Beijing: As more cities across world opt for metro rail making it the mainstay of urban transportation, Chinese planners have warned that their construction and maintenance turned out to be costlier than space travel, with networks in Beijing and Shanghai running in big losses.
China has spent about USD 6.1 billion in the last 20 years on its manned space programme sending 10 spacecrafts into orbit, but that amount would just be barely enough to build 78 km of subway system, a study of the spiralling costs of the metro rail system by state-run China Daily said.
It is now turning out that the average cost of each km of subway works out to about USD 78 million and the metro rail systems in China’s big cities like Beijing and Shanghai are struggling to maintain, unable to service vast loans procured for the construction.
Concerns about subway construction and expansion are mounting in China as 28 more cities have been permitted to build underground metro rail by 2015 spanning to 2,500 km.
“The construction will cost at least One trillion yuan (over USD 156 billion) in total,” Chen Xunru, a member of the Chinese People’s Political Consultative Conference, who conducted the research into subway construction said.
Experts are concerned that the construction could strain the resources of some cities and plunge them heavily into debt.
They are also worried that the cities may not have taken account of the possible long-term costs of operating and maintaining the network.
Moreover, the large-scale move towards construction has resulted in a shortage of trained professionals, which in turn could lead to reduced safety levels, the study said.
China’s first subway went into operation in Beijing in 1969 followed by Tianjin, Shanghai and Guangzhou.
“Subways have many advantages, including large-volume transport capacity, high efficiency levels and low energy consumption. They can also save land and boost economic development along the line.
“Big cities regard subways as an important means of reducing traffic congestion and upgrading their image,” Chen said. But smaller cities may not afford them.
“Some cities are mapping subway networks that will cost their entire combined income for five years,” he said.
“We’re not just talking about the huge amounts of money involved in building the infrastructure.
There are also annual operating and maintenance costs,” Yang Di, a manager at Shanghai Shentong Metro Group Co, which owns the Shanghai Metro and is the parent company of the listed Shanghai Shentong Metro Co.
The fact is that it’s difficult to make money from subway operations, and only Hong Kong’s metro system is profitable, he said.
Even Shanghai, with a population of 23 million and GDP of USD 297.8 billion in 2011, has been dragged into debt.
It has China’s longest subway network, with 11 lines totalling 425 km, which is longer than New York (370 km) and catching up with London (439 km).
The network is set to reach 570 km by 2013 and 877 km by 2020.
The city has the globe’s fifth-busiest metro network - following Tokyo, Seoul, Moscow and Beijing – with 2. 1 billion passengers in 2011, but the annual income it generates is insufficient to support itself.
Ying Minghong, board airman of Shanghai Shentong Metro Group Co, said that only Line 1 is profitable.
The income from ticket sales and advertising covers its daily operating costs, but is not enough to pay for maintenance or the interest on its loans. The city’s other lines are in debt.
Chen said that the interest on bank loans cost the municipal government several billion yuan, not to mention the cost of construction and other outlay.
Shanghai Shentong Metro Co had gross liabilities of USD 95.55 million by the end of 2011, according to its annual report. The figure was USD 41.19 million in 2009.
According to a Xinhua news agency analyst, the total liabilities of the Shanghai metro exceed USD 15 billion.
Beijing, with a population of 20 million, has 372 km of subway, which will be extended to 440 km by the end of the year and to 1,050 km by 2020.
It’s estimated that in 2015, when the network reaches 581 km, the system will have an operating loss of USD 674.01 million, despite the huge traffic volume, Wu Lishun, financing manager at Beijing Infrastructure Investment Co, which is responsible for financing subway construction said.
If depreciation and accounting costs are included, the loss will hit at least USD 2.6 billion, he said.