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ACADEMIA Letters Designing optimal welfare policies for intermediate public transportation systems: A developing country perspective Atanu Bhuyan The IPT Agenda Public transportation systems hold crucial significance in the 11th Sustainable Development Goal (SDG) as per the United Nations Development Programme (2020), by being instrumen- tal in connecting people and their activities in the region (Siqueira-Gay et al., 2019). In the cities of developing countries, they come in a variety of physical and organizational forms. Passenger modes in many south-Asian settings like that of India include walking, cycling, buses, trains, motorized two-wheelers (2W), cars, and intermediate public transport (IPT) modes such as three-wheeled auto-rickshaws or tuk-tuks (Goel, 2018). IPTs are mostly in- formal and unconventional modes of transport that often fill the service gaps by providing high-frequency shuttle services on a few high-demand corridors in cities having inadequate formal transportation services (Vijayakumar, 1986). In small- and medium-sized towns (that is, cities with a population of less than 10 million), the share by bus systems is lower, while the IPT modes like autorickshaw are equivalent to or more than the formal bus systems. The proportion of two-wheeler trips is more considerable in smaller cities, leading to increased vehicle kilometers traveled (VKT) and higher related externalities such as congestion, road accidents, carbon emissions, noise pollution, etc. It shows the inadequacy of the overall public transport services provided by the formal and informal systems combined (Gadepalli, 2016). Moreover, the current state of urban mobility policies has led to the formal and informal sys- tems operating in silos and competing with each other rather than synergizing to meet the larger societal objective of maximizing transit services in the city. Academia Letters, December 2020 ©2020 by Academia Inc. — Open Access — Distributed under CC BY 4.0 Corresponding Author: Atanu Bhuyan, atanu.fpm1803@iimkashipur.ac.in Citation: Bhuyan, A. (2020). Designing optimal welfare policies for intermediate public transportation systems: A developing country perspective. Academia Letters, Article 106. https://doi.org/10.20935/AL106. 1 Kunhikrishnan & Srinivasan (2018) posits that IPT modes remain relatively less studied than personal vehicles and public transport modes. A lack of understanding about user prefer- ences for IPT and the absence of a robust regulatory framework for these modes have impeded progress. Differences in supply and operating characteristics of various IPT alternatives war- rant framing individual policies for each of these modes. Therefore, a gap has been left wide open between the need for more economical, safe, and efficient transportation systems on the one hand and the supply of such facilities on the other. These issues have been considerably under-researched. Moreover, there is a clear distinction observed between developed and developing settings in treating the IPT concept. The research in developed countries is prioritized at enabling social inclusion, particularly in meeting the transportation demand for the elderly or people with disabilities (PWD). The Americans with Disabilities Act (ADA) (Gold, 2011) serves as a frequent guiding narrative for their research. However, in developing countries, the business model is mainly market and profit-driven (Franco et al., 2020). Existing literature is relatively silent when it comes to answering the following imperative questions: • What is the role of IPT modes in urban roads of developing cities in promoting sustain- able mobility? • How can IPT services be optimally deployed in the transportation system of small- to medium-sized cities in developing countries? • How can transportation policies incorporate optimal trade-offs: operational costs ver- sus the level of service of IPT modes, or IPT operators’ profit versus commuters’ util- ity? • What policy-drivers should be adopted by the government or planning authorities to increase social welfare? A much-needed academic endeavor to address these questions should consider different stakeholders’ objectives in the transportation system. The production and external cost struc- ture of IPT modes are different from conventional public transit services and play a crucial role in welfare optimal policies (Jokinen, 2016). Therefore, the concept of social welfare be- comes an indispensable part of the holistic policy and planning approach while focusing on IPT systems for a developing country setting. Academia Letters, December 2020 ©2020 by Academia Inc. — Open Access — Distributed under CC BY 4.0 Corresponding Author: Atanu Bhuyan, atanu.fpm1803@iimkashipur.ac.in Citation: Bhuyan, A. (2020). Designing optimal welfare policies for intermediate public transportation systems: A developing country perspective. Academia Letters, Article 106. https://doi.org/10.20935/AL106. 2 Designing policies for IPT systems Transportation is increasingly being adopted in social policies owing to the widespread ac- knowledgment of its principal function of providing access to “educational and employment opportunities; health and social services; family and friends; healthy, fresh, reasonably priced produce and other goods; etc.” (Kenyon et al., 2003). While developed countries focus on environmental sustainability and social equity, developing countries like India face additional transportation-related challenges. A gap has been created due to the rapid urbanization trends and exploding travel demands, putting a severe strain on the country’s available services and infrastructure. The influx of small-scale transportation operators into the mobility market has helped fill these gaps. While in large metropolitan cities, these modes complement (and often compete with) regular transit services, they function as regular (albeit more flexible) public transportation services in smaller towns. Subsidy schemes have been offered for these op- erators, particularly to IPT operators that run battery-operated vehicles, to promote electric vehicle (EV) adoption (PTI, 2020). Government efforts also include improving accessibility for people in rural areas by making vehicle ownership more affordable (HT Correspondent, 2016). Most of these subsidy schemes aim to improve the socio-economic status of people and easier access to vehicles. We scramble for answers when seeking subsidies or incentives to help regulate these vehicles’ safe and sustainable operations. There is also a prevailing negative portrayal of these informal IPT operators in literature, often associated with “reck- less driving, blocking lanes to load and unload passengers, overloading and operating unsafe vehicles, and excessive cruising for customer” (Cervero, 1991). It has been demonstrated through policy moves that seek to ban most IPT modes, or practice a gradual phasing out of these modes or formalize them into regular public transport services. Findings from studies also argue that excessive regulation of these informal modes “could have serious repercus- sions, not only in terms of the efficiency of urban transportation services but with regards to equity as well” (Cervero, 1991). The repercussions will be for the individual transportation providers and the users or commuters with their diverse travel needs in terms of accessibility, affordability, safety, security, comfort, waiting time, or expected service levels. Designing transportation policies for IPT systems, primarily in small- and medium-sized cities, should consider the intricacies of the different stakeholder needs and their mutual interactions. Figure 1 illustrates the interaction between various stakeholders in an urban transport system, which sets the premise of the policy design problem for IPT systems. A choice-based optimization model by Bierlaire & Pacheco (2017) can be used to repre- sent the problem. The benefits of such a model are: (1) Merging supply and demand aspect of planning, (2) Accounting for the heterogeneity of demand, (3) Dealing with intricate sub- Academia Letters, December 2020 ©2020 by Academia Inc. — Open Access — Distributed under CC BY 4.0 Corresponding Author: Atanu Bhuyan, atanu.fpm1803@iimkashipur.ac.in Citation: Bhuyan, A. (2020). Designing optimal welfare policies for intermediate public transportation systems: A developing country perspective. Academia Letters, Article 106. https://doi.org/10.20935/AL106. 3 Figure 1. Interaction between government and transport demand and supply stitution patterns, (4) Investigation of demand elasticity against its primary driver. There are specific challenges associated with such a modeling framework: (1) Nonlinearity and non- convexity, (2) Assumptions for simple models (logit) may be inappropriate, (3) Advanced demand models have no closed-form, (4) Endogeneity: same variable(s) both in the demand function and the cost function. A Bilevel Optimization problem is proposed by incorporating the characteristics mentioned above, with the following details: 1. Upper-level problem: For government/policy-makers/planners and transport providers, 2. Lower-level problem: For commuters and transport users The regulators’ objectives will be to maximize welfare or minimize externalities caused by increased car ownership and a resulting traffic density rise. The government can aim to maximize society’s interest by developing the built environment, improving the level of ser- vice (LOS) of the conventional public transport system, and the region’s overall economy. The objectives for transport providers and operators would be to minimize their operating costs. If it’s conventional public transport providers, then their objective may coincide with that of the government. Some relevant studies to refer to develop the model in IPT include Thiyumurthy & Yamamura (1985a, 1985b) and Kunhikrishnan & Srinivasan (2018). The third group of stakeholders in this framework are the users, who would make their choice for Academia Letters, December 2020 ©2020 by Academia Inc. — Open Access — Distributed under CC BY 4.0 Corresponding Author: Atanu Bhuyan, atanu.fpm1803@iimkashipur.ac.in Citation: Bhuyan, A. (2020). Designing optimal welfare policies for intermediate public transportation systems: A developing country perspective. Academia Letters, Article 106. https://doi.org/10.20935/AL106. 4 mode preferences in such a way that maximizes their utility. This utility will be evaluated in terms of the decision-maker’s characteristics (the user or commuter) and attributes of the different transport mode alternatives available. The transport operators and the regulators’ decision-making forms the upper level of the bilevel optimization problem, while that of the commuters forms the lower level. The following flowchart is presented for a rough visualiza- tion of the proposed modeling framework (adapted from Aksen (2009)’s work who carried out bilevel programming to describe the government’s subsidization agreement with a com- pany engaged in collection and recovery operations). Figure 2 is used to present a schematic of the proposed bi-level framework. Figure 2. The bi-level framework for the IPT problem Moving Ahead The proposed bi-level framework of IPT systems in developing cities can be considered a tactical planning problem that incorporates incremental policy reforms functioning in the for- mal/informal transportation interface while interlinking strategic and operational goals in all stakeholder interfaces. The author raises the need for a comprehensive analytical rigor through advanced prescriptive IPT system models to provide useful closed-form solutions. The short- Academia Letters, December 2020 ©2020 by Academia Inc. — Open Access — Distributed under CC BY 4.0 Corresponding Author: Atanu Bhuyan, atanu.fpm1803@iimkashipur.ac.in Citation: Bhuyan, A. (2020). Designing optimal welfare policies for intermediate public transportation systems: A developing country perspective. Academia Letters, Article 106. https://doi.org/10.20935/AL106. 5 age of prescriptive transportation models in the literature on developing countries makes this an arduous task, further delimited by the scarcity of data for numerical validation of closed- form solutions. On the upside, such a comprehensive modeling framework would be the long- awaited vital breakthrough that transportation planners and policy-makers should love to re- fer to enable an efficient IPT system. Researchers are encouraged to follow Edsger Djikstra’s ten commandments (Dijkstra, 2003) while embarking on this tumultuous yet high-yielding academic endeavor. References Aksen, D., Aras, N., & Karaarslan, A. G. (2009). Design and analysis of government sub- sidized collection systems for incentive-dependent returns. International Journal of Pro- duction Economics, 119(2), 308– 327. https://doi.org/10.1016/j.ijpe.2009.02.012 Bierlaire, M., & Pacheco, M. (2017). 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