Supply Chains and Transportation

Key transport lessons from integrated fare systems

Jorge Rebelo
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Supply Chain and Transport

Although integrated modal fares are important innovations for low-income riders, these systems can be plagued by many problems.

For example, in Rio de Janeiro — despite efforts by the government to convene all transit operators during the planning stage —private rail-based operators were reluctant to participate in the design of the system because they feared that the bus system would stand to benefit more from integrated fares.  In the end, the government went ahead with its plans.

Today, although the integrated fare system benefits the poor, it fosters the inefficiency of inter-municipal buses that receive a subsidy that allow them to survive despite low load factors. Several of those routes should have been integrated with rail. There was also fraud by van operators using transport routes and the system’s smart cards. Consequently, the subsidy rose very quickly.

Even so, Rio de Janeiro’s system is a blessing to low-income users, and overall ridership increased. If challenges are met, the system can work better for everyone. Efforts must be done to fine-tune the system, close loopholes, decrease fraud and reward the most efficient parts of the system.

In my previous blog entry, I wrote about nine suggestions for designing and implementing integrated fare systems. Now, in addition to the initial example from Brazil, I’d like to share a few other experiences and lessons regarding integrated modal fares.

When there is a regional transport agency, an integrated fare system’s level of service can be monitored from a central location, provided buses are equipped with GPS and smart card systems (as in Santiago, Chile).

The same can be done with train-based services (such as in Rio de Janeiro). In Madrid, Spain all of these functions are managed by the Metropolitan Authority (Consórcio de Transportes de Madrid). But if there isn’t one, a municipality or country can set up an organization (just for the monitoring of level of service.

In Santiago, the system was established under Transantiago, which went through growing pains but now is one of the best integrated systems in Latin America. But when Transantiago was designed, planners believed that a subsidy would not be necessary. Of course, reality showed that there was a subsidy and a law had to be approved to pay for it.  But the impact of the integrated fare was enormous, particularly for the low-income users who did not ride the subway before Transantiago, because they could not afford the bus plus metro fare. Now, with the integrated fare they can and they do it.  But the bus system still shows very high level of fare evasion, and that weighs heavily on the subsidies.

Some degree of subsidies will be needed in most cases. In Madrid, the value of the subsidies was 1.023 billion Euros vs. 1.005 billion Euros of fare collection in 2013 — therefore, subsidies were as much as the fares collected.  In Rio de Janeiro, the subsidy is about US$250 million per year; for each trip, there is a subsidy of about US$0.75. In Santiago, the subsidy is US$750 million, compared to total fare collection of US$1 billion. This stresses the need to optimize the modal networks in a way that will minimize subsidies, as well as to approve legal financing mechanisms that guarantee the timely payment of those subsidies.

In the end, the introduction of integrated fare schemes is a political decision, but it’s critical to do a complete analysis of the sector and evaluate the efficiency of modes and networks.  Introduction of an integrated fare scheme might be an opportunity to revolutionize services, rationalize the network, and benefit low-income populations by increasing accessibility, availability, affordability, and acceptance of urban transport modes.  It might also convince government of the need to have a coordinating transport agency such as a Metropolitan Authority.

This article was first published by the World Bank’s Transport for Development blog. Publication does not imply endorsement of views by the World Economic Forum.

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Author:  Jorge M. Rebelo, a Canadian and Portuguese national, is a former World Bank (WB) Lead Transport Specialist who works as a mass transit and freight logistics consultant.

Image: A tram travels through the central shopping district of Wroclaw, southern-western Poland, July 28, 2011. REUTERS/Kacper Pempel.

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