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MOTORINDIA
l
February 2012
The operational characteristics, on the
other hand, do not show any distinc-
tive trend. While the kilometers oper-
ated daily by each bus have shown a
steady increase, the proportion of the
total fleet on roads has been declining.
The overall financial performance
of urban SRTUs in India appears to be
gloomy. In fact, they are heading to-
wards a severe financial crisis. These
corporations had incurred an accumu-
lated loss of about Rs. 13 billion by
March 1999, which is nearly as large
as of Rs. 14.60 billion, the aggregate
amount of equity of both the Union
and State Governments, and reserves.
Further, this accumulated total debt is
larger than the total assets of SRTUs.
As earnings per km have grown
slower than costs, losses per km have
grown by nearly 7 per cent per annum.
This is because of inefficiency in op-
erations, uneconomical operations
to meet the universal service obliga-
tion, and universal subsidization of
services. In addition, buses are taxed
more under the motor vehicle taxation
regime.
A result of the continuing losses has
been the inability to generate adequate
funds for capital expenditure and re-
placement of the rolling stock. There
exists a vicious circle of continuous
losses leading into inadequate funds
for capital expenditure and poor man-
agement of the fleet, which in turn
leads to poor operational perform-
ance, causing even higher losses. The
mounting losses imply greater Gov-
ernment commitment for provision of
public transportation services in urban
India. There is thus a need to review
their current operations to identify the
areas for reform.
Rationale for restructuring
It has been universally recognized
that improved transport systems are
essential for accelerated economic
growth. Transportation in the urban
context assumes even greater signifi-
cance. Large agglomerations are seen
as the vertices of continued economic
growth. The productive efficiency of
urban agglomerations will be main-
tained only if the mobility require-
ments in cities are fully met.
However, this productive efficiency
in urban India is now threatened due
to the increasing number of vehicles
causing congestion, leading to slower
speeds on roads. Obviously, trans-
portation infrastructure could be the
primary bottleneck for the unimpeded
growth of the State. Thus, it is impor-
tant that the existing transportation
infrastructure be utilized optimally.
Meeting mobility needs would imply
a greater modal share of public trans-
port.
The two relevant options for bus
operations highlighted above are the
gross cost and the net cost options. In
deciding between the two options, a
key concern is whether large private
operators would come into the sec-
tor in India. If not, the net cost option
will not solve the safety problem. The
gross cost option is also favorable be-
cause it is easier to integrate fares be-
tween different operators and differ-
ent modes with the gross cost model.
Finally, if the Government realises
the need to subsidise commuters, the
gross cost option would shield the
private operators from such revenue
risks. However, the gross cost option
will require more monitoring because
the private operator will have no in-
centive to attract passengers or accu-
rately collect fares. If the Government
cannot provide the required monitor-
ing, then the use of the gross cost op-
tion will end in lower quality, falling
ridership and increased costs to the
Government.
Given the immediate constraint in
urban India in terms of the lack of
proven capacity of the private sector
to operate large public transport fleets,
it may be a more feasible option in the
short run to initiate private participa-
tion in the public transport sector the
gross cost option. In addition, it would
allow the Government to gradually
phase out subsidies to minimize po-
litical and community resistance to
restructuring. Over time, operations
under the Kilometre Scheme would
allow the private sector also to devel-
op its capability to operate and man-
age large public bus fleets.
Restructuring of STUs would help
improve their financial performance
and conserve public funds. Induction
of the private sector into the opera-
tion of buses would enable improved
performance and additional capacity
available. Yet restructuring of STUs
alone would not be sufficient to bring
about a marked improvement in the
quality of public transport.
To bring about the required im-
provements and attract private invest-
ments in public transport, it is neces-
sary that several planning, licensing
and monitoring functions in public
transport such as the following are
performed effectively:
• Fixation of fares and fees route and
network design
• Route allocation and issue of permits
• Specification, monitoring and en-
forcement of quality service stand-
ards
• Co-ordination
• Data collection and management
• Dispute resolution
• Recommendations to the Govern-
ment on policy matters
Finally, it is necessary to effect
some kind of fare integration as be-
tween bus services and urban rail
services to make the public transport
system more attractive.
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