1. 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)
November 2014, Bangkok

2. 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

3. 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

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

5. 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

6. 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 ?

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

8. 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 vs. revenue of Rs 1.44 bn in
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

9. 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

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

11. 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 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

12. 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

13. 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

14. Thank You

15. Appendix
Data Graphs

16. 2.1 Impact on supply side – On GSRTC

17. 2.2 Impact on commuters

18. 3.1 Impact on suppliers – AMTS performance

19. 3.2 Impact on commuters
Ahmedabad falls behind Bhopal in terms of incremental changes, despite higher overall satisfaction

20. 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