female Commuters

Food Court 19.2% 14.5%

Shops/Stores 13.4% 18.0%

Services 55.7% 48.0%

Infrastructure 11.0% 18.6%

19%

14%

55%

12%

Food Courts

Shop/Stores

Services

Infrastructure


PwC 149

3.7.5. Findings on the Survey Hypotheses

H1. Mumbai Suburban Railway system forms the most comprehensive urban

connectivity network in the absence of which commuters' travel and

lifestyle habits will significantly change.

Focus Question in the Questionnaire:

The Key findings can be summarised as follows:

In the absence of the suburban railways, almost 40% of the respondents felt that they will

prefer Not to Travel (refer chart no-18), i.e. it may result in a change in their daily lives. The

responses are found to be similar across all entire income groups, which indicates that the

suburban railway is a vital keg in their daily lives and that there is "There is No Alternative

(TINA)" for such commuters. Majority of the respondents who has expressed "No Travel" (i.e.

~54%), are the respondents with the trip length of more than 20 km.

For the remaining respondents, the next preferred transport mode is available at a cost which

is several times that offered by suburban railways

Figure 77: Survey Findings - Alternate mode of transport in the absence of the suburban network

The above findings indicate that railways is the most important mode of transport for

commuters with respect to cost as well as time, playing an irreplaceable role in their daily

1. Preferred alternate mode for same trip:

(1)Walk (2) Cycle (3)2-wheeler (4) Rickshaw (5) Car (6) Taxi (7) Bus (8) Off-Vehicles (9)

others

Cost: ____

6% 5% 5% 6%

6% 7%

12% 7%

5% 7% 8%

10%

13% 40%

29%

41% 30% 31%

30%

34% 54% 38% 27%

3.7 3.9

3.6

4.4

5.0

7.1

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

0%

20%

40%

60%

80%

100%

No Income Less than 5k 5k to 10k 10k to 20k 20k to 30k Greater than 30k

No Travel

Other vehicles

Office vehicles

Bus

Taxi

Car

Rickshaw

Two-wheeler

Cycle

Walk

Average cost (INR/km)


PwC 150

lives. Absence of railways will severely alter the daily travel patterns of a large fraction of

commuters, and force others to adopt travel modes at much higher costs

H2. At the current levels of fares, the demand for suburban rail services is

highly price inelastic and any further increase in fares will not result in

decrease in demand or loss of ridership.

AND

H3. Commuters are willing to pay more for the existing levels of services.

Focus Questions in the Questionnaire:

The findings show that,

~54% of the respondents have explicitly stated the willingness to pay (WTP) extra to up to 10%

for the current level of the services. Also if the fares are increased beyond the expressed WTP,

83% of the respondents have stated that they will continue with the current services. For the

rest of the respondents, unless they change their urban travel and social behaviour, their

continuance with railways will likely be a function of their relative evaluation of time, cost,

distance and comfort with respect to availability of alternate modes. (The survey did not focus

on the respondent’s behaviour with respect to non-rail transport due to defined focus of the

survey as well as due to time constraints in interviewing the commuters in the trains or on the

stations).

Among the respondents who are WTP more, the average willingness to pay extra for the same

trip in the current system is approximately 12.1% with a lower bound of 8.2% and upper bound

of 17.5%.

Of the respondents in the low income category willing to pay more, more than 60% are WTP

for up to 10% for the existing levels of service. Also the students and others with no income

have expressed maximum WTP up to 20%.

In the absence of the suburban railway system, a significant proportion of the respondents

indicated preference to shift from railways to buses followed by IPTs and private vehicles

(refer chart - 18), but the expected cost in INR per km is much higher (more than 10 times)

which the commuters pays for the travel by trains. These responses show that due to

economics of the travel, still suburban railway is the most preferred if it is available.

1. Are you willing to pay extra for same trip: Yes No?

2. Maximum willingness to pay extra for same trip:

0% (2) 0%-10% (3) 10%-20% (4) 20%-30% (5) 30%-40% (6) 40%-50% (7) 50%-

100% (8) >100%

3. Willing to use train if fare increases beyond maximum willingness to

pay: Yes No


PwC 151

Figure 78: Survey Findings - Willingness to pay extra for existing system (for ~54% of the commuters who

have expressed WTP)

It is found that a majority of respondents have stated a willingness to pay more for the current

levels of service. Based on the responses, it is found that an overwhelming majority will continue

to use the network, even if fares are increased beyond their maximum stated willingness to pay.

H4. Fares per passenger-km in the suburban rail system are extremely low

when compared with the other modes of transport within the city.

H5. Commuters are spending a significant proportion of their time and cost in

access to and dispersion from the railway network and typically are of

much lower distance than the actual railway trip length.

Focus Questions in the Questionnaire:

61% 58% 52%

58% 50% 51% 52%

18% 28%

33% 25%

25%

31%

45%

12%

7% 10% 9%

13%

10%

3%

10% 7% 5% 8% 12% 4%

0%

20%

40%

60%

80%

100%

< 5 K 5K - 10K 10K - 20K 20K - 30K > 30 K Students Others (No Income)

WTP: 0-10% WTP: 10-20% WTP: 20-30% WTP: >30%


PwC 152

The survey estimated the extent to which respondents spend on other modes of transport for the

purpose of access and disperse from the station. The findings can be summarised in the following

charts:

Figure 79: Survey Findings - Access Time, Distance and Cost

Figure 80: Survey Findings - Dispersion Time, Distance and Cost

1.1 1.9 3.2

2.3 3.7 3.2 3.5

1.3

5.0

0 0

4.9

6.5 6.8

8

3

0

2

9.8

6.8

4 5.7

4.9 4.9 5

7.5

4

64%

1% 4%

19%

1% 1% 10%

0% 0%

0

2

4

6

8

10

12

14

16

18

-140%

-115%

-90%

-65%

-40%

-15%

10%

35%

60%

85%

Walk Cycle Two-wheeler

Rickshaw Car Taxi Bus Office vehicles

Others

Avg Distance (km) Avg Cost (INR/km) Avg Time (min/km) Mode Share

Boarding Station:____________ Alighting Station:___________

Ticket Type: (1) Single (2) Return (3) Tourist Pass (4) M.S.T. (5) Q.S.T

Trip Distance:_____ Trip Cost: _____ (arrived at using above two inputs)

Access Details:

(1)Walk (2)Cycle (3)2-wheeler (4)Rickshaw (5)Car (6)Taxi (7)Bus (8)Off-Vehicles (9)Others Time: _____Cost:

______ Distance: _____

Dispersion Details:

(1)Walk (2)Cycle (3)2-wheeler (4)Rickshaw (5)Car (6)Taxi (7)Bus (8)Off-Vehicles (9)Others Time: ____Cost: ____

Distance: _____


PwC 153

The survey results show that commuters spending ~30 minutes on average in access and

dispersion for the much shorter distance (~3 km) as compared to the time spent in their journey

through suburban network for a much longer average trip length (~24 km). In other words, the

total time spent in access and dispersion is ~44% for the ~11% of the total average door-to-door

trip distance (~27 km).

Also, on a per km basis, on an average, the commuters spend ~INR 3/km on access and dispersion

whereas they spend ~INR 0.29/km on travel by trains.

Figure 81: Survey Findings - Time, Distance and Cost comparisons

Fare comparison with other public transport modes:

Also, the Mumbai Suburban Railway fares are much cheaper compared to other modes of public

transport within the city as well as in comparison with the fares of DMRC.

1.7 1.8 2.2 2.1

2.9 2.7 2.5 1.5 1.3 0 0

3.9 4.1

6.3

4.4

2.5 1.7

5

7 6.7 5.2

6 5.2 5.3 5.1

6.7

9

70%

1% 1%

15%

1% 2% 10%

0% 0%

0

2

4

6

8

10

12

14

-130%

-105%

-80%

-55%

-30%

-5%

20%

45%

70%

Walk Cycle Two-wheeler Rickshaw Car Taxi Bus Office vehicles

Others

Avg Distance (km) Avg Cost (INR/km) Avg Time (min/km) Mode Share

27

71

16

24

40

7 3

31

9

Trip Distance (km.) Trip Time (minutes) Trip Cost (INR)

Total Trip

By Train

Access & Dispersion


PwC 154

Figure 82: Fare comparisons with other Modes of Public Transport


The current single journey 1st class fares of the network are more than that of BEST (AC Service)

when compared on per km basis. However, the monthly season ticket fares for the 1st class of the

railway network is much cheaper as compared that of even that of non-AC bus services of BEST.

Figure 83: Comparing MST (40 trips/month) for suburban railway with BEST (non-AC)

Source – DMRC (Website), BEST (Website), PwC Research & Analysis

Also, inflationary costs have forced comparable transport

modes in the city, for instance BEST, to raise fares several

times in the last few decades as compared to the suburban

rail.

-

2

4

6

8

10

0-2 2-4 4-6 6-8 8-10 10-15 15-20 20-25 25-30 30-35 35-40 40-45 45-50

INR

/km

Distance Slab (km)

Mumbai Suburban Railway (2nd Class) wef 22-Jan-2013 Mumbai Suburban Railway (1st Class) wef 22-Jan-2013

BEST (non-AC) wef 1-Apr-2013 BEST (AC) wef 1-Apr-2013

Mumbai Metro One DMRC

>10 km < 10 km

Figure 84: BEST vs. Suburban Rail fares


PwC 155

Between 1993 and 2013, BEST base fares have increased around 10 times as compared to

that of 2.5 times for suburban railway.

The fares of BEST bus have been revised five (5) times since 2007.

H6. Considering the rising income of the general population in addition to

premises 1, 2, 3, 4 and 5 above, the railway fares increases are within the

affordability window of different classes of the commuters.

For testing affordability, a 5-10% range of the respondent’s monthly income was taken as the

threshold benchmarks. On comparing the survey results for spending by commuters on train travel

with income groups, we found that,

2nd Class MST:

o For low income group category (LIG) population, i.e., commuters with monthly income

of less than INR 10,000, the current fares are within the affordability range. Further,

the average spend is still lower than the 5% affordability index.

o For commuters with income category of less than INR 5,000 per month, the current

fares are in the affordable range on higher side. However, this class of commuters

form only ~3.3% of the overall population.

o Also high income group (HIG) relatively spend much lower as compared to LIG or mid

income group (MIG).

Figure 85: Spend after train travel vs. affordability (2nd Class MST)

Monthly Income: (1) < 5K (2) 5K-10K (3) 10K-20k (4) 20-30k (5)>30k

Occupation: (1) Business (2) Service (3) Farmer (4) Worker/Laborer (5) Student (6)

Unemployed (7) Retired


PwC 156

1st Class MST:

o For mid income group category (MIG) population, i.e., commuters with monthly

income of INR 10,000 - INR 30,000, the average spend is lower than the 5%

affordability level. However, the maximum spend by some commuters fall within the 5-

10% affordability range.

o However, spend after travel in 1st class MST by high income category (HIG) are much

lower (~2 - 3% of the monthly income)

Figure 86: Spend after train travel vs. affordability (1st Class MST)


PwC 157

The above findings and fare comparison with alternate modes of transport, suggest that

MIG commuters, who travel by 2nd class MST (34.7%) and 1st class MST (5.2%), show

ready absorbability for any fare hikes.

There is a limited potential for fare hikes when compared with affordability among LIG

with monthly income of less than INR 5,000.

There is a high scope for fare hikes among HIG commuters. However, still more HIG

commuters travel by 2nd class as compared to first class, which may be primarily

attributed to lack of comfort levels in first class during peak hours, capacity constraints

and short trip distance.

There is potential to increase fares without affecting the affordability of LIG commuters by

introducing a newer travel class (or an intermediate class mainly focussed on MIG) in the

existing system.

H7. The pricing of the season ticket is disproportionately lower when compared

with actual usage.

Trip Purpose: (1) Work (2) Business (3) Education (4) Medical (5) Shopping (6)

Social/ Recreational (7) Other

Trip Frequency per week:__________

Ticket Type: (1) Single (2) Return (3) Tourist Pass (4) M.S.T. (5) Q.S.T

If (4)/ (5): Total Trips/Month:_________ (1) One-way (2) Two-way


PwC 158

The respondents were asked to answer the frequency of travel per week based on which the trip

frequency per month has been derived. The following chart shows that the most of the commuters

travels between 40 to 55 (one-way) trips per month. These are mostly from the working class and

students and forms the ~97% of the daily users.

Figure 87: Trip Frequency (No of Trips/month)


The M.S.T. tickets, the most preferred mode of ticketing in the network, entitle the commuters to

travel by the system for a period of a month but no defined number of trips. The cost paid by the

commuters for M.S.T. is equivalent to 15 single-journey trips. However, as per the survey results,

the users of the M.S.T. pass holders typically makes ~45 - 50 trips per month, i.e. the fares of the

M.S.T. (2nd class) are discounted up to 70% of the actual usage or the actual fares that the

commuters would have paid using single journey tickets.

Also, from the analysis of the financials of the Mumbai Suburban Railway System, we find that the

2nd class season pass holders forms ~50% of the annual passenger load while contributes only

30% to the total fare revenues.

Figure 88: Class wise Passenger Volume vs. Passenger Earnings (WR, Mumbai Suburban Section - 2012)

Note: ST - Season Ticket and OT - Ordinary Ticket (Single/Return Journey)

0%

20%

40%

60%

80%

0 5 10 15 20 25 30 35 40 45 50 55 60

% o

f to

tal

sa

mp

le

Trips/month

30%

48%

20%

2%

60%

30%

10%

0.1% ST-II OT-II ST-I OT-I

Fare revenue share

Proportion of passengers


PwC 159

Source: PwC Research & Analysis, Passenger Earnings statement for WR (Mumbai Suburban Section)

H8. Commuters are willing to pay significantly more for improved facilities.

Table 25: Willingness to pay extra for improvement on platform/station facilities:

Willingness to pay extra for improvement on platform/station facilities

1.Reduction in

Ticketing Queue 0%

0%-

10%

10%-

20%

20%-

30%

30%-

40%

40%-

50%

50%-

100% >100%

2. Cleanliness 0% 0%-

10%

10%-

20%

20%-

30%

30%-

40%

40%-

50%

50%-

100% >100%

3. Better Toilet

Facilities 0%

0%-

10%

10%-

20%

20%-

30%

30%-

40%

40%-

50%

50%-

100% >100%

4. Safe Drinking

Water Facility 0%

0%-

10%

10%-

20%

20%-

30%

30%-

40%

40%-

50%

50%-

100% >100%

Most Preferred

The facilities include the reduction in ticketing queues on stations, cleanliness on platforms and

stations, better toilet facilities and on provision of drinking water facilities. The responses are

summarized in the table below:

Figure 89: Willingness to pay extra for improvement on the platform/station facilities

Preferences for the provision of the one facility over the other show that the all the four facilities

are equally important to the commuters with minor differences (within ±8% range). For about

33% of the commuters, the most preferred choice was cleanliness on stations and platforms. 25%

and 23% of the commuters felt toilet facilities and drinking water facilities respectively as the most

24% 15% 19% 21%

43%

31% 33%

34%

18%

25% 24% 19%

8%

17% 13% 13%

3% 6% 6% 6%

2% 3% 3% 4%

Reduction in Ticketing Queue

Cleanliness in station/platform

premises

Better Toilet Facilities

Safe Drinking Water

>100%

50%-100%

40%-50%

30%-40%

20%-30%

10%-20%

0%-10%

0%


PwC 160

preferred facility among all the facilities. Only 20% of the commuters preferred reduction in

ticketing queues as the most important facility on station reason being the majority of the

commuters used monthly season tickets or quarterly season tickets.

Table 26: Willingness to Pay Extra for Improvement on Train facilities:

Willingness to pay extra for improvement on train facilities

1. Seating in

Trains 0%

0%-

10%

10%-

20%

20%-

30%

30%-

40%

40%-

50%

50%-

100% >100%

2. Security 0% 0%-

10%

10%-

20%

20%-

30%

30%-

40%

40%-

50%

50%-

100% >100%

3. Air

Conditioned 0%

0%-

10%

10%-

20%

20%-

30%

30%-

40%

40%-

50%

50%-

100% >100%

4. Cleanliness 0% 0%-

10%

10%-

20%

20%-

30%

30%-

40%

40%-

50%

50%-

100% >100%

Most Preferred

The facilities include seating facilities in trains, security in trains, air conditioned compartments in

trains and cleanliness in trains.

Figure 90: Willingness to pay extra for improvement on train facilities

The security is expressed as the most preferred facility (~42%) among the four facilities inside the

trains. Majority of the female commuters desired security improvements in trains as compared to

male commuters.

20% 13%

27% 17%

39%

29%

27% 37%

17%

27%

23% 20%

10% 15%

13% 11%

5% 6%

5% 6%

4% 4% 3%

4% 2% 3%

1% 3%

Seating facilities in trains

Security in trains Air conditioned compartments

Cleanliness in trains

> 100%

50%-100%

40%-50%

30%-40%

20%-30%

10%-20%

0-10%

0


PwC 161

Table 27: Willingness to Pay Extra for Reduction in Travel Times:

Willingness to pay extra for reduction in travel time

5 min 0% 0%-10% 10%-20% 20%-30% 30%-40% 40%-50% 50%-100% >100%

10 min 0% 0%-10% 10%-20% 20%-30% 30%-40% 40%-50% 50%-100% >100%

15 min 0% 0%-10% 10%-20% 20%-30% 30%-40% 40%-50% 50%-100% >100%

20 min 0% 0%-10% 10%-20% 20%-30% 30%-40% 40%-50% 50%-100% >100%

The commuter’s extra willingness to pay on the current fare for the reduction in travel times was

analysed. The times categories included reduction by 5 minutes, 10 minutes, 15 minutes and 20

minutes. The commuters considered for each category are sorted as per the travel time undertaken

by them.

Table 28: Consideration for analysis of reduction in time preference

Reduction By Train travel time considered for analysis

5 mins >15 mins

10 mins >25 mins

15 mins >35 mins

20 mins >45 mins

Figure 91: Willingness to Pay extra for reduction in travel time

56%

44%

30% 25%

30%

32%

32%

25%

9%

14%

21%

23%

2% 6%

10%

13%

1% 1% 4%

7%

By 5 Mins By 10 Mins By 15 Mins By 20 Mins

> 100%

50%-100%

40%-50%

30%-40%

20%-30%

10%-20%

0-10%

0


PwC 162

3.8. Fare Optimization & Analysis

Based on the results of the surveys, and considerations of the overall level of fares on other modes

of public transport in the MMR, the fare optimization has been worked out for:

Possible increases in the overall level of suburban rail fares

The distribution of the overall increase across different fare and ticket types

Means of ensuring the fare increases are affordable to the lower income passengers

Maximum fare limits for the Mumbai Suburban Railway Network:

As shown in chart-18, the commuters expressed their preference for alternate modes of transport

and travel cost they may be willing to pay for the same. This is assumed as a proxy for the

maximum willingness to pay for different travel segments.

Figure 92: Maximum fare limits for the System

At this maximum level, some commuters across the travel segments have expressed preference for

"No Travel", i.e. they may change their travel habits or life-style habits. For instance, at present

~77% of commuters travel by 2nd class MST, however in the absence of the suburban rail, only

~46.6% commuters have expressed preference to travel by alternate modes.

In addition to above, the findings of the analysis of survey results, past financials, existing fares

and statistics can be summarized as structural anomalies in the present framework, willingness

to pay and test for affordability


PwC 163

3.8.1. Structural anomalies in season tickets

The season pass holders, in case of MST, are charged for fares equivalent to ~16 single journey

tickets (SJT) in case of 2nd class, whereas ~7 SJT 1st class in case of first class. The survey results

show that the majority of (~84%) these commuters travel 40 - 56 trips per month through the

system. That is, the MST commuters are availing the system at a discount of 70% - 80%.

Figure 93: Season Tickets (M.S.T.) - Actual Usage vs. Fares Charged

Also, the past passenger earnings data reveal that Season Ticket users contribute only half of fare

box collections despite having a lion share of daily ridership.

Table 29: Season Tickets - Revenue vs. market share

OT ST

% of daily ridership 15% 85%

% share of revenues (FY12) 47% 53%

Source: PwC Research & Analysis, WR, CR, MRVC

3.8.2. Willingness to pay extra

~56% of the total commuters have expressed their willingness to pay (WTP) for the existing level of

system. However the rest ~44% of the commuters, though have expressed no WTP for the existing

system, the majority of them have stated that they will still continue to use the system if the fares

are hikes or it exceeds their WTP.


PwC 164

The average minimum willingness to pay for the existing system is found to be uniform 10-12% for

across the travel class as well as across the income groups. Average WTP across the distance slabs

is also found to be ~10% from the current level of fares. However, majority of the commuters will

continue to travel using suburban rail system even if the fares are hiked beyond 10% or the

indicated willingness to pay.

Table 30: Average WTP across income groups, travel class and distance slabs


The demand curves were derived, as follow, based on stated WTP and willing to continue service if

the fares are increased beyond the stated WTP.

WTP Demand Curve for Travel Class

The demand curves shows the high price inelasticity for ~80-90% of the commuters from each

travel class, if the fares are hiked from current levels of 1.0 to 1.5 (i.e. 50% increase in fares).

However, this does not result in any reduction in the overall fare revenues, as fare hikes

compensates much more than likely reduction in revenue for any stated reduction in ridership.

Figure 94: WTP Demand Curves for various Travel Class



PwC 165

The commuters who have stated no willingness to continue travel by rail services, may have

considered the factors like travel comfort, capacity and the quality of service levels in the system

as a key consideration, since the high average per km cost of the other transport modes (which are

~5-10 times more than suburban rail fares) and the travel time do not make compelling

alternatives to the railway system. This indicates that there is a need for the capacity addition in

the system as well as introduction of new travel class.

WTP Demand Curve for Travel Class

The demand curves shows the high price inelasticity for ~80-90% of the commuters from each

income groups, if the fares are hiked from current levels of 1.0 to 1.5 (i.e. 50% increase in fares).

The commuters with monthly income of less than 5,000 and greater than 30,000 have shown high

price inelasticity as compared to that of other income groups.

Figure 95: WTP Demand Curves for various Income Groups


3.8.3. Means of ensuring the fares increases are affordable

to the lower income passengers

Globally affordability of transport expenditure is measured as an index equivalent to 5 – 10% of the monthly income. Only 4% of the total commuters with monthly income of <INR 5,000 uses suburban rail system (Commuter Survey 2013), against ~50% of the Mumbai’s households from this category (CTS for MMR, 2008), who usually walks to place of employment.

The lower & middle income group commuters prefer to travel by 2nd class using MST tickets. However, the monthly expenses are still below affordability index (refer the following chart), showing possibility of increase in MST fares without affecting the affordability of the lower income strata.

Additionally, significant proportion of the Mid Income group (MIG) and High Income Group

(HIG) commuters still travel by Second Class and there is a significant scope for fare rise.


PwC 166

However, the scope for fare hikes gets restricted since these commuters share the same travel class

with Low Income Group (LIG). There should be a mechanism to capture this additional value from

MIG and HIG who can afford higher fares as compared to LIG for whom after certain fare hikes, it

will cross the affordability limits as defined earlier.

One of the solutions could be to cross-subsidization of fares between the LIG, MIG and HIG;

however, there are implementation challenges in implementing the same. But alternative solutions

like introduction of a new travel class as and when 12 coach trains is converted to 15-coach train.

This can cater to commuters willing to pay more in comparison to Second Class, which in turn also

reduces the some load from First Class. Reduction in load from First Class may lead to increased

comfort and hence higher WTP.

3.9. Recommended interventions

The interventions to optimize fares or for any fare revisions should be based on certain principles,

which can remain consistent over a long period.

We studied the fare box profile for over next 10 years based on historic data, and propose

interventions in line with the proposed objectives of the fare policy over next 10 years. The

proposed interventions are based on the comparative fares of other transport modes in the city,

and ensuring the affordability of the commuters.

Recommended alternatives as the objectives of the fare box optimization:

Case-1: Maintain the current Fare Recovery Ratio of ~0.6, i.e., inflation linked fare revisions

Case-2: Close the gap between revenues and expenses over the next 10 years, i.e., achieve

FRR of 1.0 over the next 10 years

Case-3: Achieve surplus to (partially) meet capex requirements, i.e., achieve FRR of 1.1 to 1.3

over the next 10 years

Case-1: Maintain the current Fare Recovery Ratio of ~0.6, i.e., inflation

linked fare revisions

Option-A:


Option-B:





PwC 167

Figure 96: Case-1 - Interventions for fare box optimization

Fares even after a regular hike remains affordable for the low income group commuters, when

compared with other transits. And also it helps in maintaining the fare recovery levels, which

can reduce the need for operating subsidy substantially.

Figure 97: Case-1 - Interventions for fare box optimization - Impact on fares and operating subsidy

Case-2: Close the gap between revenues and expenses over the next 10

years, i.e., achieve FRR of 1.0 over the next 10 years

Option-A:


Option-B:


PwC 168




o Annual fare hike of 5% in both first and second class ordinary tickets


Fares even after regular hikes remains affordable for the low income group commuters, when

compared with other transits, and also it helps in maintaining the fare recovery levels, which can

reduce the need for operating subsidy substantially as compared to case-1 interventions.

Figure 99: Case-2 - Interventions for fare box optimization - Impact on fares and operating subsidy


PwC 169

Case-3: Achieve surplus to (partially) meet capex requirements, i.e., achieve FRR of

1.1 to 1.3 over the next 10 years

Option-A:

Annual fare hike of 20% in both first & second ordinary tickets for first 3 years followed by 10%

annual hike

Option-B:




o Annual fare hike of 7% in both first and second class ordinary tickets.


Only periodic fare hikes will not be feasible at these levels, given that in this case the suburban

rail fares will be at par with bus fares. However, option-B, i.e. structural changes in season

tickets combined with periodic fare hikes in-line with inflation (@7%), is the most feasible option.

The surplus so created over the next 10 years can be utilized towards funding requirements

necessary for improving passenger amenities in the network.


PwC 170

Figure 101: Case-3 Interventions for fare box optimization - Impact on fares and operating subsidy

In summary, the above proposed interventions can improve the financials of the suburban railway

operations substantially eliminating or reducing the need for operating subsidy. These funds can

further be utilized towards improving passenger amenities.

Figure 102: Summary of fare optimization strategies/interventions

Next Steps

Ushering in a new pricing regime through a transparent process, Railway Minister Mallikarjun

Khrage on February 12, 2014 announced in the interim rail budget (2014) constitution of an

independent Rail Tariff Authority (RTA) to advise the government on fixing of fares and freight


PwC 171

If RTA is empowered to enforce the tariff once decided in a transparent manner and after the

consultation with the various stakeholders, it can act as authority to set fares for the Mumbai

Suburban Railway Network.

If RTA is an only advisory body, then a case needs to be presented by MRVC/Mumbai Suburban

Railway System to RTA for the fare changes as well as liaison with Railway Board to seek fare

revision mechanism for the city.

Without RTA, still Mumbai Suburban Railway System need to create a common platform involving

stakeholders from Ministry of Railways, State & Local government, which can be empowered to

decide suburban rail fares for the city. This will be essential as Mumbai Suburban Railway carries

1/3rd of the daily passengers of the National Carrier; however, it has localised operations within

MMR region.


PwC 172

VOLUME - III


PwC 173

4. Estimation of Potential Revenue from

Non-Fare Box Sources

4.1. Introduction

For any public transit system, the main source of revenue is from passengers (fare box collection);

however, there is considerable potential for non-traffic revenue (or non-fare box collection). This

could be in the form of tapping the real estate potential of properties owned and using properties

and trains to generate advertising revenue.

The Mumbai Suburban Railways have implemented some conventional non-fare revenue sources

in practice such as:

Rentals/License fee from business activities such as food stalls, general shops, and medical

shops through competitive biddings.

License Fee from commercial activities at the stations such as Vehicle Parking, ATMs

(Cash Stalls of the Banks), Advertisement on Stations & Trains through inviting the

bids/tenders.

Limited Pay & Use Amenities.

However, the revenue contribution of non-fare box sources is very low (~5-7% of the total

revenues) as compared to its global comparables.

Table 31: Non fare box operating revenue of various transit systems

S.N Country City Operator Non fare box as % of

Operating Revenue

1 Japan Tokyo JR East 31%

2 Singapore Singapore SMRT 24%

3 China Hong Kong Hong Kong MTR 23%

4 UK London London Underground 17%

5 Japan Tokyo Tokyo Metro 14%

6 Taiwan Taipei TRTC 13%

Source: PwC Research & Analysis, Annual Reports of Metro Rail Systems

The various means of non-fare box revenue sources being used in the transit agencies across the

globe can be summarized as follows:.


PwC 174

Figure 103: Indicative list of non-fare box revenue sources

However, these various non-fare box revenue sources can be categorized in four broad categories,

such as:

A) Advertising

B) Station Rentals

C) Indirect Benefits

D) Real Estate Development

This section focuses on

Ways to enhance the potential of revenues from the existing non-fare box sources

Any other non-fare box sources/sub-sources of revenues that can be explored

Concept plans for four (4) stations to demonstrate enhancing the potential of revenues,

especially through real estate development

Implementation with or without any institutional and regulatory changes that may be

required.


PwC 175

VOLUME - III (A)

---

MAXIMIZATION OF NON-FARE BOX REVENUES

---

ADVERTISING

(COMMERCIAL PUBLICITY)


PwC 176

4.2. Advertising

4.2.1. Current advertising business practices in the System

Introduction

Mumbai Suburban Railway System generates non-fare box earnings from advertising, pay & park,

pay & use, STD/PCO, shoe shine, book stall etc. which are categorized and accounted under sundry

earnings. These non fare-box earnings contribute around 5 -8% of the total revenues of the System.

Advertising is the largest non-fare box source of revenue for the System and it generates around

2/3rd of the total non-fare box revenues, which is around 5% of the System's total revenues.

However, at India Railways (IR) level the contribution of the advertising is as low as 0.25% of the

total revenues45.

Figure 104: Mumbai division advertising revenues

Source: CR & WR (Mumbai Division)

More than 80% of advertising revenues come from station advertising while train advertisement

(inside/outside) contributes around 14%

Figure 105: Split of advertising revenue according to sources (Mumbai Suburban Railways)

45 IR annual report 2010-11 and 2011-12

36

59 67

49

75

90

74% 80% 75%

50%

60%

70%

80%

90%

100%

0

20

40

60

80

100

2009-10 2010-11 2011-12

INR

Cr

s.

advertising earnings total non fare box earnings

advertising % of non-fare box


PwC 177

Advertising opportunities are primarily driven by a highly dense network, providing eyeballs

that are potential captive audience. The System forms only 465 km of total 65,000 km India

Railway network i.e. even less than 1 % of IR. With this lesser network density, it carries over 35%

of total Indian Railways traffic annually.46

The commuter density for nine-car trains of rated capacity 1,700 passengers is actually around

3,000 passengers at peak hours47. These have resulted in highly dense target audience for the

commercial publicity, and an opportunity for the railways to monetize the same through leasing of

spaces for various types of advertising inventory/assets. As a result around one-third of the total

advertising revenues of Indian Railways are generated in Mumbai

Table 32: Mumbai division advertising revenue share in IR

in INR Crores 2009-10 2010-11 2011-12

IR advertising earnings 170.20 187.70 195.14

Mumbai division advertising

earnings

36.34 59.39 66.98

share (%) of Mumbai advertising in

IR

21% 32% 34%

Source: IR and Mumbai division (CR & WR) advertising earnings for FY 2010, 2011 & 2012

The key reports such as Railway Vision 2020 also depict the importance of the advertising as an

alternate source of revenues to supplement the fare box revenues.

Railway Vision 2020 document

"Railway Vision 2020" along with revenues from the three core businesses i.e. passenger services,

freight and parcel services, also emphasizes on the alternate revenue sources such as advertising

and commercial utilization of the surplus land of Railways that would be needed to be tapped to

the fullest extent for revenue enhancement.

Railway Vision 2020 document states with respect to advertising:

Railway Board has identified importance of strengthening advertising as potential stream of

source. Even the past reports like “Financial and Institutional study of combined Metropolitan

Rail Operations in Mumbai” by Symonds Travers Morgan (1996) and “Comprehensive

46 IR and Mumbai division annual ridership for 2009-10 & 2010-11 47 Mumbai Urban Transport Project (Rail Component) - MRVC

“A market driven strategy will be adopted to unlock the enormous potential to

increase earnings on advertising using freight and passenger trains (both inside and

outside), CCTV at stations, multi-lingual magazines for rail passengers and

merchandising opportunities for a number of items ranging from tickets to food

stuff and other material served on trains offer promising possibilities for advertising.

Railways can also think of launching a separate TV channel to disseminate

information and earn revenues through advertisement”.


PwC 178

Transportation Study (CTS) for MMR” by Lea Associates (2008) have highlighted advertising as

one of the potential revenue sources under the non-fare box stream. However, these reports are

silent on the detailed recommendation on how such potential can be achieved by strengthening

advertising in the System.

The subsequent sections explain in detail about existing advertising practices in the System and

measures to attain the desired vision under Railway Vision 2020 document.

Commercial Publicity policy governing Mumbai suburban

system

Indian Railways had constituted Task Force in 1999 to augment the earnings for increasing the

internal resources and to raise revenues from the non-traditional sources that inter alias included

the earnings from commercial publicity48. The task force, consisting of representatives of Railways

and Industry, identified various media / assets like passenger trains, stations, freight wagons,

hoardings and billboards on level crossing gates, commercial publicity on miscellaneous items like

tickets and consumable items supplied on trains etc.49

Based on the recommendations, broad General Policy Guidelines for Commercial Advertising was

issued by Railway Board to Zonal Railways for framing action plan. These policy guidelines are

uniformly applicable to the entire Indian Rail Network including Mumbai Suburban Railway

System.

The major points of the policy guidelines are summarized as follows:-

Table 33: Summary of commercial publicity policy governing Mumbai suburban system

Theme Key Findings

Locations for

advertising

Stations

Inside trains (in the form of thin water transfers of standard size at three

locations:

o Luggage Top

o Window Top &

o Route Map

Outside Train (only one design /colour scheme under one trademark on

one side of full train & different design under same trademark can be

permitted on other side of train. Full rake painting on exterior is

prohibited)

Tree guards & Central roundabout/parks/gardens in circulating area

with maintenance in scope of Advertiser

L.C. gates, approaches to stations

Properties along the tracks (Railway boundary walls)

48 Thirteen Lok Sabha sessional review –discussion / statement, Feb-2000

49 Press Information Bureau-Government of India (PIB-GoI): Railway Budget 2000-01 highlights

http://pib.nic.in/archieve/railbud2000/rlybgth1.html%20-%20Railway%20Budget%202000-01


PwC 179

Sites at good sheds & parcel offices

Freight wagons

Time Table (on 2nd, 3rd & 4th back and cover pages)

On reverse of Reservation Tickets

Reservation forms & similar other documents/ Publications (forms

printed by private agency procured free of cost with advertisement

rights)

Media for

advertising

Posters (Poster media is banned in Mumbai suburban section)

Boards

Glow signs

Kiosks

Neon Signs

Digital Displays

Scrolling/Moving signs

Printed Ads on documents/publications

Wall painting

Transfers

Stickers

Hoarding

Coin Operated Personnel weighing machines

Railway signage

with commercial

packaging

Identifying locations for Commercial Publicity (passenger amenities like

dustbin, modular chairs, luggage trolleys, wheel chairs, Assistance

booths, chart display Boards, Coach/train indication boards) and

Railway Signage’s

Installation & maintenance of Railway signage’s & amenities

responsibility of advertiser, in addition to license fee

Railway Signage’s in form of glow signs with no Commercial Publicity on

it and placed perpendicular to direction of the passengers movement

Outside station

display criteria

(Hoardings)

Hoarding Classification

Category A: (height of hoarding + 3 m) < (nearest track distance)

Category B: all other than in Category A

Hoarding display Criteria

Standard size of display for each station as decided by Railways

Direction of display parallel to tracks

Municipal License for sites facing roads


PwC 180

Obtain NOC from Municipal Commissioner

Obtain Municipal licenses from MCGM

License fee and tax payments to MCGM in addition to Railways

Tendering Aspects Bidding Parameter

Bidder coating highest above the reserve price for annual license fees

Criteria for Reserve Price

1.5 times highest annual publicity earnings for entire division during any

of three preceding financial years

Fresh bids for old site

Fresh bids to be invited within 3-6 months of expiry of existing contract

Contract

structuring

Contract tenure

Minimum period of the contract to advertisers should be of 3 years. After

testing of the market the period of 3 years can be reduced to 2 & 1 year

Extension Clause

An extension up to a period of two months may be given in case of non-

display of advertisement due to theft/removal of advertisement

Escalation Clause

Annual escalation in the license fee of 10% above the price offered by

advertiser

Advertisement display

Within 1 month from date of contract for contract tenure greater than

one year & in 15 days for duration of 6 months or shorter

Commercial

Aspects

Bulk Contract

Segmentation of big station into convenient zones and clubbing of

smaller stations for open tenders

Master plan

Master plan to be developed for all stations by commercial department

with agreed locations and size of the media. It should be ensured that

aesthetics and feeling of openness at stations are duly catered for

Field site plan

Site plan for each bulk contract to be prepared by commercial

department which forms part of tender documents

Display rates of advertisement

Sr.DCM/DCMs (Divisional Commercial Managers) are empowered to fix

schedule rate for all media with the concurrence of Divisional finance

and approval of Divisional Regional Manager (DRM). The rate structure

should be reviewed periodically (however no such period mentioned in

the policy) and notified well in advance of the date from which the new


PwC 181

rates would be effective

Encourage new

ideas /concepts

(First finder

scheme)

The new ideas/concepts proposed by prospective advertisers should be

examined technically and aesthetically

Concurrence of Financial Adviser and Chief Accounts Officer (FA&CAO)

and approval of Chief Commercial Manager / General Manager

(CCM/GM) may be taken for such publicity work to be awarded on first-

come-first-serve basis, without an open tender

In case annual license fee is < Rs. 1 lakh, proposal can be finalized by the

Division with due approval of DRM

Where license fee is above > Rs. 1 lakh, proposals should be sent to

Headquarter for approval

The proposal may be offered to advertiser for period of one year or for

reasonable period

Grievance re-dress After sale services

Effective after sales service system to be set up in the Commercial

Department of each Division to deal with the complains and simplifying

the procedures for advertisers

Inventory record

management

Register maintenance

Details of all advertising contracts maintained by commercial section

at each division

Each station master to maintain record of advertisement displays

with their contract details in and around stations

Monitoring

Regular monthly inspection by Chief Maintenance Inspector (CMI)

of all sites to ensure no illegal or over-display of advertisements

This policy outlines the guidelines for zonal railways to formulate and implement advertising

contracts. It covers the various aspects like type of advertising media, method of tendering,

contract structuring and media monitoring.

Subsequently Railway Board issued a series of circulars from 2005 to 2012 for amendment to the

guidelines based on the market responses to the contract in order to enhance the revenues. The

annexure-3 contains these circulars and the policy guideline.

Table 34: List of Circulars related to advertising

Year Circular No Change in clause

2006 Commercial Circular

No.36 of 2006), dt.

Sole advertising rights on entire division on a

pilot project basis on few Division (WR & CR


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01.05.06 Mumbai division were part of this)

The reserve price for 1st year should be 3 times

actual publicity earnings of the entire Division for

2004-05

Contract tenure will be 5 years & license fee

should be escalated by 10%, 15%, 20% % 25%

respectively for coming years

Sr. DCM should be the model officer for all

clearances on single window dealing basis

Master Plan by the advertiser should be approved

by Sr. DCM before physical execution of the work

2006 Commercial Circular No.

90 of 2006), dt. 23.10.06

Due to failure of bulk contract guidelines were

changed to:

Division to be clubbed with other potential

divisions OR

Cluster of stations ,entire station or station

divided into convenient zones for sole advertising

rights

Reserve price to be fixed by Division at highest

annual earning realised from the

zone/station/cluster of stations during the

preceding 3 years with an escalation clause of

10% annually


58 of 2007, dt. 01.06.07

Bulk advertisement rights on other divisions on

their railway in addition to the division identified

on pilot project basis

The Reserve price for 1st year should be three

times actual publicity earnings of entire division

during immediate preceding financial year

Provisions also exist for review of the same in

consultation with FA&CAO, subject to revision

not falling less than 1.5 times of the previous

year's actual earning


9 of 2008, dt. 07.02.08

No additional charges shall be levied on the

advertiser for display on new sites during the

currency of the contract as the entire division is

covered under contract, however these proposed

site should have clearance from Sr. DCM

2009 Commercial Circular No. The details of all the sites (location, size etc.)

which are offered for the bulk advertising rights


PwC 183


34 of 2009, dt. 30.07.09 shall be specified

For additional sites the charges may be

calculated on unit area basis at the price decided

on the basis of the tender


24 of 2010, dt. 27.04.10

Reserve price for the first year should be 3 times

the highest annual commercial publicity earning

of the entire division during any of the preceding

three financial years

2012 Commercial circular No 8

of 2012, dt. 31.01.12

In case of failure even after 3 consecutive IT for

the same commercial publicity proposal, GM may

review the reserve price in consultation with

FA&CAO and shall fix such as not be less than

the highest earnings received for that contract

during any of the preceding three years

2012 Commercial circular No.

70 of 2012, dt. 02.11.12

Reserve price for 1st year be 1.5 times highest

annual commercial publicity earnings of entire

division during any of the preceding 3 financial

years

Licence fee in the coming years should be

enhanced by uniform rate of 10% annually over

that of previous year

These policy amendments by the Railway Board were targeted to enhance the earnings from

commercial publicity vis-à-vis the revenue targets as set by the Board. However, the earnings at

divisional level remained more-or-less stagnant.

Figure 106: Mumbai Division (CR) advertising earnings vs. target for the Division

Source: Mumbai Division, CR

Figure (57) above indicates that historically there has been a clear mismatch between the expected

revenue targets and the actual realization by the division. The diagnosis reveals that there are

several strategic and transactional level issues at various levels leading to such mismatch.

40

59 59

100

50 60 42

27 26 27 29 29 30

8

33%

56% 54% 71%

43% 50%

0%

10%

20%

30%

40%

50%

60%

70%

80%

0

20

40

60

80

100

120

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 (up to Aug

13)

INR

Cr

s.

Target Actual shortfall


PwC 184

The failure of contracts at Mumbai divisional level indicates that though it was called bulk

contracts in Western Railway, interference with the number of piecemeal existing contracts

occupying more than three-fifth of area, has led to fragmentation rather the providing unified

approach as was targeted in case of bulk contracts by Railway Board. This resulted only in

submission of single offer for the tender. While in case of Central Railway over-aggressive reserve

Case Example - Bulk Advertising Rights

Bulk Advertising in Western Railway (Mumbai Division):

Following the circular no. 58 of 2007 on bulk advertising guidelines, in November 2007

Western Railways (Mumbai Central Division) invited bids for awarding bulk rights for

commercial publicity over the entire suburban section of Mumbai Division between

Churchgate and Dahanu Road stations with a reserve price of Rs.52.21 crores. However, only

one offer was received at Rs.55.54 crores from Ashok Sharma & Associates Private Limited.

Out of the total advertising area of 6, 04,134.5 sq. ft. mentioned in bulk contract for division,

60% of the total advertising area i.e. 3, 74,494 sq. ft. have already been awarded to various

contractors. Hence, only remaining 2, 29,640.5 sq. ft. advertising space was readily available

to the successful bidder.

Also, such contracts were not subject to renewals and the sites occupied by those contractors

would be handed over to the successful bidder as and when the respective contracts expire,

some of which had expiry date in 2012. Given the five (5) tenure for bulk advertising rights

ending in 2012, the existing contracts ending in 2012 practically will be not available to the

bidder. The actual license fees payable by the bidder would be with reference to the actual

advertising area made available and the license fees would go on increasing on pro rata basis

as and when additional area will be available to the successful bidder.

The bid received only single offer which went for legal disputes on site availability issues

between the Railways and successful bidder

Bulk Advertising in Central Railway (Mumbai Division):

Similarly open tender for bulk advertisement rights for Central Railways Mumbai Division

was called in August 2008 with reserve price of INR 68 crore, for which no offer was

received. On retendering in March 2009 the reserve price was halved to INR 34 crores by

Railways. This tender attracted only one offer that was discharged on the grounds of non-

availability of clear site and clause of service tax.

Key reasons for the failure of bulk advertising rights:

The Board targeted to achieve a unified approach to commercial publicity at divisional/zonal

railway level through the bulk advertising rights. However, the attempts by both CR & WR

show that the bulk contracts did not find any takers, primarily due to the following reasons:

Interference with the existing numerous piecemeal contracts

Existing contracts with multiple agencies resulting in a high fragmentation even at a

single station

Aggressive reserve price as a fixed license fee which is to be escalated annually


PwC 185

price fixation by the division has resulted into failure and later on issues of non-availability of clear

sites were raised by the successful bidder on similar lines to that in case of Western Railway.

The lack of proper demand assessment involving the market experts and agencies were the other

roadblocks to achieve the targets and the objective. Also, the revenue targets were entirely being

driven by the Ministry while the reserve price fixation was governed by Railway Board guidelines

based on the previous year's advertising earnings rather than the actual market assessment at

divisional/zonal Railways. The lack of market driven approach have resulted in unrealistic reserve

price criteria and hence low response from the bidders. The other issues include inadequate

record maintenance and co-ordination between various departments of Railways that resulted in

non-materialization of the only offers received both divisional Railways.

4.2.2. Institutional framework and Schedule of Powers

(SOP)

The apex management organization is the Railway Board, or the Ministry of Railways. The board is

headed by the Chairman who reports to the Minister of Railways. The board has five other

members in addition to the chairman- Member Staff, Member Engineering, Member Mechanical

and Member Electrical and Member Traffic heading the respective functional branches.

The traffic department of Indian Railways is responsible for the operations planning as well as all

the commercial activities through fares, freight, coaching, commercial publicity and other such

non-fare box sources of revenues. It comprises of two main departments – Commercial and

Operation.

Operation Department: The Operation department is responsible for planning of both long-

term and short-term train services, ensuring availability and proper maintenance of rolling

stock.

Commercial Department: The commercial department is responsible for commercial

publicity, marketing, developing traffic, improving quality of service provided to customers,

regulating tariffs of passenger, freight & other coaching traffic, monitoring their collections,

account and remittance.

Organizational chain of command:

At Railway Board level, the traffic department is headed by Member (Traffic), who is assisted

by Additional Members/ Advisors.

At the zonal level, the operating and commercial departments are headed by Chief Operations

Manager (COM) and Chief Commercial Manager (CCM).

At the divisional level, the operating and commercial departments are headed by Senior

Divisional Operations Manager (Sr. DOM) and Senior Divisional Commercial Manager (Sr.

DCM).

o Sr. DCM is overall in charge of commercial department of the division that includes

freight, parcels, luggage, commercial publicity, passenger train reservations including

VIP, emergency and Railway Board quota, catering ticket checking and public

complaints.


PwC 186

o Further under Sr. DCM there are two DCM’s- DCM (Coaching) and DCM (Goods).

DCM (Coaching) handles commercial publicity along with parcel, coaching services

and reservation. DCM (Coaching) is assisted by Assistant Commercial Manager solely

responsible for commercial publicity (ACM, CP).

Figure 107: Commercial Publicity institutional framework

Source: IR Organization chart, Mumbai Division (CR & WR)

Note- Western Railways has additional DCM-Catering and DCM-Reservations. ACM (CP) reports to DCM-

Catering50

Commercial Directorate of Railway Board is responsible for policy directions related to

Commercial Publicity. At Zonal level, the Chief Commercial Manager (CCM) and at divisional

level, DRM along with Sr. DCM/ DCM are responsible for implementation of the policy.

The Schedule of Powers (SOP) with respect to accepting of earning contracts of Commercial

department are laid down as per Railway Board commercial circular No. 74 of 2007. It defines SOP

provisions for acceptance of commercial earning contracts including commercial publicity (except

parcel leasing and catering) as per the total value of contract (total value means value for total

contract tenure).

Table 35: Level of delegation as per value of commercial contracts

Value of Contract Level of Delegation Accepting

Authority

1 Up to Rs.30 lakh Asstt. Scale tender committee consisting of

one officer each from Commercial and

DCM/ Sr. DCM

50 Financial & Institutional study of railway operations in Bombay Metropolitan Region (BMR)- Symonds Travers Morgan (1996)


PwC 187

Accounts Department

2 Above Rs. 30

lakh and up to Rs.

1 Crore

Sr. Scale Tender Committee consisting of one

officer each from Commercial and Accounts

Department and third member should be

nominated by DRM/ADRM

Sr. DCM

3 Above Rs.1 Crore

and up to Rs. 5

Crore

JA grade Tender Committee consisting of SR.

DCM and one JA grade officer nominated by

DRM/ADRM and a Sr. Scale Finance Officer

DRM/ ADRM

4 Above Rs 5 Crore

and up to Rs. 10

Crore

JAG Tender Committee consisting of Sr.DCM,

one JAG officer nominated by DRM and JAG

Finance officer

DRM

5 Above Rs 10

Crore and up to

Rs. 15 Crore

Headquarters level JAG Tender Committee

consisting of 3 members- Dy. FA & CAO

nominated by FA&CAO, JAG officers from

Commercial and some other department,

both nominated by CCM

Concerned SAG

officer of

Commercial

Department

6 Above Rs 15

Crore and up to

Rs 40 Crore

Headquarters level SAG Tender Committee

consisting of 3 members-

FA&CAO(WST)/FA&CAO(T) and SAG

officers of Commercial and some other

department, both

nominated by CCM

CCM/PHOD/Co-

ordinating HOD

7 Above Rs 40

Crore

HAG (PHOD level) Tender Committee in

Headquarters of 3 members consisting of

CCM, FA&CAO and third member nominated

by GM

GM

Note: ACM-Commercial Publicity does not have any designated powers as per the SOP for

commercial contracts

4.2.3. Primary interviews with stakeholders

Mumbai suburban system carrying city’s higher commuter traffic provided ideal platform for

advertisers for their product and services. In order to capture their role and experience we

interacted with prominent advertisers in the City. Our interaction with these stakeholders can be

categorized under three different groups:-

A) Advertisers presently working with Railways

B) Media Planners / Buyers

C) Transit agencies


PwC 188

Table 36: Stakeholders interaction - Advertising/ Commercial Publicity

The advertisers were mainly focused on the tactical issues that they are regularly facing with the

Railways, whereas, media planners were more focused on the strategic issues. Subject to working

on these issues will enable them to work actively with railways so as to contribute on a similar line

of their association with other successful transit agencies. The interactions with the various transit

agencies were focused on the practice followed by them for monetizing the assets for advertising

potential.

(A) Advertisers presently working with Railways

We interacted with nine of the major advertisers who have over a decade of experience of working

with Railways in the sector. These nine advertisers also contribute around third of the System's

total advertising revenues51. All of them are confident about the advertising revenue potential of

the System as it provides the maximum eyeballs compared to other transits in the City and it would

be ideal sites to advertise the products/services on Railway assets. However, there are several

operational issues highlighted by these advertisers, which, they believe, are restricting them from

expanding their current level involvement:-

Most of the advertisers seek a single point of contact or in other words single window

clearance mechanism from the railways after the contract is awarded to them. In the

present scenario advertiser have to interact with various Railway department e.g. accounts

for processing of the fees, operations for availability of asset for advertising displays.

Single window clearance mechanism for all the accounts, contracts, utility supplies

connection (electrical department), availability of inventory (technical and operations

department) etc. to be handled by a nodal officer for timely execution of the contract

within one month for more than one year contract tenure & 15 days in case of the short

duration contracts (less than a year) as mentioned in the policy.

The current practice involves The Gazetted Railway Officer (who have not deal with the

matters to which the advertising contract relates or has expressed views on all of the

matters under dispute or difference during his course of duties as Railway servant) to be

appointed as Arbitrator by General Manager of zonal Railways, the award of which shall be

final and binding on both the parties. However, this reflects conflict of interest as the

51 WR & CR present on-going advertising contract lists


PwC 189

designated officer may not be a neutral party for the resolution of the dispute. Hence

advertisers desire a fair dispute resolution mechanism by representative from both the

parties.

Significant numbers of advertisers have sought market friendly payment terms and

conditions.

Currently, the advertisers have to pay full advance annual license fee after adjusting the

Earnest Money Deposit (EMD) within 15 days from the date of issue of Letter of

Acceptance (LOA) for license fees less than INR 1 Crore. Given that security deposit is paid

in advance, advertisers opine that this advance window to be widen at least from 15 days to

few months, or quarterly/half yearly payment to moderate the cost of operations to

advertisers.

For the contracts where annual license fee is more than INR 1 Crore, 50 % of annual

license fee shall be payable as above and balance 50% within three months from the date

of issue of LOA. Given that security deposit is paid in advance, advertisers opine that this

advance window to be widen at least from three to six months or quarterly/half yearly

payment to moderate the cost of operations to advertisers.

Another concern is regarding the security of the advertising assets especially in case of

new media, concepts like LCD screens. As these media are highly capital incentive, lack of

commitment of security from Railways side-limits the introduction of newer concepts from

advertisers’ side. Also this lack of security commitment from Railways has resulted in to

illegal displays that impact heavily the earnings potential of advertisers, revenue loss to

railways as well as poor aesthetics in station premises and trains.

Higher municipal taxes for road facing hoardings: The municipal taxes as paid by

advertisers to MCGM are dependent on hoarding classification (i.e. Category A or Category

B) and hoarding type (i.e. traditional billboard or illuminated). These taxes account for

about 5% -15 % of the fees as paid by the advertisers to Railways and also loading this

burden to the client.

Table 37: Advertising - Municipal Taxes

Sr.

No.

Hoarding

Classification

Municipal Taxes 2013 rate52

(INR/ sq. mt. /annum, escalated

@ 20% annually)

Railway Average 2013 rate53

(INR/ sq. mt./annum, escalated @

10% annually)

Illuminated Non-

illuminated Average Rate Zone

1.

Hoarding Category A

Up to 1 sq. mt. 640 240 11,000 Island City

Additional area 407 160

2.

Hoarding Category B

Up to 1 sq. mt. 880 320 5,000

Suburban &

Extended City Additional area 638 239

52 Source: Interaction with advertisers , CR & WR 53 Railway rates are average for CR & WR in the given zone


PwC 190

Other key concerns of advertisers include improper advertising inventory record

management.

Figure 108: Interactions with Advertisers


(B) Media Planners / Buyers

Media planners are the key decision makers in the advertising inventory chain. Their service

portfolio includes - Market and media strategy formulation, Competitive tracking, media audience

research and planning, defining measurable objectives and tracking communication ROI,

campaign implementation and optimization. However, we found that current Railway policies are

favorable for small players i.e. advertisers to attract, but not attracting these giants in advertising

spaces. While most of these are working with other transits authorities in Mumbai and other

locations in India, their presence is not in Mumbai’s densest network. We interacted with six

media agencies, few of which have international experience too. These agencies were willing to

work with Railway subject to certain amendments in policy.

Longer contract tenure is the key requisite by majority of media agencies (68%) in order

to inculcate their presence in the Railway advertising market space. OOH advertising

market being very volatile and susceptible to economic fluctuations, longer contract tenure

will provide sufficient period for pay-backs and higher returns to them. Most of the

transits internationally and even in India provide contract tenure of about 10 -15 years

compared to maximum duration of 5 years as provided in Mumbai suburban system

contracts.

As mentioned earlier OOH advertising market being very volatile there needs to be

alternate bid parameters that act as risk sharing mechanism between the authority and

the advertisers. This will encourage larger players to enter this space. Hence Railways

should not only limit to present fixed license fee criteria for which the reserve price is

benchmarked to preceding year’s earnings. Railways can have minimum guarantee fee and

revenue sharing mechanism as bid variable

22%

44% 56%

33%

11%

44%

33% 22%

11%

22%

22% 11% 11%

22% 33%

11% 11% 11%

11% 22%

22% 11%

Effective after-sale services

Timely & single-window clearances

Effective dispute resolution mechanism

Market friendly payment terms

Assets security

Highest priority High priority medium priority Low proirity Lowest proirity


PwC 191

Media agencies are keen on developing their own media plan that will be in-line with

complimenting to station aesthetics and incorporation of innovative media /concepts,

which can be approved by Railways before execution. This compared to current method of

location, size and media based master plan as fixed by Railways does not provide proper

market understanding of OOH market.

Innovation and customization is key to OOH industry, media agency should have sole

rights to interact with media agency to create innovative advertising opportunities rather

than existing first finder scheme that adds to physical cluttering to existing advertising

contracts

Other key concerns of media agencies where multiple clearances and approvals, illegal

displays and poor station maintenance and aesthetics.

Figure 109: Interactions with Media Agencies


(C) City's other transit agencies

The interaction with the City’s other transit agencies were also conducted in order to understand

their advertising practices.

BEST

The transportation wing of Brihanmumbai Electric Supply and Transport Undertaking (BEST

Undertaking) provides bus services in Mumbai metropolitan area. BEST with fleet of 4,607 buses

and annual ridership of 3.9 million in 2011-1254 has advertising as the only source of non-fare box

revenue to the authority. The commercial department of BEST has advertising spots which have

been identified and tendered are:

Body panels of buses

Inside the buses ( includes back-side of seats & LCDs)

Bus stops

Advertisement on Kiosks affixed to Street Lighting Poles 54 “More than 300 BEST buses to go off roads” – Times of India, Nov-2012

34% 34%

51%

68%

34%

17%

34%

34%

17%

34%

17%

17% 17%

17% 17% 17%

17% 17% 17%

Brand building & station asthetics

Innovative medias Alternate bidding parameters

Longer contract tenure

Involvement in Media Plan at earlier

stage

Highest priority High priority medium priority Low proirity Least proirity


PwC 192

BEST was the first authority in the City to start with digital advertising inside its buses on LCD

screens. What started as a security measure with installation of cameras was later extended by

packaging it with advertising.

Practice of ‘First Finder Scheme’ for new sites and tendering process for prevailing sites is followed

by BEST. The contract tenure for advertisements differs with the placement. Contracts for

advertisement inside buses are given for a 10-year lease period where as those at bus stops and bus

body panels are given for 3-year lease period with rental payment by advertiser to the authority on

monthly basis.

Mumbai Metro One Pvt. Ltd.

Mumbai Metro One scheduled to start operations in March 2014, estimates its total non-fare box

revenues to be 20% of total revenues55. The non-fare box revenues consist of retail outlets at its 12

stations and advertising on trains and station areas. Our interaction with the authority indicated

that advertising contract is outsourced to Times Innovative Media (TIM), for 15 years via

competitive tendering. The contract is exclusive includes various advertising options available at

Mumbai Metro like station corridors, pillars, train wraps, train interiors, sponsorship

opportunities and a state-of-theatre digital network.

Summary of key challenges

Based on our analysis of commercial publicity policy guidelines , interaction with stakeholders and

study of other transits the challenges for Mumbai suburban system can be categorized as follows :-

Strategic challenges

1. Top-down revenue targets (budgetary estimate)

The current practice for commercial publicity earnings are that the top-down budgetary

estimates are given to the zonal/divisional railways. However we find that limited or no

inputs from zonal Railways are taken on this. This practice, in the past, has resulted into

unrealistic targets to be achieved by zonal/divisional railways that are not in sync with the

ground realities.

2. Market driven strategy

There is no appropriate strategic roadmap for advertising and currently it is driven by the

top-down targets and guidelines set by the Board. The key to achieve this is by

understanding the volatile advertising market and designing the media/inventory

accordingly.

Presently the Master Plan for the stations is limited to the physical count of the media at

locations, characterised by a lot of fragmentation in the licence holder. Also contract

structuring elements like contract tenure, innovative media, security to asset etc., are not

market friendly. The result of which are failure of bulk contracts and hence continuance of

the piecemeal contracts most of the time that attract local players with limited capability.

3. Lack of business driven organization structure

Global transit systems as well as some transits in India have created a separate

arrangement to deal with the advertising portfolio. Advertising market being dynamic in

nature needs proper understanding and cannot be limited to the execution powers to the

55 Interaction with Mumbai Metro One official


PwC 193

concerned officer. Empowered capable work force with subject matter understanding is

one of the key pre-requisite.

Transactional challenges

Along with these strategic issues there are operational and tactical challenges (or "transactional

issues") that need to be addressed to put the suburban railway on par with the City's other transits.

4. Lack of single-window clearance system

As highlighted based on our interaction with advertisers, lack of single point contact leads

to delay in requisite timely approvals and also results in other delays during the contract

tenure. It has been observed that due to poor customer service, advertisers have started

finding alternatives to railways while targeting the commuters eye-balls, i.e. advertisers

may be shifting to other transits/private buildings near transits for their OOH advertising

plan.

5. Inadequate Railway’s interdepartmental co-ordination

Co-ordination between commercial, accounts, structural and engineering, electrical, legal,

and Railway Police Force (RPF) for security are required for proper functioning of

advertising contracts. Inadequate departmental coordination leads to issues like:-

o Delays in tender finalization (exceeding more than 90 days as per current

provisions)

o Affects the timely availability of EMU for inside/out train advertising

o Rushing for contract execution even without fulfilling pre-requisites to it, for

instance, security deposit payment results in liability for the advertisers

o Security of advertising assets, especially when trains are non-operational and in

yard or billboards/digital assets in the railway premises.

6. Shorter contract tenure

Out-of-Home (OOH) market being volatile in nature needs longer contract window in

order to inculcate larger players in the system rather than limiting to smaller players in the

value chain.

Also advertising industry being dynamic and of cyclical nature, the longer tenure ensure

adequate returns to the agencies.

7. Lack of flexibility or power

The schedules of power to commercial department under the present environment are

limited as per the value of contract (his includes value for entire tenure of contract). Hence

there is no decision–making at divisional level, resulting in delays in approvals as well as

dispute resolution.

Effective dispute resolution mechanism

The current practice to have one arbitrator as appointed by GM of Zonal Railways for

dispute resolution, does not reflect neutral representations from both the parties and

hence a fair judgement especially for the advertisers. A stronger arbitration process will

strengthen grievance redressal system.


PwC 194

4.2.4. Benchmarking with successful global transit systems

In the changing economic scenario, transit authorities have started to look beyond fare-box

revenue sources for other commercial sources of revenue. Transit authorities have now started

focussing on these non fare box revenue sources, among which advertising forms an integral part.

Non-aeronautical revenue generated across all airports in India (excluding Cochin) has grown by

more than +340% from INR4.9 billion to INR21.6 billion from FY 2007 to FY 201256. DMRC with

20% of its revenue per day coming from ads and rentals in FY 2011 expects it to double and reach

40% in coming five years. Recently developed radio cab services like MERU have also ventured

into this space and is earning handsome amount via advertising on their cabs. For instance MERU

cab with 10% of revenues from advertisements and it earned INR 10 Crores in FY 2009-10 from

advertising with top line revenues of Rs 100 crore57.

As part of the study process, we also studied various Asian metros in order to understand their

advertising module. The study tour to Japan and Chine also provided an opportunity to

appreciate wide spectrum of advertising practices there.

This section highlights different transit authorities advertising revenues, institutional

framework and policy/system in operation. Situational contexts and the relevance to the

Mumbai suburban system were then demarcated for any recommendations made.

4.2.4.1. Singapore Metro Rail Transit (SMRT)

SMRT established in 1987 offer a comprehensive suite of rail, bus and taxi services that are

designed to connect seamlessly Singapore’s public transport system. SMRT with daily ridership of

1.8 million generates ~24% of operating revenues from non fare box (FY 2012). Share from various

non fare revenue sources consist of advertising, taxi operations, station rentals and engineering &

services.

Figure 110: SMRT - Non fare box revenues (FY12)

Source: SMRT annual report FY 2012

Advertising revenues grew by 21.8% to S$ 30.9 millions in FY 2012 compared to past year however

the ridership growth for same period was 8.3 %. The CAGR for annual ridership for the system and

56Indian airports deliver surging growth in non-aeronautical revenues; Published - 09/02/12; Source: Centre for Aviation; The Moodie Report 57 "Power of Ideas: How Meru Cabs Evolved"; Published - September 1, 2010; Economic Times

http://www.moodiereport.com/document.php?c_id=6&doc_id=29960


PwC 195

advertising revenues has been 8.5% and 12.7% respectively for past five years58 FY 2007 to FY

2012. Hence there is strong positive co-relation between the ridership and advertising revenues for

the system also as seen from the graph below.

Figure 111: SMRT - Ridership growth vs. advertising revenues

Source: SMRT annual reports

SMRT Investments Pvt Ltd was set up in 2000 with 100% holding of SMRT Corporation Ltd. Its

principal activities are in the marketing and leasing of media spaces as well as the marketing,

leasing and management of commercial spaces within the SMRT network. SMRT Media was set-

up as a division of SMRT Investments Pvt Ltd in 2004 to manage and market Out-Of-Home

(OOH) advertising solutions for the entire SMRT network that includes trains, buses and taxis.

SMRT Media is ranked as Singapore's No. 1 Out-Of-Home (OOH) media company by Marketing

Magazine in 2013. In 2008, SMRT Media clinched Dubai Metro media 10-year advertising

contract under a consortium of with other two companies59. The contract includes leasing media

space rights at 47 Dubai Metro Stations as well as train carriages.

SMRT Media has married out-of-home platforms with new media and mobile technology to

generate more innovative, interactive and effective advertising campaigns in order to keep in pace

with the evolving clients need. Strategic direction & outlook for FY2013 is aimed at continuing to

leverage latest technology to introduce more digital out-of-home elements into the system via

introduce of new media formats and ideas to enhance advertisers’ return on investments. Few of

the past milestones of innovative ideas by SMRT are as follows:

Table 38: SMRT Media - Key Milestones for Innovative Concepts

Year Milestones

2012 Developed Shop & Pay On-The-Go with iMobSMRT to enable instant shopping

58 SMRT annual reports for financial years 2007 - 2012 59 RTA inks $ 817m Dubai Metro contracts – tradearabia.com

100

120

140

160

180

200

2006 2007 2008 2009 2010 2011 2012

Sc

ale

of

10

0-

ba

se

y

ea

r 2

00

6

Ridership Advertising Revenue


PwC 196

2011 Added two large format digital media platforms to digital media offerings, Projection

Screen @ Orchard and Digital Screen @ Raffles

Launched iMobSMRT, a digital lifestyle space where consumers can enjoy instant deals

and offers using mobile technologies such as Near Field Communications and Quick

Response Code

2010 Installed iViewSMRT, 55-inch high definition LED screens, across the station network

Launched Media Hub Wall @ Orchard, an ambient digital platform located at the Orchard

Station link way

2007 Launched Tunnel TV, a revolutionary advertising platform installed on the MRT tunnel

wall between Newton and Orchard MRT stations

4.2.4.2. Metro Transit Rail Corporation (MTR, Hong Kong)

MTR-Hong Kong established in 1979, is one of the most profitable systems in the world, with a

high fare box recovery ratio of 186%60. The business for the transits are broadly classified under

three heads- transport operations, property & other businesses and station commercial

businesses. The property & other businesses and station commercial businesses form the non-fare

box revenues contributing 23% of total operating revenues (FY 2011). Station commercial

businesses handle the advertising in trains and stations on entire network along with rentals of

station retail spaces and telecommunications. The share of various non transport revenue sources

are as follows:

Figure 112: MTRC - Non fare box revenues (FY12)

Source: MTR annual report (FY2012)

Advertising revenues grew by 12% to HK$ 1000 millions in FY 2012 compared to past year

however the rider ship growth for same period was 4.7 %. The CAGR for annual ridership for the

60 MTR Annual Report (FY2012)


PwC 197

system and advertising revenues has been 9.3% and 11% respectively for past five years FY 2007 to

FY 201261. Hence there is strong positive co-relation between the ridership and advertising

revenues for the system also as seen from the graph below. Year 2009 shows dip in advertising

revenues due to economic slowdown but later on are in pace with the ridership growth

Figure 113: MTRC - Ridership growth vs. advertising revenues

Source: Annual reports of MTR

J C Decaux is the media agency handling the advertising portfolio for MTR for stations as well

trains. The advertisers are bound by production guidelines as by MTR, based on which the lay out

and mock-up by advertiser to MTR for approval. Recently MTR Advertising Research Kit 2011 was

launched to give insides on quality research analysis that aimed to give effectiveness to facilitate

media planning to advertisers on the network.

Along with research tools to attract key advertisers, continues endeavor in innovation in

advertising formats has been the trend in order to increase their appeal to customers. This is

mainly done via introduction of digital formats in the network. These include digital panel zones,

“MTRInterAds Experience Station”, mobile shopping scheme etc.

4.2.4.3. JR-East

JR East incorporated on 1987 is the largest railway company in Japan and one of the largest in

World It covers eastern half of Honshu island that includes part of Tokyo Metropolitan area. The

population of Tokyo Metropolitan area is projected to grow till 2015 while that of Japan as whole

and other metropolitan cities is forecasted to continue to decrease. The daily ridership on the

network has remained at approx. 17 million for last 3-4 years making it one of the busiest transits

in the World.

The non-fare box revenue contribute approximately one-third of total operating revenues for the

transit. The share of various non fare box revenue sources are from shopping centre and office

61 Hong Kong- MTR annual reports for FY’s:2007-2012

100

120

140

160

180

200

2006 2007 2008 2009 2010 2011 2012

Sca

le o

f 10

0(b

ase

ye

ar

20

06

)

Ridership Advertising Revenue


PwC 198

buildings, station space utilisation and other services (figure). Other services include hotel

operations, advertising & publicity, travel agency services etc.

Figure 114: JR East - Non fare box revenues (FY 12)

Source: JR East annual report 2012

Transit OOH advertising billing has declined to four consecutive years owing to economic

sluggishness in the country. Even with this stagnant ridership and sluggishness of OOH market the

system has achieved CAGR of 3.5% in advertising revenues in past five years. JR East intends to

heighten the value of its assets to advertisers via building extensive digitized network. To give an

illustration approximate billing in JR-East advertising fees amounts roughly 50% of total OOH

market in the Country.

JR-East advertising media has been digitized using J-AD vision large size LCD displays (326

screens as of March, 2013) installed at 41 stations. Another way in which JR-East has digitized

advertising is Train Channels, an advertising medium installed above doorways of its new

commuter railcars. With the size of operation of 20,000 screens of signage network installed inside

train and used by 50 million passengers per week, there has been compound average growth rate

of 66% in digital train advertising revenues. This is despite of fact that annual ridership on the

transit has remained more or less stagnant (~ 16 to 17 million commuters daily) and declining

Japan OOH advertising market billing.

Advertising proposals are integral part of station improvement and construction works on the

network and forms part of grand design from planning stage that ensures that space within

stations lead to expansion in the Groups advertising and publicity business.

Figure 115: JR East - Ridership growth vs. digital advertising revenues

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2002 2003 2004 2005 2006 2007 2008 2009 2010

Sca

le o

f 10

0-b

ase

yea

r 2

00

2 Digital train channel sales Daily ridership


PwC 199

Source: JR East

4.2.4.4. Delhi Metro Rail Corporation (DMRC)

Delhi Metro Rail Corporation (DMRC) incorporated in 1995 for the newly established transit in the

Capital city. The ridership on the system has increased at rate of 25.8% in last five years. The

system daily ridership has increased at CAGR of 25% to 1.9 million in 2012 in last five years.

DMRC makes operating profit of INR 0.48 per commuter in FY 2010-1162. The non-fare box

revenues are handled by Property Development department. The Property Development division

handles following three areas:-

License for spaces within station buildings for commuter related vendors such as ATMs,

Kiosks for refreshments, magazines etc. for 6 - 12 years of concession period.

30 years concession for commercial developments on vacant land pockets adjacent to

MRTS stations.

Long-term lease on land pockets in depots, etc, not immediately needed for operational

structures for 50-90 years of concession period.

Advertising - Advertisement is done via outsourcing to agencies within three broad

categories: -

o Within station premises

o On DMRC structures between stations (out station advertising)

o Within DMRC commuter trains

Currently advertising rights at various locations of Line 1, 2, 3, 4, 5 & 6 categorized as above are

awarded to advertisers for period of five years. Also DMRC has awarded the tender for the

deployment of digital signage network solutions in Delhi Metro Railways to the RC&M group. The

contract, awarded for a period of five years involves installation, operation and maintenance of

LCD screens63.

However DMRC is now moving to long term bulk contracting of 10-15 years. Existing media shall

be deemed to be handed over to the successful bidder on “as is where is” basis without any

consideration at the start of the concession period.

Advertising contract structuring by DMRC:

Media agency is responsible for preparation of their own station Master Plans

Preparation of an advertising master plan for DMRC which shall include all places available for

advertising inside and at outer surface of Metro stations. The master plan must clearly

earmark the exact locations and the type of advertising unit planned for each advertising site

and other relevant details

Designing of all advertising units / structures to complement station architecture for

advertising sites approved by DMRC

Procurement, fabrication, installation & erection of advertising units.

62 “Delhi Metro seeks to double revenue from ads, rentals” – live mint, Dec-2011 63 Delhi Metro case study – RC & M


PwC 200

Appoint an architect to interact with DMRC representative in terms of understanding the

spaces and other coordinates inside stations and subsequently implementing this

understanding in planning and execution;

Operate, manage and maintain the entire advertisement units

Management of sales & marketing of the advertising sites at DMRC including placement of

adequate professionally trained manpower on the rolls of the concessionaire

Design of themes depicting Delhi culture and its natural beauty and Delhi tourism for display

at the advertising sites as per the tender conditions

Incorporate technological innovations in the advertising field in consultation with DMRC

Create new innovative advertising opportunities at the Metro stations in consultation with

DMRC including Experiential Marketing, Product Displays, and advertisements by visual aids,

smart posters for use in e-commerce for on-line or off-line shopping purposes, etc.

Establishment of an officer near DMRC stations for maintenance of the sites, liaison work, etc

and ensuring availability of adequate staff

Obtaining all approvals, permits, etc from all competent and required authorities, including

local, civic statutory authorities, etc. at its own cost

Periodically incorporate technological innovations and improvements in the areas of

advertising / display signage’s in consultation with DMRC

Provide regular data, work orders/ sale orders or similar commitments (including financials)

and Gross Revenue (received or receivables) to DMRC. Auditing at appropriate level shall be

carried out. Government Auditors including CAG officials are authorized by the appropriate

authority to conduct the audit of any office as deemed fit by them. All activities undertaken by

DMRC are periodically reviewed by Company and Company's auditors including Government

/ CAG Auditors.


PwC 201

4.2.4.5. Learning for the City's suburban rail network

Some of the key takeaways from the review of transits for Mumbai suburban system are:-

Advertising revenues for these transits are in pace with the ridership growth. This

indicates positive co-relation among advertising revenues and ridership

Even for stagnant ridership growth as seen in case of JR-East, transits are able to

increase their advertising revenues

Advertising is bundled along with station retail businesses or real estate development

business

Innovation via digitization is the key to enhancing advertising revenues by most of

the transits

Advertising proposals are integral part of station improvement and forms part of grand

design from planning stage itself taking care of station aesthetics

Longer tenure of 10 -15 years for advertising contracts are given

These transits generally interact with media agencies who are well integrated laterally

in the advertising value chain

These lessons are appropriately taken into account in developing the various

recommendations for Mumbai suburban system.

Interaction with DMRC

DMRC is one of the few profitable metros globally. The major part of is also due to significant

contribution (over 20%) from non-fare box sources of revenue.

DMRC have achieved the growth riding on back of proper institutional arrangement to

support the fare as well as non-fare box revenues. The advertising model followed by DMRC,

so far, was on a similar line to that of Indian Railways or Mumbai Suburban Railway System,

however different from the institutional structure aspects. The consultation with DMRC,

reveal states that advertising and such other non-fare box sources of revenues are specialized

functions and hence require a dedicated division equipped with subject experts with

empowerment for decision making. However, it has recently shifting to the advertising

practices followed by the globally successful transit agencies.

The recent shift from five year advertising contract to long tern 10-15 years contract is a step

towards these evolved transit practices. DMRC is confident of the market absorbing its

advertising inventory. Though the new contracts give freedom to advertisers to prepare master

plan to compliment station aesthetics, the final approval rights remain with DMRC. Also, the

newer contracts will be based on revenue share mechanism, unlike the fixed license fee

method. This proposed revenue share ascertains the risk sharing among both the parties.

DMRC agrees that inter –departmental co-ordination is very crucial for smooth

functioning of advertising contract with the advertisers. However, it cannot

happen at lower level and proper high level intervention is necessary to assure

the availability of advertising inventory to advertiser for display of

advertisement, along with ensuring safety and security of the operations and

commuters.


PwC 202

4.2.5. Estimation of revenue potential from advertising for

Mumbai Suburban Railway System

Mumbai Suburban Railway with over 7.4 million ridership daily and annual ridership of over 2.64

billion is one of the busiest rapid transit systems in world. It is operated by CR & WR with 2600

train services per day. Mumbai Suburban Railway accounts for 51% of all person trips while 78% of

all trip- kilometer in the MMR region64. The ridership is greater than compared to all other major

transits in Mumbai. The closest public transport competitor BEST has daily ridership of 4.5

million.

Among the non fare-box sources though advertising alone forms about three-fourth of total

earnings, analysis indicates that the revenue potential from advertising can be much beyond the

current levels.

1. Based on benchmarking of Asian transits and their

advertising revenue contribution Advertising opportunities are primarily driven by highly dense network providing eyeballs /

footfalls. We compared advertising revenues and footfalls for Mumbai suburban along with other

major transit systems in world to arrive at advertising revenue per commuter for financial year

2012. The revenues thus obtained were adjusted for purchasing power parity (PPP) rate taken as of

March; 2012.The PPP adjustments are needed on the exchange rates between countries in order

for the exchange to be equivalent to each currency's purchasing power. As evident from the table

below Mumbai suburban system has lower revenue per commuter. Even recently developed,

decade old transits DMRC have thrice the revenues compared to century established network of

Mumbai suburban system.

Table 39: revenue per passenger for different transits in FY 2012

Transit System

Daily Ridership

(million

commuters)

Advertising

Revenue

(FY12, million)

Revenue/

commuter

PPP

Deflation

factor

PPP adjusted

revenue (in

INR/commuter)

Mumbai Suburban

Railway 7.24 INR 680.00 INR 0.26 1.00 0.26

MTA, New York 6.32 US$ 120.00 US$ 2.60 0.38 0.99

MTR Corp, Hong Kong 4.25 HK$ 1,000.00 HK$ 4.19 0.76 3.18

London Underground 3.21 US$ 129.70 US$ 5.54 0.38 2.10

SMRT, Singapore 2.65 S$ 30.90 S$ 1.28 0.46 0.59

DMRC 2.00 INR 500.00 INR 0.68 1.00 0.68

Taipei Metro, Taiwan 1.65 NT$ 551.46 NT$ 1.56 0.66 1.02

JR-East 17 JPY 486,00 JPY 7.83 0.75 1.56

64 Comprehensive Transportation Study (CST) for MMR ("TranSForm")


PwC 203

The trend of revenue per passenger for the above transit systems for past six year show that,

Mumbai suburban system has been the lowest consistently despite having the second highest

ridership among the transits.

Figure 116: Revenue per passenger for transit systems for last six years

Source: PwC Research & Analysis, Annual Reports

Even with potential to reach its closest transit (DMRC /SMRT) Mumbai suburban has potential to

enhance its revenues thrice, that indicates the potential of INR 180-200 crores form advertising

revenues

2. Mumbai suburban system share based on Indian OOH

market share

Market share Mumbai suburban railway system in the City's OOH advertising industry

Railway has its advertising share in OOH market in Mumbai in two broad categories – Transit

displays (on and in train advertising, platforms, FOB’s, ticketing area etc. advertising) and out

station billboards. As per the PwC, Media & Entertainment Advertising Outlook 2013-17, OOH

advertising market is estimated to reach USD 538 million in 2017 (~INR 3,161 Crores65).

Delhi and Mumbai accounted for INR 260 Crores and INR 450-500 Crores of total Indian INR

1,100 Crores OOH market in 200666. This accounted for 24% and 41% of their respective

contribution i.e. 65% of total OOH India market. Delhi has later on significantly grabbed larger pie

in OOH market since the operations of DMRC in 2005 and hence raising Delhi’s share. Also with

the privatization of four metro airports, there has been phenomenal increase in their respective

non-aeronautical revenues of airports with advertising being major aspect. In addition to this,

recent infrastructure growth in India has opened up many new spaces for OOH media beyond

metros in Tier 2 and Tier 3 cities. Based on this, 2017 market is fairly assumed to account for equal

contribution with slightly reduced share to 55% of total OOH India market coming from Delhi and

Mumbai together. According to Indian Advertising Market Report & Forecast: 2012-2016 report

by research firm IMARC Group, transit media will account for 45% of total OOH while reducing

current share of 50% billboards to 30% in 2016. Major players in Mumbai in OOH space are:

BEST, Railways, Airport (Mumbai International Airport Limited (MIAL)) and radio cabs for

transit media and MCGM and private & public Landowners for billboards. MIAL captures most

65 Currency conversion rate - 1 USD = INR 58 66 “Delhi pips Mumbai in Out of Home ad market” – The Financial Express, Jun-2006

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2007 2008 2009 2010 2011 2012

Rev

enu

e (I

NR

) /p

ass

eng

er

MTR (Hong Kong) SMRT (Singapore) JR-East DMRC Mumbai suburban


PwC 204

premium segment due to its SEC A1 commuter profile. Hence MIAL is assumed to have 40% of the

share, leaving about 30 % for BEST & radio cabs and 30 % to the railways. Billboard media for

Railways can be assumed to be 30% of total estimated billboard media in 2017.

Table 40: Mumbai suburban potential earnings by 201767

Mumbai suburban’s share by 2017 INR Crores

Estimated OOH India market 3,161

Mumbai’s & Delhi’s share in OOH

market

55% of market size 1,738

Mumbai’s share in OOH market

(half of Mumbai’s & Delhi’s share)

28% 870

Transit display share of Mumbai

suburban system

assumed 35% of estimated

45% of market size

120

Billboards share of Mumbai

suburban system

assumed 30% of the

billboard market

(estimated 40% of total

market size)

90

Total Mumbai suburban system by

2017

210

Hence the top-down estimate shows that Mumbai suburban system can attain higher share in

city’s OOH market owing to its high ridership.

3. Bottom-up assessment

Our bottom-up assessment indicates that the untapped potential for Mumbai suburban system can

be achieved in three steps. Based on our analysis the existing advertising revenues of

approximately INR 70 Crores can be enhanced by 20-30% by proper contract management

practices. These include efficient contract monitoring, post media monitoring, effective arbitration

processes. The current records indicate that reasonable amount of revenue leakages exists because

of non-compliance with standard practices.

Secondly, as seen from other transit examples, market aligned strategy in order to inculcate long

term end-to-end outsourced advertising contracts will further enhance the revenue potential.

However these practices will include proper institutional arrangement and policy tweaking for

efficient contract structuring to benchmark the advertising practices in Railways to double its

revenues. Further innovative media (mainly digitisation of inventory asset, which is the upcoming

trend in OOH market) incorporation and efficient monitoring of these long term contracts in the

long term will garner the required potential to the System.

Figure 117: Bottom-up assessment of Mumbai advertising earnings

67 Reports on India M & E market, PwC Research & analysis


PwC 205


This overall enhanced revenue potential from advertising is subject to internal organisation

restructuring and understanding the advertising market in a better way.

4.2.6. Overview of Out Of Home (OOH) advertising industry

Out Of Home (OOH) advertising is part of Entertainment and Media (E&M) industry that includes other verticals like print media, television, radio broadcasting and film entertainment. Annexure 4.3 “Overview of Entertainment and Media (E&M) industry” provides the detail description of E & M industry in India.

Currently Railways rely on Out Of Home (OOH) advertising on its assets. These include majorly traditional bill-boards, hoardings in and out-station& transit displays via transfers in and on trains. However the OOH industry has peculiar characteristics and trends that need to be looked at more closely in order to understand the market before recommendations.

1. Digital OOH is the next growth medium for the

industry

Though digital OOH in India has grown, it is still not on par

with other developing countries, our industry discussions

revealed that the share of digital OOH in India has gone up

from approximately 1% to 5-6% over last four years.

However this is significantly lower than global average of

approximately 20%. Digital OOH is expected to grow at the

rate of 35% in the next few years (2013-2017)68. Innovation

and customization is the key to DOOH growth in India.

68 PwC India Entertainment and Media Outlook report

35%

2%

Digital OOH Traditional OOH

Figure 118: Expected Growth in Digital vs .Traditional Media (2013-17)


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However, though users are slowly realizing the advantages of digital OOH, the medium still needs to

be sold.

2. Volatile growth rate

In 2012, total advertising spent stood at INR 1,862 Crores as shown in figure below.

Figure 119: OOH - Trend in Market Size

Source: Pitch Madison Media Ad Outlook 2013

OOH advertising industry is characterized by its volatile growth rate and therefore needs longer

gestation period.

3. Focus is shifting from the number of screens to the quality and quantity of

audience

The currency of outdoor media is shifting from the number of media to the potential and size of

audience. Advertisers are beginning to realize this and are willing to pay a premium for quality and

quantity of audiences.

OOH players have started to focus on Return on Investment (ROI) rather than on increasing the

number of properties. Railway is still focusing on the quantitative aspect by addition of more

traditional hoarding s to its asset base. Moreover, the OOH market participants' focus is also on the

type of audience of the OOH property and how to use that rather than just increase the number of

properties and reach. OOH, unlike print and television, is not a mass medium for advertising. It is a

niche medium with focus on geography, audience, type of property, location of property and various

other parameters

4. Targeting integrated players in advertising value chain

The value chain that is followed by commercial product advertiser to advertise their product works

in flow as described below:

i. Corporate - Client

This is a manufacturer, service provider, political party, movie production house or any other party

that is interested in advertising their product or services. They approach the media planning

agency for the strategic marketing communication plan.eg:- Vodafone, Airtel, Coca-cola, Westside,

Pantaloons etc.

1412

1752

1419

1848 1717

1862 1943 24%

-19%

30%

-7%

8.4% 4.4%

-30%

-20%

-10%

0%

10%

20%

30%

40%

0

500

1000

1500

2000

2500

2007 2008 2009 2010 2011 2012 2013

INR

Cr

s.

OOH advertising revenues growth rate


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ii. Media Planning Agency / Account planners

The media planning agency first interacts with client to understand their product, target consumer

class, advertising budget and business objective & culture. Based on this suitable media mix plan is

formulated. They begin media planning operations – conceptualizing ideas and how it will be

exposed to consumer. The services of agency includes: Market and media strategy formulation,

Competitive tracking, media audience research and planning, defining measurable objectives and

tracking communication ROI, campaign implementation and optimization.eg:- JC Decaux, Times

Media, and Laqshya OOH

iii. Media Buying Agency

Based on the media mix ascertained by media planning agency, buying agency will buy airtime and

advertising space on business’ behalf .This buying can be on pages of newspapers/magazines for

print media, airtime on television and radio, sponsorship for an event/concert, hoarding and

billboards for OOH, street furniture, online advertising on social sites say face book, LinkedIn or

product placements in movies/TV programs. Earlier a part of ad agency, today buying agency are a

different entity. E.g. - Mindshare, Madison media etc.

iv. Inventory holders

These are the owners of asset where placement of advertisement is done by advertisers via buying

agency. In print media it includes newspaper (Times group), in OOH hoardings and street

furniture by agencies like BEST, railways, broadcasters (Star group, Zee group).In most of the

cases the owners lease out the asset to local add agencies like in Mumbai Global advertisers,

Pioneer, Alakh advertising, Kapole advertising. These advertisers then deal with the media buying

agencies.

Integration of players

Players are making lateral shift across the advertising value chain, though only a few of them have

actually been able to achieve end-to-end integration. The integrated players across the advertising

value chain better understand the client’s needs and accordingly indulge to create media with

client oriented demand via incorporation of innovation and customization. Our analysis of other

transits in India and globally indicates that these integrated players are as targeted by them.

However Railways interaction in the value chain is still limited to the inventory holders. Figure 120: Advertising Industry Value Chain


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5. Innovative media for the City's suburban railway

There has being increasing trend of suburban system enhancing their potential via virtual medias

like mobile app advertising. The suburban railway should also explore the media fast growing

internet, mobile apps and voice media with major focus on individual audience, banking on its

ownership of vast real time information and passenger information system.

Advertising revenues through mobile apps & internet:

For instance, M-Indicator is one of the most downloaded mobile apps with over 3 million users. It

provides the information of the City's transit system such as maps, schedule, cost, etc. The model

works on the using the public information through mobile apps to the users of smart phones and it

earns revenues through advertising which are individually targeted.

Figure 121: M-Indicator - Mobile Apps

Western Railways has launched a mobile app "WRUPDATES" recently in 2013. Despite its

professional look, currently it is not a self sufficient app (since it redirect to mobile internet

browser to access respective sites, i.e. today this application brings all the relevant railway websites

on one page only and do not provide the passenger information though the application) and do not

have advertising as means of source of revenues.

Figure 122: M-Indicator - Sample advertisements


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Source: m-indicator. Mobond.com

The mobile application & internet can be used to enhance the commuter experience, convenience

and safety in addition to generate revenues. The following can be major value add the railways can

bring to the apps market:

Ticket booking (paper-less)

Real time train schedule & information

Real time updates on mega-blocks

Also, this can help enhance the branding of the city's suburban railway transit network, which can

bring the branded names to be associated with railways through advertisements, merchandizing,

station branding and station retail to quote some.

4.2.7. Pre-requisites for enhancing revenue generation

from Advertising

Based on OOH advertising practices by transit systems globally and in India, Indian OOH

advertising market overview and our interaction with key stakeholders, we understand that

Mumbai suburban system has huge untapped scope for enhancing its advertising earnings.

Although Railways had identified the importance of advertising as a revenue source, there still

exist several challenges, in order to achieve the potential it can garner.

The pre-requisites can be broadly classified under three heads:

A) Efficient Contract management practices - to attract integrated players from the value

chain and effective services.

B) Prime focus on market driven approach - to understand transit OOH advertising

market dynamics, clients changing needs (innovative and customized media) and

accordingly design the Media Plan to approach right set of integrated players in the

value chain, align and phase the inventory in the market. It will take care of the physical

component of advertising

C) Efficient contract structuring - to take into consideration volatility of OOH market


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However Railways approach will be dependent on the institutional framework that is discussed

later in the module under section organizational capabilities.

A) Contract management

Efficient contract management practices will implant better customer services (here the

advertisers / media agencies) and hence better image building of Railways. Along with this, it will

also ensure minimizing the revenue leakages that are currently prevailing in the system. There are

various areas where improvements are needed and these can be done within the ambit of policy

guidelines as issued by Railway Boards. Efficient contract management practices can be sub-

categorized into bid process and contract management, efficient inventory record management

and post media monitoring.

Bid process management

The bulk contract failures on Mumbai division of both Railways indicate inadequate planning of

sites before going for the tenders. The legal proceedings for Western Railways bulk contract though

in favor of Western Railways took almost six months for the final award69. This highlights the

opportunity loss to Railways for 40% of advertising sites lying vacant on entire Mumbai Western

division during the award tenure. This reflects opportunity loss of almost INR 6 Crores to Western

Railways in FY 2008-09 (considering half of INR 30 Crores earning for Western Railways in FY

2007-08 apportioned to 40% area of advertising inventory).

Table 41: Mumbai division claims in advertising contracts

Contract Nature of claim Amount

(INR Cr.)

Display of Route Maps at

door of Local trains

Claim towards outstanding license

fees and obliteration charges

0.62

Five Contracts of Hoarding

at different locations

Claim towards outstanding and 10%

surcharge on delayed payment.

Forfeiture of Security Deposit

15

One of the major reasons for the claims is lack of inter-departmental co-ordination.

As per amendment via Commercial Circular No.36 of 2006 dated 01.05.2006, Sr. DCM is the nodal

officer for all clearances to advertiser for single window dealing basis in order to get clearances for

commissioning of advertising sites from other concerned departments electrical, engineering etc.

However, our interaction with advertisers indicates that no support is extended by Railways which

in many cases exceeds one month time period for advertisement displays by advertisers. Apart

from commissioning clearances, co-ordination is required periodically for timely availability of

EMU for inside/out train advertising to advertisers with technical and operations department.

69 Ashok Sharma & Associates Pvt vs. Sr. Divisional Commercial on 14 August, 2008- http://indiankanoon.org


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Also for digital media, approval from electrical department for electricity supply connection needs

to be procured. The Railway Police Force (RPF) is the key Railway security agency in Railway

premises. The trains in yards while not in operation are most prone to asset security hazard as it

may lead to either destruction of media (mainly digital screens inside train) or illegal media being

added up (posters inside and on train). This security to asset cannot be ensured by commercial

department alone and need integrated planning among Railway departments.

Also our analysis of contract execution reveals that few contracts were under taken even without

fulfilling pre-requisites. For instance, security deposit payment - 18 out of 200 running contracts

during 2012 in Central Railways show that the Security Deposit was not paid by advertiser even

after contract agreement was executed leading to potential risk of non-recovery of license fees70.

This represented loss of around INR 3.0 - 4.5 crores to Railways in the last three financial years

2009-10 to 2011-12. It implies lack of enforcement and also lack proper co-ordination between the

finance and commercial department.

Table 42: Mumbai division cases of License fee/penalty not recovered / short recovered

Mumbai division Cases License fee/ penalty not recovered or under

recovered (INR Cr.)

CR 9 1.31

WR 3 3.34

As learnt from the experience of DMRC, advertising is a specialized function and hence requires

the division to be equipped with capable expertise officials for inter –departmental co-

ordination. However, this co-ordination cannot happen at lower level and proper high level

interventions are necessary to assure the availability of advertising inventory to advertiser for

display of advertisement, along with ensuring safety and security of the operations and

commuters. This top level intervention is the crucial factor that lacks in current institutional

framework of Railways and needs to be addressed.

Inventory record management

As per Operating Manual of Indian Railways,

The Station Master is required to maintain register showing full particulars of each

advertisement exhibited at the station.

CMI (Commercial Moving Inspector) should regularly inspect station advertising

inventory & submit monthly report for unauthorized and over-display of advertisement.

However our interaction with Central Railway indicates that no such report is submitted regularly

by CMI to divisional commercial department. Also the Comptroller and Auditor General (CAG)

70 CR data- contracts awarded in 2012


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Report No 11 of 2013, on commercial advertising in Indian Railways highlights the same

practices71.

Strengthening of advertising inventory records is essential and also a mandate as per the policy.

This not only it helps in governance of illegal of over-display of hoardings but also helps clients to

locate advertisers for particular station (advertising asset) who can be approached in order to

advertiser for their products /services.

India agencies like BEST in Mumbai, DMRC in Delhi and other global transits, maintains list of

advertisers for all categories on their respective web sites. This enables more flexibility and

transparency to clients and not limiting to physical boundaries, so that client in any part of country

can advertise their products/services on most sought after locations of Mumbai suburban system.

Our interaction with Central Railways indicated that they are in the process of developing such on-

line record of advertisers. With no cost, this step will position Railways well among customers.

Post media monitoring

As mentioned earlier division CMI (Commercial Movement Inspector) is responsible regularly

inspections of station advertising inventory & submitting monthly report for unauthorized and

over-display of advertisement.

Also arbitrations cases due to illegal display or over-display are on-going ad indicated in table

below (however this list is limited to only cases pending as of now with CR):

Table 43: Mumbai division-CR claims in advertising contracts

Nature of claim by Mumbai division, Central Railways Claim amount (INR

Lakh)

Unauthorized displays on window top transfers in local

trains

58

Over display of window top transfers in local train 17

The unauthorized and over-display by advertisers reflect loss of advertising revenues to Central

Railways that could have been collected if these sites were awarded legally. Based on these ongoing

arbitration cases, this represents opportunity revenue loss of INR 75 lakhs in FY 2012-13 for

Central Railway.

In summary, poor contract management practices are mainly because of lack of capable staff of

handling the specialized advertising contracts and in turn coordinating with other departments.

The institutional building is recommended later in section Organization Capabilities. One more

factor that needs to be considered is strengthening the dispute resolution mechanism practiced

currently.

Effective Arbitration mechanism

A separate appellate tribunal to be set-up for all matters related to all commercial matters at Zonal

Railways. This will require a resolution to be passed by Railway Board for incorporation for such

71 Section 1.6.5.1- “Deficient record management and unauthorized display” of Comptroller and Auditor General (CAG) Report No 11 of 2013


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entity. This Appellate Tribunal should be represented by a judicial Chairman and other two

members well-versed with commercial matters.

This appellate body will strengthen the regulatory framework, provide an avenue for expeditious

dispute resolution, boost customer confidence and contribute towards the smooth functioning of

the advertising in Railways along with other commercial matters.

Railway Claims Tribunal

The Railway Claims Tribunal Act, 1987 was enacted to provide speedy disposal of claims against the Railway Administration.

Although Railway Administration made a way to compensate the consignor/consignee of goods etc. and also for compensation for loss of lives yet people was not often satisfied and they went to Courts, which took very long time to decide the claims and litigation was protracted for indefinite period. Therefore, the necessity was felt to expedite the disposal of claims at the earliest, which resulted in establishment of the Claims Tribunal, which would exclusively deal with such claims and speedily dispose of the same. As a result, the burden of Courts was reduced and speedy relief was made available. Even the refund of fares and freights was also brought within the purview of Tribunal.

Chapter (II), Section 4 of the Act defines the composition of Claims Tribunal and Benches thereof as:

(1) The Claims Tribunal shall consist of a Chairman, four Vice-Chairmen and such number of Judicial Members and Technical Members as the Central Government may deem fit and, subject to the other provisions of this Act, the jurisdiction, powers and authority of the Claims Tribunal may be exercised by Benches thereof.

(2) Subject to the other provisions of this Act, a Bench shall consist of one Judicial Member and one Technical Member.

Source: The Railways Claims Tribunal Act, 1987


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Strengthening of existing contractual practices will add around INR 15 – 20

Crores to advertising revenue kitty.

B) Market Driven Approach

Out-of-Home (OOH) advertising industry is characterized by its volatile growth rate. It is very

susceptible to economic fluctuations. Hence Critical Success factor for advertising contract is

efficient design of inventory assets and packing of them. It can be divided as Master Plan and

inventory alignment.

Master Plan

Master Plan is the key to understanding of market dynamics and accordingly to design &

align/phase the inventory in the market. Proper master plan formulation will concentrate on

highlighting market demand and potential supply-mix for Railways.

Master Plan formulation in its current form and as mentioned in the policy guidelines is prepared

by divisional railway in-house. No market inputs - involvement of external agencies and/or media

experts is taken. The existing Master Plan devised for Mumbai suburban stations and outside

hoardings is limited to location and size of media. During the tending (bulk contract or piecemeal

contracts) these inventory list forms part of tender document. Any change in inventory alignment

by the advertiser needs to be approved by Sr. DCM prior to execution.

In order to add new innovative ideas/concepts to the existing inventory in the master plan as

prepared by divisions, First Finder Scheme (FFS) is defined in the policy guideline. Under this

scheme the advertiser have to identify the media type and location and approach the commercial

department. The media as identified by advertiser and found aesthetically and technically feasible

by Railways is awarded to the advertiser for period of one year or for reasonable period keeping in

view the financial. However such media are limited to only physical addition of new locations

Non-railway case example –Dispute resolution mechanism by TRAI

Telecom Regulatory Authority of India (TRAI) was entrusted as an independent regulator in

1997 for Telecomm sector. Initially, dispute settlement fell within TRAI’s purview. There were

realization that regulation and dispute settlement need not necessarily be handled by the same

entity; the two being different sets of activities. Coupled with this was the feeling that

regulation alone was not enough to further the mission of competition and protection of

consumer interest. Moreover, there was the perceived need to infuse the dispute settlement

mechanism with more credibility and transparency. With these considerations Telecom

Dispute Settlement and Appellate Tribunal (TDSAT) was set in 2000.

TDSAT is responsible for resolving disputes between licensor and licensee; between two or more service providers and between a service provider and a group of consumers. This body consists of a chairman and two members. The chairman has to be either a serving or retired judge of the Supreme Court of India or a chief justice of a high court. The two members have to have held the post of secretary to the Government of India for at least two years or must be well-versed in the field of technology, telecommunications, industry, commerce or administration.

Source: International Telecommunication Union (ITU - www.itu.int)


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at/outside station premises contrary to bringing innovative media. These media given to

prospective advertisers, in addition to existing running contracts adds to more fragmentation and

cluttering of media at station premises. Also chances are that these fragmented media will add

competition to existing contracts e.g. Competing brands may be placed side-by-side, for instance,

Pepsi & Coca-Cola.

Hence we find that there is a lot of fragmentation in the inventory. Also there is a lack of

appropriate method for periodic revision for change or amendment in the Master plan unless as

approached by the advertisers.

There is a need for market driven practice as learnt from other transit agencies wherein the

advertising master plan ideally include: Concept and Theme development - earmark locations and media details with innovation,

creativity, visual presentation and implacability to complement the station aesthetics

Design & quality improvement Plans – Procurement, fabrication, installation and erection of

quality advertising units

Maintenance Plan - Operation, management and maintenance of entire advertising units

In the current practice of Master Plan prepared by Railways, incorporation of expert ideas for

understanding the market dynamics should be done, rather than limiting to the location and size

specific with traditional media, which can done in the following two ways.

Option 1: Appoint independent media agency via open bid for Formulation of Master Plan in

Railway advertising.

The media expert will give

Compare existing advertising assets (static, digital, experimental) with other transits in

India (Airports, DMRC, bus transports) and global benchmarks

Benchmark pricing of media asset at suburban vis-à-vis transits in Mumbai

Propose tentative mix of advertising assets with digital and interactive (experiential)

technologies at appropriate locations to attain better pricing mix

Based on the Plan submitted by media expert and reviews by Railways freeze the plan.

Option 2: Advertiser to submit Media Plan to Railways

Call tenders from advertisers with their respective formulated master plan under each of

the clusters (i.e. trains, in-station and out stations) and selection of advertiser by Railways

based on their evaluation criteria

Periodic revision of Master Plan based on feedback

The following table gives the illustrative list of criteria for evaluating the best option among the two

options. These criteria can be broadly classified under –development, operational and

implementation


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Table 44: assessment for options for Master Plan formulation

Relative

weight age

Option 1 Option2

Development Criteria

Financial viability 25 1 4

Time consumed for execution 10 1 3

Operational Criteria

Market facing/customer voice 15 2 3

Operating efficiency 20 2 3

Implementation criteria

Approval/RB co-corporation 10 3 2

Total (maximum) 360 135 255

Where, 4- Fully satisfies criterion and 1 - Does not satisfies criterion

Based on above framework it can be seen that option 2 i.e. advertiser submitting Media Plan to

Railways is best suited option. This option will give flexibility to the advertiser and hence have a

market facing plan. Also the financial cost will be low. However, institutional capability and

expertise of the officials to evaluate the media plans is a crucial aspect.


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Innovative media in Master Plan

As mentioned innovation and customization is the trend in OOH. So the master plan formulated by

the advertisers should emphasis on more digitized media like digital LCD screens in trains, on

platforms. This re-orientation of existing traditional/ conventional media to digital inventory will

enhance the clientele willing to advertising on Railways assets. Moreover along with these there are

other innovative concepts that can earn handsome amount to Railways via advertising.

Advertising via mobile apps

Mobile advertising is one of the emerging trends. Recently apps like M-indicator that gives

information of Mumbai suburban Railways and earns via advertising. On similar lines

Railways can develop such app with live information on train schedules and in turn earn via

advertising with Cost per Impression (CPM) of 10-50 cents. Also with increasing number of

smart phone users mainly in Metro cities commercial earnings avenue via such streams are

very high.

On-line advertising on web-site

This is presently practiced by IRCTC on its web site. Also internet advertising is fastest

growing segment in M & E industry as cited earlier. Three to five years contracts can be

awarded to agencies for advertising on Mumbai Division –WR & CR websites.

Wi-Fi

Free Wi-Fi is provided by Northstar Commuter Rail Line Minnesota in United States and Rio

Metro in Mexico. On similar lines BluFi (combination of Bluetooth and Wi-Fi) is provided by

Bangalore city railway station. The transit authority in turn earns from advertising on pop-up

screens (similar to advertising via mobile apps). Railways advertising department (as

proposed) later in association with RailTel can venture into such agreement and provide

advertising contract to advertising agencies.

PA system advertising

Public Address system advertising on Railway platform have been implemented by WR for

Kaun Banega Crorepati (KBC) advertisement in 2009 and CR for movie Ek Tha Tiger in 2012.

However this area is still unexplored.TAM Media’s Radio Audience Measurement (RAM)

indicates maximum listenership for popular radio channels is 50 -55 k per day, as radio being

popular audio advertising media. Mumbai Railways provide much larger captive audience to

advertisers compared to these popular advertising media with peak hour footfall of 50,000 –

1,50,000 for few stations. Hence effective utilization of this avenue (at same time not

bombarding commuters with too much of advertising) can earn good revenues to Railways.

Station rebranding

Presently Mumbai suburban has advertising through print media on tickets & documents.

However, this is not lucrative media & do not attract advertisers with only about INR 1 crores

(or even lesser) of annual earnings to Railways. This print media advertising can be coupled

with concepts like station rebranding as done in Madrid Vodafone Deal. Madrid Metro has

deal with Vodafone to rename one of its lines as “Line-2 Vodafone”. Stations will be named

Vodafone-Sol. Vodafone will brand on Madrid’s official metro map, platforms & trains. This

deal has fetched 3 million Euros (4 million USD) for 3 years to Madrid Metro and increased

advertising revenue by 10% to the transit. Mumbai suburban system with such station

rebranding initiatives can earn good revenues.


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C) Contract structure

Proper Master Plan with appropriate commercial contract packaging is as desired by the market as

it takes into account the OOH market volatility. Railway Board has successively taken steps to

strategically make advertising attractive via introduction of bulk advertising contracts in the

divisions. However, analysis of contracts floated by Mumbai divisional Railways between period

2007-2009 shows that the low responses in prime market like Mumbai was mainly due to lack of

bundling of bulk contract along with other crucial elements in the contract. Mumbai division

Railways need to figure out on various key elements, which are regulated by the commercial

publicity guidelines centrally at Railway Board level that may be applicable to other locations but

not for Mumbai, that has higher potential due to high ridership. Also these points were flagged

when we interviewed advertisers. Studies of other transits also highlight that long term end to end

contract have certain specific clauses to attract right integrated players in the industry value chain

and cannot be attractive on standalone basis.

The key parameters include:

1. Longer contract tenure

2. Innovation and customization for market facing inventory

3. Eligibility criteria to attract right set of integrated players

4. Alternate bid award methods and flexible payment terms

1. Contract tenure as per the policy guidelines permits commercial publicity contracts for entire

division for period of five years. For other contracts of commercial publicity, the period of

contracts has been permitted for three to five years as per Commercial Circulars no. 24 of

2000 and 90 of 2006. This contract tenure as defined by the guideline is not at par with as

provided by other transits that generally have advertising contract tenure ranging 10-15 years.

The longer contract tenure will provide appetite for integrated players to enter the Networks

market

2. Innovation and customization is the new trend in Out-of-Home (OOH). The OOH market is

riding on back of transit with transit OOH increasing its pie from current one-third to 50% by

2017. Digitization is taking toll on traditional billboards and hoardings. Digital Out-of-Home

(DOOH) is estimated to grow at 35% from 2013-2017. Hence Mumbai suburban system should

encourage newer innovative ideas rather than limiting to schemes like first finder that only

leads to fragmentation and physical addition of inventory to the existing system. The contracts

should be structured so as to give powers to the advertiser to inculcate newer ideas in the

system.

However, these media are capital intensive and require adequate support from Railways for

security, infrastructure availability (power etc.) and inter –departmental railway co-

ordination. Hence, contracts should be structured taking care of these aspects.

3. Integrated players in the value chain have larger reach and proper understanding of the

market. Also our analysis indicates that these players have massive reach and not limited to

geography (city). Appropriate eligibility criteria e.g. international experience etc. will filter out

small players and open it for large scale players.

Our detailed study of policy guidelines, schedule of Powers assigned to zonal and divisional

railways in commercial matters clearly states that these cannot be done under the purview of


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existing framework and hence will need Railway Boards approval to incorporate above said

changes. Also the structured contract will need proper institutional set-up.

These three parameters i.e. longer contract tenure, Innovation and customization of

inventory and stringent eligibility criteria to attract right set of integrated players are key

non-negotiable and Critical Success Factors for advertising contracts for Railways

4. Alternate bid award methods-the volatility of OOH market is not justified by current

arrangement that necessitates 10% annual escalation on the license fees. Also the reserve price

for the license fee is fixed by DCM based on last financial years advertising earnings. This

practice does not reflect proper risk sharing arrangement among the parties. Our interaction

with advertisers indicated that 10 % annual escalation rate was too high and is not justified as

this practice transfers all the risk to the advertiser with no space for absorbing in cases of

losses.

As seen from DMRC case study they are moving from fixed license fee to revenue share where

the returns are assured with revenue share above the minimum amount guarantee fees to be

paid by advertisers. This method caps the certainty to the transit authority with minimum

annual guarantee fees. Above annual guarantee fees, the advertiser can bid for appropriate

percentage of revenue share. However this arrangement needs proper monitoring of accounts

of advertises. Authorities like DMRC have clearly mentioned auditing at appropriate level of

books of accounts of the advertisers to be carried out by Government auditors including CAG

officials at any time as deemed fit by them to ensure the right practices.

Railways in the current advertising contract framework need to include proper bid award

parameter. Railways can continue with present license fee criterion but with appropriate

way of benchmarking the reserve price and not limiting to past year earnings. Also the

annual escalation needs to be realistic like 15% every three years or 5% annually. Alternately

they can either adopt revenue share mechanism with proper monitoring practices for books

of account of the advertisers as practiced by other authorities.

This fourth parameter i.e. alternate bid award method may not be mandatory and can be

structured as per the institutional approach by Railways along with its ability to monitor the

revenue streams of the advertisers.


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Organisational capabilities

The above recommendations for enhancing advertising practices are as desired and practiced by

other successful transits globally and India comparable likes DMRC for enhanced advertising

revenues. However, with the required contract management practice by appropriate inter-

departmental co-ordination, physical i.e. master plan formulation and other non-negotiable

parameters for suitable contract structure as mentioned above does Railways current organisation

is capable of handling this?

The key requisites i.e. the non-negotiable parameters as mentioned above are summarised in the

following table.

Other transit examples of end to end advertising rights

Times media OOH is awarded advertising rights for 20 years on terminusT3 for DIAL & 11

years for MIAL

Advertisement rights for 99 Chennai bus queue shelters to Laqshya Media for 10 years &

7 years for BIAL

Times media OOH is awarded advertising rights for 15 years for Mumbai Metro One Pvt.

Ltd.

Laqshya Media awarded advertising rights for Mumbai metro rail

Laqshya Media has exclusive advertising rights for 500 bus shelters for10 years

JC Decaux SA has 8 year advertising contract on entire Norwegian network

JC Decaux SA awarded 8 year advertising contract for the operation of entire Shanghai

metro

JC Decaux SA awarded advertising contract for 8 years

In partnership with MMRDA , J C Decaux has contract to construct and Operate 120 bus

shelters in Mumbai


PwC 221

Table 45: Summary of non-negotiable parameters

Status quo What is wrong? What needs to be done? Capability of status quo

institutional arrangement

Non-negotiable

Master Plan Prepared by comm. dept. in-

house along with technical

dept.

No involvement of external agencies

and/or media experts

Market facing Master Plan and

regular updating based on

feedback 2

Contract tenure Up to three years

For bulk contract up to five

years

Shorter tenure attract inventory

holders

OOH being volatile in nature

needs higher tenure for large

player appetite

Longer contract tenures of 10-

15 years

2

Inter-departmental

coordination

Advertisers to co-ordinate with

various dept. for clearances

Advertisers have to coordinate with

accounts for payment details

Inter-departmental co-

ordination among departments

at top-level 1

Negotiable

Bid parameter payment

terms

Reserve price fixed based on

last FY’s advertising earnings

and escalated @ 10 % p.a.

No proper risk sharing mechanism Proper license fixation criteria

and not depending on past

revenues OR revenue sharing 3

4 Fully satisfies criteria 1 Does not satisfies criteria


PwC 222

Globally transits agencies and also some of the Indian examples like DMRC show clubbing of non-fare box

revenue sources under one head. This is done via one of the two following approaches:-

Separate business head namely property development wing for handling these non-fare box revenue e.g.

MTR-Hong Kong, DMRC, JR-East

A subsidiary or a Joint Venture company operation solely for advertising. E.g.

o Singapore Media Pvt. Ltd for Singapore Metro Rapid Transport (SMRT);

o DIAL-TIM Delhi Airport Advertising Private Ltd (TIMDAA) - Joint Venture Company

incorporated by Delhi International Airport Ltd. (DIAL) and Times Innovative Media Ltd. It

includes specialised staff involved in commercializing these portfolios.

Figure 123: Metro transits - Advertising Practices


However in Railways advertising is clubbed under Parcel and Coaching (refer figure 3 for details of

organisation structure). Both the functions being very different in nature require different capabilities among

the key person handling it. Coaching is operational in function however advertising requires different skill set.

Advertising requires building institutional capabilities in commercial department. The intra-departmental

capabilities as desired and depicted from other case examples are staff:

Capable of understanding OOH market & structuring contracts accordingly and capable to co-ordination

with operations, maintenance & engineering team for handling over of sites to advertisers within

reasonable time with respect to operational feasibility, safety and security concern

Responsible for proper creation, operation & management of advertising units solely

Empower with decision making on key advertising policies

Accountable for advertising functions

Hence even though with policy tweaking for key requisites parameters for success of advertising contracts, the

inter-departmental co-ordination as required at highest level cannot be assured. Also handling such long term

contracts (> 10 years) require efficient contract management practices.


PwC 223


An institutional arrangement that promotes co-ordination among the concerned departments, facilitates absorption of market information to formulate policies and guidelines align with the market and enforce the same is required. Our recommendations are based on the other transit system case examples and situational context to Mumbai suburban system.

Option A – Co-ordination at the divisional level

A coordination committee comprising of representatives from the commercial department, structure & technical department, electrical department and RPF will be formed in each of the divisions (Western Railways, Mumbai Division and Central Railways, Mumbai Division). These committees will be jointly chaired by the respective DRMs/Sr. DCMs of the two divisions.

Indian Railway case study

Indian Railway’s in the past with objective of bringing professionalism & expertise have

set up PSU’s to handle the specialized functions.

Rail Land Development Authority (RLDA) was established in 1989 with the objective

of Commercial development of Railway land. The authority leases out long term

property development rights for 45-99 years.

RailTel was established by Indian Railways for revenue through commercial

exploitation of its telecom network.

Indian Railway, Catering and Tourism Corporation (IRCTC) was established to

upgrade, professionalize and manage the catering and hospitality services. IRCTC gives

long term catering contracts for food plaza at stations and also ventured into hotel

management business to generate revenues. In turn these institutes have revenue

share agreements with Indian Railways.

Mumbai Rail Vikas Corporation (MRVC) formed in 1999 to execute projects under

Mumbai Urban Transport Project (MUTP) as sanctioned by Ministry of Railways. It

will also be involved in planning and development of Mumbai Suburban Rail system.

MRVC has recently entered MoU with RLDA for commercial development of land

parcels in Mumbai suburban for lease period of 45 years.

Salient features of these institutions of Indian Railways:

Established to handle a particular business that is non- core to IR i.e. other than

freight and passenger services

Built expertise, competencies and up gradation of services in their respective areas

Garner to longer tenure contracts (more than 10-15 years) with commercial third party

development model

Exhibit efficient contract management practices


PwC 224

Figure 124: Illustrative co-ordination committee at the divisional level

The mandate of such committee shall be:

Pre-contracting

Assess the current situation of all the concerned departments – new opportunities, advertising

inventory, utilization of electricity and RPF resources

Assist in the preparation of master plan

Assess sufficiency of the available resources or required investments/costs if any to implement

proposed master plan.

Allocation of budget to the concerned departments

Preparation of bulk contracts

Setting time line for clearances and approvals

Provide a nodal officer per zone/contract who will act as a single point of contact for the advertiser

Post-contracting

Periodic review of master plan along with the selected bidder/advertiser

Monitoring for illegal advertising, compliance with contract, security, etc

Periodic reporting (recommended bi-weekly or monthly)

Provide market inputs

The committee will hold fortnight (or monthly) meetings where each department will give an assessment of its current situation in terms of security of assets, utilization of electricity and new inventories.

Option B – Co-ordination at the Mumbai level (along with interdepartmental co-ordination at the divisional level)

An integrated committee comprising of representatives from the two divisions (Western Railways, Mumbai Divisions and Central Railways, Mumbai Divisions) can be formed. This integrated committee will be chaired by the GMs/DGMs of the two zonal railways. The purpose is to bring Mumbai Suburban System into notice at a higher level, which at the moment is getting crowded out in the midst of other priorities.


PwC 225

Figure 125: Illustrative integrated committee at Mumbai level

The major roles & responsibilities of this integrated high-level committee shall be:

Reporting directly to the Railway Board

Set the advertising targets for the Mumbai divisions

Conduct a quarterly review meetings

Market commercial publicity in the system as one organization

Formulate Mumbai specific standard policies and guidelines which will be revised every year based on

market conditions

Division of the Mumbai Suburban system into suitable zones or catchment areas for bulk contracts and

appointment of nodal officers for each of these zones/catchment areas

Appoint professional media planning agencies/consultants for master planning

Budget estimation and budget allocation to the concerned parties

Preparation of bulk contracts that offers advertising inventories from both the divisions

Option C – MRVC as the integrated body for Mumbai Suburban Systems

In this option MRVC will act as the integrated body with representation from Mumbai Divisions of both Western and Central Railways.

Table 46: Comparison among existing structure, option A and option B

Pros Cons

Existing structure

No additional resources will be required Full potential cannot be achieved


Advertising gets crowded out among freight, parcels, luggage, passenger train reservations

Lack of co-ordination among the concerned departments

Poor client servicing such as lack of single window clearance, lack of security to client assets are leading to lost opportunities

Poor grievance redressal process

Lack of market focus


PwC 226

Option-A Enhanced co-ordination among departments

Better services to clients/ advertisers

Single point of contact

Better security to assets

Pressures to continue to meet targets set by Railway Board


Less freedom in contract structuring

Inability to incur costs/ investments if not within departmental budget for instance, enhance electricity supply for digital media,

Option-B Integration at the highest level will ensure better enforcement of policies

Ability to formulate Mumbai specific policies and revenue targets

More freedom in bulk contract structuring

Ability to allocate additional budget if required as investments


Likely pressures from to meet targets set by Railway Board

Need to establish credibility to attract larger integrated players

Option-C Independent city specific organization

Contracting and post-contract management expertise

Brings in more trust among larger private players

Ability to manage long tenor contract

Better placed to bundle contracts with commercial development or station redevelopment projects to part finance capex

No control over operational assets

Difficult to manage and coordinate with field/divisional committee given no administrative authority

The above assessment of the institution options, it is recommended to have a combination of Option-B & C will be more preferable. MRVC can play a role of providing market expertise and consultative assistance to the integrated committee.

a. Virtual Media

4. Create of brand value for the System as a whole by investing in station aesthetics, adequate

signage, enhanced public information system using new technological platforms such as mobile apps,

internet, Google maps, etc.

The enhanced brand will help railways leverage it for enhancing advertising potential through

physical media as well as for merchandizing opportunity, for instance, heritage cards.

5. Capture advertising potential from virtual media such as mobile apps, internet, and social

media using real time data and passenger information

Large section of suburban rail commuters are using mobile phones or smart cell phones, and uses

apps like m-indicator which provides railway and other public time table. Railways generate and own

large real time information which it wishes to transfer to public through various public information

systems.

Platforms like mobile-apps, internet, social media which can be used as public information platforms

as well as advertising revenues.

It is recommended to outsource advertising rights along with platform creation on a fixed licensee or

revenue share model, instead of developing own apps and market the same.


PwC 227

A media plan should be prepared for this purpose with the help of market

experts/professionals.

6. It is recommended to establish an integrated body or leverage MRVC to represent Mumbai

Suburban Railway System as a whole for this purpose, with a close coordination/support

from railways to transfer real time information/data


Railway Board circulars shall be required to appoint MRVC/an integrated entity representing the System to

exploit virtual media. This body shall be empowered to

o Outsource or develop the virtual platforms and provide real time information

o Enter into advertising rights contract on fixed fee basis or revenue share basis or a model as

deemed appropriate

o Sell ticketing through online/virtual/mobile media

Also, Railway Board shall direct the concerned railway zonal/divisional administration to provide all

necessary administrative and information sharing support to MRVC/a new entity


Given that MRVC already exists, its success in creating a reputation as a body representing Mumbai Suburban Railway Network on various platforms, as well as its ability to diversify to commercial development and consultancy, it is recommended to entrust the commercial exploitation of virtual media to harness advertising potential with MRVC.

Figure 126: Illustrative Institutional arrangement (entrusting MRVC with commercial exploitation of virtual media)


PwC 228

Table 47: Advertisement revenue generation - Indicative Implementation Plan

TIMELINE (Years) 1 2 3

No. of months 0 3 6 9 12 15 18 21 24 27 30 33

BETTER CONTRACT MANAGEMENT

Enforce proper record management

Maintain registers at all stations & commercial dept with details of all advertising

contracts

Online record management with list of advertisers

Enforce monthly inspections by deployed CMI to report unauthorized displays

Formation of Appellate tribunal

INSTITUTIONAL SET-UP

Physical Media & Virtual Media

Letter to Dy. Dir (Traffic Commercial- Railway Board)

Railway Board Committee discussions

Meeting decision formalized and conveyed to GM & Sr. DCM/DCM (Mumbai

Division)

Institutional set-up (Option A or Option B)

Assign roles & responsibilities to committee members

Training and institution building for committee members

CONTRACT AWARD PROCESS

Contract structuring

Determine the eligibility criteria for advertisers


PwC 229

TIMELINE (Years) 1 2 3

No. of months 0 3 6 9 12 15 18 21 24 27 30 33

Prepare bid documents

Two stage bidding process

Stage I

Call for EOI /RFQ

Evaluate bidders based on eligibility criteria

Short list eligible applicants

Stage II

Call for RFP

Evaluate bidders based on financial bid

Contract negotiation and signing LOA with advertiser

ROLLING OUT ADVERTISEMENT CONTRACTS

Master Plan to be approved by Railways

Media monitoring, post-analysis + admin


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PwC 230

VOLUME - III (B)

---


---

STATION RENTALS


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PwC 231

4.3. Station Rentals

4.3.1. Introduction

Mumbai Suburban Railway System currently earns over 93% of its revenues from fare box sources, ~6-7% of

total revenues from non-fare box sources that includes mainly commercial publicity (advertising) and station

rentals. These non-fare-box revenues are categorized by Railways under sundry earnings.

Station rentals include the earnings from leasing of the operational asset by railways on station premises to

third party for a concession period up to five (5) years. Station rentals can be categorized into Pay & Park, Pay &

Use services like toilet kiosks, STD/PCO, shoe shine, stalls including food and non-food, ATM’s etc. About 80%

of total station rental earnings come from catering stalls, ATMs and Pay and Park Service

Features of providing such rentals on station premises are to provide necessary passenger amenities, to

enhance commuting experience, to complement the core operational services of Railways and to capture value

from patronized very high ridership. Stations rentals generate around ~27% of the total non-fare revenues.

Figure 127: Station rental earnings for Mumbai division & non-fare box earnings breakup for Mumbai division (FY 2012)

Source: CR & WR Mumbai division data

Station rental earning potential is dependent on several factors, three of the fundamental factors of which are as

follows:

Ridership - Source of target customer to sell its product and services. It varies from station to station on

a transit system. Earnings potential and ridership are highly correlated as higher the ridership, greater

is the potential to capture value.

Market price i.e. real estate price index of the micro-market, in which the stations are located, will

determine the rentals to be offered. Station retail rentals also have positive co-relation with the

property rates.

Ridership and retail real estate price index are few of the most critical influencers for the station rental

potential. For e.g. stations like Churchgate and CST with high ridership and located in the prime

commercial business district (CBD) of Mumbai city will cater to highest rentals from station space

utilization. However stations like Marine Lines though located in prime CBD may not cater to higher

rentals due to lower footfalls (ridership).

73%

27%

Advertising Station Rentals

12.5 14.5

24.7

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2009-10 2010-11 2011-12

INR

Cr

s.


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PwC 232

Site selection on the Railway premises is also of key importance. Areas like ticketing, entry/exit are

most preferred compared to platform areas.

The earnings from station retail rentals in Mumbai division have been more or less stagnant for last five years.

However, during the same period there has been rise in retail index in the City across all the business districts

and ridership grew considerably. This shows that the rental revenue per passenger in the City is on declining

path.

Figure 128: Ridership, real estate and station rental earning trends in Mumbai

Source: PwC Research & Analysis, WR & CR, MRVC

The real estate market, high ridership, and space utilization indicate that the station retail potential is not yet

fully tapped.

The station rentals are the services provided by Railways at its premises for providing complementary services

so as to enhance the travel experience to the commuters (without adding to congestion) and also earns income

from such facilities. Additionally it also adds to social responsibility of the National carrier by reserving

STD/PCO booths, shoe shine rentals at station premises for women, physically handicap and educated

unemployed youth. Hence a holistic approach for all these station rental services needs to be taken by Railways

to provide best class services, fulfilling social responsibility and at same time generating revenues. However

closer look at these rental services suggest that based on the existing types/varieties of rental earnings from

station space utilization, target commuters, convenience to commuters, learning from other transits and

required regulatory measures, these can be categorized under three different heads.

Categorization of Station Rentals

The three (3) categories for station rental space utilization are:

Category A: Facilities which are necessary & complementary to train services and can cater to both commuters

and external station area population.

Category B: Facilities which bank on the higher footfalls and capture value without adding to the congestion at

the station premises

Category C: Station facilities that are currently provided and may be not required or not in line with the present

environment and hence need re-orientation to be in sync with the requirements in line with necessary

passenger amenities, passenger convenience and safety.

70

80

90

100

110

120

130

140

2008 2009 2010 2011 2012

On

sc

ale

of

10

0

Island city retail rental Eastern suburbs Retail rental

Western suburbs Retail rental Ridership

Station rentals


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PwC 233

Table 48: Categorization of station rental facilities

Target audience Category A Category B Category C

Railway Commuters

only Retail self-use kiosks

Catering stalls, Pay & Use

toilet, STD/ PCO, Book stall,

Shoeshine

Both commuting &

non-commuting class Pay & park

ATMs, Kiosks, Mom &

Pop store formats, Food

Plazas

It is important to assess the quality of service and passenger convenience prior to explore the ways to capture

the potential that the sources under station rental category can yield. One way to assess is the "Level of

Services" in accordance with the international standards.

Level of services

However while exploring the potential from categories under station rentals; we need to be cognizant of the

passenger convenience, safety, and quality of services to commuters. One way to measure it is Level-of-service.

"Level-of-service (LOS) standards are a series of measures that defines relative degrees of convenience at

station premises each at platform, FoB’s and other circulation area on station premises during the peak hour

traffic. This is used to evaluate pedestrian facilities at the stations premises.

JJ FRUIN pedestrian movement design standards define Walkway Level of Service at stations. The level of

services vary from A to F, A being the best level and F the poorest level of service. The details of area available

at each LOS to commuters are as indicated in the table.

Table 49: Level of Service, J J FRUIN standards

LOS Pedestrian volume

(commuters / sq ft or sq m)

Average Area

m2/commuter Description

Per Sq ft Per Sq m

A 7 or

less

23 or

less

3.3 or

more more

Threshold of free flow convenient

passing, conflicts avoidable

B 7-10 23-33 2.3-3.3 Minor conflicts, passing and speed

restrictions

C 10-15 33-49 1.4-2.3 Crowded but fluid movement, passing restricted, cross and

reverse flows difficult

D 15-20 49-66 0.9-1.4 Significant conflicts, passing and speed restrictions,

intermittent shuffling

E 20-25 66-82 0.5-0.9 Shuffling wall: reverse, passing and cross flows very

difficult; intermittent stopping

F Flow variable

up to maximum

0.5 or

less less

Critical density, flow sporadic,

frequent stops, contacts with others.

Source: J.J.FRUIN Standards


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PwC 234

While analyzing some of the major stations of Mumbai suburban stations to assess the level of service during

peak hours, it was found that all the suburban stations today are at the lowest level of service (LOS) - 'F'.

Table 50: Level of services at key Mumbai suburban stations

Stations

(top 15 with heavy footfalls)

Peak our load Average platform Area

(m2/commuter*)

Andheri 59,333 0.2

Churchgate 54,377 0.2

Dadar 54,078 0.2

Thane 48,836 0.1

Bandra 44,015 0.2

Kurla 43,633 0.1

Virar 39,426 0.1

Borivali 38,920 0.1

CST 34,009 0.1

Mumbai Central 30,675 0.1

Kalyan 24,514 0.1

Dombivali 21,769 0.1

Goregoan 20,620 0.1

Ghatkopar 18,942 0.1

Mulund 16,034 0.1

* Rounded to decimal 0.1

Source: JJ FRUIN pedestrian movement design standards, Mumbai Suburban Rail Passenger Surveys &

Analysis – by Wilbur Smith Associates (2012)

Congestion in the station area and lack of sufficient land parcels with better connectivity are some of the key

challenges to development to parking facilities. Also addition of ATMs and Catering stalls inside the stations

will further negatively affect the level of service in the suburban stations

Since almost all the stations are at Level of Service (LOS) “F”, the maximization of revenues from the station

rental sources should be in cognizant with the commuter convenience.

Institutional framework

The Traffic (Commercial) at zonal and divisional railway level handle the activities such as commercial

publicity, marketing, developing traffic, improving quality of service provided to customers, regulating tariffs of

passenger, freight & other coaching traffic, monitoring their collections, account and remittance.


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PwC 235

For the purpose accounting, the earnings from the various sources under station rentals are included under

sundry earnings for accounting purpose.

Organizational Hierarchy:

At Railway Board level, the traffic department is headed by Member (Traffic), who is assisted by

Additional Members/ Advisors.

At the zonal level, the operating and commercial departments are headed by Chief Operations Manager

(COM) and Chief Commercial Manager (CCM).

At the divisional level, the operating and commercial departments are headed by Senior Divisional

Operations Manager (Sr. DOM) and Senior Divisional Commercial Manager (Sr. DCM).

o Sr. DCM is overall in charge of commercial department of the division that includes freight, parcels,

luggage, commercial publicity, passenger train reservations including VIP, emergency and Railway

Board quota, catering ticket checking and public complaints.

o Further under Sr. DCM there are two DCM’s- DCM (Coaching) and DCM (Goods). DCM (Coaching)

handles all the rental earnings. Catering is handled by DCM (Catering) independently.

The schedule of powers at each level is as per the value of earning contract as defined in the following table.

Table 51: Level of delegation as per value of commercial contracts

Value of Contract Level of Delegation Accepting Authority

1 Up to Rs.30 lakh Asstt. Scale tender committee consisting of one officer

each from Commercial and Accounts Department

DCM/ Sr. DCM

2 Above Rs. 30 lakh

and up to Rs. 1 Crore

Sr. Scale Tender Committee consisting of one officer

each from Commercial and Accounts Department and

third member should be nominated by DRM/ADRM

Sr. DCM

3 Above Rs.1 Crore and

up to Rs. 5 Crore

JA grade Tender Committee consisting of SR. DCM and

one JA grade officer nominated by DRM/ADRM and a Sr.

Scale Finance Officer

DRM/ ADRM

4 Above Rs 5 Crore and

up to Rs. 10 Crore

JAG Tender Committee consisting of Sr.DCM, one JAG

officer nominated by DRM and JAG Finance officer

DRM

5 Above Rs 10 Crore

and up to Rs. 15 Crore

Headquarters level JAG Tender Committee consisting

of 3 members- Dy. FA & CAO nominated by FA&CAO,

JAG officers from Commercial and some other

department, both nominated by CCM

Concerned SAG officer

of Commercial

Department

6 Above Rs 15 Crore

and up to Rs 40 Crore

Headquarters level SAG Tender Committee consisting

of 3 members- FA&CAO(WST)/ FA&CAO(T) and SAG

officers of Commercial and some other department,

both

nominated by CCM

CCM/PHOD/Co-

ordinating HOD

7 Above Rs 40 Crore HAG (PHOD level) Tender Committee in Headquarters of

3 members consisting of CCM, FA&CAO and third

member nominated by GM

GM


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PwC 236

4.3.2. Current policy guidelines

Each of the station facilities are governed by the individual policy formulated by Railway Board & implemented

by Zonal and Divisional Railways. The various policies are as follows:

1. Catering Policy 2010

2. Automated Teller Machines (ATM’s)

3. STD/ISD/PCO booth allotment policy

4. Pay & Park services outside stations

5. Policy for pay & use toilet 2006

6. Shoe shine

7. Management of Misc. stalls /trolleys 2007

8. Book stalls- Book stall policy 2004

Each of the above policies or guidelines or circulars is summarized here, while the detailed guidelines for each

are attached in the annexure.

4.3.2.1. Catering Policy 2010

Indian Railway Catering and Tourism Corporation Ltd. (IRCTC) was incorporated in 1999 as an extended arm

of Indian Railways (IR) to upgrade and manage catering and hospitality services at stations and on trains.

Pursuant to Cabinet decision, the catering business of Indian Railways was being progressively hived off to the

Indian Railways Catering and Tourism Corporation (IRCTC) through the provisions in the Catering Policy of

2005. Modification of the policy has been necessitated after the experience gained and public perception since

the operation of this policy.

The modifications pertain to

Establishing good governance standards

improving quality of catering or providing food & beverage services to onboard passengers (main line)

Mobile catering services

Operations & management of the static catering contracts for units on railway premises like platforms,

concourse areas, etc.

During the Railway Budget 2009-10, it was announced that - "All railway zones have been instructed to give

priority to provision of good quality food, drinking water and toilet facilities and ensure cleanliness on trains

and stations."

In the light of above, a new catering policy, "Catering Policy 2010", was formulated by Railway Board and

issued via commercial circular 35 of 2010, dated 21.07.2010. Railways shall progressively take over

management of all catering services through departmental catering in a phased manner. Post this policy, IRCTC

will primarily be responsible for operations and management of Food Plazas, Food Courts and Fast Food units

only.

Key highlights of Catering Policy 2010:

Catering units classification

Catering units are classified under two heads:


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PwC 237

1. Major units: Major units consist of Food Plaza, Food Courts, fast food units, Automated Vending

Machine (AVM’s), train side vending, base and cell kitchens.

2. Minor units: All remaining units not covered under Major units, for instance,

Stalls -categorized under three different selling catering products like beverages, snacks and other

light refreshments. First is the tea stall where tea, biscuits and snacks are served. The second type of

stall is milk stall, for selling various milk products and the third type of stall is juice stalls meant for

juices and fresh fruits

Trolleys

Khomcha - vending unit tray that can be carried on the head- (not on suburban stations)

All existing major and minor catering units are now managed by zonal railways, except Food Plaza, Food

Courts and fast food units.

Desirable scale of catering services

All the suburban railway stations fall under category C stations according to the Railway Board Station

Category. The desirable scale of catering services at Category C stations includes Fast Food Units, and up

to five catering units on the main platform and not more than four on island platform excluding AVM’s. At

these suburban stations tea stalls, fast foods, AVM’s should be provided liberally (up to three AVM’s on

standalone basis on each platform).

Contract Tenure

Contract tenure of major units (except food plazas, base kitchen and AVMs) and general minor units will be

for five (5) years.

Contract Renewal

There will be no renewal for major units however there will be provision for renewal after every 3 years for

general minor units on satisfactory performance.

Limitations on number of units per licensee

The guidelines also mention the ceiling limit on holding number of catering licenses by a single licensee.

o For minor units a licensee can have maximum two units at a station & ten per zone.

o For major units this limit is at two (2) units per division & 10% of all IR units.

Fixation of License Fee

Fixation of license fee will be done by Chief Commercial Manager (CCM’s) for all major units (except food

plazas, fast food unit and food court which are under the purview of IRCTC) and general minor units. This

license fee fixation criterion was implemented via Railway Board commercial circular no. 45/15/1 dated

24.06.2011.

According to guidelines, the license fees should be fixed taking into consideration weight age to each of the

factors.

Table 52: License fixation criteria as per Catering Policy 2010

No Criteria Maximum Points

1 Category of station 30

2 Average number of daily originating passengers 50

3 Number of trains stopping (day and night), 10

4 Duration of stoppages, 10


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5 No. of suburban trains stopping at a platform 10

6 Type of license (tea stall, juice bars etc.) 10

7 Location of unit (platform, concourse, ticketing area etc.) 10

8 Size of unit 10

9 Circle rates 10

Total 150

Each point shall have money value of INR 2,250/-. The license fee to be charged by zonal railways shall be the

highest as worked out through above formula or 12% of the actual sales turnover. Also the variation in fixation

of license fees for various types of units is as follows:-

Table 53: variation in license fees based on type of unit

No Criteria Equal to % as fixed by

formula above

1 Refreshment rooms /cafeterias Equal

2 Refreshment rooms /cafeterias with access to non-ticketing area 25%

3 Catering trolleys 50%

4 Tea stall ,chana sing kiosk, fruit juice kiosk 40%

5 Khomchas 30%

4.3.2.2. Policy for pay & use toilet 2006

Policy for pay & use toilet was implemented by Railway Board via Commercial Circular No.46 of 2006 dated

07.6.06.

According to this policy, all the suburban stations i.e. "C" category stations should be provided with normal

toilets at appropriate places in sufficient number.

Zonal Railways with the participation of the private sector may construct and maintain public toilets on

“Build, Operate and Transfer” (BOT) basis at railway stations. The salient features of which are:

Interested firms to finance and construct the facilities

They shall also operate and maintain on ‘Pay and Use’ basis.

Rights for advertisement through glow signboards may be permitted on the interior and exterior walls

(maximum of 75%) of the building of the Toilet Complex but mounted hoardings on roof would not be

permitted.

Concession period

o Fifteen years for BOT (ROT) contract

o Five years for only O & M contracts72

The construction of Normal ‘Pay and Use’ toilets under BOT scheme should be completed within 4

months of signing the agreement.

72 Most of toilets are on O& M basis for five years. CR is in talks with "Sulabh Shauchalaya" to establish 5-star toilets at Thane (E) & (W) on pilot basis (BOT) in addition to existing ones


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In case of dispute, Divisional Regional Manager (DRM) of division shall be the sole arbitrator whose

decision shall be final and binding on both the parties.

The Service Provider shall pay an annual license fees to the Railways as quoted in his offer above the

reserve price fixed by Railways (DRM). The payment of license fees will be on annual basis and to be

paid in advance in first quarter of every year of the contract.

4.3.2.3. Book stall policy 2004

Policy for book stalls was implemented by Railway Board via commercial circular no. 38 of 2004

dated 12.10.2004.

According to this circular, all the suburban stations, i.e. "C" category stations, should be provided with one

bookstall at the Main Platform and one trolley / table at each platform. In order to have uniformity and proper

utilization of space, the size of stalls has been standardized.

Tenure of the license of bookstalls of all categories would be five years. There would be no renewal / extension

of license and fresh two packet open tender should be called well in advance and finalized before expiry of the

existing contract

Minimum license fee will be levied at the rate of 2.5% on the sales turnover subject to a minimum of Rs. 10,000

per annum per bookstall and Rs. 100 per additional table/trolley. Zonal Railways should arrange verification of

the accounts of the Company/offices of the organizations, individual bookstall holders on quarterly basis

regularly by deputing officers of the Commercial and Accounts Department jointly

Allotment of bookstall licenses to philanthropic and social institutions will be made on application and as per

requirement on the Railways. These bookstalls will be allowed to sell the books, papers of their own

publications only.

4.3.2.4. STD/ISD/PCO booth allotment policy

Policy for STD/ISD/PCO booth allotment was implemented by Railway Board via commercial circular no. 24 of

2002 dated 22.04.02. According to this circular, all the suburban stations i.e. "C" category stations are to be

provided with one booth at each platform.

Eligibility criteria include educated unemployed (50%), physically handicap (25%) and women including war

widows and Railway employee widows (25%). Each of these categories will have reservation of ST, SC, OBC and

general as 15%, 7.5%, 27% and 50.5% respectively.

Salient features:

Two packet tendering process

Maximum size of booth 5 ft x 6 ft (or maximum 30 sq ft)

Concession period 5 years, which can b further extended for another 5 years but not more than 10

years.

License fee escalated at 10% annually

4.3.2.5. Automated Teller Machines (ATM)

In order to provide facilities to Railway commuters and at same time enhance the revenue via no-fare box

stream Indian Railways initiated process of leasing kiosk at station premises for Automated Teller Machines

(ATM’s). A Memorandum of Understanding (MoU) between Ministry of Railways and State Bank of India (SBI)


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PwC 240

for installation of ATMs at 681 Railway stations was signed on 04/08/2006. In addition to ATM, an Internet

Ticketing Kiosk is also proposed to be provided by installing PC's & after Proof of Concept (POC) in association

with IRCTC. The first year's annual license fee shall be payable to Railway along with the signing of this

agreement. Thereafter applicable license fees for subsequent years will be payable to Railway within one month

of its becoming due. The electricity connection will be provided by Railways on payment of charges by the

banks.

The salient features of the policy are summarized as follows:

Table 54: features of MoU for ATM

Salient features of MoU

Contract Period 5 years

Licensee fees for category “C” stations

(2006 rate)

INR 45,000/sq. m. /annum

Escalation rate 5% p.a.

ATM kiosk area 6 sq. mt.

Internet Ticketing Kiosk

(free of fee)

1.5 sq. mt.

SBI has installed in total 57 ATMs in the Mumbai Suburban Railway Network, with 28 ATMs on WR and 29

ATMs on CR.

Similar MoU was signed on 22nd November, 2006 between IR & six nationalized banks, viz., Canara Bank,

Union bank, Punjab National Bank, Dena Bank, Bank of Baroda and Indian Bank for ATM installation at

identified locations. These banks have so far installed 70 ATMs in Mumbai Suburban Railway Network with 43

ATMs on WR and 27 ATMs on CR.

Both these agreements with banks (SBI & other six nationalized banks) were for a period of five years,

thereafter renewed on mutually acceptable terms.

If Zonal Railway intends to install more ATMs in addition to those installed under MoU route by SBI & other six

nationalized banks, Zonal Railway can invite bids through open tender process. The policy guidelines regarding

installation of ATMs through tender process were circulated via Commercial Circular No. 03 of 2001 dated 22-

01-2001.

Salient features:

The bank will be selected by two packet tenders — technical bid and financial bid

Committee of JA Grade officers belonging to Commercial, Accounts and Engineering Departments is

required to be formed for evaluating the financial bid and contract awarded to highest bidder

For subsequent years the license fee will have a 10% increase over the previous year's license fee. The

payment will be made in half yearly equal installments in advance.

ATM will be installed on area admeasuring 6 ft x 6 ft

The tenure of contract should be of 5 years. Railways can renew these open tender, however total tenure

should not exceed ten years.

At present there 32 ATMs, 13 on WR and 19 on CR, installed by private banks through open tender route.

The list of existing ATM on Mumbai suburban is provided in the annexure.


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4.3.2.6. Pay & Park facilities

The guidelines with regards to Pay & Park facilities propose to provide the parking facilities on chargeable basis at

the stations premises where the parking slot can be made available. Railway Boards letter No. 95/TGI/8/P dated 15.

12. 1995 highlights the parking policy by Railways. Subsequently circulars were issued by Board for clarifications

(Circular No. 35 of 2000 for “Parking charges of Car /Scooter/ Cycle stand at Railway Stations” and Circular

No. 39 of 2004 “Cycle/Motor Cycle/Scooter/Car Parking Contracts”- both are attached in the annexure list).

A joint team comprising members from engineering and commercial department is required to finalize plan for the

stations after survey of the parking area with locations and dimensions clearly marked on the plan.

The divisions can appoint a third party through open tender process to operate and manage pay & park

facilities, the salient features of which include:

Contract duration - 3 years

Divisions empowered to fix parking charges, reserve price (Sr. DCM/DCM) with concurrence of

divisional finance and approval of DRM

Reserve price fixation criteria - Land Value, number of users, type of vehicle

Divisions may also explore the possibility of managing parking facilities departmentally within the existing

resources and no additional posts should be created for this purpose.

Circular No. 69 of 2006 by Railway Board was issued for “Introduction of computer/machine generated

parking slips at railway stations for car parking”. This policy talks about improve the functioning of vehicle

parking stands at railway stations to bring transparency in realization of parking charges and covers all

Category “A” stations only. At stations where there are proper entry and exit gates in parking lots,

computerized parking facility may be introduced indicating date and time of parking, vehicle number and

parking rates in different slabs. At those stations where there are no proper entry and exit gates, the parking

contractor may issue parking slips through the hand held terminals. The above procedure should be adopted for

fresh contracts and a suitable addition for all ongoing contracts, where contractors may be given three months

time to adopt the above procedure. The cost of all equipments required for issuing computer/machine

generated parking slips shall be borne by the parking contractors.

4.3.2.7. Management of miscellaneous stalls /trolleys 2007

To streamline the management of miscellaneous stalls/trolleys at par with catering units at different category

stations, these policies were issued. All stalls, toy stalls and multipurpose stalls except the units selling catering

items, books/magazines and medicines will come under this broad category.

All miscellaneous stalls/trolleys will continue to be allotted and managed by Zonal Railways two -packet

tendering system by open bids by DRMs with 25% for reserved categories

The tenure of license for miscellaneous Stalls/trolleys will be five years on annual license fee basis escalated at

10% annually.


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4.3.3. Learning from global urban rail/metro systems

The learning from some of the successful global urban rail/metro systems with respect to station rentals have

been summarized as follows.

A) Singapore Metro Rail Transit (SMRT), Singapore

SMRT established in 1987 offer a comprehensive suite of rail, bus and taxi services that are designed to connect

seamlessly Singapore’s public transport system.

SMRT Properties is the divisions of SMRT Investments Pvt Ltd (“SMRT Investments”), a wholly-owned

subsidiary of SMRT Corporation. SMRT Properties primary business activity is in the development, leasing

and marketing of commercial spaces at train and stations.

Revenues from station rental category contributed to 27% of the total non-fare box revenues in FY 2012. It grew

by 10.7% to S$ 81.5 million in FY2012 compared to past year with average occupancy rate as high as 98%. The

CAGR for annual ridership for the system and rental revenues have been 8.5% and 18.8% respectively for past

five years73 i.e. FY 2007 to FY 2012.

The revenue from rentals is growing as a result of increased rental spaces year-on-year, following the

opening of more new and refurbished stations in the network. For instance in FY 2012, 23 shops along line 4 &

5 were launched adding more than 850 sq. mt. of retail spaces. However, even with dip in the real estate retail

index in the same period the transit agency has been able to more than double its earnings from the station

rental.

Figure 129: Ridership, real estate and station rental earning trends in SMRT

Source: SMRT annual reports, PwC Research & Analysis

B) MTR Corporation (Hong Kong)

MTR-Hong Kong established in 1979, is one of the most profitable systems in the world, with a high fare box

recovery ratio of 186%74. The businesses for the transit are broadly classified under three heads- transport

operations, station commercial businesses and property & other businesses. Station commercial businesses

handle the leasing of the station retail spaces along with advertising and telecommunication business.

The station rentals contributed to 25% i.e. one-fourth of total non-fare box revenues in FY 2011. Station rental

revenues for the transit grew by 12.4% to HK$ 2,142 millions in FY 2012 compared to past year with average

occupancy rate as high as 98%. The CAGR for annual ridership for the system have been 9.3% respectively for

past five years75 FY 2007 to FY 2012. The revenue from rentals of station spaces are growing as a result of

73 SMRT annual reports for last five (5) years (FY2007-2012) 74 2012 MTR Annual Report - Consolidated Profit and Loss Account 75 Singapore rail- SMRT annual reports for FY’s:2007-2012

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increased rental spaces year-on-year following opening of more new and retail areas. For instance in FY 2012,

the number of station shops at year end increased by 37 over the previous year to 1331, following renovations at

ten stations. Total station retail space rose by 966 sq. mt. to 55,898 sq. mt. with total 280 brands offering

shopping convenience to passengers at station premises. The earnings from the retails are also show positive

co-relation with the real estate retail index in the city.

Figure 130: Ridership, real estate and station rental earning trends in SMRT

Source: MTR annual reports, PwC research & analysis

C) JR East, Tokyo (Japan)

JR East incorporated on 1987 is the largest railway company in Japan and one of the largest in World. The

group businesses are classified under four heads mainly: transportation, station space utilization, shopping

centers & office buildings and others including advertising & publicity and hotel operations.

The ridership has remained the same during the last five (5) year period and the retail price index of the city has

seen a declining trend. Due to the combined effect of two, the earnings from the station rentals have remain

almost stagnant. However, the earnings from the station space utilization contribute half (~48%) of the total

non-fare box revenues (FY 2012).

Figure 131: Ridership, real estate and station rental earning trends in JR-East Japan

Source: JR-East annual reports, PwC Research & Analysis

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D) TRTC-Taipei

Incorporated in 1996, Taipei Rapid Transit Corporation (TRTC) is one of the profit making transits in the

world. Besides its core transit business, TRTC is involved in number of affiliated businesses, including

advertising, parking lots, station shops and underground shopping malls.

The multi-faceted operations helped the agency to increase its profitability and provide customers with a wide

range of services. Numerous metro shopping zones are planned as per the local characteristics for the

customers. Other affiliated rentals at stations include souvenir shops, mobile phone services, site rental,

financial services (ATM). The number of station shops has increased from 11 in 1996 to 116 in 2011.

Park-and-ride lots facilities are also provided in pace with ridership growth at stations to meet the parking

needs of commuters using the metro service. Station rental earnings formed 31.7% of the total non-fare box

earnings in FY 2012, and are growing in line with the growth of the city's retail price index and transit ridership

as seen from the last five (5) years performance.

Figure 132: Ridership, real estate and station rental earning trends in TRTC

Source: Taipei-TRTC annual reports, PwC Research & Analysis

Key learning:

The following summarizes some of the key learning from the practices for other operating streams as followed

by other transits.

Station rental earnings are typically in sync with the retail index growth in the city i.e. they follow the

market trend.

The year-on-year growth in station rental earnings is also attributed to the addition in retail areas with

refurbishment of station remises by authorities.

Station retail is handled by property development division that handles the commercial businesses i.e.

property development and station retail stores.

The station retails are not governed by various policies that bifurcate retail into food and beverages,

other misc. stores, shoe shine etc.

These lessons are appropriately taken into account in developing the various

recommendations for Mumbai suburban system

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4.3.4. Estimation of potential from station rentals

4.3.4.1. Category A - Complementary Services & necessary (Pay & Park)

Pay & park facility is a complementary service for the public transport agency, and also enhance the

convenience for the commuters using private vehicle commuter. Also there is an acute shortage of the parking

space supply in the city; hence there is a ready demand for parking as well as an opportunity to contribute to the

mutual benefit of both the city as well as commuters.

Mumbai divisional railway earned around INR 5.52 Crores in financial year 2011-12 (INR 3.03 Crores from

Western Railways and INR 2.49 Crores from Central Railways).

The commuter survey conducted by PwC & Prozeal Consulting (June 2013), reveal that around 4% of the survey

commuters use two & four wheelers for access to and/or dispersal from stations. With over 7.4 million daily

commuters on the network this translates to a demand for approximately over 2, 00,000 two wheelers. The

ridership is growing day-by-day and hence the assured parking is the necessity service and the need of the hour.

CR as of now has 25 car-parking at 20 stations in the Mumbai Division. WR & CR together has 40 parking lots

at around 30 stations mainly catering to two-wheelers. However the current supply of parking spaces is very

low as compared to the overall demand.

Parking lots in the city:

There are 150 legal lots operated by Government agencies, Municipal Corporation, Railways, MMRDA and

MSRDC all put together.

Out of these nearly 100 lots are provided by MCGM for nearly 8000 PCU’s76.

MMRDA owns clutches of land around the city has allotted space for 800 PCUs to be parked at the

business hub of Bandra-Kurla Complex, 850 vehicles at Nariman Point and 50 at Oshiwara.

MSRDC has lots at 17 different locations, like Jogeshwari - Vikhroli Link Road, Sion, Chheda Nagar,

Elphinstone Road and Vikhroli mainly below flyovers.

Out of total 40 parking lots on railway plots, only around 15 parking lots are provided in Greater

Mumbai, up to Dahisar and Mulund stations.

o There are three stations in Mumbai - Kurla LTT, Mulund and Mankhurd - where the CR has

allotted around 1,700 sq m of land for parking.

o The remaining lots go beyond Thane and Vashi For the nearly 20 lakh vehicles plying on the

city's roads, Mumbai has only one parking spot for every 120 vehicles77.

This demand–supply gap provides opportunity to Railways to provide passenger convenience along with the

earnings from the same. In 2013, Western Railway (WR) has identified 11 lots to accommodate up to 2,000

vehicles. While Central Railway (CR) has identified Ghatkopar, Kurla, Kanjurmarg, Panvel, Tilak Nagar,

Mulund, Parel, Nahur, Kopar, Neral stations while on WR Dadar, Bhayander, Borivali, and Bandra Terminus

(BDTS) stations78. In addition to enhancing passenger convenience and parking revenues, other major benefits

of ‘pay and park’ lots is that railways will be able remove existing and prevent encroachment by the illegal

hawkers.

Maximization of revenue from pay & park:

The revenues from pay and park can be enhanced any or combinations of the following: 76 PCU (Passenger Car Units) is term in highway engineering used for expressing traffic capacity- A car is considered as a

single unit , motorcycle half car unit & large size vehicle (bus ,trucks) 3 car units

77 http://www.ndtv.com/article/cities/mumbai-has-one-parking-spot-for-every-120-vehicles-207316 78 http://freepressjournal.in/pay-and-park-facility-will-fetch-handsome-revenue-for-cr-wr/

http://www.ndtv.com/article/cities/mumbai-has-one-parking-spot-for-every-120-vehicles-207316

http://freepressjournal.in/pay-and-park-facility-will-fetch-handsome-revenue-for-cr-wr/


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PwC 246

A) Pricing corrections - benchmarked to market prices

B) Capacity addition

o Identify new parking plots

o Multi-level car parking

A) Corrections in parking charges

MCGM has recommended increasing parking charges based on business of the areas, timings of parking and so

on. It has proposed per-hour rates for parking lots, ranging from Rs 60 for busiest areas (proposed to be revised

to Rs. 45 as per resistance from the corporators in January, 2014) to Rs 20 for least busy localities from present

flat parking rate of Rs 20 per hour.

Table 55: MCGM - Revised parking rates (for 2014-15)79

Category Min. charges for 4-wheeler

parking

Min. charges for 2-wheeler

parking

For 1 hr over 12 hr Monthly For 1 hr Over 12 hr Monthly

Category A: Most populated

commercial complexes, important

government and private offices, area

that witness maximum footfall

60 210 1800 15 90 750

Category B: Areas with general

commercial area and office premises

40 140 1200 10 60 500

Category C: Smaller commercial

areas with lesser known vehicular

traffic

20 70 600 5 30 250

Source: MCGM, News Articles (Times of India, Mid-day)

The rates for year 2016 & 2017 have also been proposed by MCGM and under review by the committee.

Railways working in association with MCGM for uniform charges will provide better meeting the demand and

supply rather than cannibalization of the parking facilities provided by agencies in the city. As highlighted in the

table, even if the monthly rates are increased to that charged by DMRC, current revenues can be enhanced by

~100%.

Table 56: Comparisons of parking charges of Mumbai Suburban Railway, MCGM, and DMRC

Parking rates (in INR) Mumbai Suburban

Railway MCGM DMRC

2-wheeler

Daily (for 12 hours) 15 30 - 90

(5 - 10/hour) 15

Monthly 250 250 - 750

(300 - 850 for 2016 & 2017) 475

79 "BMC likely to reduce proposed rates for parking at civic lots"; Published on January 7, 2014; Time of India; and "Mumbai corporators seek 50 per cent discount in parking fee" published on December 31, 2013 by Mid-day.


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PwC 247

4-wheeler

Daily (for 12 hours) 50 70 - 210

(20 - 45/hour) 30

Monthly 625 600 - 1800

(700-2000 for 2016 & 2017) 1000

Inventory: 40 lots ~100 lots 95 lots

Source: DMRC, Railways, MCGM

The above table indicates that the parking rates charged in the railway plots is one of the lowest in the city. Even

if the rates benchmarked to DMRC's existing parking charges, the revenues can be enhanced substantially. This

will further increase the viability of the parking lots in the Island City.

Figure 133: expected revenues from pay & park through corrections in parking charges

B) Capacity addition

As detailed in the previous section, there is a demand for over 2,00,000 2-wheelers parking spaces by daily rail

commuters as well as the shortage of parking space at city level as a whole. Railways can tap the opportunity by

augmenting the capacity by identification of suitable parking lots, such as

Underutilized plots in the station area

Land parcels not suitable for commercial development or operational use.

Idle land plots (may or may not have been identified for the future infrastructure or commercial

development, but idle till the beginning of tendering process)

Multi-level parking at existing parking lots (case to case basis based on commercial viability)

Additionally, these will prevent the encroachment in the inactive or underutilized land plots and also reduce

the chances of title claims such as the claims surfaced during the transaction process of Bandra Land plot

resulting in delays of over five (5) years and still not put to the market successfully.

The current supply of around 40 parking lots can cater to around 10,000 to 15,000 2-wheelers only. However,

using the land plots along the corridor and near transit node, there is a possibility to enhance parking supply

from current supply to at least 50,000 2-wheeler capacities (i.e. total parking area of around 1.3 lakh sq m) in

the immediate term. This can increase the pay & park earnings by 3-4 times and coupled with pricing

corrections can enhance it by 6-8 times.

5.5

9.6 10.8


Pricing corrections (DMRC)

Pricing corrections (Avg MCGM rates)

INR

Cr


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PwC 248

Figure 134: expected revenues from pay & park through corrections in parking charges

Joint development with local governments (e.g. MCGM)

MCGM traffic committee has initiated plans for charging for off -street parking in the city. However the

underlying objectives can only be achieved if the city matches its parking need. The railways in association with

local governments can jointly undertake parking venture, which can benefit both the stakeholders, commuters

and the city as a whole. This capacity addition will enable the local body’s traffic department in association with

the city traffic police to have better control on city parking and enforce better parking discipline. Also recent

development by MCGM to procure devices to get unauthorized parking, real-time traffic data and study traffic

patterns can be further utilized for policy enforcement80.

The following table summarizes the key value adds and benefits that each of the stakeholders can derive from

the mutual cooperation.

Table 57: Railways and ULB association for parking

Urban Local Body (e.g. MCGM) Railways

Value adds MCGM Traffic department in association

with the city traffic police will

enforcement & high penalties to prevent

unauthorized parking outside these

parking lots

MCGM owned land parcels near stations

Increased parking charges for parking

slots in congested area

Railway land plots for parking

Benefits Revenue share from the venture

Decongested roads

Solution to parking problem to some

extent by availability of increased parking

space

Enhanced revenues due to certainty of

day & night parking demand

Higher rates, but lower than the

charges in congested areas of the city

FSI/TDRs for use at other

commercially viable plots

Commercial parking ventures:

The existing plots with high ridership patronization and vehicular traffic can be identified for the commercial

parking venture like multi-level parking combined with commercial real estate.

80 Indian Express-“ Civic body installs devices worth Rs 42 lakh to study traffic patterns”, , dated March 27, 2014

5.5

10

17

29


Only pricing corrections

Only enhanced capacity (3-4 x)

Pricing corrections + capacity

enhancement

INR

Cr


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PwC 249

Example: Thane Station redevelopment

The lands parcel measuring approximately 8,912 sq. mt, is located on the eastern side of Thane station,

adjoining the suburban railway platform area. The site with existing open parking lots and auxiliary facilities

like ATMs, booking offices is proposed for commercial development. The redevelopment plan is provided

taking into consideration the existing parking plus the mandatory parking that comes up as a part of

development. The development is in conjunction with Thane Municipal Corporation (TMC) along with

integration of proposed Bus Rapid Transit System (BRTS).

Table 58: Thane station redevelopment –proposed parking

Sr.

No.

Option Area (from the

proposed site)

No of units (2-wheeler

equivalent)

1 Existing parking plot 500

2 Ground Level Parking within site ~1700 sq m 570

3 Mezzanine level parking at 3 m

within site (proposed at higher FSI

and if additional parking is opted)

~1300 sq m (at 15%

of the total area)

430

Such site specific development with the Municipal authority will provide better facilities to the commuters.

Example: Parking at Bhandup Station

Bhandup station has daily footfall of 1, 75,273 with peak hour footfall of 18,07581. Approximately 1% of

commuters i.e. around 1,750 commuters use two-wheelers as their access and / or disposal mode that translates

to 870 PCU’s82. Railways own a land plot of area around 9,269 sq m (max width 22.5 m) out of which only a

small slot is being used for parking currently.

As per the BMC's calculations, a two-wheeler would need 2.88 sq m that will translate to requirement of at least

3,300 sq. mt. of parking area to cater to existing parking usage.

However, full utilization of land for commercial parking combined with commercial space, can multifold the

parking space availability; add to increased revenues, as well as commercial utilization of the underutilized

open land plot.

81 'Mumbai Suburban Rail Passengers Survey and Analysis' (2012)by Wilbur Smith Associates (2012) 82 Commuter survey by PwC-Prozeal Consulting (2013)

Commercial parking ventures in other cities by Municipal co-corporation

New Delhi Municipal Corporation (NMDC) awarded South Square automated multi-level car parking to DLF

on third party development for period of 30 years with development mix of commercial (30): parking (70).


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4.3.4.2. Category B: Capture value from high footfalls without causing

congestion (ATMs)

The second categories of services are by capturing value from services that are not essential to the railways

operation. The strategic location of these facilities, not adding to the congestion in the station area will lead to

garner earnings from this stream. These can also be used to serve both commuting and non-commuting

population of the city. This category will include: - automated teller machine (ATM), kiosks, automated vending

machine (AVM’s).

Automated Teller Machines (ATMs)

ATMs in Mumbai Suburban Railway Network can be categorized under two categories-via Memorandum of

Understanding (MoU) route and via open tenders. Mumbai Suburban Railway has 57 ATMs by SBI and 70

ATMS by other six (6) nationalized banks through MoU channel. There are 32 ATMs installed through

tendering route via open tender process by divisional railways. Hence 80% of total ATM i.e. 159 on Mumbai

suburban network is via MoU route (36% of SBI ad 44% of other nationalized banks). This accounts for

approximately 1.4 - 1.5 ATM per suburban railway station.

Recently in June 2013, Central Railways has called for 101 ATM’s in 38 suburban stations for period of 5 years,

raising the ATMs per suburban station in the city to ~2.0.

Figure 135: ATM on Mumbai division

Source: Mumbai Division (CR & WR)

License fee for ATM

As mentioned earlier the license fees for SBI and other nationalized bank ATMs is fixed via MoU. The MoU

states that for category “C” stations i.e. suburban stations, the license should be at INR 45,000 per sq. mt. per

annum, 2006 rate & escalated at 5% annually (approx INR 490 per sq.ft. per month at 2013 rate).

For ATM via open tender the license fee varies from INR 500 -2,500 per sq. ft. per month at suburban stations.

High footfall stations like Churchgate, Andheri, Bandra, Dadar, and Mumbai Central have higher rental

of approximately 2500 per sq. ft. per month.

Stations like Borivali, Santacruz, Goregaon, Grant Road, and Vile Parle have rental of approximately

1000-1500 per sq. ft. per month.

36%

44%

20%

Existing ATM break-up in Mumbai Suburban

SBI as per MoU



23%

29%

48%

ATM including 84 (out of 101 tendered) via open tender

SBI as per MoU




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Other stations like Ghatkopar, King circle, Dombivili, Karjat, Mankhurd, Govandi have rental of

approximately 800-500 per sq. ft. per month.

These tenders ensure market comparable rental rates for ATM unlike via MoU with nationalized bank that

have uniform blanket rental rate (or license fees) across all suburban stations.

Roadmap for ATM penetration in the network

Indian ATM industry is expected to double & reach 2, 00,000 by 2016 with 1, 04,500 ATM as on October

201383. Also as per World Bank data, ATM growth in India is the highest (doubled) in last three years but still

the penetration is lowest (refer the following chart).

Reserve Bank of India (RBI) released guidelines in June 2012 for introduction of new white label ATMs (WLA).

The white label ATMs (WLA) are owned and operated by non-banking companies and do not display any bank's

branding. WLAs serve customers from all banks and will be interconnected with the entire ATM network in the

country. Policies like these of WLA are emphasized by RBI in order to increase the penetration of ATM.

Figure 136: ATM penetration per 100,000

Source: World Bank Data

Total number of ATM in metro cities in India is 40,449 as of June 201384. Growth in metro cities is expected to

be 20%85. Mumbai’s share (assumed to be divided equally among five metros) is over 8,100 out of which

Mumbai suburban network caters to only 159 (and 259 ATMs with the addition of additional 101 ATMs in

Central Railway). Mumbai Suburban Railway which carries around 25% of the region's population daily, 85%

of which belongs to service & business class, caters to only ~2-3% share of city’s ATM network..

There is an opportunity to enhance the ATM penetration in the network through open route tendering,

exclusive tie ups for While Label ATMs in the network.

83 Indian ATM Industry 2012, Celent 84 RBI data on ATM in India 85 Indian ATM Industry 2012, Celent

125.8

50.9

45.6

4.3

129.0

60.2

49.6

8.9

Japan

Singapore

Hong Kong

India

2011

2008


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PwC 252

Considering the share of railways in the urban mobility and usage by the large proportion of the city's

population, its ATM penetration should ideally be 10 - 20% of the total ATMs in the city, i.e. at least 1,000 -

1,200 numbers of ATMs. However railways need to strategically identify the stations, location at stations

premises and the numbers of ATMs per station. The following list presents the indicative criteria that can be

adopted:

Each station to have at least Two (2) ATM (according to Catering Policy 2010, maximum 3 ATMs are

allowed per platform)

Stations with higher footfalls (> 1,00,000) to prioritize for additional ATM’s

Location of ATM’s can be strategically adjacent to areas such as ticketing area, entry/exit and concourse

areas to ensure convenience without causing to congestion.

Considering 1 ATM every 12,500 footfall based on World Bank data for India (approximately 8 ATM per 1,

00,000 populations as of 2011), we identified the indicative list of 21 stations with higher footfall and mapped it

with the existing ATM services. Based on our preliminary estimate and the above criteria, we estimate that

around 250-300 ATMs can be added to these stations in the immediate term in next 2 -3 years. This year on

year escalation in number of ATM can be done in order to provide more services. However, we have capped the

number of ATMs at any station to maximum of 20 (or in accordance with the catering policy 2010) considering

the focus on addition of ATM on other medium footfall stations.

ATM via open tender on Central Railway (CR)–Mumbai Division

Mumbai Division, Central Railway invited tenders in June 2013 from public sector Banks

and Banks promoted by Financial Institution for installation and operation of 101 Automatic

Teller Machines (ATM) at 38 Station over Mumbai Division for period of five years. (The Tender

Notice for the same is attached in the annexure list). The list includes at least one ATM on stations

where presently there are no such facilities and strengthening of such facilities at high footfall stations

like Kalyan, CST and Thane to 6 to 10 ATMs. The bidders are allowed to bid for any number of the site

or all the sites together.

The locations of such ATM to be installed have been selected by Railways mainly near booking office

area, FOB’s, Concourse/entrance area and beside platform facing road side. Such locations

necessitate capturing the value by providing financial services to commuters by not adding

congestion to platform areas and at the same time generating revenues for Railways.

Out of these 101 ATM’s, 84 sites have been awarded successfully to Banks / Financial

Institution with a total realizable license fee of around INR 7.4 Crores ( (first year license

fees for 84 tendered sites). On an average the rental realization via such open tenders for

Railways is approximately three times higher compared to Public bank ATM via MoU

route as shown in the table below.

Sr. No. ATM type License fees (INR sq.

mt./annum)

Remark

1. Open tender 1,47,ooo As per average value for 84

tendered sites

2. MoU route 45,000 For category “C” station as per

MoU

Source: Central Railway, PwC research & Analysis


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PwC 253

Table 59: ATM capacity enhancement

Stations Footfalls86 Existing

ATM’s*

Potential @ 1 per

12,500 (max. 20)

Additional Units (to be

added by 2015)

Central Line

Dombivali 283,362 7 20 13

Ghatkopar 268,225 5 20 15

Bhandup 1,75,273 5 14 9

Mulund 2,55,711 5 20 15

Wadala 1,60,645 2 13 11

Byculla 1,32,319 9 11 2

Kalyan 360,348 15 20 5

Chembur 1,73,788 2 14 12

CST 6,36,661 13 20 7

Kurla 380,930 4 20 16

Thane 653,928 10 20 10

Dadar 286,960 9 20 11

Western Line

Andheri 6,04,244 5 20 13

Mumbai Central 238,231 4 19 15

Borivali 392,417 5 20 15

Virar 395,095 2 20 15

Bandra 491,106 5 20 18

Mahim 1,22,939 2 10 15

Goregaon 285,204 2 20 8

Mira Road 170,262 2 14 18

Churchgate 505,110 7 20 12

Total 120 375 255

* Considering 101 ATM floated by CR

Considering the above estimation and recent tenders, it is realistically possible to add around 100 ATMs to the

suburban network year-on-year in the near term. Assuming the average license fee of INR 1, 47,000/sq m based

on recently awarded 84 ATMs by CR, the revenue potential is expected to grow from INR 5 cr in 2012-13 to

around INR 80 Cr by FY 2019.

86 'Mumbai Suburban Rail Passengers Survey and Analysis' (2012)by Wilbur Smith Associates (2012)


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PwC 254

Figure 137: estimated ATM earning with ATM additions


4.3.4.3. Category C: Other facilities (catering stalls)

The third category of services is passenger amenities that are necessary but require proper restructuring

otherwise it may lead to passenger inconvenience.

In Indian Railways, the existing station rentals were primarily conceived as a means to enhance passenger

amenities and for the purpose of social benefits. Hence, the services like STD/ PCO booths, Book stalls,

Shoeshine on the platform that are kept reserved for physically handicap, educated unemployed youth and

women category. Though these form a miniscule revenue source for Railways but are seen more as employment

generation at the same time providing services to commuters.

The important element in this category is catering units. With the existing ~450 stalls & kiosks, catering units

generated around INR 4 Crores of revenues for the suburban rail network in FY 2012.

Catering Units

The catering stalls on platforms which were with IRCTC for duration of five years from 2005-2010 were

transferred back to zonal railways under Catering Policy 2010. All the existing major and minor catering units

are managed by zonal railways except Food Plaza, Food Courts and fast food units, which are still with IRCTC.

Catering units on suburban stations can be divided mainly among the following four categories:-

1. Tea stalls

2. Milk stalls

3. Fruit juice stalls / kiosk

4. Chana sing kiosks

5. Automated Vending Machines (AVM’s)

The total available catering area on suburban station is around 25,000 sq. Ft. 87. The present composition of

catering units is such that half of the units are tea stalls; however these tea stalls consume approximately 84%

87 CR & WR catering units data (annexure)

5 13

25

37

52

68

88

159

259

359

459

559

659

759

0

100

200

300

400

500

600

700

800

0

10

20

30

40

50

60

70

80

90

100

2013 2014 2015 2016 2017 2018 2019

To

tal

AT

M

INR

Cro

res

ATM annual earnings (INR Crs.) Total ATM's


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PwC 255

of the available station retail area. The remaining area is consumed by milk stalls, kiosks and AVM’s (detailed

list is provided in the annexure).

The existing kiosks were awarded by IRCTC after it took over the catering operations from railways

departmental catering between 2005 and 2010. The key features of these kiosks are

Low space consumption (<1.5 sq mt) compared to stalls,

Can be placed on platforms, under FOBs at platform, ticketing area, as well as on non-paid areas and

Do not add to the congestion at the stations

However with transfer of catering units to zonal Railways from IRCTC after Catering policy 2010, these

contracts will be cancelled after expiry of their running contract tenures of five years. Hence the major catering

units available will be the tea and milk stalls.

Figure 138: Unit-wise distribution of catering units (Left) & Area wise distribution of catering units (Right)

Source: CR & WR data, PwC Research & Analysis

Tea stalls and milk stalls consume 90-120 and 64-112 sq. ft. of area per stall respectively and are generally

provided on the platform. The kiosks i.e. chana, fruit juice etc. are smaller in size 16 - 46 sq. ft. of area per kiosk.

Policy mentions allotment of all units at stations via open and competitive two-packet tendering system.

However, Mumbai suburban station platforms are flanked with tea stalls and milk stalls mostly awarded

during the pre-independence era. There were no fresh tendering for the catering units in Mumbai Division of

Central Railway since independence and the existing contracts have continued. As a result 30 firms/individuals

are running about 200 stalls in Central Railways that are being renewed year-on-year88. Hence the rentals as

paid by these vendors are not reflection of market prices. Analysis of license fees of kiosks awarded by IRCTC

indicates that these smaller units have much higher rentals compared to stalls.

88 “Central Railway never invited fresh tenders for stalls on platforms in Mumbai, reveals RTI” – moneylife, May-2013

84%

7%

6% 4%

Tea stalls (tea,buiscuits & snacks)

milk stalls

fruit juice kiosks

Others (AVM,chana sing kiosks, cold drink stalls)

51%

18%

17%

14%


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PwC 256

Figure 139: area and rentals comparison for different catering units


Key issues

Hence the key issues pertaining to this category of services at station premises include:

License fee

License fee for catering units especially stalls (that contribute half of suburban catering services) are not

reflective of the market rates. This is because the fees are revised nominally without price corrections. Other

key reasons are that most of the stalls are not being awarded through the tender route, and the existing

legacy contracts have been renewed at nominal increase in license fee.

Red herring facilities

The catering units were started by India Railways on station platforms to enhance experience of commuters

while travelling. However, the stalls on the platform area, at stations like Bandra are adding to the

passenger inconvenience primarily during peak hours.

Categorisation of units

The catering services are categorised based on catering units and others selling miscellaneous items. The

catering units are further categorized based on beverages it sells and area consumed, for instance, Stalls,

kiosks, food plaza etc. Our look at other Asian transit indicates that there is no such categorisation among

station retail business. Also, tea stalls category of units may be valid in some parts of India, but the validity

of such categorization in the context of urban area like Mumbai is itself is a questionable. With the changing

demographics, there is a need to redefine the policy in the suburban railway context.

Fragmented market

Catering Policy 2010 permits maximum two major stalls per zone per contractor. This has resulted in

increased contract management activity, time and costs at divisional railways level. Also it restricts entry of

larger, branded and organized players. Such practice is in contrary to the one followed by other transits

following bulk contracts with longer contract tenor (for instance, DMRC - see the following box).

Integrated de-congestion approach

As seen above the smaller units like kiosk, AVM as awarded by IRCTC during 2005-2010 consume lesser

area at station while generating the higher revenues or fees realisation for Railway. But with transfer of

control to Railways, it is understood that these contracts for the small kiosks & AVMs will be terminated

90

32 16 16

120

64 46

24

100

112

150

200

0

50

100

150

200

250

0

50

100

150

Tea stalls milk stalls fruit juice kiosk chana sing kiosk

Ind

ex

ed

le

ase

ra

te/s

q f

t/m

on

th

No

of

un

its


-

PwC 257

after expiry of running contract tenures. There is a need to assess the necessity of the stalls, and other

formats with respect to space availability, passenger convenience, and plans for station redevelopment.

Roadmap for capturing value from category C services

Mumbai suburban stations already running at the lowest level of services (LOS “F”) offers no opportunity to

add any more number of units as it will lead to further congestion. However, the revenues can be enhanced via

market corrected rates, removal of the fragmentation and re-structuring of units.

As seen from other global transit examples, there exist positive co-relation between station retail earnings,

ridership growth and real estate index of the city. Mumbai division station rental earnings have remained

stagnant for years mainly due to the legacy contracts. Legacy contract renewals may be handled on par with

market and can be given a timeline to get expired from legacy basis to tendered basis.

The catering policy mentions that at suburban stations tea stalls, fast foods, AVM’s should be provided liberally.

Our analysis indicates that smaller units provide services without adding congestion at platforms. Location

plan should be prepared for each of the station by Railways. This location plan should include-identification of

suitable unit type (kiosk, stalls etc.) and site selection (at platform, circulation are etc.). Emphasis should be on

kiosks, AVMs as these occupy smaller area compared to stalls at station premises.

DMRC station retail case study

DMRC station retail box revenues are handled via property development division of the

system. Station box retail consists of 8, 82,008 sq. ft. of area. DMRC has formulated

Kiosk Policy that controls kiosk within its premises.

Salient features of the policy are:

Location of kiosks to be approved by Chief General Manager/ Electrical such that it does

not interfere passenger flow and operations

Standard kiosk size of 4 Sq mt. and as approved by Chief Architect

Tenure of contract is three years that may be extended for further 3 years

Kiosks categorized as food kiosks and non-food kiosks. Food kiosk to be only in unpaid

areas and limited to four per station. Non-food kiosk can be located anywhere inside the

paid / unpaid area

Apart from kiosks, there are retail stores in about 40 out of 140 stations. The brands

like McDonald's, Big Bazaar, Comesum restaurant, Hudson News and Café, House of

Technology (HOT) are present at these stations. Monthly rent for 300 sq. ft. space at

Metro station is around INR 50,000 however busy stations command 60-70 %

higher rentals.

Bulk Contracts:

DMRC has entered into contract with Hudson News Café (via open tender route) to open

chain of 57 stores at 38 DMRC stations for the contract period of 15 years. This contract

will add 2,000 sq. mt. of retail area to DMRC stations that is equivalent to present total

Mumbai suburban catering area. Hudson cafes will be offering food & beverages,

newspapers, magazines, books, confectionery, health & beauty aids, electronics, mobile

recharges and other travel convenience items.


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PwC 258

Also, as learnt from DMRC's kiosk policy and bulk contracts, more emphasized should be given going forward

to enhance efficiency in the contract management and enhance the revenue potential. Under construction

Mumbai Metro One, is following the similar practice and has tendered out all of its 12 stations under one

contract for the period of ten (10) years to enhance monitoring efficiency.

Opportunity to enhance station rental earnings with Station Redevelopment

As cited from global transit station retail businesses, the enhanced revenue is contributed because of addition of

retail area with refurbishment of stations. Mumbai suburban system station rental earnings can be maximised

by prioritizing redevelopment at high footfall stations. The redevelopment can include air-space commercial

development in addition to station rentals. The key parameters for assessing the station selection for

redevelopment can be follows:-

Peak hour Load

This reflects Level-of-service (LOS) standard. Major stations with higher footfall will be high priority for

redevelopment

Interchange stations

Interchange stations between suburban lines and/or intercity terminus facility such as Bandra, Kurla,

Andheri and Dadar have trend of high footfall and can be prioritised

Intermodal transit connectivity

Suburban railway stations redevelopment plan can be integrated with other transit modes buses and IPTs

adjoining the stations for better integration of facilities. Thane station redevelopment taken by Railways is

one such example. Other stations like Borivali and Mulund can also be prioritised on these criteria

Station area development trends

Development trends in the surrounding area will drive future ridership addition to the stations. Railways

should work along with the urban planning authority for identification of such area and develop

accordingly. For e.g. Stations like Virar, Goregaon

Railways have already initiated plans for redevelopment of key stations in Mumbai. Mumbai Rail Vikas

Corporation (MRVC) has proposed redevelopment of three stations — Dadar (Central and Western), Kurla and

Borivali as first three on the list of over 20 stations. The concept plan has already been sent to the Ministry of

Railways and the Government of Maharashtra for approval.

The station redevelopments are mainly aimed at providing better travelling experience to commuters. This will

be done by reorganisation of entry/exit points, circulating areas, proper connectivity to foot over bridges,

redevelopment of ticketing counters and reorganisation of structures on railway platforms for easy movement

of passengers. This reorganisation of structures will lead to substantial earnings from the station rentals. Also

additional FSI approval as envisaged from such redevelopment will also add to the commercial development

earnings.


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PwC 259

4.3.5. Recommendations and action points

ATMs:

4. Having low penetration, there is a need to enhance supply of spaces for ATMs through

conventional and non-conventional means

Prioritize stations with higher footfalls having daily ridership of over 1,00,000 as a candidates for

additional ATMs based on required penetration levels (E.g. 1 ATM for every 25,000 daily ridership)

Station which are the trip generators, such as residential areas in the Northward and the Suburban city,

should be given a priority and high penetration levels

ATM format such as Point of Sales (POS) Terminals consume relatively less space and can be

accommodated in ticketing areas (for instance, Ticketing Area at concourse level in Dadar Station)

Location of ATM’s can be chosen strategically adjacent to areas such as ticketing area, entry/exit and

concourse areas to ensure convenience without causing to congestion.

5. Prefer open tender route to generate more value than MoU route and transfer rights to

allot or lease spaces to division only.

Open tendering route yield more lease rentals and also are closer to market. This has been substantiated in the past including recent tendering of 101 ATM sites by Central Railway during June, 2013.

6. Additionally, invite White Label ATM operators such as Tata Communications Payment

Solutions, Prizm Payment Services, etc. for bulk ATM space contract (for instance bulk

contract for 10 or more ATM spaces for a station/a group of stations)

RBI has identified 17 non-bank entities to set up White Label ATMs (WLA) in India which are expected

to ad around 1.5 lakh ATMs in the next 3 years.89

Four of the well known players in this market are Tata Communications Payment Solutions Ltd, Prizm

Payment Services Pvt. Ltd, Muthoot Finance Ltd and Vakrangee Ltd

Bulk contracts will help add more number of ATMs in the system with minimum tendering and

contracting process.

Pay & Park:

3. With MCGM revising its parking rates, railways should revisit parking rates in its land

parcels to enhance viability of parking lots in the city.

According to Parking Policy 2004 (Commercial Circular No. 39 of 2004),

o Parking rates should be fixed by Sr. DCM/DCM with the concurrence of divisional finance and

the approval of DRM.

o While fixing the parking rates, a survey should be carried out for parking charges prevailing at

other prominent locations in the city/area and it should be ensured that parking rates fixed are

normally not below the parking rates prevailing at important/prominent places in the same

city/area.

o The parking charges should be reviewed before the award of new contract as per the above

procedure.

However, the parking rates are found to be lower than prevailing rates charged by local municipal

authorities, shopping malls etc. in the city.

89 Moneycontrol Bureau; April 05, 2013 (http://www.moneycontrol.com/news/business/rbi-gives-17-licences-for-white-atms-tatas-to-open-soon_847904.html?utm_source=ref_article)


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PwC 260

It is recommended that Sr. DCM/DCM should conduct a parking rate survey once a year and revise

parking charges accordingly (for instance on annual basis).

4. Identify suitable sites and underutilized land parcels to increase new supply of parking

lots

There is a demand for parking among the railway users as well as general public. However, the supply

of parking lots is not sufficient.

Coordination between commercial and technical/operations department is necessary to identify and

transfer surplus land assets for the purpose of commercial parking. The proposed Land Management

Cell (under Real Estate) can also play an important role for this purpose.

The land parcels near stations, which are not being used currently or are under-utilized should be

released for parking with immediate effect till these land parcels are put under different usage

(including commercial development). This will also benefit railway, for instance:

o Generation of additional revenues

o Better utilization of land assets, especially longitudinal sites least attractive for commercial

development

o Prevention of encroachment, land boundary and title issues

o Prevention of land sites getting land locked, etc.

Supply can also be enhanced in partnership with other agencies such as local government, bus

transport corporations for joint development of parking lots or multi-level parking ventures with

commercial/retail component. However, such opportunity should be assessed on a case-to-case basis.

Catering and other retail stalls

Catering stalls are not the major contributor to revenue. It is primarily due to highly fragmented market and existence of legacy stalls. IRCTC followed market driven strategies during 2005 - 2010, however, post-2010, the catering is entrusted to departmental catering unit. However, the revenue potential from retail stalls can be enhanced if the following recommendations are implemented:

4. Revise the license fee for the existing catering stalls not awarded by IRCTC in accordance

with the Catering Policy 2010

Ensure license fees are revised according to the latest circular on catering license fee fixation (No. C

45/15/1). Currently this has not been enforced effectively and the license fees are revised nominally

without price corrections.

Need a better enforcement at divisional levels, which can be achieved by having targets in place. The

recommended targets are to achieve 100% compliance, i.e., 100% of the stalls to be awarded through

open tendering process or for the existing legacy stalls to be converted to finite contract tenor with the

nearest market rate as license fee only by end of Financial Year 2014-15.

5. The policy need to be amended for classification of type of stalls (for category 'C' stations)

which are more relevant for the cities like Mumbai

Classification like tea stalls, milk stalls, etc may not be relevant for cities like Mumbai. A better pro-

market classification can ensure participation from quality, branded food and beverage (F&B) outlets as

well as non-F&B retail which flourishing outside stations at a high lease rentals.

6. Also, policy should be amended to prevent market fragmentation and to enable bulk

contracting a feasible option

The current policy prevents a contractor to have more than 2 major stalls per zone; however it leads to

fragmentation of retail market in the network. However, as practiced by other transits, for instance,


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PwC 261

DMRC, bulk contracting has resulted in better outcome such as participation from branded retail

chains adding to station aesthetics, easy contract management and monitoring, etc.


The existing organization structure is well versed to implement above recommendations at a division level. However, some of the changes recommended in case of Catering Stalls will need approvals from Railway Board, prior to its implementation.


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PwC 262

VOLUME - III (C)

---


---

INDIRECT BENEFITS


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PwC 263

4.4. Others - Indirect benefits

4.4.1. Introduction

For any metro city, the urban mobility or transportation is a very basic requirement. Ensuring smooth and

efficient movement of people and goods in urban areas has direct economic benefits and it also enhances the

productivity of workers. Availability of good and efficient transportation services at affordable costs enhances

the quality of life of residents. An efficient urban transport provides access for people to employment, markets,

education, health care and other key services in an affordable & sustainable manner.

The mass rapid transit systems like Mumbai Suburban Railway System play an important role in ensuring the

efficient and affordable urban mobility in the metro cities like Mumbai. Such transport systems serves the

mobility needs of the masses but also benefits the city directly as well as indirectly,

Similar is case of Mumbai Suburban Railway System. The way Mumbai City has developed shows that the

suburban rail network has played a critical role in the socio-economic and geographic development of the city.

The benefits the System has created can be seen as:

Direct benefits - To the commuters at large and businesses dependent on the commuters by serving the

transportation needs most conveniently at an affordable price level.

Proximity or Indirect benefits - To the environs such as development of markets across the transport

system corridor, through sustainable businesses, higher rentals and property prices, better

environment, and similar.

Direct value created for the commuters are being captured by the transit agency through fares and businesses

through license fee/lease rentals. But, should the transit agency be entitled to share in the benefits it is creating

for the society (or the city) at large, which is being captured by various other stakeholders such as private

entities, citizens and other government entities? In this section, we try to address this question, what is value

that can be captured and how, and the challenges thereof.

4.4.2. Indirect value created by the System

Mumbai Suburban Railway System has impacted the way city has developed. It carries over 7.4 million

passengers daily on its geographically spread network across MMR within the reach of maximum 3 hours by

trains in affordable and timely efficient manner.

The process of spatial growth dynamics saw an outward urban expansion generally following suburban rail

corridors. Suburban rail fares being relatively lower provided an opportunity to settle farther away from work

places in form of affordable housing and significant saving on transportation cost. The population has grown

substantially in the external nodes between 1971 to 2001 and 2001 to 2011.


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PwC 264

Figure 140: Spatial Growth on account efficient and affordable suburban rail connectivity

Source: CTS for MMR (2008)

If the municipal corporation boundaries are analysed for the last 10 years only, the impact of railway network

and MUTP phase I & II can be observed from the growth in the population in these satellite towns.

Figure 141: Satellite town population growth trends (1991 - 2011)

Source: CTS for MMR (2008), Census 2011

0.8

0.1

0.32

0.18

0.82

1.26

0.17

0.7

0.52

1.19

1.82

1.22 1.12

0.81

1.25

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

Thane Vasai - Virar Navi Mumbai Mira- Bhayander Kalyan - Dombivali

Po

pu

lati

on

(m

illi

on

)

1991 2001 2011


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PwC 265

Table 60: Spatial growth of satellite town - railway projects

Satellite

Towns Attributed to Major Railway Projects

Mira –

Bhayander,

Vasai-Virar

Enhanced

connectivity of

Western

Railway corridor

1980-1990-12 coach service started on DDR-VR section

MUTP I- Quadrupling of Borivali-Virar section

Trains starting from Bhayandar has considerably increased due to

MUTP I completion between Borivali and Virar making train journeys

safer and more comfortable for Mira-Bhayandar and Bhayandar

residents.

Thane,

Kalyan

Dombivali

Extended

Connectivity

from CST

Under MUTP project

o 5th & 6th Lines Kurla – Thane

o 5th & 6th lines CSTM – Kurla

Thane has gained new importance as a railway link to Navi Mumbai

due to the Thane-Vashi/Nerul and Thane -Panvel local train line.

Since Feb 2010 new fast trains have started between Thane and

Panvel with stoppages at Kopar Khairne, Nerul, Belapur CBD and

Kharghar.

Navi

Mumbai

Completion of

Major

Transportation

Links- Central &

Harbour Lines

Construction of a commuter railway line from Mankhurd to Vashi in

May 1992.

A new railway link between Nerul and Uran is under construction

and the portion of this line from Seawoods to Ulwe is at an advanced

stage of construction.

Figure 142: Population Distribution in Mumbai Metropolitan Region

The availability of dwelling at affordable rates in addition to connectivity to the city has helped in decongesting

the city. The businesses along or close to the public transportation corridor has benefitted due to patronized

and enhanced customer flow. The value of land and property owned by residents along the corridor has

appreciated significantly due to the better transportation linkages. The suburban population increased rapidly

compared to the population of the island city. As a result the prices across the suburban hubs soared. Below set

of data extracted from National Housing Board Residex Index suggest the same.

39.8 31.9 27.9 25.2

60.1 68.1 72.1 74.8

0%

20%

40%

60%

80%

100%

1981 1991 2001 2011

Island City Suburbs

Source: Population Change & Economic Restructuring in Mumbai Report 2011


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PwC 266

Figure 143: National housing Board Index for Satellite Towns in MMR Region

Source: National Housing Board Residex

Importance of public transportation has also come under increased focus due to the contribution of vehicular

pollution to climate change and deteriorating air quality and its impact on health. Suburban Railway System

has also benefitted the road users who experience relatively much lesser vehicular congestion on the roads due

to other users using the suburban rail transport. The survey conducted by PwC & Prozeal Consulting (2013) as a

part of this study shows that if the suburban railway network would not have been there, at least 60% of the

commuters would have continued their regular trips using buses, auto rickshaws, taxies, two-wheelers and

four-wheelers. These could have resulted in multi-fold increase in vehicular traffic, investments for road

infrastructure, fuel consumption pollution and decline in open public spaces.

4.4.3. Beneficiaries of the value created

The indirect benefits created by the suburban railway have been immense. But not all the value is being

captured by the suburban railway. The development & expansion of the city in turn is captured by the

Municipal Corporations in forms of increased property taxes and betterment levies. The benefit that the road

users get because over 7.4 million passengers use suburban railway has not been captured by any ULB /

authority and is enjoyed by the road users.

The indirect value created by the System is being captured by the variety of the beneficiaries as described below:

Government - through taxes and surcharges

Occupants of Businesses & market

Real Estate investors, developers and owners

Feeder transport networks

-

100

200

300

400

500

600

700

800

900

Thane Virar Vasai Navi Mumbai Mira Bhayender Kalyan Mumbai - Composite

On

sc

ale

of

10

0 (

20

01

2002 2007 2012


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PwC 267

Figure 144: Key beneficiaries of the value created by the suburban network


4.4.4. Value capture mechanisms

Innovative funding mechanism based on “Polluter pays Principle” can be developed as Green Cess or Urban

Transport Tax or Fuel Cess/tax. Congestion charge and property tax are other key instruments to capture

value. However, further variants of the same can be used. Also, carbon credits are another form of indirect

value capture which can be explored by the railways.

4.4.4.1. Congestion fees

Congestion charge or congestion fee is a fee payable to use traffic congested zone / areas thereby congesting

them further. Road users, especially those with private vehicles, increase congestion on the road during peak

hours. In cities with poor public transportation system there may be little option other than to use private

transport. However, in cities with an efficient public transportation system, excessive use of private transport

not only causes increased road congestion but also leads to poor utilisation of public transport system.

Congestion pricing should reflect the short-run marginal cost of using private vehicles and is typically imposed

for entry into downtown and business districts or based on the time of the day. Congestion pricing is an

excellent tool as compared to administrative procedures for traffic management as it alters the relative prices

between use of private vehicles and public transport and thus provides the appropriate incentive for behaviour

change. Furthermore, it charges a price for each trip that contributes to the congestion and thus is a better tool

as compared to a licensing scheme under which the vehicle user may buy a license for entry into the congested

parts of the city.


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In March 2013, the 11-member panel, headed by additional chief secretary (home), has recommended

congestion charge for the city in its 51-point action plan submitted in Bombay High Court. The panel has

proposed two ideas for imposing the congestion levy. One, a congestion charge to restrict the number of

vehicles in certain areas, includes the city's central business districts, and two, congestion pricing on certain

goods in select zones.

Congestion pricing was first introduced in Singapore in 1975, followed by Rome in 2001, London in 2003,

Stockholm in 2007 and Milan in 2008. The system has reportedly reduced traffic on the roads of those cities by

10-30% and brought down air pollution as an additional benefit.

Singapore Area Licensing Scheme (1975)

In 1975, Singapore introduced an Area Licensing Scheme for charging drivers who enter downtown Singapore.

Vehicles are charged $3 per day on purchasing day licenses which had to be displayed on entering the area. In

1998 the scheme was changed to an Electronic Road Pricing (ERP) system involving toll for each trip to certain

parts of the city. Each vehicle is fitted with an In-Vehicle Unit (IU) with a cash card fitting in the IU. The

appropriate toll is deducted from the cash card when the vehicle passes through the ERP zone in the city.

London Congestion Pricing - 2003

In 2003, London introduced congestion fee for charging drivers who enter central London. Any vehicle entering

the zone was supposed to pay a fine of 5 pounds. The annual revenue from this source amounted to 226.7

million pounds and net revenue of 137 million pounds (2012).

Potential:

Using the baseline of London Congestion Charges, if such a thing were to be implemented in the city, the

picture would look like this:

A vehicle in London pays 12.42 pound as congestion charges. There are over 2.16 million registered vehicles in

Mumbai90. Over 2,50,000 private cars/day enter the Island City (CTS for MMR, 2005), and if a car is charged

around Rs 100 as a congestion fee, for entering the Island City, it can result in annual congestion fee collection

of INR 750 to INR 1000 Cr.

Suburban rail travel accounts for ~51% of all motorized person trips and ~78% of all motorized person-km

travel in the city (CTS for MMR, 2008). Being the cheapest mode of transport in the city, capacity enhancement

programs like MUTP-1 & 2 are helping in increasing usage of the network. With the introduction metro, the

estimated share of suburban railway will be around 30 - 33% of all person trips by 202191. Based on this facts

around 30% - 35% of the total collections can be claimed by railways, however, it shall depend on various

institutions/agencies and acceptability.

On a conservative side, we estimate a share in the range of 10% - 20% for railways, i.e. a revenue share of

around INR 75 Cr to INR 200 Cr per annum.

Bottlenecks in Implementation:

To implement and monitor the congestion zones in a densely populated city like Mumbai would require

a huge investment to create IT infrastructure. It will also necessitate the standardization of the number

plates for the system to be able to detect them. Also, there will be huge operational expenses also for the

purpose of monitoring.

From the point of jurisdiction, local and/or state government can levy and collect congestion charge.

Railways do not have any jurisdiction to levy such charge in the city other than in its own premises.

Also, justifying high share would be difficult for railways given that there will be several claimants

including BEST Undertaking, an entity of local government MCGM, and priority for financing of public

transport projects such as Metro, Monorail, etc and pedestrian friendly walkways.

90 mahatranscom.in (2012) 91 CST for


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PwC 269

A transaction arrangement between the local government, state government and central government (Ministry

of Railways) will be required to be formulated to transfer agreed share of collections by local/state government

to Mumbai Suburban Rail System.

4.4.4.2. Fuel taxes as carbon surcharge

A fuel cess or tax may be levied to capture the externality cost of use of private transport. An additional fuel tax

changes the relative price between private vehicle use and public transport and has the potential to incentivize

inter-modal shift. However, it does not sufficiently target cost of additional congestion on the roads as it is

levied uniformly on all users irrespective of whether the vehicle is driven into congested areas or during peak

hours. Such taxes are more suitable if levied as charges for carbon emission from use of private vehicles. The

efficiency of using this tool should be examined in the context of distortions that exist in fuel pricing. In India, a

substantial portion of the fuel price consists of taxes. Imposing an additional tax may only lead to further

distortions without necessarily sending out the suitable price signals.

Potential:

India has consumed 85 million tones of Petrol and Diesel in 2012-1392. As per a research conducted by Indira

Gandhi Institute for Research & Development, Mumbai consumes around 7 million tones93 of petroleum & oil

equivalent. Consumption of petrol & diesel measures to around at 4.7%94 of total India’s consumption. Out of 7

million tones, Mumbai consumes 0.87 million tones of petrol and 3.1 million tons of diesel.

Even if a 2 rupee surcharge on 1 liter of petrol and a 1 rupee surcharge on 1 liter of diesel are levied, the annual

surcharge collection at 2012-13 numbers would sum up to around INR 588 crores95.

On a lower end scenario if only a 0.5 rupee flat surcharge on every liter of both petrol and diesel is levied, the

annual surcharge collection at 2012-13 numbers would sum up to around INR 241 crores.

Based on the similar assumptions as laid out in above, assuming a share in the range of 10% - 20% for railways

would mean revenue of around INR 25 Cr on lower side to INR 116 Cr on upper side.


Railways do not have jurisdiction to levy and collect fuel tax/cess, however, central government can levy the

same and transfer the collections to railways. There are precedents to this such as Fuel Cess under Central Road

Fund Act, wherein railways gets 12.5% share of cess collected on 100% of petrol vehicles and 50% of diesel

vehicles

Also, pricing of Petrol and Diesel is very sensitive and can turn political hence there might be a resistance in

accepting additional fuel cess. Under the recent reforms measure such as deregulation of fuel price, the prices of

petrol, diesel and CNGs are being hiked regularly on a monthly basis. Under such environment it may not

be preferable to impose the additional surcharge, however, the possible advantages and

levying cess in the future should not be ruled out..

4.4.4.3. Green Cess:

Green Cess is the cess levied on new and existing private vehicle users who have or will be benefitted from the

decongested roads as a result of others using suburban rail system. Planning Commission working group on

urban transport (12th five year plan) has already recommended the implementation of green cess to

Government of India. For existing vehicles it will mean a yearly payout of 3% of the value of the vehicle along

with the renewal of the vehicle insurance.

92 Source: Annual Statistics from Petroleum Planning & Analysis Cell, India 93 Source: Metabolism of Mumbai report by Indira Gandhi Institute of Research & Development, Mumbai 94 Source: Annual Statistics from Ministry of Petroleum & Natural Gas, India 95 Source: Petrol & Diesel prices are taken on December 4th, 2013 from IOCL website


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PwC 270

Figure 145: Channel of fund flow for Green Cess levied at Central/State/City Government level

Source: PwC Research & Analysis, Planning Commission working group report on Urban transport strategy (12th five year plan)

Potential:

Based on the past five (5) years’ record of insurance collections96, the following table presents the projected

insurance collection for the next five (5) years.

Table 61: Vehicle Insurance Premium Paid @4% & Green Cess @3 % in Mumbai (in INR Crores)

Vehicle Type 2013-14 2014-15 2015-16 2016-17 2017-18

Vehicular Insurance Premium @4%

Private Car 215 284 377 499 662

Two Wheeler 47 59 75 94 119

Total Premium 261 344 452 594 781

Green Cess @ 3%

Private Car 161 213 283 374 496

Two Wheeler 35 44 56 71 89

Total Cess 196 258 339 445 586

96 Source: Insurance Regulatory and Development Authority & Ministry of Roads, Transport & Highways


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Of the total green cess collected from the city, if the city's suburban rail network gets a share of around 10% -

20%, it can yield annual earnings of around INR 25 Cr to INR 50 Cr in the financial year 2014 - 2015.

Table 62: Revenue generation potential from Green Cess for Mumbai Suburban Rail

Share of Mumbai

Suburban Rail 2013-14 2014-15 2015-16 2016-17 2017-18

10% 19.6 25.8 33.9 44.5 58.6

20% 39.2 51.5 67.7 89.1 117.1



The recommendation was given by the planning commission’s working group and the government of India may

already be considering it. An alignment at the central level will be required for railway to get the proposed share

from that revenue. There are precedents under Central Road Fund Act, wherein railways gets 12.5% share of

cess collected on 100% of petrol vehicles and 50% of diesel vehicles. Similar arrangement can be struck between

two ministries of Central Government for Green Cess.

4.4.4.4. Urban Transport Tax:

Urban Transport Tax is the cess levied on new private vehicle users who will be benefitted from the decongested

roads as a result of others using suburban rail system. It will be charged at 7.5% of the total cost of petrol

vehicle and 20% of the total cost diesel vehicle. Planning Commission working group on urban transport (12th

five year plan) has already recommended these measures to Government of India.

Potential:

The past trends97 in the number of vehicles shows that in the next five years MMR region will see addition of

over 8 lakh cars and over 1.6 million 2-wheelers.

Table 63: Projected additions to the existing vehicles traffic

Regions Type of Vehicles 2014 2015 2016 2017 2018

Greater

Mumbai

Cars – Petrol 37,279 40,126 43,190 46,487 50,037

Cars – Diesel 15,977 17,197 18,510 19,923 21,444

Two Wheelers 106,513 114,645 123,399 132,821 142,963

Thane

Cars – Petrol 38,543 42,683 47,268 52,345 57,968

Cars – Diesel 16,518 18,293 20,258 22,434 24,843

Two Wheelers 110,123 121,952 135,051 149,558 165,623

Kalyan Cars – Petrol 11,648 12,899 14,284 15,819 17,518

Cars – Diesel 4,992 5,528 6,122 6,779 7,508

97 Motor Transport Statistics of Maharashtra 2011-12


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Two Wheelers 33,279 36,854 40,812 45,196 50,051

Navi Mumbai

Cars – Petrol 6,403 7,091 7,852 8,696 9,630

Cars – Diesel 2,744 3,039 3,365 3,727 4,127

Two Wheelers 18,294 20,259 22,435 24,845 27,513

Additional Cars in 5 years 811,094

Additional Two Wheelers in 5 years 1,622,187

Under the proposed rates urban transport tax by the Planning Commission, the government is estimated to

collect around INR 900 Cr annually from MMR region alone, as shown in the following table

Table 64: Total Collection by the Government (Figures In INR Crores)

Type of Vehicles98 2014 2015 2016 2017 2018

Cars - Petrol @ 7.5% 359.06 393.20 430.67 471.80 516.96

Cars - Diesel @ 20% 410.36 449.38 492.20 539.20 590.81

Two Wheeler @ 7.5% 108.62 118.95 130.29 142.73 156.39

If the city's suburban rail network gets a share of at least 10% - 20%, it can generate annual funds of around

INR 90 Cr to INR 180 Cr.

Table 65: estimated share of Urban Transport Tax for Mumbai Suburban Rail System @10%

Railway’s Share 2014 2015 2016 2017 2018

Cars - Petrol @ 10% 35.91 39.32 43.07 47.18 51.70

Cars - Diesel @ 10% 41.04 44.94 49.22 53.92 59.08

Two Wheeler @ 10% 10.86 11.90 13.03 14.27 15.64


This Urban Transport Tax will be collected by the insurance companies and then transferred to the Municipal

Body or State Government or Central Government. To route it to Mumbai Suburban Railway System, an

understanding will be required to be struck at Central / State Government Level.

4.4.4.5. Carbon credits:

Public transport project has the benefit of reducing carbon emission by providing a viable alternative to use of

private transport. At present developing countries are not mandatorily required to reduce their carbon

emission. However, adoption of carbon emission abatement projects in developing countries earns carbon

credits that can be used for off-setting emissions by developed economies through the Clean Development

Mechanism (CDM) framework. An urban transport project may be eligible for such credits.

Carbon Credits for Bus Rapid Transit in Bogota

TransMilenio, Bogota, Colombia is the first BRT project to be successfully registered under CDM for carbon

credits in 2006. Credit is available for projects which have a clear plan to reduce existing public transport

capacities either through scrapping, permit restrictions, economic instruments or other means and replacing

them by a BRT system. Transmilenio will generate credits from the following source:

Improved fuel-use efficiency

98 Average value per car and two-wheeler is taken from EIU & a consultant’s report on Indian Auto Sector


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Use of new and larger buses and scrapping of old buses

Mode switching due to the availability of a more efficient and attractive public transport system.

Potential:

The environment impact assessment under the CDM procedure has to be carried out for the new projects such

as MUTP-3 for eligible carbon credits. This may not only yield additional revenue annually, but also helps the

System improve its brand image and intangible value.

Other potential can be derived from leasing of platform rooftop for installation of solar panels to third parties or

railways can invest it and earn lease revenue and/or carbon credits/Solar REC Certificates99 as well as saves on

cost of high electricity.

Rooftop PV solar plant having PV module efficiency of 12% will require an area of 100 sq ft/kW100 i.e. ~10,000

sq m of roof space for 1 MW of solar power. Assuming 5/6 hours a day and 300 clear days, it can generate

around 1.8 - 2 million units and equivalent number of Solar REC certificates.

Bottlenecks in implementation:

Putting a roof-top solar power will incur a huge upfront capex requirement of around INR 11 to 13 Cr/MW101

4.4.4.6. Additional Property Tax:

The urban transport project is an amenity that will increase the value of land or property near the stations. One

option for the Urban Local Body (ULB) to capture some value from this benefit is to levy a higher rate of

property tax on these properties. The ULB may designate areas/colonies close to the stations as the “project

influence zone” and levy a higher rate of property tax. It is important that this higher rate should not be

applicable throughout the city. Such properties must be easily accessible from the stations and are able to

generate higher rental income. The additional property tax levy may capture a small part of the enhanced rental

value of the property. Similarly, commercial properties close to the stations would be more valuable as they can

attract more consumers and should pay additional property tax. This option would only work if the present

system of property tax administration and collection is efficient. If property tax coverage is poor then the ability

to generate revenue from higher property tax would be limited.

Potential:

A. At a flat rate:

Based on the past three (3) to five (5) years property tax collections, the expected property tax collection

were estimated for each of the seven (7) municipal corporations in MMR region.

Table 66: Estimated future property tax collections (in INR Crores)102

Municipality 2013-14 2014-15 2015-16 2016-17 2017-18

MCGM 3,236 3,627 4,065 4,555 5,105

TMC 172 193 218 246 278

NMMC 77 92 111 134 161

99 REC - Renewable Energy Certificate; Solar REC are currently being traded on Power Exchange in India at around INR 9 - 10 per REC, which 2 - 3 times of non-solar REC. 100 Rooftop Solar PV Experience in India , The Energy & Resource Institute (TERI) 101 Rooftop Solar PV Experience in India , The Energy & Resource Institute (TERI) 102 Based on property tax collections in the past three (3) to five (5) years


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PwC 274

Mira – Bhayander 91 102 114 128 143

Kalyan – Dombivali 97 109 122 137 153

Vasai – Virar 81 91 102 114 128

Total Property Tax Collection 3,753 4,214 4,732 5,314 5,968


If a flat or uniform rate of cess/surcharge is collected in the range of 0.5% to 3%, it can yield the share for the

System in the range of INR 20 Cr to over INR 100 Cr annually.

Table 67: Estimate additional property tax collection as share of the Suburban Rail Network (flat rate tax regime)

Share for the

suburban rail 2013-14 2014-15 2015-16 2016-17 2017-18

0.50% 19 21 24 27 30

1% 38 42 47 53 60

3% 113 126 142 159 179

B. In accordance to influence zone (area within certain sq kms from station):

The influence zone of the suburban rail network varies as we move away from the transit node. Hence,

alternative tax slabs can be implemented, few of such combinations described below:

Table 68: Differential additional property tax rates - major and minor influence zone

Slabs Influence zone (in Sq Kms) Major Influence Zone Minor Influence Zone

A 0.5 3% 0.50%

B 1 3% 0.50%

C 1.5 3% 0.50%

If differential tax regime is followed, it can result in additional collection of around INR 30 Cr to 70 Cr annually

as a share for the System.

Table 69: share of the System under differential additional property tax

Share of Suburban

Network

2013-14 2014-15 2015-16 2016-17 2017-18

A 33.00 37.05 41.60 46.71 52.47

B 47.23 53.02 59.54 66.86 75.10

C 61.46 69.00 77.48 87.01 97.72


The development & expansion of the Mumbai city in turn is captured by all the Municipal Corporations in

forms of increased property taxes and betterment levies. It comes under the State list / Municipal jurisdiction to

collect these levies. Although a conclusion can be drawn that the suburban railways played a crucial role in


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development of the suburban areas, staking a claim on the proceeds collected by municipal corporations will be

an institutional challenge. Hence, a mutual cooperation and agreement between the local government, state

government and central government (MOR) is a prerequisite.

4.4.5. The Way Forward:

Managing an urban transport system in an ever growing metro city is challenging and has its own share of

difficulties. As the city grows, the parts which were the outskirts of tomorrow become the city centers of today.

This results in interaction of various organizations. With so many organizations representing each outskirt,

each of one having a different constitutional structure, the coordination amongst them becomes a really difficult

challenge.

At times it is also down to the lack of coordination because of the constitutional rights to each of the central,

state and local governments. Railway is a central subject while the land use planning and the land use planning

and the property tax are the state/local government subject. There is a lack of coordination or value sharing

mechanism between the railways and state government with respect to indirect benefits.

There is a dire need for a much integrated approach to ensure integrated development and optimal utilization

of country’s resources. Mumbai has various municipal corporations, development and transport authorities

such as railways, town planning authorities, etc. undertaking development activities and at times found to be

not working in integrated manner. The coordination can be required on operational front, policy & planning

front and even at times on financial front.

Since the geography of Mumbai curtails the space available for development, therefore the only way is to move

forward is a holistic & integrated approach towards development. This requires the synchronization at an

organizational level as well and not only geographical integration. It calls for a well integrated united body/ a

nodal body, under whom all the current authorities will work. It will not only enhance coordination, better and

integrated town planning bit will also bring in lot of synergies and address the institutional challenge of

disparity in the indirect value capture. It will ensure the distribution of proceeds collected through taxes and

cess to the appropriate value creator for the further development activities.

There have been some few initial steps taken within India towards achieving a value share mechanism or

integration of agencies at highest levels. The following are some of such examples:

Unified Metropolitan Transport Authority in Hyderabad

Government of Andhra Pradesh has enacted a law for formation of UMTA for Hyderabad metropolitan region.

The UMTA would have the power to give decisions on all major infrastructure projects in the city, such as

construction of flyovers, connectivity to airport, new railway lines and construction of new bus terminals. It has

the power to direct different agencies involved in implementation of traffic and transportation policies. Any new

project or ongoing project pertaining to traffic and transportation would be placed before UMTA for clearance.

Urban Transportation fund in Pune

Pune Municipal Corporation has proposed the creation of an urban transport fund to rise around INR 2600

crore for self-financing of metro rail project. This fund would be raised through additional FSI of three in the

metro corridor. Rs. 2300 crore would also be raised through additional FSI allocation for financing BRTS

project.

Pimpri-Chinchwad Municipal Corporation has also set-up an urban transport fund which will be financed

through resources generated from capturing value from beneficiaries in project influence zone. The fund would

be managed separately through an SPV.


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Fund allocation under Central Road Fund Act

The Central Government have allocated “Central Road Fund” generated by levying Fuel Cess on Petrol & high

speed Diesel for financing the development and maintenance of Road Projects, wherein of the total collection

(50% of the fuel cess collection on diesel and 100% of the same on petrol), 12.5% will be allocated to railways for

the construction of bridges, underpass, etc.

Figure 146: Channel of fund flow for Fuel Cess (Central Road Fund Act)

Next Steps

Ministry of Urban Development, Ministry of Railway, Government of Maharashtra, MMRDA and Local Bodies

should form a coordination committee. MMRDA should anchor this committee. This committee should

undertake a consultative study to assess the revenue assessment from indirect value capture for entire MMR

region, existing claimants to funds collected and means of alternate financing using these funds to meet future

capex.


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VOLUME - III (D)

REAL ESTATE DEVELOPMENT


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PwC 278

4.5. Real Estate Development

4.5.1. Background

Mumbai Railway Vikas Corporation Limited (MRVC), a public sector undertaking of Government of India under Ministry of Railways, has been entrusted with the task of executing a number of suburban rail improvement projects under the Mumbai Urban Transport Project.

The Mumbai suburban railway network, operated by the Mumbai division of Western & Central Zonal Railways, covers more than 130 stations across 5 lines. While suburban operations generates revenues from both fare and non-fare box sources, it has been observed that the top line has been insufficient to meet even the ongoing operating expenses103. For financial year 2011 – 12, this operating deficit has been estimated at almost 34% based on estimates by World Bank. While the importance of bridging this deficit is well-recognized, there have also been concerns about the affordability of fare increases on the general public, as well as on the low level of the non-fare box revenue sources, currently estimated at about 3-4%.

MRVC has engaged PricewaterhouseCoopers Private Limited (PwC) vide Letter of Award (MRVC/W/168/TA3 dated 15.01.2013) for study "Revenue maximizing study in particular for non-fare box revenues with affordability studies ".

Further, MRVC has also entered into a Memorandum of Understanding (MoU) on July 16, 2013 with Rail Land Development Authority (RLDA), for monetizing the real estate belonging to Indian Railways through commercial development “at or in the vicinity” of identified stations in the Mumbai suburban rail network.

Coverage

The real estate development has been one of the major sources of non-fare box revenues for the successful transit systems across the globe. However, till date, there has been no revenue generation from the commercial development of the land assets in the region. This section is focused on the estimating the potential from commercial development of the railway land assets in the region with the following coverage:

Overview of the railway land assets in the region

Implementation challenges or complexities

Overview of Development Control Regulations (DCRs), governing policies and guidelines

Overview of the region's real estate market

Potential Estimation

Institutional Arrangement

o Appreciation of the existing institutional framework and guidelines

o Learning from the study tour and global urban rail/metro systems

Implementation plan and way forward

o Overview of Mumbai City Development Plan 2014-2034

o Concept Plans

o Short Term, Medium Term and Long Term Measure

103 Indian Railways Annual Report 2011 – 12


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PwC 279

Guiding Principles

In performing this study, PwC has been guided by the inputs from Railways and MRVC on key operational aspects. Our recommendations are provided within the inputs provided by Railways and study conducted by us.

Further, our analysis has also been guided by the clauses of the Memorandum of Understanding (MoU) signed by MRVC with the Railway Land Development Authority (RLDA) on July 16, 2013, under which it is envisaged that the land parcels will be sub-leased by MRVC to a third party developer for commercial development. Consequently, the prevailing RLDA’s contractual guidelines for third party development of parcels are assumed to apply, specifically with regard to payment structure, lease tenure and the benchmark viability metrics.

Real Estate, being a highly volatile market poses challenges in accurately predicting outcomes of future market potential. It should be noted that estimates in this report are based on a preliminary study and first-cut estimates for the development potential of the individual sites and based on limited market study and interactions. The assumptions underlying the estimates are subject to change based on technical features of the individual sites, or any other site-specific aspects that may affect the development potential at a later stage. In the present case, it is assumed that the third party developer will be provided with sufficient flexibility to develop the parcels with suitable development mix and architectural plan according to the prevailing market needs.

Brief overview of zones in the MMR region

The Mumbai Metropolitan Region (MMR) is an urban agglomeration consisting of the city of Mumbai and its satellite towns. It consists of eight municipal corporations and fifteen smaller municipal councils. The Municipal corporations are listed as follows

Municipal Corporation of Greater Mumbai (MCGM) or Brihanmumbai Municipal Corporation (BMC)

Navi Mumbai Municipal Corporation (NMMC)

Thane Municipal Corporation (TMC)

Kalyan Dombivali Municipal Corporation (KDMC)

Vasai Virar Municipal Corporation (VVMC)

Mira Road – Bhayandar Municipal Corporation (MBMC)

Bhiwandi – Nizampur Municipal Corporation (BNMC)

Ulhasnagar Municipal Corporation (UMC)

For the purpose of the study, we have mapped the properties based on available information and data in the seven (7) zones of the MMR region

Island City (MCGM)

Western Suburbs (MCGM)

Eastern Suburbs (MCGM)

Thane City (TMC)

Navi Mumbai (NMMC)

Extended Suburbs (KDMC, VVMC, MBMC, BNMC, UMC)

Others

From the real estate market point of view, the above zoning has been used for the retail and residential real estate market, however, for the purpose of office real estate market MMR region is further divided into different business districts.


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PwC 280

Office real estate market: The office market is typically analyzed based on the business districts in the region. The region has around six (6) major business districts as shown in the map.

Figure 147: Business districts in MMR


4.5.2. Overview of railway land assets in the MMR Region

The railway land assets are spread across the MMR region, mostly linearly along the rail corridor. Most of the

land is under operational use such as land under tracks, station area, offices, workshops, maintenance depots,

car sheds, etc and some non-operational uses like grow more food, residential quarters for railway staff, open

plots which are operationally underutilized or where the operations has been stopped or shifted to other

locations and lying vacant, etc.

Indian Railways is one of the largest land owners in the city and owns around 2,000 acres of land in MCGM

municipal jurisdiction alone.

Indian Railways owns over 2000 acres of land in the MCGM area alone, making it one of the largest land

holders in the MCGM municipal jurisdiction. Most of these land assets are, through spread over Island and

Suburban areas; over half of them are concentrated in the Island City, which is a prime value zone as per the

real estate market. The high concentration of railway assets in the Island City can be explained by the fact that

most of these assets were acquired in the past during the British Period when the city of Mumbai was largely

concentrated in the Island City.


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PwC 281

Figure 148: Distribution of Assets across the MCGM region

Source: Ward wise Land Use Reports MCGM, Consultation with MRVC

As far as real estate is concerned, railway owned properties can be broadly classified into the following

categories

Stations

Operational assets (tracks)

Operational assets (Workshops, car sheds, store depot, parcel depot, open/vacant plots, etc)

Residential colonies

Offices

Figure 149: Distribution of assets in the MCGM region according to asset class104

Source: Ward wise Land Use Reports MCGM, Consultation with MRVC

104 Approximate figures estimated based on the available MCGM land use maps & reports and Consultation with MRVC.

0

300

600

900

1200

1500

1800

Station & Terminals

Operational Assets

Residential Quarters

Offices

Ar

ea

in

Ac

re

s


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PwC 282

Based on broad overview of Railway asset classes as mentioned above and its interference with the operations

for likelihood for commercial development, we classify the assets in four broad categories:

Vacant Plots

Residential colonies

Stations

Operational assets

o Workshops

o Car sheds

o Siding

o Depots, Stores & Goods sheds

The detailed overview of each of the asset type is given in the following sub-sections.

Vacant Plots

All the railway land parcels are classified as railway land under operational use. There are certain sites which are mostly free of operational use, mostly uncovered or covered by structures which are less critical to the overall railway operations or in use under schemes like "Grow More Food". It is difficult to give a number to such sites as such sites are created or consumed depending on the operational usage. Some of these sites are already identified for the purpose of commercial development.

Two railway land plots in Bandra East admeasuring around 16 acres has been proposed for commercial development and most of the upfront lease premium generated shall be utilized towards financing of MUTP project. In addition to Bandra plots, around 13 other sites aggregating ~100 acres have been identified for commercial development in Western Railway Line for financing the Churchgate – Virar Elevated Rail Corridor

Table 70: List of Some of the railway owned vacant/open plots in MMR

Asset location Area (approx in sq mt)

Kurla 1200

Bandra (East -1) 45000

Bandra (East - 2) 21000

Mumbai Central* 40000

Mahalaxmi* 14027

Lower Parel* 9606

Bandra* (2 plots) 5000 + 16,408

Santacruz (East)* 10,000

Santacruz (W)* 15311

Andheri (2 plots)* 11,800 + 4663

Jogeshwari (Phase -1)* 89641

Jogeshwari (Phase -2)* 89641

Borivali (E - 1)* 10024

Borivali (E - 2)* 17265

Byculla 8094


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PwC 283

CSTM station Carnac Bunder side area connected by D’mello Road

60,703

Chinchpokli (siding, between Nirmal park & Chichpokli Station)

~ 10117

Source: PwC Research and Analysis, RfQ for Churchgate - Virar Elevated Rail Corridor

*Identified for commercial development under Chruchgate – Virar elevated railway corridor


Based on our discussion with officials from both Central and Western Railways there are around 10,000 railway quarters in the MMR region. Most of the residential quarters are in the vicinity of operational assets. The biggest railway colony is the BA (W) with a total of 742 quarters. A majority of the buildings are more than 50 years old. It can be observe that old structures are beyond repairs and a complete redevelopment is required

Table 71: Railway Residential quarters (Type I to Type IV) from Churchgate to Bandra

Type Of Quarters Nos More Than 50 Yrs

Old Proposed For Dismantling

New QtrQuarterd

TYPE I 755 604 158 40

TYPE II 438 333

69

TYPE III 6 2

4

TYPE IV 71 39

4

TOTAL 1270 978 158 117

Source: Western Railway Sources

Table 72: Staff Quarters from Bandra to Virar

Type 1 Type 2 Type 3 Type 4 Type 5 Transit

2396 1604 36 92 12 29

Source: Western Railway Sources

Stations

Along the three lines – Western Lines, Central lines and Harbour lines there are over 120 stations. These

stations form the key nodes around which the city has grown the most.


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Figure 150: Distribution of Stations across the line

Source – PwC Research & Analysis

There are around 6 stations which are common to both Western Line and Harbour Line and 3 stations which are common to both Central Line and Harbour Line, as summarized in the following table.

Table 73: Table showing overlapping stations between stations

Overlapping Stations Remarks

Western Line & Harbour Lines (Column – 1)

Central Line & Harbour Lines (Column – 2)

The overlapping stations for

Column 1 are counted in the

Western Lines and for Column 2

in Central Lines

Andheri Mumbai CST

Vile Parle Masjid

Santacruz Sandhurst Road

Khar Road

Bandra

Mahim Junction

The railways stations in the Mumbai Suburban train network can be classified as follows:

Suburban Railway Stations - The stations serviced by suburban trains (all the stations in the following

table are suburban railway stations).

Intercity Terminus/Junction – The stations which are terminals (origin & final destination station) or

junctions between two or more intercity lines.

Suburban Terminus – The stations which are terminus (origin & final destination station) for the suburban

trains.

Suburban + Suburban Interchange - The stations which are junction or interchange between two or more

suburban railway lines (e.g. interchange between Western line and Harbour line)

Suburban + Intercity Interchange – The stations which are junction or interchange between the

suburban railway line and intercity railway line.

36

61

25

0

10

20

30

40

50

60

70

Western Lines Central Lines Harbour Lines


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Table 74: Suburban Stations

Sr. No. Lines Station Name Intercity

Terminus/Junction Suburban Terminus

Suburban + Suburban

Interchange

Suburban + Intercity

Interchange

1 Western Railway Dahanu Road

√

√

2 Western Railway Vangaon

√

3 Western Railway Boisar

√

4 Western Railway Umroli

√

5 Western Railway Palghar

√

6 Western Railway Saphala

√

7 Western Railway Kelve Road

√

8 Western Railway Vaitarna

√

9 Western Railway Virar

√

√

10 Western Railway Nala Sopara

11 Western Railway Vasai Road √ √

√

12 Western Railway Nalgaon

13 Western Railway Bhayander

√

14 Western Railway Mira Road

15 Western Railway Dahisar

16 Western Railway Borivili

√

√

17 Western Railway Kandivali

18 Western Railway Malad

19 Western Railway Goregaon

√

20 Western Railway Jogeshwari


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Suburban + Suburban

Interchange


Interchange

21 Western Railway Andheri

√ √ √

22 Western Railway Vile Parle

√

23 Western Railway Santacruz

√

24 Western Railway Khar Road

√

25 Western Railway Bandra √ √ √ √

26 Western Railway Mahim Junction

√

27 Western Railway Matunga Road

28 Western Railway Dadar W √ √

√

29 Western Railway Elphinstone Road

30 Western Railway Lower Parel

31 Western Railway Mahalaxmi

32 Western Railway Mumbai Central √

√

33 Western Railway Grant Road

34 Western Railway Charni Road

35 Western Railway Marine Lines

36 Western Railway Churchgate

√

37 Central Railway Mumbai CST √ √ √ √

38 Central Railway Masjid

39 Central Railway Sandhurst Road

40 Central Railway Dockyard Road

41 Central Railway Ray Road


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PwC 287



Suburban + Suburban

Interchange


Interchange

42 Central Railway Cotton Green

43 Central Railway Seweri

44 Central Railway Wadala Road

√ √

45 Central Railway Raoli

46 Central Railway GTB Nagar

47 Central Railway Chunabhatti

48 Central Railway Tilak Nagar

√

49 Central Railway Chembur

√

50 Central Railway Govandi

51 Central Railway Mankhurd

√

52 Central Railway Vashi

√

53 Central Railway Sanpada

54 Central Railway Jui Nagar

55 Central Railway Nerul

56 Central Railways Seawoods

57 Central Railway Belapur CBD

√

58 Central Railway Kharghar

58 Central Railway Mansarovar

59 Central Railway Khandeshwar

60 Central Railway Panvel √ √

√

61 Central Railway Kings Circle


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PwC 288



Suburban + Suburban

Interchange


Interchange

62 Central Railway Byculla

63 Central Railway Chinchpokhli

64 Central Railway Currey Road

65 Central Railway Parel

66 Central Railway Dadar C √ √ √ √

67 Central Railway Matunga

68 Central Railway Sion

69 Central Railway Kurla

√ √

70 Central Railway Vidyavihar

71 Central Railway Ghatkopar

√

72 Central Railway Vikhroli

73 Central Railway Kanjur Marg

74 Central Railway Bhandup

75 Central Railway Nahur

76 Central Railway Mulund

77 Central Railway Thane

√ √ √

78 Central Railway Kalwa

79 Central Railway Mumbra

80 Central Railway Diva

√ √

81 Central Railway Kopar

√

82 Central Railway Dombivilli

√


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PwC 289



Suburban + Suburban

Interchange


Interchange

83 Central Railway Thakurli

84 Central Railway Kalyan √ √

√

85 Central Railway Shahad

86 Central Railway Ambivilli

87 Central Railway Titwala

√

88 Central Railway Khadavali

89 Central Railway Vashind

90 Central Railway Asangaon

√

91 Central Railway Khardi

92 Central Railway Kasara

√

93 Central Railway Vithalwadi

94 Central Railway Ullhasnagar

√

95 Central Railway Ambarnath

√

96 Central Railway Badlapur

√

97 Central Railway Vangani

98 Central Railway Shelu

99 Central Railway Neral

√

100 Central Railway Bhivpuri

101 Central Railway Karjat

√

102 Central Railway Palasdari

103 Central Railway Kelavli


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PwC 290



Suburban + Suburban

Interchange


Interchange

104 Central Railway Dolavli

105 Central Railway Lowjee

106 Central Railway Khopoli

√

107 Central Railway Jugnendra

108 Central Railway Kaman

110 Central Railway Karbao

111 Central Railway Bhivandi

112 Central Railway Sagar Sangam*

113 Central Railway Jasai*

114 Central Railway Navha Sheva

115 Central Railway Dronagiri

116 Central Railway Uran* √

117 Central Railway Dighe

118 Central Railway Airoli

119 Central Railways Rabale

120 Central Railway Udyaminagar

121 Central Railway Vikasnagar

122 Central Railway Turbhe

*Note: Stations on under construction Neral-Uran line

Source: PwC Research & Analysis, MRVC


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PwC 291

The stations are spread across the MMR region from Churchgate in the South, Island City to Dahanu Road in the North, Mumbai CST in the South to Kasara in the North East beyond Thane region and Khopoli in the South East beyond the Navi Mumbai region.

Figure 151: Distribution of Stations across zones

*Others are the areas within the MMR region having municipal councils and villages

Source: PwC Research & Analysis, Egis report

30

11 12

18

9

19

23

0

5

10

15

20

25

30

35

Island City Western Suburbs

Eastern Suburbs

Extended Suburbs

Thane Navi Mumbai

*Others


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PwC 292

Figure 152: Mumbai Suburban Railway Network


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PwC 293

Operational Assets

Most of the land plots owned by railways are in operational use. Other tracks, these operational land plots are sub-

categorized as follows based on their current usage/nomenclature used:

o Workshops – Workshops are used for periodic overhauling of trains and other repairing and

maintenance activities. Workshops are also used for certain manufacturing activities

o Car sheds – Car sheds are used for parking of bogeys for washing and other maintenance purposes

o Sidings – A rail siding is a track section distinct from a running track, connected to the running track at

one or both ends. Sidings are used for marshalling, stabling, storing, loading and unloading of vehicles.

o Depots, Stores & Goods sheds – Railway stores, depots and Goods Sheds are used for storing of

goods, bamboos, coals, cements, etc.

Workshops

There are four (4) railway workshops in the MMR region, belong to central and western railways, each having

jurisdiction over two (2) workshops. Central Railway workshops are located in Mating and Parel; while Western

Railway workshops are located in Parel and Mahalaxmi.

Based on the consultation, public information and secondary research, the preliminary site assessment was

carried out as summarized below:

A) Matunga Workshop (Central Railways)

The workshop was setup in 1915 as a Repair workshop for Broad Gauge (BG) and Narrow Gauge (NG) coaches and

wagons of the erstwhile GIPR. Currently the workshop is used for periodic overhauling (POH) and heavy

corrosion repair of mainline and EMU coaches

Table 75: Matunga Workshop activities

Serial No. Activities Outturn 09 – 10 Target 10 – 11

1 BG AC Coach POH 340 360

2 BG NAC Coach POH 1850 1884

3 BG EMU POH 691 720

Source: Railway Board (http://www.indianrailways.gov.in/railwayboard)

http://www.indianrailways.gov.in/railwayboard


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PwC 294

Figure 153: Matunga Workshop

Table 76: Matunga Workshop Site Profile

Site Physical Conditions

Site Location The site is located between Matunga Road and Matunga Station

Total Site Area and shape ~ 320812 sq m. The site is more or less rectangular in shape.

Current Land Usage The site is currently used as a workshop by CR for periodic overhauling of Broad Gauge, AC, Non Ac coaches and EMU coaches. The site handle around 2964 coaches

Existing structures Currently the site is mostly covered by car sheds and tracks on the periphery on two sides. The site is also covered with many trees.

Site Boundary The site has well demarcated boundaries with tracks from Central Lines and Western Lines, Flyover "Takandas Kataria Marg"

Encroachments No encroachment of any sort is observed in the site

Site Accessibility and catchment area

Approach Road The site can be approached from the flyover "Takandas Kataria Marg"

Major Connecting Road The site shares boundary with Takandas Katari Marg

Immediate Vicinity Across the Central Line tracks high density street retail cum residential establishments are there. Across the Takandas Kataria Marg, Western Railway Colonies are located

Traffic congestion/Density of development

There is low congestion on the road outside the site and the density of development is also low (Density of development is high across the Central Line tracks)



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PwC 295

B) Parel Central Locomotive Workshop (Central Railways)

The workshop was set up as Steam Loco Shed in 1879 for the erstwhile GIPR. It is one of the largest and oldest

repair workshops in the country. The workshop has both repair as well as manufacturing activities. At present the

workshops is used or POH of diesel locomotives, 140T Diesel hydraulic cranes, tower wagons and MLR of coaches;

and manufacturing of WDG3A, WDS6, NG loco of NDM class for Neral- Matheran and ZDM3 locomotives for

Kalka-Shimla

Table 77: Parel Central Locomotive Workshop activities


1 BG Dsl. Loco POH 71 68

2 NG Loco POH 12 13

3 MLR 61


Figure 154: Parel Central Locomotive Workshop

Table 78: Parel Central Locomotive Workshop Site Profile


Site Location The site is located near to the Parel Station and is surrounded by Railway colonies and just across the tracks there is Western Railway workshop

Total Site Area and shape ~ 76890 square metres. The site is more or less rectangular with a highly skewed length-width ratio



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PwC 296

Current Land Usage Currently the land is being used by CR for periodic overhauling of Broad Gauge Diesel Locomotives, Narrow Gauge Locomotive and MLR. Altogether the site handles ~ 150 coaches

Existing structures Currently most of the site is covered by car sheds with tracks having the second most coverage

Site Boundary The site has clearly demarcated boundaries. It is surrounded by tracks from Central Lines on one side, Railway quarters and staff facilities on 2 sides and other properties on one sides



Approach Road The site is more or less landlocked with approach roads through the railway quarters and staff facilities

Major Connecting Road The site is connected to the Dr. Babasaheb Ambedkar Road by the approach roads running across the railway colony (not a DP road)

Immediate Vicinity Railway quarters and staff facilities on 2 sides and other properties on one sides


Low observable congestion outside the site


C) Parel Workshop (Western Railways)

This workshop is also known as the Carriage repair workshop of Western Railways. It is a premier broad gauge coaching workshop. The workshop was originally started as a locomotive repair workshop by the erstwhile Bombay Baroda and Central India Railway (BB&CI) and came up between the years 1870 – 76.

Interaction with senior Western Railway officials (Mumbai division) has revealed that the site is being used for periodic overhauling of long distance trains like mail expresses

Table 79: Activities of Parel Western Railways Workshop

Serial No. Activities Capacity

1 Periodic overhauling of coaches – ICF design coaches

and LHB design coaches ~1500 coaches

2 Periodic overhauling of National Dairy Development

Board (NDDB) milk tankers

3 Manufacturing of wheel sets for other workshop

divisions ~1200 wheel sets

Source: Interaction with senior western railway officials (Mumbai Division)


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PwC 297

Figure 155: Parel Western Railway Workshop

Table 80: Site profile of Parel Western Railway Workshop


Site Location The site is located near the Lower Parel Station

Total Site Area and shape ~ 63170 square metres. The site is rectangular

Current usage Currently the land is being used by WR as an EMU Workshop

Existing structures The site has a car shed and tracks leading to the car sheds from the western lines on one side

Site Boundary The site has clearly demarcated boundaries. It is surrounded by the western lines on one side, Railway sports ground lane on one side, other properties on one side and tracks leading up to the workshop on one side



Approach Road The site can be approach from the Railway sports ground lane and the Shakti Mills lane. It has more or less a good frontage

Major Connecting Road The site is connected to the Tulsi Pipe Road and Senapati Bapat Marg through Shakti Mills lane and Railway Sports Ground Lane +Sun Mills Compound Lane respectively


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PwC 298

Immediate Vicinity The area is an industrial area with various mills and industrial estates like – Shakti Mills, Janata Industries, etc. Upcoming Grade A high rise commercial office buildings, old residential buildings, small format retail shops and local offices


The Congestion may be at the nodes where the Shakti mills compound meets the Tulsi Pipe Road and the Sun Mills compound Road meets the Senapati Bapat Road

D) Mahalaxmi Workshop (Western Railways)

The workshop was set up in 1910 for the erstwhile BB&CI Railway for the purpose of repairing wagons. At present the workshop is used for Centralized Periodic Overhaul of Electrical Multiple Units (EMUs) running on suburban section of Western Railway.

Table 81: Mahalaxmi Workshop activities


1 BG EMU POH 327 648


Figure 156: Mahalaxmi Workshop



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PwC 299

Table 82: Mahalaxmi Workshop site profile


Site Location The Site is located between Mumbai Central and Mahalaxmi station

Total Site Area and shape ~ 71280 square metres (50,000 square metre area is covered). The site is more or less rectangular with a very high length/width ratio making it a longitudinal site

Current Land Usage Currently the land is being used as workshop by WR for POH of BG EMU. The site handles intends to handle around 600 Coaches every year (Currently handling around 350 coaches)

Existing structures The site has a car shed and tracks surrounding the car shed on all the sites

Site Boundary The site is surrounded by tracks of Western lines on one side and Mahalakshmi AHS Chawls and Zenith house on one side

Encroachments There is an encroachment on the boundary shared with AHS Chawls on the periphery of the track as the boundary between the site and the Chawls is not clearly demarcated


Approach Road The site is more or less landlocked

Major Connecting Road The only major road to which the Site can be connected is Keshav Rao Khadye Marg and Sane Guruji Marg through the Chawls

Immediate Vicinity Upcoming Grade A high rise residential buildings, commercial office space


Congestion is high on one side



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PwC 300

Car sheds

Car sheds are generally used for parking of coaches for repairs, washing and other maintenance purposes. It is used for checking of safety items like under gear of rakes, brake gear; passenger amenity items; electrical and mechanical items; batteries; etc. Car sheds are of two types – Diesel Car sheds and EMU Car sheds depending on the type of train they caters to.

There are eleven (11) car sheds in the MMR region – five (5) belong to the Western Railways and six (6) to the Central Railways.

Table 83: Railway Car sheds in MMR

Western Railways Central Railways

Diesel car sheds EMU car sheds Diesel car sheds EMU car sheds

1. Bandra Marshaling Yard (BAMY) - Diesel

Virar Kurla Diesel Car shed Kurla EMU Car shed

Kandivali Kalyan Diesel Car shed Kalwa Car shed

Mumbai Central Sanpada Car shed

Electric Loco Shed, Khar

Road CSTM

Source: Central Railways (http://www.cr.indianrailways.gov.in), irfca.org

A) Western Railways

Diesel Car shed

1. Bandra Marshalling Yard (BAMY) – It was the first shed in Western Railways that hold ALCO locos which serviced premier trains from Bombay in late 60s. It was later used for only shunting duties. Currently it holds only WDS4 and WDS6locomotives.

EMU Car sheds

1. Virar EMU Car shed – The Virar Car shed was remodeled to accommodate around 30 15-Car rakes.

The car shed was set up in a 2 km long and 22o meters wet strip of reclaimed marshy land (Area is ~

440,000 square meters. It is the largest car shed in India. It was commissioned very recently in 2013.

2. Kandivali EMU Car shed – Used as an EMU Car shed. Western Railway’s dual power AC-DC EMU’s

are parked and maintained here. The site has an approximate area of 22,419 square meters. The site is

surrounded by tracks in the periphery.

3. Mumbai Central EMU Car shed – Used as a Car shed for EMUs and trip shed for visiting Locos

4. Electric Loco Shed – Functions as an AC/DC trip shed

Table 84: Car shed wise rake holdings (Western Railways)

Sheds Capacity

Virar Car shed 30 rakes

Kandivali 20 rakes

Mumbai Central 50 rakes

Source: Interaction with Western Railway officials, public domain information

http://www.cr.indianrailways.gov.in/


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PwC 301

B) Central Railways

Diesel Car sheds

1. Kurla Diesel Car shed – It was commissioned in the year 1952. It caters to the shunting services of BB

division and home shunting locos.

The shed also houses a Railway Consumer Depot (RCD) which stores Diesel for fueling diesel locomotives. It also houses an A-Class Accident Relief Train.

Table 85: Types of Locos maintained in Kurla Diesel Car shed

Serial No. Type of Loco Horse Power Capacity

1 WDM2 Inferior 1300 28 locos

2 WDS6 1300 13 locos

3 WDS4 (Effective Holding) 700 12 locos

Source: Central Railways (www.cr.indianrailways.gov.in)

2. Kalyan Diesel Car shed – It was inaugurated on 31st January, 1987. Currently the car shed houses 69

locos. The shed also has mail link of 16 locomotives for important mail/express trains like Duranto

express. It also houses locomotives for freight trains operating within Mumbai Division. Currently

capacity augmentation and up-gradation projects of around INR 1280 Crores are going on at the site.

Table 86: Types of Locos maintained in Kalian Diesel Car shed

Serial No. Type of Loco Horse Power Capacity

1 WDG3A 3100 55 locos

2 WDM3D 3300 3 locos

3 WDM3A 3100 5 locos

4 WDM2 2600 6 locos


EMU Car sheds

1. Kurla EMU Car shed – The crashed was commissioned on 3rd Feb, 1925.

2. Kalwa Car shed – The car shed was commissioned in 26th Jan, 1981.

3. Sanpada Car shed – The car shed was commissioned on 13th September, 1994

All the three car sheds are night stabling depots where night examination is carried out in stabled rakes on a daily basis. Inspections are carried out in these car shed for checking safety items, passenger amenities, other electrical and mechanical items and the batteries.

Table 87: Car sheds wise Rake holdings (Central Railways)

Sheds Stock 9 – Car 12 – Car

Kurla Car shed DC 12 rakes 2 rakes




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PwC 302

AC – DC (Siemens) 0 rakes 44 rakes

Kalwa Car shed DC 11 rakes 20 rakes

AC – DC (BHEL) 0 rakes 10 rakes

Sanpada Car shed DC 44 rakes 0 rakes


Typically Car sheds are landlocked with a single access road at one end of the long land plots and surrounded by tracks. For commercial development of these sites, there is a need for improvement in accessibility and operational need assessment. In addition to this there are other macro complexities and site specific complexities which will influence the commercial development of these sites, these complexities are discussed in the following chapter.

The possibility of consolidating the operations of these Car sheds can be explored. In case of Kandivali Car shed because of its presence in the vicinity of Central Ordinance Depot (COD), getting necessary clearances for commercial development from the concerned authority (for instance, NOC from COD) may be difficult and there is least possibility for the commercial development at this site. So the possibility of enhancing the capacity at Kandivali Car sheds and similar sites to consolidate the operations of other more commercially viable sites can be considered.

Sidings

There are around 22 railway sidings in the MMR region. Most of the sidings are in the Trombay region and Kalamboli region as is evident from the following table. Out of 22, only 7 sidings are in the vicinity of suburban lines.

Table 88: Railway sidings in MMR

Name of Siding Alpha Code Serving Stations

1 Crompton Greaves Ltd. Sdg* CPWS Bhandup

2 Indian Navy Store Depot Military Siding* RNSG Kurla Jn.

3 Mumbai (Wadi Bandar)* WB CST

4 Tisco Sdg Kalamboli KTIG Kalamboli Goods Shed

5 Food Corporation Of India Siding. KFCG Kalamboli Goods Shed

6 Tata Iron & Steel Co. Siding KTTG Kalamboli Goods Shed

7 Steel Authority Of India Ltd. Siding KSAG Kalamboli Goods Shed

8 Cotton Corp. Of India Ltd. CCIK Kalamboli Goods Shed

9 Vishakapattanam Steel Project Sdg. VSPG Kalamboli Goods Shed

10 Turbhe Apm Complex TAPG Kopar Khairna

11 National Rayon Corpn. Sdg* NRSG Kalyan Jn

12 Maharashtra Gas Cracker Complex Sdg MGCS Nagothane

13 BPCL SDG. At Uran* MBPP Panvel

14 Rashtriya Chemicals, and Fertilizers Sid FZSG Trombay



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PwC 303

15 Bharat Petroleum Siding BRSG Trombay

16 Hindustan Petroleum Corporation Siding VOSG Trombay

17 Tata Thermal Power Station Siding TTPS Trombay

18 Tata Power House Siding TPHG Trombay

19 Indian Oil Blending Siding IOSG Trombay

20 Naval Siding Karanja, Uran City NSKG Uran City

21 Victoria Dock BPT Rly* BPTV Wadala Road

22 Grain Depot* BPTG Wadala Road

Source: Centre for Railway information system (Rates Branch System), Sep – 2009

*Sidings in the vicinity of Suburban lines

Figure 157: Distribution of Sidings across zones


Again in case of siding, commercial development will required shifting of operations. Micro market analysis and feasibility study can be carried out at each of these sites to identify potential sites for commercial development.

Goods Shed and Parcel Depots

A) Good sheds:

There are nine (9) full rake Goods Sheds in the Mumbai Division of Central Railways. Wadi Bunder is one of the prime sites in the Island City.

Table 89: Central Railways Goods Shed in Mumbai

NAME OF TERMINALS

Code REMARKS

1 Kalamboli KLMG All except POL/Coal/Cement

2 Kalyan KYN All except POL/Outward Coal

3 Nagothane* NGTN Only Bagged consignment

4 New Mulund Good Shed NGSM O/W-All except POL/Coal. I/W-Cement, Bamboo Only

0

2

4

6

8

10


Eastern Suburbs

Thane Navi Mumbai

*Others


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PwC 304

5 Pen PEN All except POL/Coal

6 Roha ROHA I/W-All except POL/Coal, O/W- Coal up to 31.3.11

7 Taloja Panchanand TPND All except POL/Coal

8 Turbhe TAPG Only Bagged consignment

9 Wadi Bunder WB Only Bagged consignment


B) Parcel Depots:

There is a parcel depot at Grant Road which currently serves as a parcel depot for western railways, recruitment office for 4th Grade employees and laundry for washing of linens. There is one more depot at Currey Road between Parel and Elphinstone Road Stations.

All these parcel depots are located in prime locations in the Island City.

4.5.3. Challenges and Complexities

Revenue generation through real estate development is influenced by various challenges &/or complexities, affecting the commercial development potential and ease of implementation. This section describes the nature of the complexities present in the System.

The complexities are of both internal and external types. Also, some complexities have its effect at a macro level whereas some complexities have effect at a micro or site level. These may vary for different asset or property classes owned by railways.

Macro complexities

External

- External Regulations – These regulations can significantly affect the potential as well as the timely

execution of the projects. These regulations vary with area. Some of the key regulations relevant for real

estate development are

o Land use change: For commercial development the “land use” of a site needs to be change.

Most of the railway lands are classified as “Operational Use”, which needs to be change. Based on

their development policies the concerned authority may or may not approve the land use change

depending on various conditions like location of the site, capacity of the infrastructure in its

vicinity. This decides if the desired development can be carried out or not

Because of the existing inadequate infrastructure getting land use change is difficult, especially in

congested areas

o FSI relaxations: This affects the potential and hence the financial viability of the project. Again

based on their development policies the concerned authorities will give the desire FSI. Compared

to the global standards, Mumbai’s FSI regime is highly restrictive.


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PwC 305

o Clearances and approvals: Before carrying out the development projects necessary clearances

and approvals needs to be collected from various concerned authorities This affects the timely

execution of the project

- Multiple Agency Problem – Real estate development will involve different stakeholders with different

priorities and interests. To obtain development rights, MRVC will be required get clearances and

approvals from multiple entities within the railways such as zonal railway, RLDA and Railway Board. Also

the consent, clearances and approvals will be necessary from the state government and the municipal

government to obtain connectivity to site, land use conversion, granting of FSI and FSI relaxation (if any).

- Market Conditions – The real estate industry is a volatile market and influenced by various macro

factors such as socio-economics of the country and state, state policies & regulatory environment, and

perception of the market participants, especially investors, developers and tenants.

The report contains a detailed overview of regulations and policies and real estate market of the MMR region in the subsequent sections and in the annexure.

Internal

A) Institutional Capabilities: These are the guidelines and policies, capability to handle large tenor

contracts, etc. which are necessary for commercial development of the railway land assets. Absence of

clear guidelines and policies may not lead to successful commercial exploitation.

B) Ease of Construction: It is the technical ease with which the construction can be carried out. Vacant lands

are easier to construct compared to a station with high ridership or an operational assets with high

intensity operations.

Site specific complexities

Idle or surplus railway land plots with no operational activity have resulted in encroachments and land title issues. For instance, title claims have surfaced during the transaction process of the Bandra land plot which has resulted in delays of over five (5) years.

External site specific complexities

The external site specific complexities are applicable across the all the asset class

A) Encroachments – Presence of encroachments on the property can delay the project and add additional

cost. Removable of encroachments can also create a socio political problem. Around 1% of Mumbai’s slum

is on railway land (Out of around 1959 slum settlements in the Mumbai region around 20 of these

settlements are on railway land)

There have been instances of encroachments in different sites. One of the prominent cases of encroachments is the case of the railway land plots close to Bandra Station. Discussion with Se. DEN (Estate), Western Railway (Mumbai Division) revealed that the Garibh Nagar chawls adjacent to the station have encroached on the some portion of railway land and MCGM land.


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Figure 158: Bandra Station

Some of the sites identified with encroachments

Table 90: Sites identified with encroachments*

Stations Operational Assets (non – open plots)

Operational Assets (open plots)

Bandra Station Space between Dadar C and

Dadar W stations Lower Parel (West)

Jogeshwari (Phase 1)

Jogeshwari (Phase 2)

Borivali (East 1)


*Note: The above list is not an exhaustive list

B) Congestion outside the site – If the site is located in a congested area getting land use change may be

difficult as the envisaged commercial development at the site will put further pressure on already stressed

infrastructure, utilities and traffic. Further it will be difficult to carry out the construction and it will also

affect the market attraction of the site.

For example in case of Borivali (East – 2) along the Churchgate – Virar elevated railway corridor which was identified for commercial development, there is a high congestion outside the site because of the presence of Borivali station and a local market

Some of the sites identified with high congestion outside the site


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Table 91: Sites identified with congestion outside the site

Stations Operational Assets (non – open plots)


Virar Mahalaxmi workshop (high congestion on the west side)

Mumbai Central

Vasai Road NGSM Mulund Lower Parel (West)

Bhayander Station Santacruz (West)

Goregaon Andheri (East)

Andheri Borivali (East 2)

Bandra

Dadar W

Dadar C

Lower Parel

Mumbai CST

Chembur

Thane


*Note: The above list is not an exhaustive one.

C) Presence of structures – In most of the sites various structures both critical and non-critical, abandoned

and active have been observed like offices, printing press, pumps, etc. Commercial development of these

sites will require demolishing of these non-critical or abandoned structures and may require shifting of

such structures to elsewhere.

For instance, in Byculla plot there existed two structure, both are found to be abandoned & inactive. One of the two structure has been be demolished by the railways themselves very recently. For the purpose of commercial development at this site, MRVC indicated the other structure can be demolished and shifted to the small plot in the south of Byculla station.

Internal site specific complexities

The internal site specific complexities are further classified into generic site specific complexities applicable to all the asset class and site specific complexities unique to the asset types

A) Generic – applicable to all asset class

a) Accessibility

Limited accessibility to the site i.e. land locked situation limit the overall commercial potential as well as the ease of construction.

For instance, Mumbai Central plot (~40,000 square meters) adjacent to the Mumbai Central Station which can be access only through the already congested circulating area of the station stands to lose its commercial potential although it is situated in a sound micro market because of inadequate access.


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Some of the identified sites with inadequate access

Table 92: Sites identified with accessibility issues*

Operational Assets (non – open plots) Operational Assets (open

plots)

Mahalakshmi Workshop Mumbai Central

Parel Central Locomotive Workshop Lower Parel (West)

Space between Dadar C and Dadar W Santacruz (West)

Kurla EMU Car shed Andheri (East)

Kandivali Car shed Jogeshwari (Phase 1 and Phase 2)

Kalwa EMU Car shed

Bhandup Store Depot

NGSM Yard


*Note: The above list is not an exhaustive.

b) Size and Shape

A smaller land parcel is more complex to construct compare to a larger land parcel. Also it is desirable that the shape of the land parcel is not longitudinal

A narrow longitudinal strip with limited accessibility can significantly decrease the ease of implementation

B) Applicable specifically to stations

a) Commuter Traffic –

With higher commuter traffic the complexities increases as the level of disruptions which will be caused due to construction goes up and the technical capacity required also goes up. Station like Dadar, CST and Bandra will be more complex as compared to Byculla and Mulund

b) Interference with future enhancement of stations –

There is a chance that the commercial development might constrain the future enhancement of stations which will be required as the commuter traffic will keep on increasing

C) Applicable specifically to Operational Assets

a) Intensity of the operations

With higher intensity of operations in the site, the complexity for developing the site increase as the level of interference with the operational usage during the construction will be high.

Sites like Parel Central Locomotive workshop, Virar Car shed, Mumbai Central car shed with high intensity of operations will be more complex

b) Criticality of the operations


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A particular site can be highly critical to the overall operations of the railway. In such a case commercial development may not be feasible in that site or the operations in that site will have to be shifted somewhere else for commercial development, thus increasing the complexity. There are sites where the intensity of operations is low, but highly critical as they are the only operational asset serving in a particular geography

D) Applicable specifically to Residential Quarters

a) Number of quarters

Higher the number of quarters, higher is the impact on the initial development such as temporary location or more construction time to relocate them first prior to exploiting commercially developable area.

b) Area of the land parcel

A smaller parcel creates higher complexity, as it does not offer the opportunity of carving out space in the existing land parcel and relocating the residents at the same geography

The above two complexities are further enhanced if the proximity of the quarters to the work place of the residents is high as it rule out any possibility of shifting the residents to some other location. A large area provides the opportunity of carving out space in the existing land parcel and relocating the residents in the same geography without shifting them to a new location.

E) Applicable specifically to Operational Plots with lower usage (open plots)

Open plots or vacant lands do not have any such specific complexities. However, the generic site specific complexities like – size and shape, accessibility, congestion outside the site and encroachments continue to affect the development potential.

Qualitative assessment of complexities

The complexities are qualitatively assessed to arrive at a score that will serve the objectives such as

1. To compare one asset class with other

2. To compare various sites under each of the asset class

Parameters are developed based on these complexities for comparing the asset class as well as the sites

The approach adopted for quantification of complexity was to

1. Sort out the complexities on which the asset classes are comparable to one another on a broad level

2. Sort out the complexities on which the sites are comparable to one another

3. Each complexity was rated from 0 (zero) to 4 (four), with 4 (four) representing higher ease of

implementation i.e. low complexity and 0 (zero) representing lower ease of implementation i.e. higher

complexity

4. Based on our inferences drew from analysis of regulations, market and other respected reports we gave

weightage to each of the sorted complexities

5. Again based on our inferences drew from analysis of regulations, market, respected reports and analysis

of the site, we scored each site on a scale of 0 (zero) to 4 (four) for each of the complexities

6. Based on the scores and the weight given for each complexity a weighted average complexity score is

calculated for each of the sites for each asset class


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7. Further the complexity score for each asset class is calculated by taking a weighted average of the average

site specific complexity score for each asset class and the scores given to each asset class on the

complexities sorted in bullet point no. 1 (one) above

Parameters for comparing asset classes

0 1 2 3 4

Policies and

guidelines

(Institutional

capabilities)

Not even

considered

Formulation

stage

In principal

exists

Present and

in use

Comparable with

global best

practices

Market perception

(Attractiveness to

developers)

Highly

unattractive Unattractive Neutral Attractive Very attractive

Ease of construction Very Low Low Medium High Very High

Stations

Operational assets (non – open plots)

Operational assets (open

plots)


Institutional capabilities 3 2 3 0

Market Attraction 3 1 4 3

Ease of construction 1 2 4 3


Institutional capabilities – Only vacant land parcels have guidelines for commercial development and have tried in the past. MFC guidelines are available for station redevelopment as multi-functional complexes. However, only air space developments above existing operational assets are yet to be tried.

Market attraction – From a market perspective vacant lands are more attractive for commercial development in comparison to air space development above existing long stretch of operational land with low frontage and accessibility.

Ease of construction – Due to absence of operations vacant lands are easier to develop compared others.


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4.5.4. Overview of Mumbai Real Estate Market

Mumbai, referred to as the financial capital of the country, is the hub of banking & financial services industries,

home to the stock exchanges and financial regulators; headquarters for many prominent corporate houses; and an

important port as well as a centre for trading activity. The major real estate market can be divided as –

Commercial, Retail, Residential and Hospitality.

The commercial relevance of the city has been a key driver for the real estate industry. Mumbai Metropolitan

Region (MMR), which is the conurbation of Mumbai comprising of Greater Mumbai, along with its neighboring

satellite towns and urban areas, like Thane and Navy Mumbai, forms the second largest urban centre in the

country with a population of 20.7 mn. The MMR market is fairly vast and diverse in itself, comprising of various

micro markets distinct in their characteristics, development profile and maturity levels.

The land prices in Mumbai tend to be very high, attributing to as much as 50% of the project cost in certain cases

mainly in Island city, owing to the scarcity of developable free land parcels in the city. Railways with ~ 40% of its

land parcels in Island city can bank upon this opportunity by correctly marketing land parcels for commercial

development on long term lease model.

Offering and transactions in office spaces have increased in Secondary and Peripheral Business Districts (SBD &

PBD) compared to the traditional Commercial Business Districts (CBD) and extended CBD of South and Central

Mumbai. This is mainly due to lower capital & rental rates in these upcoming BD’s. For residential market Navi

Mumbai and extended western suburbs like Borivali, Vasai, Virar are been flourished with supply. South and

Central Mumbai has a lot of supply coming from redevelopment of defunct mill lands by National Textile Mills

(NTC).Organized retail is steadily increasing its pace with about demand for 20 mn. sq. ft. of mall space in the

city.

“Annexure 4.1: Overview of Mumbai Real Estate Market” gives present detailed scenario of Mumbai real estate

market in terms of existing stocks, capital & rental rates, absorbency, tenant profile, upcoming projects under

each of the market.

4.5.4.1. Impact of Transit system on Real Estate market

Different theories on real estate have confirmed that a transportation infrastructure greatly enhanced the area

along the routes and provides the people in the vicinity with both intangible and tangible benefits. Intangible

benefits are easy access to an a efficient transport system making travel to far off locations easy, travel time

savings, travel cost savings.

Mumbai Suburban train network has contributed to the growth of the city by improving connectivity across the

region spawning new growth centers. The urban expansions because of increasing congestion and property prices

in the established areas have generally followed the suburban rail corridors. The catchment areas of suburban

stations are the predominant locations for high density urban development. For a detailed impact of transit

system on urban spatial growth and real estate market, the section on indirect benefits should be referred.


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Figure 159: Spatial population growth in MMR (1971 and 2001)

Source: CTS for MMR (2008)

Figure 160: Spatial population growth in MMR (2011 and 2052)

Source: Concept Plan Mumbai Metropolitan Region, Jan 2013 (GoM – Vision Mumbai)


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It might be difficult to quantify exactly the impact of the suburban line in existence for over 100 years, except the recent development projects. However, the cases from the other cities like Delhi, where the green field metro lines show the clear impact on real estate market i.e. supply and demand for various asset classes.

Case Examples: Impact of Delhi Metro and Bangalore Metro on Real Estate Market

The metro rail (DMRC) has greatly improved the connectivity in Delhi and because of this improved connectivity

residential preferences of citizens have been altered with citizens opting for outer areas like Rohini, Mayur Vihar,

and Peeragarhi. Also residential land values have increase many times as compared to that of land plots away

from the transit node/corridor. The improved connectivity to the peripheral areas of the city due the metro have

also reduced the differential in commercial space rentals between the Commercial Business Districts (CBD’s) like

Connaught Place and various commercial areas.

Similar is the case of Bangalore metro (started operations in October 2011) where the improved connectivity to

the peripheral areas in South & West Bangalore have started providing substantial increase in real estate price

indices in these regions compared to the city CBD’s105.

Since the benefits is not limited only to the immediate catchment of the transit system but to a much larger

catchment, the Mass Rapid Transit System projects should be looked at as an integrated land and

infrastructure development. Given that most of the railway land parcels are located in a close vicinity of the

suburban railway stations (or transit nodes), maximum value can be captured if monetized strategically and

timing appropriately with the market movements.

4.5.5. Development Plan and Development Control Regulations for

Mumbai

4.5.5.1. Development Plan 2014-34

The present development in the City is governed by Development Plan 2005-2025. MCGM is preparing the

Development Plan for 2014-2034 periods with a “Vision Development Plan 2014-34” which can be articulated as

follows:

“To enable the transformation of Greater Mumbai into a Global City that is

inclusive, sustainable, livable, and efficient”

Salient features:

Development Plan (DP) 2014-2034 endeavors to move away from the constraining development policies

which created artificial scarcity of development rights leading to increase in real estate prices, decrease in

per capita residential space and forcing of a large portion of population into informal housing stock

Focus on redevelopment as a key element of Mumbai’s development

Create a ‘common pool of land for public purposes’ through encouraging the redevelopment of existing

build up areas

Adopt flexible Land Use Zoning that will facilitate new economic activities to occur and allow mixed Land

Uses subject to environmental safeguards

105 PwC conducted World Bank funded study “Metro Impact Assessment – Delhi, Chennai and Bangalore”


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Promote Transit Oriented Development (TOD)

Simplify Development Control Regulations (DCR) to increase transparency and minimize transaction

time

Ensure the availability of adequate development rights catering to space demands over a 20 year horizon

period through flexible regulations. This in turn would allow the market to operate competitively, so as to

function and counter restricted housing supply and increase affordability

Promote inclusive development by adopting inclusive housing policy and inclusive zoning strategy

Promotion of Urban Renewal and Redevelopment in Mumbai106

The key elements of this strategy are listed as follows

Promote Polycentric development with a view to emphasize existing commercial centers and

emerging new employment centers

Strengthen Transit Oriented Development in the influence zone of important railway stations,

important new metro stations, at important nodes along existing major road networks and around

important transport linkages with the MMR

Encourage Urban Renewal of areas that would benefit from comprehensiveness redevelopment such

as large slums, area in Island City with dilapidated older buildings and areas that are rapidly

transforming, such as older industrial lands

A) Promote Polycentric development

The new DP 2014 – 34 endeavors to enhance the development potential around the existing growth centers as

well as the emerging growth centers. The existing centers are the Nariman Point – Fort CBD, Worli, BKC and

Andheri. The DP 2014 – 34 has identified growth nodes across the MMR region

106 Source – MCGM (Development Plan – Preparatory Studies Part 3)


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Figure 161: DP 2014 - 34 Growth centers in MMR

Source: MCGM, Existing land use survey (2012)

Railway properties in these nodes should be identified and segregated for commercial development. A micro

market analysis should be conducted for each of these nodes to ascertain the right development concept, product

mix.

B) Transit Oriented Development

The new DP 2014-34 seeks to promote TOD around existing railway stations, proposed metro stations and

important major road intersections. The previous DP 1991, although it planned the development along the railway

corridor, it prevented development on either side of the corridors on the grounds of accessibility. The new DP

intends to digress from the previous one by intensifying land uses and facilitating compact high density mixed

usage in areas around the railway stations and hubs and nodes of other transportation modes. The new DP 2014-

34 intends to develop these areas around transportation nodes into growth and employment hubs.

Some of the key railway stations identified as part the DP 2014-34 are listed below


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Table 93: the key railway stations identified as a part the DP 2014-34 for ToD strategy

First Tier Second Tier

Western Lines Central Lines Harbour Lines Western Lines Central Lines Harbour Lines

Churchgate CST Wadala Grant Road Parel Chembur

Dadar Kurla Mumbai Central Kurla

Lower Parel Ghatkopar Mahalaxmi Nahur

Bandra Mulund Lower Parel

Andheri Jogeshwari

Borivali Malad

Goregaon

Figure 162: Transit Oriented Zones in Greater Mumbai

Source: MCGM, Development Plan 2014-34 (Preparatory Studies)


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C) Increasing the supply of land for public purposes

With the growing population the requirement of land is going up. In order to address this situation the

new DP 2014 – 34 has adopted two approaches

Opening up vacant/under developed lands which are relatively environmentally insensitive

Create a pool of land for public purposes

At present there are 116.56 sq. km under No Development Zone (NDZ) according to the previous DP –

1991 and majority of these lands are environmentally sensitive leaving a small chunk for development.

Also the supply of vacant land in the city is limited to only 21.94 sq. km highlighting the heights of

land shortage in Mumbai.

Interaction with MCGM DP 2014-34 team

The interaction was held with the officials of MCGM DP 2014-34 team and advisor to MCGM. It was

found that MCGM is keen to work closely with the railways as railways would be looking forward to

put some of its land assets in the development. The coordinated work will benefits both the direct

stakeholders and indirectly to a larger stakeholder, viz. commuters and the city.

The railway land parcels at present do not form a part of the Development Plan, and hence the

connectivity and accessibility, infrastructure utilities, etc are not planned for the proposed or future

development in railway land assets. Hence it is advisable for railways to share the land details with the

planning authority whether or not meant for commercial development, so as it can become a part of

the development plan with consideration for improved accessibility and infrastructure provisions.

The DP 2014-34 is being developed at several levels. The tier-I plans are mainly focused at a overall

city level planning however, tier-II plans will be more local area focused. The railway land plots if

shared at this stage can get priority in the tier-II plan formulation.

Implications for Railways

As discussed earlier revenue generation through monetization of railway assets will be influenced by

the development control regulations of the local government and also by the site specific features.

Acquiring the necessary land use changes, clearances and other favorable regulations; as well as

improving the site specific features like accessibility of sites, utility infrastructure, removal of

encroachments; etc requires the co-operation of the local Governments like MCGM.

The urban authorities plan for the infrastructure development of the city and come up with

development plans periodically. It has been observed that in the past development plans, railway land

parcels did not form a part of the development plan.

Also as mentioned earlier, the discussions with MCGM officials have revealed that the railway land

assets do not form a part of the Development Plan 2013 – 34. This puts railways in a very

disadvantage position as it might miss out on the following:

- Favorable development regulations envisaged by the urban authority for the overall city

development

- Improvement in infrastructure around the land parcels

- Improvement in accessibility to all the railway land parcels

- Removal of encroachments


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- Planned development around the land parcels

Moreover unplanned development around the land parcels and encroachments will further

deteriorate the site conditions like accessibility, thereby making more and more land parcels land

locked. This will affect the scope of monetization of the assets as well as the attainable potential.

In order to address these issues Railways will have to adopt a very pro-active approach and engaged

with MCGM for the overall integration of suburban transit system and railway assets in the overall city

development plan while at the same time retaining the ownership of its assets.

4.5.5.2. Development Control Regulations (DCR) in the MMR zone

The Mumbai suburban rail network and the railway properties are spread across the MMR region

transcending different jurisdictional zones. Most of the properties are concentrated in the zones which

fall mostly under the jurisdiction of Municipal Corporation of Greater Mumbai (MCGM), Thane

Municipal Corporation (TMC) and few under Navi Mumbai Municipal Corporation (NMMC).

In the following section, excerpts from the DCR regulations for MCGM and TMC has been studied in

details, since the commercial development rights above station in Navi Mumbai are with CIDCO.

As per Maharashtra Region and Town Planning (MR&TP) Act 1966, every municipal corporation has

to prepare a development plan to be implemented over 20 years. Presently Development Plan 1991 is

under use. The Plan defines Land use and manner of development. DCR is a tool to assist the city

administrators to implement the development plan. The key clauses of DCR of MCGM and TMC have

been summarized in the Annexure-4.

The major regulations affecting the real estate development strategy for railways are:

1. Land use regulations

2. FSI regulations

3. TDR regulations

4. Other Approvals (To be procured by developers)

In addition to these, the other regulations will have impact on the development on a site-by-site basis

(as detailed in Annexure 4.2)

Land use regulations

The railway lands come under the categories of Residential, Transport and Government Office

Table 94: Current land use classification of railway assets

Source: MCGM land use survey

Land Use Classification Railway asset types

Government Residential Quarters Residential Quarters

Transport Railway Stations

Railway Yards/Sidings

Railway Terminal

Government Office Railway Offices


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To carry out any development plans the land use classifications need to be change to any one of –

Commercial or Residential according to the type of development considered. The approvals for the

same needs to be procured from Urban Development Department, Government of Maharashtra

(UDD, GoM) as per section 37 of Maharashtra Regional & Town Planning (MRTP) Act 1966.

Railway land plots have traditionally been earmarked as operational land in the city's development

plan. Therefore the success of any real estate strategy needs adequate planning support from state and

city governments.

Since past and current development plan of city excludes railway land areas, accessibility and

infrastructure planning activities have not accounted for such parcels. As a result, many of these sites

lack access through proper roads and may also lack connectivity to utility infrastructure, critical for

commercial development.

According to the Draft Development plan 2013- 34the city is likely to adopt a flexible and mixed land

use regime which will benefit the railway land assets it being located in the transit influence zone.

In addition to land use change, there are several NOCs that need to be obtained from non-municipal

entities, such as NOC from the Central Ordinance Depot will be require, in case of Kandivali Car Shed,

if it is put to market for the commercial development.

FSI regulations

Mumbai is very unique when it comes to FSI and TDR regulations. Compared to global cities FSI in

Mumbai is extraordinarily low and uniform and according to experts it is the most constraining

development control regulations which are affecting the development of Mumbai.

Topographically Mumbai as a city is comparable to Hong Kong, New York and Singapore where the

topography creates a constraint on land supply. To take care of the land supply constraint these cities

have designed higher FSIs with greater planning.

Over time Mumbai has actually decreased the FSI values since 1964, when the FSI value at Nariman

Point was fixed at 4.5 and reduced to 1.33 in 1991 for most of the island city. This is in contrast to the

development in the other cities across the world where with the advancements in technology and

improvement in infrastructure, has led to development with higher FSI increased and population

density decreased. In most of the global cities planners always establish the regulated FSI at a higher

level than the FSI of the existing building – this practice incentivizes the redevelopment of old

buildings.

The FSI in the Island City was decreased to 1.33 in 1991 on the justification that it will prevent

congestion and overcrowding, but on the contrary density of population in the region has increased

and the real estate prices has skyrocketed

Further, FSI is calculated on the net land area after adjusting for mandatory recreational/open space

area, for instance, net land area is 85% of the total area in case of land plot of size between 2,500 to

10,000 sq. m.

Mandatory parking provisions is necessary to be met and it is excluded from FSI calculations.

However, additional parking will be counted as a part of permissible FSI.

Mumbai FSI regulations salient features

The FSI is extraordinarily low compared to global standards

It is uniform over large area


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Not differentiated between commercial and residential

The FSI does not reflect the difference in accessibility around train stations

The FSI regulations are not linked to land market values

Does not encourage the redevelopment of old buildings – most of the old buildings at

Nariman point predates the imposition of 1.33 FSI value and hence redevelopment of them

will result in loss of floor space

Created an artificial floor space shortage resulting in high real estate prices

As shown in the figure below there is a little variation in FSI values over a distance of 30 km from the

CBD in case of Mumbai where as there is a significant variation

Figure 163: Variations of Maximum FSI in commercial areas with distance from CBD

Source: Mumbai Transformation Support Unit (MTSU) – Vision Mumbai

Figure 164: Variations of Maximum FSI in residential areas with distance from CBD

Source: Mumbai Transformation Support Unit (MTSU) – vision Mumbai

0

5

10

15

20

25

30

CBD 5 km 10 km 15 km 20 km 25 km 30 km

FS

I V

alu

es

Distance from CBD

Singapore New York Seoul Vancouver Mumbai

Dharavi

0

2

4

6

8

10

12

CBD 5 km 10 km 15 km 20 km 25 km 30 km

FS

I V

alu

es

Distance from CBD

Singapore New York Seoul Vancouver Mumbai


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Advantages of higher FSIs for cities like Mumbai

Prevents cities from sprawling and decreased population dispersions, thus less travel and

transportation need leading to time savings, cost savings and lesser pollution.

With the increase in income households and firms can consume more floor space without

moving out to new areas in the suburbs.

Existing FSI regulations

The FSI values for different zones under different land use are shown in the table below

Table 95: Existing FSI (MCGM)

Island City Suburbs and Extended Suburbs

Residential Zone (R-1) and Residential Zone

1.33 0.5-1

Local Commercial Zones (C-1) and District Commercial Zones (C-2)

1.33 1 (For purely commercial use non residential)

Service Industrial Zone (1-1)

General Industrial Zone (1-2)

Special Industrial Zone (1-3)

1 1

For Storage Buildings

(Warehouses and Godowns)

0.5 or volume to plot area ratio of 4 m whichever is less

Educational Buildings, Medical Institutions and Institutional Buildings

1.33 1

Government and Semi Government offices in

1.33 1

Source: DCR Mumbai (1991)

Recently a decision was made to allow a FSI value of 4 for the redevelopment of Dharavi. A decision was made to allow an FSI of 2.5 in new slum redevelopment projects which is being implemented by Slum Rehabilitation Authority (SRA). The following map shows the variations in FSI across different areas in the MMR region.

Source: Mumbai Transformation Support Unit

(MTSU) – Vision Mumbai, 2008

Figure 165: FSI values across different zones


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TDR Regulations

Transfer of Development Rights (TDR) makes available additional built up area (BUA) in lieu of land

acquisition in urban areas by municipalities or any government agencies for public purpose especially

for road widening, parks, play grounds, schools etc. to the owner of the land. The BUA can either be

utilized by owner himself or transferred it to other developers in need of the extra BUA for an agreed

sum of money. Clause 34 in DCR, 1991 regulates TDR in Mumbai.

In the past few months TDR prices have almost doubled in Mumbai. The current price of TDR is ~

INR 4000 per sq. ft.

The Government use TDRs to finance its projects such as social programs like slum rehabilitation,

road constructions, housing and community facilities that the city could not afford to finance from its

other available resources.

Challenges

Grant of additional FSIs through TDRs resulted in increase of FSI in individual plots at dispersed

locations where the infrastructure like roads were not compatible with the increased FSI

Arbitrary increase of FSIs through TDRs will create huge infrastructure problems

MMRDA a Special Planning Authority (SPA) in Mumbai awarded a plot of 6.2 acres, which is a part of

Wadala Truck Terminal (WTT), to a reputed developer in May 2010 on long-term lease for

commercial development. The maximum permissible BUA awarded translates to a FSI of 19.8;

however, the FSI for the whole WTT is 4.0. The enhanced FSI is derived from the unused FSI of Trust

Terminus and recreational ground, which are also the part of WTT, being transferred to this plot.

Also, the National Textile Corporation (NTC) received TDRs in lieu of its Textile Mills in Worli given

to BMC for its office. It auctioned these TDRs in the market generating revenue for itself.

Implication for Railways:

Railways can monetize commercially unviable or developable land plots using TDRs. However, there

are challenges /issues which need due considerations:

TDRs once sold cannot be reclaimed. The current model of commercial development do not

permit sale of land plots, and TDRs cannot be given on lease.

Sold TDRs can be retained with railways if and only if these are permitted to be used within

the well developed market for railway land plots itself. However, such a market does not exist

today.

Also, TDRs generated in MCGM jurisdiction cannot be used in other municipal jurisdiction.

This will require regulatory changes and assistance from State Government and coordination

between various municipal bodies to enable development of MMR region specific TDR

market.

Regulatory approvals

Currently the Railway land parcels have been classified as “Operational” in the DCR and no other

development other than Railways operation/ Railway offices/ residential colonies are permitted.

Before taking up any commercial development work the land use needs to be change either to

“Commercial” or “Residential” depending on the type of the development considered. Also relaxation

in FSI above permissible should be procured from UDD, GoM. There clearances should be in place

before the plot goes into market for bidding. Later on, there will be project specific approvals that will

need to be procured by the developer from MCGM, Fire Authority, Railways and any other


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appropriate authority. The framework for land use change is same based on past land use change

transaction for RLDA Bandra plot where as the project specific approvals as laid by MCGM and is

depicted in figure below.

Figure 166: Land use change and FSI relaxation approval process

4.5.6. Existing institutional arrangement & Railway guidelines

Indian Railways was the first central organization to develop an institutional strategy for land

monetization with the primary objective of reducing the growing operating deficits and for reducing

the demands for central budget support.

RLDA – The Railway Land Development Authority (RLDA) was constituted as a

separate statutory body in 2006 for development of vacant railway land for commercial use for

the purpose of generating revenue by non-tariff measures. It is a statutory authority under the

Ministry of Railways (MoR), Government of India, set-up by an Amendment to the Indian Railways

Act, 1989

IRCON – IRCON International limited is a government company under the Ministry of Railways,

registered under the companies act, 1956

IRSDC (Indian Railways Stations Development Corporation Limited) – A Special Purpose

Vehicle constituted under Companies Act, 1956 with the equity participation of “Ircon International

Limited (IRCON)” a Government Company under the Ministry of Railways and “Rail Land

Development Authority (RLDA)” a statutory authority under Ministry of Railways, to

develop/redevelop identified Railway Stations across India with the primary objective of augmenting

and improving passenger related amenities at stations in holistic manner.


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MRVC – It is a project executing agency which is responsible for executing the identified Rail

Projects under MUTP-II with the funds provided to it by Ministry of Railways and Government of

Maharashtra on 50:50 basis

According to the Circular No.2000/LM (L)/2/16 of Ministry of Railways, Government of India the

role of MRVC in commercial utilization of railway land in Mumbai Area are defined as follows

Commercial development of land and air space will not entail any outgo from MRVC funds

Ownership of assets will be as under

o The ownership of all the operating assets (such as track, rolling stock, etc) will be with

Ministry of Railways

o The ownership of commercial properties on Railway land and airspace will be with

Ministry of Railways

o The ownership of commercial properties (at Railway Station and Railway alignment)

on Government of Maharashtra’s land and air space will be with Government of

Maharashtra

1/3rd of net revenues arising from commercial properties on Railway land (1:1:1 sharing

principle) will be given to MRVC against Ministry of Railway’s share of counterpart funds

Property development will be done through MRVC in areas covered by MRVC project, duly

consulting Ministry of Railway/Govt. of Maharashtra. However, on sites already taken up by

Ministry of Railways for commercial development through its PSUs, the work can be

progressed in consultation/agreement with Government of Maharashtra

Figure 167: Existing Institutional Arrangement for property development

MoU between RLDA & MRVC – RLDA & MRVC has entered into MOU (dt. 16.07.2013) for

commercial development of Railway Land / Air Spaces at stations in Mumbai. The principle is that the

revenue generated will be reinvested for the City’s suburban infrastructure development projects (for

instance, station redevelopment)

Salient features of MoU & RLDA model:

The commercial assets so developed shall remain under the exclusive control of and be

operated and maintained by MRVC during the entire lease period


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Min. Return on Equity offered (EIRR) – 22.5%

Min. Internal Rate of Return on project – Cost of borrowings + 5% (subject to min. of 15%)

Bidding criteria

o Annual rental, or

o One-time upfront lease payment, or

o Combination of both

Payment terms

o Upfront lease payment (in single or maximum 4 instalment)

o Annual lease payments, escalated at 15% every 3 years

Figure 168: MoU between RLDA and MRVC

Leasing of sites to MRVC

Exploitation and operation

rights

Assets created

Payment of consideration

Leasing of sites

Development rights

Lease and license payment

Assets

Profit sharing

Assignment and entrustment of land and air space as per the

Clearances

Approvals


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location and size identified by MRVC

RLDA guidelines allow commercial models based on upfront premium and annual payment model;

however, upfront premium should be at least 7 times the annual payment component. Hence optimal

trade-off between upfront and recurring revenue stream (or annual payment) is required for each of

the land parcel based on financial feasibility and investment priority.

4.5.7. Potential Estimation

The approached developed for potential estimation can be explained as follows

Step 1 – Development of filter criteria for selection of sites

Step 2 – Selection of the sites based on the criteria developed above

Step 3 – Making assumptions for calculations based on

o Existing market conditions

o Existing regulations

Step 4 – Estimation of potential

Filter criteria for selection of sites

The filter criteria were developed so as to arrive at a list of assets which are commercially more viable. Various factors which influenced the potential of the site as well as its strategic importance to the overall city were considered for developing the criteria and various past reports were reviewed

The factors considered for developing the criteria are listed below

- Regulations

- Market conditions

- Inferences drawn from literature review –

- Overall city development plan

Two levels of criteria were developed for the selection of the assets

Level 1 filter – Applicable across all the asset class

1. Located in the area with favorable market conditions

2. Areas in an around the identified development nodes in the formulated Development Plant

for TOD

Level 2 filter

Stations


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1. Stations with high ridership

2. Station with strategic importance (interchange, junctions, terminals, etc)

3. Possibility of Transit Oriented Development

Operational Assets (non –open plots)

1. Existing usage/trends (decline/increase)

2. Interference between operations & commercial development (existing/expected)


1. Age of the assets/condition of the buildings in case of residential quarters

Operational Plots (open plots)

1. Site characteristics (Shape, size and accessibility)

Selection of Assets

We identified around 61 assets totalling ~ 500 Acres

Table 96: Distribution of identified assets according to the asset class

Asset type Number of sites Acreage

Station 25 ~ 58

Operational asset (non-open plots) 15 ~ 341

Operational assets (open plots) 16 ~ 108

Residential quarters 5 ~ 23


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Figure 169: Distribution of identified assets according to geographic zones

Stations

We have identified 25 stations with an approximate acreage of 58 Acres

Table 97: Identified stations

Western Line Central Line Harbour Line

Virar Mumbai CST Wadala

Vasai Road Masjid GTB Nagar

Bhayander Byculla Chembur

Borivali Dadar C Govandi

Goregaon Kurla

Andheri Ghatkopar

Bandra Bhandup

Dadar W Mulund

Mumbai Central Thane

Chruchgate Dombivali

Kalyan

0

2

4

6

8

10

12

Island City Western Suburbs Eastern Suburbs Extended Suburbs

TMC KDMC

Nu

mb

er

of

asse

ts

Station Operational assets (non-open plots) Operational Assets (open plots) Residential quarter

~302 Acres

~100 Acres ~112

Acres

~ 7 Acres ~4

Acres

~6 Acres


PwC 329

Figure 170: Distribution of selected stations according to geographic zones

Figure 171: Identified stations

9

4

6

3 3

0

2

4

6

8

10

Island City Western Suburbs Eastern Suburbs Extended Suburbs TMC

Nu

mb

er

of

asse

ts


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Operational Assets (non – open plots)

Based on the filter criteria developed we identified 15 operational assets under various usage

Table 98: Identified operational assets (non - open plots)

Serial No.

Asset location Description ~ Area (in sq mt)

1 Grant Road Old Goods Shed ~ 120000

2 Grant Road Grant Road Parcel Depot ~ 12705

3 Mahalakshmi (W) Workshop ~ 71280

4 Lower Parel Parel Workshop ~ 105800

5 Lower

Parel/Elphinstone Road

Central Railway Locomotive Workshop ~ 68250

6 Dadar Land parcel between the WR & CR Dadar Station ~ 13845

7 Kandivali Car Shed ~ 22419

8 Matunga Matunga Workshop ~ 320812

9 Kurla Kurla Car shed ~ 11716.5

10 Wadala Wadala siding ~ 27744

11 Kalwa, Thane Kalwa car shed ~ 83782

12 NGSM Cement Mulund Railway Freight Yard ~ 181044

13 NGSM Yard NGSM - Cement Warehouse ~ 28693

14 Bhandup Bhandup East Yard ~ 38550

15 Wadi Bunder Coaching yard, next to MbPT port area ~ 133546

16 Currey Road depot Currey Road depot between Parel & Elphinstone

Road stations ~ 80937

Figure 172: Distribution of identified operational assets (non - open plots) according to type

4

3

5

4

0

1

2

3

4

5

6

Workshops Car Sheds Goodshed, Parcel Depot, Warehouse

Sidings & Yards


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Figure 173: Distribution of identified operational assets (non - open plots) according to geographic zones

Figure 174: Identified operational assets (non - open plots)

10

1

4

1

0

2

4

6

8

10

12

Island City Western Suburbs Eastern Suburbs TMC


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We have identified 5 Residential colonies for the purpose of potential estimation based on the criteria developed by us

Table 99: Identified residential quarters

Railways Asset Location Age of the assets

(years) Number of Quarters

Existing BUA

Western Railways Bandra (W) ~ 40 742 ~ 18550

Western Railways Santacruz (W) ~ 40 500 ~ 12500

Central Railways Parel >40 650 ~ 16250

Central Railways Kurla >40 750 ~ 18750

Central Railways Matunga >40 500 ~ 12500

Operational assets (open plots)

Based on our filter criteria we have identified around 13 land parcels, which are listed as follows

Table 100: Identified operational assets (open plots)

Serial No.

Asset location Zone Description ~ Area (in sq.

meters)

1 Kurla Eastern Suburbs

NO use to railways since it is a very small plot as well as away

from the station ~ 1200

2 Bandra (E) Western Suburbs

plot has been identified and was put under bidding in the past

~ 45000

3 Bandra (E) Western Suburbs

Identified, located between the above plot (or pipeline) and

railway tracks on the west side ~ 21000

4 Mumbai Central Island City

The land parcel currently houses offices of various departments

like GRP, RPF, Union, Rest House, Reservation centre,

Power supply office

~ 40000

5 Mahalaxmi Island City

Operational printing press along with supporting pump house

and power unit, Defunct Scrap Yard, Temple, 4 – 5 perennial trees and an abandoned office

building

~ 14027

6 Lower Parel Island City

The site is cover with various structures like abandoned office

buildings; Temple; Hutments/staff quarters; storage

sheds for scrap such as RCC rods, electric cables, etc;

perennial trees

~ 9606

7 Santacruz (W) Western Currently the land is being used ~ 15311


PwC 333

Suburbs as a railway colony

8 Andheri Western Suburbs

Operations and support activities such as circulation

area. Partially occupied by PPF offices and police station

~ 4663

9 Jogeshwari (Phase -1) Western Suburbs

The land parcel is currently used for railway quarters, small scale farming purposes and to support

other railway facilities

~ 89641

10 Jogeshwari (Phase -2) Western Suburbs

~ 89641

11 Borivali (E - 1) Western Suburbs

G+1/2 structures, mainly temporary hutments

~ 10024

12 Borivali (E - 2) Western Suburbs

G+1/2 structures, mainly temporary hutments

~ 17265

13 Byculla Island City

~ 8094

14 Carnac Bunder Island City CSTM station Carnac-Bunder

side area connected by D’mello Road

~ 60703

15 Chinchpokli Siding Island City Decommissioned siding, between Nirmal park &

Chichpokli Station ~ 10117

Figure 175: Distribution of identified operational assets (open plots) across geographic zones

Key assumptions for calculations

The assumptions were made so as to make the estimates as realistic as possible under the prevailing

conditions

Factors considered for making the assumptions

The factors considered while making the assumptions are listed as follows

- Market factors

o Absorption level

o Rental rates

- Regulations

o DCR regulations

o Permissible FSIs

- RLDA guidelines

6

8

1

0 1 2 3 4 5 6 7 8 9

Island City Western Suburbs Eastern Suburbs


PwC 334

Assumptions & Scenarios

- Land use change – The potential ere estimated under the premise that the necessary land

changes required will be acquired

- Development – Land + Air space development has been considered for all the asset lass

except for station where only Air Space Development has been considered

- Product mix – A product mix of retail and commercial office space was considered with

proportion of the mix varying with the zones based on the micro market conditions in the

respective zones

- FSI regimes – Two FSI scenarios are considered – Prevailing FSI and Enhanced FSIs.

Prevailing FSIs are the FSIs which are currently applicable to a particular zone. An enhance

FSI of 2 was considered across all the sites

- Absorption rates – The absorption rate per year was assumed to be 100,000 square feet for

both commercial office space as well retail space throughout all the zones

- Rental rates – Rentals for commercial office space, retail space and retail space are taken

according to the prevailing market rates in the respective micro markets of the sites

- Upfront rate – Similarly upfront rates for commercial office space, retail space and retail

space are taken according to the prevailing market rates in the respective markets of the sites

- Phasing of construction

o The rate of construction was assumed to be 360,000 square feet/year

o Construction was phased over a minimum period of two years with 10% completion in

1st year. The upper limit depended on the area to be built

Illustrations

Case 1 - if the area to be build is small and required less than 2 years to complete based on the

construction rate above then it will be phased over two years with 10% completion in 1st and the

remaining 90% in the 2nd Year

Case 2 – if the area to be build is big and required more than 2 years to complete based on the

construction rate above, then 10% of the area will be completed in the 1st year and the remaining 90%

will be equally phased out through the remaining required number of years

Estimation of potentials

Stations

The 25 stations under prevailing conditions and based on above assumptions will theoretically

generate approximately INR 263 Crores in the 5th year from the start of construction on an annuity

basis. On an upfront basis it can theoretically generate approximately INR 708 Crores.

However the above mentioned potentials can be generated only if all the identified 25 stations are

brought to the market simultaneously, which is practically impossible both from a market point of

view as well from an implementation point of view


PwC 335

Figure 176: Stations - Annuity under prevailing FSIs

Figure 177: Stations - Annuity under enhanced FSIs

Figure 178: Stations - Upfront revenues

263 357

410

542

0

100

200

300

400

500

600

Year 5 Year 10 Year 15 Year 20

An

nu

ity

in

IN

R C

ro

re

s

371

600 690

913

0

100

200

300

400

500

600

700

800

900

1000


An

nu

ity

in

IN

R C

ro

re

s

708

1105

0

200

400

600

800

1000

1200

Prevailing FSIs Enhanced FSIs

An

nu

ity

in

IN

R C

ro

re

s


PwC 336

Operational Assets (non-open plots)

Under prevailing conditions the 16 identified operational assets, if simultaneously brought into the market and developed can theoretically generate approximately INR 169 Crores in the 5th year from the start of construction on an annuity basis. On an upfront basis it can theoretically generate approximately INR 968 Crores.

However the above mentioned potentials can be generated only if all the identified 16 assets are brought to the market simultaneously, which is practically impossible both from a market point of view as well from an implementation point of view

Figure 179: Operational assets (non - open plots) - Annuity under prevailing FSIs

Figure 180: Operational assets (non - open plots) - Annuity under enhanced FSIs

169

601 842

1189

0

200

400

600

800

1000

1200

1400


An

nu

ity

in

IN

R C

ro

re

s

521

1862 2572

3506

0

500

1000

1500

2000

2500

3000

3500

4000


An

nu

ity

in

IN

R C

ro

re

s


PwC 337

Figure 181: Operational assets (non - open plots) - upfront revenue


Under prevailing conditions the 15 identified operational assets, if simultaneously brought into the market and developed can theoretically generate approximately INR 178 Crores in the 5th year from the start of construction on an annuity basis. On an upfront basis it can theoretically generate approximately INR 893 Crores.

However the above mentioned potentials can be generated only if all the identified 16 assets are brought to the market simultaneously, which is practically impossible both from a market point of view as well from an implementation point of view

Figure 182: Operational assets (open plots) - Annuity under prevailing FSIs

968

2865

0

500

1000

1500

2000

2500

3000

3500


An

nu

ity

in

IN

R C

ro

re

s

178

542 659

871

0

100

200

300

400

500

600

700

800

900

1000


An

nu

ity

in

IN

R C

ro

re

s


PwC 338

Figure 183: Operational assets (open plots) - Annuity under enhanced FSIs

Figure 184: Operational assets (open plots) - upfront revenue


Under prevailing conditions the 5 identified residential quarters, if simultaneously brought into the market and developed can theoretically generate approximately INR 937 Crores at market rates and approximately INR 147 Crores at ready reckoner rates as upfront payment.

Table 101: Identified residential quarters revenue potential

Assets Upfront revenues at prevailing FSIs (INR

Crores)

Upfront revenues at enhanced FSIs (INR

Crores)

483

1053 1211

1602

0

200

400

600

800

1000

1200

1400

1600

1800


An

nu

ity

in

IN

R C

ro

re

s

893

2001

0

500

1000

1500

2000

2500


An

nu

ity

in

IN

R C

ro

re

s


PwC 339

M

ar

ke

t r

ate

s Bandra (W) 183 491

Santacruz (W) 171 434

Parel 292 578

Kurla 46 115

Matunga 245 484

Re

ad

y

re

ck

on

er

ra

tes

Bandra (W) 1 54

Santacruz (W) 16 77

Parel 65 146

Kurla 0 0

Matunga 65 151

On an annuity basis the 56 (non-residential) identified assets can theoretically generate ~ INR 610 Crores and on an upfront basis the 61 identified assets (including the residential quarters) can generate ~ 3506 Crores under the prevailing conditions if brought to the market simultaneously

Figure 185: Annuity at prevailing FSIs

263 357 410 542 169

601 842

1189

178

542

659

871

0

500

1000

1500

2000

2500

3000


An

nu

ity

in

IN

R C

ro

re

s

Stations (25) Operationalassets (non-open plots) (16) Operational assets (open plots) (15)


PwC 340

Figure 186: Annuity at enhanced FSIs

Figure 187: Upfront revenue

However practically all 61 sites cannot be monetized simultaneously and hence the estimated

potential will not be realized. Monetization of assets is subjected to DCR regulations, existing site

conditions and the institutional arrangements

In order to maximize value capture through real estate development the site conditions needs to be

improved to enhance potential and ease of implementation, the assets should be timely phased based

on market conditions, explore avenues for engaging with MCGM for favorable regulations and

enhanced the institutional arrangements to make it more conducive for property development

371 600 690 913 521

1862 2572

3506

483

1053

1211

1602

0

1000

2000

3000

4000

5000

6000

7000


An

nu

ity

in

IN

R C

ro

re

s

Stations (25) Operationalassets (non-open plots) (16) Operational assets (open plots) (15)

3506

708 968 893 937

8073

1105

2865

2001 2102

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

Total Stations (25) Operationalassets (non - open plots) (16)

Vacant land parcels(15) Residential Quarters (5)

An

nu

ity

in

IN

R C

ro

re

s


PwC 341

4.5.8. Pre-requisites for commercial development of railway

assets

A close working among all the stakeholders is required for solving the complexities. For solving the

external complexities a close co-operation with urban authorities like MCGM and TMC is required,

where as for solving the internal complexities a close working with Railways is required

Site conditions of individual sites needs to be improved so as to captured the full potential the sites

has to offered under prevailing conditions or to further enhance their potentials and also to enhance

the ease of implementation. Improving conditions of individual sites will require engaging both the

urban authorities as well as the Railways. Close working with urban authorities is required for solving

accessibility issues, congestion issues and removal of encroachments. Whereas shifting or

consolidation of operations and structures, demolishing of structures require go forward from the

Railways. For the air space development of stations co-ordination with and support from the

technical/operational team of railways is required

Further urban authorities like MCGM, TMC, etc needs to be engage for getting the appropriate land

use change, necessary clearances and FSI relaxation. And more importantly the option of

collaborating together for creating high quality, viable communities along the transit nodes should be

explored

In order to explore the opportunities to collaborate with MCGM and to ascertain the necessary

institutional arrangements for real estate development we studied the Development plan 2014 -34 of

MCGM and conducted a detailed analysis of the existing institutional arrangements

There are three key pre-requisites for commercial development of railway assets

Creation of inventory of assets

Collaboration and Co-ordination with urban authorities like MCGM, TMC, etc

Contracting and Contract management

The above three supported by a robust institutional framework

1. Creation of inventory of Assets

Optimizing revenue generation through real estate development requires timely phasing out of

inventories in the market. In order to do so, the railway assets need to be consolidated and improved.

Inventory building of assets will require the co-ordination of MRVC, Western Railways, Central

Railways and the Ministry of Railways

The current institutional arrangement mandates MRVC to identify the sites at the suburban stations

and its vicinity for commercial development in consultation with RLDA and the zonal railways.

The zonal railways are also responsible for entrustment of the identified site to MRVC subject to its

approval for commercial development.

Based on the future requirements and enhancement plans of operations, zonal railways should make a

clear segregation of sites for commercial development and operational purposes and entrust the sites

segregated for commercial development to MRVC

Improve Site conditions

Encroachments

1. A clear demarcation of boundaries will help in prevention of encroachments


PwC 342

2. Work with urban authorities for relocating the settlements. The urban authorities can be

engaged on the premise of affordable housing.

Railway can offered land parcels with lower potential for development of affordable

housing. Higher FSIs can be sought from the authorities in return for accommodation of

other settlements from non-railway land.

Considering the fact that most of the railway properties are along the tracks and close to

stations, these affordable housing developments will be in the vicinity of suburban station

thus providing the residents an easy access to their work place. Wherever the land parcels

offered for the development of affordable housing are not close to the station, building of

new stations can be considered

3. Indian Railways have come up with a low cost housing scheme “Sukhi Griha” for slum

dwellers along the track

4. Further studies for identifying the sites for development of affordable housing should be

carried out

Congestion outside the site

1. Creation of alternate access should be explored

2. Sites which are adjacent to the stations and which can be accessed only through the

circulating area of the station can be developed along with the station. Multi level parking

can be considered for decongesting the station circulating area

3. Interactions with Senior Western Railway (Mumbai Division) officials have revealed that

street hawkers and encroachments on Municipal public roads are the main cause of

congestion around the stations. Urban authorities can be engaged for removal of such

elements for decongestion of the access

Western railway is working with Virar Municipal Corporation for removal of

encroachments on the approach road to the Virar station

4. Urban authorities like MCGM can be engaged to envisaged appropriate land use which

will be mutually beneficial for the railways and the urban authorities as well as the general

public.

For example in return for higher FSIs, pay and park facilities can be developed on railway

lands and parking on roads can be prevented thereby creating more space for traffic

movements on roads

- Presence of structures

1. The structures should be segregated into critical or non-critical

2. The non-critical structures can be demolished where as the critical structures needs to be

shifted

3. Land parcels where getting land use change for commercial development may be difficult

or the potential is low because of micro market conditions, can be considered for shifting

of these structures

4. As the structure comes under operational use, offices can be consolidated in buildings

with higher FSIs

Accessibility –


PwC 343

3. Adequate access should be created for all the landlocked sites, especially for ones with

high potential and located in favorable micro market.

4. Along with the enhancement of the existing access, alternate accesses should be also be

created

5. Sites adjacent to stations and that can be accessed only through the circulating area of the

station or a platform of the station should be developed along with the station

6. MCGM should be engaged for connecting the sites to the DP roads. Interaction with

MCGM officials revealed that they are ready to provide DP road access to the sites

wherever required

7. MCGM should be engaged for improving the accessibility to the sites by removal of

encroachments on public roads leading to the site

8. Exchange or selling of land parcel can also be considered

* Site specific solutions are given in the appendix

Size and Shape –

1. Explore if the neighbouring lands can be acquired for improving its shape

2. TDR can be consider as an option

2. Collaboration and Co-ordination with urban authorities

Railways has always been a Central Government subject in India with Railways more concerned about

its operations, whereas land use planning and urban development has always been at a local level.

Different institutions with different mandates are responsible for various infrastructures in a city.

Thus there is an inherent problem that arises from many institutions having narrow and often

competing mandates. Policies that might be optimal for one may not be the same for the other.

Under current conditions, integration of transport infrastructure development and land use planning

is absent. The urban authorities are only responsible for giving clearances and approvals on a piece

meal basis

Various respected studies have suggested that major changes in the transit system influences the

urban development and location choices of citizens and commercial corporations. A broad framework

that subjects the various institutions involved to align their interests with broader objectives of the

city is required

There are global examples where various agencies are integrated at the highest level and have

successfully demonstrated the capability and efficiency of such integration

Case 1: MLIT (Japan)

The Ministry of Land, Infrastructure, Transport and Tourism, abbreviated MLIT, is a ministry of

the Japanese government which is a single ministry responsible for formulating and implementing

policies and regulations with respect to city planning, environment, housing, urban and national

railways, roads, aviation and maritime

This integration at the highest level aligns the objectives of individual bureaus and helps in better

planning of urban areas with integration of rail, road transit system and with the overall city

development plan


PwC 344

Figure 188: MLIT Institutional structure

Source: MLIT website

Case 2: Transport Integration Act 2010 (Parliament of the State of Victoria,

Australia)

It is a law enacted by the Parliament of the State of Victoria, Australia which came into effect on 1st

July, 2010. The law seeks to unify all the elements of the transport portfolio of the state in order to

ensure that transport and land use agencies worked together for the development of an integrated and

sustainable transport system

Case 3: MTRC (Hong Kong)

MTRC is owned by the Hong Kong Government with around 77% shares. The rest 23% of shares are

with the private investors

MTRC has followed the concept of transit-led-development by adopting “Integrated Railway +

Property Model”. This has helped it earned surplus revenues to fund its expansion plans without

relying on funding from government

MTRC receives land grants from the company with land above and adjacent to its stations thus

relieving MTRC from acquiring land in the open market. MTRC purchases the development rights

from the Hong Kong government at a “before rail” price and sells this right to a selected developer at

an after rail price

MLIT

City Bureau

Road Bureau

Housing Bureau

Railway Bureau

Maritime Bureau

Ports and harbour Bureau

Civil Aviation Bureau


PwC 345

Figure 189: MTRC institutional arrangement

MTRC leads and co-ordinates the development process including

Preparing the development master plan and phasing

Resolving all interfaces with the railway

Tendering of the land parcels

Liaise between different developers

Monitoring the quality of the developments

Property management after completion

A committee comprising of MRVC, Railways and the urban authorities can be formed to ensure co-

ordination and integration of Suburban railway operations with the overall city development plan.

This committee will help in building inventory with Railways help, acquired necessary land use

change, FSI relaxation and other necessary clearances and approvals with MCGM help and efficient

execution of project through MRVC.

Figure 190: Formation of a committee for integrated planning (Illustration)


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Monetization of assets – portfolio approach

Railways requires monetization of its assets where as MCGM requires land for the purpose of up-

gradation of existing infrastructure and creation of new infrastructure.

Monetization of railway assets on a piece meal basis limits the possibility of engaging with urban

authorities like MCGM, thereby reducing the scope of co-operation for maximizing mutual benefits.

In current practice Railways seeks land use change and FSI relaxation on a piece meal basis which was

observed to encountered resistance from urban authorities primarily due to existing connectivity and

utility infrastructure in the respective areas. Getting necessary clearances also takes around 12 – 24

months

Again, since a plethora of clearances and approvals are required from urban authorities for carrying

out the development projects, monetization of assets on a piece meal basis requires the same

interactions being followed repetitively causing delays in approaching market and avail opportunity.

An integrated monetization approach where railway offers a portfolio of assets for integration with the

overall city development plan enhances the scope of co-operation between the two agencies. Railways

with its vast land holdings of approximately 2000 Acres in the MCGM region can offer land parcels in

prime locations for integration with the development plan in return for favorable regulations

Availability of land parcels at desired locations will help the urban authorities to plan and execute the

development plan better, where as Railways will benefit from the statutory powers of urban

authorities thus acquiring necessary land use change, connection of DP roads to railway land parcels,

FSI relaxation and other necessary clearances

Approaches that can be adopted for engaging urban authorities like MCGM

A) Exchange of land/land use rights

Small stand alone land parcels can be released to the development plan where there is a scope of

integration with the development plan, in return for favorable development rights in bigger

consolidated land parcels. MCGM can put the released land to necessary use according to the overall

city development

B) Joint development of pay and park facilities

Parking facilities can be created in congested areas for reducing road parking thereby reducing traffic

congestion on road. Railways and urban authorities like MCGM can enter into Commercial parking

ventures either through joint development or through third party development.

According to the requirements of the city, Railway assets at appropriate places can be used for

creation of parking facilities in return for favorable regulations elsewhere. MCGM will also have to put

regulations that prevents parking on roads in order to achieve its objective of decongestion and

increase the occupancy of parking facilities

C) Transit Oriented Development

Railways and MCGM can worked together to envisaged an integrated land and infrastructure

development around major transit nodes thereby mutually benefiting each other and the general

public.

While Railways will benefit from increase ridership and flexible land use planning and development

regulations around the transit nodes, urban authorities will achieved a comprehensive and inclusive

development of the city through –

- Better land use and conservation of land resource


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- Savings – Savings in public money through reduction of investments in physical

infrastructure like additional road expansion, etc

- Mobility Options for all – Reduce the use of private vehicles on road

- Reduction of vehicular traffic on roads and hence pollution, an efficient and convenient

transit system for its citizens, better land use

- Reduction environmental degradation

TOD will help MCGM to provide a variety of high-density, mixed-use, mixed-income housing,

employment and recreation options within walking/cycling distance of each other and of MRTS

stations - in order to induce a lifestyle change towards healthier living and better quality of life.

Integrate communities rather than segregating them and reduce social stigma and dissent.

D) Decongestion

Suburban railway network has helped in the de-congestion of the city and contributed to the spatial

growth of the city and development of new urban centers.

In these new urban centers the presence of a high capacity transport system station makes the area in

the vicinity desirable from a convenience point of view. This increases the demand for commercial and

residential space around the transportation node, thereby boosting land values. This value creation

needs to be internalized. Urban authorities like MCGM and Railways have to come together to reap

the value created

Benefits for Railways

- Benefits from the statutory powers of urban authorities – land use change, connection of DP

roads to railway land parcels, FSI relaxation and other necessary clearances

- Revenue generation from property development of railway land

Benefits for Urban authorities

- Capitalize on the increasing demand for land in the vicinity through levying fees on the

conversion of land use, higher FSIs

Case –Government of Karnataka has been capturing the value through various methods like

charging for higher FSIs, cess & surcharge, TDR and additional property tax in the catchment

area of Metro

Other methods are Impact fee, Building Regularization scheme, Incentive Zoning, TDR, tax

increment, demolition charges, etc

- Will help MCGM in controlling the semi-legal or completely illegal activities of developers.

Depending on how much deviation a developer wants from the norms, MCGM can negotiate

facilities they want in that area

Case – Southbank development project, Brisbane (Australia). The real estate developer was

allowed to build extra floors in return for a parking facility and a public plaza

3. Contracting and Contract management

Contracting involves bid process management, procurement, implementation of the project. MRVC

has been doing contracting related activities since its inception under MUTP 1, MUTP 2. MRVC has

shown professional caliber to deliver the pr0jects.


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Figure 191: Contract management approaches

A. In this approach MRVC is responsible for managing the contract with the third party

developers. The MoU between RLDA and MRVC stated that the commercial assets so

developed shall remain under the exclusive control of and be operated and maintained by

MRVC during the entire lease period.

B. In this approach a Special Purpose Vehicle is formed to manage contracts with the third party

developers. MRVC formed Special Purpose Vehicles for contract management with developers

in the cases of Belapur International Technology Park and Vashi International

InfoTech Park.

C. In this approach MRVC enters into a joint development venture with local urban authorities

like MCGM. There has been no such joint development venture with MCGM or any other

urban bodies in the past.

There has been collaboration between MRVC and MCGM for the development of the Bandra East plot which was not a joint development venture in the true sense; rather it was a financial arrangement between Railways and MCGM. Commitment from railways to invest 2/3rd of upfront premium (proportion to additional FSI) in suburban railway infrastructure capacity enhancement (under MUTP project)

In order to enhance the contract management capability, a separate real estate wing can be formed dedicated to property development

Case: DMRC, Delhi (India) DMRC was registered on 03-05-1995 under the Companies Act, 1956. DMRC has equal equity participation from Government of India (GoI) and Government of National Capital Territory of Delhi (GNCTD)

A Property Development Wing was set up in 1999 for real estate development under the following arrangements

30 year concession for commercial developments on vacant land pockets adjacent to MRTS

station


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Long-term lease (50-90 yrs) on land pockets, in depots, etc, not immediately needed for

operational structures

Figure 192: DMRC Institutional arrangements

4.5.9. Recommendations and action points

5. A thorough technical and project due diligence should be undertaken with a strong

Railway Land Management Cell for Mumbai Metropolitan Region

Given the large value of the land under the ownership of Ministry of Railways in MMR region and

the fact that the prolonged neglects lead to encroachment and/or lack of accessibility, irrespective

of land has been identified or not for commercial development, every land should be subject to

area/site improvement planning.

Irrespective of usage, guidelines to be provided for each of the land parcels, for instance, every

land parcel above 1 acre should have been integrated with the development plan with a provision

for adequate accessibility based on shape and size of the plot. This will prevent loss of land value

over time due to land locked situation.

It is recommended to have a strong "Land Management Cell" for the Mumbai

Suburban Railway with representatives from both – Mumbai Division, Central Railway and

Mumbai Division, Western Railway. This cell will be supervised by a high level committee

comprising GMs and Chief General Engineers (CGEs) of both the zonal railway. Given that

responsibilities of commercial development of surplus land parcels lies with RLDA/MRVC, they

are also important members of this cell.

In the past, RLDA initiated bid process to select developers for some of the sites without

proper land-title records for the subject site or sub-division of land parcel, which has

resulted in cases like delays or legal disputes.

For instance, bids for 4.5 Ha Bandra land in Mumbai was discharged or in case of 2.14 Ha

land plot in Jamnagar, Gujarat, financial bid were not invited for want of undisputed land

title records.107

With full time Estate Officers from CR, WR and RLDA/MRVC, the responsibilities

of this cell shall be

107 Rajesh Agarwal, "Commercial Development of Railway Land"; IRICEN JOURNAL OF CIVIL ENGINEERING


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o To maintain and update land records, maps, plans

o To verify land boundaries

o To verify land records with the state revenue authority

o To verify land titles, address any disputes related to it, rights to use land under the land

allotment agreements, etc.

o To integrate land parcels in the city development plan to improve site accessibility and

prevent land locked situation.

o Identify & earmark surplus land parcels in the region for commercial development as well

as pay & park facility.

o To ensure lands free of encroachment

The cell shall also be the nodal agency to identify surplus land and entrust the

same for commercial development to either RLDA/MRVC. There should be a structured

process to prioritize identification of suitable sites for commercial development, such as

o Priority-1: Sites identified and/or entrusted with RLDA/MRVC for commercial

development, for instance,

Already entrusted with MRVC - Bhandup Store Depot, site adjacent to Thane (E)

and NGSM yard108

Two (2) Bandra land plots (~11 acres and ~5.5 acre)

Land parcels bundled with the proposed Churchgate-Virar Elevated Corridor

Proposed land parcels in the city under Central Railway zone

CSTM station Carnac-Bunder side area connected by D’mello Road

Wadi Bunder

Lokmanya Tilak Terminus – Adjoining railway station.

Mankhurd – Adjoining station areas.

Currey Road depot between Parel & Elphinstone Road stations.

o Priority-2: Transit-oriented development at stations and re-densification/commercial

development of surplus land in railway colonies especially colonies which are older should

be prioritized.

Illustrative list of residential colonies, that can be prioritized

Bandra (W) railway colony (>35 years)

Matunga central railway colony (>40 years)

Matunga western railway colony (>60 years)

Parel railway colony (>40 years)

Kurla railway colony (>40 years)

Suburban Stations can be prioritized for ToD/air space development based on the

criteria with respect to factors such as

Daily passenger traffic/density

108 Source: MRVC, RLDA (http://www.rlda.in/status-of-site.html)


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Station type – Interchange stations

Intermodal transit connectivity – Robust integration with other transit

modes

Station area development trends – High rate of development around

station area

Integration with the ToD strategy as proposed in the City Development

Plan 2014-34. The draft DP 2034 for Mumbai has already identified 22

stations, which are

Tier-1

Western Lines Churchgate Dadar Lower Parel Bandra Andheri Borivali

Central Lines CST Kurla Ghatkopar Mulund

Harbour Lines Wadala

Tier-2

Western Lines Grant Road Mumbai Central Mahalaxmi Lower Parel Jogeshwari Malad Goregaon

Central Lines Parel Kurla Nahur

Harbour Lines Chembur

o Priority-3: Operational assets based on the recent trends of their usage, for instance, non-

strategic, declining operations/traffic, feasibility of shifting to northward of the city from

the prime land in the Island City, feasibility of consolidation of various similar operations

in the network, and so on.

For instance, among the four railway workshops in Mumbai, Parel Workshop is being used for periodic overhauling of long distance trains like mail express109. The operations at Parel workshop can be consider for shifting towards the outskirts of Mumbai. The feasibility of the same can be evaluated by the proposed cell.

The proposed Land Management Cell is recommended to be put in place immediately, given that

the Development Plan 2014-34 for Mumbai City is under preparation which will be followed by

tier-2 level or local area plans.

Also, the proposed cell should have a set target to achieve due diligence of 50% of the all land

parcels within three (2) years since its inception, with identified sites for commercial development

on a priority, and achieve 100% due diligence by 5th years of its inception.

6. Collaboration with the State and Local Governments to mutually benefit as well as

to benefit the city as a whole.

Integration with Development plan: The city needs land resources for better town planning

whereas railways need better accessibility to its land and provision for infrastructure/utilities for

future development. This can be achieved by initiating integration of railway land assets with the

city's development plan and need to partner with local authorities like MCGM to be pro-railways

in deciding appropriate land use classification, earmarking suitable connectivity provisions, etc.

Additionally a quid pro quo arrangement between the local/state government and railway can

be explored. Some of the various strategies or types arrangement can be:

5. Development in accordance with the requirement of the city development plan and not only

from commercial best use perspective, however, with adequate compensation for the

opportunity lost in terms of TDRs, etc.

109Interaction with Senior Western Railway officials, Mumbai Division,


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E.g.: Pay and Park, Green Zones, Residential/office, Multi-modal transit points etc

6. Exchange of development rights to the city governments in congested areas in return for higher development rights in lesser congested areas

7. Joint development model with the city governments, wherein railways and urban bodies like MCGM can enter into commercial ventures such as parking, through joint development. MCGM can also bring in higher enforcement measures to prevent illegal parking in the area to achieve its objective of decongestion and enhance the viability of parking venture.

8. Sale/exchange of assets for better consolidation - For instance, smaller isolated land plots can be exchanged for the land parcels closer to transit nodes/corridor.

Financial arrangement: Financial arrangements between railways and state/local government

under which a commitment to reinvest a part of revenue generated from commercial development

for the city's suburban railway infrastructure, as done in case of Bandra land (~11 acres).

TOD Strategy: Since most of the railway land parcels are in the vicinity of the transit nodes,

railways can help achieve the ToD vision/strategy of the local government (MCGM) to encourage

high density vehicular free developments in the vicinity of major transit nodes.

7. From the initial stage itself, it is preferable to engage private sector constructively

to build mutual confidence and trust

It is recommended to organize workshops and marketing road shows involving private sector

participants such as developers, to engage them for the pilot projects as well as future road map.

These marketing activities will also help alienate perceived risks among the developer community

to deal in properties with railways.

The clear plans should be outlined for the role and support of railways/MRVC especially during

pre-tendering and during construction, for instance,

o Pre-tendering stage support: Land due diligence, preparatory actions such as land

use change, approved FSI, connectivity issues and construction related clearances from all

the relevant railway departments (especially in case of air space development)

o Support during construction: Single point of contact (e.g. nodal railway/MRVC

officer for the project coordination and supervision) for clearances and approvals from

within railways, adherence to construction and building plans once approved, etc.

8. Going forward, for better value capture there is a need to develop capability,

resources and flexible commercial models (joint development, revenue share

model, self development, etc.), i.e., beyond the role of just contract management.


Commercial development, since it involves large amount of involvement and coordination with

internal and external stakeholders, will required complying with various local acts and

regulations. For instance, land use change is a must to undertake commercial development which

will require approvals from state and local government.

Internal policy/regulatory changes: The following regulatory or policy changes shall be required -


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o Guidelines/circular to establish MMR region specific Land Management Cell, its

composition, functions and targets to be achieved.

o Amendment to existing guidelines/policies and MoU between RLDA and MRVC (Dt.

16.07.2013) which shall empower RLDA/MRVC to undertake re-

densification/commercial development of residential colonies with concession period up

to 99 years.

External policy/regulatory changes: The following regulatory or policy changes shall be required -

o Site specific land use change and grant of FSI will be required, and accordingly DCR shall

be amended.

o Also, DCR will be required to be amended to

To permit Flexible TDR (for instance permitting use of unused FSI in the same

area irrespective of whether it is located in the northward direction of the land or

not),

To permit mix-land use (for instance, transportation/railway + commercial

office),

To qualify and incentivize re-densification of residential colonies (for instance,

minimum permissible FSI of 2.5 which shall be enhanced further on case-to-case

basis).


The key success factors of an institution will be coordination with railways, state government, local government and private sectors/developers. The required coordination can be mapped out as follows:

Figure 193: Land Management Cell (Illustration)

RLDA is an authorized entity to undertake commercial development of railway land parcels in Indian Railways. However, RLDA has signed MoU with MRVC, under which MRVC can undertake commercial development of sites as entrusted to it by RLDA.As described in the above schematic, a close coordination between various entities is a minimum and mandatory requirement.


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Given its unique structure (a joint venture between state and central government), market reputation, project management skills, contract management expertise and past track records, MRVC is best position to

undertake commercial development in the city.

MRVC (& RLDA) will require developing real estate market expertise, marketing and leasing capability and strengthen post-contract monitoring capability. A separate Business Development Cell, having a board level representation, can be created within the organization which shall be responsible for:

Represents MRVC in Land Management Cell

Coordinate and facilitate integration of railway land parcels in

the city's development plan

Prepare a inventory of land parcels commercially monetizable

and a roadmap to bring these sites to market

Liaison with railways and RLDA for release of site

Liaison with state and local governments for requisite clearances and approvals

Explore avenues and prepare a business case for collaboration with state and/or city

government for possible partnership

Master/concept planning of sites for commercial development

Bid process management, marketing and leasing of sites/properties

Private sector engagement

Post-contract management

The above list is indicative and it can be further elaborated based on the mandate given to MRVC by MoR/RLDA.

Figure 194: Business development wing in MRVC

(Illustration)


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Conclusion


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5. Conclusion

Under existing conditions, the cumulative operational deficit and investment need of the Mumbai Suburban Railway Network represent a large financial burden on the Ministry of Railways over the next 10 years, estimated currently to be close to INR 50,000 Crores (as an arithmetic sum). However, this burden can be reduced by augmenting the fare box and non-fare box revenues, as discussed in the report.

The impact of both fare box and non- fare box revenue generation on the overall investment required over the next 10 years can be assessed under the following 4 scenarios

Scenario-A:

If no fare interventions are made, with non-fare box revenue maximization including real estate (upfront payment model), the funding gap can be reduced from ~ INR 48,300 Cr to ~INR 38,300 Cr.

Figure 195: Scenario A (No fare interventions)

Scenario-B:

If the current levels fare recovery ratio (FRR) is maintained with interventions in fare structures, then with non-fare box revenue maximization including real estate (upfront payment model), the funding gap can be reduced from ~ INR 48,300 Cr to less than INR 32,700 Cr.

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Figure 196: Scenario B (Case-1: Current FRR is maintained)

Scenario-C:

If the gap between operating expenses and fare box revenues is met, i.e. in other words if FRR of 1.0 is to be achieved in the next 10 years with appropriate interventions in fare structures, then together with non-fare box revenue maximization including real estate (upfront payment model), the funding gap can be reduced from ~ INR 48,300 Cr to less than INR 25,000 Cr.

Figure 197: Scenario C (Case-2: Achieve FRR of 1.0)

Scenario-D:

If the gap between operating expenses and fare box revenues is met as well as an operating surplus is target, i.e. in other words if FRR of 1.1 to 1.3 is to be achieved in the next 10 years with appropriate interventions in fare structures, then together with non-fare box revenue maximization including real

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estate (upfront payment model), the funding gap can be reduced from ~ INR 48,300 Cr to less than INR 16,500 Cr. Additionally the future operating surplus can also be leveraged, which can further reduce the need for additional funds to less than INR 12,000 Cr.

Figure 198: Scenario D (Case-3: Achieve FRR of >1.0, i.e. in the range of 1.1 to 1.3)

After fare and non-fare (except indirect benefits) interventions, there still remains a funding gap of over INR 16,000 Cr, which can be reduced further, if the sources of indirect benefits value capture (as discussed in section 4.5), which at a conservative estimate can add another ~INR 4,000 - 6,000 Cr for railways in the next 10 years, are tapped appropriately.

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6. Recommended Institutional Arrangement for

MRVC for non-fare box sources of revenues

Given that MRVC is well positioned to play a critical role in maximization of the non-fare box revenue

for the Mumbai Suburban Railway System and based on the institutional assessment discussed in the

section 4 for each type of non-fare box revenue sources, the following institutional structuring for

MRVC is recommended.

It is recommended to create a Business Development Division which shall be headed by an executive

Board of Director. This will include three (3) business divisions:

D) Property Division: The property division shall be responsible for commercial development of

land parcels. This division should have two sub-divisions:

o Commercial Development, which will be responsible for

Identification of new sites

Represent MRVC and coordinate with proposed Land Management Cell

Coordinate with state and local government

Site development

Concept planning

Site development through self or joint or third party development


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Assist the successful bidder during construction stage for required coordination

with railways

o Property Management, which will be responsible for

Real estate market research

Post-award contract management

Manage property developed through self or joint mode

Monitor activities for properties developed through third parties in accordance

with the agreement

Assist commercial development team in concept planning and at various stages as

required

E) Advertising and Retail Division: The primary functions of this division are to

o Liaison with the high-level integrated committee of WR & CR for Mumbai Suburban

Railway System

o Create and develop for brand value for Mumbai Suburban Railway System

o Exploit merchandising opportunity

o Market research & interactions with advertising industry

o Commercial exploitation of virtual media such as online portals, mobile media, etc.

o Also, advertising and station rentals for the redeveloped stations if entrusted to MRVC,

this department can fulfill the responsibility of contracting as well as post-contract

management

F) Consultancy: MRVC brings in capabilities in the field of project and construction contract

management in both the Brownfield and Greenfield transit systems. Also, it is well positioned to

develop in-house capability for harnessing potential from commercial development and virtual

advertising media and can leverage such knowledge to provide consultancy services to other

transit agencies in India and also possibly to markets like Africa.


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Annexure


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Annexure-1: Lessons from Japanese Urban Rail Systems

A1-1 Background to Japanese Railway System

Japanese Railway Industry

The Japanese railway system is one of the densest and most advanced networks in the world. There are

Six Japan Railways Group (JR) companies, state owned until 1987, that provide passenger services to most

parts of the 4 island regions of Hokkaido, Honshu, Shikoku, and Kyushu; there is a seventh JR company that

carries freight. Private rail companies form some of the leading corporations in the country. Private railways

were developed by private corporations developing rail-integrated communities along the rail lines, allowing

them to achieve profitability by diversifying into real estate, retail, and numerous other businesses. Regional

governments, and companies funded jointly by regional governments and private companies, also provide rail

service.

There are more than 27, ooo km of rail networks in the country. The privatized JR networks control over 20,

ooo km of these lines with the remaining 7,000 km operated by other private enterprise local railway

companies.

Subway metro systems are popular in the cities of Tokyo-Yokohama, Osaka, Kobe,

Fukuoka, Kyoto, Nagoya, Sapporo and Sendai. However, the distinction between suburban commuter trains

and metro subway systems is thin and several suburban trains serve metropolitan areas, along with other forms

of railways like street car and monorails.

Japan also pioneered the concept of the high-speed "bullet train" (“Shinkansen"), which now links Japan's

leading cities with speeds of up to 300 km/h (186 mph). There are other train services running at typical speeds

of 130-160 km/h.

Figure 199: Japanese Railway industry snapshot

History of Japanese railway:

The history of Japanese railways goes way back to 1872 with the opening of Japan’s first railway line between

Shimbashi (Tokyo) and Yokohama. A key milestone was achieved in 1987 with the privatization of the Japanese


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National Railways (JNR) and the JR Group companies succeeded the former JNR, after years of policy changes

and reforms as shown in the figure below.

Figure 200: History of Japanese Railways

Urban Railway Systems in Japan - Policy & Institutional Framework

Phase 3 (2000's)

Urban Railway policy (improvement of transit convienence, mitigation of congestion

Act on Enhancement of Convienience of urban railways (2005)

Phase 2 (1960 - 1990)

Post war economic growth increasing demand and need for government support

Outline of Railway master plan with government support railway companies

Phase 1 (mid 50's)

Business model to secure profits from railway- related businesses established (1910)

Railway companies establish themselves and business model widely introduced in major urban

areas (1920)


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A1-2 Ministry of Land, Infrastructure and Transport (MLIT)

About MLIT

The Ministry of Land, Infrastructure, Transport and Tourism, abbreviated MLIT, is a ministry of the Japanese

government. It is responsible for one-third of all the laws and orders in Japan and is the largest Japanese

ministry in terms of employees, as well as the second-largest organ of the Japanese government after

the Ministry of Defense. The ministry has four external organs including the Japan Coast Guard and the Japan

Tourism Agency.

MLIT was established as part of the administrative reforms of January 6, 2001, which merged the Ministry of

Transport, the Ministry of Construction, the Hokkaido Development Agency, and the National Land Agency.

Before the ministry renamed itself on January 8, 2008, the ministry's English name was "Ministry of Land,

Infrastructure and Transport".

MLIT comprises of various Bureaus and Railway Bureau forms a part of it.

Key Learning

MLIT was studied with an aim to understand their institutional structure and their policies and framework

guiding the growth of Japanese Railway industry together with integrated land development.

The key points learnt during the meetings are:

Land, Infrastructure and Transport, the three kegs of transit-oriented development (as well as non-fare

box revenue maximization) are integrated at the highest levels in Japan, and development planning is

well coordinated between the Central and local governments.

Policy for Urban Railway Development:

Rail together with Property development model and policy programme of Separation of

Infrastructure & Operations program has led to financially self-sufficient urban rail systems

requiring no operating subsidy from the Government.

Policy focus on passenger convenience through improvement in facilities:

Multi-modal stations as regional hubs (e.g. Nishitetsu Tenjin Station, Fukuoka City)

Barrier free facilities

Proactively introduction & up gradation of commercial outlets at stations to attract more

shoppers

A1-3 Tokyu Corporation

About Tokyu Corporation

Tokyo Corporation is a leading example of a company engaged in urban development and real estate business

around core railway operations. Tokyu lines are composed of 8 lines covering a total distance of 104.9

kilometres. Those include 7 lines, such as the Toyoko Line that links the two urban centres of Shibuya and

Yokohama, the Den-en-Toshi Line that is a major artery providing access to central Tokyo, as well as the

Setagaya Line, which is a street carline. Tokyu Corporation became the first private rail company (not including


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Tokyo Metro) to carry more than 1 billion passengers in fiscal 2006, transporting approximately 1,062,590,000

passengers in fiscal 2010.

The major business segments of Tokyu Corporation involve:

Transportation Business – Creating a stable cash flow

Life Service business- Enhancing the value of rail service areas in coordination with each business

Real estate business - Driver of profit growth

Overseas Business Expansion: Seizing new growth opportunities

Tokyu Corporation has an overlap in terms of segmentation by business line. The railway operations are carried

out by the parent Tokyu Corporation as it is the major constituent company and operates as a consolidated

subsidiary company.

Table 102: Details of Tokyu Corporation - Railway Operations

Length 8 Lines – 104.9 km

Station 98

Rolling stock 1258

Passengers 1.06 billion / year

Income Japanese Yen 147 / year

Employee Strength 4100 people

Key Learning

Tokyu Corporation was studied to get an overview of how the varied lines of businesses are integrated with

Railway Business for achieving profit maximisation and also as to how Station redevelopment is undertaken

hand in hand with urban development opportunities

The case of Redevelopment of O-Okayama station was taken up and the delegation had a detailed

understanding of the integration of station facilities including underground tracks, parking spaces and

hospital building over stations for maximising space utilization.

The delegation also undertook a site visit of the Futakotamagawa station and witnessed construction

activities focused around creation of residential and commercial plots close to a rail and bus transit

hub. The visit provided insights into ways in which rail and Property development model can provide

examples for the Mumbai suburban Stations for future redevelopment.

A1-4 J R East

About JR East

East Japan Railway Company is a major passenger railway company in Japan and one of the seven Japan

Railways Group companies. The company name is officially abbreviated as JR East in English. The company's


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headquarters are in Yoyogi, Shibuya, and Tokyo. JR East Group is a stock exchange listed company. JR East

group works with the motto: “Thriving with Communities, Growing Globally”

It undertakes Rail + Property model based on the principles of providing Life-Style products & services

And its policy to expand globally

Railway Business: The railway business of the JR East Group covers the eastern half of Honshu island (Japan’s

main island), which includes the Tokyo metropolitan area. They provide transportation services via our

Shinkansen network, which connects Tokyo with regional cities in five directions, as well as conventional lines

in the Kanto area and other networks. Their networks combine to cover 7,512.6 kilometres and serve 17 million

people daily. They are the largest railway company in Japan and one of the largest in the world.

Key Learning:

JR East Group was studied in order to understand their broad range of businesses, categorized as:

Trains & Railways related business

Life-style products & services

IT & Suica businesses

Railcar manufacturing business

Projects like Yoshikawa-Minami Station, in which development in coordination with land use projects and

other regional improvement plans and Construction of connected pedestrian overpasses over the Shin-etsu Line

tracks at Niigata Station to eliminate level-crossings, ease traffic congestion, and develop the surrounding area

as a whole can serve as good examples for many Mumbai suburban Railway stations where land space

utilization, traffic congestion etc. are the main areas of concern.

All the businesses are co-related to each other and hence provide a perfect example for maximization of Non-

fare box revenues which is illustrated below:

JR East Model is based on providing “Life Style Product & Services” near the area of maximum footfalls

pooling power – i.e. stations

Station Space utilization

In-station shopping malls to meet day-to-day needs

Figure 201: JR East Station Space utilization

“ecute” - Comfortable & spacious meeting points in station premises


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Hotels & Hospitality:

~50 hotel properties – most of which are adjacent to stations

Tokyo Station Hotel

A1-5 Tokyo Metro

About Tokyo Metro

Tokyo Metro is operated by Tokyo Metro Co. Ltd., a private company jointly owned by the Japanese

government and the Tokyo metropolitan government. Tokyo Metro Co. Ltd. is joint venture of Central

Government (53.4%) and Tokyo Metropolitan Government (46.6%).

Railway Business: The Company replaced the Teito Rapid Transit Author commonly known as Eidan or TRTA,

on April 1, 2004. TRTA was administered by the Ministry of Land, Infrastructure and Transport, and jointly

funded by the national and metropolitan governments. It was formed in 1941, although its oldest lines date back

to 1927 with the opening of the Tokyo Underground Railway the same year.

Convenience store "NEWDAYS" station: Number of stores: 468 stores

KIOSK”: Number of stores: 438 stores


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Table 103: Tokyo Metro operating details

Operating Lines 9 lines

Route Length 195.1 km

No. Of Stations 179

No. Of Cars 2,773 (as of March 2012)

No. Of Passengers 6.22 million/day (FY2011)

Key Learning:

Tokyo Metro Co. Ltd. has a similar institutional structure like Mumbai suburban railway system and hence

studying their Integrated Line of businesses with the railway system can serve as a good example.

Their line of Businesses include

Operating and managing railway business

Management of other affiliated business

o Retail-related Business (Management of shops in the stations and other commercial facilities etc.)

o Real estate Business (Developing office buildings for rent etc.)

o IT Business (Leasing the optical fiber cable etc.)

These businesses accounted for 15% of revenue in FY2011 which when taken as an example in Mumbai can help

to maximize the non fare box revenues serving the purpose of this study.

A1-6 JR West

About JR west

The West Japan Railway Company (“JR West”) is one of the seven JR Group companies with operations in

Osaka region. JR West, like JR East, has diversified based on Life-style based model in businesses such as Real

Estate, Retail, Hotels, etc businesses to enhance its non-fare box revenue streams.

Railway Business: JR West's highest-grossing line is the Sanyō

Shinkansen high speed rail line between Osaka and Fukuoka. The Sanyō

Shinkansen alone accounts for about 40% of JR West's passenger revenues.

The company also operates Hakata Minami Line, a short commuter line

with Shinkansen trains in Fukuoka.

The "Urban Network" is JR West's name for its commuter rail lines in

the Osaka-Kobe-Kyoto metropolitan area. These lines together comprise

610 km of track, have 245 stations and account for about 40% of JR West's passenger revenues. Urban Network

stations are equipped to handle ICOCA fare cards. Train control on these lines is highly automated, and during

peak hours trains run as often as every two minutes.

Service km 5,012.7

No. of Employees 26,778

Passengers-km

(Unit: 100 mil.)

541 km


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JR West's Urban Network competes with a number of private commuter rail operators around Osaka, the "Big

4" being Hankyu Railway/Hanshin Railway (Hankyu bought Hanshin in 2005), Keihan Railway, Kintetsu,

and Nankai Railway. JR West's market share in the region is roughly equal to that of the Big 4 put together,

largely due to its comprehensive network and high-speed commuter trains (Special Rapid Service trains on the

Kobe and Kyoto lines operate at up to 130 km/h).

Key Learning:

JR west was studied to get an insight about how to improve usefulness for local people by creating appealing

environments in and around their stations through a variety of business operations designed to add value to

railway facilities.

The development of Osaka station city cites a good example for the above. The operations undertaken include:

Sales of Goods and Food services

Department Stores

Shopping centres

Real Estate

Hotels and Travel

The department stores were judiciously chosen and planned to cater to different passenger and user

communities (high-end and low-end) depending on their usage and transit patterns. All these operations

contribute to around 35% of the total Revenue. Additional points of interest were also generated on the way

Osaka Station City was re-modelled with minimal disruptions to existing railway operations.

A1-7 Hankyu Hanshin Holdings

About Hankyu

Centred on the Kansai district of Japan, Hankyu Hanshin Holdings Group operates six core businesses—Urban

Transportation, Real Estate, Entertainment and Communications, Travel and International Transportation,

Hotels, and Retailing.

The Group is one of the primary private-sector railways operators in Japan. In October 2006, the Hankyu

Hanshin Holdings Group came into being through the management integration of Hankyu Holdings, Inc. and

Hanshin Electric Railway Co., Ltd.

Railway Business: The transportation segment is the company's main cash flow generating business and

comprises the railway companies Hanshin Electric Railway (acquired in 2006) and Hankyu Railway. It also

includes the smaller railway lines of Hokushin Kyūkō Electric Railway and Nose Electric Railway, as well as

equity stakes in Kita-Osaka Kyūkō Railway, Sanyo Electric Railway, Osaka Monorail and Kobe Electric Railway.

The company also owns various taxi and bus franchises.

Key Learning:

Since the operations of the company are centered on transportation, retailing, real estate, entertainment and

media, Hankyu Hanshin Holdings was studied to get an overview of how to maximize non fare-box revenue.

The key points to note are:


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The group has focused on the development of areas along its lines since its opening, in line with

Rail+Property model. Real Estate business comprises primarily leasing and management of

commercial facilities and office buildings, & its condominium business.

Current or recent large scale development includes:

o Phase II of the department store section of the Umeda Hankyu Building rebuilding project, and

o Osaka Station North District (Umekita) Development Area Project

Entertainment & Communication include advertising, IT services, etc contributing 15% to the revenues

of the group

The company owns and operates many hotels, and is developing real estate projects mainly on land

along its railway lines through its subsidiary Hankyu Realty, which was previously separately listed, but

fully acquired through a stock swap in 2002.


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Annexure-2: Detailed Report on Task-4 Commuter Survey

REPORT - SOCIO ECONOMIC PROFILING AND AFFORDABILITY STUDY

OF COMMUTERS ON MUMBAI SUBURBAN RAILWAY SYSTEM


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Annexure-3: Advertising - India Entertainment & Media

Industry

This section elaborates the India Out-of-home (OOH) market, present trends and the future trends. The

understanding of market can be taken to align Mumbai suburban system inventory for proper positioning in

this market.

1.1 Media and Entertainment (M&E) industry Overview

Entertainment and media (E&M) businesses captures a wide variety of products and services among various

sectors. They continue to raise their game in operational agility and customer insight. There are number of

segments within the industry, each of which provides a different form of entertainment to target audience.

These segments include traditional print media, television, radio broadcasting, film entertainment, video games

and advertising. Advertising, a form of communication is used by companies to market their respective

products and services via its various media segments in order to encourage and persuade audience (prospective

customer) to drive for their commercial offering.

As per PwC global Entertainment and Media Outlook 2013-17, India is among other seven territories i.e.

Argentina, Indonesia, MENA, Russia, Brazil, China, Mexico, with fastest growing Entertainment and Media

industry at compound annual growth rate (CAGR) of 14%.

The Indian entertainment and media (E & M) industry has massive reach. The industry grew from 20,025 USD

million in 2011 to 22,890 USD million in 2012; marking a growth of 12.6 per cent. The Indian M&E industry is

projected to grow 13.5% to clock revenues worth 43,075 USD million by 2017110.

Figure 202: India E & M industry growth trend

Source: PwC Global Entertainment & Media Outlook 2013-2017

110 PwC Global Entertainment & Media Outlook 2013-2017

0

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1.2 Media segments in Media and Entertainment (M & E) industry

While conventional media such as Out Of Home (OOH), television (TV), print and radio continue to be

dominant; segments such as animation, visual effects, films and music are also posting strong progress owing to

content and benefits of digitization. Though, conventional (non-digital) media will continue to dominate

overall E & M spending in coming five years (2017), the growth will be more in digital space. The industry will

be largely driven by the advent of digitization in conventional media of OOH via digital signage/catalogues,

LCD/LED screens, and interactive video walls/floors etc.

Total advertising expenditure across media stood at US$ 5.66 billion in 2012 while advertising revenues

increased by 9 per cent.

The advertising media chosen by media buying agency depends on achievement of required coverage and

number of exposures in a target audience. The characteristics of commercial product to be advertised decides

the above two factors and ultimately the media segment. The performance of media is defined by two

dimensions: frequency and spread. Frequency is to ensure high coverage of target audience so that it is spread

among target audience to receives average number of “Opportunity to See” (OTS).The various media available

to media buying agencies are as shown in diagram below.

Figure 2043: Media Segments in Advertising

Source: Pitch Madison media outlook 2012

A) Print Media

This segments consist of advertising spend by print in news papers and magazines. This is the conventional

media of advertising with news paper advertising having larger share. With 41.1% share at INR 11,970 Crores in

the advertising pie, 90% was contributed by newspaper print and remaining 10% by magazines print

advertising. Print media is now facing intense cut in advertisement spends by advertisers due to advent of

digital media and benefit provided by digitization.

B) Films

This segment consists of both out-of-home and in-home metrics. Out-of-home covers advertising spend at the

cinema including on-screen advertisements before the movie and within movie includes product placements.

Advertising media

OOH

Print

Cinema

Radio

TV

Internet

Figure 203: Media wise ad-pie share (FY 2012 - INR

28,694 Cr)

40%

41.70%

3.20%

0.53%

6.50% 8%

TV Print Radio Cinema Outdoor (OOH) Internet


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Advertising cost in this media segment is very high compared to others. Film advertising is estimated to

increase at 6.9% CAGR from 2013 to 2017 (Source: PwC –Global Entertainment and Media Outlook 2013 -17)

C) Radio

With privatization of radio broadcasting sector in late 90’s, radio is popularly becoming preferred medium by

advertisers. Radio is affordable medium to advertise as the production costs are much cheaper compared to

other broadcasting media i.e. television. In radio advertising it is important to identify the right timing (e.g. tea

in morning, healthy beverages in daytime) to reach specific radio listeners (e.g. housewives during the day,

commuters during travel). It's an immediate medium and so works well for promoting events, such as a special

sale, on the day.

Radio impact is limited due to lack of visual element and hence advertising agency has to come up with

creativity in audios during commercial production. The share of radio advertising in total advertising media is

increasing with 4.7% in 2009 to 6.4% in 2017 ,estimated to increase at remarkable 18% CAGR from 2013 to

2017 (Source: PwC –Global Entertainment and Media Outlook 2013 -17)

D) Television

This segment considers all advertising spend on broadcast (terrestrial and multichannel). Terrestrial covers

advertising sold on traditional, over-the-air channels via subscription service or free digital TV. Multichannel

includes network advertising revenue generated via pay-TV networks (cable, digital terrestrial television [DTT],

Internet Protocol TV [IPTV] or satellite).TV is advertising media with high impact as it offers by far the widest

coverage .Airtime can be finely selected and purchased at a time when your target audience segment is most

likely to be viewing.

Television is the most expensive medium. The cost of airtime, producing commercials and difficulties in getting

quality time slots cab ne very high.TV advertising is estimated to increase at 11.8% CAGR from 2013 to 2017

(Source: PwC –Global Entertainment and Media Outlook 2013 -17)

E) Internet

This segment is split as spending by advertisers through a fixed-line connection and mobile devices. The fixed-

line categories consist of advertising via paid search, display, classified and video advertising. Display includes

all banner, rich media, sponsorship, lead generation and e-mail related advertising. The mobile category

includes all advertising delivered direct to mobile devices via formats designed for the specific device. With

internet traffic growth in India being fastest globally and estimated to triple from 138 million in 2012 to 348

million in 2017 as per Cisco Visuals Networking Index (VNI) forecast (2012-17) internet advertising will

increase its pie in total advertising media. Internet advertising is estimated to increase at remarkable 24.2%

CAGR from 2013 to 2017 (Source: PwC –Global Entertainment and Media Outlook 2013 -17)

F) Out-Of-Home (OOH)

The out-of-home (OOH) advertising market consists of advertiser spending on OOH media such as billboards,

street furniture (bus shelters, kiosks), transit displays (bus sides, taxi toppers), sports arena displays and

captive advertisement networks (in venues such as elevators, lobbies and theatres). The OOH market includes

the so-called digital out-of-home (DOOH) advertising market, which has become a key growth area for the

overall OOH market due to growth in digitization. Alternative formats for OOH advertising can include

advertisements on petrol pumps, bike racks or inside rest rooms.OOH advertising is estimated to increase at

11.2% CAGR from 2013 to 2017.111

The graph highlights the cost versus reach proposition for each type of media in a relative manner as

approached by clients to determine their spending on the medium.

111 Source: PwC –Global Entertainment and Media Outlook 2013 -17


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PwC 375

Figure 205: Cost v/s target audience for OOH media


1.3 Out-of-home (OOH) advertising

Out-of-home (OOH) advertising is a mass-market media that describes any type of advertising that reaches the

consumer when they are outside home. Out-of-home advertising, therefore, is focused on marketing to

consumers when they are "on the go" in public places, in transit, waiting (such as in a medical office), and/or in

specific commercial locations (such as in a retail venue). OOH is highly adaptable, offering virtually unlimited

potential anywhere from billboards to digital boards, bus wraps to kiosks, highways to city streets, airports to

shopping malls and 24*7 with dynamic content and always on displays that grab people’s attention when

they’re on the go. As per industry source, OOH audience primarily belongs to SEC A112. However Out-of-home

(OOH) advertising market is characterised by its volatile growth rate and susceptible to economic fluctuation

(figure). Most of the brands squeeze their budget for outdoor advertising during economic down time.

1.3.1 SWOT Analysis of OOH advertising

Strengths

High exposure locations including

transportation hubs, waiting areas and key city

Weaknesses

No established rating measurement tool unlike

TV, internet advertising

112 SEC (Socio Economic Classification) is the division of total potential market into smaller groups based on variables

such as social class, education, income, occupation, etc of the Chief Wage Earner of the household. SEC range from

A1, A2, B1, B2, C, D, E1 and E2 with A1 being the highest classification.


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attractions

Mixed audience profile from lower to middle

class to upper class at airports

Variety of sectors to advertise e.g. Telecom,

FMCG, Media & Entertainment and

automobiles

Greater levels of flexibility ( sizes and shapes)

and creativity

Broad city and urban coverage, filling the gaps

left by other media

Better reach and interaction near the target

locations

Relatively cheaper media compared t others

Lack of quality OOH properties

Opportunities

Transit OOH is increasing pie

Digital penetration is evolving rapidly

Threats

Volatile in nature

Intense competition from other media (print,

TV etc.) as advertisers may shift to other media

Highly unorganised industry

1.3.2 Sector-wise advertising spends for OOH advertising

Telecom continued to be biggest advertiser in OOH with near to one-third (29%) contribution. Other prominent

sectors to advertise on OOH medium include BFSI, FMCG, Automobiles and Entertainment & media.

Figure 206: OOH - Sector wise spending

Source: PwC Global Entertainment & Media Outlook Report

1.3.3 Out-of-home (OOH) advertising categorization

29%

24% 13%

13%

11%

10%

Telecom

BFSI

FMCG

Auto

Entertainment & Media

Others


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Figure 207: OOH - Media Categories

Source: Indian Outdoor Advertising Association [IOAA]

A) Billboards

Billboards form over half of share of total OOH market with roadside billboards being predominant. Located on

primary and secondary arterial roads and highways, it gets high-density consumer exposure to both residents

and commuter traffic. Billboards have high eye-catching exposure with high consumer frequency. With broad

urban coverage, it reinforces messages from other media when viewers are away from their homes during the

course of daily activities.

B) Street furniture

Street Furniture displays are designed to functionally complement the furniture and are suitable for advertising

displays in metropolitan areas. In metropolitan areas these are located in waiting areas of transportation hub;

malls, phone kiosks where coverage to large media formats are unavailable.

C) Transit

This provides advertising on transit mediums likes airports, railways, metros and buses. Transit advertising is

effective as the transit acts as moving advertisement covering the length and breadth of the city. Airports have

become one of the most effective mediums for premium brands due to its SEC A1 audience profiles. With

airport modernization program in 2005 and privatization of four International airports at Mumbai, Delhi,

Bangalore and Hyderabad by Airport Authority of India (AAI) there has been surge in non-aeronautical

revenues, of which advertising forms major component113. Areas such as passport control, customs, baggage

and departure are used for advertising. The inclination is towards innovation and customized offering of OOH

offerings.

113 Moodie Report; "Indian airports deliver surging growth in non-aeronautical revenues"; (http://moodiereport.com)

Out-of-home advertising

(OOH)

Bill boards

Bulletins

Digital billboards

Posters

Walls

Street furniture

Bus shelter

Urban furniture-

Phone kiosks,

Newsracks

Transit

Airports

Metro

Rail & Subways

Buses

Cabs/wrapped vehicles

Alternatives

Interior places- clubs,

restaurants, bars

Exterior places-

Resorts,leisure

Point-of-Sale

http://moodiereport.com/


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PwC 378

On the other hand railways and buses target have

mixed baggage of commuter profile ranging from

SEC A2- B2114. Areas like inside and outside

train/bus, on platforms/buses are used by

advertisers for advertising. Metros are emerging as

a new advertising destination for premium brands.

For instance with impetus from Delhi Metro Rail

Corporation (DMRC) operations in 2005, Delhi's Rs

260-crore OOH market growth was at faster rate

of 18-22% per annum compared to other metros.

National Capital Region of Delhi contributed 70-

80% of the outdoor advertising market, while

Delhi accounts for 10-15%. With the metro

platform, Delhi's outdoor advertising space

increased thereby raising Delhi's share115.

Apart from these public transports private cabs

are also use their vehicles to advertise. Meru has

been offering non-digital advertising to users; it has entered with offering of digital advertising in 2011. It will

install digital screens in its fleet of cabs. With around one million passengers spending an average 45 minutes in

a cab, these cabs offer a captive SEC A audience to advertisers.

D) Alternative

OOH has been slowly increasing its scope and providing greater reach by advertising on interior spaces like

restaurants, bars, malls and exterior places like resorts; leisure places .Alternative media provides greater levels

of flexibility and creativity with advantage to small-to-medium advertisers who cannot afford other OOH

media.

114 SEC (Socio Economic Classification) is the division of total potential market into smaller groups based on variables

such as social class, education, income, occupation, etc of the Chief Wage Earner of the household. S EC range from

A1, A2, B1, B2, C, D, E1 and E2 with A1 being the highest classification.

115 Delhi pips Mumbai in Out of Home ad market - http://www.financialexpress.com

Figure 208: OOH - Market share split between traditional

media and transit media

1323 (71.1%)

539 (28.9%)

Traditiona Outdoor OOH Transit Media

http://www.financialexpress.com/


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Annexure-4: Overview of MMR Real Estate Market

Introduction

Mumbai the financial capital of India is the base for most of the big Indian as well as the multinational

companies. Various factors –like good connectivity through sea, air and rail; an environment conducive to

business; presence of the stock exchange and prominent commodity exchanges; and the headquarters of

regulators and several banks have caused high commercial activity in the city and contributed to the economic

growth.

High commercial activity has lead to high demand for commercial space in Mumbai. It has also lead to an

increase in population both through natural growth and migration, which in turn have increase the demand for

residential spaces. Residential pockets like Cuffe Parade, Napeansea Road and Wolli are amongst the costliest

in the country.

High population growth and presence of high income groups have given rise to high retailing activities both

premium and cheap retailing. There is a growing demand for retail space in the MMR region.

The major real estate market can be divided as follows

Commercial real estate market

Retail real estate market

Residential real estate market

Hospitality real estate market

Commercial real estate market

The total office stock in Mumbai as of Jan, 2014 stands at 91 million square foot116. The

absorption of office spaces in Mumbai rose by 4.4% year on year to 7 million square feet in 2013 from

6.7 million square feet in 2012. Despite the economic uncertainty the vacancy rate dropped from 24% in

2012 to 22.9% in 2013. According to studies the vacancy rate is expected to go back to ~ 24% in 2014 and

then go down to 18.2% by 2017.

Figure 209: Net absorption of office space in Mumbai

Source: Mumbai office market 2013 Review and Predictions for 2014, Jones Lang LaSalle (JLL) in India

116 Mumbai Office Market: 2013 Review & Predictions for 2014, Jones Lang LaSalle India

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PwC 380

Macro economic factors have a direct effect on the real estate market. The GDP growth rate has fallen sharply to

5% year on year as of FY2012 – 13 against the potential GDP growth rate of 7 – 7.5% as defined by RBI. During

the recent periods the Indian Rupee has also undergone a considerable deterioration against the USD and the

CPI index is sustained at a high rate of 10%. During 2013, the average growth of commercial real estate stock in

Mumbai fell to 8.8% from a sustained average growth rate of 18.5% since 2004. However this can be explained

by the fact that from 2004 to 2013 the office stock in Mumbai has risen by more than five times, which lower

the incremental growth. Towards the middle of 2013, growth in the stock of office space in Mumbai was still the

fourth highest among the major cities in the world. These suggest that the while the growth rate has come

down, it has become more stable.

Figure 210: Supply and absorption trends of commercial space in MMR

Source: Investment Advisory Report (2013), Knight Frank

Capital and Rental values

The capital values for commercial space in Mumbai rose by 3.2% year on year in 2013 and the

rental values rose by 2.8% year on year. The highest increase was observed in the Western Suburbs and

the Thane & Navi Mumbai region where capital values rose by 7% and 6% respectively and rental values rose by

5% and 4.5% respectively.

Profile of tenants

The profile of users of commercial space is changing with dominance of IT/ITES and BFSI giving way to

companies in media, telecom, consulting and logistics.

0%

5%

10%

15%

20%

25%

30%

0

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120

140

2008 2009 2010 2011 2012 2013E 2014E 2015E 2016E 2017E

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Figure 211: Distribution of office market in MMR according to sectors

Source: PwC research and Analysis, Market Reports

From commercial real estate market point of view MMR region is divided into six micro markets namely

Central Business District (CBD), extended CBD, Emerging CBD, Western and Eastern Secondary Business

Districts (SBD) and Peripheral Business District (PBD).

Figure 212: Commercial space micro market in MMR

Business District Micro-markets

CBD Nariman Point, Cuffe Parade, Ballard Estate, Fort, Mahalaxmi, Worli, Churchgate

Emerging Business District BKC, Bandra (East), Kalinga, Kalanagar

Extended-CBD Parel, Lower Parel, Dadar, Prabhadevi

SBD Western Suburbs Andheri, Jogeshwari, Goregaon, Malad

SBD Eastern Suburbs Kurla, Ghatkopar, Vikhroli, Kanjurmarg, Powai, Bhandup, Chembur

PBD Thane, Airoli, Vashi, Ghansoli, Rabale, Belapur

30%

25% 19%

30% BFSI

IT/ITES

Manufacturing

Other service sectors


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Figure 213: Business districts in MMR


A) CBD

The CBD located in the southern most parts of the city comprises of prime areas like Nariman Point, Cuffe

Parade, Fort and Churchgate. CBD was the first business district to develop and hence most of the companies

both private and public have their bases in CBD. The BFSI tenants who dominated the consumption of office

spaces in the earlier years are the prime tenants of the business district.

B) Extended CBD (ExBD or Off-CBD)

The ExBD or off-CBD comprises of Lower Parel, Mahalaxmi, Prabhadevi and Worli. Geographically located

within the heart of the city, this region until the nineties housed several defunct textile mills. During the last

decade the region has witnessed a major transformation with the mills giving way to new real estate

development transforming the region into high end commercial, residential and retail zones.

The global financial crisis of 2008-09 and the resultant slowdown in business coupled with the emergence of

competing markets like BKC and Off-BKC with high quality buildings offering better amenities and large floor

plates adversely impacted the demand for office space and vacancy rates went up from 15% to over 30%.

C) Emerging Business district

Geographically it lies closer to the heart of the city compared to the CBD which lies at the southern tip of the

city. It is the first in a series of new commercial centers planned in Greater Mumbai to decongest South Mumbai


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The accessibility is good with better planned with broad roads and a has sound infrastructure with abundant

parking, power supply and well maintained office spaces

Discussion on the above districts

The above three business districts are mostly driven by Banking, Financial Services and Insurances (BFSI)

which contributes almost 50% to the total demand for office space

Figure 214: Distribution of office space according to sectors in CBD & Off CBD, Emerging CBD and Extended CBD

Source: Knight Frank Investment Advisory Report (2013)

A mindset of segregating offices into client facing front end and back end is observed among the corporate.

They prefer to locate their back end offices in places with lower real estate prices/rentals like SBD Central &

SBD West, and client facing divisions in the premium markets of CBD & Off-CBD, BKC & Off-BKC and Central

Mumbai.

The markets of CBD and Off-CBD, BKC & Off-BKC and Central Mumbai commands premium because of the

profile of the occupiers – the occupiers are mostly front offices of multinational banks, consulting and media

houses, corporate headquarters of domestic and international manufacturer

Going forward the distinction between the three markets CBD & Off-CBD, BKC & Off-BKC and Central Mumbai

are expected to go away and the regions will merge into one bigger CBD for the city.

Figure 215: Distribution trend of office market across zones

Source: Knight Frank Investment Advisory Report (2013)

D) Suburban BD (SBD) Western Suburbs

48%

15% 5%

32% BFSI

Manufacturing

IT/ITeS

Others

0%

20%

40%

60%

80%

100%

1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

Ma

rk

et

sh

ar

e i

n %

BKC & Off BKC CBD & Off- CBD Central Mumbai


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PwC 384

It is only in 2001-2005 large scale Grade-A commercial office development started in this region. The office

space development is primarily focused on IT/ITES industry.

Are has good transportation connectivity. It is closer to International Domestic Airport and has good

connectivity via link road network, western expressway, the suburban train network and the upcoming metro

rail network.

A large number of BFSI players have relocated their back end support functions to this district, besides the

IT/ITES industry and together they contribute about 30% of the office space demand followed by mid size

manufacturing sector with around 25%

E) SBD Eastern Suburbs

The business district emerged during 2005-07 when the demand for office space fuelled by high economic

growth increased significantly. With relatively lower rentals and well established connectivity with other

business districts it emerged as a prominent office market

Although the demand for office space went up in the region the region did not observed any increase in rentals

primarily on account of continuing supply and competitive prices from the micro markets of Navi Mumbai and

Thane. The profile of the office space occupiers in the region is largely a price sensitive.

F) Peripheral BD (PBD)

This business district has emerged as the information technology hub by attracting occupiers mainly from the

IT/ITES sector. The growth can be attributed to the availability of large land parcels that has made

development of good quality buildings easy which offers large floor plates at affordable rentals

It is forecasted that IT/ITES industry will continue to remain the largest contributor to the demand of office

space in the district. The demand is expected to improve in the next five years and the supply of new projects is

was remain steady

The business district has good accessibility provided by well planned, broad and well connected roads are one of

the major growth factors of this district. The commercial floor plates available are much larger as compared to

those in the southern and western parts of the city

Figure 216: Growth of office space stock across business districts

Source: Investment Advisory Report (2013, Knight Frank)

0

5

10

15

20

25

30

35

40

45

CBD & Off CBD

BKC & Off BKC

Central Mumbai

SBD West SBD Central

PBD

Off

ice

sp

ac

es i

n m

illi

on

sq

ua

re

fe

et

2008

2013E

2017E


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PwC 385

Figure 217: Commercial lease rental trend in MMR business district

Source: PwC Research and Analysis, real estate market reports, reports from reputed housing finance units

Figure 218: Capital & Rental YoY Growth rates across business districts

Source: Mumbai office market 2013 Review and Predictions for 2014, Jones Lang LaSalle in India

Residential real estate market

The residential real estate market in the MMR region can be divided into the following zones

Table 104: Residential space micro market in MMR

Zone Major residential destinations

Island City Colaba, Cuffe Parade, Tardeo, Mahalakshmi, Parel,

0

50

100

150

200

250

300

350

Q3 '08 Q3 '09 Q3 '10 Q3 '11 Q3 '12

CBD

Extended CBD

Emerging CBD

Andheri(W)

Andheri(E)

Powai

Airoli

Thane

Vashi

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

CBD SBD Central SBD BKC SBD North Western Suburbs

Eastern Suburbs

Thane and Navi Mumbai

Suburbs

Capital value YoY Growth Rental YoY growth


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PwC 386

Worli, Dadar, Mahim, Sewri. Wadala

Western Zone Bandra, Andheri, Goregaon, Malad, Borivali, Dahisar, Mira Road, Bhayander, Vasai, Virar

Central Zone Chembur, Ghatkopar, Powai, Bhandup, Mulund, Thane, Kalyan, Dombivali, Kasara, Ambernath, Karjat

Navi Mumbai Airoli, Vashi, Nerul, CBD Belapur, Panvel, Taloja, Ulwe

A) Island city

The Island city houses the CBD and Off-CBD districts and is the home to a large number of corporate headquarters and the Bombay Stock Exchange (BSE). Residential areas in this zone like Cuffe Parade, Napeansea Road and Worli are amongst the costliest in the country

Table 105: Capital values in some of the prominent micro markets in Island City

Micro market Average Capital Values (INR/sqft.)

Dadar 15,000 – 30,000

Prabhadevi 30,000 – 80,000

Parel 25,000 – 45,000

Worli >35,000

Lower Parel 20,000 – 45,000

Mahalakshmi 25,000 – 40,000

Wadala 15,000 – 20,000

Sewri 20,000-30,000

Sion 18,000-30,000

Source – www.magicbricks.com, Times of India (Times Property), ICICI Property Services Group – Mumbai Residential

Real Estate Overview (July 2012)

B) Western Zone

This region is home to the BKC business district. In this zone Bandra and Juhu attracts most of the demand and commands the highest residential property prices in this zone. The zone has a sound social infrastructure with good education, healthcare, retail and entertainment options

Table 106: Capital values in some of the prominent micro markets in Western Zone


Bandra 25,000 – 60,000

Andheri 11,000 – 25,000

Goregaon 9,000 – 15,000

Kandivali 9,000 – 12,000

Borivali 9,000 – 12,000


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PwC 387

Santacruz 20,000 – 50,000

Bhayander 5,000 – 7,000

Mira Road 5,000 – 7,000

Dahisar 8,000 – 9,500



C) Central Zone

It covers the northern region stretching from Sion to Karjat. Office spaces are coming up in large numbers along the LBS road and localities such as Powai and Thane of this zone. The primary connectivity to the zone is mainly through the suburban train network and the Eastern Expressway. Till Thane the region has decent social and other physical infrastructure. The region houses several organized retails

Table 107: Capital values in some of the prominent micro markets in Central Zone


Ghatkopar 10,000 – 18,000

Mulund 7,500 – 15,000

Bhandup 8,000 – 12,000

Vikhroli 10,000 – 12,000

Chembur 10,000 – 18,000

Ghodbunder Road (Thane) 4,500 – 6,000

Panchpakhadi (Thane) 6,000 – 8,500

Teen Hath Naka (Thane) 5,500 – 6,100

Vasant Vihar (Thane) 6,500 – 8,000



D) Navi Mumbai

The region is emerging into a prominent real estate market driven by good employment opportunities mainly in the IT/ITES sector. A new business district CBD Belapur has been planned as the office development hub. The region has good social infrastructure with quality schools and retail infrastructure. The connectivity is primarily through the suburban train network. Vashi is the most prominent area in the zone and command the highest property price

Table 108: Capital values in some of the prominent micro markets in Navi Mumbai


Palm Beach Road 12,000 – 14,000

Nerul 8,000 – 10,000

Kharghar 6,000 – 6,500


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PwC 388

Panvel 5,000 – 5,500



In the short term residential real estate market prices are likely to go up as there is a huge unmet demand for homes in the city. The supplies of residential units have been slow because of the slow pace of approvals from sanctioning authorities. The input cost for developers have gone up as the time of completion increased from 2-3 years to 4-5 years

Figure 2208: Supply and absorption trend of residential space in MMR

Source: Liases Foras, Knight Frank - Research Investment Advisory Report (2012)

Figure 221: Micro market split of launch units as on March 2012

Source: Knight Frank – Residential traction @ glance (June – 2012)

0%

5%

10%

15%

20%

25%

30%

0

50000

100000

150000

200000

250000

300000

350000

400000

2007 2008 2009 2010 2011 2012

No

. o

f U

nit

s

Stock Occupied stock Vacancy

1% 4%

12%

26%

20%

15%

13%

9% Sounth Mumbai

Central Mumbai

Central Suburbs

Western Suburbs

Navi Mumbai

Thane

Peripheral Western Suburbs

Peripheral Central Suburbs

44483 37127

72129

112543

69150

41950

0

20000

40000

60000

80000

100000

120000

2007 2008 2009 2010 2011 2012

No

.of

un

its

Figure 219: Residential launch trend in MMR


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PwC 389

Around 50% of the demand is for residential units priced up to INR 7.5 million. Developers are targeting this market and hence 55% of the under construction units belong to this price bracket.

Figure 222: Ticket size split of launched units as on March 2012

Source: Knight Frank – Residential traction @ glance (June – 2012)

Attractiveness of residential pockets are influenced by the following factors

Infrastructure – Connectivity infrastructure like roadways and railways, social infrastructure like

schools, malls, etc, utility infrastructure like power, water supply, etc

Residential Cost

Proximity to organized retail

Proximity to commercial development

Future infrastructure development

Future employment generation

Lower Parel

Ghodbunder Road

Kharghar Panvel Bandra (E) JVLR Borivali/Kandivali

Powai Wadala

Infrastructure

Residential Cost

Proximity to organized retail

Proximity to commercial development

Future infrastructure development

Future employment generation

12%

28%

15% 11%

10%

5%

6%

6%

2% 2%

2%

1% <2.5 Million

2.5-5 Million

5-7.5 Million

7.5-10 Million

10-12.5 Million

12.5-15 Million

15-20 Million

20-40 Million

40-80 Million

80-150 Million

150-400 Million

400-1000 Million


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PwC 390

Good/ Low

Above Average

Average/ Medium

Below Average

Bad/ High

Source – ICICI Property Services

From the above matrix, among the prominent residential pockets analyzed Bandra (E) is the most attractive

micro market with sound infrastructure, proximity to organized retail, commercial development. Because of the

presence of BKC future prospects for the development of infrastructure and future employment generation

looks good. However the residential costs are high reflecting the lack of land parcels.

Retail real estate market

MMR region currently has 19.98 million sq. ft. of operational mall space in the city. As of 2011, there were 32

operational malls and 7 new Malls were coming up in the MMR region with a Gross Lettable Area (GLA) of ~ 13

million square feet. With a population of 18.30 million as per the 2011 census Mumbai can absorbed ~ 20

million square feet of Gross Lettable Area.

Figure 223: Mall Space Demand and Supply in MMR

Source: Demand and Supply of Mall Space in India, 2011 (Asipac)

0

5

10

15

20

25

2011 2012 2013 2014

Ma

ll S

pa

ce

( i

n m

illi

on

s

qu

ar

e f

ee

t)

Demand

Total Supply


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PwC 391

Figure 224: Distribution of Malls across MMR



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PwC 392

Retail real estate market in Mumbai can be divided into 4 zones

Table 109: Retail Space micro market in MMR

Zone Major retail destinations

Island City Nariman Point, Haji Ali, Worli, Lower Parel, Dadar and Mahim

Western Suburbs Bandra, Andheri, Santacruz, Goregaon, Malad, Borivali, Dahisar, Mira Road – Bhayander stretch

Central Suburbs Matunga, Chembur, Ghatkopar, Bhandup, Mulund,

Navi Mumbai Airoli, Vashi, Kharghar

Thane Thane, Kalyan

Figure 225: Distribution of retail stock (Total area 8.72 million sq. ft.)

Source: Knight Frank Research - India Organized Retail (2010)

A) Island City

The major markets in the zone are Nariman Point, Worli-Prabhadevi, Lower Parel and Haji Ali-Kemps Corner.

As the Island City houses up market residential area, a large number of international and national brands are

present here. High Street Phoenix located at Lower Parel and Atria Mall located at Worli are two of the major

malls in the area.

B) Western Suburbs

Santacruz, Linking Road in Bandra, Andheri, Malad, Goregaon and Kandivali are some of the major micro

markets in the zone. The dominant micro markets are Andheri (West) and Malad (West) accounting for a total

of large 6 malls. Two factors might have contributed to their dominance – first presence of high income

individuals as compared to other micro markets in the zone and the lack of organized retail space in these micro

markets necessitating the need for large malls.

C) Central Suburbs

15%

43%

27%

15%

Island City

Western Suburbs

Central Suburbs

Navi Mumbai


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PwC 393

The major micro markets in this zone are Matunga, Chembur, Ghatkopar and Mulund. The central suburbs

have ~ 29% mall vacancy which is far higher than any other zones in Mumbai. The vacancy rate can be

attributed to poor design of malls in this zone.

D) Navi Mumbai

Airoli, Vashi and Kharghar are the major micro markets in this zone with Vashi being the dominant one with 5

of the major 6 malls located in Vashi. Increase in commercial activity lead to increase in residential demand

which in turn lead to an increase in demand for retailing activity.

E) Thane

High commercial activities have lead to high residential demand which in turn has lead to rising demand for

retail space. The market has grown exponentially towards Ghodbunder Road which has witnessed large scale of

residential projects coming up in the last few years.

Figure 226: Mall Space demand and supply across micro markets (2013)


Figure 227: Mall Space Demand trend across micro markets


0

1

2

3

4

5

6

Kalyan Dombivali

Mira Bhayandar


Central Suburbs

Navi Mumbai

Thane

Ma

ll s

pa

ce

(in

mil

lio

n

sq

ua

re

fe

et)

Demand

Supply

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

2011 2012 2013 2014

Ma

ll s

pa

ce

(in

mil

lio

n s

qu

ar

e

fee

t)

Kalyan Dombivali

Mira Bhayandar

Island City

Western Suburbs

Central Suburbs

Navi Mumbai

Thane


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PwC 394

The average anchor tenants monthly rentals in Mumbai ranges from INR 41- 89/sq.ft. per month with rentals

in Island City being considerably higher and Navi Mumbai being the lowest. Even in case of vanilla tenants,

monthly rentals which ranges between INR 97 – 267/sq. ft. per month Island City has the highest and Navi

Mumbai has the lowest.

The three major high streets markets in Mumbai are – Breach Candy/Kemp’s Corner (Island City), Colaba

Causeway (Island City) and Linking Road-Bandra (Western Suburbs).

Figure 229: Average mall rentals in MMR

Source: PwC Research and Analysis, real estate market reports & articles

It is observed that stores at lower floor levels commands much higher rentals than stores on the upper levels, this is because stores at lower levels attracts more footfalls than stores on the upper levels.

Figure 230: Popular verticals in organized retail

Source: PwC Research and Analysis, real estate market reports & articles

Significant and major developments in the Eastern region have been concentrated in the

regions around Mulund (around L.B.S Marg) and Thane. The major factor contributing to this trend

is the residential boom in these regions, which generates follow-on demand for retail spaces. Also the rental

0

50

100

150

200

250

300


Central Suburbs Navi Mumbai

INR

/sq

. ft

. p

er

mo

nth

Anchor rentals

Vanilla rentals

33%

11%

11% 7%

7%

7%

6%

5%

5% 2%

4%

2% Clothing & Apparel

Food & Beverage

Mobile & Telecom

Food Services

Electronics

Footwear , Eyewear& Timewear

Jewellery

Home & Interior

Leisure,Enter. & Gaming

Pharmacy

Beauty,Fitness & personal care

Fashion Accessories

400 400 350

600

800

600

Colaba Causeway Linking Road-Bandra Breach Candy-Kemps Corner

INR

/sq

. ft

. p

er

mo

nth

Minimum

Maximum

Figure 228: High street retail rentals


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PwC 395

trend in the Eastern suburbs shows that they are the lowest and more stable (INR 100 – 200 / sqft/month),

when compared with other regions

Figure 231: Retail lease rental trend in MMR

Source: PwC Research and Analysis, real estate market reports, reports from reputed housing finance units

Key takeaways

Commercial office space

Vacancy rates for commercial office space are expected to come down to below 20% by 2017 because of

decelerated supply and steady rise in demand.

Island city housing the CBD and Off-CBD is highly congested with high parking issues, overcrowding of

local trains, traffic bottlenecks.

A phenomenon of migration among the corporate away from island to suburban and peripheral

business districts has been observed leading to spatial restructuring.

Corporate are segregating their offices into client facing front end and back end offices, and prefer to

locate their back end offices in relatively cheaper suburbs.

In the future the distinction between CBD & Off-CBD, BKC and Off-BKC and Central Mumbai will be

blurred.

In the secondary business districts the main demand contributor for office spaces is the IT/ITES

industry players. The rental profiles of occupiers in this zone are generally price sensitive

Residential

The supply of residential units has been slow because of the slow pace of approvals from sanctioning

authorities.

The residential market in the city has picked up faster recently given the downturn in commercial office

market.

Most of the new residential units are coming up the suburbs, extended suburbs, Navi Mumbai and

Thane. Only 1% of new residential units are coming up in South Mumbai.


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PwC 396

Capital values for residential units are still the highest in the Island City.

A sound social infrastructure and connectivity infrastructure are crucial for the attractiveness of a

micro market.

Retail

Island city already has quality retail space and it is more or less saturated. But it also yields the highest

rentals.

Almost half of the mall space addition has been observed in the Eastern Suburban region.

Retail demand is influenced by residential development which in turn is influenced by commercial

development.

Most of the new retail spaces are coming up in the central suburbs (part of Eastern - largely Powai) and

Thane.

Income level of residents of zone is a factor that influences retail space development in the zone

Key inferences

Commercial development causes residential development which in turn drives retail space development

Good quality infrastructure in terms of connectivity, utility and social infrastructures are vital for the

real estate attractive of the region

Congestion in terms of lack of land parcels, traffic problems, parking problems, etc affects the

attractiveness of the market

Island city is saturated and there is very little scope for further commercial development and residential

development

The growing markets for commercial, residential as well as retail real estate are the suburbs, Thane and

Navi Mumbai. At present and in the near future focus can be on the suburbs where the property values

are relatively higher than the Thane and Navi Mumbai and whose distinction from the Island City’s

CBD and Off-CBD are gradually blurring

Level of Rental values is also dependent on the profile of the occupiers. The Island City commands

premium because of the high profile of the occupiers. In future well planned infrastructure

development in Suburbs, Thane and Navi Mumbai might alter the profile of the occupier and rental

values might go up

Figure 232: Micro market real estate growth profile


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PwC 397

Annexure-5: Summary of DCR of MCGM and TMC

Key DCR clauses of MCGM with impact on commercial development

Section (9): Land uses and manner of development#

The clause states “ The uses of all land situated between the municipal limits of Greater Mumbai, have been

designated or reserved for certain purposes in the development plan, shall be regulated in regard to type and

manner of development/re-development according to table hereunder-“

Sr.

No.

Use Person/authority

who

may develop

Condition subject to which

development is permissible

II Commercial (C)

(a) (i) Local Commercial

(C-1)

Owner The owner may be allowed to develop on such

terms as may be agreed between him and

commissioner (ii) District Commercial

(C-2)

Public Authority

or Owner

(b) Retail Market (RM) Corporation

or Owner

Acquire and develop the Retail Market

OR

Owner may be permitted to develop a retail

market with type, number and size of stalls

prescribed by the Commissioner and further

subject to his agreeing to hand over built up area

to Corporation free of Charge. There-after the

owner will be entitled to have full permissible FSI

of the account the area utilized for market

(c) Shopping Centre

(SC)

Acquire and develop the Retail Market

OR

Owner may develop Shopping Centre subject to

his agreeing to give at least 25 % of the shops to

the Corporation for the purpose of rehabilitation

of shop-keepers displaced from sites reserved for

public purposes or amenities in the construction

plus 15 % of cost of construction. There-after the

owner will be entitled to have full permissible FSI

of the account of built –up area of Shopping


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PwC 398

Centre to be handed over to the Corporation

Commercial (C )

(g) District Commercial

Centre/Town Centre/

Town Sub-Centre

Corporation

or Owner

or Special Planning

Authority (SPA)

Corporation /SPA may acquire the land and

develop it for District Commercial Centre/Town

Centre/ Town Sub-Centre

OR

Owner may develop District Commercial

Centre/Town Centre/ Town Sub-Centre on his

agreeing to give 30% of permissible built-up area

along with land as per requirement of

Commissioner free of cost, for users permissible

under C1/C2 zones. The owner thereafter will be

entitled to have permissible FSI of the plot for

other permissible users under C1/C2 zones

without taking into account area handed over to

the Corporation

(# Residential land use here is not described as the Concession period by MRVC restricts this kind of

development)

2. Land Use Classification and Uses permitted Further Part IV- Land Use Classification and Uses permitted describes permissible uses under each of

land use category. Section 53(1) mentions “Uses permitted in Local Commercial area/ zone (C-1)” where as

Section 54 mentions “Uses permitted in District Commercial area/ zone (C-2)”.The table underneath briefs

land use under each category:

Land use

Classification

Uses permitted

C-1 Zone Any use permitted in R-2 Zone (residential with Shop Line and/or including

theatre, cinema, concert halls, dance and music studios)

Confectioneries, bakeries and establishment for preparation and sale of

eatables (employing not more than 25 persons)

Auto part store and show rooms for motor vehicle and machinery

Sale of second hand goods

Club house, other recreational activities

Furniture storage and household goods

Retailing of building material

Pasteurizing and milk processing plants (each employing not more than 9

persons)


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PwC 399

Printing, book-binding, engraving and block-making

Veterinary dispensaries and hospitals

Repair ,cleaning shops and analytical experimental or testing labs

Paper-box manufacturing (each employing not more than 9 persons)

Mattress making and cotton-cleaning (each employing not more than 9

persons)

Ice factories in independent buildings

Establishment selling tins, package etc.(employing not more than 9 persons)

Business offices including trade exchanges

Aquariums

C-2 Zone Any use permitted in C-1 zone except residential use other than ancillary to

commercial user

Area to extend of 40% of permissible floor area shall be developed for a)

Wholesale establishment b) public utility building c) headquarter of

commercial organization d) Printing, book-binding, engraving and block-

making

On remaining 60 % of permissible floor area, uses permissible on in C-1 shall

be provided such that extend of residential use shall not exceed 30 % of

remaining 60% of permissible floor area

The prima facia understanding of land use permitted suggests that Commercial C-1 should be the designated

land use after conversion from operational

3. Section 36: Parking Space requirement

This section states the minimum size for area of parking space required and quantitative requirement of

parking spaces based on built up area

Section 36 (1) (ii) Size of parking spaces –The minimum sizes of parking spaces to be provided shall be as

shown below:


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PwC 400

Section 36 (2): Quantitative Requirements: Four wheeled auto vehicles-Parking spaces for four

wheeled auto vehicles shall be as provided in table below

Occupancy Parking space required

For all starred hotels One parking space for 60 sq. mt. of total floor area

For lodging establishments One parking space for 120 sq. mt. of total floor area of a

lodging establishments

Government, semi-public or private office

business buildings

One parking space for 37.5 sq. mt. upto 1500 sq. mt.

and for every 75 sq. mt. of additional area exceeding

1500 sq. mt.

Mercantile (Market ,department, stores,

shops, and other commercial users

(IT parks)

One parking space for 40 sq. mt. upto 800 sq. mt. and

for every 80 sq. mt. of additional area exceeding 800

sq. mt.

Shopping not included in Mercantile

occupancy

One parking space for 150 sq. mt. in case of shopping

users with each shop not exceeding 20 sq. mt. & one

parking space for 50 sq. mt. above 20 sq. mt.

Cinema and theaters parking space equivalent to 8 % of total number of seats

with additional parking as otherwise required for other

permissible users in conjunction with that of cinema /

theaters

As per Section 36 (3) Other Vehicles : “For all non-residential, assembly and non-assembly occupancies

, 10% additional parking space subject to minimum of two parking spaces shall be provided in addition

to what is prescribed in the Regulations”

Section 36 (4) Transport Vehicles: “In addition to parking spaces provided for Mercantile buildings,

parking space for transport vehicles at the rate of one space per 2000 sq. mt. of floor area or fraction

thereof exceeding first 400 sq. mt. of floor area .The space shall not be less than 3.75 * 7.5 m in size and

not more than six spaces need to be insisted upon”

Hence proper number of four wheeler units and area for parking spaces needs to be considered as part of

development plan for project. This is the mandatory parking provision in DCR and is not counted

towards FSI.


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PwC 401

4. Section 37: Space requirement for various parts of buildings

This section address the space requirement of various parts of building based on its use i.e. occupant load

per 100 unit of plinth or covered area as described in table below:

So for proposed commercial development the occupant load to be considered is 10 /100 sq. mt. of plinth

area for business whereas for Mercantile the occupant load ranges from 16.6 – 33.3 /100 sq. mt. of plinth

area.

5. Section 23(1)(a): Recreational /amenities open space

This section states mandatory open spaces in residential and commercial layouts

As our plot area is greater than 10,000 sq. mt., 25 % of area is to be left open to sky to satisfy this clause of

DCR.

6. Section 29: Open Space requirement: side and rear open space

This section mentions side and rear open space in relation to the height of building for light and ventilation

(1) Residential and Commercial zones: The open spaces on all sides except front side of a building shall be

of width not less than a third of height of that building above ground level ,rounded to the nearest

decimal subject to maximum of 20 m ,the minimum being 3.6 m for residential building and 4.5 m for

commercial building

(b) Building with length /depth exceeding 40 m (a) If length of building exceeds 40 m an additional width

of 10 % of dimension in excess of 40 m shall be required on the side or rear open space as the case may be

:


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PwC 402

Provided that no such increase in additional open space shall be necessary if (a) it is front open margin

space or (b) when only store rooms and stairways derive light and ventilation from open space.

Provided further that-

(i) Open space for separation between any building and a single storeyed accessory building need not

exceed 1. 5 m

Also clause (f) of same section states that “Where a room does not derive light and ventilation from open

space; the width of exterior open space as given in these Regulations can be reduced to minimum of 3.6

m for residential building and 4.5 m for commercial building upto height of 24 m. For building with

height of more than 24 m or more such exterior open space shall be minimum of 6 m or more subject to

requirements of Fire Brigade Authorities “

For commercial development at plot the width of exterior open space will be minimum 4.5 m for

commercial building up to height of 24 m and minimum of 6 m for building with height of more than 24 m

or more subject to requirements of Fire Brigade Authorities assuming A/C rooms i.e. does not derive light

and ventilation from open space

Section 29 (5) open Space requirement: Front setbacks

Section 29 (5) (A) states “Front setback from street line/Plot Boundary” and Section 29 (5) (B) states

“Front setback from street Centre Lines” requirement in each zone as detailed in table:

As per this clause the required front open space from street line/plot boundary for commercial zone

development will be 4.5 m.


-

PwC 403

7. Section 22(1): Internal means of Access to each Plot-Minimum road width vis-à-vis the

area served

This section states the minimum prescribed with of access road based on area served

The clause states “Plots which do not abut on a street shall abut/front on a means of access, the width

and other requirements of which shall be as given in Table 6 hereunder for residential and commercial

zones…”

As our site have area greater than 10,000 m, the minimum width of access road to be constructed should

be 12 m. The length of access road will vary based on size feature and requirements.

8. Section 29(8)(ii): Additional restriction on construction / reconstruction for Building

sites abutting railway boundary

The clause states “Subject to the requirements of set-backs from roads and side and rear marginal open

spaces under relevant Regulations, no new construction of a building or reconstruction of an existing


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PwC 404

building shall be allowed within a distance of half the height of the said building from the railway

boundary, and in any case at least 3 m away from such boundary”

Further the clause stipulates criteria for development within 30 m from Railway Boundary

[Building sites situated within 30 m from Railway Boundary:

No Objection Certificate from the concerned railway shall be insisted before granting permission for the

building plans between railway boundary and distance of 30 m from it. The development of such plot

shall be carried out as per terms and conditions stipulated by the Railway Authority]

As the land parcel is within 30 meter distance from railway boundary, this becomes critical success factor.

As, here approvals are to be procured from Railways itself and are also project-specific approvals) but we

suggest to have beforehand view of Railways Technical Department on this development to avoid

complications later on.

9. Section 31 (1): Heights of Buildings: - Height via-a-vis the road width

This clause states that “The height of a building shall not exceed one and half times the total of the width

of the street on which it abuts and the required front open space. [The restrictions of height of the

building spelt out in Regulations No. 31(1) shall however, cease to apply in case where the plot fronts on

road having width more than 18.00 mtrs and where front marginal open spaces of 12 mtrs. minimum is

observed, provided that open spaces as on other sides are made available as required from the fire

safety point of view].For this purpose, the width of the street, may be the prescribed width of the street,

provided height of the building does not exceed twice the sum of the width of the existing street and width

of prescribed and required open space between the existing street and the building.”

Both land parcels do not front the road and hence are subjected to height restrictions. Also any prescribed

access/road as earmarked in the development plan by MCGM needs to checked to incorporate the width in

calculating the permissible height of the building

10. Section 35 (1): Floor Space Index computation: Floor Space Index/Built-up

calculations:

This section states that “The total area of a plot shall be reckoned in Floor Space Index/Built-up

calculations applicable only to new developments to be undertaken here after as under-“

The total area considered for FSI calculation shall be as under:


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PwC 405

Table 110: Summary of TMC DCR

Sr.

No.

DCR Section

no. Clause Name Clause and Impact on proposed development

1 Section (64)

Land Uses and manner of

Development

Clause: The various land use classification shall be in the following zones -

(i) Residential ... Purely residential (R1)

Residential with shop lines at ground floor (R2)

(ii) Commercial ... Commercial Zone (C1 & C2)

(iii) Industrial ... Industrial Zone

(iv) Green ... Green Zone G1

Green Zone G2

Green Zone G3

(v) Special Reservations ... a) Special Housing

b) Low Density Residential Zone

2 Section 64,

Appendix M (4,5)

Uses permitted in Local

Commercial area/ zone C-1 and in

District Commercial area/ zone C-2

Based on preliminary analysis the land use for proposed development should be Commercial

C-1 or C-2 (permission to undertake both)

3 Section 47 (1) Internal means of Access to each

Plot-Minimum road width vis-à-vis

the area served

Clause: Plots not abutting street and serving area between 4000 - 10,000 sq. m in

commercial zone should have access road of width 9.0 m for access length up to 300m and

12.0 m for above 300 m


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PwC 406

4 Section 53 (1)(a) Recreational /amenities open space Clause: Extent - In any layout or sub-division of vacant land in a residential and commercial

zone, open spaces shall be provided as under –

(i) Area above 1,000 sq. m. to 2,500 sq. m. ... 15%

(ii) Area above 2,500 sq. m. to 10,000 sq. m. ... 20%

(iii) Area above 10,000 sq. m. ... 25%

These open spaces shall be exclusive of areas of accesses / internal roads /designations or

reservations, development plan roads and area for road widening and shall as far as possible

be provided in one place. Where however, the area of the layout or sub-division is more than

5000 sq. m. open spaces may be provided in more than one place, but at least one of such

places shall be not less than 750.00 sq. m. in size

5 Appendix N.1.2.7 Open Spaces Clause: Buildings in commercial Zone:

Marginal open spaces along periphery of land or plot shall be 4.5 m minimum, provided that

in case of land/plots fronting on classified roads, set back prescribed under Ribbon

Development Rules* or 4.5 m. whichever is more shall be observed.

*Ribbon development refers to development along the periphery of a classified road

6 Section 44 (b) Additional restriction on

construction / reconstruction for

Building sites abutting railway

boundary

Clause:

As the plot is within 30 m from the railway boundary a No Objection Certificate (NOC) from

Railways should ne procured.

No new construction of a building within a distance of half the height of building from railway

boundary & in any case at least 3 m away from such boundary

7 Section 75(a) Additional open space requirements Clause: Open spaces - Marginal open spaces along periphery of land or plot shall be 4.5 m

minimum, provided that in case of land/plots fronting on classified roads, set back prescribed

under Ribbon Development Rules or 4.5 m. whichever is more shall be observed.


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PwC 407

8 Section 83 (1) Heights of Buildings: - Height viz.-

a-viz. the road width

Clause: Height viz.-a-viz. the road width - The height of the building shall not exceed two

times the total width of street on which it abuts and the required front open space. For this

purpose, the width of the street may be the prescribed width of the street, provided the height

of the building does not exceed two and half times the sum of the width of the existing street

and the width of the proposed required open space between the existing street and the bldg.

Provided however, above restrictions on height of the bldg., will not be applicable for bldg.

erected on a plot which fronts on road having width of 18 m and above if front marginal open

spaces of not less than 12 m is provided.

9 Section N.1.2.7 Floor Space Indices and Tenement

Density

Clause: Maximum permissible shall be one. For the purpose of F.S.I. net area of land

excluding open space and areas covered by internal roads shall only be considered.


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PwC 408

10 Section 54 (3) Floor Space Index computation Clause:

Residential & Commercial Zones

1. Up to 1000 sq. m. Total area

2. From 1000 to 2500 sq. m. Total area subject to maximum of 2125 sq. m.

3. From 2500 to 10000 sq. m. Total area excluding 15% out of the area for

recreational / amenity open space vide item (ii) in clause (a) of sub-regulation (1) of

Regulation 54.

4. Above 10000 sq. m. Total area excluding 15% of the area for recreational open

space under item (iii) of clause(a) of sub-regulation (1) of Regulation 54

Note: The occupation certificate for buildings constructed for residential/commercial use

shall be granted by the Commissioner only after recreational area is developed and

structures for recreational activities are actually provided on site.

11 Section 85 (1) (ii) Parking Space requirement Minimum parking space for

four wheeler motor vehicle should be 2.5 m * 5.5 m

Scooter, Motorcycle 3 sq. m Section 92 Provision for Ramps -


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PwC 409

12 Section 85 Quantitative four wheeled auto

vehicles-parking spaces

requirements

Clause & Impact

For private office business buildings- One parking space for 75 sq. m. up to 1500 sq. m. and for

every 150 sq. m. of additional area exceeding 1500 sq. m.

For Mercantile (Market ,department, stores, shops, and other commercial users - One parking

space for 80 sq. m. up to 800 sq. m. and for every 160 sq. m. of additional area exceeding 800

sq. m. provided that no parking space is provided for floor area up to 100 sq. m

13 Section 140 Space requirement for various parts

of buildings

A) For Mercantile:(Occupant load gross area in M2/person)

(a) Street floor and sales basement:- 3

(b) Upper sale floors:- 6

B) Business and Industrial:- 10

14 Section 95 Height of habitable Room C) Flat roof: 2.75 to 4.2 m

D) Air conditioned habitable room: 2.4 to 4.2 m

E) Department stores and its lobbies: 3.6 to 4.2 m


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PwC 410

15 Section 121 Basement Clause & Impact

F) The basement shall be put only to the following uses and shall be

constructed within the prescribed set-back and prescribed building lines and subject to

maximum coverage on floor 1 (entrance floor) -

a) storage of household or other goods or ordinarily non-combustible material

b) Strong rooms, bank lockers, safe deposit volts etc.

c) Air-conditioning equipments and other machines used for services and utilities of the

building.

d) parking spaces

e) users strictly ancillary to the principal user

The basement shall not be used for residential purpose.

G) Height should be at least 2.4 m from floor to the underside of the roof slab or ceiling.

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