मुंबई Mumbai: Looking beyond traditional sources to raise money and bringing association of advertising-branding with metro projects much closer, Mumbai metro phase one project will be the second urban infrastructure project in the country to use station branding for non-fare box revenue collection. Expected to be soon operational, the phase one line of Mumbai Metro between Versova to Ghatkopar is currently e-auctioning naming rights for 12 of its stations.
Gurgaon Rapid Metro built by Infrastructure Leasing & Financial Services (IL&FS) that started in November 2013 was the first metro project to auction naming rights for four of its station.
At a time when major cities in the country are building metro projects, station branding could fuel the non-tariff revenue generation. Most metro projects in the country are currently built by partnership of state and central government with only few like Hyderabad Metro that have private players (Larsen and Toubro). In a country where populist compulsions demand lower fares, the non-fare box revenue generation becomes crucial for the success of any metro project.
The globally successful station branding strategy, however, has just taken off in the country and metro operators have kept the expectations low. For example, Mumbai Metro phase one project built at a cost of Rs 2,356 with a concession period of 35 years expects only about 5-10% of its revenue to come from non-fare box collection, out of which about 40% is expected to come from advertisements and station naming rights, said a spokesperson for Mumbai metro.
Following the global trend, the contracts are awarded for a minimum of five years which can be further extended by five years. Sources close to the bidding process said the rights were sold at about Rs 2-6 crore for each station for one year and the bidding has got a very good response so far. Under the station branding, the name of the private company will prefix the name of the station and the company would be awarded rights for 13 elements like key areas at the station, pamphlets and brochures, on the website and during announcements.
Similarly, Gurgaon Rapid Metro expects about 10-15% of its overall revenue to come from non-tariff avenues, about 50% of which comes from station branding. The contract period is about 3-5 years and players like Vodafone, Micromax, Airtel and Induslnd Bank have branded the four stations. In the coming years, non-fare box revenue is expected to jump to 30-40% as the ridership and network expands.
There are also players who refuse to toy with the idea. Delhi Metro Rail Corporation touted as most successful example of metro project in the country has abstained from using the concept. With an operational network of 189 km, its skepticism that has held DMRC back. The ‘excess presence’ of private players can undermine the brand of DMRC, said a senior official of DMRC on condition of anonymity. He further argued that the idea was discussed some time ago but was not thought to be viable, along with the proposal of advertising outside the metro coaches.
Despite abstention from station branding, DMRC earns about 65% of its revenue from non-operational activities like consultancy, retail, real estate , advertisements, bank deposits etc.
But the increased reliance on non-fare box revenue generation including station branding is not without its risks and there are precedents of failure too. Delhi Airport Expressline expected about 70% of its revenue to come from real estate and retail development, the expectation failed to materialise and Airport Expressline is currently a loss making entity with a monthly loss of about Rs 4 crore. R-Infra (private partner) exited the first urban infrastructure PPP project in the country citing breach of concessionaire by Delhi Metro Rail Corporation.
But as the engagement of private players in urban infrastructure increases, the pressure to break even at the earliest and churn profits will only increase the reliance on non-fare box revenues. For example, the upcoming 72 kilometer long Larsen &Toubro Metro Rail Hyderabad Limited project is based on a revenue model of 50% from passenger fares, 45% from property development and 5% from advertisement and other miscellaneous sources. No indication has been given that the project will use station branding.
Globally, governments and metro operators have made much more money through the concept of station branding. Dubai Metro was the first urban public infrastructure project in the world to raise money by selling station naming rights to private players. In the first round held in 2008, it raised about Rs 300 crore after selling station naming rights for 23 of its 47 stations. The model was soon followed by metros in cities like Chicago, Boston, Houston, London, Philadelphia, Montreal, Rio de Janeiro and Rapid Metro Project in Gurgaon.