Public service obligations (PSO)

Where fares are set below the direct cost of service provision because of political expediency and/or because government believes that higher fares would disadvantage vulnerable groups in society, then government is seeking to impose a ‘public service obligation’ on operators.

At the simplest level, this may take the form of mandating minimum hours and frequencies of service so as to enable personal mobility at times when commercial operation is not viable. This may be extended to require coverage of routes where the levels of demand or road conditions impinge on operator viability, and commercial services would not otherwise be provided.

Another common manifestation of government imposing public service obligations is requiring the carriage of young children at a reduced fare compared to adults, but in some cases the range of fare reductions and exemptions required can become very wide-ranging – covering, for example, scholars, students, pensioners, war veterans, persons with disability, serving police and military personnel, etc, etc. In extreme cases, public transport operators may be required to carry a clear majority of passengers at ‘concessionary’ fares, or even no fare at all.