Divay Pranav, Director – Policy and Partnerships, Yulu
Indian cities have been crying out for sustainable mobility options for some time now. Studies show that 65-70% of the trips undertaken in our cities are sub-5km journeys. However, motorists overwhelmingly prefer to use their private vehicles for these journeys. As the number of four- and two-wheelers adds up, polluted air and traffic jams have become the norm. Today, India is home to 17 of the world’s 25 most polluted cities, and 2 of the world’s 10 most congested cities.
Mobility as a service (MaaS) is recognised as a panacea for the mobility challenges confronting our cities. This has been acknowledged by policymakers in the form of The National Urban Transport Policy 2014. However, efforts by cities to tie up with private partners for rolling out MaaS offerings have had mixed success, with many projects getting stalled. This blog sheds light on some best practices for urban policymakers to contemplate when onboarding private MaaS operators.
Here are six good practices:
1. Adopt permit systems instead of tenders
The practice of selecting a MaaS partner for a city through a long-term tender process comes with a risk of failure, for multiple reasons. For one, MaaS businesses are heavy on capital expenditure and operating expenditure. Since operators in the industry are typically regional players, they lack deep pockets and may not be able to sustain their operations across an entire city in tough times. This was seen in the post-Covid phase when several operators had to fold up their operations.
In comparison, permit-based systems (see the table) are a better way for cities to onboard MaaS operators due to the following reasons:
- The permit tenure can range from 3-5 years with inbuilt provisions for a performance-linked extension, instead of the long-tenure (7-10 years) tenders that most cities prefer.
- It would allow multiple operators with multiple form factors to co-exist in a city.
- It would boost competition among operators and eliminate the risk of a city being too dependent on one operator.
A successful model for Indian cities to emulate is the permit system under the Public Bike Sharing (PBS) and Shared Micro Mobility System (SMMS) Policy of the Directorate of Urban Land Transport (DULT), Government of Karnataka. Similarly, the Permit System of the Ahmedabad Municipal Corporation is a well-designed system that allowed the government to attract multiple operators. Ahmedabad also offers an all-inclusive viability gap funding of Rs.20,000 per bike for a maximum of 2,000 bikes.
2. Grant permits for a specific number of bikes, not parking sites
An ideal mobility network must have 5-6 parking sites per sq.km. of serviceable area—or about one every 150-200 metres. It is, thus, in the best interest of a city to get operators to create more parking sites and ensure bike availability at these sites. However, when license fees are levied by the number of parking sites, operators may become extra cautious about limiting their real estate footprint. They will create sites on the most profitable routes in the municipality and overlook less developed areas.
In comparison, arrangements that levy a small annual fee on the fleet size and jointly approve the parking site creation with the operator work better to ensure uniform service availability in the city. MaaS should not be viewed as a major revenue-earning source for a municipality or any other mass transit operator in the first few years of the service rollout. A permit system allows for transparent and reasonable fees that can be determined by the project authority. For example, the permit system by DULT in Karnataka levies an annual fee of Rs100 per e-scooter and Rs50 for a pedal bike.
3. Assist operators in building the supporting infrastructure
MaaS services are in most demand in high-footfall areas like city centres or office districts, where real estate costs are usually high. In fact, real estate costs account for 10-15% of the operating costs of MaaS operators. Cities can assist these operators by providing space to build supporting infrastructure, which enables the former to enhance their operational efficiency and financial viability.
The space can be used for infrastructure such as:
- Battery swapping stations: For every 100 e-scooters offered, an operator needs to have a battery swapping station with 2-3 battery charging pods, each one capable of charging 12-15 batteries simultaneously. A suitable density of such stations must be ensured to serve customers in each corner of the city.
- Repair and maintenance workshops: For every 500-700 e-scooters, a repair and maintenance workshop with 4,500-5,000 sq. ft. of floor space is required. Each workshop would have 10-15 mechanics and would also store spare parts. This would ensure faster turnaround on every faulty e-scooter and eliminate downtime.
A great example here is the Delhi Metro Rail Corporation. DMRC provides support infrastructure like workshops and battery swapping stations to companies offering last-mile connectivity solutions to metro users. The Municipal Corporation of Delhi (MCD) has also unlocked real estate for EV charging point operators as well as battery swapping operators through innovative models, turning Delhi into the largest market for EV charging and swapping solutions across India.
4. Weigh the benefits of dedicated parking spots versus a ‘free float’ model
A ‘dedicated parking spots’ model allows movement only between parking zones. It is critical to place these parking zones near major trip origin-destination spots and transit routes.
Meanwhile, the free-floating model allows bikes to be dropped at any place in the city. Although this model allows greater flexibility for users, it is operationally difficult for operators to re-balance their fleets and may also result in higher traffic rule violations. In fact, the free float model has proven to be a disaster in some Indian cities owing to irresponsible parking by users and the high cost of fleet rebalancing for operators.
5. Choose a form-agnostic model
Several tenders, Expressions of Interest (EoIs), and permits in cities have prescribed the form factor (pedal bicycles, pedal-assist bicycles, low-speed e-scooters, high-speed e-scooters) for MaaS services. In some cases, operators had to introduce more than one form factor to win the right to operate the service. A better approach for municipalities is to create an ecosystem that has space for multiple operators and form factors.
Here’s why it is important for cities to be form-agnostic:
- Managing more than one form factor is a major challenge when it comes to spare inventory management, repair and maintenance, relocation and re-balancing, among others.
- Different form factors have different unit economics and earning potential. Having more than one form factor leads to conflict in the prioritisation of tasks. For example, a battery-fuelled e-scooter will always be a priority over a pedal bicycle due to its higher earning potential.
- Private investors link fund allocation to form factors. In general, raising funds for micro-mobility businesses is quite tough. Raising funds for pedal bicycles requires a different approach and stakeholder outreach. Sometimes this means seeking viability gap funding from the government or municipality to fund the capital expenditure.
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6. Provide flexibility to operators to design their business model
In the past, we have seen MaaS tenders prescribing the fare structure and its components (security deposit, subscription fees, user fees, and processing fee). In our opinion, this decision should have been left to the operators. Here are some reasons why:
- Service operators know the cost associated with functions such as deployment, relocation, recovery, repair and maintenance, procurement of spares, battery charging, etc. Thus, they are better placed to devise a pricing that ensures good uptake for their bikes.
- Utmost attention should be paid to attract only serious players in this business. Many tenders have allowed advertising as an additional source of income for MaaS operators, citing lower profitability in this segment. Often, the eligibility criteria in such tenders were kept so low that advertising companies ended up winning most tenders. In most such cases, there were no efforts by those companies to launch mobility services, which beats the very purpose of the activity.
MaaS projects have taken off in cities around the world, and there’s no reason why urban India should be any different. The six best practices listed above will help policymakers iron out the wrinkles in onboarding the MaaS operators and pave the way for the successful implementation of such projects in the years to come.
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