Cost-Benefit Analysis in
| WiSe 2017/18
Professor Frank Wätzold
Cost-Benefit Analysis of Commuter Train Improvement in the
Metropolitan Area, Bangladesh
Vinay Seregar –
Matriculation number 3625187
Parmida Daniali – Matriculation number 3745944
Dhaka as the capital city of Bangladesh and one of the
most important cities of this country suffers from inconvenient and
insufficient infrastructural public transportation system. In 2011, this city
has been selected as the 9th mega city in the world and with the rapid
population growth, this matter is something that should be taken care of. In
this paper, a cost-benefit analysis has been made on 4 different alternatives
on commuter train services of Dhaka-Narayanganj route as this route is the most
popular one amongst others with approximately 12,000 daily passengers. The
proposed alternatives are Alt.-1 upgradation of existing rail track in order to
increase operating speed Alt.-2 new imported DEMU (Diesel Electric Multiple
Units) will be introduced in addition to Alt.-1. Alt. -3. Would be installation
of double track, replacement of the existing signaling system to automatic
color light signal, and the construction of a new station at Shyampur will be
included along with using DEMU and lastly, we have Alt.-0 which is doing
nothing (current situation).
Calculation of cost and benefit for different
In this study, the selected Dhaka-Narayanganj route is
about 16.11 km single track with 5 stations. Based on statistics, Annual
Average Ridership Growth Rates (AARGR) which have been used are 3%, 5% and 10%
for calculating future passengers. The calculation of cost and benefits for
alternatives has been made using these factors are: 1. Passenger demands and
train capacity 2. Vehicle operation costs (VOC) savings 3. Accident reduction
saving 4. Net emission reduction savings 5. User benefits 6. Operating and
maintenance cost and 7. Capital and construction costs and all the below prices
are considered based on BR (Bangladesh Railway) records. It is noteworthy to
mention that in our studies, only incremental benefits and costs are measured
and also Benefits and costs are valued at their opportunity costs.
1. Passenger demands and train capacity: using time-space
diagrams with the X axis for time and Y axis for distance. These diagrams show
the frequency of train, headways and train composition for each scenario.
Table1. Amount of trains, compositions and
headway for different scenario
Scenario pairs of train compositions headway (min)
Alt.-0 18 – 22 2 – 3 60
Alt.-1 21-25 2 – 3 52
Alt.-2 36 2 30
Alt.-3 232 11 4
In this study, peak and off-peak ridership hour is
considered 6.00 and 00.00.
2. Vehicle operating cost savings: VOC for large buses
with average operating speed of 36 km/h is 31.74 Taka/km. Also travel times of
bus at peak and off-peak is 30 and 90 minutes. Also, average occupancy of
person per bus and adjusted value of VOC is considered 36.4 and 160.09.
Table 2. VOC savings for different scenarios
3. Accident reduction savings: has been calculated by
deducting rail accident cost and auto accident cost of each year. Annual
average daily travel (AADT) for our selected route is 5,586.5 so yearly Vehicle
Kilometer Travel (VKT) is 35,072,047 km. In order to get the values of auto
accidents avoided, economic cost of accident avoidance of fatalities, grievous
injuries and simple injuries are used. Rail accident costs was US$ 312,998.45
on this route and total kilometers traveled between 2008 and 2011 by commuter
trains was 505,410. Hence the rail accident rate per million is 619,296.12$.
Table 3. Accident reduction savings for different
4. Net emission reduction savings: has been calculated by
deducting rail emissions from equal auto emission for each alternative.
According to Environmental protection Agency the standards emission for each
pollutant based on g/bhp-hr is: Hydrocarbons (HC) 1.3, carbon monoxide (CO)
15.5, oxides of nitrogen (NOX) 5 and suspended particulate matter (PM) 0.25
also load factors for auto and rail engines are assumed 0.4. Moreover, emission
cost of CO2 US$ 51.47/ton and a 100 year CO2 equivalent of other pollutants is
for HS 12, CO 1.9, NOX 296 and PM 680. Finally, according to local government
engineering department, BHP of heavy duty buses are 195hp.
Table 4. Emission reduction savings for different
5. User benefit: consists of travel time cost savings and
savings from fares of commuter trains over buses. In 2011, bus fare and train
fare were Tk. 34.00 and Tk. 6.00. Economic travel time cost per passenger for
buses was Tk. 17.60/hr in 2005 therefore travel time cost of Tk. 35.22 in 2011
was used in calculations.
Table 5. User benefits for different scenarios (US$)
6. Operating and maintenance Costs: comprise of
maintenance cost of different departments of BR which is Tk. 4,281,750.0/loco
and Tk. 1,466,083.00/car, cleaning costs which is Tk. 82,125.00/loco and Tk.
62,460.00/car, salary costs of staff which is Tk. 1,038,180.00 and
administration costs which is Tk. 1,873,516.00, mileage cost of operating staff
that is considered Tk. 1,610.00/train and fuel cost of our study route which in
our assumptions, 43 liter/trip is used and for each car reduction 0.7 liter is
deducted and fuel price is Tk. 61.00/liter in 2011. Revenues of tickets are
deducted from values of other costs to gain net costs of each alternative. As
calculated, Alt.-3 has the highest maintenance cost with 10% AARGR.
Table 6. Total operating and maintenance costs for
7. Construction and Capital costs: in 2011, price of a
new locomotive was Tk. 273,052,545.00, price of a carriage was Tk. 20,000,000.00,
price of constructing new station with signaling system Tk. 32,017,500.00,
price of constructing rail track was Tk. 14,120,683.00/km and land price was
Tk. 800,000.00/Katha (750 ft2).
Table 7. Total construction and capital costs for
Result of the Cost-Benefit
The evaluation results are shown in the table. The
elements considered for alternatives are Annual Average Operating and
Maintenance cost(AAOMC), Benefit-cost ratios(BCR) and Net Present Value(NPV).
BCR has a range of 0.87 to 1.23 for 3% AARGR, from 1.01 to 1.36% for 5% AARGR
and 1.34 to 1.69 for 10% AARGR. Alt-0 and Alt-3 at 3% AARGR has a negative NPV
which is not feasible. Whereas Alt-1 has the highest BCR and NPV values with
lowest AAOMC and Alt-3 at 10% shows highest benefit of $26.87M.
It is seen that the Alt-0 and 3 at 3% AARGR is not considerable
because it generates negative NPV and Alt-2 is the best suitable in terms of
BCR and NPV but it fails to fulfil future expected headway and it also has
highest AAOMC at 5% AARGR. Alt-1 has good BCR at 10% AARGR but also has 52
minutes of headway. Alt-3 looks suitable for the future point of view as it has
highest NPV of US$ 26.87M, although it has higher AAOMC it fulfills future
passenger demand and has minimum headway so out of all four alternatives Alt-3
is best suitable to implement.
A sensitive analysis was carried out to input some
variations in terms of Increased value of time, increased ticket of fare and
elimination of rail accidents etc. for the same cost-benefit analysis to
discover more suitable alternatives.
Increased value of time
In 2011, the travel cost time per hour was considered as
Tk. 35.22 while calculating user benefit. This was done only with bus in
consideration. If we take into accounts various other modes of transportation
the travel time cost per hour increases so that would-be Tk. 41.25. An increase
of this value will also increase BCR and NPV. BCR value for AARGR 5% and 10% is
Increased ticket fare
The ticket price was considered as Tk. 6.00 for 2011 and
2012 and then for the rest of the time it was Tk. 9.00. The probability is that
the number of passengers will increase with the development of commuter service
so the ticket price can be increased to Tk. 17.50 which will make all the
alternatives economically sustainable. This will result in increased BCR and
positive NPV. A highest NPV of 36.23
million US$ would be generated and BCR of 2.29 for Alternative-1 at 10% AARGR.
Elimination of rail accidents
The government of Bangladesh has taken good initiation to
reduce accidents by separating railway track grading’s at important crossings
and it would reduce the accident rate by 50%. The effect was negligible. The
NPV value continued to be negative, BCR is still less than 1 for Alt-0 and
Alt-3 at 3% AARGR. Alt-3 has highest NPV of US$ 27.50 million at 10%AARGR and
Alt-1 has BCR of 1.70 at 10% AARGR.
The study helped us to find out the better alternatives
and to know whether the present route can be suitable for future demands or
not. It analyzed the different methods to upgrade the existing route by
introducing new technologies like DEMU and new signal system. Results revealed
that less headway and more stations are important for the route.
The improvement of the commuter train will also influence
the regional development and passengers will shift from road to commuter
trains. This will reduce the traffic congestion on road and in turn the
emission of CO2 will decrease. Which was the objective of National Transport Plan
(NTP). This will also help to increase the goads flowing between the major two
cities during non-season period of train services.
Alt-1 and Alt-2 are helpful in increasing train frequency
with a nominal cost but they are economically feasible only for lower AARGR
from 3%TO 5%. At higher AARGR they have less NPV value but BCR is almost
similar to alt-3. Hence Alt-3 is most feasible in all criteria and has
solutions to all limitations faced by other alternatives such as more
frequency, higher NPV and less headway. And it is suitable in a best way for
higher AARGR and future point of view. Other than these improvements if it is
possible to increase the DEMU capacity for hauling 10 cars or increase the
ticket fare or increasing the revenues from advertisements more revenue can be
generated. Even the partnership with private companies is also one of the best
way to provide best quality of train facility and more revenue.
Wang, R., Kudrot-E-Khuda, M., Nakamura, F., Tanaka, S., A
Cost-Benefit Analysis of Commuter Train Improvement in the Dhaka Metropolitan Area, Bangladesh, Volume 138, Pages, 2014