International Conference on
Benefits of Competition Reforms for Consumers and Producers in
Developing Countries (CREW Project)
18 -19 November 2014, Bangkok

Outline
1. National Policy Framework – Competition issues
2. GSRTC monopoly in ‘Stage Carriage’ permits - who gains from it?
3. AMTS monopoly in city regular bus transport - at what cost to the State?
4. Abolishment of MPSRTC – what have been the gains and limitations?
5. Way forward
2

1. National policy framework: reduced role of private sector
• Motor Vehicles Act
- MV Act, 1914 failed to deal with burgeoning road transport sector
- Mitchel-Kirkness Committee (1932)– restriction on no. of licenses/route, fixation of schedule and fare, compulsory motor insurance, etc.
- Spirit largely incorporated in the MV Act, 1939 (revised in 1988)
• Given effect through Road Transport Corporation Act 1950 and concomitant addition of special provisions for State Road Transport Units (SRTUs) in the MV Act
- Reservation for SRTUs in partial/complete exclusion of private players at the discretion of the state
- State discretion led to wide variation in the transport set up across states
• Road transport placed in Schedule B of Industrial Policy Resolution 1956, indicating move towards progressive state control and only supplementary role for private players
3

4

2.1 Impact on supply side
• Truncates competition
• ‘Illegal’ entry of private players to cater to demand-supply gap due to supply side bottlenecks favor larger operators
• Impact on GSRTC
• No competitive benchmark PLUS continued budgetary support leads to persistent inefficiency and market distortion
• Impact On Private transport operators plying in ‘stage carriage’ mode
• Illegal nature of operation, as only have
‘contract carriage’ permits
• Additional cost (rents)
• Likely domination of larger, influential players
• Unregulated competition
2.2 Impact on Commuters
• Majority of commuters aware of
‘illegality’
• But, 2/3 rd of the respondents are indifferent
• No significant increase in fare
• No significant fare difference
5

2.3 Policy Lessons
• Legal restriction on supply side, even when GSRTC cant meet demand
• No competitive benchmark to improve operational efficiency of GSRTC
• Unregulated entry of private players, imposes additional cost on operators (promotes corruption)
• Commuter’s implications:
- Additional costs (rents) likely to be passed on to passengers
- No published time schedule, fare chart, route, etc.
- No dispute resolution mechanism
- Could pose safety and security issues; legal tangles
• Commuters are enjoying some benefits from public-private competition, which raised question Should the 1994 policy be continued ?
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7

3.1 Impact on supply side 3.2 Impact on Commuters
• Sustaining on large dole of public fund infusion
• Cost of Rs 3.16 bn in 2013-13 vs. revenue of Rs 1.44 bn in 2012-13
• No ‘local’ benchmark
• Insufficient annual fare adjustment
• Stifles innovation – administrative laxity, financial constraint
• To reduce cost, it has leased out 170 of
AMTS buses to private operators and also have hired another 210 buses from them
• Thus, Pvt operators are running half of the city services
• But, presence only as service provider to
AMTS
• Subsidized fare
• No alternate option/choice
• Limited service availability
• Falls behind Bhopal in terms of incremental changes, despite higher overall satisfaction
8

3.3 Policy Lessons
• Diminishing scale of ‘own’ operation; low efficiency
• Limiting competition and private participation puts considerable pressure on state resources
• Hemorrhage of public resources with high opportunity cost – Rs 1.72 billion deficit on Rs 1.44 billion revenue!
• Limited possibility of innovation in service based on passenger needs
• Raises question on utility of following with this public monopoly
• Requires assessment of the element of competition in the ‘procurement’ of services of private operators
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10

4.1 Impact on producers
• Open entry for private operators
• Freedom for private operators to choose type of permit, route, schedule under regulatory oversight
• Control on fare, route, schedule in hand of RTA
• Fragmented market dominated by private players
• Estimated to have around 200 private operators
• A heterogeneous group - fleet size ranging from a single bus to 20-25 buses
• A limited number of public operators
4.2 Impact on Commuters
• More than half the passengers report some level of improvement in almost all parameters post abolishment
• Most respondents also report only marginal increase in fare , which has been largely in line with general price rise
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4.3 Policy Lessons
• Competition seem to be providing benefits to commuter , but needs to be strengthened, structured
• Weak regulatory oversight poses challenges – operators not following schedule, route, fare, etc.
• So need a strict but smart regulatory framework to be implemented by a wellresourced institution – M.P. State Public Transport Regulatory Authority
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5. Way forward
• Abolish monopoly for State Road Transport Undertakings (SRTUs)
• Fosters un-competitive market
• Falling scale of operation, cannot cater to the increasing demand
• Increasing burden on state exchequer
• Affects passenger welfare
• More competitive Public Private Partnership (PPP) agreements
• Considerable volume of procurement from the private service providers
• But, no well defined framework from competition angle
• Setting up State Road Transport Regulator
• Weak regulatory structure (including enforcement) allows easy evasion of law
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Data Graphs
15

30,0
25,0
20,0
15,0
10,0
5,0
-
Cost overruns revenue of GSRTC consistently, requiring ever increasing external support
26,0
21,3
20,0 24,0
15,8
15,1
14,6
15,4
16,4
15,9
16,8
17,0
18,2
17,8 17,5
19,7
14,3
11,4
12,4
12,0
27,8
24,8
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Annual Revenue (Rs billion) Annual Cost (Rs billion)
16

% of passengers rating public buses to be significantly better
AMD-VAD 8%
AMD-JAM 4%
AMD-VAD 16%
AMD-JAM 2%
AMD-VAD 6%
AMD-JAM 2%
AMD-VAD 10%
AMD-JAM 2%
AMD-VAD 14%
AMD-JAM 18%
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
60%
40%
20%
0%
100%
50%
0%
Fare charged by private vs. public operators
Expensive
AMD-JAM
Neutral
AMD-VAD
Affordable
No significant increase in fare
80%
60%
12% 8%
24%
16%
Ahmedabad-Jamnagar Ahmedabad-Vadodara
Fare increase higher than general price rise
Fare increase similar to general price rise
Fare increase lower than general price rise
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1%
0%
2%
1% 0%
Staff cost accounts for half of AMTS total
29%
17% cost (2012-2013)
50%
Staff Cost
Fuel & Lubricant Cost
Tyres & Tubes Cost
Spares Cost
Interest Cost
Depreciation Cost
Tax Cost
Other Costs
1200
1000
800
600
400
200
0
Operated fleet size of AMTS largely static; fleet utilization on the decline
1120
966 942
985
750
78%
March'10
Average Fleet Held
(Number)
674
72%
March'11
671
March'12
68%
Average Fleet Operated
(Number)
750
67%
March'13
Fleet Utilisation (%)
90%
85%
80%
75%
70%
65%
60%
3,50
3,00
2,50
2,00
1,50
1,00
0,50
0,00
Cost overruns revenue consistently and expanding rapidly, requiring ever increasing external support
3,16
2,37 2,3
2,61
1,85
0,84
0,98 0,96 0,93
1,09 1,18 1,09 1,2
1,44
0,49 0,49 0,56 0,57
2002-03 2003-04 2004-05 2005-06 2007-08 2009-10 2010-11 2011-12 2012-13
Annual Revenue (Rs. billion) Annual Cost (Rs. billion)
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• Ahmedabad falls behind Bhopal in terms of incremental changes, despite higher overall satisfaction
Ahmedabad
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
57%
13%
50%
9%
70%
9%
61% 62%
7% 6%
61%
16%
51% 46%
17% 18%
39%
5%
Bhopal
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
51%
1%
36%
39%
43%
46%
60% 39% 41%
18%
22%
16% 18%
4%
16% 16%
56%
9%
Significant Improvement Marginal Improvement
Significant Improvement Marginal Improvement
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4.2 Impact on Commuters Perceived impact of abolishment of MPSRTC on services
•
• More than half the passengers report some level of improvement in almost all parameters post abolishment
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Most respondents also report only marginal increase in fare, which has been largely in line with general price rise
Nearest bus stop
No. of operators
Availability Frequency Timeliness Waiting time Categories Quality Comfort Safety Amenities
Significant improvement Marginal improvement
80%
60%
40%
20%
0%
Marginal increase in fare and in line with general price rise
100%
80%
60%
40%
20%
0%
44% 44%
12%
8%
78%
14%
Bhopal-Gwalior Bhopal-Indore
BHP-GWL BHP-IDR
Madhya Pradesh
Madhya Pradesh
Increased significantly Marginal increase
Has remained the same
Fare increase higher than general price rise
Fare increase similar to general price rise
Fare increase lower than general price rise
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