Honey Gupta & Rijit Sengupta CUTS International 5 th May, 2015 Manila, The Philippines

1. Transition to improved Bus Regulatory Regimes in Developing Countries: a review of international experiences Honey Gupta & RijitSengupta CUTS International 5th May, 2015 Manila, The Philippines

2. Outline • Introduction (Overview of the CREW Project) • Key Findings (Countries) • Context and Need of Regulation • Bus Transport System – basic elements • Select country experiences • Counter-Balancing Measures for Different Bus Industry Structures in Developing Cities

3. 1. Introduction (Overview of CREW Project) • CUTS work on competition policy and law across Asia & Africa (www.cuts-ccier.org) supported by development partners and recognised internationally • Partnership with various public agencies/authorities in the countries, and regional authorities • Competition reforms can be used as a tool for achieving developmental outcomes – CREW project (www.cuts-ccier.org/CREW). Making competition reforms work for people • Demonstrate benefits of competition reforms on consumers and producers in key markets - Countries: Ghana, India, The Philippines & Zambia - Sectors: Staple Food (Wheat, Maize and Rice) & Bus Transport • Approach: Evidence highlighting linkage of competition/regulatory reforms with consumer and producer welfare • Evidence base advocacy for policy change through a consensus-based, multi-stakeholder driven process

4. 2. Key Findings from Research (Countries) Ghana • Inter-city and intra-city is dominated by private operators, with the public operator (MMT) only acting as a ‘public interest’ (welfare) measure • There are no fixed service schedules, with coverage largely restricted to high demand routes • Women prefer bigger buses • Lack of a scientific, inclusive fare setting process – strong influence of the ‘Transport Union’ • Political economy constraints affect implementation Zambia • Characterized by imported second hand buses that often lack quality • Staff/crew not professional and often rude • High load factor (passenger km/seat km) and uncomfortable ride, in spite of high fares • General dissatisfaction among consumers (about 70%) – fares perceived too high for quality of service in city transport

5. 2. Key Findings from Research (Countries) Philippines • Evolved from highly regulated and concentrated in 1970s to a liberalised market composed of private operators • Current intra-city (Metro Manila) bus market is beset with excess capacity and weak enforcement of rules • Presence of a large number of buses (and private cars) in Metro Manila affecting consumers’ mobility and leading to huge time delays • India • Different states have different approaches to transport service provision (only public providers/public + private/only private) • Govt monopoly in state like Gujarat leading to financial loss; purely private system in Madhya Pradesh creates consumer concerns • Welfare and Popular schemes for Women and Students exist • Fare determination is done by states through a proper formula • Process of reforms of the archaic MV Act has been taken up as a priority by the present Govt.

6. 3. Context, Need & Areas in Bus Transport Regulation • Most critical areas in Bus Transport Reforms: • - Fare setting • - Route Allocation • - Contract Management • - Gender considerations (Women’s comfort and Safety) • - Taxation (Licensing Fees) • - Bus Stations Development Public Welfare (Public Interest) Market driven Economy Fig: Achieving the right balance (purpose of regulation)

7. 3. Need for Regulation (Countries)

8. 3. Need for Regulation (Countries) • PHILIPPINES • Strengthening enforcement mechanisms (identifying priority institutional issues) • Metro Manila Development Authority and LTFRB to work in harmony to address public transport related concerns – what more needs to be done? • Rational fare setting, as a measure to regulate competition (fares seem high – LTFRB to should consider conducting a ‘consumer survey’ in Metro Manila) • Long-term sustainability of Metro Manila will require reduction in excess bus capacity (vehicular population) – comprehensive process of urban transport reforms INDIA • PPP seem to the way forward for promoting competition, need guidance for developing pro-competitive procurement • State level Transport Regulator proposed under the RTSA Bill 2014 – but lack consensus • Need to move away from Govt monopoly – but maintain city bus transport as a ‘public welfare’ measure

9. 3. How and What to Reform? What Experiences Exist? • CUTS Discussion Paper: • Highlights basic elements of bus transport regulation • Reviews select country experiences – regulatory transition

10. 4. Bus Transport System – basic elements The regulatory strategy, market type and access to the market together define the typology of regulation This approach balances public sector control of policy and service planning decisions with the active involvement of the private sector.

11. 4. Bus Transport System – basic elements • Competition is key element of reform; incentives provided by competition are generally more effective in promoting efficiency and demand-responsiveness • Competition in urban bus transport can take two forms:

12. 4. Bus Transport System – basic elements Bus route and service planning need not be sophisticated or require large resources, but progressive, systematic and realistic. Planning invariably involves route identification based on demand assessment and development of a service plan Recommended resource: ‘Bus Karo: A Guidebook on Bus Planning & Operations’ available at http://embarqindia.org/bus-karo

13. 4. Bus Transport System – basic elements • Fare regulation is an integral component of a regulated passenger transport regime • Controlled competition - fare control is usual; tender award criteria - highest revenue share or lowest subsidy for the right to operate • If no fare controls - the award criteria may be lowest level of fares proposed for the service • In a fully deregulated regime, there are no direct fare controls (is this acceptably from a ‘welfare’ angle?) • Fares should either allow for full cost recovery, else Subsidy should be acceptable • Fare Setting involves two important considerations – • Fare structure - Fare structure refers to the types of fares charged • Flat fare (irrespective of distance travelled) • Graduated fare - fare increases with distance travelled, often increasing at a decreasing (telescopic) rate • Zonal fare - fare increases with distance usually independent of bus routes used • Fare level - Average fare paid per passenger (or per passenger-kilometer) for the whole system. Raising or lowering this average level changes the total income of the bus system.

14. 4. Bus Transport System – basic elements Contracts - Primary reference document laying down conditions that form the basis of the business agreement between the city authority and the service provider Different formats of contracts are used to procure bus services from private companies

15. 5. Select Country Experiences • Almost all developed and developing countries have experimented with different forms of ownership and regulation of bus transport. • 1. SEOUL - Deregulation to Controlled (franchised bus) Competition • Mostly deregulated prior to reforms, Seoul Metropolitan Government overhauled its bus transport system in 2004 • Drivers for reform - Financial crisis of Seoul public transport system, Poor regulation, low service levels, Increased car ownership, traffic congestion, air pollution • Reforms: • Bus Route Rationalisation – redesign of route structure, integrating > 400 bus routes • Transport Infrastructure and system Improvement – exclusive bus lanes, easy transfers, better user information • Distance based integrated fare charging – unified fare structure applicable to both bus and rail services • Reform Experience • Initial public discontent with reforms could have been avoided with proper communication, involvement • By Oct 2004, almost 90% Seoul residents expressed satisfaction with the restructured bus services and new fare system • Gradually, average bus speeds increased by 33% • Total bus accidents and injuries on all routes combined have fallen by about one-third • Distance-based fare charging resulted in commuters paying about 30% less on average for using public transport

16. 5. Select Country Experiences • 2. Sri Lanka – Monopoly to Regulated bus transport market • Experienced distinctively different bus transport services in terms of ownership, management and regulatory structures during the past 100 years • Current form - regulated mixed competition that began in 1979 • The unplanned and rapid growth between 1979 and 1983 led to many owner driven buses entering the industry • Reforms: • Incorporation of Ceylon Transport Board - nationalised the Bus operations creating Monopoly • Introduced individual private minibusesin 1979- to enhance bus transport capacity through competition; district based operators' associations given regulatory powers • National Transport Commission Act in 1991 – to develop national policy for bus transport and for financial support • Fare rationalisation in 2000 – fares indexed to bus input cost; not effectively applied due to opposition • In 2005, 11 Regional State Public owned and operated bus companies were reformed into a single entity - Sri Lanka Transport Board (SLTB) • Reform Experience • Operators selected their own vehicles, route frequencies and hours of operation. • Competition led to crush loads, excessive speeds, congestion in the central area and safety violations • National Transport Commission did not develop effective regulatory measures despite NTCA, 1991 • Private sector fleet increased rapidly but reliability and productivity decline • Fare rationalisation reform in 2000 was ineffective due to weak regulatory structure • Competitive tendering of subsidised services to allow the private sector was not used • Wrong emphasis on revenues instead of sector development

17. Inherent challenges with different Bus Transport Market structures and common regulatory responses are compiled for self-assessment of strategies best suited to context….

18. 6. Counter-Balancing Measures for Different Bus Industry Structures in Developing Cities

19. 6. Counter-Balancing Measures for Different Bus Industry Structures in Developing Cities Source: Bus Regulation and Planning – Bus Sector Reform, Federal Ministry for Economic Cooperation and Development, Germany

20. THANK YOU!