Private sector challenge

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Written By murali772 - 27 October, 2008

Bangalore Infrastructure Privatization Analysis Economy monopoly competition

“If you need to understand the difference between STUs and private operators, you need to compare the services provided by private operators in districts like Dakshina Kannada and Udupi, and those offered by STUs in fully nationalized districts like Gulbarga and Raichur", says Rajavarma Ballal, president of the state federation of private bus operators.

The government cannot go on with nationalization for long. It has to open up this space for private investment. Mr Ballal feels government-run corporations will never be able to invest as much money as needed in the sector, and run as efficiently as they do.

According to him, the government discriminates against private operators. The tax the government levies on KSRTC is different from what it extracts from us, he said. Ballal said KSRTC and other STUs pay a fraction of their earnings to the government. NWKRTC and NEKRTC have been exempted from tax till they break even. BMTC pays 3% of its earnings as tax and KSRTC pays 5%.
    
However, private operators are made to pay advance tax of Rs 550 per seat per quarter, irrespective of whether the bus operates and makes money or not. He said STUs suffer losses due to their inefficiency, but blame it on competition from private operators. “Worse still, the STU staff are bleeding them. They clandestinely own 75% of the 38,000 maxicabs in the state,’’ he said.

He rubbishes the argument that private operators will not ply buses to villages. “Each village with a road is covered by us in Dakshina Kannada and Udupi districts. No such private operator has ever made losses. If you offer prompt service, people are willing to pay for it,’’ he said. “If they privatize KSRTC and let us run it, we will show them 10-fold profits,” challenges Ballal. Is the state ready for such a challenge?

For the full story, click on:
http://epaper.timesofindia.com/Repository/ml.asp?Ref=VE9JQkcvMjAwOC8xMC8yNyNBcjAwNjAw&Mode=HTML&Locale=english-skin-custom

Muralidhar Rao

COMMENTS


Different rules?

navshot - 28 October, 2008 - 04:29

Do we have different rules for different districts? Why can't private guys start operations in Gulbarga? Or is it that Govt. has given permission in one district and not in the other? Tried searching for answers, but didn't succeed. -- navshot

full fledged option vs others

silkboard - 28 October, 2008 - 05:23

Okay, I agree with this line, The logic behind nationalization is that public transport is a service and not a business. In a welfare state, the government has the responsibility of connecting each village to the nearest highway or main road. But, there are several ways in which government can honor this responsibility. Forcing private operators to run non-profitable routes is one way. Government can approve routes for private players, and ensure a fixed ratio of lucrative vs non-profitable (or welfare) routes. As for levels of privatization, there could be different ways of designing this. Here is quick overview: - Full fledged - state owns roads, routes and buses owned by private players - Half hog - state owns roads, as well as routes. Bus owned by private players - Minimal - state owns roads, routes and buses. private players maintain and operate. Full fledged - Like in telecom sector, multiple operators allowed, they pick and run routes. A regulatory authority watches all action, and ensures that welfare or non-profitable routes get served. Tight control on routes - If government doesn't want full fledged competition via privatization, it can sell bus operating contracts fir every route. So, only one transportation company will server each route, but in total, (numbers used as example) 10 different companies could be serving the total of 1000 routes. Service level could be monitored every six months, and contract for each route renewed and handed over to another player if feedback isn't good enough. In above scenario, there could be rules to prevent one single bus operator for becoming a monopoly. Outsourcing operations - last and not so good option would be to outsource operation of buses to private parties. state could own buses as well as routes, but outsources running of buses to private parties.

irrationality is not uncommon

murali772 - 1 December, 2011 - 13:49

As the name suggests, Public transport is not a profiteering nor a lucrative business. It is for providing subsidised transport to those that need it - like office goers, students, factory staff, etc.

This argument could extend to healthcare and education also, apart from power supply and water supply. So, would you say the government should not have allowed the private sector into these areas too?

No private operator can invest the huge sums needed for land & infrastructure such as depots for parking buses, maintenance facilities for buses, etc, & still be able to make substantial profits if the tickets rates are to be kept affordable for these sections of society, particularly in larger cities. In smaller cities like Mangalore, most private operators use road sides for parking buses overnight & for servicing & washing them to make ends meet !

The answer to that is in the following specific point, listed in the draft policy paper, accessible here

"8. All bus stands to be taken over and run (or better still - leased out to professional contractors) by local bodies, like BMP, City Corporations, Municipalities, etc, making the facilities available to all service providers against user charges."

The concept has thus not lost relevance & will remain so since there will always be those that need subsidised transport, & cannot pay enough to allow the bus operator/s to make sizable profits - this is so, even today & even in the developed world.

On the question of affordability to the common man, these extracts from the report put out by the Ministry of Petroleum - "With improved efficiency, the fare structure can continue to remain low while still providing for overall viability of the operations" should provide the answer. And, such efficiency cannot come about as long as the services remain the monopoly domain of government service providers.   

At the same time, public monopolies are known for inefficiencies & well-known problems such as graft, which need to be tackled periodically by citizen groups such as praja.

till kingdom come??? But, PRAJA has more or less given up.

Cities such as Seoul, Bangkok & Santiago have graduated out from the tens of thousands of private buses that were causing havoc on the streets & now have better, more disciplined govt owned /regulated services, whilst streets of cities like Manila & Mexico city continue to suffer.

Why look all over the world, when you have fair examples in our own backyard (check this post by Mr Dhanuraj, Director, Centre for Public Policy Research, Kochi)? And, all that's required is to accept their role, and facilitate their operations.

City road transport, due to it's inherent nature is a resource that, if allowed for commercialization, would greatly inconvenience all other road users. What we need to pursue must be a course along the lines of a welfare state as suggested by the news article, & not encourage more chaos on an already congested city road network. One blueline service was enough to prove this for India. We do not need to test again what has already been proven all around the world several times over.

This is a matter of traffic management and policing, which has to be good either way. And, the welfare state argument could extend to other sectors also.

Wonder why this is so hard to understand & accept !

Understand, may be; but not accept, and there perhaps lies the essential difference

Other than the one shrill voice here, there have only been a few murmurs every now & then, mostly complaining about BMTC's well-known inefficiencies - none are seriously demanding privatization.

If you go through the various debates, it will become fairly evident that there are enough people supporting the idea of competition (nobody is talking of privatisation, please), while there are many who are non-commital largely because they are not comfortable about being seen as 'politically incorrect', and there's one irrational voice that champions the status quo. Similar irrationality shows out in another area too - the debate on Kannada number plates. Both the subjects have been debated enough and more, and, as far as I am concerned, I would like to limit my engagement only to rational beings.

So, I don't believe that there is any quick-fix solution - we might have to wait till Metro ph-1 has been completed & see how BMTC operates feeders then & revise the PIL at that stage, if improvements are insufficient.

stage n+1 ???

Meeting with Mr Ballal

murali772 - 24 November, 2011 - 15:16

I was in Mangalore last week, and took the opportunity to meet Mr Ballal. Amongst other things, he stated that he was headed to Delhi the next day to prevail upon the Transport ministry at the centre not to allow amendment of a certain section of the Motor Vehicles Act, which, if allowed, would empower nationalisation of routes by state governments without reference to the centre.

After having revoked the notification issued by the S M Krishna government, allowing for stage carriage service operations in cities other than Bangalore (which paved the way for the birth of Bendre Nagara Saarige in Hubli-Dharwar), the present Karnataka government has apparently been pursuing this. The aim plainly is to hold out a constant threat to the private operators, and thereby extract money from them. Mr Ballal couldn't put it as explicitly as that for obvious reasons, and, as such, these are my conclusions from the talk.

I suggested to him that he should instead be demanding scrapping of the power to nationalise itself, with the concept having lost its relevance in today's world.

He appreciated the support, and offered to team up with PRAJA in helping liberate the bus services from the stranglehold of the government.

Very clearly, as I can see it, it's perhaps time for a PIL, along the lines detailed here.

Private bus service is very

flanker - 27 October, 2008 - 17:03

Private bus service is very good in Dakshina Kannada and Udipi districts. I have not traveled to the villages but on HW17 I never had to wait for more than 10 minutes for a express bus.

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