Monday, February 20, 2017

A proposal on urban transport management

Arguably the two biggest immediate constraints facing large cities in developing countries like India are the availability of affordable housing and acute traffic congestion. Unlike several other problems, including the availability of adequate utility infrastructure and jobs, these two are not easily mitigated and the costs on the typical urban resident can be huge. 

In the absence of affordable housing within a reasonable enough distance from the city centre to make you feel that you are living in the city, a reality in most Indian cities, immigrants are forced into  living in outer suburbs or squat on cramped illegal settlements. This amplifies workplace commute times and adds to the traffic congestion. The latter spares none, reducing peak-time travels to crawls, and leaves a toxic smog of air pollution. This post will focus on urban transport. 

I have written earlier arguing that cities need to embrace several complementary policies to address the challenge of traffic congestion. The main levers are four-fold - increase the cost of vehicle ownership (higher emission standards, higher vehicle taxes etc), vehicle usage (congestion charging, higher parking fees etc), extensive promotion of public transport, and focus on transit-oriented development (higher FAR on transit corridors and around stations). Addressing traffic congestion is an ongoing process, with no final destination in terms of policies, and cities will have to constantly play with all these levers.  

The problem suffers from a serious incentive alignment and jurisdictional problem. The city residents suffer the consequences and the local government has no power or role in the exercise of at least two of the four policy levers - vehicle ownership and public transport. Both are the domain of state governments, leaving policies to control vehicle usage and transit oriented development as the only available lever with cities. It is indeed scandalous that, outside of road infrastructure, very few Indian cities spend anything on urban transport. 

Unfortunately, both these run into challenges of the political economy. Higher parking fees and congestion pricing risk inviting the wrath of the middle class vehicle users. Higher FAR on transit corridors, as the example of Mumbai DP 2034 shows, generates opposition from existing land owners. Also, there is the realisation that any progress on these as isolated events may not suffice.

In the circumstances, the standard response of Indian cities to traffic congestion has been road widening and fly-overs. That has run its course in all the larger cities. Now it is left to the demand side policies of internalising the costs of vehicle ownership and usage and the supply side one of expanding public transport. I have argued here that the odd-even vehicle ban in Delhi may have a crossing of the Rubicon moment in India. So is there a way forward?

How about an initiative whereby Government of India volunteers to support cities who embrace an integrated approach that combines all these levers? To start with, it may be tried out in 3-5 cities over a 10 year period. Some of the cities where metro rail systems have been sanctioned may be the best places to initiate this approach. Based on initial learnings, it can be gradually extended to other cities.

The cities should develop an integrated transport plan, with focus on addressing effective transport management. This should be done differently from the current approach of semi-cooked, cookie-cutter transport plans made on shoe-string budgets that every city flaunts. The plan should bring together all the levers and integrate them with existing policies, and be supported by credible data and  rigorous enough quantitative analysis. It should seek to align incentives, institutional roles, and resource requirements.

State governments should commit to transition the responsibility of urban transport to the local government, with adequate financial and institutional support. They should also evolve mechanisms to impose surcharge or higher registration and annual taxes on vehicles registered in the city, while minimising tax arbitrage opportunities.

Cities should commit to a progressively rising schedule of internalising vehicle usage charges - higher parking and congestion pricing, and pedestrianisation of certain areas. Most importantly, they should accept the incorporation of transit-oriented development into their master plans, with a plan for phased rise in FAR and corridor coverage, starting with the densest travel corridors. And cities should commit an increasing share of resources to invest in urban transport.

GoI should make conditional all its investments in metro-rail and other urban transport systems to the adoption of transit-oriented development and value capture frameworks. It should support any city which volunteers with the aforementioned reforms with significant long-term resource commitment.

All sides, as well as opinion makers, need to realise that there are no short-cuts like PPPs that can substitute for large public investments in urban transport. And public support will have to cover even a significant share of operating expenditures. It is for this reason that all financing options should be explored, including value capture instruments that can help socialise at least some of the private windfalls from these measures.

The city, state, and GoI can negotiate a tripartite agreement to implement the first phase of this over a 5-8 year period, with reasonable milestones and timelines.  

This approach has several benefits. The most important is that it enables more effective realisation of the full benefits of investments like those on metro rail systems. Currently, in the absence of higher FAR and value capture frameworks, metro rail projects are set up to struggle for their viability and benefit none but rentier landowners. Or programs like Smart Cities make isolated transport investments, whose full potential remain unrealised without complementary measures. Or an Urban Mass Transport Authority gets established and ends up as powerless Committee. Or city master plans remain disconnected from policy levers, thereby limiting the impact of both.

Another benefit of an integrated approach is that it binds everyone together into a compact, allowing burden sharing, and attenuating the political economy challenges. A congestion pricing or higher vehicle taxes can become palatable when seen as part of a package that includes investments in public transport.

This also creates the demand side pressures to proceed with an integrated implementation. It then becomes largely an effort to effectively implement the plan. It should be hoped that these cities will have at least one or two very competent enough set of officials during the period to generate the thrust required to achieve the objective.

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