Towards a discussion of support to Urban Transport development in India Energy & Infrastructure Unit South Asia Region

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Road accidents are a global pandemic. Nearly 0.5 million people die and up to 15 million people are injured in urban road accidents in developing countries each year, at a direct economic cost of between 1 and 2 percent of GDP in many countries. Accidents occur widely on roads between intersections rather than being concentrated at intersections, as is the case in industrialized countries, and the majority of victims are poor pedestrians and bicyclists.
Adequate data are the basis for policy formulation and implementation. The first steps to improve traffic safety are the development of national road accident data collection and analysis capability, and the formation of institutional arrangements to ensure that the data are transmitted to those who need them for policy purposes. Accident frequency and severity can be reduced by improved road design and traffic management policies. While some infrastructure investment is specifically safety oriented (such as infrastructure for NMT in Lima, or grade-separated railway crossings in Buenos Aires), there is a strong case for mandatory safety audits in the design process for all transport infrastructure. Improved medical response can be achieved by some relatively inexpensive and simple institutional innovations. Increasing safety awareness to change traffic patterns and pedestrian behavior requires development and training of staff for specific road-safety coordinating agencies or councils, at both the national and municipal levels.

Personal security is a growing social problem in many countries. While this problem encompasses much more than the transport sector, it is important to analyze the nature and significance of insecurity in the urban transport sector and to devise policy instruments to counter it. That might include collection and analysis of data on personal security in the transport sector to enhance official awareness of the problem, and might include commitment of police authorities to arrest and the courts to appropriately penalize offenders. Strengthening public participation in projects, particularly at the neighborhood level, is important. Some transport policy initiatives can contribute directly to better personal security. For example, street lighting—designed to improve pedestrian security—can be included in street improvement, and particularly in slum-upgrading, projects. Franchise conditions for public transport can give incentives for improved attention to security by public transport operators.

Technical measures alone are unlikely to resolve the fundamental paradox of a sector’s combining excess demand with inadequately financed supply. Improvements in the efficiency of roads, vehicles, public transport operations, and traffic management can undoubtedly improve the efficiency of urban transport. This will not be enough, however, because of three structural characteristics that distinguish urban transport from most other urban service sectors. These characteristics are (a) the separation of infrastructure from operations, (b) the separation of interacting modes of transport, and (c) the separation of infrastructure finance from infrastructure pricing. What is required, therefore, is an integrated package of strategies for infrastructure pricing, service pricing, and urban transport system financing, founded in well designed institutions within an appropriate political framework.

Charging for road infrastructure is the core of a strategy for both efficient allocation of resources and sustainable finance. Congestion increases private transport costs and contributes to the decline of public transport service. While these two phenomena are logically connected, in most cities they are institutionally and financially separated. In principle, vehicular users of congested urban road space should be charged a price at least equal to the short-run marginal cost of use, including congestion, road wear and tear, and environmental impacts.

In the absence of direct charging, fuel taxation should be structured concurrent with vehicle license duties to give a proxy charge for road use and its external impacts. In practice, a range of direct and indirect mechanisms is used to charge for road use. The most common of these mechanisms—the fuel tax—reflects global warming impacts well, but is a poor surrogate for either congestion or road-maintenance impact pricing. Nevertheless, if it is the best proxy there is, the fuel tax should be structured to reflect its relative contributions to urban air pollution, again in conjunction with the structuring of vehicle license duties.

Parking charges should be related to an overall infrastructure pricing strategy. Although they are also a poor proxy for congestion charges, parking charges should, in any case, always cover the full opportunity-cost of land used for parking. Where parking policy is the only available proxy for congestion, pricing controls need to cover all forms of parking space (including that provided privately by employers for their employees).
Direct charging for roads requires careful political and administrative preparation. Although cordon pricing and tolling of specific roads is a step in the right direction, the long term solution lies in more systematic congestion charges. Of course, it is not easy to raise prices or taxes, particularly for goods that have traditionally been viewed as free. For instance, resistance to increased fuel prices in the República Bolivariana de Venezuela in the late-1980s was very violent. Riots following an increase in public transport fares in Guatemala in 2000 cost five lives. This suggests that such increases in charges must be linked with a perceptible improvement in provision of services. There would remain a large education requirement to explain the link between the increased cost and the improvement of services, and to offer realistic choices of alternatives. The second part of the integrated solution thus refers to service provision and pricing.

Pricing principles for public transport modes should be determined within an integrated urban strategy. This means that they should reflect the extent to which road infrastructure is adequately charged. Given the high level of interaction among modes, and the prevalent undercharging of road use, financial transfers between roads and public transport services—and between modes of public transport—are potentially consistent with optimal pricing strategy.

Subsidies or compensation payments do not mean that there should be a monopoly supplier of transport services. In the interests of efficient service supply, transport operators should operate competitively, with purely commercial objectives, and with financial transfers achieved through contracts between municipal authorities and operators for the supply of services. Any noncommercial objectives imposed on operators should be compensated directly and transparently, where appropriate, by the non-transport line agencies in whose interests they are imposed. Above all, in the absence of appropriate contracting or other support mechanisms, the sustainability of public transport service should be paramount, and should generally have precedence over traditional price regulation arrangements. The completion of an integrated policy thus requires an integrated urban transport financing system.

Urban transport financing should be fungible. Given the interaction among modes, there is a strong case for treating the urban transport system as an integrated whole. Because neither congestion nor environmental impacts are currently subject to direct charges in many countries, optimizing the performance of the sector as a whole might justify using revenues raised from private automobile users to fund improvements in public transport. Private sector financing for transport infrastructure, raised through competitive tendering of concessions, may be supported by public contributions as long as these have been subject to proper cost-benefit analysis.

There are different ways of securing fungibility of funding. In a well-managed unitary authority, such as in Singapore, this occurs through the normal budgetary process. In more complex, multitiered administrative systems, achieving this flexibility may require the pooling of urban transport financial resources within an urban transport fund administered by a strategic transport authority at the municipal or metropolitan level. Under such an organization, all local transport-user charges, including congestion charges and any allocations of local taxes or intergovernmental transfers for transport, should normally be made to the fund.

Urban transport funds do not imply earmarking of taxes. Earmarked taxes, such as the payroll tax on employers, that supports the public transport agency Régie Autonome des

Transport Parisiens (RATP) in Paris, have the advantage of a secure legal and budgetary foundation, and are often the basis on which sound long-term service planning can be undertaken. However, the value of having an integrated urban transport fund does not depend on any specific tax source being earmarked for transport. Moreover, in order to develop the credibility of the fund, and particularly to gain political and popular support for the payment of congestion charges, it is essential that the objectives and scope of an urban transport fund be clearly defined, that allocations be subject to rigorous appraisal, and that the operations of the fund be transparent.


Policy integration has significant institutional implications. In the interests of urban transport integration and sustainability, developing countries could therefore profitably move toward prices reflecting full social costs for all modes, to a targeted approach to subsidization reflecting strategic objectives, and to an integration of urban transport funding, while still retaining supply arrangements for individual modes that give an important incentive to operational efficiency and cost-effectiveness. The implementation of such a policy package has significant institutional implications, requiring close coordination both between jurisdictions and between functions, as well as between private and public sector planning and operating agencies.

The basis for institutional coordination is often very weak. Few cities have a strategic agency for land-use and transportation planning, or a competent traffic management unit. Traffic police are therefore often involved with traffic management planning, for which they are ill equipped and untrained. Public transport planning and regulation is also often tied to operations. The few institutions that do exist tend to be understaffed and their staff poorly trained.

Urban transport institutions need both restructuring and strengthening. Action is required on two levels. First, authorities need to recognize what kind of technical organization is necessary to address urban transport issues. Second, the organizations need adequate human, as well as physical, resources to perform their functions. While no single institutional blueprint for public transport is appropriate for all countries, there is enough experience to establish some general principles for the reduction of institutional impediments to effective policy integration.
Jurisdictional coordination may be facilitated through the clear establishment in law of the allocation of responsibility between levels of government. Formal institutional arrangements can be made for collaboration where multiple municipalities exist within a continuous conurbation. The process of decentralization in developing countries may offer an excellent opportunity to address the problems. In particular, intergovernmental transfers need to be carefully planned to be consistent with the allocation of responsibility, but structured to avoid distorting local priority setting. Central governments might also encourage coordination at the metropolitan level; in France, for example, the central government made both local taxation powers and intergovernmental transfers conditional on appropriate jurisdictional and functional collaboration.

Functional coordination should be based on a strategic land-use and transport plan. Detailed planning, both of transport and land use, should be aligned with a municipal or metropolitan structure plan. Coordinated operation is further enhanced by the clear allocation of functions among agencies, with the more strategic functions being retained at the metropolitan level. Obligations statutorily imposed on local authorities should be linked to specific channels of finance (such as direct line agency funding of reduced public transport fares). Responsibility for traffic safety should also be explicitly allocated, with an institutional responsibility at the highest level of the local administration. Traffic police should be trained in traffic management and safety administration, and involved in transport and safety policy planning.

Responsibility for planning and operating public transport should be institutionally separated. For effective involvement of the private sector, technical regulation should be separated from procurement and economic regulation. A clear legal framework should be established for competition in public transport supply, either in the market or for the market. Operations should be fully commercialized or privatized, and the development of new competitive private suppliers of service encouraged through legal recognition of associations, and so on. The public sector should develop strong service procurement and contract enforcement skills.

Decentralized democratic process must be complemented by high technical competence. Ultimately, transport policy formulation involves an element of tradeoff between conflicting interests. It is therefore bound to be a political process. Too often (not least in Latin America) bad investments have been made, and serious urban transport issues trivialized, by the political process. Cities that have exhibited good transport planning and management, such as Curitiba and Singapore, have often developed under strong leadership and have been founded on a high level of technical and professional competence in the planning function. The question is how to reconcile coherent technical vision with more decentralized and fragmented democratic processes.

Public participation and technically strong planning can be complementary. The development of public participation and consultation, in parallel to the local democratic process, is an important means of improving local policy design. This may occur through advance exposure of plans to a free press and other media, as well as through more formal processes of public consultation or public inquiry. For small scale, very localized, infrastructure projects it may be possible to incorporate local preferences in the design process itself. Public transport users may also be involved in service franchising arrangements by complaints and consultation processes and by linking bonus payments for franchised operators to public or media appraisal. At a more strategic level, and for larger, more complex projects, consultation often functions more as a means of trying to reconcile inherently competing or conflicting interests; it is nevertheless central to the development of consensus-based city development strategies.

Public participation must be timely and well structured. Developing strategic involvement requires action at two levels. First, the public processes must be organized to facilitate timely but well-informed consultation. Second, particularly where formal local political processes are weak, the existence of effective local community groups is extremely important. In developing countries, such groups are often well developed in rural areas but much less so in cities. As both policy and financial responsibility for urban development is decentralized to the cities, it is thus possible to create institutional and financial arrangements that better reflect the complex interactions both within the urban transport sector and between urban transport and the rest of urban development strategy. It is only on such a carefully considered institutional and financial basis that the fundamental paradox of urban transport can be resolved.

1 The importance of growth to poverty reduction can be demonstrated by comparing the performance of the Indian and Chinese economies over the last two decades. Over that period the GDP growth rate in India has been around 5.5% with the economy growing about 2.6 times reaching a level of about US$510 billion in 2002. In China the GDP has been growing at about 9.5 % over the same period with the economy growing more than five fold between 1982 and 2002 reaching a level of about US$ 1,232 billion in 2002. In terms of impact of the economic growth on poverty reduction, by 2002 China had lifted 400 million people out of poverty and its poverty rate had declined to 4.6%. In India over the same period the poverty rate only declined from 36% to 29%.

2 The Indian and Chinese economies have evolved differently in the past two decades, with the share of the agriculture sector declining more sharply in China – to less than 15% of GDP in 2002 – while in India it was nearly 23%. In India the contribution of services to GDP grew to above 50%; in China services contributed 33.7 %. In India, industry share of GDP is about 27% and in China it is 52%. Moreover, by 2002/2003, the amount of foreign direct investment and volume of trade in China have reached a level that is many times of those in India.

3 See for example: The Economist, March 3, 2005: A Survey on India and China. The Guardian, September 24, 2004: India’s silicon city booms to busting. Business Week, November 1, 2004: Bangalore: Tech Eden No More; India’s IT center has exploded – and so have its infrastructure problems.

4 An Executive Summary of Cities on The Move can be found in Attachment III and the full report on request.

5 In parallel to this policy note, the Bank is preparing for “A breath of Fresh Air: Ten Years of Progress and challenges in urban air quality management in India 1993-2002”. This report, prepared in collaboration with the Central Pollution Control Board, is a contribution to the on-going efforts to assist cities with developing or updating their air quality management strategies. The study objective was to assess the impacts of ten years of actions and interventions in five metro-cities, so as to assist these and other cities in India in designing better-informed strategies and action plans to combat urban air pollution. The report presents a retrospective analysis of urban air pollution data with a focus on particulate air pollution from 1993 to 2002 in Delhi, Kolkata, Mumbai, Hyderabad, and Chennai.

6 India Country Assistance Strategy, September 14, 2004 (Report No. 29374-IN).

7 In Tamil Nadu, Urban Development II (TNUDII) is nearing completion and TNUDIII is being prepared. Tamil Nadu Road Sector Project is under implementation since 2003. In Karnataka, an Urban Reform Project is under preparation and Karnataka State Highways Improvement Project is under implementation since 2001.

8 Environmental aspects of urban transport were addressed in J. Shah and T. Nagpal, ed., Urban Air Quality Management Strategy in Asia – Greater Mumbai Report, The World Bank Technical Paper No. 381, 1997. See also A. Bertaud, Urban Planning and Air Quality, South Asia Urban Air Quality Management Briefing Note No. 6, The World Bank, April 2002.

9 Two-wheeler group includes scooters, motorcycles and mopeds. Indian two-wheeler industry took off after the introduction of the New Economic Policy in 1985, when restrictions on production capacity were reduced and foreign investment was allowed. Another growth spurt occurred after macro-economic reforms in the early 1990s. The subsequent rise in India’s GDP (5.5% per annum) fed the demand for two-wheelers. The annual production towards the end of the 1990s was 3 million vehicles (George et al, 2002).

10 Source: Impact of road transportation systems on energy and environment – an analysis of metropolitan cities of India, Tata Energy Research Group, 1993.

11 Company-owned buses and mini-buses are said to play a major role in employee transport in Bangalore. According to some statistics, there may be as many as 35,000 private buses (all sizes) and vans in Bangalore used for private mass transport. Compare to 2,200 buses operated by BMTC.

12 See S. Benjamin “Governance, economic settings and poverty in Bangalore”, Environment and Urbanization, April 2000.

13There are exceptions to this statement. Chennai Traffic Police, for example, has done a very good job of collecting and analyzing traffic accident data. There was also a passenger opinion survey in Chennai done within a MTC Route Rationalization Study (Pallavan Consultants, 2001). Generally, there is a visible effort to improve accountability of the local government and allow the voice of the public to be heard, e.g. the report card for public services in Bangalore. Web sites have been set in both cities to provide the public an easy opportunity to record their views.

14 32% of CMTC passengers reported household incomes between Rs.1,000 and Rs.2,500.

15 Source: “Urban populace unhappy with infrastructure: Study” The Hindu, 12 March 2003

16 Source: “At your IT service, India’s Hyderabad”, Asia Times (on-line), January 7, 2004. The study covered nine cities: Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, Kochi, Mumbai, Pune and Delhi (National Capital Region).

17A generic term “rapid urban railway” is used here because the MRTS defies an easy classification. Its location and station spacing suggest a metro, but its tracks, the rolling stock and frequency of service suggest a commuter (suburban) railway. It was reported recently that the Government of Tamil Nadu will commission a feasibility study for a (yet another?) metro line in Chennai. In the Indian urban transport context, names given to various transport modes are not based on rigorous definitions, adding confusion to a taxonomy already made fuzzy by a lack of an internationally recognized terminology. Only 3 other cities in India have rail-based systems: Mumbai has a major network of suburban rail lines, whereas Kolkata and Delhi have short metros (the latter is expanding).

18 Source: “Public Finance of Highways in India” Policy note (work in progress), the World Bank, January 2004. As of 2000, India has a Central Road Fund fed by a fuel cess. The fund has a formula for allocating the proceeds between national, state, rural and urban roads, but the total available is not based on any use-related criteria.

19 The Scheme was set up in 1993-94, to benefit urban infrastructure in 5 of the largest cities in India, including both Bangalore and Chennai. The funding comes 25% from the national government, 25% from the states, and the balance is to be borrowed. Some aspects of this Scheme’s design are salutary. For example, the participating cities should prepare development plans, and prepare their funding propositions using a package approach in conformity with the plan. When it comes to eligible project types, however, the Scheme lists “city transport networks,” but specifically precludes “buses and trams, …., mass rapid transit or light rail transit system projects, projects that are highly capital intensive and of long duration; or long term studies.” It does allow “laying of ring roads and outer ring roads and bypasses around megacities provided … tolls are built into the scheme” and “laying, improving and widening of arterial and subarterial roads … to remove transport bottlenecks.” These stipulations appear at least contradictory, since the development plan in any given city could include priorities for exactly those types of projects which are precluded by the Scheme. In practice, the stipulation on having a development plan and following a consistent package approach appears not to have been followed. As far as urban transport is concerned, the Scheme provided partial funding for ring roads and numerous multi-grade intersections in Bangalore and Chennai, but had no broader strategic impacts. The quotes are from C. Ramachandran, “Case Study of Partnerships in Infrastructure Financing: A Study of India’s Megacity Scheme” (1995).

20 These examples are not meant to invite an exact emulation, especially not the employment tax used in France.

21 Until the 74th Constitutional Amendment (74th CA) introduced in 1992, local government institutions in India were merely outposts of the state governments. The intent of the 74th CA is that cities should be managed by locally elected municipal governments and corresponding administrations, rooted in financial independence, and accepting accountability to the local constituency.

22 Bangalore has 6 deputies in the 220-strong state parliament.

23 A study focusing on road corridors was carried out in 1999 by a team of consultants led by Central Road Research Institute (New Delhi).

24 This is not to say that a fragmented institutional setup cannot produce good results. A remarkable turnaround of Bangalore Metropolitan Transport Corporation since 1997 is a case in point. What a fragmented approach probably cannot produce is a network of exclusive bus lanes on the streets of Bangalore.

25 This paragraph draws on annual reports from BMTC and CMTC, and on Pradeep Singh Kharola, “Reforms in the public transport – a systems approach”, in X. Godard and I. Fatonzoun, ed., Urban Mobility for All, Procedings of CODATU X Conference, Lomé (Togo), 12-15 November 2002.

26 Most recently Geetam Tiwari, “Urban Transport Priorities – Meeting the Challenge of Socio-Economic Diversity in Cities, a Case Study of Delhi, India”,

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