33

# **VII.** APPLYING THE PRICING MODEL

61. The above avoidable cost methodology, together with the inverse elasticity rule, can now be used to calculate a set of road user charges for Tunisia. The price elasticities have been taken from Annex 2 and are equal to -0.6, -0.7 and _-0._ for car, bus and truck respectively (the figure for truck being the mid-point between -0.9, representing strong integ-modal competition, and -0.1, representing no inter-modal competition). The supply elasticities have been estimated from the slope of BC in Figure 6; the values for car, bus and truck are 46.61, 34.82 and 13.21 respectively. In other words, BC is fairly elastic. The calculations are set out in Table _5_ which shows, in column 21, the resulting user charges and, in column 22, the revenues which would result from levying such charges.2I/ The total revenues generated by the user charges, $91 million (which appear in Table _5_ as $91.8 million due to rounding), correspond to the total expenditures set out in Table 2. The user charges vary from 0.52 cents per veh km for cars (gasoline) to 2.71 cents per veh km for buses and 12.70 cents per veh km for articulated trucks.

62. Table 6 compares the results frcm the avoidable cost methodology with the existing user charges in Tunisia (shown in column 7). It does not include the user charges recommended by Newbery, et al (1988), since the over-estimation of congestion costs would have caused these charges to generate $285.0 million, tather than the more modest figure of $54.86 given in Table 2, column (2). Table 6 includes three comparisons. The first set of user charges (column 1) correspond to the ones derived in Table _5_ and are designed to cover all avoidable costs by generating total revenues of $91.6 million. The next two sets were designed to generate $385.7 million, these being the revenues generated by current user charges.22/ The first of these sets, column 3, has been calculated or, the same basis as those set out in column 1. In other words, the difference between the $91.6 million generated by the user charges set out in column (1) and the $385.7 million generated by those set out in column (7), has been treated as a collective common cost and recovered from all users using the inverse elasticity rule. The second set, column (5), has treated the difference between the $91.6 million and the $386.7 million as a pure tax and, following the procedure adopted by Newbery, et al (1988), has recovered these additional collective common costs from passenger vehicles only (the user charges for vehicle types 3 to 6 and 8 have been kept the same as in column (1)).

- 2j/ Table S **ha been laid** out **as** X Lotus spread-sheet. **The inverse** elasticity rule is applied by choosing a _coll_ well away from the table, say AS35, to represent S. This cell is then set equal to the initial guessed value of S. The ceUs in column 19 are sat equal to (AS3S/g), with 8 representing the appropriate price and supply elasticities for that type of traffic. Column 20 is then **set** equal to (col. 19 col. 18). The value of AS3S is then altered iteratively until the total of column 22 equals the total revenues required.

- _fI_ The govemrnment in Tunisia collected about S200 million in road **user** charges during 1982 (World Ba.k and Intenational Road Federation statistics). **The** higher **figures** of $285 miUion and $386 milion given in **Newbery** et al (1988), **sugget** (i) **the** VOC **model** used in Tunisia **contains** some **bias;** end/or (ii) there were **imporant** exemptions (e.g. of diplomatic **and** government **vehicles);** and/or (iii) the collection of road user charges was subject to significant levels of avoidance, evasion and **lealage.**