Tuesday, August 12, 2008

Myths in urban transport subsidies

Myths in urban transport subsidies

by Girish Sant and Ashok Sreenivas

An article in the Economic and Political Weekly issue of 2nd Aug 08 (by Girish Sant and I) on myths of urban transport subsidies may be of interest to you. The paper as it appeared in EPW can be downloaded from http://www.epw.org.in/epw//uploads/articles/12509.pdf, but this will be available for free public access only for a few days. A slightly different version of the paper can be downloaded from the Prayas website at http://prayaspune.org/peg/article_detail.php?article_id=485 at your convenience. Your comments and feedback will be most welcome. Thanks.

A brief summary of the paper is given below.

Using very simple modeling and data from Pune, this paper shows that urban public transport receives far less subsidies than private transport (i.e. cars and 2-wheelers) if all costs are considered. Considering only two of the external costs, it turns out that on a per passenger-km basis, private transport is subsidized over 10 times as much as public transport. The popular myth of subsidized public transport stems from the fact that 98% of transport subsidies are implicit (and therefore hidden), while public transport receives the 2% visible, explicit subsidies.

This raises some serious questions not only about the pricing of urban transport but also allocation of municipal finances, such as:
(a) This pricing structure subsidizes the rich at the expense of the poor.
(b) It promotes usage of private vehicles at the expense of the economically, socially, and environmentally desirable alternative of public transport.
(c) Allocation of the municipal budget reveals questionable priorities. For examples, the funds allocated for health care are about half the amount allocated to traffic signals, 'junction improvement' etc. while there is talk of privatizing public hospitals due to a 'lack of funds'!
(d) Budget allocation lacks transparency. For example, 36 out of 40 projects listed under a special purpose vehicle ostensibly meant for public transport improvement will actually aid private transport more than public transport.

All this points to an urgent need for more participatory process to reform transport pricing as well as municipal budgeting.

Best regards,

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