Controlled Public Transport Fares in the Developing World: Help or Hindrance to the Urban Poor?

Institute of Transportation Engineers. ITE Journal, Jun 2005 by Thompson, John E, Nagayama, Katsuhide

* Public transport is an essential element of mobility for all Cairenes, particularly the poor. Sustainable public transport must be achieved with a minimum (but not necessarily a complete absence of) subsidy. There are no easy procedural answers to this issue, but approaches must be tailored to Egyptian norms, political realities and perceptions. A logical path, given that formal public transport operators are government-owned, is that the commercialization of operations via the increasing involvement of the private sector.

GREATS has recommended a comprehensive series of programs and projects to enhance transport for all Cairenes, including the urban poor. The hardware (infrastructure), software (institutional and organizational arrangements) and humanware (education and training) elements of the master plan include approximately 60 projects and programs. Although the plan focuses on the entire metropolitan region and the populace therein, the needs of the urban poor are seen as an important component of that plan.

In other words, achieving sustainable social and economic growth, assuring social equity and improving the urban environment are adopted as core future goals. Three master plan elements are seen as being particularly beneficial to the urban poor.

Targeted Subsidy

Measures that could be used to mitigate the plight of transport for the urban poor include the targeting of public transport support. This can come via the application of subsidies that benefit specific strata of the population rather than all users of public transport or via the designation of routes or services that specifically benefit the urban poor.

In either case, operators and the government must enter into more targeted arrangements. One of the most effective means of providing a subsidy to lowincome citizens while maintaining the incentive for public transport operator efficiency is to provide the subsidy directly to the person, not the enterprise.

In that way, fares can be set at a commercially viable level and operators would continue to pursue efficiency measures, as perhaps built into a performance agreement. This was achieved in Peru, whereby tickets were sold at kiosks and other outlets around the city and neighborhoods at a reduced price that was considered affordable to the population.

In Brazil, it is believed that no one should spend more than 6 percent of their salary on public transportation. Consequently, legislation was passed so that all major employers would provide a subsidy directly to workers equal to the difference in their transportation costs and 6 percent of their salary.

In France, a tax is levied on businesses and collected by local governments. This revenue is used to subsidize transport operators that operate under franchise agreements with local transport authorities. Transfer of responsibility for "social" subsidies from the accounts of the transport operators to those of the relevant line agencies/ministries also is widely advocated in several former Soviet republics.