Governance and Reform of Paratransit – An institutional strategy to strengthen the role and function of the regulator

Reforming and regulating informal paratransit systems present significant challenges, often focused on managing poor service quality, safety concerns, replacing outdated vehicles, and competition issues, leading to efforts at formalising or removing them. There is an evolving discourse on paratransit reform exploring diverse approaches, recognising the sector's entrepreneurial potential and its key role in urban transportation. This highlights the need for inclusive regulatory frameworks considering paratransit's unique characteristics. Contemporary interventions, such as BRT implementation, data and technology integration, and institutional reforms, show some success yet significant limitations. Many of the interventions do not resolve the business model, or the institutional structure. The exception is formalizing paratransit through BRT projects; however, implementation confronts difficult on-ground realities. Effective management structures and sustainable business models are crucial. Analysis reveals that regulation alone is ineffective due to the entrepreneurial nature of paratransit and cities' limited regulatory capacity. Regulation is often ineffective against economic forces and operator survival instincts. Cities attempting to solve this regulatory dilemma, engaging more formally, through gross cost contracting, often face an unmanageable risk burden, demonstrating that regulators should regulate risk-takers rather than manage risks themselves. This paper proposes a partnership contract model with paratransit, that involves sharing risk with a commercial, business-like public sector partner. This will enhance public sector capacity with a shift from a regulatory to a managerial approach. The proposal for an appropriate contract paratransit ensures a sustainable business model for operators where they carry demand risk, incentivising them to plan and adapt services, grow demand, and be rewarded for their efforts. It also provides a pathway to meaningful integration of paratransit into the public transport network.