Metro rail rents shops, bank booths to boost revenue

A new challenge has emerged over the balance of income and expenditure of Dhaka Metro Rail. It is not being possible to cover the loan instalment and additional operational costs with the revenue ticket sales. The authorities therefore are trying to find alternative sources of income.

An initiative has been taken to rent out shops, bank booths and space for advertisements at metro stations. Already it has been decided to rent out 31 shops.

However, the experts say the authorities should also ensure that these commercial establishments do not hamper passenger service.

Dhaka Mass Transit Company Limited (DMTCL) is in charge of constructing and operating metro rail. Sources in this state owned company say a large portion of the maintenance and operational cost is being covered with the project. It was also in the agreement signed with the contracting agency.

However, the contracting agency will not be in charge of the maintenance from next year. As a result, operational costs will rise. In this situation, it will create pressure in operating the service if revenue does not increase.

Experts said that the government has still kept VAT exempted on metro rail travel. Even then, the fare of Dhaka metro rail is higher compared to neighbouring countries. So there is little scope to increase revenue by raising fares. Increasing metro rail trips and boosting income through car parking and shopping mall rentals near the stations are better alternatives.

At the beginning, DMTCL rented out two metro rail installations for advertising to increase revenue. Digital advertisements are being shown on monitors inside the metro rail, while some ads are also displayed on its interior walls. In addition, the authority earns from advertisements placed on the sliding doors between the train and the platform. Later, bank booths were rented out at metro stations.

Currently, 144 booths of 11 banks have been set up at metro stations. Each station has booths from multiple banks. These have been allocated to banks through open tenders. In return, the DMTCL authorities receive rent.

In addition, adequate space has been kept under four stations. These stations are Uttara (North), Agargaon, Farmgate, and Kamalapur. There is a plan to construct station plazas in these unused spaces. Under this plan, parking rent for cars and shop allocation are proposed. However, there are discussions that such arrangements could cause traffic congestion under the stations. Therefore, a final decision has not yet been made.

DMTCL Managing Director (MD) Faruque Ahmed told Prothom Alo that there is little opportunity to impose extra charges on passengers. The main goal now is to maximise passenger revenue (ticket revenue) by utilising the metro rail’s capacity to the fullest. Besides this, efforts are being made to increase revenue by renting out shops and bank booths and through advertising. This will somewhat reduce the financial burden.

Excluding Agargaon and Kawran Bazar, the DMTCL authorities have decided to allocate 31 shops in total at 14 metro stations from Uttara (North) to Motijheel. These shops are already in the non-paid areas of the station concourse halls and are covered with red shutters. Once leased, the leasing organisation must arrange the shops. The authorities have prepared guidelines for this.

DMTCL has announced in a notice that those interested in renting can collect application forms from the metro rail office (Room 319, Level-3, Diabari, Uttara) during office hours from 17 August to 16 September. Each form costs Tk 5,000, which must be submitted via pay-order or bank draft (non-refundable). About 30 applications have already been received.

The interested company must have some basic criteria to take the lease. These include an updated trade licence, income tax certificate, proof of income tax payment, VAT registration certificate, the bank-issued transaction statement of the last year, and a certificate of financial solvency.

In addition, the applicant must submit a complete business plan. Detailed information must be included about which products or services will be sold, how operations will be managed, and what the staff structure will be. The plan will prioritise the security and aesthetics of the metro station.

The initial contract period will be five years. At the time of submitting the application, 15 per cent of the annual rent must be deposited as a security guarantee. Before signing the contract, 20 per cent of the annual rent must be deposited as a security guarantee along with one year’s advance rent. Every year, the rent will increase by 5 per cent.

DMTCL sources said that most of the applications submitted so far are for fast food and coffee shops. However, for security reasons, gas stoves will not be allowed in metro station shops.

In allocating shops, the highest bidder will be finally nominated through an open competitive tender process. If necessary, DMTCL will make a decision after discussions with the bidders. In response to a question about how the shop rent will be determined, a responsible DMTCL official, requesting anonymity, told Prothom Alo that along with the rent for shops under designated stations, the reputation of the metro rail will also be considered. Only then will the shop be leased.

The shops available for allocation at the stations range from 200 to 2000 square feet. A maximum of four shops will be allocated at Uttara North Station. Three shops will be leased at Pallabi, Kazipara, Dhaka University, and Secretariat stations. Two shops each are available at Uttara Center, Uttara South, Mirpur-11, Shewrapara, Bijoy Sarani, and Motijheel stations. One shop each will be allocated at Farmgate, Shahbagh, and Mirpur-10 stations.

The metro rail project from Uttara to Mirpur and Farmgate to Motijheel was taken up in 2012. In the first phase, the metro rail from Uttara to Agargaon was inaugurated on 28 December 2022. On 4 November 2023, the Agargaon to Motijheel section was inaugurated.

Initially, the plan was to extend the metro rail only up to Motijheel, but later it was expanded to Kamalapur. Currently, the total project cost stands at Tk 334.72 billion (33,472 crore). About 59 per cent of the funds were borrowed from Japan International Cooperation Agency (JICA).

An analysis of the metro rail’s revenue and loan instalments showed, provisional revenue from ticket sales was about Tk 4 billion (400 crore) in the last fiscal year. Earlier, in the 2023-24 fiscal year, this revenue was about Tk 2.4 billion (244 crore). In 2022, after partial commencement, revenue in 2022-23 fiscal year exceeded Tk 220 million (22 crore).

DMTCL sources said that more than Tk 1 billion (100 crore) was spent just for salaries, wages, and electricity in the last fiscal year. From the next year, maintenance and equipment purchase costs will not be borne by the project but from the metro rail’s revenue. In that case, annual expenditure will exceed Tk 2 billion (200 crore). As the metro rail facilities age, expenses will also increase. Salaries and wages for staff will also rise.

Meanwhile, instalments for the loan taken from JICA must be paid by DMTCL authorities. The company’s sources said that during the first ten years of metro rail construction, repayment of the principal instalment of JICA loans was not required, which known as the grace period. Limited repayment began in June 2023. About Tk 750 million (75 crore) has been repaid so far. Another 100 million (10 crore) must be repaid this year.

However, a large loan instalment must be repaid from May next year. Overall, about Tk 4.65 billion (465 crore) must be paid in the following year.

DMTCL sources said that gradually, the repayment amount will increase. In the five years up to 2030-31, over Tk 37 billion (3,700 crore) will have to be paid as instalments for the MRT-6 loan. This means an average of Tk 7.4 billion (740 crore) per year will be required for loan instalments.

Regarding this, transport expert Md Shamsul Hoque told Prothom Alo that metro rail revenue must be increased, there is no doubt about this. However, the number of shops planned cannot be excessive. It must also be ensured that passengers or the general public receive proper services and are not cheated. In other words, commercial activities must be conducted in a way that does not inconvenience passengers. It must also be ensured that allocation to one party and re-allocation to another, or management based on political considerations, does not happen.