Though rather dated (November 1, 2005), the study by the World Bank recommending privatisation of Inter-City Bus Services, is gaining greater currency by the day. As such, even if the jury is out on whether privatisation can work in cities, the argument in support of the same, as far as Inter-City Bus Services is concerned, is too persuasive to be ignored any longer. May be a PIL here is the need of the hour.
Some excerpts of the recommendations of the study:
Despite restrictive granting of permits and unfavorable/discriminatory tax treatment for private operations, the private sector has won back a rapidly increasing share of the inter-city road passenger market, and now about 80 % of the bus fleet is privately operated. A study of private inter-city bus operations in three states has confirmed that there is a significant amount of clandestine operations by private operators who provide stage carriage services while holding contract carriage permits. However, the services appear to be generally satisfactory, with between 60 and 70 % of users surveyed rating the services either satisfactory or good.
The Association of State Road Transport Undertakings (ASRTU) has made a proposal for reform, the thrust of which generally supports corporatization of STUs, subsidies, compensation for social mandates imposed by Government, cross-subsidies among routes, and an expanded role for STUs in the regulation of inter-city services. This report's recommendations, however, differ from the ASRTU proposals in some important respects: it is doubtful that the social obligations imposed on STUs, which the ASRTU would like to see paid as a subsidy to the STUs, could not be delivered more efficiently by the private sector; the case for the capital and route operating subsidies advocated by the ASRTU in the inter-city bus markets is at best weak; their proposed bundling of unprofitable routes with more profitable ones in order to provide a cross-subsidy to the former has generally been found unworkable; and the proposal that STUs act as both operator and regulator presents serious issues of conflict of interest and moral hazard.
If the primary objective is the best quality service at the lowestpossible cost, the long-run strategy for inter-city bus services must be to move the STUs to majority private ownership in competitive markets as early as possible. Arguably, competition is more important than privatization. However, so long as there are large labor forces employed by publicly owned carriers with high unit costs, the pressures to restrict competition and keep tariffs high to protect the least efficient carrier will remain strong, and this will protect not only the STUs but also serve as an umbrella to protect marginally efficient firms in the private sector as well - all at the expense o f higher fares for bus users or higher taxes for the citizens at large.
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