CREW Project
Research Findings of Diagnostic Country
Report (DCR), India
Bus Transport Sector
NRG Meeting III Presentation by
Outline
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National Policy Framework – Competition issues
GSRTC monopoly in ‘Stage Carriage’ permits - who gains from it?
AMTS monopoly in city regular bus transport - at what cost to the State?
Abolishment of MPSRTC – what have been the gains and limitations?
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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)
• Post independence, road transport placed in Schedule B of Industrial Policy
Resolution 1956, indicating move towards state control
• 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
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2. Case of GSRTC – monopoly over ‘Stage Carriage’
permits:
Implications on operators and commuters
4
2.1 Case of GSRTC: monopoly in ‘Stage Carriage’ permits
• GSRTC accorded monopoly status in stage carriage segment in 1994
- Entry barrier truncates competition as private players not legally permitted
- However, large operators by-pass the system, small operators can’t
• GSRTC has been faltering in the recent past in fulfilling the demand
Avg. Fleet Held (Number)
Avg. Fleet Operated (Number)
Passenger Carried (Billion)
Mar-03
9,097.00
7,793.00
1.27
Mar-08
8,069.00
6,932.00
0.85
Mar-13
7,719.00
6,694.00
0.84
• Large demand-supply gap allows ‘illegal’ private entry; generates competition
nevertheless
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2.2 Impact on transport operators
• GSRTC
• No competitive benchmark
• Continued budgetary support promoted inefficiency
- Allows systemic weaknesses to persist
- Introduces market distortion
• Private transport operators plying in ‘stage carriage’ mode
• Likely domination of larger, influential players
• Illegal nature of operation, as only have ‘contract carriage’ permits
• Additional cost (rents) to ensure smooth operation
• Unregulated competition
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2.3 Plight of Commuters
• Majority of commuters aware of this ‘illegality’
Amenities
% of passengers rating public buses to be
significantly better
AMD-VAD
• 2/3rd of the respondents exercise better choice
8%
AMD-JAM
4%
AMD-VAD
• No significant increase in fare or price difference
between public and private operators
Safety
16%
Comfort
AMD-JAM
2%
No significant increase in fare
AMD-VAD
90%
6%
80%
80%
70%
AMD-JAM
2%
60%
60%
50%
AMD-VAD
40%
Quality
10%
24%
30%
20%
AMD-JAM
2%
10%
12%
16%
8%
Categories
0%
AMD-VAD
Ahmedabad-Jamnagar
14%
Ahmedabad-Vadodara
Fare increase higher than general price rise
AMD-JAM
18%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Fare increase similar to general price rise
Fare increase lower than general price rise
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2.4 Commuters benefitting from market competition
Competitive forces
are working and
benefitting commuters
Makes a case for review of 1994 ‘order’ providing legal monopoly
to GSRTC
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2.5 Lessons for policy
• 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
• Commuters are enjoying some benefits from public-private competition, which raised
question - Should the 1994 policy be continued
?
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3. Case of AMTS – Monopoly over intra-city
regular bus transport:
What cost to the State?
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3.1 Legal monopoly over intra-city regular bus transport
• There is legal public monopoly given to AMTS
- Limits private entry as parallel operator and thus
competition
• Operational performance has been faltering,
though cost is burgeoning
Operated fleet size of AMTS largely static; fleet utilization
on the decline
1120
1200
966
1000
942
750
800
674
78%
600
400
0%
2%
1%
0%
17%
Spares Cost
Interest Cost
Depreciation Cost
Tax Cost
65%
0
60%
March'11
March'12
Average Fleet Operated
(Number)
March'13
Fleet Utilisation (%)
Cost overruns revenue consistently and expanding rapidly,
requiring ever increasing external support
Staff Cost
Tyres & Tubes Cost
67%
200
Rs billion
1%
80%
70%
68%
Staff cost accounts for half of AMTS total cost (2012-2013)
Fuel & Lubricant Cost
671
75%
Average Fleet Held
(Number)
50%
85%
750
72%
March'10
29%
90%
985
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
3.16
2.37
2.3
1.18
1.09
2.61
1.85
0.84
0.98
0.96
0.93
1.09
1.44
1.2
0.57
0.56
0.49
0.49
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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3.2 Impact on supply side
• Sustaining on large dole of public fund infusion, considerable cost to
the state
• Cost of Rs 3.66 bn in 2013-13 vs. revenue to Rs 1.44 bn
• No scope for setting benchmark for improving operational efficiency
• Annual adjustment in fare may not be sufficient
• 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
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Ahmedabad
3.3 Impact on Commuters in
Ahmedabad
100%
90%
80%
70%
60%
50%
•
•
•
•
40%
Subsidized fare
No alternate option/choice
Limited service availability
Falls behind Bhopal in terms of
incremental changes, despite higher
overall satisfaction
59%
55%
58%
54%
53%
12%
14%
76%
61%
60%
11%
11%
30%
20%
10%
13%
0%
12%
14%
Distance Timeliness Availability Frequency
from stop
Significant Improvement
Waiting
time
8%
Types of
Comfort
bus services
Safety
Marginal Improvement
Bhopal
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
31%
22%
4%
Distance
from stop
31%
31%
8%
9%
40%
25%
8%
3%
Timeliness Availability
5%
Frequency Waiting time Types of bus
services
Significant Improvement
Marginal Improvement
32%
33%
7%
8%
Comfort
Safety
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3.4 Lessons for Policy
• 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
• 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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4. Case of MPSRTC – Abolishment in 2005
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4.1 MPSRTC – Abolishment in 2005
• Set up in 1962; 36,000 buses in early 90s but left with only 1,800 buses by 2000 –
with disproportionately high staff strength of 13,000
• At the time of abolishment in 2005, it had a fleet of around 1500 (~1,000 were on
road) and 11,500 employee.
• Monthly losses of MPSRTC was running into Rs 50 million
• Accumulated salary backlog itself touching Rs 450 million
• Closure estimated to have cost the state Rs 12 billion, including cost of offering
voluntary retirement services to staff
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4.2 Impact on producers
• Open entry for private operators
• Freedom to private operators to choose type of permit, route, schedule under
regulatory oversight
• Determination of fare 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 like Madhya Pradesh Tourism Development
Corporation, Bhopal City Link Ltd., Atal Indore City Services Ltd., etc.
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4.3 Impact on Commuters
No. of
operators
Availability
Frequency
Gwalior
Amenities
Marginal improvement
68%
Marginal increase in fare and in line with general price rise
80%
100%
60%
60%
22%
30%
20%
6%
20%
10%
0%
BHP-GWL
BHP-IDR
Madhya Pradesh
Increased significantly
Has remained the same
44% 44%
40%
26%
26%
50%
40%
78%
80%
52%
70%
Marginal increase
12%
8%
14%
0%
Bhopal-Gwalior
Indore
14% 24%
32%
Safety
24%
39%
46%
38%
30%
Indore
Comfort
Indore
16%
Gwalior
16%
18%
Indore
Gwalior
16%
Gwalior
44%
16%
Indore
Quality
40%
16%
Gwalior
52%
50%
16%
Indore
40%
40%
20%
Gwalior
50%
48%
22%
Indore
Timeliness Waiting time Categories
Significant improvement
• Most respondents also report
only marginal increase in fare,
which has been largely in line
with general price rise
40%
42%
22%
Gwalior
52%
16%
42%
24%
Gwalior
Indore
28%
Gwalior
22%
Indore
Nearest bus
stop
Indore
58%
18%
42%
46%
50%
24%
Gwalior
44%
10%
Indore
22%
• More than half the passengers
report some level of
improvement in almost all
parameters post abolishment
Gwalior
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
42%
Perceived impact of abolishment of MPSRTC on services
Bhopal-Indore
Madhya Pradesh
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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4.4 Lessons for Policy
• 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. Concluding General Observations
• Strategy to promote competition in Public Procurement (PPP)
• Negotiated Performance-based Contracts
• Regulation of Fare, Service Standard
• Need for State Public Transport Regulatory Agencies
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