Reasons of Government Intervention in Transportation Industry

2075 words 9 pages

Certain function can be carried out satisfactorily only by the central or local government even where the provision of public transport is left entirely to the private sector, the government has an important role to play. If only to ensure through appropriate policy measures that the operating environment is conducive to the development of a suitable transport industry. A fundamental requirement is full government commitment to the success of the transport system even if this requires difficult political decision. In this report, there are few reasons for government involvement in the transport industry with of course based on real-life examples.

TRANSPORTATION INDUSTRY OVERVIEW Transport is that part of economic activity
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For example, the Council of Pensioner and Retired Persons Association (SA) Inc commented:
The idea of User Pays — that the system will pay for itself — is absurd. Public transport is a PUBLIC UTILITY, a PUBLIC SERVICE, the same as the Police Force or the Fire Brigade.

B. Controlling Monopolies
Transport is a natural monopoly in many ways but particularly in the case of transport where very heavy capital costs are involved. The best examples are the canal of the eighteenth-century. The existence of a natural monopoly in certain aspects of urban public transport is seen as necessitating a role for government to prevent the exercise of market power and possible exploitation of the travelling public. This role usually takes the form of direct service provision and/or regulation of fares. Unrestrained competition leads to market dominance by a company thereby achieving monopoly power. Such dominance brings into question many issues affecting the public interest such as access (in a port would smaller shipping lines be excluded?), availability (would smaller markets continue to receive air service by a monopoly carrier?) and price (would the monopolist be in a position to charge high prices?). Other reasons for policy intervention include the desire to limit foreign ownership of such a vital industry for concerns that the system would be sidetracked to service more foreign than national interests. For example, the US limits the amount of foreign ownership


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