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India Road Transport Service Efficiency Study

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Public Transport

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.


For the full text, click on:

http://www-wds.worldbank.org/external/default/main?pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&theSitePK=523679&entityID=000012009_20051208130941&searchMenuPK=64187283&theSitePK=523679

Muralidhar Rao

Comments

silkboard's picture

Old story

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58 users have liked.

... and no new facts mentioned in your post.

You should write about ways to tackle what we all fear, buses racing with each other on streets, fare fixing via cartelization etc. Without addressing those, you can't win popular support (2/3rd majority), even though you may still have majority of readers on your side of argument.

How will the operators share resources (road, shelters etc)? Will they pay one time road tax, or recurring road use surcharge? Will they pay for maintenance for bus shelters, terminus etc? Does the state still KSRTC around (to make sure fare-carterl doesn't happen), or should it withdraw completely?

And then again, inter-city and intra city are two different beasts, require two diferent type of analysis. Inter city is rather easy to buy, there are enough sceptics for intra-city competitive model.

Also, look at trunk route service, and local shuttle service (currently left to auto rajas) in slightly different light.

To make your point more sellable, you need to add some more analysis.

murali772's picture

a la Pak govt

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59 users have liked.

When sectors such as airline, telecom, banking, insurance, etc were opened out also, similar fears were expressed. And, since many things had not been properly thought through, there indeed were a lot of hiccups, initially. Eventually, the processes matured, and everyone is better off for it all today.

As such, while agreeing with you fully that a proper regulatory regime needs to be in place, we cannot go on perfecting it till kingdom come before deciding to get one's feet wet. We start with what we have, which in itself is quite a lot, and then go on building on it based on hands-on experience.

Experiences in other sectors have shown us the way out. However, for sceptics and status-quoists, nothing will ever be enough! It is like Pakistan government asking for credible proof of involvement of its people in the terror acts in India.

Muralidhar Rao

Muralidhar Rao
silkboard's picture

unreasonable

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Murali sir, I must say I was shocked to see the title of your comment, though I can see why you see it that way.

With enforcement and regulation setup so lax that people can literally do anything on the roads and get away, you can't ignore that before moving on to suggestions that will heavily rely on them. Not to say that your arguments are not compelling, but its like this. Its like looking across a river and saying that I love that town and I so want to be there, but not realizing that a bridge needs to be built first to get there.

The focus right now should be on a regulatory authority, separation of regulation and actual operation of transportation services (both of which are performed by KSRTC for state, and BMTC for the city). Parallely, focus should be on enforcement, of all drivers on the road, and not just those who drive the buses.

With reasonable suggestions on above lines first, you will have an easier time leading on to the eventual proposal of competition and privatization.

The assumption you have made is that you are dealing with entities like Pakistan and Terrorism, thats what your last comment tells us. Rest of us are reasonable and as city-loving as yourself :)

murali772's picture

shock treatment

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Silkboard avare'

I sincerely believe you all are just pussy-footing the issue, and thereby providing enough excuses and alibi's for perpetuation of these government monopolies.

Let's just take the example of Kochi and Thiruvananthapuram (Tvm). My brother and his wife, both grew up in Kochi, and did their architecture together at the Engineering College in Tvm. They had been using public bus transport services extensively in both the cities, and even though they travel in cars these days, they are fully aware of all aspects pertaining to the matter, particularly with my brother recently being appointed by the Govt of Kerala as the Chairman, Technical Advisory Group, Urban Planning.

Kochi city is almost totally served by private players in the public bus transport services arena, whereas in the case of Tvm, it is just the opposite. And, as a result, there is a world of difference in the quality of services available in the two cities. In the case of Kochi services, aspects such as frequency, connectivity, dependability, cleanliness, etc are extremely good, compared to the Tvm services. The only aspect where they score poorly is with regard to over-speeding. But, if you look at it, this over-speeding is resulting from competition to grab as much custom as possible, in order to sustain their operations even at the irrational and uneconomical fare levels fixed by some babu's. And, the simple fact of the matter is that if the grip of this license-permit regime is relaxed a bit in these aspects, everything will fall in place, and you'll have the best of services, solving in its wake all the traffic problems of the city.

Where the tightening is required is in policing against over-speeding, over-loading, etc, which cannot happen today, since under the conditions prevailing, it is only the police and such government officials who can 'manage' the system, and therefore own the operations. A TVS will not want to touch this business even with a barge pole, though the name TVS itself came into reckoning through in this business.

Kochi is the commercial capital of Kerala, with a population of 6 lakhs, about double that of Tvm. And, for the level of activity in the city, the usage of motorised two-wheelers is comparatively low, largely because of the dependable bus services.

The situation is not too different in our own Mangalore.

And, in the only aspect that the private operators fare poorly, namely over-speeding, our own BMTC (and Tvm's government bus operators) is not some shining beacon of virtue either. Besides, whereas in Kochi and Mangalore, this is resulting out of economic compulsions, in the case of BMTC, it is resulting out of the plain arrogance of its drivers.

My submission, as such, is that if we campaign for entry of the private sector into these services, the rest of it will fall in place automatically, since a TVS will make that a pre-condition. And, the cange can be brought about by the stroke of a pen. No more grand fly-overs, TTMCs, dedicated lanes, chopping-off of trees, and related scams. In fact, not a single paisa to be spent by the government.    

Muralidhar Rao

Muralidhar Rao
silkboard's picture

so what to do next?

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59 users have liked.

Now that you have labeled pussy-footing accusations, suggest what should we do next on this matter?

Is PIL the only way forward? The Lawyer was clear that day that the other approach (asking for more powers to BMLTA) seems more feasible. Do you want to meet him and prepare better grounds for a PIL like this?

Or, do you want to try meet Transport Minister and pitch this to him. We will need a more solid presentation though.

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