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Unravelling myths about subsidies in urban transport: a case study of Pune

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Author(s): Ashok Sreenivas, Girish Sant Publication Date: August, 2008

Based on a case study of Pune, this paper (published in the Economic and Political Weekly, 2nd August 2008) exposes the myth that urban public transport is subsidized and private transport (i.e. cars and 2-wheelers) is not. It turns out that on a per passenger-km basis, private transport is subsidized over 10 times as much as public transport, when only two of the external costs are considered. The myth stems from the fact that 98% of transport subsidies are implicit (and therefore hidden), while public transport receives the 2% visible, explicit subsidies. This raises serious questions not only about the pricing of urban transport but also allocation of municipal budget. (a) This pricing structure subsidizes the rich at the expense of the poor. (b) It promotes usage of private vehicles at the expense of the economically, socially, and environmentally desirable alternative of public transport. Removing such subsidies will encourage the use of public transport and thus reduce congestion, pollution and fossil fuel consumption. (c) Allocation of the municipal budget reveals questionable priorities. For examples, the funds allocated for health care are about half the amount allocated to traffic signals, ‘junction improvement’ etc. while there is talk of privatizing public hospitals due to a ‘lack of funds’! (d) Budget allocation lacks transparency. For example, 36 out of 40 projects listed under a special purpose vehicle ostensibly meant for public transport improvement will actually aid private transport more than public transport. All this points to an urgent need for more participatory process to reform transport pricing as well as municipal budgeting.

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