In this weekly column on The Sunday Morning Business titled “The Coordination Problem”, the scholars and fellows associated with Advocata attempt to explore issues around economics, public policy, the institutions that govern them and their impact on our lives and society.
Originally appeared on The Morning
By Dhananath Fernando
We’ve had enough discussions about how Covid-19 could bring about a new normal, and its negative impacts on the economy and our day-to-day lives. However, “crises” do not only bring threats but also open up ample opportunities. That’s probably why wartime UK Prime Minister Sir Winston Churchill said: “Never waste a good crisis.” Reforming our public transportation is one golden opportunity presented to us on a silver platter due to Covid-19.
What’s wrong with our public transport?
When Sri Lanka progressed to a middle-income country to reach GDP per capita of $ 4,000, people could afford a personal vehicle even with the exorbitant import tariff imposed by the Government. As a result, about 48% of Sri Lankans started commuting to the city in their personal vehicles.
At the same time, our public transport, still lumbering along as it was in the mid-1980s, had not progressed to the aspirations and expectations of a fast-growing middle class. Adding to woes, the quality of public transport depleted at a rapid rate, increasing the number of people commuting in their personal vehicles and burning more fossil fuels, which account for 19% of our total imports. The environment paid the price as our air quality index plummeted. Simply, our problem was that we had been commuting vehicles instead of commuting people.
Commuting amidst COVID
With Covid-19 hitting us hard, buses and trains cannot operate to their full capacity, according to the Government’s health guidelines. That brings two contradicting problems. People may not have adequate commuting options to adhere to health guidelines, so individuals commuting via crowded public transport pre-pandemic may consider travelling in their own vehicles for health reasons when the economy gradually opens up, spelling disaster and making our existing traffic jam worse.
At the same time, bus owners will be demotivated to field their buses as they cannot make a profit without operating at full capacity without a ticket price revision.
Meanwhile, some commuters may not need to travel at all while “working from home”.
Hidden problems and mediocre solutions
Whenever the topic of public transportation enters the national discussion, our solutions have been very shallow and out of depth. We have taken a more regulatory and blanket tariff approach instead of understanding the real problems. The popular solutions were increasing tariffs on vehicle imports and discussing a ban on tuk tuks, claiming that they contribute to most of the congestion and accidents, even though hard facts paint a completely different picture.
Looking back 20 years, do you see a different brand or structure of buses running on our roads? It’s the same box-type Leyland or Tata, and the same air-conditioned (AC) Rosa buses. Why has the structure of the buses operating on our roads not changed over the last 20 years, when the world has moved to the extent of offering services of unparalleled comfort and safety?
With limited railway service, the 138 bus route (Maharagama/Homagama-Pettah) is considered the most congested bus route to the commercial capital of Colombo. Even at an electoral level, Maharagama/Homagama is considered one of the most densely populated suburbs where aspirational Sri Lankans live, or in other words, where the educated middle class reside.
Have you ever wondered why AC buses do not operate on this route? Most of the main routes (Galle Road, Kandy Road, Negombo Road, Battaramulla Road, Gampaha, etc.) on which most educated middle-class citizens commute to the city on a daily basis for employment, business, and education, use buses which are in the dilapidated state; the so-called luxury service (AC) is horrendous, despite passengers being charged double the usual price.
Have you ever thought about why, while there is a big demand for people to commute comfortably even at a higher price, no one ever thought to have more AC buses, at least as a surface-level solution? That is where a pragmatic approach to public policy, in this case, transport policy, comes into play.
Deadly combination
Ideology aside, the deadly combination for any market, which leads to its stagnation, is lack of competition, over-regulation, and price controls. Unfortunately, our public transport system has all three in just the right amounts to brew a recipe for disaster, costing the Sri Lankan economy a colossal amount of money and having a significant environmental impact.
The route permit for buses that commute between districts costs several times more than the bus itself. At the same time, the route permit is not competitively priced, creating entry barriers and restricting supply. Private bus owners request that even if new route permits are issued, the existing bus owners should be given priority. Simply put, the public bus owners run a cartel, creating meticulous entry barriers so they can continue to provide a ramshackle service to the public and get away with it. On the other hand, a maximum price ceiling on a ticket price is imposed by the Transport Authority.
On the flip side, bus owners have no incentive to field a higher quality bus and a higher quality service as the ticket price would be the same, whether a new or old bus. In a similar way, buses can’t charge a premium for providing a friendly and courteous service. Irrespective of whether they operate during off-peak hours or peak hours, the price of a ticket is the same. Due to this, there’s no incentive for buses to operate after dark and the few that do run are often seen racing each other to grab passengers at the next halt, in contrast to the crawl during rush hour.
Think of a situation where airline ticket prices are regulated – undoubtedly, it looks silly, given the dynamism of the industry. The same applies to public transport. As a result, there is no competition in the public transport space. Trains are a government monopoly and there is no competition and no pressure for them to increase their services as they have no incentive, even if they improve the quality and quantity of service. Their incentive is securing overtime via inefficiencies; they earn the same salary regardless of service levels.
The taxi service which has evolved without single government regulation, respecting market forces, is the only hope for the people. As we all know, the night rates are higher in taxis. The taximeter works in a system where when demand in a specific area is high, prices are higher. As a result, resources are better managed and utilised. People can plan their lives methodically and decisions can be made rationally, while convenience is delivered to your fingertips. Of course, there are areas for improvement, but undoubtedly, service levels, experience, and value for money are far superior.
Opportunity post Covid-19
Subject experts such as Prof. Amal Kumarage of the University of Moratuwa have done enough research and listed solutions to bring an end to this debacle in many forums.
What the Government could do is reconsider the route permit system and do away with entry barriers for businesses to enter the public transport market which would then end the present cartel.
The Government has to reconsider the pricing formula for bus fares and deploy a flexible pricing structure with the proposed pay card system where buses can charge a higher fare if they operate at night.
A test run has already been done with the participation of some cabinet ministers in this Government.
Given lower fuel prices in the world market, even a concessionary rate can be provided for public transportation to encourage them to operate at lower costs, considering the damage to the environment.
Simultaneously, the Railway Department requires more competition. The Government can consider keeping the ownership of the railway tracks with the Department and provide private investors with the space to join in a public-private partnership to run train compartments, operations, and cargo. If we can check the location of our tuk-tuk taxi, obviously it isn’t rocket science to develop an application to monitor the arrival and departure times and locations of trains.
Most of these regulatory reforms won’t affect the Government’s fiscal position, and we should look at options to take maximum mileage of market-based pragmatic solutions rather than inefficient government interventions.
When public transportation sees significant improvement, the Government should consider imposing a congestion tax as done in London, where vehicle entry to the city is expensive, so more people are encouraged to use public transport and congestion is discouraged.
The current higher taxes on vehicle imports is a blanket tariff which has no impact on reducing congestion. When the public transportation is up to the mark, vehicle imports (mainly low efficiency-engine vehicles) will automatically drop, so the Government will not have to crush the dreams of aspirational Sri Lankans progressing to four wheels from two or three. Additionally, the Colombo Municipality will earn extra revenue via the congestion charge.
Last but not least, the Government should abolish the vehicle permit system and treat all its hard-working residents equally. The vehicle permit system has indirectly allowed daylight robbery of taxpayer money, and of course, it has to be kept active for political reasons. This is the golden opportunity to move from the “do nothing” seat to the “do reform” seat, and we should not waste this crisis without making reforms in our public transport system.
The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute or anyone affiliated with the institute.