The Indian Economy Blog

July 15, 2007

Public Transport In India

Filed under: Basic Questions,Business,Growth,Infrastructure — Pragmatic @ 1:22 pm

The term itself is a misnomer in many ways. Which transport system in India is not public? The ubiquitous auto rickshaw is used as a “hop-in and hop-out” coach in many parts of India, operating with a fixed tariff rate on predetermined routes. In Udaipur (Rajasthan), a parterre and rear vomitory has been added to these motor powered three-seaters for greater comfort and economic viability. In places like Agra and Meerut, even this enhanced comfort and adornment has been shunned to yield the proverbial ‘can of sardines’. The scarcity of alternatives for commuters allows these uncomely modes of transit to be economically viable despite many handicaps, viz., police haftas, poor fuel quality and unending traffic jams.

And, then there are those long 10/12 seater minibuses christened as ‘tempos’, belching out smoke and noise, generally ferrying over a score of passengers, ensconced inside and clinging outside, and plying on the opposite lanes on various national highways. It is no use blaming the passengers for patronising these lusus naturae, for the plebeians have no options but to brook the monster. No respectable public transport ever touches their lives, as all public sector transport agencies vie for higher profits and focus less on public service. The passengers at major towns and cities seek non-stop journeys on buses with super fast and express tags, which facilitate embarking and disembarking solely at major stations. Various service providers, both public and private, bend backwards to meet these requirements. In Maharashtra, the state road transport Volvo buses compete with privately operated Volvo buses for nonstop commuting between major cities, while minor towns and villages continue to languish unconnected by any safe and reliable means of transport.

The recent fatalities involving Blueline buses in Delhi and the reactions of the public, courts, politicians and popular media are a fascinating study in the modern Indian psyche. The public is agonised but has no real alternatives to the insufficient service quantity and terrible service quality of public transport. Those who can afford, graduate to the motorcycles or cars at the first opportunity and add to the road congestion. The courts have rendered and continue to render yeoman service but unless the correct processes and delivery systems are in place, fatigue and inertia in implementing these court orders will set in the executing agencies. The politicians have not grabbed the opportunity to assume leadership role and seek major structural reforms, when the larger public opinion is on their side. Their maudlin display of public concern is, instead, focused solely on scoring petty political points. The popular media has, as is the wont, sensationalised and hyped the incidents rather than generate awareness on the subject and seek long-lasting solutions.

There are myriad aspects related to the problem of public transport in India that have been dissected by many expert committees, NGOs and researchers. The unregulated growth in the cities and government regulations permitting higher floor space ratios in suburban areas have promoted sprawl and led to a shifting of population away from the city centre. As the offices, workplaces, schools, hospitals, shopping and other utilities continue to be based in the city, they generate long trips between residences and almost all other trip destinations. This, in turn, puts greater pressure on the public transport.

There is another aspect of this quodlibet that defies logic. The public transport system in Delhi and many other places is run by private operators, but through individual bus owners rather than an established private agency. It reeks as a relic of the socialist era when the state did not trust the private corporate houses. It would be ideal if the bus system in cities like Delhi and Pune is corporatised and opened to two or three private players; these could be reputed corporate houses like Tatas, Reliance, Bharti or GVR. These firms could own, manage, operate and finance their own public transportation systems. They will bring in much needed efficiency and accountability into the system while economies of scale and market forces will keep the tariff rates competitive. The license fees from these operators can be used by the government to subsidise non-profitable routes. The advantages of the proposed system are numerous to recount and there aren’t many drawbacks of this system except certain teething problems. However, it has to be accompanied by strict regulations, performance standards, and overall coordination by an independent regulatory authority to ensure an efficacious network of services. The modernisation of transport offices, registration and driving licensing authorities has to be a concurrent step.

A half hearted approach by having public agencies contract with private firms to operate services on a system wide basis, for selective routes, or for selected functions like maintenance is a recipe for disaster. Such a half baked approach will only further empower and profit the patron-client ecosystem of politicians, bureaucrats and their cronies appointed to various transport boards.

Spare a thought now for the Indian automobile industry. Mumbai civic corporation says that it doesn’t want the Tatas Rs 1 lakh car on its roads. Do we need to go back to licensing to decide how many vehicles to produce every year or should we have better roads and infrastructure coupled with regulatory processes (like entry fees for private vehicles at peak hours and in city centres)? The answers are obvious but one can only hope and pray that the decision makers will soon overcome their misoneism.


  1. Today, Indian cities are growing so fast that good roads and infrastructure can only take one so far. Major changes to city infrastructure take at least a year or so and during that time traffic would have grown by such a massive percentage that that particular piece of infrastructure would be quickly rendered obsolete.

    I think in the long run, some sort of regulation is required. Traffic solutions can’t always be supply side because supplies become constrained very quickly. Some disincentives must be put in place as a supplement to the supplies.

    For instance in Singapore, there is an extremely high tax on the purchase of any car and the law states that the government will confiscate the car once it has completed around ten years on the road. At the same time, public transportation in Singapore is extremely good. The consumers are discouraged to buy cars and encouraged to use an extremely hi-tech public transport system, thus reducing traffic congestion on the roads.

    This model may not work in most Indian cities but similar models and plans ought to be developed and implemented. This is not very easy of course and there is no guarantee that any of these models might work. But as you correctly said, the govt must stop resorting to half-baked, solutions and resort to proper detailed planning if any solution is to evolve.

    Comment by Amogh — July 15, 2007 @ 11:24 pm

  2. Private operators in the Transportation sector is definitely one of the steps forward…look at what it did to the Airline Industry….. maybe we could try this in the Railways Passenger segment as well rather than just the Cargo segment.

    Here in Bangalore, there are a number of the big software firms which run massive fleets of vehicles of every kind to transport their employees and all the complaining that I have generally heard of is the traffic and not the efficiency of these fleets. Probably the operators to whom these services are outsourced would also be a good choice for running our Public transport systems.

    Comment by Sid — July 16, 2007 @ 12:37 am

  3. How about trying the classical free-market solution-

    Why leave solutions to \’experts\’, whether in the government committees or at this blog?

    Comment by Gurmeet — July 16, 2007 @ 3:07 am

  4. Yes, I do agree we need a way to control the number of cars on the road.
    We should go the Singapore way.

    It\’s sad but we have to face the truth the Infrastructure in India is not going to
    improve overnight. Hopefully we\’ll get there some day.

    I never knew that Mumbai civic corporation has outright expressed it\’s views on the one lakh car on its roads.

    A similar post is being discussed on

    Very interesting ….


    Comment by Madhu Nair — July 16, 2007 @ 6:50 am

  5. Outsourcing to a reputed corporate house like Reliance or Bharti…hmmm no doubt things will improve. And so will Mukesh Ambani’s and Sunil Mittal’s net worth. We’ll be left with few hundred names running the entire economy (utilities, groceries, transport, telecom, airports, insurance, software, cement….).

    I think we should explore bringing back the British. this time around, of course there needs to be a strict “do not enslave” clause :)

    Comment by ashutosh — July 16, 2007 @ 10:14 am

  6. In Chennai, the govt MTC has the sole monopoly in public bus transport.
    Due to corruption, top heavy management, etc, the buses are inadequete and rattling tin cans. The vested interests lobby of unions, bureacrats
    and politicans (who share the leaking booty) block any effort to
    privatise or aleast allow a certain number of ‘permits’ for private buses…

    In mofussil areas of TN, there are a fixed number of private operators,
    whose ‘bus-route permits’ escaped nationlisation in 70s. and no private operator is allowed to ply buses over 100 km routes. the govt
    corporations have the monopoly over those routes, with acute shortages during peak hours and holidays. The existing private ‘permits’ are
    traded (in black) for crores of rupees. A good place to park black money and hedge against inflation. For e.g : Erode-Salem route
    (a prosperous area) was sold for some 2.8 crores recently..

    License raj is still well entreched in this vital sector. As usual the vested instests lobby of permit holders, bureacrats and politicians
    stop all efforts and decontol. Every party is funded by the looby of
    bus-owners periodically to protect their ‘monopoly’ permits. the amount of ‘donations’ are mind-boggling…

    and the common people suffer in silence, while travelling jam packed like sardines in tin cans… crazy in 2007.

    and this article in Business World shows the plight of Rickshaw pullers of Delhi, ruthlessly exploited under a archaic license raj..

    Comment by K.R.Athiyaman — July 16, 2007 @ 12:42 pm

  7. Business world article :

    Comment by K.R.Athiyaman — July 16, 2007 @ 12:43 pm

  8. Few points here …

    Even the US cannot be ranked not very high on ‘public buses’ (with exception of a few cities). Europe albiet is different – however small the town, it has a bus service. But point to be noted – the smaller the town, the poorer the frequency of buses. Many cities substitute the bus with a tram in Europe. A much better approach for smaller towns.

    Secondly, there are some in house success stories for us. While not completely fulfilling, Mumbai has a better than average public transport through BEST – guess there are lessons for other growing cities like Pune here. Another example is Bhopal – check out this:

    Thirdly – I think this also has to do a lot with the way our cities grow. It is imp to develop many ‘small’ cities than grow few large cities – thus making the whole discussion as above trivial.

    Finally – a related issue is that of road development. Unless there are wide enough roads in cities and a well maintained arterial network between cities – the problem will remain partially solved.

    Comment by Nikhil Kulkarni — July 16, 2007 @ 1:41 pm

  9. But the Mumbai Civi Council is right is expressing concern at the 1 lakh car which is being manufactured by Tatas. Do we need additional cars on the raod when the infrastructure is not in place to equip the existing number of vehicles leave alone the parking space that needs to be provided for the same. Imagine people migrating to cars from 2-wheelers and the serpentine queues of cars which we will get to see. Already, car is seen as a status symbol in our society and people will latch up this 1 lakh car as and when it is produced.So much for the ‘common sense’ of the corporates which are taking up such projects. They are ENABLING the masses to get a car and DISBALING the same masses from getting a short and sweet ride to the office/home.

    Comment by Shivv — July 16, 2007 @ 3:15 pm

  10. Pragmatic says,
    “It would be ideal if the bus system in cities like Delhi and Pune is corporatised and opened to two or three private players; these could be reputed corporate houses like Tatas, Reliance, Bharti or GVR. These firms could own, manage, operate and finance their own public transportation systems. They will bring in much needed efficiency and accountability into the system while economies of scale and market forces will keep the tariff rates competitive”.

    I guess it is very easy to say that everything should be privatized! Definitely, privatization brings in efficiency, accountability and much needed flexibility. However, privatization also looks for returns, and merely privatizing the transportation industry will not cure the problem. Will the above mentioned corporate houses invest if they for one second think that they will not see returns for a while – given the mess that transportation is in?

    Wishing that privatization will solve the problem is just not enough. Scalability is still an issue given the large number of commuters in cities nowadays. Can Bombay survive without the trains? What can other cities learn from the local trains system in Bombay? Can it be replicated elsewhere? I know, Hyderabad is experimenting with MTS. Alternative models to Tatas, and Reliance running the show (i.e., if they do invest in such projects) should also be considered on their merit.

    Comment by Girish Mallapragada — July 19, 2007 @ 9:18 pm

  11. “Outsourcing to a reputed corporate house like Reliance or Bharti…hmmm no doubt things will improve. And so will Mukesh Ambani’s and Sunil Mittal’s net worth. ”

    Well, as long as they deliver improvement I’m not going to grudge them thier profit, they’ve earned it.. Better than babu’s increasing thier net worth and delivering no improvements in return. Not to mention that the broader community – investors, employees, the exchequer etc. will get to share in private sector riches. Better than loss-making public services draining away public money.

    Combine the tax on profits, license fees and the savings due to not having to fund losses, and the total money saved by government could fund much needed social sector investments.
    As the author mentions – effective, independent regulation and transparent performance monitoring is important. We can worry that regulation may not be good enough, but then
    i. How much worse could it get?
    ii. The regulatory model is proven to work in India – eg. SEBI, RBI etc.
    iii. As citizens in a democracy, if we can’t influence our regulators, possibly we deserve no better.

    Re. Girish’s comment – a valid question; but look at the number of private players in airlines, despite them all being in the red and the probability being they will remain in red in near future. And investors line up to fund thier investments. They are betting on long term profitability. It was the same with telecom and is the same now with the Media sector in now. None of the companies and funds investing in these have made / are expecting overnight returns. In MTS, Reliance has bid for and is doing one in Bombay. So yes, corporates and investors do indeed put money in projects where profitability may be a few years down the line. After all, if VCs can invest millions in business plans that may never work out, why would they not invest in infrastructure projets where there is at least a sure market and hence a clearer path to profitablity.

    Comment by gg — July 23, 2007 @ 7:52 pm

  12. gg – If markets were transparent and fair, I would be all for Azim Premji, K.P.Singh, Mukesh-Anil Ambani and company adding billions to their net worth. Pls note that they don’t carry the same value system as Warren Buffet or Bill Gates. Forget giving back to the community, Indian tycoons would go to any length to shut down competition. Arun Sarin recently talked about the kind of pressure these local bigwigs put on the government while bidding for Hutch. Yes, Vodafone can take them on but what happens to the thousands of small domestic enterprises that can never blossom because of these “weeds” in our system that suck up all the resources to grow bigger.

    whether loss making PSUs do more damage or these “weeds”…i think it would be a good analysis project. i still think the 3rd option of outsourcing to British, Japanese, Germans or Americans is worth considering…civilization redux!

    Comment by ashutosh — July 24, 2007 @ 11:01 am

  13. “Mumbai civic corporation says that it doesn’t want the Tatas Rs 1 lakh car on its roads” – I think this is a wrong way to look at it, especially considering the poor state of public transport facilities in Mumbai etc.

    The right way could be to say, a person capable of buying 1 lakh car is capable of paying taxes on purchase, and also taxes on entering busy areas during paek times (which singapore collects using a hi-tech electronic reader in each car + direct debit from cards which drivers need to purchase + overhead electronic reading machines located in strategic peak area locations, which doesnt require the car to even stop for swiping the cards etc).

    The taxes that are collected can be routed back into public transport infrastructure by investing in better/cleaner/safer public transport which would in turn control the number of personal vehicles purchased.

    Comment by Renjith — July 25, 2007 @ 4:13 pm

  14. gg,

    What you say is true – the VC market thrives on uncertain long-term oriented returns. However, the same VCs also have their exit strategies ready when they don’t see the light soon. The issue is that incentives for early investors do not lie in seeing the project become successful but often in making a quick buck by exiting. I have nothing against firms seeking such returns -just that projects which social welfare as an objective might not be amenable to such investors.

    Your other argument that investors will stay put because they see a large market at the end is not valid. Many large scale studies have shown that the impact of market share on profits is very minimal. benefits from market share can only accrue due to two reasons – 1) ability to reduce costs by squeezing suppliers through buying power 2) ability to extract more margins from distributors/consumers through monopoly powers. Although in principle this might seem to work, the evidence from empirical analysis is almost missing. In fact the firms that deliver superior profits are often those that are not leaders in terms of market share (e.g., BMW, Apple etc.)

    My only contention is that there should be incentives beyond mere economic returns for certain kind of investments in infrastructure projects. Only then can India sustain continued private investment in projects that enhance social welfare.

    Comment by Girish — July 29, 2007 @ 2:36 am

  15. Look at Korea. It developed its infrastructure projects using money from:

    1. Compensation from Japan of its occupation of Korea, and
    2. Financial help from USA for the use of Korean soldiers in Viet Nam war.

    If you travel in Korea, you do not see a single inch of land being idle. People have no time to sit and chat. In India, the evening time is “Yatra”. Young folks could not stay home or do some thing productive. They have to get out to the market, sit on some place and
    chit chat. People in this country talk too much and do the minimum. China is following the
    foot steps of Korea, Taiwan, Singapore in infrastructure development, which should make China a 2nd-1st world country in the next 10 to 20 years. India has a long way to go!!

    Comment by Jasdeep — August 20, 2007 @ 3:17 am

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