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The Egged bus cooperative faces a long-term future without state subsidies, while private transportation firms will compete over 150 of its routes in public tenders.

After decades of subsidizing Egged, the cooperative and the treasury have reached an agreement under which subsidization will stop entirely by 2015. The only subsidies will be sector-specific ones - for the disabled, soldiers and students - as well as for certain equipment.

The accord was reached after months of negotiations between Accountant General Yaron Zelekha and Egged Chairman Arik Feldman. The agreement spells out the subsidies the cooperative will receive over the next 10 years, during which time Egged is to streamline its operations.

According to details ironed out two months ago, Egged will become more efficient each year, and by the end of 10 years, it should save NIS 415 million in costs compared to today. This will make Egged competitive against private companies that are winning transportation tenders.

The agreement also gives the state considerable leeway over offering routes for competition in the upcoming years. It also requires Egged to adopt smart cards on public transportation, and intensifies state supervision over its operations (as it maintains over trains) and over the Israel National Roads Company, which replaced the Public Works Department.

Zelekha called the agreement "a milestone in the relations between the bus cooperative and the state." While the government could have agreed to a further multiyear subsidy agreement with Egged, it instead pushed for greater efficiencies at the bus company to level its cost savings with the state subsidy "so that eventually the subsidy will be canceled."

In the past four years, 15 percent of Egged's bus routes have been tendered out to private transportation companies.