19-11-2012, 06:13 PM
ROAD TRANSPORT SERVICE EFFICIENCY STUDY
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EXECUTIVE SUMMARY, FINDINGS AND RECOMMENDATIONS
1. The World Bank has long been involved in financing road infrastructure in India, and presently the Bank’s program exceeds USD 4 billion in the road sector alone. Government policies for the organization and functioning of the road transport industry will have major implications for the economic returns and societal impacts of these large investments in highway infrastructure now underway. This study has been undertaken to assess the present policy regime, and identify measures which may be considered to improve the functioning of road transport, in particular long-distance road transport, and enhance its already enormous contribution (3.9% of GDP) to the workings of the Indian economy. While the road transport sector encompasses a wide variety of activities, this study has focused on three aspects which were considered the most relevant to the investments in highway infrastructure ― the trucking industry, inter-city buses, and in view of its very important but largely unfulfilled role in enhancing road safety, the motor insurance industry. The key findings and recommendations of the study are summarized below.
Inter-City Bus Services
13. The Road Transport Corporations Act of 1950, initiated the creation of State Transport Undertakings (STUs) with monopoly franchises for many inter-city bus services. At their zenith in the early 1980s, the STUs controlled 45 percent of India’s bus fleet. While they incurred losses on most urban services, their rural and inter-city services generally covered operating costs. The Motor Vehicle Act of 1988 reversed the policy, and encouraged greater reliance on the private sector, which led to increased competition for the STUs and mounting losses. By the year 2000, STU losses exceeded Rs.22 billion; the Government then halted financial support to the STUs and encouraged State Governments to do the same. The role of STUs in inter-city bus services is receding in most of India, and several states now rely exclusively on private sector provision.
. Despite restrictive granting of permits and unfavorable/discriminatory tax treatment for private operations, the private sector has won back a rapidly increasing share of the inter-city road passenger market, and now about 80 percent of the bus fleet is privately operated. A study of private inter-city bus operations in three states has confirmed that there is a significant amount of clandestine operations by private operators who provide stage carriage services while holding contract carriage permits. However, the services appear to be generally satisfactory, with between 60 and 70 percent of users surveyed rating the services either satisfactory or good.
15. Unit costs of STU operations have escalated due to excessive staffing, and on average STU costs per passenger-kilometer are more than 40 percent higher than that of private operators. STU staff costs are now about three times that of the private sector; they employ on average 7 staff per bus at an average salary of Rs.7,700 per month, whereas for private operators those numbers are 4.3 and Rs.3,500 respectively. Reducing STU staffing and salaries to levels comparable with the private sector would result in an annual savings of around Rs.40 billion. Not all of this would accrue to the economy, since some of it is a transfer from STU staff to bus passengers or tax payers. Redeployment of surplus STU staff, however, would be a true saving.
EFFICIENCY OF ROAD TRANSPORT SERVICES IN INDIA
The World Bank has long been involved in financing road infrastructure in India and presently the Bank’s transport program exceeds USD 4 billion in the road sector alone. Government policies that govern the organization and functioning of the road transport industry will have major implications for the economic returns and societal impacts of these large investments in highway infrastructure now underway. This study has been undertaken to assess the present policy regime, and identify measures which may be considered to improve the functioning of road transport, in particular long distance road transport, and enhance its already enormous contribution (3.9% of GDP) to the workings of the Indian economy. While the road transport sector encompasses a wide variety of activities, this study has focused on three aspects which were considered the most relevant to the investments in highway infrastructure ― the trucking industry, inter-city buses, and in view of its very important but largely unfulfilled role in road safety, the motor insurance industry. The recommendations herein are consistent with the 2004 Country Assistance Strategy and the India Policy Review document “India: The Challenges Ahead” prepared by the Bank in 2002.
The report is presented in three sections corresponding to each of the three main topics: the trucking industry (Section I), inter-city bus services (Section II), and commercial motor insurance (Section III). The three sections maybe read as stand-alone pieces, and readers interested in a particular topic may go directly to the relevant section. The main conclusions and recommendations of the report are presented in the combined Executive Summary for the benefit of readers desiring a quick overview.
THE TRUCKING INDUSTRY
Despite many remaining impediments, mainly concerning the
existing infrastructure1, India has achieved a highly competitive, low-cost road freight transport industry for basic services, with highway freight rates among the lowest in the world (see Table 1.1) and indeed surprisingly low given the operating conditions in India. The development of trucking industry policy in India in recent years generally follows the recommendations of the 1999 Sundar Committee report entitled “Trucking Operations in India”.2 Presentations by trucking association officials at a workshop initiating the present study on January 8, 2003, and subsequent interviews with trucking operators and state government officials3 have generally echoed the picture painted by the Sundar Committee. Officials of the Ministry of Shipping, Road Transport and Highways (MOSRTH) have confirmed that the Sundar Committee Report is still a primary guiding force in the Government’s trucking industry policy.