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| Sunday, 27 June 2004 |
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| News Business Features Editorial
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Poor regulation, major cause for transport breakdown Breakdown of the transport sector in Sri Lanka is a result of weak regulation said prof. Amal S. Kumarage of Moratuwa University. Prof. Kumarage expressed this idea by his working paper presented at a workshop on Regulatory Impact Assessment (RIA). The workshop was organised by Institute of Policy Studies (IPS) and Centre on Regulation and Competition of Manchester University, Uk. Extracts from the presentation on Regulatory Impediments in the Land Transport Sector of Sri Lanka. Worldwide bus companies are owned and operated partly by public sector and partly by private sector. The government obligations are to approve timely fare increase in line with rising cost and provide a subsidy for unremunerative services or concessionary fares. It is also responsible for planning studies, preparing routes and services to be given on contract. Although entry of private sector has enabled to increase investment in the industry and some quality improvements, private sector has failed to provide the quality of the services that is expected. Reliability of the services have deteriorated. Idling of buses at terminals and stops have increased, accident- risk factors have increased while productivity of crew and buses have decreased. These factors have combined to cause sharp increases in over loading of buses as fares are fixed. Fares in real term have not come down with increased competition., as opposed to quality of service that has deteriorated as measured by most indicators. Single bus private operators only operate when and where it is profitable to do so. As a result buses do not ply on routes or times that are not financially remunerative. The regulator is unable to enforce a time table which has resulted in severe consequences in constraining the mobility of labour, distorting land use development and abandoning rural areas. Subsidy No country has an affective bus or rail service that is entirely free of state subsidy. Subsidy can be used productively to influence other parameters such as urban traffic congestion, urban sprawl, rural development, mobility for the rural poor and social upliftment of under developed areas. However some independent studies show that most of subsidies provided by the Srilankan government are general subsidies and not for specific targeted un-remunerative services. Role of the regulator National Transport Commission (NTC) set up in 1991 as the regulating body is not performing satisfactorily. It is functioning as a permit issuing office. It does not have a mechanism or data to determine supply levels, fare levels or routing and scheduling of buses. Provincial agencies of the NTC have also not developed. The issuing of permits has been found to be quite un satisfactory for most routes. Other methods such as franchising, tendering or contracting have not been investigated by the NTC. UK, which spearheaded de-regulation of buses, there is pressure now to re-reregulate the nation's buses as a means of attracting passengers back. It has been argued that since privatisation under previous Conservative government that a wholesale takeover by the private sector based on competition first, communities second and leaving workers a poor third would ultimately benefit no one. Imposing greater regulation through a framework of public control over private operations is the role of the effective regulator. Manage the supply of buses and efficient utilisation of resources, ensure the qualitative continuity of non profitable services, maintain service parameters between 'quality and fare, ensure that there are no barriers to enter bus operation, systematically plan and develop the bus service as a network of service and route, protect the rights of bus passenger are expected from an effective regulator. Possible models of developing bus operations. Permit system Permit system which is presently practised in Sri Lanka become unwieldy? when there are many operators. It is best as a self-regulatory system, where state sector operator is the dominant operator and a selected few services are given to private operators. The system began under such condition but with large number of operators it cannot be effectively monitored. Under this system there is no competition in the industry and it breeds corruption. Supervised competition through Route Associations This system is followed by most of third world countries through operators route associations,operator's unions or cooperatives. As an example in the case of Buenos Airs, 15000 private buses are formed into 3000 route associations and they are responsible for scheduling bus services. They provide administrative and legal advice to their members. Government decide bus fare and the unions can negotiate fare increases. Unions ensure the equitable earnings by interchanging routes and schedules on a weekly basis. Similar systems are practised in Caracas, Istanbul and Manila. Route Franchising or Transport Provision Contracts This method uses dynamic market forces to secure the supply of bus passenger service at a competitive price. In this method a route or particular services on a route or even all services in a region could be tendered periodically. The quality of the service is pre-defined and maximum fare collectable is stated. This method has an in-built mechanism to deal with unremunerative services. In this system private and public companies may be allowed to compete for tenders. This system apply in London, Costa Rica and New Zealand. However this method can be successful only if a strong and independent regulator is set up to plan and manage the bus industry on a professional line. Market Partitioning In this approach , the industry may be partitioned in to small and more manageable segments as basic Service and Premium Service. The first group consists of basic bus services at the regulated fares so that such route is ensured of basic level of service at an affordable fare. The second category comprises those services wherein services are customised for particular market needs and priced at a premium according to the market demand. These services could extended to several class categories such as luxury air conditioned service, services which seating could be reserved, school services, special service for office and factory workers. Cities such as Dhaka, Hong Kong and Bangkok are following this system. What appears most appropriate for Sri Lanka may be to use Route Associations for large routes with concessions or smaller routes as a first step. Route associations could be franchised over the long-term after market portioning, states Dr Kumarage. |
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