Regulatory reform reduces barriers to competition and market openness, and fosters market dynamics, while ensuring essential social and environmental welfare. Incorporating practices for consultation, transparency and access to law, regulatory reform also contributes to reduced corruption. A policy of deregulating a transport market may lead to the formation of cartels among operators aimed at excluding new competitors from access to crucial supplies or facilities, or artificially raising fares. The regulatory institution will then need to prevent the acquisition and exploitation of excessive market power by controlling anticompetitive commercial behaviour.

1. Regulation of Transport
- Ankit Singh –
- Magan Singh –
- Ria P John –
- Robin Singh -

2. - Regulatory Reforms –
- Ankit Singh -

3. REGULATORY REFORMS
Regulatory reform reduces barriers to competition and market openness, and fosters market
dynamics, while ensuring essential social and environmental welfare. Incorporating practices for
consultation, transparency and access to law, regulatory reform also contributes to reduced corruption.
Needs of Regulatory reforms:
 The existence of natural monopolies
 The limitations of competition for the market
 The existence of asymmetric information between transport operators and regulators
 The need for private investment in infrastructure facilities
 The need to assign risks between operators and government
Transport: Economic reforms
Transport is pivotal to economic development. On the one hand, the achievement of economic growth and poverty
reduction requires good physical access to resources and markets while on the other, quality of life is generally
dependent on the quality of physical access to employment, health services, homes, education and other
amenities.
• Transport services are recognized as being among the main bottlenecks to socio-economic development and
social integration

4. By way of example, governments have often attempted to secure one or more of the following objectives
simultaneously, in the public transport sector:
• Service coordination (including integrated route structures)
• Through ticketing
• Coordinated scheduling of services
• Multi-modal coordination
• Centralized information systems
• Safety
• Environmental protection
• Cost and price minimization
• Service quality
• Affordability
Economic reforms often:
(a) Replace publicly-owned monopolies with publicly-regulated private monopolies with the risk that prices are
set permanently above marginal social cost
(b) Fail to ensure that charges for the use of infrastructure are set correctly. Privatization or commercialization of
public transport without appropriate charges for the use of public infrastructure may accentuate distortions both
within the sector and among sectors;
(c) Fail to internalize the social costs of externalities, such as congestion, pollution and noise.

5. Reasons for reform
under the direct control of public ownership it is necessary for reforms to take place :
• Increasing discontent with the model of public ownership - where such organisations are perceived to suffer from x-
inefficiency argument and also financial constraints
• Changing macroeconomic environment combined with social change - The economic power of governments and their ability
to influence markets has been considerably reduced due to the rise of multinational and transnational companies. less people
are now reliant on public transport services.
• The desire to introduce competition into the provision of transport services - Choice is more a part of today’s society than it
has been in the past, hence introducing competition into the market gives the consumer more viable choices.
Economic reform: creating a competitive market-based transport sector
• Depoliticization
• The commercialization of operational management
• The selection and detailed design of an appropriate competitive market form;
• The development of effective competitors;
• Increased private participation in transport infrastructure financing;
• The development of regulatory institutions appropriate to the market form.
Depoliticization and commercialization in transport
• Unbundling of functions
I. In maintenance - particularly in the contracting out of road maintenance to the private sector;
II. In vehicle operations - in the separation of rail service provision from infrastructure or of the competitive
operations of bus operations from service planning
III. In ancillary service provision (catering and baggage handling in air transport).

6. Economic reforms: maintaining a competitive
market based
A policy of deregulating a transport market may lead
to the formation of cartels among operators aimed
at excluding new competitors from access to crucial
supplies or facilities, or artificially raising fares. The
regulatory institution will then need to prevent the
acquisition and exploitation of excessive market
power by controlling anticompetitive commercial
behaviour.
Private participation in transport infrastructure
facilities and services
In terms of transport facilities, the competitive award
of long period concessions, licenses or facility leases
is the primary means for introducing market forces
into the provision and management of infrastructure
with the objective of stimulating efficiency by
transferring risk to the private sector.
The scope for private sector finance and management in transport

7. The scope for private financing in transport infrastructure developing countries compared with power or
telecommunications

8. Economic reforms: the need for regulation
In general, there are three distinct reasons why it can be desirable to retain some public control or regulation of the right to
supply transport:
(a) Where the duplication of supply would be either wasteful or impractical, as with indivisible infrastructure (major highways,
bridges, seaport or airport superstructure and railway infrastructure), the need to regulate stems from the danger of
monopoly exploitation;
(b) Regulation may be desirable where an unregulated market may result in:
(i) Matching of schedules (in local bus markets);
(ii) Increased pressure to engage in dangerous practices, such as overloading of freight vehicles or racing of buses;
(iii) Perceived losses in the stability and reliability of service, with consequential losses in patronage and reductions in
vehicle occupancy;
(c) While cost reductions resulting from unfettered competition may allow services to continue that were previously
unprofitable, and may even lead to more frequent services being provided on previously unremunerative routes by using
smaller vehicles that are more suited to low demand, sometimes social objectives may require direct financing of some
services that might otherwise be lost through competition in the market.
In practice, however, economic reforms often:
(a) Replace publicly-owned monopolies with publicly-regulated private monopolies with the risk that prices are set
permanently above marginal social cost;
(b) Fail to ensure that charges for the use of infrastructure are set correctly. Privatization or commercialization of public
transport without appropriate charges for the use of public infrastructure may accentuate distortions both within the sector
and among sectors;
(c) Fail to internalize the social costs of externalities, such as congestion, pollution and noise.

9. As a consequence, new regulatory requirements have emerged. It is, therefore, necessary to redirect the activities of
governments in the transport sector to make markets effective and to provide what markets cannot. Governments must,
therefore, perform three roles:
(a) Establishing a market framework which requires the creation of a competitive structure and avoidance of anti-
competitive behaviour;
(b) Creating incentives for economic efficiency which requires the introduction of proper pricing for public infrastructure;
(c) Establishing effective non-market institutions and processes, in areas where markets do not operate, which requires
governments to both decentralize political responsibilities and direct local community involvement.

10. Economic reform and regulation in the railway industry
In principle, there are three main options for the vertical organization of the railway industry:
• Vertical integration – this corresponds to the traditional structure where a single, usually state-owned, firm controls all the
infrastructure facilities as well as the operating and administrative functions;
• Competitive access – this occurs when there is an integrated operator (usually public), which is required to make its rail
facilities (tracks and stations) available to other operators on a fair and equal basis. This method keeps the advantages of
integration in terms of economies of scope, coordinated planning and reduction in transaction costs, but if the integrated
company has incentives to leave out other operators, the overall effectiveness of the system may be compromised;
• Vertical separation – in this structure the ownership of facilities is fully separated from other rail functions (such as train
operations, marketing and ticketing) and can also be privatized. This has the attraction that the rail infrastructure, which
remains characterized by natural monopoly conditions, is separated from rail operations where potential competition
among different operators may be implemented.
Alternative regulatory frameworks
Liberalization of the railway industry creates new
roles and functions for the regulator and new
possible regulatory structures. The selection of a
new structure will depend on the objectives of
the economic reforms and any constraints may
apply that typically may be one or more of the
following:
• Fiscal where there is a need to maximize the proceeds of
disposing of state assets and minimize any ongoing subsidy
requirements;
• Cost efficiency from commercial operating practices;
• Economic efficiency arising from setting prices at marginal
social cost;
• Innovation from technology-improving investment policies;
• Equity from ensuring transport services for poorer social
groups;
• Optimal modal-mix in terms of the coordination of railway
use and development with other modes of transport;
• Risk minimization in terms of maintenance of services over
time and the risk of default.

11. - Coordination for Different Modes of
Transport -
- Ria P. John –

12. Introduction
• Co-ordination is the assignment, by whatever means, of each facility to
those transport tasks which it can perform better than other facilities,
under conditions which will insure its fullest development in the place so
found.
• Co-ordination is the creation, in any way at all, of effective joint services by
agencies which are directly complementary.
• Co-ordination is the attainment of such a compromise between monopoly
and competition as will insure the continuance of essential agencies,
maintain the maximum variety of service, eliminate undue waste, and
preserve effective incentives to improvement.
• Co-ordination is the avoidance of duplication through the subordination of
rival agencies.
Source: Journal of Political Economy , Dec., 1930, Vol. 38, No. 6 (Dec., 1930), pp. 660-681

13. Modal Competition

14. Need for Coordination
• Coordinated development of the transport system giving scope for all forms
of transport to play their appropriate role has become very important.
• There has to be modal coordination with integrated development of all
modes. Government has to come in as a monitor to keep a level playing
field for modes with no unhealthy competition.
• So far, policies oscillated between freer competition in the transport market
and heavy state control. However, neither of these two methods is found to
be wholly satisfactory and conducive to the evolution of a coordinated
transport system.
• However in recent years, in keeping with the prevailing economic
philosophy of many countries which have favored liberalization of economic
policies, a policy of some deregulation in the transport sector has come to
be adopted.
Source: Journal of Political Economy , Dec., 1930, Vol. 38, No. 6 (Dec., 1930), pp. 660-681

15. Need for Coordination
• It is inevitable that, with the advent of new transport facilities of genuine
utility, the spheres of the older agencies should contract somewhat, and it is
necessary in the public interest to facilitate, by private experiment and
governmental supervision, the process of determining for the several
agencies their appropriate fields of activity
• The paralleling of older by newer agencies may in some cases provide an
excess of capacity so wasteful, or so subversive of the continued stability of
some established and altogether essential facility, that the mitigation of
competition itself constitutes a problem
• To the extent that unregulated competition produces efficient prices and
efficient investment, the most efficient division of transport will be brought
about by the market. Transport coordination, in the sense of an active
public policy other than the protection of competition, would be required
only where competition fails to meet that standard.
Source: Journal of Political Economy , Dec., 1930, Vol. 38, No. 6 (Dec., 1930), pp. 660-681 ,
Theory and Applications of Economics in Highway and Transport Planning, Vinay Maitri, P.K. Sarkar

16. Need for Coordination
• Even where market can regulate itself through strong competitive
pressures, it may still not produce the right answer in terms of modal split
that maximize economic welfare. This is due to the high level of
externalities present in the market, hence all decisions are based on private
costs and benefits and do not take into consideration the wider implications
of these decisions.
Source: Journal of Political Economy , Dec., 1930, Vol. 38, No. 6 (Dec., 1930), pp. 660-681 ,
Theory and Applications of Economics in Highway and Transport Planning, Vinay Maitri, P.K. Sarkar

17. Methods
Coordination for different modes of transport can be achieved through
• Regulation of price mechanism in the market
• Formulation of policies to attain balance of modes
• Formation of single regulatory body to look after all modes
• In many instances traffic can be handled most effectively through the
creation of joint services involving the integrated use of more than one
facility and it is desirable, by public or private means, to promote their
development.
• Cross-subsidy method is also practiced to compensate one mode through
profits of different mode.

18. Indian Context
• Over the last fifty years or so the government has delved into coordination of
modes a umber time and Transport Policy Committees were appointed.
• Planning Commission Sub-Committees Report on Transport 1948 : The
Committee was appointed to go into a number of basic issues including
consideration of all transport modes-road, rail, river ways, coastal/overseas
shipping, air and most importantly, coordination among modes viz road, rail
and river traffic.
• Committee on Transport Policy and Coordination (CTPC) 1966
• National Transport Policy Committee 1980
• Steering Committee on Transport Planning (SCTP) 1988
• The Planning Commission
Source: Theory and Applications of Economics in Highway and Transport Planning, Vinay Maitri, P.K. Sarkar

19. THANK
YOU