PURSUING COMPETITION REFORMS IN
STAPLE FOOD & BUS TRANSPORT SECTOR
Neha Tomar & Shreya Kaushik, CUTS International
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Outline
• Introduction & Purpose
• Staple Food (Wheat)
- Key Findings
- Further Research and Advocacy
- Envisaged Outcomes
• Bus Transport
- Background
- Key Findings
- Further Research and Advocacy
- Envisaged Outcomes
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I. Introduction & Purpose
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CREW Project Background
• To enhance visibility of Competition Reforms among Dev
Country Policymakers & Key Actors - CUTS experience
• Objective: Link reforms to consumer and producer welfare
• Four Countries & Two Sectors (Choice based on Background
Research and Consultations)
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Methodology
• Selection of sectors
• Identification of States in India (based on literature review and
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internal/external discussions with experts)
- Staple Food: Rajasthan & Bihar
- Bus Transport: Gujarat & Madhya Pradesh
Selection of relevant reforms (staple food and bus transport) –
national and state-level
Collection of data – primary and secondary
- Secondary data: policy documents, relevant data, SH views
- Primary data: survey in 4 states, interviews with key SHs
Data analysis
Further details of Methodology in FCR-PG
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2. Staple Food
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Key Findings
• Seed
- Reforms have had significant impact on users (farmers) through
improved quality, low cost and access
- Number of private players has also increased (over past ten
years)
• Procurement (PACS in Bihar):
- State monopoly since 2013
- Present at every Panchayat level
- Limited impact on ground – however, high potential to reach
out to the farmers
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Key Findings
• Marketing
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Rajasthan
Adopted APMC Model Act in 2005
Only 2 licenses for private markets and 76 licenses for direct
marketing
Entry barriers: excess documentation, security deposit, location
of buying points, minimum produce to be bought
Bihar
Abolished AMPC Model Act in 2006
Slow but gradual increase in private players
No investment in infrastructure
Only large farmers (and traders) seem to have benefitted
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Further Research & Advocacy
• Issue: Impact of current procurement system of wheat & paddy
on farmers welfare in Muzaffarpur, Bihar
• Methodology:
- 4 Blocks - Kanti, Bochaha, Turki, Silaut (20 – 25kms from
Bhagwanpur Mandi, Muzaffarpur)
- Primary data
 Focused Group Discussion - PACS Members, Farmers
 In-depth interviews - Local Agriculture Officers, Local Aggregators, Private
Players
- Available Secondary data
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Emerging Issues
• PACS
- Delayed procurement order (wheat)
- Lack basic equipment (Moisture Meter)
- Limited storage facilities
- No direct authorization to pay farmers
- No technical/financial/administration support provided
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Emerging Issues
• Farmers
- Requirement of Land Possession Certificate
- Sale at price lower than MSP to local aggregator (sometimes
even the PACS), especially small farmers
- Bias purchase by PACS
- Dissatisfied with PACS
• Local Agriculture Officers
- Irrational moisture content standard (wheat)
- Lack of coordination between Government Deptt & PACS
• Aggregators
- Paddy procurement below MSP, wheat during season is lesser
than MSP then higher
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Envisaged Reform Pathway
PACS Reform
• PACS have potential to help small farmers and needs
strengthening (institutional/technical/financial)
Agriculture Markets
• Policy should differentiate between small farmer/medium
farmer/large farmer
• Access to competitive and organised market for farmers (state
oversight)
Private Sector
• Enabling easier entry and better engagement of private players
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3. Bus Transport
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Background
• Motor Vehicles Act
- 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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Key Findings (Gujarat)
Current Situation
• Stage carriage monopoly to GSRTC on intercity routes (1994
Govt. Gazette)
• Shrinking fleet size of GSRTC, led to the entry of private
operators
• High operational cost of GSRTC (about US$47mn in 2012-13),
burden on the state exchequer
• Private operators deemed illegal on the stage carriage routes
(Only 2%-18% respondents found service of the public operator
significantly better than private competition)
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Key Findings in Gujarat
Emerging Issues
• Decline in GSRTC’s passenger carrying capacity from 1.27
billion in 2003 to 0.84 billion in 2013
• Private operators incurring additional transaction costs/‘rents’
• There is need to let private operators enter inter-city market
• Intra-city Transport:
⁻ AMTS enjoys a monopoly, even though incurring high
operational losses (Rs1.7bn in 2012-2013 alone)
⁻ Shrinking fleet size and private players are sub-contracted for
fleet operation
⁻ They have to attach their fleet to AMTS with no individual
recognition
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Key Findings in Madhya Pradesh
Current Situation
• Liberalised public transport sector after MPSRTC’s disbanding
in 2005
• DOTs function more as administrative body than performing
regulatory functions (limited to licensing and fare regulation)
• Fare determination mechanism: RTA decides the fares that lacks
an inclusive approach
• Low accountability of private bus operators: Gap in transport
availability on non-profitable routes and off peak hours
• Provision under the Planned Road Transport & Safety Bill 2014
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Key Findings in Madhya Pradesh
Emerging Issues
• Low access to passengers on non-profitable routes (~ 60%
respondents complained about availability in intercity services)
• No accountability mechanism for private operators by the state:
Delayed or cancelled bus trips (grievance mechanism absent)
• Lack of route rationalisation  unequal distribution of routes
• Lack of mechanism of PPP in intercity segment
• Intra-city transport: BCLL acts as both operator and regulator,
creating a conflict of interest
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Further Research & Advocacy
Goal: Policy reforms for efficient bus transport sector in states
• Discussions on the need, structure & functions of a ‘State Road
Transport Regulatory Body’
• Approach
⁻ Development of ‘Concept Note’: Covering issues related to route
rationalisation, better PPP mechanisms, fare setting etc.
⁻ Knowledge partnership with State Govt Transport Department
⁻ Close interaction with state level stakeholders for understanding the
regulatory environment of the state
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Further Research & Advocacy
Goal: Policy reforms for efficient bus transport sector in states
Gujarat
• Roundtable discussion with government officials: emerging willingness
to abolish the 1994 Gazette order
• Discussions with private operators – willing to pass on the impact of
reduced coast of operation vis-à-vis fare reduction
• Orientation on pro-competitive procurement (engagement of CCI)
CUTS Inputs
• ‘Approach Paper’ good practices & possible reform options
• Input for ‘Blueprint’ on ‘Intercity Transport Regulator’
• Facilitate discussions between State Govt & CCI
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Further Research & Advocacy
Goal: Policy reforms for efficient bus transport sector in states
Madhya Pradesh
• Govt. has already passed a ‘Madhya Pradesh Intercity Transport
Authority’ (MPITA) in February, 2015
• MPITA in the inception stage and needs refining (functional and
administrative)
• Orientation on pro-competitive procurement (engage CCI)
CUTS Inputs
• ‘Knowledge partnership’ to DoTransport to refine MPITA
• Facilitate discussions between State Govt & CCI
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Further Research & Advocacy (National)
Goal: Infusing competition principles in public procurement
of bus services in Gujarat and MP
• Ahmedabad (Gujarat) and Bhopal (MP) have one operator each in the
BRTS segment
⁻ Chartered Speed Carrier (Ahmedabad) and Capital Roadways
(Bhopal)
• ‘Eligibility criteria’ for bidding like in the case of BRTS, limits the
number of worthy operators hence limiting competition (lack of an
institutional guideline on competitive procurement process)
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Further Research & Advocacy (National)
Goal: Infusing competition principles in public procurement
of bus services in Gujarat and MP
CUTS Inputs
• Liasoning with CCI to facilitate discussions between CCI and
relevant State Govt Departments/officials:
1) Possible ‘institutional guideline’ on competitive procurement’ of
bus services
2) Guide the DoTs for facilitating competition among operators on
selected routes
3) Capacity building of the DoTs vis-à-vis competition principles
(Competition Act, 2002)
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Emerging Reforms Pathway
• Policy framework need to be balanced:
- State monopolies lead to burden on exchequer (in this
case bus transport)
- Withdrawal of government doesn’t necessarily promote
sectoral efficiency (in this case wheat sector)
• PPP are the way forward for introducing innovation and reduced
operation cost in bus transport (State level Capacity Building)
• State Transport Regulator (effective regulation to facilitate
emergence of modern bus transport that benefits both operators
and users)
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Thank You!
nt@cuts.org & shk@cuts.org