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Delhi's bus privatization experiment
Written By Naveen - 24 September, 2010
BMTC Bus Bus Stops Privatization Delhi Analysis public transport Buses
Excerpts from a 2007 paper about details of Delhi's city bus privatization process is reproduced below :
The green signal for the privatization of the public buses in Delhi was given in 1992. That year, Delhi became the first city in India to introduce private buses on such a large scale. It was also decided that the private buses would be directly under the administrative control of state transport department of the Delhi administration. By simply being allowed to avail either a stage carriage or a contract carriage permit, any individual operator was eligible to ply a private bus in the city. Individual operators, under various schemes like graduate scheme, SC/ST scheme, ex-servicemen scheme, suvidha scheme and so on, were encouraged to apply for these permits.3 Thus began the era of the Redline bus in Delhi which, with hindsight, one can label as the earliest prototype of today’s Blueline. Soon enough, the Redlines proved themselves to be not only a menace to traffic, with fast and reckless driving, but also gave Delhi a steady death toll of pedestrians and cyclists. Not unsurprisingly, the ensuring public outrage forced the government to call off the Redline scheme. But what should have led to a decisive change of perspective and policy in the management of public transport became instead a simple change of colour. The Bluelines thus were presented as the solution, without exorcising in either spirit or substance the disturbing ghost of the Redlines.
In 1996, the Delhi government attempted a further refinement of the privatization model, which they termed as ‘under DTC kilometre scheme’. The plan was to now forge a public-private partnership; the essential aim being to enforce a level of discipline amongst the disorderly ranks of the many Blueline entrepreneurs, who were now operating across a number of bus routes in the capital. The ‘under DTC kilometre scheme’, was intended to subject the Blueline buses to the operational discipline of the Delhi Transport Corporation (DTC). Thus, as part of this new public-private partnership, the Bluelines were expected to follow the DTC timetable and have a DTC conductor (ticket collector) on board, with only the drivers in the employ of the bus owners. Further, the bus owners holding the requisite permit would get a fixed amount depending on the distance covered by the bus in a day. With these changes, the Delhi administration presumed that the scheme would be self-sustaining and require no subsidy. However, the kilometre scheme rapidly broke down, the partnership discontinued by early 2002, and the privately operated Blueline buses were released as an unchecked fearsome force onto the roads of Delhi.
In 2002, the Delhi administration once again sought to tinker with the transport plan with measures intended to be even more radical than those previously taken by the government. The plan, titled ‘Strategy for Deregulated Sectoral Operation of Delhi’s Stage Carriage Public Transport System’, argued that there was a need to further enlarge the scope of the ‘private sector’ in the existing public transport system by introducing ‘a scheme for augmenting the bus fleet …through corporate houses and big operators.’ Clearly, the Delhi administration, as early as 2002, had already begun to introduce corporate profit to regulate public transport in Delhi. This despite the fact that it was only too evident that both the Redlines and the Bluelines had turned dangerous for the commuters in Delhi precisely because of the attempts to privatize and run them on the principle of unchecked profit.
The plan of 2002 was widely criticized, especially by the innumerable small time bus entrepreneurs, who clearly were going to be the first victims of the entry of large capital. While big fish eating small fish is the general trend in processes for capitalist accumulation, the Delhi administration, as an added bonus to corporate profit in the public transport sector, even decided to sink the fishing boat itself so that there would be no check on the fattened big fish.
The brief account of the introduction of private buses in Delhi shows that the present crises of Blueline buses is being essentially sought to be cured by a more relentless commercialization/privatization of transport. The new twist this time round, however, could be that any added gain in safety from the ‘high capacity’ premium buses would be balanced by the fresh problems of access. That is, a large number of the poorer sections of the working population of Delhi will now have to pay higher fares for their safety and travel or be forced to risk travel on perhaps cheaper but even more rickety and dangerous private buses, whose owners will be even more voracious in their appetite for money as they will be constantly squeezed by the big transport players.
One can already envision how the problem of transport access is likely to take shape. The ‘high capacity’ buses are expected to charge high fares because the government would not provide any subsidy, a policy already outlined in the National Urban Transport Policy of 2006. The policy document unambiguously states that ‘the basic principle in financing public transport systems would be that the government should provide the infrastructure but the users (direct and indirect within the city) must pay for the operating costs and the rolling stock.’
Clearly, public transport in Delhi is moving rapidly towards its tryst with full-fledged corporate led privatization. For those making the decisions, it doesn’t seem to matter that the experience with profitable transport has been a chilling race with death. Since 1991, the mass public transport logic on the ground has basically been created to push small bus entrepreneurs to embrace desperate and fatal practices: they have to race for money to fill their buses to the brim with hapless commuters and cut corners with safety regulations. A vast chain of corrupt practices have developed in which traffic police and transport officials have been paid to look the other way instead of checking violations. Finally, roads are now increasingly crowded by the middle class that is apathetic to bus commuters because it drives cars acquired through loans.
In the original scheme of things, in Road Transport Corporation Act 1950, the rationale for mass public transport in the country was to facilitate social and economic development by offering cheaper travel, linking the hinterland with urban centres, providing subsidized service to the poor and students, better passenger amenities and well-organized maintenance. The commercialization of Delhi’s bus service has not only defeated the above but clearly makes the whole question of privatization suspect in terms of realizing goals such as safety, efficiency and affordability.
Thus, the recent attempts to solely blame ‘errant drivers’ is inadequate, if not fallacious. These ‘errant drivers’ have been made possible by the logic of public transport privatization; they are the result not the cause for turning buses into killers. And unless the monster of unchecked profit, whether by small players or corporates, remains the mainstay of the transport planning, Delhi’s roads will be unsafe and the body count will rise. The meaningful debate should be on developing the means to revive and reconfigure a sustainable notion of mass transport as a public good that is regulated by carefully designed norms for efficiency, safety and affordability.
COMMENTS
Naveen - 28 September, 2010 - 12:38
SB -- about Bogota.....
"In practice, the bus companies are not responsible for the actual provision of bus services; they are merely intermediaries between the bus owners and the government. The bus drivers are critical actors in the provision of public transportation services. The competition between them has led to dangerous driving, disregard of schedules and mistreatment of passengers."
"The weakness of the state translates into policies that overwhelmingly and disproportionately favor the most powerful actors — the bus companies — at the expense of weaker ones, such as bus owners and bus riders. The bus companies extract ample rents from doing little to provide adequate public transportation and exploit bus owners by having them pay for the right to use a route and by forcing them to compete with one another. At the same time, bus owners support bus companies’ efforts to increase the fare above its true costs because it is one way to survive despite decreasing ridership."
"At the bottom lies the rider, the least powerful actor. In theory, a capable and strong government could protect the rider by diminishing these power imbalances. In strengthening the city government’s capacity and power, therefore, lies the beginning of the solution to the problems present in the public transportation system."
Source.
1) Initially, the status of bus transport in almost all developing country cities (like Bogota, Manila, Bangkok, Jakarta, etc) was one of total chaos with too many private unregulated providers (what is similar to Mangalore /Kochi & what has become of Delhi now). All these cities are still struggling to get out of the mess & provide regulated /efficient services, but serious attempts are very difficult owing to the bus unions, who can't be broken. Delhi will also continue to struggle now, unfortunately.
2) I think the assumption that the poor record of regulation in Delhi as the factor responsible for the blueline fiasco is incorrect, though it may have led to the case becoming more extreme than it might have been in other cities. From the above case study, it's amply clear that bus firms or bus owners handing over their buses to drivers for a fee is common even in Bogota.
3) Racing & driving recklessly to gain advantage in competition is also a worldwide phenomenon that cannot be ignored in any discussion on improving bus services in the larger Indian cities, since methods of attempting privatization without careful analysis can be catastrophic - there are too many bus dependent people, too many pedestrians, very high traffic volumes, besides other negatives with unregulated providers as stated above - even Bogota is not rid of them despite Transmilano. Thus, it cannot be set aside purely as a regulatory failure, but must be seen as an industry hazard that needs attention.
4) In India, in place of unregulated private providers (& the chaos & sub-standard conditions that come with it), we have public monopolies that lose tax payers' money, are generally inefficient & with few incentives to be responsive to passengers' needs, though BMTC has been performing somewhat better.
5) I don't think you will find any published financials (for private city bus businesses) since owners typically have few buses & do not maintain accounts (even if they did, it might not be available on the net). The question of whether or not bus business is profitable depends on what quality the bus provides. For the same quality levels that BMTC provides & at the same fares, the private operator might find it very hard to manage since he is unlikely to have expensive bus maintenance infrastructure & depots. Hence, typically private buses (on Hosur rd or Marathalli) are extremely shabby & very poorly maintained since they are forced to offer even lesser fares than BMTC to attract some patronage & cater to very low-paying commuters.
6) What I have been attempting is to utilize the existing strengths that BMTC has (ie. an institutional structure & experience) & combine it with possible private sector efficiencies to improve bus services.
7) As you rightly mentioned, instead of focussing on coming up with an optimal model to improve bus services in the city, the discussion almost always shifts to center around an extreme position - demands for small-time bus players to be allowed in parallel with no regulation, whilst criticizing BMTC no end & the assertion of viability of private run buses, though this is irrelevant in the context. In my opinion, opting for deregulation or allowing private parties of whatever form without careful analysis is something worse than what we have now.
8) The only way this can move ahead sensibly is for "fence-sitters" to participate more. I request you, IDS & others interested to use the "Urban bus toolkit" from the link above, read the various case studies, play with the tool & revert with your opinions rather than be drawn into questions of viability & dwell upon the rejection of an earlier application for operating buses.
The real issue clearly is far bigger than this -- finding solutions to distribute subsidies without any misuse by private parties & help commuters with more efficiencies in bus operations.
Naveen - 24 September, 2010 - 05:22
Excerpts from a writeup about the Blueline buses on "Our Delhi Struggle"
The Blueline’s grim numbers stem entirely from two perverse economic incentives: the driver’s salary is wholly dependant on how many fares he picks up, and each bus is in direct competition with every other bus on the route.
The Blueline buses are privately-owned, not city-run. While a city-run service would prioritize getting its citizens from A to B, a private driver is less focused on customer service than on overtaking the next bus down the road. After all, the faster he drives, the more competitors he passes, the more passengers he picks up, and the more money he makes.
The safer he drives, the more buses will pass him, and the less money he earns.
Blueline buses are not typically driven by their owners. Instead, thousands of drivers rent their buses from a smaller group of owners at a cost of
three or four thousand rupees a day plus maintenance
. With passengers paying between two and ten rupees a ride, drivers are forced to pick up a few hundred people before they can even begin to consider buying lunch.
Delhi govt fails to phase out Bluelines ahead of CWG
Naveen - 24 September, 2010 - 05:27
Last November, the government had announced that an efficient private bus service, to be run by a corporate entity on the pattern of those operated in cities like Paris and London, would be launched much before commencement of the Games.
But with just a month left for the Games, officials in the transport department now said the "ambitious project" will not take off at all ahead of the event.
The cluster bus service was conceived as part of plan to improve the public transportation system in the city.
In fact, in November, the government had awarded a contract to Star Bus Services Pvt Ltd, a private entity, under which the company was to run 40 low floor luxury buses, having modern gadgets including GPS facility, on 32 routes in South Delhi.
As per the agreement, the Star Bus Ltd had agreed to increase the fleet to 250 later.
The contract was awarded to Star Bus Services Pvt Ltd after it emerged as the successful bidder in the tender process.
As per the plan finalised by the Delhi Integrated Multimodal Transit System (DIMTS), the transport department will finalise the bus fares, which will go to the government, while the private operator will be paid a fixed amount on the basis of every kilometre travelled.
But almost after 11 months, the project failed to take off.
Click here for full article
So it is an accepted fact that a stage carriage license allows private parties to participate in operating city bus services as conceptualized by NUTP, but I think the key is the concern on rash driving and overspeeding to make margins causing fatalities and violations in the process of operating the service which seems, on the face of it, to exceed the levels provided by a publically run organization like BMTC.
While accepting none of the models so far in the country have been able to address that, probably because of lack of attention to detail, we need to come up with specific SLA's with enforcement guidelines for each fail point and how a regulatory body will be able to enforce this? What is practically possible to do? What is the effort it will take from the various authorities?
A white paper from our side will help nail these nitty gritties can be of tremendous value add to authorities beyond what they can already do, which is, issue licenses. The white paper should touch upon how to enforce ethical pratices from private parties running city bus services and how those can be monitored by the regulator with nothing left for figuring out later. The target should be that points from this white paper can be put directly into an agreement that will be signed when providing the stage carrier license.
Not sure if I am the right person to start it though. Looking for help.
Naveen - 26 September, 2010 - 05:26
Can the City PT services be run profitably? Well, of course yes because BMTC itself does so today!
BMTC is being given land for depots /workshops free of cost by govt. Part of these lands are commercialized (eg. TTMCs). Thus, they have revenue sources through real estate that they never paid for & this is how they manage full recovery of operational costs. If they did not have these non-bus operation revenues, they might never have managed to post profits or their profits might have been lower.
Further, in relation to total investments amounting to perhaps several thousands of crores (if present day land values are included), what profit they generate is too low & assuming private operator/s invest to the same extent based on market rates for land whilst keeping bus fares at the same level as BMTC, they would quickly go under since revenues generated would never be enough even to service debts taken for land acquisition for depots & for purchase of buses, let alone pay wages & maintain buses.
Thus, the assumption that private parties can cope with expenses for the same quality of services & still manage profits because BMTC manages to do so is entirely fallacious.
But when you cut things down to zones and routes, there will be reds and blacks there, and people may not bid for routes or zones that are not profitable.
Correct, only if franchisee/s are dependent on revenues through bus fares alone. The logical thing to do is to reduce their dependence on actual bus revenues.
Every zone will have both profitable as well as non-profitable routes. Conditions must be specified when zones are franchised that the entire zone (with it's non-profitable routes) must also be serviced. Though such non-profitable routes might not produce higher incentives for operation by way of passenger numbers, it would still make sense to the franchisee/s to operate there since any route operation increases earnings for them.
In the model that I proposed, pay-offs are also based on km driven & incentives if pre-determined schedules are met strictly. Thus, the franchisees will still have earnings, but to a lesser extent than high density corridors.
If you leave the external aspect of pricing out, the fact of life is that most people will prefer private transport
The fact of life is that people will use any transport (public or private) that suits their needs by way of competitive pricing, quality & routing. Being private (or public for that matter) does not automatically enhance credentials for the operator. The operator has to strive to provide services that are best rated by all users collectively (not as a particular group or as individuals).
The inner most area (CBD) is one zone, then multiple between CBD and ORR, and larger but probably not so lucrative ones between ORR and PRR. Story for outer areas could be centered around commuter rail stations, or trunk route stops/interchanges.
If zoning is done in fragments & does not cut across the city center/s, bus operation will also need to be fragmented & this will result in higher costs & inconveniences for commuters since they will have to make needless multiple transfers, assuming only one firm operates in each zone. Some fragmentation is unavoidable (such as feeders, ditributors, local closed loop shuttles within zones, etc), but trunk routes, the real 'bread winners', will have to be included for most zones.
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