Delhi Metro Rail Corp

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W16648
DELHI METRO RAIL CORPORATION (B): DOING MORE WITH LESS
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Somnath Chakrabarti and B. S. Kiran wrote this case solely to provide material for class discussion. The authors do not intend to
illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other
identifying information to protect confidentiality.
This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the
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Copyright © 2016, Richard Ivey School of Business Foundation Version: 2016-10-07
On March 23, 2016, a freak hailstorm was lashing Delhi, the national capital of India, ranked by the World
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Health Organization as the world’s most polluted city and by the United Nations as the world’s second-
most populous city.1 However, Anuj Dayal, the executive director of corporate communications for Delhi
Metro Rail Corporation Ltd. (DMRC), was sensing a different kind of storm with the company’s financial
year coming to a close on March 31st.
Globally, rising urbanization, rapid climatic variations, and disruptive innovations had pushed urban
mobility to its tipping point.2 Cities and companies were exploring intelligent and integrated travel solutions
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to sustain the growth potential of urban economies. Policy-makers and other stakeholders realized that the
quality of public transport and its service experience would be a key factor in inducing people to switch
from the convenience of private transport.
The Delhi metro, operated by DMRC, had suffered severely from many of these changes. It had endured the
extra commuter weight when Delhi’s regional government imposed restrictions on private transport, forcing
more commuter traffic onto the Delhi metro. DMRC had managed to cope by relying on every bit of its
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operational reserves and resources. However, Dayal knew that this situation could not last, and that sustainable
solutions were required.
DMRC’s service mission was to delight its customers, expressed with its service philosophy DLITE (an
acronym for the phrase “Do lasting improvement in travel experience).”3 The company’s financials,
however, presented a less positive picture (see Exhibit 1). Total expenditures were rising faster than total
revenue, resulting in larger losses in profit before tax. With fares set at a minimum of US$0.164 and a
maximum of $0.60, the Delhi metro was definitely one of the most affordable means of public transport in
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the entire country. However, DMRC was losing money. Commuter tariffs, the prime source of revenue,
had not risen since 2009 and supplementary sources of revenues were either stagnating or declining. The
increasing gap between revenue and expenditure was threatening DMRC’s expansion plans and
jeopardizing its mandate to provide efficient service to the citizens of Delhi.
Dayal had managed DMRC’s media relations for almost 12 years without releasing a single advertisement
promoting the Delhi metro. But Dayal knew that DMRC would need more than positive press and customer
This document is authorized for educator review use only by Muhammad Shakeel, Other (University not listed) until Sep 2019. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
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goodwill to stay financially healthy and provide quality urban transit. With rising expectations and
operational costs, DMRC was finding it difficult to reconcile the conflicting priorities of different
stakeholders and balance the economy, efficiency, and effectiveness (the three Es).
As the hailstorm raged outside, Dayal was facing an operational tempest within DMRC. How could DMRC
sustain augmented services amid rising operational costs and debilitating resource constraints? Could DMRC
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continue to delight the customers and increase revenue? Were there innovative approaches that could both create
and capture value? DMRC’s managing director, Mangu Singh, had a caution for his team. “We need to think out
of the box and . . . explore more alternatives to do more with less.” The question was how?
INDIA AND THE REST OF THE WORLD IN 2015: THE CHALLENGES OF ECONOMY, ECOLOGY, AND
EXPECTATIONS
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A wave of urbanization was sweeping the world.5 Simultaneously, unprecedented developments in
information and communication technology, and the rise of social media, had created an “era of empowered
customers.”6 These twin developments were creating unprecedented challenges and opportunities for
service providers.
According to Barney Cohen, in designing the new global development agenda, policymakers would need to
understand and account for the nature and extent of the major demographic changes likely to unfold over the
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next 15 years.7 They would also need to predict how such changes could be expected to contribute to or hinder
the achievement of the new sustainable development goals. He stated that much would depend, for example, on
how well countries managed their cities. In 2014, 54 per cent of the world’s population lived in urban areas, and
the coming decades would see continued global population growth and urbanization.8 In fact, all of the growth
in global populations over the next 15 years was projected to occur in urban areas. Additionally, those projections
showed that urbanization, combined with the overall growth of the world population, could result in the addition
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of another 2.5 billion people to the global urban population by 2050, at which time the world was expected to
be one-third rural and two-thirds urban. The greatest urban growth was expected to occur in India, China, and
Nigeria, given the size of their populations. Together, these three countries were projected to account for 37 per
cent of the total growth of the world’s urban population between 2014 and 2050. By 2050, India was projected
to have an additional 404 million urban residents.9
Connected, compact, and commerce-based urban areas had become the epicentre of growth. In order to
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unlock and harness the full potential of urban areas for policy makers and urban governance, DMRC needed
to create a smart, reliable, and scalable infrastructure. Further, as described in a Forrester report, “climate
change and emerging scarcities [would] necessitate a focus on ‘more for less.’”10 Thus, the emerging
challenge before most policy makers was to ensure that cities continued to be economically vibrant and
ecologically resilient.
India was also experiencing unprecedented changes in its demographics; according to census reports, India
was on the verge of an urban explosion. According to the 2011 census, there were currently 53 cities in
India with a population exceeding 1 million. By 2031, it was expected that the number of cities with
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populations exceeding 1 million would rise to 87, with a total urban population of around 600 million.11
However, the economic and ecological situations in urban areas were alarming. Even while cities were
contributing up to 60 per cent of a country’s gross domestic product and were the country’s main growth
engines, cities were struggling to proportionally increase infrastructure services. McKinsey Global Institute
predicted that demand for key services in urban areas would increase five to seven times in most categories
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of cities.12 Reports also suggested that 44 per cent of India’s rapidly-growing carbon emissions had urban
origins, emanating from transport, industry, buildings, and waste.13 Delhi was the worst case—not just in
India, but in the world.14
A recent United Nations report had highlighted that India had the world’s largest youth population, with
356 million youth in the 10–24 age group.15 Although most developed countries were aging faster, India
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was endowed with a huge “demographic dividend,”16 which indicated that developing countries with large
populations could see their economies soar, provided that they invested heavily in education and health care
for young people, among others services.
In order to attract investments, the Government of India announced its commitment to improve the ease of
doing business in the country.17 Several campaigns including Make in India18 and Digital India,19 were
attempting to boost manufacturing opportunities, harness the potential of networked opportunities, and build
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the Indian advantage in information and communication technology. Several other initiatives, such as the Skill
India, Start-up India, and Stand-Up India campaigns, were also promoting the entrepreneurial spirit.20
To handle the new wave of expectations and harness opportunities, the Government of India had announced
a different set of campaigns. In the context of urbanization, the government envisioned a portfolio of Smart
Cities for planned urbanization and to effectively deal with its attendant challenges.21 The Swachh Bharat
campaign was already popular with its bid to improve cleanliness across the country.22 Even profit-making
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companies were being asked to support the initiative as a part of their statutory commitment to corporate
social responsibility.23
URBAN MOBILITY: THE TIPPING POINT
Millennials acted as a catalyst for the improvement of urban transit. Being tech-savvy, they expected urban
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mobility to be more tech-driven to provide a seamless commuter experience. Being hyper-connected and
assertive, they demanded more value added and convergent solutions from their service providers.
Mobility patterns were set for a new course. With about 30 per cent of India’s population being urban, there
was recognition in policy documents that “effective, comfortable, safe, fast, and affordable urban transport
systems not only increase the commercial and labour market efficiency of cities, but also increase access to
amenities, improve general mobility, and add to quality of life, thereby making cities liveable and workable.”24
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The government had shifted its urban mobility policy from focusing on movement of vehicles to movement
of people. After decades of experience, both society and policy makers realized that an effective public
transport system would reduce traffic congestion and accident-caused fatalities, and help arrest the rising
pollution levels by reducing dependence on fossil fuels like petroleum.
Reducing dependence on petroleum products would also help India reduce its dependence on imports. In
India, petroleum products were predominantly imported; however, the projected gap between demand and
supply was considerable. McKinsey estimated that by 2030, India’s import dependence would increase to
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51 per cent of primary energy requirements. India would become one of the most import-dependent
countries in the world. In comparison, by 2030, the United States and China were expected to have import
dependences of 1 per cent and 20 per cent respectively.25
Understanding the positive externalities of mass transit systems like the Delhi metro and the multiplier effect
on business and commerce, the government acknowledged that “India’s growth story [could] be written on
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the canvas of transport systems and the writing pen would be urban mass transit systems.”26 Various metro
projects had been planned as public-private partnerships (PPPs)27 for Hyderabad, Kochi, and Chennai, with
many more projected for locations such as Lucknow, Gujarat, Orissa, Maharashtra, Assam, and Tamil Nadu.
The Indian government was also considering revising the population norm for financing metro projects,
decreasing the required population of 2 million for financial assistance to 1 million. To this end, DMRC
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had begun assisting metro projects in other cities, such as Jaipur and Kochi, and had submitted proposals
for light rail metro projects for the cities of Kozhikode and Thiruvanthapuram in the state of Kerala.28
However, for policy makers, the huge capital requirements, gestation period, and financial viability of metro
projects were particularly significant because most metro rails around the world were incurring losses.
Notable exceptions were Hong Kong’s metro, with its Rail + Property model,29 and the Delhi metro, which
had been making operational profits from the beginning.
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In a quest to find innovative and intelligent solutions, cities such as Helsinki were experimenting with
ambitious Mobility-as-a-Service projects, striving for mobility-on-demand models.30 Also, with rapid
advances in the field of social networking and with the ubiquitous spread of smartphones, policy makers
and businesses were using technology to understand customer journey patterns and to provide solutions
that tapped into the potential benefits of a “shared economy.”31
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Customer preferences for economic, end-to-end solutions and urban mobility solutions had opened new vistas
for entrepreneurs and innovators. The trend had spawned a new breed of transport aggregators such as Uber and
Ola in India. Because citizens and countries were becoming more conscious of their carbon footprints, there was
also a notion that use of urban mobility was reaching its tipping point.32 For commuters in emerging economies
like India’s, the key issues were reliability, punctuality, safety, first- to last-mile connectivity, and ambience.
Vocal, better informed, and connected customers were no longer satisfied with baseline services; they were
pushing for and demanding better service experiences from their providers.
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DMRC: DRIVING CUSTOMER DELIGHT
Since beginning operations in 2002, the Delhi metro had transformed the way people commuted, worked, and
lived. Its network of 192 kilometres of rail (and continuing to expand) criss-crossed the entire National Capital
Region; by 2016, it was carrying an average of 2.5 million commuters daily. Combining the hard and soft
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infrastructures, DMRC had been able to deliver a superior customer experience to a diverse clientele coming
from different economic and social strata by offering reliable, punctual, and efficient services.
Increased ridership had brought with it a more technologically-savvy clientele. Accordingly, DMRC had
expanded its offerings and service delivery mechanisms in order to serve a more technologically-enabled
society. However, with the increase in commuter ridership, there was also increased pressure on the Delhi
metro’s service architecture. Customer-facing staff received regular queries and suggestions regarding the
provision of wireless Internet facilities, the improvement of first- to last-mile connectivity, and increased
service frequency during peak times. There was also a demand for enhancing station amenities and
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expanding metro services to unconnected areas.
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INNOVATIONS, INDIGENIZATION, AND GREEN INITIATIVES
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In the technological realm, DMRC was the first to reach a number of goals. It was the world’s first metro
to introduce contactless tokens, which had since been adopted by the Hong Kong, Bangkok, and Taipei
metros. With the objective to be an indigenous organization, DMRC had 90 per cent of its coaches
manufactured domestically. DMRC was also set to export metro coaches to Australia for the Queensland
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and Sydney metros.33
The Delhi metro was also the world’s first metro to obtain carbon credits for its Clean Development
Mechanism projects registered under the United Nations Framework Convention on Climate Change. These
projects involved a regenerative braking system and modal shift. DMRC was also actively promoting the
use of solar power and was committed to reducing its own carbon footprints. Other upcoming metros were
eager to emulate DMRC’s good practices in this domain.
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DMRC: PRINCIPAL BUSINESS SEGMENTS AND MENTORING
DMRC’s demonstrable success triggered demand for metro rail services even in Tier 2 cities. The Delhi
metro was seen as a model of how urban transport systems could be successfully built in other crowded
cities. Domestically, DMRC was seen as a benchmark to be emulated by upcoming metros.
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The company’s principal business segments were traffic operations, real estate, external projects, and
consultancy. Revenue directly attributable to traffic operations included income from various different
types of sources: train operation and feeder bus earnings; rental income from kiosks, parking, shops,
restaurants, malls, and advertisements; and sales of tender forms and carbon credits. Revenue directly
attributable to real estate included leasing of land, property, and sale of tender forms. Revenue from external
projects was recognized by including eligible contractual items of expenditure plus proportionate
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departmental charges. Revenue directly attributable to consultancy included income from consulting and
sales of tender forms (see Exhibit 2).
CONSULTING ASSIGNMENTS
DMRC was the “turnkey consultant”34 for metro projects in the Indian cities of Jaipur and Kochi. DMRC was
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carrying out the construction and supervising the work of the projects. It had conducted detailed project reports
for metros in Pune, Lucknow, Nagpur, Ahmedabad, Vijayawada, and Visakhapatnam, as well as light metro
projects in Kozhikode and Thiruvanathapuram, in the state of Kerala. DMRC’s consulting work also included
pre-feasibility studies for the Raipur Regional Rapid Transit System and for the Amritsar Metro.35
Globally, DMRC’s experiences and expertise were very relevant to developing countries. DMRC
conducted a study on special assistance on project implementation for the Jakarta mass rapid transit system
in Indonesia as an international consulting assignment. Additional international consulting assignments
included work for the Dhaka metro. Countries such as Ireland, Pakistan, Sri Lanka, Syria, and Vietnam had
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shown interest in DMRC’s expertise in developing their metro systems.36
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DMRC: BUSINESS MODEL AND FINANCES
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Globally, mass rapid transport systems were considered very capital intensive during their construction
period. The low financial rate of return and high gestation period had kept many private participants out of
metro projects. Historically, most metros around the world were largely funded through their respective
governments. In the case of the Delhi metro, significant amounts of funding came from the Japan
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International Cooperation Agency (JICA) and through the governments of India and Delhi.
Of around 140 metros around in the world, none generated overall profits, although five metros—in Singapore,
Hong Kong, Taipei, Tokyo, and Delhi—generated operational profits. The Delhi metro’s staff ratios were
comparable to those of the Singapore metro, which was considered the most efficient in that domain.
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HONG KONG’S RAIL + PROPERTY MODEL AND SELECT EMULATION BY DMRC
Passenger fares were never enough to sustain a metro system. In order to augment its revenues, DMRC
tapped into other sources. Closely emulating a model used by Hong Kong’s metro, DMRC had adopted a
revenue model based on market principles, rather than depending exclusively on government funding.
Hong Kong’s metro was run by MTR Corporation Limited (MTR) in one of the world’s most crowded
cities. The government of Hong Kong was one of the majority stakeholders in the corporation. MTR was
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not only renowned for its 99 per cent on-time performance, but also for its Rail + Property business model.
MTR had a unique arrangement with Hong Kong’s government, which leased land to MTR at prices based
on a scenario without a built metro. MTR was allowed to develop and capitalize on the subsequent value
created once the metro was built.
MTR had built a complete ecosystem in which it operated the metro and developed real estate in and around
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the metro stations. MTR owned malls, skyscrapers, and residences in close proximity to its transit stations.
Some of the properties even had direct underground connections to the train. As well, all of the retail space
within metro stations, which themselves doubled as large shopping complexes, was leased from MTR.
MTR thus benefitted from this model because it could capture greater value. This concentration of
economic activities attracted more and more commercial players to partner with MTR.
Emulating MTR’s model, DMRC had undertaken property development in its metro stations. Over time, the
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activity also included development of hotels, modern office buildings, shopping malls, multi-level parking at
stations, and other small shops and kiosks. The stations were made more attractive and aesthetically pleasing.
Complete station facades were also branded. Space was provided to erect towers for different mobile
applications. With easy connectivity, increased accessibility, and security, Delhi Metro’s space had enticed big
brands and retailers such as Big Bazaar, Reliance Fresh, McDonalds, Kentucky Fried Chicken, Café Coffee
Day, Pizza Hut, Vodafone, and Reliance to set up their stores and activities in metro station complexes. Space
was also provided to leading public- and private-sector banks for installing ATMs.
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RAISING REVENUE FROM OTHER NON-TARIFF SOURCES
The advertisement activity in DMRC came in three formats: advertising inside the trains, advertising inside
the stations, and advertising on civil structures. For advertisements inside the trains and the stations, DMRC
signed 5- to 10-year agreements. Outdoor advertisements were governed by the advertisement policy set
by the Government of India and the Supreme Court of India. The policy allowed outdoor advertisement in
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Municipal Corporation of Delhi and New Delhi Municipal Corporation areas, and revenue was shared with
local bodies. The advertisements on civil structures involved those in underground stations and on visibility
tracks. In financial year (FY) 2014/15, vinyl wrapping of metro trains was allowed to augment advertising
revenues.
DMRC earned around 17 per cent of its total traffic operations revenue from rental income of space for
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kiosks, parking, shops, restaurant, malls, and advertisement in both FY 2013/14 and FY 2014/15. This
resource mobilization from additional sources helped DMRC run operations without suffering significant
losses. These activities, additional revenue from lease income, and others sources helped DMRC to partially
fund project costs. However, whenever DMRC wanted to generate revenue, it had to deal with the constraint
of various municipal laws that permitted municipal authorities to tax the revenue. Land use changes were
also difficult to arrange.
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DMRC 2015: THE PERFECT STORM
In 2015, DMRC’s status as one of the world’s five metros (out of around 140) to generate an operating
profit was in jeopardy. Commuter tariff had stagnated and the inflation rate, based on the consumer price
index,37 was at an average of 9.7 per cent per month for the six year period of 2009–2014.38
Energy costs, input costs, and staff salary had increased operational costs, putting operating profitability
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under strain. Earnings before depreciation, interest, and taxes as a portion of total revenue dropped from
above 45 per cent in FY 2009/10 and FY 2010/11 to below 35 per cent in FY 2013/14 and FY 2014/15 (see
Exhibit 1). This drop was an indication of DMRC’s financial strain as it headed into its expansion for phase
3—a 140-kilometre extension to the existing rail network, to be completed by 2016. In addition, the Reserve
Bank of India was reducing its minting of metallic currency, limiting the availability of small change, which
would have an impact on DMRC’s operations.
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Based on DMRC’s traffic projections, DMRC had proposed a five-category fare system (₹10, ₹20, ₹30,
₹40, and ₹50—a range of US$0.16 to $0.80)39 to replace its existing 15-category fare structure that ranged
from ₹8 to ₹30. However, there had been no development on the issue.
Questions had been raised about the Delhi metro’s financial health as far as in India’s parliament. The
federal government had signalled that DMRC needed to tap into a PPP model, as well as other models, for
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funding its expansion plans. However, the PPP model DMRC had tried for the Delhi metro’s dedicated
airport express line had run into difficulties. The private concessionaire had exited, leaving DMRC to
operate the express line by itself.
The impact of stagnant fares was beginning to show in DMRC’s ability to deliver service and in its
expansion plans. The Japanese lending agency, JICA, had funded the debt of the Delhi metro’s initial three
phases, covering almost 50 per cent of the costs. However, global recessionary trends were casting doubts
about the amount of funding JICA would provide for phase 4—an addition that would increase the length
of the Delhi metro’s network to over 400 kilometres. Decreasing income from advertisements and
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increasing non-operating ratios were also adding stress on DMRC’s finances and operations. After 13 years
of continuous operations, DMRC was bracing itself for some tough times ahead. Dayal needed to determine
how to do more with less. How could DMRC intelligently innovate? How would it balance economy,
efficiency, and effectiveness with stagnating fares and increasing ridership?
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EXHIBIT 1: DELHI METRO RAIL CORPORATION LTD. FINANCIALS, 2009–2015
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Financial year ending March 31st
2009/10 2010/11 2011/12 2012/13 2013/14 2014/15
Financial figures in US$ millions
Revenue from fare box (traffic earnings) 87.121 163.872 212.083 224.775 225.587 246.271
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Other revenue 68.423 189.069 256.991 269.160 302.959 336.359
Total revenue 155.544 352.941 469.073 493.935 528.562 582.646
Total expenditure 174.557 355.729 483.285 495.387 538.595 627.691
EBDIT 75.021 164.728 194.783 188.899 175.554 202.797
Profit before tax −19.013 −2.788 −14.211 −1.452 −10.033 −45.061
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Profit after tax −43.255 −90.847 −38.627 −16.706 −16.496 −17.141
Average ridership per day (in millions) 0.919 1.259 1.660 1.926 2.190 2.386
EBDIT ÷ total revenue (%) 48.2 46.7 41.5 38.2 33.2 34.8
Note: Total revenue includes revenue from operations and from other income. EBDIT = earnings before depreciation, interest,
and taxes.
Source: Delhi Metro Rail Corporation Ltd., Annual Report 2014–2015, September 29, 2015, accessed January 30, 2016,
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www.delhimetrorail.com/OtherDocuments/DELHI1-92english.pdf; Delhi Metro Rail Corporation Ltd., Annual Report 2013–2014,
September 30, 2014, accessed March 11, 2015, www.delhimetrorail.com/OtherDocuments/EnglishAR201314Low.pdf; Delhi Metro
Rail Corporation Ltd., Annual Report 2012–2013, September 30, 2013, accessed March 11, 2015,
www.delhimetrorail.com/OtherDocuments/DMRC_Annual-Report-2012-2013.pdf; Delhi Metro Rail Corporation Ltd., Annual Report
2011–2012, September 05, 2012, accessed March 11, 2015, www.delhimetrorail.com/OtherDocuments/Annual-Repot11-
12(English).pdf; Delhi Metro Rail Corporation Ltd., Annual Report 2010–2011, September 07, 2011, accessed March 11, 2015,
www.delhimetrorail.com/OtherDocuments/AnnualReports/2010-11.pdf; Delhi Metro Rail Corporation Ltd., Annual Report 2009–2010,
August 12, 2010, accessed March 11, 2015, www.delhimetrorail.com/OtherDocuments/AnnualReports/2009-10.pdf.
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EXHIBIT 2: DELHI METRO RAIL CORPORATION LTD. REVENUE FROM OPERATIONS, 2010–2015
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Financial year ending March 31st
2010/11 2011/12 2012/13 2013/14 2014/15
Financial figures in US$ millions
A. Traffic operations
Traffic earnings 163.872 212.083 224.775 225.587 246.271
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Feeder-bus earnings 0.380 0.323 0.283 0.255 0.260
Rental earnings 41.778 54.593 54.990 46.119 51.191
Total from traffic operations 206.029 266.999 280.048 271.960 297.722
B. Real estate (lease income) 21.594 11.949 8.432 10.074 8.767
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C. Consultancy (consulting income less
4.708 5.321 6.291 8.693 2.538
deductions, if any)
D. External projects 84.379 122.126 150.270 197.202 184.419
Total revenue from operations 316.710 406.396 445.041 487.929 493.446
Source: Delhi Metro Rail Corporation Ltd., Annual Report 2014–2015, September 29, 2015, accessed January 30, 2016,
www.delhimetrorail.com/OtherDocuments/DELHI1-92english.pdf; Delhi Metro Rail Corporation Ltd., Annual Report 2013–
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2014, September 30, 2014, accessed March 11, 2015, www.delhimetrorail.com/OtherDocuments/EnglishAR201314Low.pdf;
Delhi Metro Rail Corporation Ltd., Annual Report 2012–2013, September 30, 2013, accessed March 11, 2015,
www.delhimetrorail.com/OtherDocuments/DMRC_Annual-Report-2012-2013.pdf; Delhi Metro Rail Corporation Ltd., Annual
Report 2011–2012, September 5, 2012, accessed March 11, 2015,; www.delhimetrorail.com/OtherDocuments/Annual-
Repot11-12(English).pdf; Delhi Metro Rail Corporation Ltd., Annual Report 2010–2011, September 7, 2011, accessed March
11, 2015, www.delhimetrorail.com/OtherDocuments/AnnualReports/2010-11.pdf.
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ENDNOTES
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1
Rishi Iyengar, “New Delhi, the World’s Most Polluted City, Is Even More Polluted than We Realized,” Time, November 27, 2014,
accessed February 20, 2016, http://time.com/3608534/india-new-delhi-worlds-most-polluted-city; Gaurav Vivek Bhatnagar,
Delhi Is Now World’s Second Most Populous City,” Hindu, July 12, 2014, accessed February 20, 2016,
www.thehindu.com/news/cities/Delhi/delhi-is-now-worlds-second-most-populous-city/article6203066.ece.
2
Gladwell defined a tipping point as “the moment of critical mass, the threshold, the boiling point,” Malcolm Gladwell, The
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Tipping Point: How Little Things Can Make a Big Difference (Boston, MA: Little, Brown, 2000).
3
Delhi Metro Rail Corporation Ltd., Sustainability Report: 2014–2015, 31, accessed June 20, 2016,
www.delhimetrorail.com/otherdocuments/SustainabilityReport2014-15.pdf; Delhi Metro Rail Corporation Ltd., Annual Report
2014–2015, 16, September 29, 2015, accessed January 30, 2016, www.delhimetrorail.com/OtherDocuments/DELHI1-
92english.pdf.
4
All currency amounts are in US$ unless otherwise specified.
5
“Report: Century of the City,” Rockefeller Foundation, December 18, 2006, accessed February 14, 2016,
www.rockefellerfoundation.org/report/century-of-the-city.
6
Ted Schadler, “Welcome to the Empowered Era. An Empowered Report: Reinvent Yourself to Serve Empowered Customers
and Employees,” November 1, 2010, accessed February 26, 2016,
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Forrester,
www.forrester.com/report/Welcome+To+The+Empowered+Era/-/E-RES57265.
7
Barney Cohen, “Urbanization, City Growth, and the New United Nations Development Agenda,” Cornerstone, accessed
June 30, 2016, http://cornerstonemag.net/urbanization-city-growth.
8
Oxford English Dictionary, sub verbo “urbanization,” accessed June 29, 2016, www.oxforddictionaries.com/us/definition
/english/urbanization.
9
Barney Cohen, op. cit.
10
Ted Schadler, op. cit.
11
Planning Commission, Government of India, “Urban Development” in 12th Five Year Plan Hackathon 2012–2017,
September 2012, accessed February 26, 2016, http://planningcommission.nic.in/hackathon/Urban_Development.pdf.
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12
Shirish Sankhe, Ireena Vittal, Richard Dobbs, Ajit Mohan, Ankur Gulati, Jonathan Ablett, Shishir Gupta, et al., India's Urban
Awakening: Building Inclusive Cities, Sustaining Economic Growth (Delhi: McKinsey Global Institute, April 2010), accessed
February 17, 2016, www.mckinsey.com/global-themes/urbanization/urban-awakening-in-india.
13
“Leveraging Urbanization in South Asia,” World Bank, accessed February 22, 2016, www.worldbank.org/en/region/sar
/publication/urbanization-south-asia-cities.
14
Dipak K. Dash, “Delhi's Air Worst among 381 Cities: World Bank,” Times of India, September 25, 2015, accessed February 20,
2016, http://timesofindia.indiatimes.com/india/Delhis-air-worst-among-381-cities-World-Bank/articleshow/49098691.cms.
15
PTI, “India Has World's Largest Youth Population: UN Report,” The Economic Times, November 13, 2014, accessed July
tC
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population-osotimehin, dated November 18, 2014.
16
Ministry of Youth Affairs and Sports, Government of India, “Demographic Dividend” and “Employment and Skill
Development,” in National Youth Policy 2014, accessed June 29, 2016,
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Demographic Dividend” in Economic Survey 2012–2013, released with the Government of India Budget 2012–2013, accessed
March 03, 2016, http://indiabudget.nic.in/es2012-13/echap-02.pdf.
17
World Bank, “Ease of Doing Business Index,” Doing Business Project [database], accessed March 8, 2016,
http://data.worldbank.org/indicator/IC.BUS.EASE.XQ.
18
No
“Home Page,” Make in India, accessed February 10, 2016, www.makeinindia.com.

19
“Digital India: Power to Empower,” Department of Electronics and Information Technology, Government of India, accessed
March 10, 2016, www.digitalindia.gov.in.
20
“PM Modi Launches Skill India Initiative that Aims to Train 40 Crore People, NDTV, July 16, 2015, accessed April 14, 2016,
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2016, http://indianexpress.com/article/india/india-news-india/pm-modi-to-unveil-startup-india-movement/; Yuthika Bhargava,
“Stand up India’ Will Transform Lives of Dalits, Tribals: Modi,” The Hindu, April 5, 2016, accessed April 14, 2016,
www.thehindu.com/news/national/modi-launches-stand-up-india-scheme/article8437594.ece.
21
“Smart Cities Mission,” Ministry of Urban Development, Government of India, accessed February 12, 2016,
http://smartcities.gov.in.
22
“Swachh Bharat Mission: Urban,” Ministry of Urban Development, Government of India, accessed February 12, 2016,
Do
https://swachhbharat.mygov.in.
23
Sammi Caramela, “What Is Corporate Social Responsibility?” Business News Daily, June 27, 2016, accessed June 29,
2016, www.businessnewsdaily.com/4679-corporate-social-responsibility.html.
24
Planning Commission, Government of India, Recommendations of Working Group on Urban Transport for 12th Five Year Plan
2012–2017, accessed February 18, 2016, http://planningcommission.gov.in/aboutus/committee/wrkgrp12/hud
/wg_%20urban%20Transport.pdf.
25
Vipul Tuli and Amit Khera, India: Towards Energy Independence 2030 (McKinsey & Company, January 2014), accessed
March 8, 2016, http://iitbaa-gbf.com/wp-content/uploads/2015/08/India_Towards_energy_independence_2030.pdf.
Page 11 9B16A050
t
os
26
Confederation of Indian Industry, “Conference on Urban Mass Transportation, Focusing on Metro & Light Rail,” press
release, October 4, 2013, accessed March 14, 2016, www.cii.in/PressreleasesDetail.aspx?enc=m6iW4MXZpn51epTFQotB
JRHu9T89lrmOO2cYAsE0lXGUEz3+wenTGn2XvYICpcrJOYfczr3T5/fKMaWmT0Cjkw==.
27
Public-private partnerships are “agreements that transfer to the private sector investment projects that traditionally have
been executed or financed by the public sector;” European Commission, “Public Finances in EMU,” European Economy, no.
3 (2003): 273, accessed June 29, 2016, http://ec.europa.eu/economy_finance/publications/publication473_en.pdf;
rP
International Monetary Fund, Public-Private Partnerships, March 12, 2004, accessed August 29, 2015,
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partnerships as “an arrangement between government or statutory entity or government-owned entity on one side and a
private sector entity on the other, for the provision of public assets and/or related services for public benefit, through
investments being made by and/or management undertaken by the private sector entity for a specified period of time, where
there is a substantial risk sharing with the private sector, and the private sector receives performance-linked payments that
conform (or are benchmarked) to specified, pre-determined, and measurable performance standards;” Department of
Economic Affairs, Ministry of Finance, Government of India, PPP Guide for Practitioners, April 2016, 6, accessed June 29,
2016,www.pppinindia.gov.in/documents/20181/33749/PPP+Guide+for+Practitioners/e3853cb9-ac07-4092-b8ac-
60a8c4d4ed35?version=1.0.
yo
28
Delhi Metro Rail Corporation Ltd., Annual Report 2014–2015, 14, September 29, 2015, accessed January 30, 2016,
www.delhimetrorail.com/OtherDocuments/DELHI1-92english.pdf.
29
Hong Kong’s Mass Transit Railway was supported with profits from developing land alongside the rail system. The Rail +
Property model is discussed in detail in a subsequent section of this case; Robert Cervero and Jin Murakami,
“Rail + Property Development: A Model of Sustainable Transit Finance and Urbanism,” working paper, UC Berkeley Center
for Future Urban Transport, May 2008, accessed July 16, 2016, www.its.berkeley.edu/sites/default/files/publications/UCB
/2008/VWP/UCB-ITS-VWP-2008-5.pdf.
30
Mobility-on-demand systems provided a combination of transportation options (bicycles and light electric vehicles) at
strategic locations, usually at metro stations. Users would use a paid card to access the transportation option of their choice,
op
which they would leave at the station closest to their destination; William J. Mitchell, Mobility on Demand: Future of
Transportation in Cities in Smart Cities (Cambridge, MA: MIT Media Library, June 2008), accessed February 14, 2016,
http://smartcities.media.mit.edu/pdf/Mobility_on_Demand_Introduction.pdf.
31
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32
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functions/sustainability-and-resource-productivity/our-insights/urban-mobility-at-a-tipping-point.
tC
33
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Queensland-Sy.html.
34
A turnkey project is one that is constructed to be sold as a completed project.
35
Delhi Metro Rail Corporation Ltd., Annual Report 2014–2015, 14, September 29, 2015, accessed January 30, 2016,
www.delhimetrorail.com/OtherDocuments/DELHI1-92english.pdf.
36
Ibid.
37
The consumer price index measures changes in the price level of a market basket of consumer goods and services
purchased by households.
38
The average inflation by year for India was calculated as an average of 12 monthly inflation rates per each calendar year. The
No
average inflation rate in India by year, based on the consumer price index, for the years 2009 to 2014 was 10.83 per cent in 2009,
12.11 per cent in 2010, 8.87 per cent in 2011, 9.3 per cent in 2012, 10.92 per cent in 2013, and 6.37 per cent in 2014.
39
₹ = INR = Indian rupee; US$1 = ₹62.5 on December 31, 2015.
Do

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DELHI METRO RAIL CORPORATION (B): DOING MORE WITH LESS

Copyright © 2016, Richard Ivey School of Business Foundation Version: 2016-10-07

URBAN MOBILITY: THE TIPPING POINT

DMRC: DRIVING CUSTOMER DELIGHT

expanding metro services to unconnected areas.

shown interest in DMRC’s expertise in developing their metro systems.36

RAISING REVENUE FROM OTHER NON-TARIFF SOURCES

Total revenue 155.544 352.941 469.073 493.935 528.562 582.646

Total expenditure 174.557 355.729 483.285 495.387 538.595 627.691

EBDIT 75.021 164.728 194.783 188.899 175.554 202.797

Profit before tax −19.013 −2.788 −14.211 −1.452 −10.033 −45.061

Traffic earnings 163.872 212.083 224.775 225.587 246.271

Rental earnings 41.778 54.593 54.990 46.119 51.191

Total from traffic operations 206.029 266.999 280.048 271.960 297.722

B. Real estate (lease income) 21.594 11.949 8.432 10.074 8.767

Total revenue from operations 316.710 406.396 445.041 487.929 493.446

17, 2016, http://articles.economictimes.indiatimes.com/2014-11-18/news/56221890_1_demographic-dividend-youth-

“Home Page,” Make in India, accessed February 10, 2016, www.makeinindia.com.

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