ADB Transport Forum
‘Asia on the move: Energy efficient and inclusive transport’
Keynote address on Indian Urban Transport Policy
By
Sri S. Jaipal Reddy
Hon’ble Urban Development Minister, Government of India
It gives me great pleasure to be amongst you all on this important Transport Forum with focus on energy efficient and inclusive transport in Asia.
India is one of the emerging urban economies in the world with a specific shift in terms of contribution to GDP from agriculture to tertiary and manufacturing sectors, thus bringing urban areas to the centre stage of the development process. Because of high economic growth and low urban base, Indian cities are growing at a faster rate than in rest of the world. At present, India has second largest urban system in the world with 310 million people and 5,161 cities and towns.
For urban areas to be able to support the required level of economic activity, they must provide for easy, sustainable flow of goods and people. However, such flow of goods and people has been facing several problems of congestion, pollution and accidents coupled with lack of coordination amongst various agencies. Unless these problems are remedied, poor mobility can become a major hurdle to economic growth and cause deterioration in the quality of life.
Government of India has, therefore, approved a comprehensive National Urban Transport Policy which focuses on returning the roads to the people which have been colonized by the vehicles. The thrust of the policy is ‘to move people’ and not the vehicles. The overall objective of the policy is to ensure safe, affordable, quick, comfortable, reliable and sustainable access for the people to jobs, education, recreation and such other needs in our cities.
In a federal system of governance in India, urban transport is primarily a State subject. It means that the while the national policy offers guidelines and financial and fiscal incentives to the States and cities for designing their urban transport strategies; it is for the respective state governments to adopt and adapt such policy in their urban centres.
The policy focuses on integration of land use and transport planning. Unless planning of land use and transport is organically interlinked, whatever transportation measures we take later at best can only be a partial remedy. While in respect of new townships, transit-oriented development is being urged; in existing cities, a Comprehensive Mobility Plan prioritizing public transport, non-motorized transport and pedestrianization with the objective of reducing overall transport demand is being insisted. In order to facilitate preparation of such plan, we in the Central Government have a scheme under which 80% of the cost of such studies is being provided as grant by the Central Government.
An analysis of existing public transport facilities shows that most of the cities do not have even an organized city bus service. Even where the city bus-service is existing; the quality is not high enough to motivate commuters to prefer public transport to the personal. The dependence on large scale bus services appears to be unavoidable in developing countries of Asia. In fact, even the experience in the developed countries points to this inevitability. For example in a city like London, which is famously served by its underground metro system, about 50% of the public transport burden is borne by the buses. Having regard to this, the Central Government in India is emphasizing setting up of an ITS-enabled modern city bus service in all the cities. We are also laying due stress on quality so that the bus system can be sold to the public as a "Branded Product". For standardization of the quality of buses for urban transport, the Central Government has formulated Urban Bus Specifications. As the taxes have been found to be contributing a significant share of the cost of these modern buses, action has been initiated towards reduction of the taxes at the Central and State level. For the first time in 2008-2009, the Central Excise Duty stands reduced from 16% to 12% on buses. Since fare can never be sufficient for financial sustainability of quality public transport; Central Government is encouraging the cities to come up with an advertisement policy and parking policy to raise the resources. We are also urging the State Governments to set up of a Dedicated Urban Transport Fund—proceeds of which can come from earmarked state and local taxes—to exclusively meet investment requirements of urban transport.
In the advertisement policy, care is being taken to minimize the visual pollution in the cities and use well defined spaces such as buses, metros, foot over bridges and public utilities to maximize the advertisement revenue. Many cities are already using advertisement to fully fund foot over bridges including escalator-enabled foot over bridges, skywalks, road signages etc.
In the parking policy, it is envisaged that the parking fee should truly represent the value of the land occupied. A reasonably high parking fee should be used, not only to reduce travel demand but also to make public transport more attractive. The parking policy envisages a graded scale of parking fee depending upon the size of the car, higher parking fee for Central Business District (CBD) area and lesser in outside area, expensive on-street parking as compared to multi-storied parking etc. Such multi-storied parking lots would be provided with park and ride facility with motorized/non-motorized transport modes to facilitate decongestion of the CBD area. The funds so generated would be used to contribute to the Dedicated Urban Transport Fund for creating paid parking complexes wherever required and, for promoting public transport. Delhi is already in the process of implementing this policy and other cities are also being encouraged in this direction.
With a view to incentivising investment in public transport systems, the Central Government is providing substantial financial assistance for metro rail projects and Bus Rapid Transit Systems (BRTS). In Delhi, Bangalore, Kolkata and Chennai, Central Government is providing financial assistance up to 35% of the total project cost as equity and loan as joint project promoter with the respective State Governments. For encouraging Public Private Partnership, Central Government is also providing grant of 20% of the estimated project cost as viability gap funding. Metro projects in two cities of Hyderabad and Mumbai are being taken up under this viability gap funding scheme. The total estimated cost of these metro projects for 380 kms is about USD 21 billion. Apart from this, land is extensively being used in all these projects to make them viable while keeping the fares low. Central Government is also providing financial assistance for BRTS projects in nine cities namely Ahemadabad, Surat, Rajkot, Jaipur, Hyderabad, Vijayawada, Vishakhapatanam, Pune, Indore and Bhopal for 360 kms at a total cost of about US$ one billion. All these BRTS projects have dedicated cycle paths and pedestrian paths. We are planning for BRTS in many more million plus cities of India since BRTS is typically many times cheaper than the Metro. I may add parenthetically that million plus cities are spawning by the year in India.
The National Urban Transport Policy envisages setting up of Unified Metropolitan Transport Authority (UMTA) in all million plus cities to facilitate coordinated planning and implementation of urban transport programmes and projects. Such UMTAs have already been set up in Hyderabad, Chennai, Mumbai, Jaipur and Bangalore.
I am fully aware that India’s urban transport is going to be the most difficult challenge if we want the urban centres to drive the country’s economic growth. I am happy that we have undertaken all major policy initiatives at the federal level to incentivize the states and local urban governments to align their policies and institutions in line with our National policy.
The key challenge, for quite some time to come, would be a paradigm shift in the way we view urban transport. The twin pillars of this shift would be: One, keeping the interests of the pedestrians/cyclists at the core of all urban infrastructure and transport projects. Second, aligning the land-use and urban planning with the transport requirements of our people. On both these counts, we need to alter our mindset and steer away from the personalized transport to the public transport.
We cannot but empathize with the urge of the newly emerging classes to acquire a personal vehicle of their own because a car means much more than a car to them in a self-validating way, more so when we, in India, have one of the lowest car-ownership per thousand people in the world. Here, I would like
to draw a substantive distinction between owning a car and using it frequently. We can surely, through appropriate policy framework, de-motivate the use of personal vehicles for majority of the trips, like business, employment, education etc.
I may not be entirely mistaken to assert that no city in the world has so far been able to solve the problems of urban transport by adding more roads. As such the focus has to be on increasing road-utilization capacity rather than on adding more flyovers and roads. I am convinced that if we provide attractive options of public transport, which can be a combination of pedestrian walks, cycle paths, metros and above all, comfortable and convenient bus services; it would persuade the urban commuters to shift voluntarily to the public transport systems.
In the end, a public transport costs less not only in terms of commuter’s pocket but also in terms of pollution which is one of the major problems of the globe. In one stroke we find a major solution to two major problems—urban transport and global warming. To use public transport and thus rub shoulders with people is surely one welcome way of leading a communitarian way of life rather than landing in elitist and secluded paradise.
Thank you!
Thursday, November 13, 2008
Sunday, October 19, 2008
Global financial crisis: reflections on its impact on India - The Hindu
S. Venkitaramanan
The relative freedom from the contagion spreading from the global tsunami on the Indian financial system owes much to the wise and judicious policies of our central bank and the Government of India.
The U.S. financial crisis has had its reverberations on both developed and developing world. It is not possible to insulate Indian economy completely from what is happening in the financial systems of the world. Effectively speaking, however, the Indian banks and financial institutions have not experienced the kinds of losses and write-downs that even venerable banks and financial institutions in the Western world have faced.
By and large, India has been spared the panic that followed the collapse of banking institutions, such as Fortis in Europe, and Merrill Lynch, Lehman Brothers and Washington Mutual in the U.S.
The relative freedom from the contagion spreading from the global tsunami on the Indian financial system owes much to the wise and judicious policies of our central bank and the Government of India.
Discussions on this subject have proceeded on two lines. One is to point out that the Indian banks have taken less risks than their peers abroad. The less risk you take, the more will be safer you are. This, however, begs the question, “Why did the Indian banks take less risks?”
The answer lies in the wise regulations and meticulous supervision by the RBI. At a time when total deregulation was the order of the day in the 90s, Dr. Manmohan Singh as the Finance Minister authorized a path-breaking study of the Indian financial system by an experienced central banker, M. Narasimham. He had the wisdom to foresee that the financial system had to be placed on a well-regulated basis. Mr. Narasimham’s classic reports gave the policy framework for the Government of India and the RBI to formulate the structure of India’s banks and financial institutions. Mr. Narasimham’s model was based on adequate capitalisation, good provisioning norms and well-structured supervision. Government of India and RBI accepted these recommendations and proceeded to implement them.
What was, indeed, important was that the model did not allow investment banking on the pattern of the American paradigm. In a sense, RBI enforced its own version of the U.S.’ Glass-Steagal Act of 1933, which insulates banks from capital market exposures. The RBI enforced strict capital adequacy requirements and if any financial institution or bank exceeded the specified limits of exposure to stock markets, it would have to provide more capital. This effectively insulated the banks and financial institutions from volatility of the bourses. Enforcement of the above instructions has paid good dividends. Erosion of capital of the banks and financial institutions has been reduced. These exposure limits, however, deserve to be reviewed from time to time.
The RBI must be congratulated for imposing Basel-II norms impartially and in a flexible manner. They have kept it in line with the Indian financial system. Observation of these limits, however difficult it may be in practice, will definitely help the Indian financial system to escape the kind of trouble, which is afflicting the financial system in other countries.
There is another observation, which has to be kept in mind in judging the relative freedom of Indian banking system from the catastrophic mess in the U.S. This is based on the important fact that the Indian banking system is basically owned by the public sector. The State owns many of the banks and financial institutions in the country. There is greater confidence of depositors in a state-owned bank than in a privately-owned bank. This is evident from the fact that in the latest version of the rescue package in the U.S., the government has come forward to infuse capital into distressed banks and financial institutions. Maybe, we can congratulate ourselves that India had already done what Washington is now doing in the midst of the crisis and therefore escaped much of the confidence problems.
Credit is also due to the Government of India and the RBI for having avoided the temptation of total capital convertibility. Had we embarked on total capital convertibility, we would have been exposed to much greater contagion from the current mess than we have been so far. The lesson is that in economic reforms, we have to proceed with caution. Striking the right balance between boldness and caution is where wisdom lies.
A continuing process
It is, however, fair to point out that we should not be complacent in regard to the process of reform. Reform is a continuing process. The latest contribution to the process of reform is a report produced by Dr. Raghuram G. Rajan, former Counsellor of IMF and at present Professor at Chicago Business School. The report incorporates a number of useful suggestions. Although one may have differences of approach with certain aspects, the report deserves to be examined and implemented to the extent possible to keep the Indian financial system modern and efficient.
In this connection, it is only appropriate to refer to the stabilising role of the Securities and Exchange Board of India (SEBI) in managing the difficult task of regulating our stock markets. Especially, attention has to be drawn to the role of Participatory Notes. In the present context in which private capital from abroad has been responsible for many problems in the Indian stock markets, SEBI must be congratulated for its cautious line on this subject, making appropriate relaxations as needed.
While the RBI is to be congratulated for its cautious and nuanced stance in regard to its regulation, one can argue that its regulation can sometimes be a little bit oriented towards management of banks. Whether it is appropriate for the central bank of a country to decide on where the branch of a bank should be located is a matter for discussion. In a recent debate, Dr. Raghuram Rajan had pointed out that a well-known foreign bank, which had applied for opening its branch in a rural area, was refused permission, notwithstanding the fact that no Indian bank had asked for permission to open a branch in that area. It is perhaps time to put a stop to such management of minutiae by the central bank, which should have its hands full with other more pressing issues.
While the RBI may legitimately pride itself on better regulation than the U.S. Federal Reserve, there are two topics on which it has to follow the example of U.S. Federal Reserve. One is concerning the distribution of profits of the central bank. The U.S. Federal Reserve had a profit of nearly $39 billion in 2006-07 out of which it had transferred $34 billion to the U.S. Treasury. This is in sharp contrast to the behaviour of the RBI, which appropriates the bulk of its profits of nearly Rs.50,000-60,000 crore to the so-called contingency fund and transfers only Rs.10,000 crore to the Government. If the RBI could follow the example of the U.S. Fed in this matter, Mint Street can fix half the fiscal problems of the North Block.
Another issue on which the Federal Reserve offers a good example to follow is regarding the measurement of inflation. U.S. Federal Reserve measures inflation on the basis of consumer price index and not on the basis of wholesale price index. This makes a substantial difference. In the U.S., in the last year the consumer price index increased only by 2 per cent, measured on the basis of what the Fed calls “headline inflation,” excluding fuel and food. Even if the consumer price index including fuel and food is considered in India, the RBI will come out with an inflation of 7 per cent as against the figure of 12 per cent, on the basis of wholesale price index. If we follow the consumer price index in measuring inflation, India can afford to have an interest rate of roughly 5 per cent lower than the one in force at present. This can make a significant difference to the fiscal fortunes and the growth of the Indian economy.
(S. Venkitaramanan is a former Governor of the Reserve Bank of India.)
© Copyright 2000 - 2008 The Hindu
The relative freedom from the contagion spreading from the global tsunami on the Indian financial system owes much to the wise and judicious policies of our central bank and the Government of India.
The U.S. financial crisis has had its reverberations on both developed and developing world. It is not possible to insulate Indian economy completely from what is happening in the financial systems of the world. Effectively speaking, however, the Indian banks and financial institutions have not experienced the kinds of losses and write-downs that even venerable banks and financial institutions in the Western world have faced.
By and large, India has been spared the panic that followed the collapse of banking institutions, such as Fortis in Europe, and Merrill Lynch, Lehman Brothers and Washington Mutual in the U.S.
The relative freedom from the contagion spreading from the global tsunami on the Indian financial system owes much to the wise and judicious policies of our central bank and the Government of India.
Discussions on this subject have proceeded on two lines. One is to point out that the Indian banks have taken less risks than their peers abroad. The less risk you take, the more will be safer you are. This, however, begs the question, “Why did the Indian banks take less risks?”
The answer lies in the wise regulations and meticulous supervision by the RBI. At a time when total deregulation was the order of the day in the 90s, Dr. Manmohan Singh as the Finance Minister authorized a path-breaking study of the Indian financial system by an experienced central banker, M. Narasimham. He had the wisdom to foresee that the financial system had to be placed on a well-regulated basis. Mr. Narasimham’s classic reports gave the policy framework for the Government of India and the RBI to formulate the structure of India’s banks and financial institutions. Mr. Narasimham’s model was based on adequate capitalisation, good provisioning norms and well-structured supervision. Government of India and RBI accepted these recommendations and proceeded to implement them.
What was, indeed, important was that the model did not allow investment banking on the pattern of the American paradigm. In a sense, RBI enforced its own version of the U.S.’ Glass-Steagal Act of 1933, which insulates banks from capital market exposures. The RBI enforced strict capital adequacy requirements and if any financial institution or bank exceeded the specified limits of exposure to stock markets, it would have to provide more capital. This effectively insulated the banks and financial institutions from volatility of the bourses. Enforcement of the above instructions has paid good dividends. Erosion of capital of the banks and financial institutions has been reduced. These exposure limits, however, deserve to be reviewed from time to time.
The RBI must be congratulated for imposing Basel-II norms impartially and in a flexible manner. They have kept it in line with the Indian financial system. Observation of these limits, however difficult it may be in practice, will definitely help the Indian financial system to escape the kind of trouble, which is afflicting the financial system in other countries.
There is another observation, which has to be kept in mind in judging the relative freedom of Indian banking system from the catastrophic mess in the U.S. This is based on the important fact that the Indian banking system is basically owned by the public sector. The State owns many of the banks and financial institutions in the country. There is greater confidence of depositors in a state-owned bank than in a privately-owned bank. This is evident from the fact that in the latest version of the rescue package in the U.S., the government has come forward to infuse capital into distressed banks and financial institutions. Maybe, we can congratulate ourselves that India had already done what Washington is now doing in the midst of the crisis and therefore escaped much of the confidence problems.
Credit is also due to the Government of India and the RBI for having avoided the temptation of total capital convertibility. Had we embarked on total capital convertibility, we would have been exposed to much greater contagion from the current mess than we have been so far. The lesson is that in economic reforms, we have to proceed with caution. Striking the right balance between boldness and caution is where wisdom lies.
A continuing process
It is, however, fair to point out that we should not be complacent in regard to the process of reform. Reform is a continuing process. The latest contribution to the process of reform is a report produced by Dr. Raghuram G. Rajan, former Counsellor of IMF and at present Professor at Chicago Business School. The report incorporates a number of useful suggestions. Although one may have differences of approach with certain aspects, the report deserves to be examined and implemented to the extent possible to keep the Indian financial system modern and efficient.
In this connection, it is only appropriate to refer to the stabilising role of the Securities and Exchange Board of India (SEBI) in managing the difficult task of regulating our stock markets. Especially, attention has to be drawn to the role of Participatory Notes. In the present context in which private capital from abroad has been responsible for many problems in the Indian stock markets, SEBI must be congratulated for its cautious line on this subject, making appropriate relaxations as needed.
While the RBI is to be congratulated for its cautious and nuanced stance in regard to its regulation, one can argue that its regulation can sometimes be a little bit oriented towards management of banks. Whether it is appropriate for the central bank of a country to decide on where the branch of a bank should be located is a matter for discussion. In a recent debate, Dr. Raghuram Rajan had pointed out that a well-known foreign bank, which had applied for opening its branch in a rural area, was refused permission, notwithstanding the fact that no Indian bank had asked for permission to open a branch in that area. It is perhaps time to put a stop to such management of minutiae by the central bank, which should have its hands full with other more pressing issues.
While the RBI may legitimately pride itself on better regulation than the U.S. Federal Reserve, there are two topics on which it has to follow the example of U.S. Federal Reserve. One is concerning the distribution of profits of the central bank. The U.S. Federal Reserve had a profit of nearly $39 billion in 2006-07 out of which it had transferred $34 billion to the U.S. Treasury. This is in sharp contrast to the behaviour of the RBI, which appropriates the bulk of its profits of nearly Rs.50,000-60,000 crore to the so-called contingency fund and transfers only Rs.10,000 crore to the Government. If the RBI could follow the example of the U.S. Fed in this matter, Mint Street can fix half the fiscal problems of the North Block.
Another issue on which the Federal Reserve offers a good example to follow is regarding the measurement of inflation. U.S. Federal Reserve measures inflation on the basis of consumer price index and not on the basis of wholesale price index. This makes a substantial difference. In the U.S., in the last year the consumer price index increased only by 2 per cent, measured on the basis of what the Fed calls “headline inflation,” excluding fuel and food. Even if the consumer price index including fuel and food is considered in India, the RBI will come out with an inflation of 7 per cent as against the figure of 12 per cent, on the basis of wholesale price index. If we follow the consumer price index in measuring inflation, India can afford to have an interest rate of roughly 5 per cent lower than the one in force at present. This can make a significant difference to the fiscal fortunes and the growth of the Indian economy.
(S. Venkitaramanan is a former Governor of the Reserve Bank of India.)
© Copyright 2000 - 2008 The Hindu
Monday, August 18, 2008
Indian Economy and Inclusive Growth
http://www.techsatish.net/2008/08/15/vijay-tv-neeya-naana-independence-day-spl/
Wednesday, July 9, 2008
Driving to Green Buildings - BuildingGreen.com
The Transportation Energy Intensity of Buildings
Since the late 1990s, Portland’s Pearl District has been transformed from a largely abandoned industrial area into a bustling mixed-use neighborhood. Local developers actively promote alternative forms of transportation, evident in the giant neon “Go By Streetcar” sign atop this multi-use complex.
As the world’s first LEED Platinum building, the Chesapeake Bay Foundation’s Philip Merrill Environmental Center is loaded with green features: photovoltaic panels, rainwater harvesting, composting toilets, and bamboo flooring, to mention just a few. However, moving the organization’s staff of around 100 into the new building meant that many employees who had been able to walk to work in the older downtown facility now have to drive roughly ten miles (16 km) to get there. To their credit, the organization spent two years looking for a downtown building to house their growing staff, and they tried to mitigate the increased use of cars in the new building with bicycle and kayak racks, showers, and loaner vehicles for non-automobile commuters, among other strategies. The fact remains, however, that the additional energy use from more employees driving to work may well exceed the energy savings realized by the green building.
Designers and builders expend significant effort to ensure that our buildings use as little energy as possible. This is a good thing—and very obvious to anyone who has been involved with green building for any length of time. What is not so obvious is that many buildings are responsible for much more energy use getting people to and from those buildings. That’s right—for an average office building in the United States, calculations done by Environmental Building News (EBN) show that commuting by office workers accounts for 30% more energy than the building itself uses. For an average new office building built to code, transportation accounts for more than twice as much energy use as building operation.
This article takes a look at the “transportation energy intensity” of buildings and the influence of location and various land-use features on this measure of energy use. While the focus will be primarily on energy (and the associated environmental impacts of energy use, such as pollution), we will see that measures to reduce transportation energy use can have very significant ancillary benefits relating to water runoff, urban heat island mitigation, and habitat protection, while creating more vibrant, livable communities.
Transportation Energy Intensity as a Building Performance Metric
“Transportation energy intensity” is a metric that has long been used to measure such things as how efficiently freight is transported. We’re proposing it here as a metric of building performance. The transportation energy intensity of a building is the amount of energy associated with getting people to and from that building, whether they are commuters, shoppers, vendors, or homeowners. The transportation energy intensity of buildings has a lot to do with location. An urban office building that workers can reach by public transit or a hardware store in a dense town center will likely have a significantly lower transportation energy intensity than a suburban office park or a retail establishment in a suburban strip mall.
Comparing Transportation and Operating Energy Use for an Office Building
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In the table, we compare the transportation energy intensity of an average commercial office building with the building operation energy intensity of such a building. We use average figures for commute distance, fuel economy, work days per year, gross square footage per employee, and commuting transportation mode to calculate the average transportation energy use per square foot of building floor area. For that average building, the transportation energy use exceeds the building energy use by 30%. When compared with a new, more energy-efficient building built to ASHRAE 90.1-2004 energy code, the transportation energy use exceeds the building energy use by nearly 140%. (Note that this analysis examines only site energy; if it compared primary energy or source energy, the differences would be smaller—largely due to the significant electricity use in commercial buildings and the inefficiency of electricity generation.)
We will see in this article that about eight factors, largely controlled by planners, designers, developers, and regulators, dramatically affect the transportation energy intensity of buildings. While far from a comprehensive treatise on the topic, this article introduces these issues and makes the case that, first, we need to pay far more attention to location and land-use planning as a part of green development, and, second, that this is an area deserving a great deal more research attention.
Environmental Impacts of Automobile Travel
Transportation Share of U.S. Criteria Air Pollutant Emissions (2002)
[enlarge image]
Transportation energy use and the environmental impacts associated with that energy use are huge. In 2006, transportation in the U.S. consumed 28.5 quads of energy (84 trillion kWh), or 28.5% of total national energy use, according to the Energy Information Administration of the U.S. Department of Energy. Both the total energy and the percentage of transportation energy use have been rising in recent years, while industrial energy use (currently the largest share at 32.1%) has been dropping. The transportation share of carbon dioxide emissions is slightly greater at 32.9% (2005 data) and higher than that of industrial, commercial, and residential sectors, with the share rising slightly since 1990.
Environmental impacts of transportation are not limited to energy and greenhouse gas emissions. The table below shows transportation’s share of certain criteria pollutants.
In addition to these direct emissions from transportation, there are many other environmental impacts associated with the infrastructure needed to support transportation and with development patterns. Our roadways create impervious surfaces that result in significant pollutant runoff into waterways—in fact, non-point source water pollution from stormwater runoff is now the nation’s leading source of water pollution to estuaries and the third largest to lakes. Highways fragment ecosystems and wildlife habitat. Paved areas, including roadways and parking lots, absorb solar energy, contributing to localized heat islands that exacerbate smog and increase air-conditioning requirements in urbanized areas. And stormwater runoff from these surfaces creates thermal pollution that makes many waterways unsuitable for trout and other cold-water fish.
Land development is occurring at a far higher rate than population growth, resulting in sprawl. In the nation’s 34 metropolitan areas with populations greater than one million people, between 1950 and 1990 the population increased 92.4%, according to the U.S. Environmental Protection Agency (EPA) report Our Built and Natural Environments: A Technical Review of the Interactions Between Land Use, Transportation, and Environmental Quality, while the urbanized land area grew by 245%, or 2.65 times the population growth rate. In Atlanta, the developed land area grew almost tenfold during this period, while the population grew a little over threefold.
As our urban and suburban areas spread out, vehicle travel increases. Transportation planners use vehicle miles traveled (VMT) to measure automobile use. In the U.S., VMT per household has increased from 12,400 miles (20,000 km) per year in 1969 to 21,200 miles (34,000 km) per year in 2001, a 70% increase. During the same period, VMT for commuting to work increased from 4,180 miles to 5,720 miles (6,730 km to 9,200 km), or 37%.
Reducing the Transportation Energy Intensity of Buildings
While most measures to reduce building energy use relate just to that particular building, most measures to reduce the transportation energy use of buildings relate to the broader land-use context. They help to achieve what is often called transit-oriented development (TOD) or smart growth. (The terms new urbanism and neo-traditional development are also used, though with slightly different connotations.) Among the goals of these development paradigms are communities, towns, or urban areas that are pedestrian-friendly and accessible with minimal use of the automobile.
Features used to achieve this sort of development are typically beyond the control of building designers and, to some extent, even building owners. Location is critical. “The transportation performance of buildings is all about location,” says Doug Farr, AIA, of Chicago, author of the forthcoming book Sustainable Urbanism: Urban Design With Nature (John Wiley & Sons, 2008).
We’ll now explore eight key factors that can reduce the transportation energy intensity of buildings, primarily by reducing VMT. Transportation and land-use planners often talk about the “D-factors,” including density, distance to transit, diversity of uses, and design of streetscapes; we’ll look at these and others.
Density
Density vs. Vehicle Travel for U.S.
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Per capita vehicle travel tends to decrease with increases in density.
Most experts put density at or near the top of the list of measures for reducing vehicle use. Hank Dittmar, executive director of the Prince’s Foundation for the Built Environment and chair of the Congress for the New Urbanism, points to density as the first priority in achieving location efficiency. Research he conducted with the Natural Resources Defense Council (NRDC) and the Center for Neighborhood Technology (CNT) in the 1990s “showed a fairly dramatic reduction in VMT as you moved from seven to 10–12 units to the acre,” he told EBN. The reduction curve begins to flatten out at 40–50 units per acre; the benefits of mixed use remain, Dittmar explains, but the residents of those units may still have to travel for work and other trips throughout the region, which density does not affect. This correlation between density and VMT is shown in the graph above.
Reid Ewing, Ph.D, a widely published author on transportation planning and traffic calming and director of the National Center for Smart Growth Research at the University of Maryland, says that in the most compact, densely populated places like Chicago, VMT can be as much as 90% less than in sprawling suburbs. Among the innovative strategies for encouraging density are density transfer mechanisms, which enable planners to manage development rights by trading them from environmentally sensitive areas to areas that can be developed. This mechanism is being used in Montgomery County, Maryland; Sarasota, Florida; and Chapel Hill, North Carolina.
Transit availability and access
Everyone agrees that the availability of rail and bus transit is a key requirement for getting people out of cars. Distance to transit addresses how far someone must walk to get to a bus stop, light rail or trolley stop, or train station. “The first problem is that it isn’t there for most people,” says Dittmar. When public transit isn’t available, or convenient, or comfortable enough to be used, some companies are taking it upon themselves to satisfy the need. Information technology giant Google maintains a fleet of alternative-fuel buses that it uses to shuttle employees from many locations throughout the San Francisco Bay area to its office park; the company encourages ridership by offering such amenities as comfortable seats and wireless access.
To be effective, transit stops have to be close to where people live. “Generally speaking,” according to John Thomas, Ph.D., of the Development, Community & Environment Division at EPA, “one-quarter to one-half-mile range is the distance people will walk to transit.” People can be expected to walk further to reach rail transit stops compared with bus stops, but rarely will people walk more than a half-mile.
While transit is the key word in transit-oriented development, it’s really more about walking. “I think of transit as connecting walkable districts,” says Ellen Greenberg, a coauthor of The New Transit Town (Island Press, 2004) and the past director of policy and research at the Congress for the New Urbanism. “Everyone winds up being a pedestrian somewhere in the travel day,” she told EBN. Even people who commute by car walk to and from their cars, she points out, “but transit riders are on foot a bigger part of their day, so transit-oriented developments have, by their very nature, a bigger component of the walking trips than conventional development.”
In a discussion of transit, it’s worth noting that some forms of transit are no more energy efficient than private automobile commuting (see chart below). On a Btu per passenger-mile basis, buses actually use more energy per passenger mile than cars, assuming average occupancy of both, while all forms of rail use less and vanpools use a lot less. The number of passengers makes a huge difference in the energy intensity (Btu per passenger mile). For example, by increasing the assumed ridership of a transit bus to 40 people, the energy intensity drops to less than 1,000 Btu per passenger mile. Note that even though buses with average ridership may use more energy per passenger mile than cars, bus transit is still beneficial as a public service, because it can make urban areas more walkable.
Mixed uses and access to services
The Energy Intensity of Different Forms of Travel
[enlarge image]
Diversity has to do with the mix of residential, commercial, and retail land uses and whether key services can be met within easy walking distance of residences and workplaces. In the LEED for New Construction rating system, one of the considerations for awarding a credit is whether a residential area is within a half-mile of at least ten out of 22 listed services, including banks, convenience grocery stores, daycare, restaurants, pharmacies, laundry, schools, libraries, and parks. Farr calls this area a “pedestrian shed”—a play on the term “watershed”—referring to a surrounding area in which everyday needs can be met on foot.
This diversity also affects the success of transit. “It’s very important for people who ride transit to be able to accomplish multiple things on foot once they arrive at their destination,” notes Greenberg. “You need to have a mix of uses to satisfy people’s needs,” she told EBN.
In addition to having a diversity of services and land-use types in a community, it is beneficial to have a diversity of housing to serve all socioeconomic groups. According to Ewing’s book Best Development Practices (American Planning Association, 1996), “promoting affordable housing serves transportation as well as social purposes.” He notes that low-skill-level workers tend to be concentrated in cities, while low-skill-level jobs are concentrated in wealthier suburbs. This mismatch results in a lot of commuting by those who have the hardest time affording it.
Parking management
For transit-oriented development to succeed, many experts call for good parking management. Todd Litman, executive director of the Victoria Transport Policy Institute, calls parking management the top priority in reducing VMT. “Once you build generous parking,” Litman told EBN, “you have very little incentive to provide alternatives.” Brett Van Akkeren, a smart growth analyst at EPA, told EBN that in suburbs there are nine parking spots for every car.
Greenberg agrees, saying that the first priority “is definitely constrained or expensive parking supply. It has been shown that expensive parking acts as a deterrent to commuters.” In the book Parking Management Best Practices (Planners Press, 2006) and in a summary paper, “Parking Management: Strategies, Evaluation and Planning” (Victoria Transport Policy Institute), Litman lays out more than 20 strategies that can be used alone or in combination to reduce parking by 20% to 40%.
As with many of these strategies for encouraging transit-oriented development, parking affects more than just VMT. “Not only will more parking encourage more driving,” says John Holtzclaw, a widely published transportation researcher in San Francisco and chair of the transportation committee for the Sierra Club, “but curb cuts along sidewalks make walking less interesting and less safe and make buildings less interesting.” Surface parking also takes up a lot of space, forcing pedestrians to walk further to get where they want to go. Where you do have parking, suggests Holtzclaw, “have it underground. Don’t take up the first two floors with parking; that just deadens the neighborhood.”
Walkability, traffic calming, and site design
As noted earlier, walkability is key to the success of transit-oriented development. “Walkability and public transit go hand-in-hand,” argues Holtzclaw. He suggests that planners place themselves as pedestrians: “Think about how it feels to walk. Are there places to walk to? How are the streets laid out? Are there sidewalks on both sides of the street? Is the traffic calmed? Are the buildings close to the sidewalk, or do you have to walk through a parking lot to get inside?”
Hank Dittmar notes that while transit is a key aspect of smart growth and transit-oriented development, not all communities are there yet. For communities without transit, measures can be taken to prepare for a transit future. “They ought to be getting those neighborhoods ready,” he said. “At the core must be a connected, strong network that works for pedestrians.”
Traffic calming is another aspect of walkable communities. “By slowing traffic, you create a nicer pedestrian environment,” notes Reid Ewing, whose book Traffic Calming: State of the Practice (Institute of Traffic Engineers, 1999) remains the authority on the topic. “Also, when you slow down traffic, you make trips shorter, which reduces VMT,” he told EBN. (For more on traffic calming, see EBN Vol. 12, No. 3.)
Along with traffic calming, it helps to create streetscapes that are comfortable, safe, relaxing, and enjoyable to spend time in. Good lighting, park benches, outdoor tables at cafés, shade tree plantings, pedestrian courts that are closed off to automobiles, and public wireless access can all help to create vibrant, pedestrian-friendly outdoor spaces where people will be glad to walk a few blocks from a transit stop to get to their workplaces, and glad to walk to a restaurant for lunch, thus helping to reduce VMT.
Connectivity
Connectivity is about designing—or redesigning—communities so that pedestrian connections are better. It can mean breaking up “super-blocks” into smaller, more walkable blocks, and replacing connector streets and cul-de-sacs with a network of interconnected streets that spread out traffic flow, slow down vehicles, and make walking more pleasant.
“The smaller the block dimension, the more people will walk,” notes Farr. Ewing agrees that limiting block size favors pedestrians. “You ever walk on a super block? They’re endless,” he says. “With small blocks, it’s much easier to walk.” To evaluate the connectivity of a community, Ewing created a “connectivity index,” which is determined by dividing the number of roadway links (street segments between intersections) by the number of roadway nodes (intersections). The higher the connectivity index, the greater the route choices and the better the pedestrian access. Using this formula, a minimum connectivity index of 1.4 is considered necessary for a walkable community.
Connectivity can also be achieved for pedestrians by creating pathways that cut between cul-de-sacs or that bisect long blocks. Such connections don’t spread out vehicle traffic, but they improve walkability. Providing appropriate lighting and attractive landscaping along those pathways can increase usage.
Bicycle accessibility
In Copenhagen, Denmark, more than 30% of workers commute by bicycle. Since the 1970s, planners, traffic engineers, and politicians have worked hard to keep road infrastructures from growing, which has reduced VMT by 10%.
While a much smaller percentage of Americans bicycle than walk, bicycle access is an important strategy in achieving the kind of communities envisioned with transit-oriented development. While walking is limited to sidewalks and pedestrian pathways, a significant portion of bicycling occurs on roadways, where it competes with motor vehicles.
There are areas in Europe, particularly The Netherlands, Denmark, and Sweden, where bicycling accounts for up to 40% of all trips, and in the U.S., bicycling is widely used on many campuses and in a some urban areas. A big limitation to greater bicycle usage in the U.S. appears to be that our streets and communities are not bicycle friendly. According to the 2004 publication Getting to Smart Growth II by the Smart Growth Network, a 2003 poll by the American League of Bicyclists found that over half of the respondents would like to bike more often, and three-quarters of them would increase their biking with safer bike paths and other amenities.
The most important strategies for increasing bicycle use relate to where people bike: bicycling lanes and designated bicycle paths and trails. But some bicycle-access measures relate more to buildings. Covered bicycle storage allows people to bike to work and not worry about their bicycles getting wet. Changing and shower facilities at workplaces are essential for bicycling to be realistic as a commuting option.
Improved efficiency of transportation options
The strategies addressed here focus primarily on land-use and transportation planning issues. The transportation energy intensity of buildings can also be reduced by making our motorized means of transportation more energy efficient. Natural-gas-fueled and hybrid diesel-electric buses are increasingly appearing in cities around North America, offering both improvements in fuel economy and reductions in pollution emissions. New, more efficient light-rail and heavy-rail train cars are improving the energy efficiency of rail travel; most of those serving as commuter transit are now electric, so they have very low emissions (at the place of use).
Checklist:
Select Strategies for Achieving Transportation-Efficient Communities
With both bus and rail transit, the best way to improve the energy efficiency of operation is to increase ridership. While a packed train, subway, or bus may be somewhat less pleasant for riders, it’s far better from the standpoint of energy use and pollution emissions per passenger-mile.
With private automobiles, the same arguments apply—for both energy efficiency and ridership. Hybrids and biodiesel-burning cars are generally better than conventional gasoline-powered cars, but even the lowest fuel-economy SUV carrying four carpool riders to work will use less energy and emit less pollution per passenger-mile than a hybrid Prius carrying only a driver.
Developing Building-Specific Metrics for Transportation Efficiency
One reason that location efficiency or transit-oriented development isn’t more front-and-center in the design community is that it’s too easy to consider it someone else’s problem. The common sentiment is that it’s a land-use issue that’s beyond the scope of a particular building project. Specific metrics that measure the transportation energy intensity of a building would help change that perception. “What’s needed is to develop a set of adjustment factors that a planner or designer could apply that indicate the reduction of vehicle travel,” Litman told EBN. From these, one could calculate the reduction in energy consumption associated with those factors, he suggests.
Portland planners predicted in 2001 that the new streetcars would serve about 3,500 riders a week, but 9,000 people now ride them daily. Over half of the city’s development in the last decade has occurred within one block of the streetcar route, and property values within a block of the route are 35–40% higher than those just two blocks away.
For example, if one could define the baseline transportation energy intensity for a building type and attach a number to that, it should be possible to modify that value by a series of adjustment factors—much as is done with energy performance ratings of buildings. These adjustment factors would be based on the measures covered in this article: distance to transit, presence of bicycle pathways, traffic calming, etc. In such adjustment factors would be implicit weightings: distance to transit might be worth more than existence of bicycle racks, but both could be applied numerically.
One could argue that the transportation energy use of a building is too dependent on occupant behavior to warrant this sort of treatment (that even if the building is located right next to a light-rail station, there is nothing to stop workers from driving to work anyway). This is a reasonable concern that needs to be addressed, but the same concern exists with building energy use—albeit to a lesser degree. We are learning that the modeled energy use of buildings often varies considerably from the actual energy use—because doors are left open, workers use electric resistance heaters at their workstations and leave their computers on 24/7, or the facility managers use more air conditioning than predicted. Despite the reality that user behavior influences the actual transportation energy intensity of a building, such modeled transportation energy intensity would provide a good means of comparing one building to another in terms of expected performance.
Such metrics could be used in energy and environmental rating approaches for buildings, from Energy Star to LEED—permitting such certification programs to become more performance-based. Clearly, there would be a lot of details to work out, but the opportunities for providing metrics that help us reduce the environmental impacts of buildings are huge.
Final Thoughts
Conventional wisdom has it that the U.S. population is expected to increase by forty million people over the next two decades, 80% of whom will settle in developments like this car-dependant Denver suburb. More and more communities are recognizing that transit-oriented development offers a better option, particularly among an aging population.
The green building movement is making tremendous strides at improving the environmental performance of buildings. Pushed by building codes and pulled by voluntary programs like LEED, buildings are getting better and better. But, as this article shows, if we want to continue reducing the ecological footprint of buildings, we need to focus much more actively on the transportation impacts that are associated with our buildings. With average new code-compliant office buildings “using” twice as much energy getting occupants to and from the buildings as the buildings themselves use for heating, cooling, lighting, and other energy needs, the green building community needs to focus greater attention on the transportation dependency of our buildings.
Farr takes these ideas one step further: “It’s unconscionable to do any new development that’s auto-dependent,” he told EBN, suggesting that the architects’ oath should address these location issues in some way. “I think you should lose your license for laying out sprawl,” he said, only half in jest.
Increasingly, a key driver of such changes is likely to be demographics. According to Sam Zimmerman-Bergman at Reconnecting America, a national organization providing resources on transit-oriented development, by 2030 there will be “demand for 10 million more housing units for people who want to live near transit.” When you add in such factors as a possible increase in transportation fuel cost, demand could be even greater.
“What we’re talking about is a fundamental paradigm shift,” according to Todd Litman of the Victoria Transport Policy Institute. The benefits of reduced VMT would extend well beyond energy savings. “If we get people to drive less through building location and building management strategies,” says Litman, “there’s a huge range of benefits beyond energy conservation and pollution reduction. Until we develop a more holistic model that takes [these added benefits] into account, we’ll undervalue transit demand management.”
It’s time for the green building community to embrace the transportation energy intensity of our buildings much more directly. Where we build should be given greater attention, and our tools for evaluating building performance should include metrics that relate to transportation.
– Alex Wilson with Rachel Navaro
For more information:
Congress for the New Urbanism
Chicago, Illinois
312-551-7300
www.cnu.org
Reid Ewing
National Center for Smart Growth
University of Maryland
College Park, Maryland
301-405-6788
www.smartgrowth.umd.edu
Reconnecting America
(and the Center for Transit-Oriented Development)
Oakland, California
510-268-8602
www.reconnectingamerica.org
Smart Growth Network
International City/County Management Association
Washington, D.C.
202-962-3623
www.smartgrowth.org
Todd Litman
Victoria Transport Policy Institute
Victoria, British Columbia, Canada
250-360-1560
www.vtpi.org
Since the late 1990s, Portland’s Pearl District has been transformed from a largely abandoned industrial area into a bustling mixed-use neighborhood. Local developers actively promote alternative forms of transportation, evident in the giant neon “Go By Streetcar” sign atop this multi-use complex.
As the world’s first LEED Platinum building, the Chesapeake Bay Foundation’s Philip Merrill Environmental Center is loaded with green features: photovoltaic panels, rainwater harvesting, composting toilets, and bamboo flooring, to mention just a few. However, moving the organization’s staff of around 100 into the new building meant that many employees who had been able to walk to work in the older downtown facility now have to drive roughly ten miles (16 km) to get there. To their credit, the organization spent two years looking for a downtown building to house their growing staff, and they tried to mitigate the increased use of cars in the new building with bicycle and kayak racks, showers, and loaner vehicles for non-automobile commuters, among other strategies. The fact remains, however, that the additional energy use from more employees driving to work may well exceed the energy savings realized by the green building.
Designers and builders expend significant effort to ensure that our buildings use as little energy as possible. This is a good thing—and very obvious to anyone who has been involved with green building for any length of time. What is not so obvious is that many buildings are responsible for much more energy use getting people to and from those buildings. That’s right—for an average office building in the United States, calculations done by Environmental Building News (EBN) show that commuting by office workers accounts for 30% more energy than the building itself uses. For an average new office building built to code, transportation accounts for more than twice as much energy use as building operation.
This article takes a look at the “transportation energy intensity” of buildings and the influence of location and various land-use features on this measure of energy use. While the focus will be primarily on energy (and the associated environmental impacts of energy use, such as pollution), we will see that measures to reduce transportation energy use can have very significant ancillary benefits relating to water runoff, urban heat island mitigation, and habitat protection, while creating more vibrant, livable communities.
Transportation Energy Intensity as a Building Performance Metric
“Transportation energy intensity” is a metric that has long been used to measure such things as how efficiently freight is transported. We’re proposing it here as a metric of building performance. The transportation energy intensity of a building is the amount of energy associated with getting people to and from that building, whether they are commuters, shoppers, vendors, or homeowners. The transportation energy intensity of buildings has a lot to do with location. An urban office building that workers can reach by public transit or a hardware store in a dense town center will likely have a significantly lower transportation energy intensity than a suburban office park or a retail establishment in a suburban strip mall.
Comparing Transportation and Operating Energy Use for an Office Building
[enlarge image]
In the table, we compare the transportation energy intensity of an average commercial office building with the building operation energy intensity of such a building. We use average figures for commute distance, fuel economy, work days per year, gross square footage per employee, and commuting transportation mode to calculate the average transportation energy use per square foot of building floor area. For that average building, the transportation energy use exceeds the building energy use by 30%. When compared with a new, more energy-efficient building built to ASHRAE 90.1-2004 energy code, the transportation energy use exceeds the building energy use by nearly 140%. (Note that this analysis examines only site energy; if it compared primary energy or source energy, the differences would be smaller—largely due to the significant electricity use in commercial buildings and the inefficiency of electricity generation.)
We will see in this article that about eight factors, largely controlled by planners, designers, developers, and regulators, dramatically affect the transportation energy intensity of buildings. While far from a comprehensive treatise on the topic, this article introduces these issues and makes the case that, first, we need to pay far more attention to location and land-use planning as a part of green development, and, second, that this is an area deserving a great deal more research attention.
Environmental Impacts of Automobile Travel
Transportation Share of U.S. Criteria Air Pollutant Emissions (2002)
[enlarge image]
Transportation energy use and the environmental impacts associated with that energy use are huge. In 2006, transportation in the U.S. consumed 28.5 quads of energy (84 trillion kWh), or 28.5% of total national energy use, according to the Energy Information Administration of the U.S. Department of Energy. Both the total energy and the percentage of transportation energy use have been rising in recent years, while industrial energy use (currently the largest share at 32.1%) has been dropping. The transportation share of carbon dioxide emissions is slightly greater at 32.9% (2005 data) and higher than that of industrial, commercial, and residential sectors, with the share rising slightly since 1990.
Environmental impacts of transportation are not limited to energy and greenhouse gas emissions. The table below shows transportation’s share of certain criteria pollutants.
In addition to these direct emissions from transportation, there are many other environmental impacts associated with the infrastructure needed to support transportation and with development patterns. Our roadways create impervious surfaces that result in significant pollutant runoff into waterways—in fact, non-point source water pollution from stormwater runoff is now the nation’s leading source of water pollution to estuaries and the third largest to lakes. Highways fragment ecosystems and wildlife habitat. Paved areas, including roadways and parking lots, absorb solar energy, contributing to localized heat islands that exacerbate smog and increase air-conditioning requirements in urbanized areas. And stormwater runoff from these surfaces creates thermal pollution that makes many waterways unsuitable for trout and other cold-water fish.
Land development is occurring at a far higher rate than population growth, resulting in sprawl. In the nation’s 34 metropolitan areas with populations greater than one million people, between 1950 and 1990 the population increased 92.4%, according to the U.S. Environmental Protection Agency (EPA) report Our Built and Natural Environments: A Technical Review of the Interactions Between Land Use, Transportation, and Environmental Quality, while the urbanized land area grew by 245%, or 2.65 times the population growth rate. In Atlanta, the developed land area grew almost tenfold during this period, while the population grew a little over threefold.
As our urban and suburban areas spread out, vehicle travel increases. Transportation planners use vehicle miles traveled (VMT) to measure automobile use. In the U.S., VMT per household has increased from 12,400 miles (20,000 km) per year in 1969 to 21,200 miles (34,000 km) per year in 2001, a 70% increase. During the same period, VMT for commuting to work increased from 4,180 miles to 5,720 miles (6,730 km to 9,200 km), or 37%.
Reducing the Transportation Energy Intensity of Buildings
While most measures to reduce building energy use relate just to that particular building, most measures to reduce the transportation energy use of buildings relate to the broader land-use context. They help to achieve what is often called transit-oriented development (TOD) or smart growth. (The terms new urbanism and neo-traditional development are also used, though with slightly different connotations.) Among the goals of these development paradigms are communities, towns, or urban areas that are pedestrian-friendly and accessible with minimal use of the automobile.
Features used to achieve this sort of development are typically beyond the control of building designers and, to some extent, even building owners. Location is critical. “The transportation performance of buildings is all about location,” says Doug Farr, AIA, of Chicago, author of the forthcoming book Sustainable Urbanism: Urban Design With Nature (John Wiley & Sons, 2008).
We’ll now explore eight key factors that can reduce the transportation energy intensity of buildings, primarily by reducing VMT. Transportation and land-use planners often talk about the “D-factors,” including density, distance to transit, diversity of uses, and design of streetscapes; we’ll look at these and others.
Density
Density vs. Vehicle Travel for U.S.
[enlarge image]
Per capita vehicle travel tends to decrease with increases in density.
Most experts put density at or near the top of the list of measures for reducing vehicle use. Hank Dittmar, executive director of the Prince’s Foundation for the Built Environment and chair of the Congress for the New Urbanism, points to density as the first priority in achieving location efficiency. Research he conducted with the Natural Resources Defense Council (NRDC) and the Center for Neighborhood Technology (CNT) in the 1990s “showed a fairly dramatic reduction in VMT as you moved from seven to 10–12 units to the acre,” he told EBN. The reduction curve begins to flatten out at 40–50 units per acre; the benefits of mixed use remain, Dittmar explains, but the residents of those units may still have to travel for work and other trips throughout the region, which density does not affect. This correlation between density and VMT is shown in the graph above.
Reid Ewing, Ph.D, a widely published author on transportation planning and traffic calming and director of the National Center for Smart Growth Research at the University of Maryland, says that in the most compact, densely populated places like Chicago, VMT can be as much as 90% less than in sprawling suburbs. Among the innovative strategies for encouraging density are density transfer mechanisms, which enable planners to manage development rights by trading them from environmentally sensitive areas to areas that can be developed. This mechanism is being used in Montgomery County, Maryland; Sarasota, Florida; and Chapel Hill, North Carolina.
Transit availability and access
Everyone agrees that the availability of rail and bus transit is a key requirement for getting people out of cars. Distance to transit addresses how far someone must walk to get to a bus stop, light rail or trolley stop, or train station. “The first problem is that it isn’t there for most people,” says Dittmar. When public transit isn’t available, or convenient, or comfortable enough to be used, some companies are taking it upon themselves to satisfy the need. Information technology giant Google maintains a fleet of alternative-fuel buses that it uses to shuttle employees from many locations throughout the San Francisco Bay area to its office park; the company encourages ridership by offering such amenities as comfortable seats and wireless access.
To be effective, transit stops have to be close to where people live. “Generally speaking,” according to John Thomas, Ph.D., of the Development, Community & Environment Division at EPA, “one-quarter to one-half-mile range is the distance people will walk to transit.” People can be expected to walk further to reach rail transit stops compared with bus stops, but rarely will people walk more than a half-mile.
While transit is the key word in transit-oriented development, it’s really more about walking. “I think of transit as connecting walkable districts,” says Ellen Greenberg, a coauthor of The New Transit Town (Island Press, 2004) and the past director of policy and research at the Congress for the New Urbanism. “Everyone winds up being a pedestrian somewhere in the travel day,” she told EBN. Even people who commute by car walk to and from their cars, she points out, “but transit riders are on foot a bigger part of their day, so transit-oriented developments have, by their very nature, a bigger component of the walking trips than conventional development.”
In a discussion of transit, it’s worth noting that some forms of transit are no more energy efficient than private automobile commuting (see chart below). On a Btu per passenger-mile basis, buses actually use more energy per passenger mile than cars, assuming average occupancy of both, while all forms of rail use less and vanpools use a lot less. The number of passengers makes a huge difference in the energy intensity (Btu per passenger mile). For example, by increasing the assumed ridership of a transit bus to 40 people, the energy intensity drops to less than 1,000 Btu per passenger mile. Note that even though buses with average ridership may use more energy per passenger mile than cars, bus transit is still beneficial as a public service, because it can make urban areas more walkable.
Mixed uses and access to services
The Energy Intensity of Different Forms of Travel
[enlarge image]
Diversity has to do with the mix of residential, commercial, and retail land uses and whether key services can be met within easy walking distance of residences and workplaces. In the LEED for New Construction rating system, one of the considerations for awarding a credit is whether a residential area is within a half-mile of at least ten out of 22 listed services, including banks, convenience grocery stores, daycare, restaurants, pharmacies, laundry, schools, libraries, and parks. Farr calls this area a “pedestrian shed”—a play on the term “watershed”—referring to a surrounding area in which everyday needs can be met on foot.
This diversity also affects the success of transit. “It’s very important for people who ride transit to be able to accomplish multiple things on foot once they arrive at their destination,” notes Greenberg. “You need to have a mix of uses to satisfy people’s needs,” she told EBN.
In addition to having a diversity of services and land-use types in a community, it is beneficial to have a diversity of housing to serve all socioeconomic groups. According to Ewing’s book Best Development Practices (American Planning Association, 1996), “promoting affordable housing serves transportation as well as social purposes.” He notes that low-skill-level workers tend to be concentrated in cities, while low-skill-level jobs are concentrated in wealthier suburbs. This mismatch results in a lot of commuting by those who have the hardest time affording it.
Parking management
For transit-oriented development to succeed, many experts call for good parking management. Todd Litman, executive director of the Victoria Transport Policy Institute, calls parking management the top priority in reducing VMT. “Once you build generous parking,” Litman told EBN, “you have very little incentive to provide alternatives.” Brett Van Akkeren, a smart growth analyst at EPA, told EBN that in suburbs there are nine parking spots for every car.
Greenberg agrees, saying that the first priority “is definitely constrained or expensive parking supply. It has been shown that expensive parking acts as a deterrent to commuters.” In the book Parking Management Best Practices (Planners Press, 2006) and in a summary paper, “Parking Management: Strategies, Evaluation and Planning” (Victoria Transport Policy Institute), Litman lays out more than 20 strategies that can be used alone or in combination to reduce parking by 20% to 40%.
As with many of these strategies for encouraging transit-oriented development, parking affects more than just VMT. “Not only will more parking encourage more driving,” says John Holtzclaw, a widely published transportation researcher in San Francisco and chair of the transportation committee for the Sierra Club, “but curb cuts along sidewalks make walking less interesting and less safe and make buildings less interesting.” Surface parking also takes up a lot of space, forcing pedestrians to walk further to get where they want to go. Where you do have parking, suggests Holtzclaw, “have it underground. Don’t take up the first two floors with parking; that just deadens the neighborhood.”
Walkability, traffic calming, and site design
As noted earlier, walkability is key to the success of transit-oriented development. “Walkability and public transit go hand-in-hand,” argues Holtzclaw. He suggests that planners place themselves as pedestrians: “Think about how it feels to walk. Are there places to walk to? How are the streets laid out? Are there sidewalks on both sides of the street? Is the traffic calmed? Are the buildings close to the sidewalk, or do you have to walk through a parking lot to get inside?”
Hank Dittmar notes that while transit is a key aspect of smart growth and transit-oriented development, not all communities are there yet. For communities without transit, measures can be taken to prepare for a transit future. “They ought to be getting those neighborhoods ready,” he said. “At the core must be a connected, strong network that works for pedestrians.”
Traffic calming is another aspect of walkable communities. “By slowing traffic, you create a nicer pedestrian environment,” notes Reid Ewing, whose book Traffic Calming: State of the Practice (Institute of Traffic Engineers, 1999) remains the authority on the topic. “Also, when you slow down traffic, you make trips shorter, which reduces VMT,” he told EBN. (For more on traffic calming, see EBN Vol. 12, No. 3.)
Along with traffic calming, it helps to create streetscapes that are comfortable, safe, relaxing, and enjoyable to spend time in. Good lighting, park benches, outdoor tables at cafés, shade tree plantings, pedestrian courts that are closed off to automobiles, and public wireless access can all help to create vibrant, pedestrian-friendly outdoor spaces where people will be glad to walk a few blocks from a transit stop to get to their workplaces, and glad to walk to a restaurant for lunch, thus helping to reduce VMT.
Connectivity
Connectivity is about designing—or redesigning—communities so that pedestrian connections are better. It can mean breaking up “super-blocks” into smaller, more walkable blocks, and replacing connector streets and cul-de-sacs with a network of interconnected streets that spread out traffic flow, slow down vehicles, and make walking more pleasant.
“The smaller the block dimension, the more people will walk,” notes Farr. Ewing agrees that limiting block size favors pedestrians. “You ever walk on a super block? They’re endless,” he says. “With small blocks, it’s much easier to walk.” To evaluate the connectivity of a community, Ewing created a “connectivity index,” which is determined by dividing the number of roadway links (street segments between intersections) by the number of roadway nodes (intersections). The higher the connectivity index, the greater the route choices and the better the pedestrian access. Using this formula, a minimum connectivity index of 1.4 is considered necessary for a walkable community.
Connectivity can also be achieved for pedestrians by creating pathways that cut between cul-de-sacs or that bisect long blocks. Such connections don’t spread out vehicle traffic, but they improve walkability. Providing appropriate lighting and attractive landscaping along those pathways can increase usage.
Bicycle accessibility
In Copenhagen, Denmark, more than 30% of workers commute by bicycle. Since the 1970s, planners, traffic engineers, and politicians have worked hard to keep road infrastructures from growing, which has reduced VMT by 10%.
While a much smaller percentage of Americans bicycle than walk, bicycle access is an important strategy in achieving the kind of communities envisioned with transit-oriented development. While walking is limited to sidewalks and pedestrian pathways, a significant portion of bicycling occurs on roadways, where it competes with motor vehicles.
There are areas in Europe, particularly The Netherlands, Denmark, and Sweden, where bicycling accounts for up to 40% of all trips, and in the U.S., bicycling is widely used on many campuses and in a some urban areas. A big limitation to greater bicycle usage in the U.S. appears to be that our streets and communities are not bicycle friendly. According to the 2004 publication Getting to Smart Growth II by the Smart Growth Network, a 2003 poll by the American League of Bicyclists found that over half of the respondents would like to bike more often, and three-quarters of them would increase their biking with safer bike paths and other amenities.
The most important strategies for increasing bicycle use relate to where people bike: bicycling lanes and designated bicycle paths and trails. But some bicycle-access measures relate more to buildings. Covered bicycle storage allows people to bike to work and not worry about their bicycles getting wet. Changing and shower facilities at workplaces are essential for bicycling to be realistic as a commuting option.
Improved efficiency of transportation options
The strategies addressed here focus primarily on land-use and transportation planning issues. The transportation energy intensity of buildings can also be reduced by making our motorized means of transportation more energy efficient. Natural-gas-fueled and hybrid diesel-electric buses are increasingly appearing in cities around North America, offering both improvements in fuel economy and reductions in pollution emissions. New, more efficient light-rail and heavy-rail train cars are improving the energy efficiency of rail travel; most of those serving as commuter transit are now electric, so they have very low emissions (at the place of use).
Checklist:
Select Strategies for Achieving Transportation-Efficient Communities
With both bus and rail transit, the best way to improve the energy efficiency of operation is to increase ridership. While a packed train, subway, or bus may be somewhat less pleasant for riders, it’s far better from the standpoint of energy use and pollution emissions per passenger-mile.
With private automobiles, the same arguments apply—for both energy efficiency and ridership. Hybrids and biodiesel-burning cars are generally better than conventional gasoline-powered cars, but even the lowest fuel-economy SUV carrying four carpool riders to work will use less energy and emit less pollution per passenger-mile than a hybrid Prius carrying only a driver.
Developing Building-Specific Metrics for Transportation Efficiency
One reason that location efficiency or transit-oriented development isn’t more front-and-center in the design community is that it’s too easy to consider it someone else’s problem. The common sentiment is that it’s a land-use issue that’s beyond the scope of a particular building project. Specific metrics that measure the transportation energy intensity of a building would help change that perception. “What’s needed is to develop a set of adjustment factors that a planner or designer could apply that indicate the reduction of vehicle travel,” Litman told EBN. From these, one could calculate the reduction in energy consumption associated with those factors, he suggests.
Portland planners predicted in 2001 that the new streetcars would serve about 3,500 riders a week, but 9,000 people now ride them daily. Over half of the city’s development in the last decade has occurred within one block of the streetcar route, and property values within a block of the route are 35–40% higher than those just two blocks away.
For example, if one could define the baseline transportation energy intensity for a building type and attach a number to that, it should be possible to modify that value by a series of adjustment factors—much as is done with energy performance ratings of buildings. These adjustment factors would be based on the measures covered in this article: distance to transit, presence of bicycle pathways, traffic calming, etc. In such adjustment factors would be implicit weightings: distance to transit might be worth more than existence of bicycle racks, but both could be applied numerically.
One could argue that the transportation energy use of a building is too dependent on occupant behavior to warrant this sort of treatment (that even if the building is located right next to a light-rail station, there is nothing to stop workers from driving to work anyway). This is a reasonable concern that needs to be addressed, but the same concern exists with building energy use—albeit to a lesser degree. We are learning that the modeled energy use of buildings often varies considerably from the actual energy use—because doors are left open, workers use electric resistance heaters at their workstations and leave their computers on 24/7, or the facility managers use more air conditioning than predicted. Despite the reality that user behavior influences the actual transportation energy intensity of a building, such modeled transportation energy intensity would provide a good means of comparing one building to another in terms of expected performance.
Such metrics could be used in energy and environmental rating approaches for buildings, from Energy Star to LEED—permitting such certification programs to become more performance-based. Clearly, there would be a lot of details to work out, but the opportunities for providing metrics that help us reduce the environmental impacts of buildings are huge.
Final Thoughts
Conventional wisdom has it that the U.S. population is expected to increase by forty million people over the next two decades, 80% of whom will settle in developments like this car-dependant Denver suburb. More and more communities are recognizing that transit-oriented development offers a better option, particularly among an aging population.
The green building movement is making tremendous strides at improving the environmental performance of buildings. Pushed by building codes and pulled by voluntary programs like LEED, buildings are getting better and better. But, as this article shows, if we want to continue reducing the ecological footprint of buildings, we need to focus much more actively on the transportation impacts that are associated with our buildings. With average new code-compliant office buildings “using” twice as much energy getting occupants to and from the buildings as the buildings themselves use for heating, cooling, lighting, and other energy needs, the green building community needs to focus greater attention on the transportation dependency of our buildings.
Farr takes these ideas one step further: “It’s unconscionable to do any new development that’s auto-dependent,” he told EBN, suggesting that the architects’ oath should address these location issues in some way. “I think you should lose your license for laying out sprawl,” he said, only half in jest.
Increasingly, a key driver of such changes is likely to be demographics. According to Sam Zimmerman-Bergman at Reconnecting America, a national organization providing resources on transit-oriented development, by 2030 there will be “demand for 10 million more housing units for people who want to live near transit.” When you add in such factors as a possible increase in transportation fuel cost, demand could be even greater.
“What we’re talking about is a fundamental paradigm shift,” according to Todd Litman of the Victoria Transport Policy Institute. The benefits of reduced VMT would extend well beyond energy savings. “If we get people to drive less through building location and building management strategies,” says Litman, “there’s a huge range of benefits beyond energy conservation and pollution reduction. Until we develop a more holistic model that takes [these added benefits] into account, we’ll undervalue transit demand management.”
It’s time for the green building community to embrace the transportation energy intensity of our buildings much more directly. Where we build should be given greater attention, and our tools for evaluating building performance should include metrics that relate to transportation.
– Alex Wilson with Rachel Navaro
For more information:
Congress for the New Urbanism
Chicago, Illinois
312-551-7300
www.cnu.org
Reid Ewing
National Center for Smart Growth
University of Maryland
College Park, Maryland
301-405-6788
www.smartgrowth.umd.edu
Reconnecting America
(and the Center for Transit-Oriented Development)
Oakland, California
510-268-8602
www.reconnectingamerica.org
Smart Growth Network
International City/County Management Association
Washington, D.C.
202-962-3623
www.smartgrowth.org
Todd Litman
Victoria Transport Policy Institute
Victoria, British Columbia, Canada
250-360-1560
www.vtpi.org
Sunday, July 6, 2008
Avoid currency devaluation - The Hindu BusinessLine
Avoid currency devaluation: "Avoid currency devaluation
Prabhat Kumar
COME uncertain times and exporters organisations start lobbying for devaluation of the rupee to enhance India s competitiveness in exports. The usual justification advanced by them is the fall in the real effective exchange rate REER , that is, fall in value of the rupee versus the dollar. However, it is well-known that countries do not gain by way of devaluation of currencies in the long run. At best, exporters gain on the foreign exchange holdings stashed in the banks or on amounts yet to be repatri ated. Any other expected gain is neutralised by reduction in the prices of export goods and/or by the rise in prices of inputs used in such goods.
Notwithstanding threat of an economic slowdown, especially in the export sector, there is a strong case for defending the rupee. Recently, the greenback that has had a bull-run rising to 120 per cent of its real value in trade-weighted average terms, is coming down against the euro and other major currencies. Euro has gained over 10 per cent against the dollar this year. The rupee is tied strongly to the dollar and, thus, has depreciated too.
The recent slump in India s exports is purely on account of the sluggish US economy and consequential impact on other economies. Exports plummeted not just in India, but also in South-East Asia. Countries"
Prabhat Kumar
COME uncertain times and exporters organisations start lobbying for devaluation of the rupee to enhance India s competitiveness in exports. The usual justification advanced by them is the fall in the real effective exchange rate REER , that is, fall in value of the rupee versus the dollar. However, it is well-known that countries do not gain by way of devaluation of currencies in the long run. At best, exporters gain on the foreign exchange holdings stashed in the banks or on amounts yet to be repatri ated. Any other expected gain is neutralised by reduction in the prices of export goods and/or by the rise in prices of inputs used in such goods.
Notwithstanding threat of an economic slowdown, especially in the export sector, there is a strong case for defending the rupee. Recently, the greenback that has had a bull-run rising to 120 per cent of its real value in trade-weighted average terms, is coming down against the euro and other major currencies. Euro has gained over 10 per cent against the dollar this year. The rupee is tied strongly to the dollar and, thus, has depreciated too.
The recent slump in India s exports is purely on account of the sluggish US economy and consequential impact on other economies. Exports plummeted not just in India, but also in South-East Asia. Countries"
Thursday, July 3, 2008
Real Estate in Chennai - a ground level view
This program is a very well composed one depicting the ground level issues concerning real estate in Chennai. Speculators and builders exploiting the speculation market for short term gains seem to be the consensus for the 'land-rush' seen in the city today. The ground level reality is that Chennai indeed all Indian metros, and soon the second tier cities, are becoming an elitist one-dimensional society due to the non-affordability of housing in the traditional urban areas. The builders' version of affordability is suburbanization. Where is all this headed? When 75% of the population is sidelined from mainstream development, what is the effect of such a phenomenon on the urban fabric and the country's economy?
Leaving aside a discussion on inflation or global gasoline prices or sustainability of this speculation driven economy or opportunity for the marginalized population, what other factor of this kind of development is detrimental to sustainable development? This is not Fabian socialism or Marxist communism, rather it is urban economics and urban sociology. For an urban area to thrive, diversity in its mix in every form from people to occupations to buildings to open space to recreation and entertainment to cultural development and spiritual development is essential. A city thrives on the choices it provides, and when the choices cease to exist, it dies a natural death. Today, Ranganathan St may be a thriving locality and South Usman Rd may be a place thats forever crowded. But, how one-dimensional are these areas? What kind of choices do they provide for someone living or visiting or working in these areas?
Already, how many people use Mambalam as a transit area for connecting to the rest of the city? That factor alone was responsible for the genesis of these markets and the phenomenal growth achieved by these markets. Does that primary function exist today? In such a scenario, how long would it take for this market's attractiveness to start dwindling if a similar shopping paradise with better facilities opened elsewhere? The customer base and the economic model of these markets have changed so dramatically, what do these markets have now that will continue to attract more customers to the area?
While India typically does not have a tradition of brands and organized retail, is the current pull of Ranganthan St and South Usman Rd as a market, despite the competition in the rest of the city, due to the brand image of these areas or the brand image of the retail stores in the area? If it is the former, what is the business district of Ranganathan St and Usman Rd doing to enhance the customer experience and sustain its economic base? If its the latter, all that would take for the area to collapse is for these brands to open in different locations. What does the collapse of this business area mean to the economy of the city?
The attractiveness of not only this business district, but any business district to the majority of people that engage in its economy is the informal, unorganized activity that thrives on the shadows of the big businesses. The Indian economy relies heavily on this informal organization to provide a livelihood to scores of people who do not have the education and hence the opportunity to be part of the organized economy. Such districts provide choices for people to earn a livelihood and thrive on the diversity of the economic base, in turn providing plenty of choices for the customers. When such districts collapse, it is normally due to marginalization of the less economically viable choices and glorification of the high-return ones. This is the phenomenon that is plaguing Indian cities today, and will eventually result in the death of the urban fabric. Having a city that can only be afforded by the rich is a nice concept, but in reality, it is not a sustainable model. This value chasing 'land-rush' will only result in continuous sprawl and more marginalization rather than sustainable development.
Leaving aside a discussion on inflation or global gasoline prices or sustainability of this speculation driven economy or opportunity for the marginalized population, what other factor of this kind of development is detrimental to sustainable development? This is not Fabian socialism or Marxist communism, rather it is urban economics and urban sociology. For an urban area to thrive, diversity in its mix in every form from people to occupations to buildings to open space to recreation and entertainment to cultural development and spiritual development is essential. A city thrives on the choices it provides, and when the choices cease to exist, it dies a natural death. Today, Ranganathan St may be a thriving locality and South Usman Rd may be a place thats forever crowded. But, how one-dimensional are these areas? What kind of choices do they provide for someone living or visiting or working in these areas?
Already, how many people use Mambalam as a transit area for connecting to the rest of the city? That factor alone was responsible for the genesis of these markets and the phenomenal growth achieved by these markets. Does that primary function exist today? In such a scenario, how long would it take for this market's attractiveness to start dwindling if a similar shopping paradise with better facilities opened elsewhere? The customer base and the economic model of these markets have changed so dramatically, what do these markets have now that will continue to attract more customers to the area?
While India typically does not have a tradition of brands and organized retail, is the current pull of Ranganthan St and South Usman Rd as a market, despite the competition in the rest of the city, due to the brand image of these areas or the brand image of the retail stores in the area? If it is the former, what is the business district of Ranganathan St and Usman Rd doing to enhance the customer experience and sustain its economic base? If its the latter, all that would take for the area to collapse is for these brands to open in different locations. What does the collapse of this business area mean to the economy of the city?
The attractiveness of not only this business district, but any business district to the majority of people that engage in its economy is the informal, unorganized activity that thrives on the shadows of the big businesses. The Indian economy relies heavily on this informal organization to provide a livelihood to scores of people who do not have the education and hence the opportunity to be part of the organized economy. Such districts provide choices for people to earn a livelihood and thrive on the diversity of the economic base, in turn providing plenty of choices for the customers. When such districts collapse, it is normally due to marginalization of the less economically viable choices and glorification of the high-return ones. This is the phenomenon that is plaguing Indian cities today, and will eventually result in the death of the urban fabric. Having a city that can only be afforded by the rich is a nice concept, but in reality, it is not a sustainable model. This value chasing 'land-rush' will only result in continuous sprawl and more marginalization rather than sustainable development.
Sunday, June 29, 2008
Marketing to Rural India: Making the Ends Meet - India Knowledge @ Wharton
Published: March 08, 2007 in India Knowledge@Wharton
On one side are the fast-moving consumer goods (FMCG) and the consumer durables companies. On the other are consumers in rural India, potentially the largest segment of the market. Finally, the two are coming together.
The fact that this has not happened in the past is not for want of trying. In Mumbai and New Delhi corner offices, executives have long recognized that to build real sales volumes they will have to reach outside the big cities. In several categories, rural India already accounts for the lion's share. According to MART, a New Delhi-based research organization that offers rural solutions to the corporate world, rural India buys 46% of all soft drinks sold, 49% of motorcycles and 59% of cigarettes. This trend is not limited just to utilitarian products: 11% of rural women use lipstick.
Other numbers are equally revealing. According to the National Council of Applied Economic Research (NCAER), an independent, non-profit research institution, rural households form 71.7% of the total households in the country. Spending in this segment is growing rapidly and consumption patterns are closing in on those of urban India. Jagmohan Singh Raju, a professor of marketing at Wharton, says: "No consumer goods company today can afford to forget that the rural market is a very big part of the Indian consumer market. You can't build a presence for a brand in India unless you have a strategy for reaching the villages."
Several European multinational firms -- and a few U.S. firms -- have been making inroads into rural India for years. Companies such as Unilever, Phillips and Nestle have long been known to India's rustic dukaandaars, or merchants. Among U.S. firms, companies such as Colgate and Gillette have made considerable headway. According to Raju, marketing to rural customers often involves building categories by persuading them to try and adopt products they may not have used before. "A company like Colgate has to build toothpaste as a category, which means convincing people to change to toothpaste instead of using neem twigs to clean their teeth, which was the traditional practice," he says. "This is difficult to do and requires patience and investment by companies. It's not like getting someone to switch brands."
Companies that have figured this out are doing better in the villages than in the cities. Soft drinks giant Coca-Cola is growing at 37% in rural markets, compared with 24% in urban areas. According to Hansa Research, a market research firm that has published a Guide to Indian Markets 2006, the penetration of consumer durables has risen sharply in India's villages between 2000 and 2005. In color TVs, sales are up 200%; in motorcycles, 77%. In absolute numbers, however, the penetration is still low. Coke, for instance, reaches barely 25% of the rural market. This means the upside potential is huge for companies that develop effective rural marketing strategies.
According to NCAER, the low penetration rates can be attributed to three major factors: low income levels, inadequate infrastructure facilities and different lifestyles. But income levels are going up, infrastructure is improving and lifestyles are changing. Almost a third of the rural population now uses shampoo compared with 13% in 2000, according to Hansa Research.
FMCG and consumer durables companies have in the past tried tinkering with all the four 'P's -- product, pricing, promotion and place-- of the marketing mix. Hindustan Lever -- which is in the process of changing its name to Hindustan Unilever to reflect the fact that it is the Indian subsidiary of the Dutch conglomerate -- is among India's largest FMCG companies. It has been highly successful in marketing in rural India and has been a pioneer in reaching out to the smallest of villages with innovative products such as single-use packets of shampoo that sell for a penny. (The rural consumer uses shampoo on rare occasions; she does not want to invest in a bottle.) Independent agencies run media vans that show movies in distant villages. They have live promotions and demonstrations during breaks.
The area where innovation has moved to center stage is in the fourth P -- place (or distribution). Infrastructure has always been the bugbear of the Indian marketer. Distribution channels can make or break a company's rural marketing efforts. To sell in villages, products must be priced low, profit margins must be kept to the minimum and the marketing message must be kept simple.
Empowering Women Consumers
Hindustan Lever, whose 2006 revenues were $2.8 billion, has been learning these lessons for nearly a decade. The company's Project Shakti (its name means "strength") was born out of this realization, and it has become a case study for business schools and evolved beyond its original goals. "The objectives of Project Shakti are to create income-generating capabilities for underprivileged rural women by providing a small-scale enterprise opportunity, and to improve rural living standards with greater awareness of health and hygiene," says Dalip Sehgal, executive director of the Shakti initiative.
Hindustan Lever's drive into rural India was prompted in part by growing competition. When the Indian economy opened up in early 1990s, multinationals such as Procter & Gamble stepped up their activities, forcing Hindustan Lever to seek higher revenues and growth by reaching into villages with 1,000 or fewer residents. Launched in 2001, Project Shakti was an important part of this strategy. It involved working with rural self-help groups (SHGs) to educate rural women, while also making them part of the company's marketing network. "Women from SHGs become Shakti entrepreneurs -- direct-to-home distributors [of Hindustan Lever products] in rural markets," says Sehgal. "This micro-enterprise offers low risks and high returns. The products distributed include a range of mass-market items especially relevant to rural consumers," such as soap, toothpaste, shampoo and detergent.
The Shakti website features a video profile of Rojamma, a young woman from the state of Andhra Pradesh in Southern India, as an example of a typical Shakti distributor. A mother of two who was left to fend for herself and two daughters after her husband abandoned the family, Rojamma initially made ends meet by working in her parents' fields. She then joined the Shakti project and became a distributor of Hindustan Lever products, speaking in village after village to impoverished and often illiterate women about the need to bathe their children and wash their clothes regularly and also selling them soap and detergent. The commission Rojamma earned on her sales helped provide for her family. "Today she is a proud entrepreneur and enjoys not only the money she earns from the project but also the respect of society," says Sehgal. "The lives of thousands of women have changed because of Shakti."
A typical Shakti distributor sells products worth Rs 10,000-15,000 (around $250) a month, which provides an income of Rs 700-1,000 (around $25) a month on a sustainable basis. While this may not seem to be a high income, it makes an enormous difference to women who live in remote villages in dire poverty. In many cases, earnings from Shakti help them double their household income. Much of the additional income goes to educating children, and also to purchasing consumer durables such as television sets, which further expands the rural market for such products. Some Shakti distributors -- whom the company calls "entrepreneurs" -- invest the extra money in buying vehicles such as motor scooters that allow them to go into more villages.
Indeed, with help from Shakti distributors, Hindustan Lever has been able to reach rural consumers in thousands of remote Indian villages. According to media reports, Shakti distributors now account for 15% of the company's sales in rural India. Meanwhile, the potential for growth is enormous, since studies have shown that just 15% of Indian consumers use products such as shampoo. According to Wharton's Raju, there are behavioural reasons why rural consumers represent a sound bet for companies that are willing to invest in reaching them. "Affluent consumers demonstrate that they have 'arrived' by buying bigger houses or cars. People at lower income levels do so by buying premium brands. This means brand loyalty is very high among less affluent consumers. That is why the rural market is critical for companies. The first-mover advantage is significant."
The Shakti model was piloted in 50 villages of the Nalgonda district in Andhra Pradesh. It has now spread to more than a dozen states, creating 26,000 women distributors covering 80,000 villages. By 2010, the goal is to recruit 100,000 Shakti distributors covering 500,000 of India's more than 600,000 villages. "This initiative has been extremely successful," says Ajay Gupta, CEO of www.ruralnaukri.com, a job site for the rural market.
In addition to the distribution network, the Shakti project includes Shakti Vani (or voice), a social awareness program, and iShakti, a community portal. "Desktop computers are set up in the homes of Shakti entrepreneurs," says a Hindustan Lever spokesperson. "These computers are equipped with software developed by Unilever through which users can access content in categories including education, employment, agriculture, health and entertainment. They can also ask questions on any of these subjects and have them answered by experts."
iShakti is in its early days; it was launched in November 2004. The Vani project, however, is operational in more than 20,000 villages in states like Madhya Pradesh, Karnataka, Chattisgarh and Andhra Pradesh. Hindustan Lever has also tied up with partners such as Tata Consultancy Services, India's largest software firm, which is actively involved with the iShakti portal, and ICICI, a financial services institution that is involved with providing micro-credit loans. With the network now in place, other companies want to hop on to the Shakti bandwagon. One service that is likely to be added soon is insurance.
ITC's eChoupal Initiative
Another innovator in rural distribution -- the $3.6 billion, Calcutta-based tobacco-to-hotels conglomerate ITC -- has also been trying to build a platform that others can use. At a recent seminar on rural marketing, ITC chairman Y.C. Deveshwar outlined plans to create a trust that could work as an agency through which companies -- both private and public -- could market goods and services to Indian farmers. The trust route would hopefully make other companies more willing to sign up with their offerings. ITC has the right credentials to launch this trust. Like Hindustan Lever's project Shakti, its eChoupal venture has been the subject of several case studies.
ITC's foray into an enhanced distribution network came from the recognition that the existing agri-produce distribution channels were inefficient. The company exports various agricultural products -- soybean, rice and wheat, to name a few. It needs to source them from farmers.
"In 2000, ITC embarked on an initiative to deploy technology to reengineer the procurement of soybeans from rural India," says S. Sivakumar, CEO of ITC's agri-business division. "Kiosks -- called eChoupals -- consisting of a personal computer with Internet access were set up at the villages." He explains that soybean farmers could access this kiosk for information on prices, but had the choice to sell their produce either at the local market or directly to ITC at their hub locations. A hub location services a cluster of eChoupals. By purchasing directly from the farmer, ITC significantly improved the efficiency of the channel and created value for both the farmer and itself.
"While the eChoupal network was initiated to facilitate more efficient and effective procurement, the connectivity -- both physical and informational -- between the farmer and the market that it facilitated has allowed ITC to use it for distribution of goods and services from the market to the farmer," says Sivakumar. It has thus evolved into a business platform.
The eChoupal infrastructure consists of:
- A kiosk with Internet access in the house of a trained farmer, called a Sanchalak. This kiosk is within walking distance of target farmers.
- A warehousing hub managed by the former middleman, called a Samyojak. This is within a tractor-driveable distance of target farmers. (The former middlemen were given a role to avoid resistance to the project. They joined because they could see that their traditional business was in jeopardy.)
- A collaborative network of companies orchestrated by ITC with a pan-India presence.
This is, of course, a simplified structure. And there has been a stream of new initiatives. For instance, in August 2004, ITC introduced the Choupal Sagar, a rural retail outlet at the hub. The first was set up at Sehore in Madhya Pradesh. "This 7,000 sq. ft. mall sells consumer goods as well as agri-products," says Sivakumar.
The benefits to the farmer are obvious. And ITC itself gains. Apart from the more efficient channel, there is money to be made from the reverse flow. In 2005-06, ITC generated $23 million selling chemicals and fertilisers. That may not sound like much, but it's early yet. In a recent move, ITC has set up its first urban outlet, the other end of the eChoupal chain, to retail fresh fruit and vegetables.
What about other companies? Does it make sense for them to climb on the bandwagon? Sivakumar gives the example of PI Industries, which has increased its market share in Madhya Pradesh from 12.3% in 2003 to 33% in 2005 after partnering with ITC to sell through the eChoupal. "The eChoupal project is already benefiting more than 3.5 million farmers," says Sivakumar. "Over the next decade, the eChoupal network will cover more than 100,000 villages, representing one-sixth of rural India, and create more than 10 million e-farmers."
Room for All
Both Project Shakti and eChoupal have been around for less than a decade. Which is likely to succeed? Observers say there is place for both; the Indian rural market is huge. According to Wharton's Raju, while Shakti and eChoupal are different in orientation -- one focuses on individuals while the other is corporate-based -- each has been very successful in its own way. "You can't think of success just in financial terms," he says. "Both projects have created tremendous goodwill for Hindustan Lever and ITC." That is no small asset, especially for ITC, whose initials once stood for Indian Tobacco Company.
Sivakumar claims the ITC model is superior because it involves two-way traffic. "We are starting with raising rural incomes," he says. "The level of affordability in rural India is low. For consumers to buy products, you have to first put more money in their pockets. We are creating a virtuous circle of higher income, higher productivity and higher consumption." He adds that there is a distinction between the commission paid to Shakti entrepreneurs and the micro-credit arranged for them, and the eChoupals' efforts to raise rural incomes by improving agricultural efficiency for the whole community. At Hindustan Lever, company officials are equally confident about Project Shakti. They say they are in the business of creating entrepreneurs and arranging micro-credit for them. This, too, has a catalyzing effect on the whole community.
Raju believes that the drive to gain access to rural retailers is, in some ways, as critical as the one to reach consumers. "If you look at rural retail in India, the outlet size is very small. Merchants will often stock just one brand in a category; they do not have the resources to stock multiple brands. They will stock the brand that sells the most."
This lesson has hardly been lost on Indian-owned companies. Over the coming months, the battle for rural wallets will include not just European and U.S. multinationals but also fast-growing Indian companies. A retail initiative by the $22.6 billion Reliance Industries is a case in point. The Mukesh Ambani-led group plans to pump in $5.5 billion over the next few years to create a farm-to-storefront infrastructure for a pan-India retail network. (Only part of this money is for the rural component.)
Mukesh Ambani has company. Brother Anil Ambani, who parted ways with him in 2005, is connecting rural India through Reliance Infocomm, a mobile services provider. Its network now encompasses 240,000 towns and villages, accounting for 42% of the rural population. It plans to double the rural coverage to 400,000 villages, making up 50% of the rural population.
There are many others. The rural initiative of the Mumbai-based $1.3 billion House of Godrej -- Godrej Aadhaar -- plans to set up 1,000 stores across India in the next five years. Delhi-based telecom major Bharti Airtel chairman Sunil Mittal has tied up with Wal-Mart, which will need its supply chain. From the Goenkas to the Gulabchands, from the Tatas to the Thapars, every major Indian business group has plans to move into the hinterland.
Like Thoreau and Tolstoy, Gandhi, revered as the father of modern India, believed that the country's future lay in her villages. These days, every marketer would agree.
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