Fare hikes with flawed rationale

With an estimated population of 14 million, Bengaluru is one of the fastest growing cities which, under unplanned urbanisation, is also facing serious environmental and development challenges that are further exacerbated by lacklustre administration. The city has been, for decades, facing the perils of unsustainable development in the form of traffic congestion and water scarcity.

Since the beginning of the year, its residents have been feeling the pinch of price hikes in public transportation that started with a 15% increase in bus fares last month, followed by the recent abnormal increase of Namma Metro fares by over and above 50%. With stagnant wage growth and inflation emerging as key concerns for consumers, the recent fare hikes have stirred public outrage and disappointment. Against this background, a critical and comprehensive evaluation of transportation pricing
is warranted. The recent episodes of public transport price
revisions in the city highlight flaws in price determination which lack strong economic rationale.

While the government and the Bangalore Metro Rail Corporation Limited (BMRCL) justify the revisions in the bus and metro fares citing rising fuel and operational costs, it is to be noted that these revisions could have been implemented gradually, taking into consideration alternative ways of cost recovery, by increasing ridership and institutionalising financial support through grants, budgetary allocations, rationalisation and optimisation of indirect taxes, and setting up of and mobilising finances through dedicated public transport fund units.

Amid the strong backlash from the public and the opposition parties, the government has intervened to correct the anomalies in the metro fares determined by the Fare Fixation Committee. Following the price increase, preliminary data reveal that the metro ridership reduced by 10% while commuters looked at alternative modes of commuting. However, people considering other modes of transportation have few options to mitigate the burden as the economic, social, and opportunity costs of alternative mobility options are also substantially higher with rising fuel prices, pollution, and travel time due to traffic.

Over the last few months, there has been a similar increase in the fares across ride-hailing services and auto-rickshaws in the city. The government gave a big relief and impetus to women commuters by enabling free bus rides through the Shakti Scheme. But the recent hike in bus fares has had disproportionate impacts on women and men with the latter bearing the brunt of the increased fares. While redistribution of income is one of the primary objectives of the government, freebies have to be rationally implemented while addressing fairness, equity, and efficiency concerns.

Despite limitations, price control measures by the government to protect the interests of commuters are sometimes necessary, at least in the short term to bring about stability in transportation pricing without harming the financial sustainability of the service providers. Bengaluru is consistently ranked among the worst cities in traffic congestion. According to the latest TomTom index, it is the third slowest city in the world due to traffic congestion. Though experts are divided over the index calculation, the city is undoubtedly suffering due to the congestion. Meanwhile, efforts taken by the government to manage the city’s traffic have been rather disappointing with bad roads, construction delays, illegal parking etc worsening the situation.

Solution in congestion pricing?

In the context of rapid urbanisation and climate change, the government should reconsider its approach to urban planning by focusing on improving access to sustainable urban mobility and providing incentives for greater use of public transport. To address air pollution and decarbonise the transport sector, policymakers across the globe are finding ways to make public transportation affordable and accessible by improving last-mile connectivity. Government policies should encourage the use of public transport rather than act as a deterrent. Already burdened with one of the country’s highest road taxes, Bengaluru residents are also at the receiving end of policy inefficiencies. Though there are reservations and political challenges with congestion pricing, it is high time Indian cities considered implementing the model to address the growing traffic issue and encourage the use of public transport.

It can internalise the negative externality imposed by increasing air pollution and vehicular emissions. Moreover, the revenue generated through congestion pricing can be used to improve road infrastructure and sustainable urban mobility. The government should also seriously consider other sustainable financing options to maximise its revenue and debt obligations, through alternative institutional financing mechanisms instead of relying entirely on user fares.

(The writer is an assistant professor at the School of Economics and Public Policy, RV University)