India is a country on the move. Our inter-city transport demand is expected to double from 7,900 BPKM (billion passenger kilometres) in 2015 to 16,000 BPKM by 2030, growing at 4.7 percent. This need for inter-city transportation is largely fulfilled by road which accounts for 80 percent share (of which bus accounts for more than 60 percent share).

However, in recent years, this share is being steadily eroded by private vehicles usage. This trend is particularly worrying as smaller vehicles means road assets reaching capacity earlier than planned. The economy also takes a hit because of higher fuel consumption and emission per traveller.

India has a total inter-city fleet of nearly 10 lakh buses, of which about 1.15 lakh buses are operated by State Road Transport Undertakings (SRTUs),and the remaining operated by the fragmented private sector. Given the critical state of bus transport, enhancing the supply and performance of BOTH public and private units is essential.

Issues with Public Bus Transport
Public bus transport has three core issues. First, SRTUs are plagued with systemic challenges.Most are in poor financial health, despite them being India’s largest organised bus operators.

They also have added responsibility of providing connectivity to routes often deemed non-profitable. Limited loss reimbursement from State Governments exacerbates the situation and further limits their ability to augment fleet.

In addition, most of them do not operate efficiently due to weak processes, inadequate capability, and poor technology integration. This sub-par operational performance leads to high costs and poor passenger convenience, further eroding market share.

Second, the regulatory and business environment in India is not conducive for buses, more so for private buses.

For private players, restriction on stage carriage permits, differential taxation and lack of access to state-run terminals are key challenges.

Third, terminal infrastructure needs revamp if share of public bus transportation is to increase. Most bus terminals in India offer sub-standard passenger amenities. Capacity at many bus stations is insufficient to cater even to public buses let alone private buses.

Way Forward
To be able to service India’s growing transport requirements, all stakeholders need to come together. Increasing SRTU competitiveness, implementing institutional reform and enhancing terminal infrastructure quality are key solution areas.

A combination of short and long-term initiatives will be required to enhance the competitiveness of SRTUs. A long-term plan should centre around three themes – building organisational capability, leveraging technologies (eg- vehicle tracking), and redesigning processes(eg - O&M planning through preventive maintenance). Concurrently, wet leasing can be adopted in the short term to leverage private sector operating efficiency.

A potential answer lies in the fast-growing profitable AC segment, where SRTUs are has been low. As disposable incomes have increased, passenger transport through AC buses has grown. Wet leasing model for AC buses can help improve SRTU profitability, while also guaranteeing asset utilisation to private players and better user comfort – win-win for everyone.

Further, existing in situations need systemic reform. A regulated competition regime should be adopted with both public and private operators on a level playing field. Routes should be transparently bid to the most competitive bidder, with premiums going towards financing viability gap funding requirements of unprofitable routes.Further, there should be equal access to infrastructure, planning-based permit allocation, and regulated monitoring.

It is important to note that SRTU shall always have public service obligations and constraints that render them noncompetitive. Therefore, government support would be critical to help them prepare for the transition.For reforms to succeed, two institutions need to be set up.

First, State Transport Authorities would need to transform into Planning and Regulatory Authorities to take up roles of route planning, route bidding& contracting, tracking and enforcement, budgeting and marketing. Second, Bus Port Authorities (independent from SRTUs) need to be set up to undertake infrastructure planning, defining usage norms, and asset development and commercialisation.

Lastly, a renewed focus to develop state of the art terminal infrastructure is essential to make public bus transport attractive.

Enabling passenger-focused and cost effective public transport is imperative for India. Given the criticality and state of public transportation, systemic transformation that brings together all stake holders is the need of the hour. The time to act is now.