CREW Project Research Findings of Diagnostic Country Report (DCR), India Bus Transport Sector International Conference on Benefits of Competition Reforms for Consumers and Producers in Developing Countries (CREW Project) 18 -19 November 2014, Bangkok

Outline 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? Way forward

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 (b) Schedule B-those which were to be progressively state-owned and in which the state would generally set up new enterprises, but in which private enterprise would be expected only to supple­ment the effort of the state; and

2. Case of GSRTC – monopoly over ‘Stage Carriage’ permits: Who gains from it?

2.1 Impact on supply side 2.2 Impact on Commuters 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 Majority of commuters aware of ‘illegality’ But, 2/3rd of the respondents are indifferent No significant increase in fare No significant fare difference

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 ?

3. Case of AMTS – Monopoly over intra-city regular bus transport What cost to the State?

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

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

4. Case of MPSRTC – Abolishment in 2005 What impact on competition on the ground?

4.1 Impact on producers 4.2 Impact on Commuters 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 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

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 well- resourced institution – M.P. State Public Transport Regulatory Authority

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

Thank You

Appendix Data Graphs

2.1 Impact on supply side – On GSRTC

2.2 Impact on commuters

3.1 Impact on suppliers – AMTS performance

3.2 Impact on commuters Ahmedabad falls behind Bhopal in terms of incremental changes, despite higher overall satisfaction

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 Most respondents also report only marginal increase in fare, which has been largely in line with general price rise Marginal increase in fare and in line with general price rise