Metro Rail Policy 2017: Driving India’s Future With Efficient Urban Mobility – IMPRI Impact And Policy Research Institute

Policy Update
Rashmi Kumari

Introduction 

India’s rapid urbanization has led to enormous pressure on its transport systems, and the urban population of India is expected to reach around 600 million by 2031(National Commission on Population, 2019), resulting in heavily congested, polluted, and compromised quality of life. Earlier, there were stand-alone metro projects executed as individual pieces of a fragmented framework before 2017, which led to various issues related to cost overruns, overall ridership, and a lack of integration.

While the Delhi Metro gained a reputation as a model of success, the other projects generally struggled due to a lack of private sector participation and ownership, underlying financial unsustainability, and inadequate last-mile connectivity. To address these gaps, the Government of India launched the Metro Rail Policy 2017, which received Union Cabinet approval on August 16, 2017. 

This Policy aims to establish standardization in planning and implementing metro extension projects to ensure economic viability, multi-modal integration, last-mile connectivity, and to encourage the private sector to participate. The Metro Rail Policy provides a unified framework to align metro systems with city development plans and foster sustainable urban mobility to provide a sustainable, reliable, efficient, and future-ready public transport solution.

Functioning

The Metro Rail Policy 2017 sets a unified framework to make metro projects in Indian cities financially viable, sustainable, well-integrated, and backed by private sector participation. The following steps outline the functioning of the Metro Rail Policy in a structured and coordinated manner:

Step 1: Project proposal and mobility study 

Before approving a metro project, the state must prepare a CMP through UMTA and evaluate alternatives like BRTS, light rail, or trams to ensure the chosen mode matches demand, population, and cost, avoiding wasteful investments.

Step 2: Private Participation and Funding Models 

The policy includes a requirement for private sector participation – either providing operational services or, in the case of public-private partnerships, the entire project. The policy proposes three models of central support for states to deliver projects: 

• PPP with Viability Gap Funding
• Grant of 10% upfront 
• Equity model with 50:50 equity-sharing

This means that states can receive central funds provided they find private partners, declare incorrectly on taxpayers, and bring access to the expertise and efficiencies of the private sector. 

Step 3: Revenue generation and establishing a fare regulation model 

States must raise revenue beyond ticket sales — through real estate, advertising, and value capture tools like betterment levies — while a Fare Fixation Authority reviews fares regularly to keep them affordable and ensure financial viability.

Step 4: Multi-Modal Integration and Last-Mile Connectivity

Metro systems cannot work in isolation, so UMTA must ensure seamless links with buses, suburban rail, and BRT, while also planning feeder services, pedestrian walkways, and cycling paths within a 5 km radius to address last-mile connectivity and make metro travel convenient.

Step 5: Transit-Oriented Development (TOD)

States should promote high-density, mixed-use urban development around metro corridors — combining housing, offices, and commercial centers near stations — to reduce long car commutes, boost land values, and encourage sustainable, walkable neighborhoods.

Step 6: Evaluation, Implementation, and Monitoring 

Before receiving approval, each project must undergo independent expert scrutiny to ensure it will achieve a minimum of 14% Economic Internal Rate of Return (EIRR) before it can be implemented by states (with the federal government overseeing project cost and timing, as well as achievement of agreed policy goals). 

Achievements

Since its introduction in 2017, the Metro Rail Policy has significantly shaped India’s urban transport landscape, delivering measurable outcomes in terms of expansion, innovation, and sustainable mobility. The key achievements include:

1. Metro Rail Expansion Rapidly: Our city networks have expanded rapidly since the Metro Rail Policy 2017, with over 50 cities actively preparing new metro rail networks on the ground to improve urban mobility. Since its introduction, 683 km of metro and RRTS networks have been approved. Additionally, 363 km of metro networks have been made operational after the policy was implemented.
2. Cost-effectiveness and Affordability: The Metro Rail Policy 2017 boosts cost-effectiveness by standardizing systems, leveraging private investments, encouraging value capture financing, and promoting affordable alternatives like MetroLite and MetroNeo.
3. Private Sector Participation: There has also been an increased use of public-private partnerships (PPP) for metro construction, fare integration, and station management, and this has enabled the private sector to participate in metro construction while saving the government money.
4. Sustainability: Delhi Metro earned ₹19.5 crore by selling 3.55 million carbon credits (2012–2018), showcasing its pioneering efforts in quantifying climate benefits and implementing dedicated energy efficiency projects.
5. Economic/Social Outcomes: Metro systems and planning processes have helped local economies and facilitated, supported workers, local employment, and local economic growth, connect development corridors (new Meerut Metro under RRTS) and metrolite and metroneo, women’s-only coaches, NCMC integration, among other inclusivity approaches.

Challenges

While the MRP 2017 has delivered notable progress, it continues to grapple with structural and systemic hurdles such as:

1. Private Investment hurdles: High capital costs, long gestation periods, and uncertain returns have limited the ability of the private sector to participate in metro infrastructure, and while a PPP framework for risk sharing is evolving, it is still limited.
2. Institutional and Technical: Many states do not have the organisational capacity to implement Transit-Oriented Development (TOD) and Value Capture Financing (VCF) measures, and the integration of state/institutional measures for effective delivery hinders project rollouts, as states grapple with capacity constraints.
3. Approval and Regulatory: High standards for EIRR in feasibility studies, mandatory PPP requirements, and fragmented legislation have delayed numerous metro projects, specifically in lower-ridership cities, and a common legal framework is still pending.
4. Land and Environment: Land acquisition in dense urban areas is problematic for metro projects, and therefore, project approval will take longer and cause community resistance; the geotech, waste, and noise problems complicate what is already hard.
5. Ridership and Cybersecurity: Poor last-mile connectivity, faulty DSRs, and limited parking stall availability all exacerbate low ridership potential, while greater digitalization of services creates higher opportunity for cyberattacks.

Bangalore Metro had a ridership level of just 0.96 lakh daily maximum when its break-even point was at 18.64 lakh, as estimated. In other cities like Hyderabad Metro, it was at 0.65 lakh daily and maximum when their break-even ridership was at 19 lakh.

Way forward

1. Strengthen PPP modes: Encourage private investment through tax incentives, reforms to GST, and a better financing environment to establish a meaningful public-private partnership.
2. Strengthen last-mile connections: Make feeder services, NMT networks, and parking a requirement in this DPR, and provide other options such as the National Common Mobility Card (NCMC) to increase ridership to the metro.
3. Develop Smart Finance and Planning: Use credible feasibility studies, manage both upfront costs and cost overruns, & investigate value capture, green bonds, and other innovative finance modes to help secure an ongoing and sustainable funding regime.
4. Increase technical and cyber readiness: Complete geotechnical surveys and EIAs, upgrade processes to include modern cybersecurity methods, using agencies such as CERT-In, both debris and weathering of infrastructure, and cybersecurity of information are increasingly vulnerable, and potential risk can be mitigated with best practices.
5. Develop institutional capacity and legal frameworks: Develop a harmonized Metro Rail Act & build capacity for UMTA staff to train in international best practices in signalling and safety, better governance outcomes, and delivery of projects.

References:

1. Metro Rail Policy, 2017 A. Background and context. (n.d.). https://www.mohua.gov.in/upload/whatsnew/59a3f7f130eecMetro_Rail_Policy_2017.pdf
2. Union Cabinet approves new Metro Rail Policy; Focus on compact urban development, cost reduction and multi-modal integration. (2017). Pib.gov.in. https://www.pib.gov.in/newsite/PrintRelease.aspx?relid=170009
3. Untitled Document. (n.d.). Mohua.gov.in. https://mohua.gov.in/upload/uploadfiles/files/Metro%20Rail%20_%20MoHUA.pdf
4. Agencies. (2021, September 26). Delhi Metro earns Rs 19.5 crore in its efforts to combat climate change. The Economic Times; Economic Times. https://economictimes.indiatimes.com/industry/transportation/railways/delhi-metro-earns-rs-19-5-crore-in-its-efforts-to-combat-climate-change/first-in-the-world/slideshow/86529164.cms

About the contributor: Rashmi Kumari is a Research Intern at IMPRI and a Master’s student in Economics at Gokhale Institute of Politics and Economics, Pune.

Acknowledgement: The author extends her sincere gratitude to the IMPRI team and Ms. Aasthaba Jadeja for her invaluable guidance throughout the process.

Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.

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