[sustran] Lahore and Public transport subsidies

[Brendan Finn]

Dear all, 

Perhaps good quality PT can be provided in Lahore without subsidy, perhaps it can't,  I can't tell from this distance. A few thoughts:

- If the politicians demand that it is without subsidy, this will set an agenda and will certainly result in a different outcome. I'm not sure that this is the best starting point.

- It is always possible to make PT profitable, especially where car ownership and affordability is low. However, where profitability is a prerequisite, there will be places that won't get served (at least not as well as others) and there will be people that won't be able to afford the fares. These are tough decisions, the ground rules need to be made clear from the outset. Otherwise, everyone's time gets wasted (good scenario) or the public transport gets financially undermined and degenerates (bad scenario).

- Key financial drivers such as vehicles capital costs and fuel will be priced in first-world prices, but have to be paid for from third-world incomes. Even allowing for low driver and maintenance worker wages, this is still a tough equation to solve, especially if you want clean vehicles. If politicians want public transport to pay its way, it has to give the operators sufficient tariff freedom to generate a sustainable income - actually, it has to take the trouble to learn the cost structure of the industry and formally recognise it. 

- I agree with Joachim's point that Government can invest in the infrastructure for public transport (I made this point in my earlier e-mail) which can establish the conditions for more productive PT with lower unit costs. However, this requires a capacity and political will on the Government side which is not always present. 

- Put it another way, if Government is willing to roll up its sleeves and work hard, it may indeed be able to get finaicially viable PT. However, if it won't do the tough work and dumps the problem on others, then no-subsidy is a pipe dream or else the poorer sectors of the community get excluded.

I think Lahore is going to be quite interesting, and I would appreciate if Hassan keeps us informed on how the thinking develops. My memory is a bit hazy, but didn't Lahore previously try to offer out city or area franchises for bus operations?

With best wishes, 


Brendan.
_______________________________________________________________________________________________________________
Brendan Finn          e-mail : etts at indigo.ie          tel : +353.87.2530286

----- Original Message ----- 
From: <bruun at seas.upenn.edu>
To: <sustran-discuss at list.jca.apc.org>
Sent: Saturday, October 10, 2009 11:25 PM
Subject: [sustran] Re: Public transport subsidies


> Carlos and Joachim:
> 
> You are talking theoretically but the request for advice addresses an  
> immediate, practical problem.
> If you are going to wait until the conditions are right on the streets so
> that operations can be fast and efficient and no operating subsidy is requird,
> and/or umtil car owners are taxed so that this money can be used to  
> support public transport,
> you might be waiting a long time. The people who decide public policy often
> have a conflict of interest. They often aren't willing to raise their costs
> or restrict their driving. So, in the meaniime, public support is needed or
> nothing will improve.
> 
> And, in actuality, the subsidies do often pay for themselves ecomonically.
> If even a small percentage of the money spent on private automobiles by
> the population can be saved, this might well justify the subsidy. Cities
> with good public transport spend less overall on passenger transportation
> than those that don't. The problem that policy makers often have is
> that politicians don't like to make this point, they only like to talk
> about how they are saving tax dollars but not about how public spending
> can be offset by reduced private spending.
> 
> Eric Bruun
> 
> 
> 
> Quoting Carlosfelipe Pardo <carlosfpardo at gmail.com>:
> 
>> Hi, I think if there were subsidies to public transport (which is anyway
>> debatable) they should come from within the sector and from charging
>> real costs to cars via fuel surcharge (or un-subsidized fuel), parking
>> charges, congestion charging, etc. Especially in developing cities,
>> subsidies are not something that you can assign to all sectors (health,
>> education, etc) but that you have to choose where to put them because
>> there's not enough money for everything. Maybe it's best to let
>> transport be closer to a real market (i.e. have cars pay real costs so
>> public transport can benefit) while education and health can be
>> subsidized properly.
>>
>> Best regards,
>>
>> Carlos.
>>
>> Joachim Bergerhoff wrote:
>>> Dear Hassaan,
>>>
>>> thanks for letting us have a share in your beautiful challenge.
>>>
>>> There are many good arguments for public subsidy to public transport
>>> operations.  Simon has mentioned many of them, including the reduction of
>>> car congestion.
>>>
>>> However, there are also strong arguments against it, theoretical and
>>> practical. I would like to make two points:
>>> - it is crucial to distinguish public investment in infrastructure from
>>> public subsidy to operations
>>> - public transport is praised for its sustainable efficiency.  This should
>>> also translate in market success.  Need for operating subsidies is an
>>> indicator for poor market regulation.
>>>
>>> In dense areas, public transportation is cheaper than private motorised
>>> transportation as it consumes less capital, less energy, less work.  If it
>>> can't compete with private motorised transport, it is because private
>>> motorised transport has competitive advantages and public transport suffers
>>> operating handicaps (difficult access to stops, slow speeds, bad
>>> interconnections).  This is the poor market regulation, mostly due to the
>>> preference given to private cars in all infrastructure projects.
>>>
>>> The practical argument is that if you manage to set up a successful bus
>>> system by keeping prices low through subsidies, you will not be able to
>>> respond to the success with more services, because you will quickly reach to
>>> limit of subsidies you can mobilise and the system gets stuck.  Public money
>>> is needed for so many other things, starting with education and health.  It
>>> should not be wasted on paying inefficient public transport that is
>>> inefficient because public policy really favors the private car wherever it
>>> can.
>>>
>>> Hence, my suggestion is that the public authority should not persist in bad
>>> regulation and pay subsidy just enough subsidy to public transport enough to
>>> make the system (hardly) bearable for those who depend on mass transit and
>>> those who suffer from congestion.  Public policy should INVEST in better
>>> infrastructure that allows for profitable operations of public transport.
>>> It can even aim at public transport paying back the infrastructure in the
>>> long run.  Whether and how much you include customer service and marketing
>>> in the 'infrastructure' or not is a secondary question.
>>>
>>> There are many low and high quality examples of profitable public transport
>>> operations from all continents.  You could add an even better one.
>>>
>>> Looking forward to the continued debate,
>>>
>>> Yours sincerely,
>>>
>>> Joachim
>>>
>>>
.dimts.org>


>>>> ------------------------------
>>>>
>>>> Message: 3
>>>> Date: Fri, 9 Oct 2009 18:46:03 +0100
>>>> From: "Ahuja, Sonal (Capita Symonds)" <Sonal.Ahuja at capita.co.uk>
>>>> Subject: [sustran] Re: Sustran-discuss Digest, Vol 74, Issue 5
>>>> To: "Brendan Finn" <etts at indigo.ie>, "Simon Bishop"
>>>>        <simon.bishop at dimts.in>,        <sustran-discuss at list.jca.apc.org>,
>>>>        <hghazali at gmail.com>
>>>> Message-ID:
>>>>        <
>>>> A1EF01DFD0E79C448BDDE9B6899841AC014C66FC at CAPPRWMMBX09.central.ad.capita.co.uk
>>>>
>>>> Content-Type: text/plain;       charset="us-ascii"
>>>>
>>>> Dear Hasan,
>>>>
>>>> This paper may be useful
>>>>
>>>> http://www.istiee.org/te/papers/N32/02%20van%20goeverden%20_5-25_.pdf
>>>>
>>>> My argument in favour of subsidy for public transport is that all modes
>>>> or road transport including car are far from indirect subsidy either
>>>> (fuel or highway construction costs) so why should public transport not
>>>> get some contribution from government finances.
>>>>
>>>> If there is no subsidy for public transport there can be serious impacts
>>>> on service quality of public transport. In all cases even partial
>>>> private participation needs to be closely monitored and regulated to
>>>> guarantee quality of service to passengers.
>>>>
>>>> In particular in urban and regional transport a considerable decline of
>>>> services may be expected without subsidy for urban public transport.
>>>> Moreover, fares are bound to increase. Often taking subsidy out of
>>>> public transport is detrimental to low income groups and leads to social
>>>> exclusion of the people who need the public transport the most but
>>>> cannot afford it. Simon has highlighted some the issues with Delhi and I
>>>> would agree with Brendan's observations regarding impact of lowering
>>>> subsidies on public transport.
>>>>
>>>> The level of subsidy in public transport is eventually is not just an
>>>> economic but a political decision as well.
>>>>
>>>> With warm regards
>>>> Sonal
>>>>
>>>> Sonal Ahuja
>>>> Associate Director,
>>>> Development Transport and Infrastructure
>>>> CAPITA SYMONDS
>>>> 24/30 Holborn, London EC1N 2LX
>>>> Tel: +44 (0) 20 7870 9300
>>>> Fax: +44 (0) 20 7870 9399
>>>> Mob: +44 (0) 77 88 666 523
>>>> Mail: sonal.ahuja at capita.co.uk
>>>> www.capitasymonds.co.uk
>>>>
>>>> Think of the environment. Print only if necessary.
>>>>
>>>> -----Original Message-----
>>>> From: sustran-discuss-bounces+sonal.ahuja=capita.co.uk at list.jca.apc.org
>>>> [mailto:sustran-discuss-bounces+sonal.ahuja<sustran-discuss-bounces%2Bsonal.ahuja>
>>>> =capita.co.uk at list.jca.apc.or
>>>> g] On Behalf Of Brendan Finn
>>>> Sent: 09 October 2009 17:59
>>>> To: Simon Bishop; sustran-discuss at list.jca.apc.org
>>>> Subject: [sustran] Re: Sustran-discuss Digest, Vol 74, Issue 5
>>>>
>>>> Dear Hassan,
>>>>
>>>> I am in agreement with the general direction of Simon's e-mail. The
>>>> Government of the Punjab is being unrealistic if it expects to get
>>>> anything resembling a quality public transport system without subsidy or
>>>> support funding. I guess if they give an exclusive franchise to a
>>>> company without any restrictions on coverage, service level, quality or
>>>> tariff, it could be possible, but that would not meet the needs of the
>>>> citizens. There is a common misconception among some politicians and
>>>> senior decision-takers that if you privatise bus services you don't need
>>>> to give any subsidies because the private sector is always profitable.
>>>> Alas, this does not hold true.
>>>>
>>>> There are two categories of urban public transport system that do not
>>>> require subsidies:
>>>>
>>>> 1) A few rare exceptions such as Hong Kong and Singapore which do not
>>>> receive Government money, but Government has created the conditions for
>>>> them to be profitable.
>>>>
>>>> 2) Most cities in Africa and many in other parts of the world where
>>>> unregulated buses and paratransit provide services with low quality
>>>> vehicles and poor conditions for the workers. The quality of the service
>>>> itself varies but I don't think you will find in any of these cities
>>>> that either the citizens or the city authorities are pleased with what
>>>> they have even if it is functional.
>>>>
>>>> In my opinion, a city such as Lahore needs to set outs its goals first
>>>> and assess the value of achieving them. What sort of city does it want
>>>> to be? How important is transportation to that vision and how should its
>>>> people move? Will the city's economy function if traffic continues as it
>>>> is? Only then decide how to achieve it.
>>>>
>>>> A good public transport system which has reasonable coverage and service
>>>> levels will cost money (actually, even a bad one costs money). The
>>>> questions for the Government are:
>>>>
>>>> a) What role does Government believe it should have in network coverage,
>>>> service design, vehicle specification, quality, etc.? Once it starts to
>>>> get involved, it must take some responsibility for the financial
>>>> outcomes.
>>>>
>>>> b) What can it do to minimise the cost and maximise transportation
>>>> effectiveness? Well-enforced priority for buses is an obvious method
>>>> which boosts productivity, reduces unit costs, and makes the service
>>>> attractive to users.
>>>>
>>>> c) What should be the balance of paying the costs between the customers
>>>> and the government? Is Government willing to allow price freedom to the
>>>> operators, or does it wish to provide tariff protection for some or all
>>>> users? If the latter, then it had better be prepared to contribute
>>>> something.
>>>>
>>>> But ultimately it boils down to figuring what a good PT system is worth
>>>> to the city, and what the alternatives cost. The alternatives can be
>>>> expensive freeway-construction, or cheap do-nothing in which the city's
>>>> resources are squandered in congestion and investments go to other
>>>> better-functioning cities and countries. When they know what they want
>>>> and what it's worth, it's a lot easier for them to figure how much they
>>>> would be willing to pay, and will recognise a good bargain if they can
>>>> get it for less.
>>>>
>>>>
>>>> With best wishes,
>>>>
>>>>
>>>> Brendan.
>>>> ________________________________________________________________________
>>>> _______________________________________
>>>> Brendan Finn          e-mail : etts at indigo.ie          tel :
>>>> +353.87.2530286
>>>> ----- Original Message -----
>>>> From: "Simon Bishop" <simon.bishop at dimts.in>
>>>> To: <sustran-discuss at list.jca.apc.org>
>>>> Sent: Friday, October 09, 2009 6:23 AM
>>>> Subject: [sustran] Re: Sustran-discuss Digest, Vol 74, Issue 5
>>>>
>>>>
>>>>
>>>>> Dear Hassan,
>>>>>
>>>>> I do not underestimate the size of the task you are embarking upon and
>>>>>
>>>> I wish you all the luck.  I was thinking about your question in some
>>>> depth and it made me think that your task might be even harder than you
>>>> think.
>>>>
>>>>> In my experience it nearly always requires additional finance to have
>>>>>
>>>> a 'quality' public transport network.  In Delhi I have been working as a
>>>> consultant with Delhi Transit which has pushed the government to replace
>>>> the existing bifurcated system of a state monopoly that runs quite
>>>> inefficiently and requires regular top ups to be kept alive.  The other
>>>> is a fully private 'Blueline' system that breaks even but, to do so
>>>> requires cheap uncomfortable truck body buses running at high speed to
>>>> capture as many passengers as possible.
>>>>
>>>>> Delhi Transit borrowed heavily from the London model to develop a
>>>>>
>>>> system of 17 zonal clusters in the city which would be franchised to the
>>>> lowest cost bidder.  The bidder would collect a per km fee for each km
>>>> run but in contrast to the state monopoly his/her performance would be
>>>> measured by GPS and an Operational Control Centre with a system of
>>>> rewards and penalties.  The fact was that this turned out to require
>>>> government support, but it was much less than the 650 million pounds or
>>>> so that is charged in London (back of the envelope figure = about 150
>>>> million pounds or 3 flyovers a year - the government are constructing 24
>>>> of these in the run up to the Commonwealth Games and already they are
>>>> becoming saturated).
>>>>
>>>>> The government has stalled on taking on the commitment so far because
>>>>>
>>>> it says the charge is too much.  However, I would argue strongly, and
>>>> suggest that you too strongly consider looking at and arguing for a
>>>> performance-based bus system even if a subsidy is required.
>>>>
>>>>> The first reason is that you will need quality performance to compete
>>>>>
>>>> with private vehicles and you will need to pay for it.  Think of ways of
>>>> raising the money like a cess on fuel or cross subsidization from
>>>> parking charges, even like Bogota, support from carbon credits.  Taxing
>>>> cars and motorbikes, I acknowledge, is difficult politically without a
>>>> viable public transport system available, but, if a plan were
>>>> constructed and in, say Year 2 a bus system was in place, it would be
>>>> possible to commit to raising money from private vehicles in that year
>>>> to pay back someone like the ADB or WB.
>>>>
>>>>> The second reason is that the bus network will reduce costs elsewhere,
>>>>>
>>>> which, as part of your project you should independently quantify
>>>> (accidents, congestion, pollution, technology transfer, etc).  Even if
>>>> you think that the government will say, "All very well, but....." you
>>>> should think about 'playing the long game'.  There is fast approaching a
>>>> time when even the elite will be beleaguered by long traffic jams and
>>>> will start to realize that having a good bus system actually helps them
>>>> drive around more easily in their government cars - in India they're
>>>> Ambassadors, don't know what they are in Pakistan.  The elite will
>>>> eventually come to realize a subsidy is a small price to pay for their
>>>> comfort.
>>>>
>>>>> You could also mitigate some of the costs in the following ways.  I
>>>>>
>>>> notice in India the preponderance of cycle rickshaws that are totally
>>>> un-integrated in the public transit system.  At virtually zero cost you
>>>> could use them as 'feeder routes' to BRT, thereby reducing the costs of
>>>> running a bus-based service considerably and possibly employing more
>>>> people.  You could 'upgrade' rickshaws in your contract specification so
>>>> they are accessible, comfortable and desirable.  Another way to reduce
>>>> costs would be to develop what we are trying to develop in Delhi, a BRT
>>>> system that reduces ongoing costs by improving the efficiency of buses
>>>> spending less time in traffic for instance and increasing revenues from
>>>> a fast, competitive service.
>>>>
>>>>> In the end I think we need to start asking the question, 'How much do
>>>>>
>>>> we want to pay for a quality public transport system rather than 'How
>>>> can we get it for free'?  'How can we mitigate some of these costs by
>>>> taking advantage of the strengths already existing in Asian cities,
>>>> para-transit, cheaper labor (non-existent in the Western world)?' Most
>>>> importantly, 'How do we COMMUNICATE these needs to our politicians so
>>>> they sanction the funds?'  You could start by looking at places like
>>>> London that have turned round their loss of bus patronage and improved
>>>> journey times by adopting quality performance models.
>>>>
>>>>> All the best,
>>>>>
>>>>> Simon Bishop
>>>>>
>>>>>
>>>>> ----------------------------------------------------------------------
>>>>>
>>>>> Message: 1
>>>>> Date: Thu, 8 Oct 2009 13:14:22 +0600
>>>>> From: Hassaan Ghazali <hghazali at gmail.com>
>>>>> Subject: [sustran] Lahore Transport Company Revisited
>>>>> To: cai-asia at lists.worldbank.org, sustran-discuss at list.jca.apc.org
>>>>> Message-ID:
>>>>> <c4ee40d0910080014m3f4517b7odcccd8d2f8cb655a at mail.gmail.com>
>>>>> Content-Type: text/plain; charset=ISO-8859-1
>>>>>
>>>>> Friends,
>>>>>
>>>>> With all due apologies for cross postings, I seek your assistance in a
>>>>>
>>>> task which has been assigned by the Honourable Chief Minister of the
>>>> Punjab to sort out some of the matters regarding the LTC which was
>>>> formed earlier this year.
>>>>
>>>>> We are reviewing the Motor Vehicles Ordinance, 1965 and amending them
>>>>>
>>>> to enable a sustainable financial and regulatory framework for the
>>>> public transport sector.
>>>>
>>>>> At this point I have two specific questions which are as follows:
>>>>>
>>>>> (1) Is there any public transport system in existence which does not
>>>>>
>>>> rely on government subsidies or viability gap funding?
>>>>
>>>>> (2) If not, are there any examples or case studies of how financing
>>>>>
>>>> has been arranged and how this has been reflected in the tendering
>>>> process for procurement of buses?
>>>>
>>>>> Many thanks in advance.
>>>>>
>>>>> Hassaan
>>>>>
>>>>> Institutional Development Specialist
>>>>> The Urban Unit
>>>>> Planning & Development Department,
>>>>> Government of the Punjab
>>>>>
>>>>> A: 4-B Lytton Road, Lahore, Pakistan
>>>>> T: 9213579-84 (Ext.116)
>>>>> F: 9213585
>>>>> M: 0345 455 6016
>>>>> Skype: halgazel
>>>>> http://www.urbanunit.gov.pk