How high will fares be on such costly metro rail projects?

After the government decided to implement three metro rail projects at a cost of Tk 2.5 trillion (Tk 250,000 crore), one question has come to the fore: how high will fares have to be on such an expensive metro rail system? Will the revenue generated by the projects be enough to repay the loans?

At its meeting yesterday, Wednesday, the Executive Committee of the National Economic Council (ECNEC) approved cost increases for two metro rail projects and a new project covering three routes: Hemayetpur to Bhatara, Airport to Kamalapur, and Gabtali to Dasherkandi in Dhaka.

The total cost of the three projects has reached Tk 2.5 trillion. Metro rail revenue comes primarily from fares. To recover such a huge investment, fares would have to be set at a very high level.

Otherwise, the government would have to provide substantial subsidies to repay the loans. That, in turn, would put further pressure on the overall economy.

The Metro Rail Act 2015 states that the purpose of the public transport system is to “provide the public with fast and improved public transport services at low cost”. One provision of the law says that operating costs and people’s ability to pay must be taken into account when setting fares.

The fare set for the Uttara–Motijheel route under the Awami League government, which was ousted in the July mass uprising, is higher than fares on metro systems in neighbouring countries. The government at the time said the metro rail was for both the rich and the poor. Yet poor people are rarely seen using the metro.

The minimum fare on the Uttara–Motijheel route is currently Tk 20. A journey from one end to the other costs Tk 90. The distance is 20 kilometres. No bus in Dhaka charges as much for that distance. The government-set bus fare for travelling the same distance is Tk 50, while the minimum bus fare in Dhaka is Tk 10. The metro, of course, is air-conditioned, whereas most buses in Dhaka are not.

The picture that emerges is that Dhaka is getting a modern public transport system, but not one that is low-cost. Nor is it fully in line with the affordability expected of public transport.

Of the three metro rail projects approved by ECNEC yesterday, one is new and two involve revised proposals. At a total cost of Tk 2.5 trillion, the three projects will build 64.44 kilometres of metro rail, combining underground and elevated sections.

Across the three projects, the average cost of constructing the metro lines and putting the trains into operation will be Tk 38.76 billion per kilometre. The cost on the Uttara–Motijheel route is Tk 15.84 billion per kilometre. The project was taken up in 2012, but its cost has increased several times. The entire route is elevated.

Dhaka Mass Transit Company Limited (DMTCL) is responsible for constructing and operating metro rail in Dhaka. During the interim government’s tenure, DMTCL analysed the costs of metro rail projects being implemented in various Asian countries. The analysis found that, excluding land acquisition and salaries and allowances, metro rail construction in India cost Tk 1.5 billion to Tk 4.5 billion per kilometre.

Two of the projects are being implemented with loans from Japan’s development cooperation agency JICA. Their combined cost is around Tk 2.04 trillion. The other project is being financed by the Asian Development Bank (ADB), with a projected cost of Tk 455 billion.

Government sources said the two JICA-funded projects—MRT Line-1 and MRT Line-5 North—were not initially on the agenda of yesterday’s ECNEC meeting. The plan had been to approve only the new project, Line-5 South, financed by loans from the ADB and South Korea.

The two projects involving proposed cost increases were added at the last moment. The reason, according to the sources, was that the per-kilometre cost of Line-5 South is comparatively low. If that project had been approved first, questions could have been raised about revising the costs of the more expensive projects. The three projects were therefore approved together.

Impossible to repay loans from revenue

Metro rail services began in Dhaka on 29 December 2022. An analysis of revenue shows that ticket sales on the Uttara–Motijheel route generated around Tk 4 billion in the last financial year (2024–25), based on provisional figures.

Ticket revenue was around Tk 2.44 billion in 2023–24. After partial operations began in 2022, revenue from ticket sales was more than Tk 220 million in 2022–23.

In total, passenger fares generated Tk 666 crore up to the end of the latest financial year. In addition, the metro earns around Tk 20 crore a year from shop rentals, advertising and other sources.

According to DMTCL sources, more than Tk 1 billion was spent last financial year on salaries and allowances, electricity and other expenses alone. Initially, when maintenance and equipment were required, the contractors bore the costs under the project. That period ended in January. DMTCL now has to bear the costs of maintenance and equipment purchases itself. As a result, expenditure in this area is expected to rise further in the future.

A loan of Tk 197.18 billion was taken from JICA to build the metro rail from Uttara to Kamalapur. The loan, including interest and principal, has to be repaid over 30 years in two instalments each year. If the value of foreign currencies rises, the amount Bangladesh has to pay in taka will also increase.

According to DMTCL sources, repayment of the principal on the JICA loan was deferred for the first 10 years of construction, known as the grace period. Limited loan repayments began in June 2023.

Around Tk 4.65 billion will have to be repaid this year. More than Tk 37 billion will have to be paid in instalments through 2030–31. The current revenue from the Uttara–Motijheel route will not be enough to cover the instalments.

DMTCL officials said JICA is providing loans of around Tk 1.5 trillion for two new projects being implemented with Japanese financing. These loans, including interest, will have to be repaid over the next 40 years. For the other metro rail project, around Tk 350 billion is being borrowed from the ADB and South Korea.

Why are costs rising?

Officials of the Road Transport and Highways Division and DMTCL said the terms attached to JICA loans give Japanese contractors additional advantages. Japanese companies also play major roles at various stages of the projects, including feasibility studies, design, tender preparation and implementation. JICA approval is required for various tender-related decisions, making it difficult to create genuinely open international competition.

There are also allegations that technical conditions in the tenders are limiting competition. One example is the requirement to use the “one-pass joint” method in the construction of the underground section of MRT Line-1, a technology developed in Japan.

Government sources said the current BNP government had been somewhat concerned about the high cost of metro rail construction after taking office. It held several rounds of discussions with JICA in an effort to reduce the increased costs. But JICA did not agree to reduce costs by opening up the tendering process or through negotiations, the sources said.

Experts and the government agree that Dhaka needs public transport systems such as metro rail. There has also been discussion that the government could face criticism if it does not build the new metro rail projects because of their higher costs.

Professor Shamsul Hoque of the Department of Civil Engineering at Bangladesh University of Engineering and Technology (BUET) told Prothom Alo that the proposed expenditure was undoubtedly a risky investment. “The country is already carrying a heavy debt burden. That burden has now increased further. The question is how the people of the country will be able to bear it,” he said. He added that feasibility studies had shown the Uttara–Kamalapur metro route to be the most financially viable. “Even there, the costs cannot be recovered.”

The professor further said that JICA had conducted the metro rail feasibility study. “The contractor is Japanese, the technology is theirs, and the supervision is also in their hands. They provide the loans in the Japanese currency, the yen. The products are purchased from that country. Bangladesh then has to repay the loans in dollars. With so many weaknesses, it is not possible to implement the projects at competitive prices,” he said.