Summary

Putting policy into practice
Regulatory policies in urban public transport 

This case study is based on a report written in 2005 in response to a request from the Government of India for the World Bank to provide support to the development of the urban transport agenda in India.
The Government of India’s strategy for urban transport puts primary emphasis on the need to increase the efficiency of use of road space by favoring public transport, by the use of traffic management instruments to improve traffic performance, and by restraining the growth of private vehicular traffic. Complementing this is a strategy to reduce vehicle emissions by technological improvements in vehicles and fuels.
The government and many city authorities are dealing with the urban transport issue on many fronts. In Delhi, they are undertaking a major investment in the new Delhi metro system; new flyovers have been constructed; and public transport vehicles have been converted to CNG.
In Mumbai, the government is investing in urban roads and suburban rail projects and is considering implementation of metro system. In Chennai, a section of elevated mass rapid transit (MRT) system has been developed as a continuation of the suburban rail system, ring roads have been completed and urban expressway construction planned. In Bangalore, the city has been discussing metro options.

return to top

Putting policy into practice
While Indian cities have developed comprehensive urban transport strategies, there is little on-street attention to the need for public transport priority in any of the urban road projects. Similarly, despite the discussion of non-motorized transport, there is little attention to the needs of the walking public through proper sidewalk provision.
Bangalore’s metropolitan area has a population of 5.7 million and is growing at 4.9% a year, while the Chennai area has a population of 7.5 million, with a growth rate of just under 1%. Motor vehicle ownership is increasing rapidly. Chennai already has 324 vehicles per 1,000 people and Bangalore has 298 vehicles per 1,000 people. Chennai’s public transport system is dominated by buses, but it also has three commuter rail lines and one urban rail rapid transit line in the making. Bangalore relies on buses only. All operators are in the public sector.
On the institutional side, the transfer of powers and resources from states to local governments has been slow. The political constituencies of state and local institutions being different, the continuing dominance by the state produces transport policies and investments not well aligned with local interests.

The proliferation of state and local institutions and parastatals is unusually high, resulting in diluted regulatory and funding authority, and accountability for urban transport matters. Neither city has developed capacity for public transport regulation.

Public transport has traditionally been a subsidized sector. The bus operator in Bangalore has in recent years turned an operating profit, but not yet in Chennai, where cost recovery is about 90%. The use of competitive mechanisms is underdeveloped, as is the reliance on private sector funding and know-how. It’s limited to outsourcing bus services in Bangalore, contract-based street maintenance, and efforts to charge for on-street parking in both cities.
Both cities intend to improve the supply of public transport services, though largely staying within the public monopoly paradigm. This approach is supply-oriented, and traffic growth-biased. In the short term it neglects the mobility of low-income travelers. It does not involve any use of traffic restraint tools and hence leaves street-based public transport services to the mercy of unrestrained competition from private transport. It favors capital-intensive public transport modes, such as metros and other urban railways, which may not be economically justifiable. In the longer term the emphasis on increasing road capacity encourages car-based urban development patterns. The actual policies, as opposed to the statements in principle, thus appear to be both socially regressive and financially unsustainable.
To conform more closely with the strategic directions, the two study cities in particular, and Indian cities more generally, need a demand-segmented, service-oriented urban transport strategy. This would balance growth with equity concerns, with a strong but cost-conscious orientation in favor of public transport modes.

The World Bank has a current presence as a partner in development endeavors of these cities. The areas of the current Bank activity include both urban and transport projects. Reflected in the World Bank’s Country Strategyfor India are agreed guidelines for urban transport where instruments would include advisory services and investment lending for major urban centers, contingent on:

The existence of a statewide urban policy aiming to clarify roles in urban development

Quality of municipal management

Willingness to prioritize investment using economic criteria

Development of a sound urban transport development strategy and investment program

Commitment to the introduction of modern traffic management and enforcement

Commitment to institutional reforms required for citywide transport management

A project to finance a rapid busway corridor or network would be of highest priority in either city, because of its strategic investment and regulatory aspects. Proposals for bus-based rapid transit, in the form of sketch plans and outline cost estimates, are said to have been tabled in both Bangalore and Chennai, and could be built readily and rapidly.
The process of transferring the jurisdiction and resources from state to local governments has been slow, though accelerating in recent years. Municipal Corporations in Bangalore and Chennai are weak in both authority and staff capacity. Given the joint nature of much of the transport infrastructure and services, the state governments are de facto metropolitan governments.

There are several essential aspects in which the distribution of power and accountability between state and local government institutions affect urban transport matters. State transport agencies have an aggregate approach to the sector and ally themselves with big actors in the road and/or rail construction industry and others. This tends to lead to a preference for large-scale investment projects, such as flyovers and elevated roads in Bangalore, or even the MRTS in Chennai.

Neither city has vested the prime responsibility for all aspects of urban/metropolitan transport in one institution. Authority, to make decisions, control over resources and accountability are spread widely between state governments, local governments, and state and national parastatals.

return to top

Regulatory policies in urban public transport
Historically, state bus companies have been the prime providers of public transport services in most Indian cities, including Bangalore and Chennai. Fares have traditionally been set low by state authorities to permit travel by low-income citizens, especially those covering long distances. A traditional and entrenched focus on production rather than service, rigidities regarding staff levels and remuneration, and low financial capacity combined to create a formidable barrier to change.

Raising the level of public transport services became essential. Since the public sector alone was not seen up to the task, the 1988 liberal legislation opened the door to private transport operators. What the legislation failed to do was to create a regulatory apparatus on each of the three levels of government, capable of dealing with a mixed public/private market so that the ensemble would evolve in the public interest.

The response to these changes in Bangalore was not to deregulate but to improve the public monopoly through restructuring, fare adjustment, and an internal improvement program. The door was opened to the private sector through outsourcing.

Changes in Chennai were less dramatic. The bus company increased its cost recovery and the compensation payments were increased, greatly improving the company’s financial position. It’s also trying to introduce outsourcing of transport services, but this has been challenged by the unions and the matter is in court.

The essential remaining question is whether the current regulatory arrangement, a public-sector monopoly, with an outsourcing complement, can produce the cost efficiency and service levels to make this mode competitive with individually owned motor vehicles. An option is to move toward a market-based arrangement, by separating regulatory and service planning functions from the provision of operations, organizing the latter through the medium of competitively awarded service contracts.