Last week, there were reports that India’s plan of electrifying buses had hit a speed bump. Apparently, biggies like Tata didn’t turn up to bid for the project because of a big fear — they didn’t believe that state transport corporations would be able to pay them because of their poor financial condition.

And this got us thinking about the state of affairs of public bus transport in the country. So in today’s Finshots, we’ll talk about just that.

The Story

Guess how many people ride government buses in India each day?

70 million!

For perspective, the much-heralded Indian Railways ferries only 24 million people daily.

And if you look at the major cities, buses have always been a public favourite. Because it offers unmatched connectivity and also because it is an affordable form of transit. No wonder then in 2018, the World Resources Institute estimated that 46% of all motorised trips within Bengaluru were on buses.

Yup, buses are a lifeline for the masses.

But there’s a problem plaguing the public bus system in India. It is in shambles. Only a handful of the State Road Transport Undertakings (SRTUs) manage to turn a profit. Most of them are bleeding money. And it doesn’t really take a genius to figure out what’s wrong.

To begin with, there’s a problem with fares.

See, buses consume a lot of diesel and we know that fuel prices aren’t exactly cheap in the country. It’s not subsidised for state-run buses. Not to forget that staff salaries are a significant portion too. And with roughly 5 staff per bus, some folks say it’s overstaffing that’s killing the buses. If you put these two elements together, they make up nearly half of the total costs incurred by SRTUs.

But they can’t just raise fares either to combat this issue. For instance, an IndiaSpend study that looked at Delhi’s transport system revealed that while the fare is to be revised twice a year based on inflation numbers, it just doesn’t happen as frequently. There’s always political pressure involved. So even when fuel costs soar through the roof, fares don’t keep up.

Sure, state governments reimburse the SRTUs for the concessions they dole out. But it’s often not enough. There are numerous delays. And even a gap of a few hundred crores of rupees each year. If you add the rising costs that don’t get tacked on to the fares, you’ll see that the SRTUs are often left with no option but to borrow money to survive. And that comes with an interest cost too which further worsens their situation.

So what’s the end result of all this?

Well, we get old and poorly maintained buses — nearly a quarter of all SRTU buses are overaged or older than 8 years. And the older the buses, the poorer the fuel efficiency. This again adds to the costs. Also, these poorly maintained buses could turn people away from bus rides. They’ll find alternatives. And that’ll create a bigger dip in revenue growth.

But hey, all these are just the symptoms. The root cause of the problem is something else…

The brutal truth is that we just don’t care enough about our buses. Just look at the website of the Ministry of Road Transport and Highways. The last published performance review of these state-run buses was way back in 2017.

Okay, it’s not like the government has completely ignored it. They’re trying to finalize the reports for FY18 and FY19 now. But it’s still way too much of a time lag. And the provisional numbers that we gathered don’t paint a pretty picture — the 56 SRTUs across the country have suffered a combined loss of a staggering ₹17,000 crore. It looks grimmer with each passing year.

And if we don’t know how dire the situation is, how do we take the right action to rectify it? How do we decide how much money is needed to turn around the sorry state of affairs?

For instance, India has around 3 lakh buses run by state undertakings. But some estimates say that India needs around 30 lakh buses to meet the needs of the population. And since we all love comparisons, heres’s one — While China has about 60 buses for every 10,000 people, India has a measly 4 buses that serve the needs of 10,000 folks. The bare minimum is 12. So we’re way off the mark.

But despite being aware of this problem, we continue to under-allocate to the bus system. Historically, public transport gets less than 1% of the annual budget for road transport and highways. And that’s not nearly enough.

Because public transport may not always be profitable. The priority here is to improve welfare and convenience for the people. It has to be subsidised one way or another.

And before you say, “But the railways…,” let’s clarify something — even the passenger railways in India don’t make any money. In fact, Raosaheb Danve, who’s the Minister of State for Railways, says that for every rupee spent, the Railways lose 55 paise. Instead, it makes up for this by offering freight services to the private sector.

But buses can’t transport goods right. So SRTUs have no option but to think of other ways to drum up revenue. They have to figure out ways to increase their non-traffic receipts which account for just 5% of their revenues.

For instance, there’s the tried and tested advertising angle. Look around you and you’ll probably see fewer ads on the buses. That’s probably because brands may not want to be associated with a poorly maintained machine. So the problem with this is that buses do need to be spruced up before this revenue source can be tapped. But they first need money to do that.

And maybe if they can’t attract advertisers on buses, they have to improve efficiency in renting out space at bus stations to private players who then put up supermarkets or build mini shopping malls.

Or even do the simple things right and find reasonable ways to cut costs. For instance, through periodic “route rationalisation” to figure out if the best routes and stops are being used. Because right now, these studies are few and far between. No one pays enough attention to it.

And even the government can play its part. You see, government bus operators pay a whole host of taxes — almost 13 types on their assets and operations. This might include a motor vehicle tax, passenger tax, municipal levies, service tax on air-conditioned bus fares…the list goes on. In fact, taxes alone might make up 20% of an SRTU’s cost. Maybe rationalizing this alone can save a good chunk of money and lead them on the path to financial viability.

Oh, and not to forget — the induction of electric buses. Because that way, we’ll at least save on fuel costs.

Otherwise, the coffers will bleed dry and we’ll be left with a fairly inefficient public bus transport system. And that’ll be a shame because, for India’s masses, buses are what serve as connectors to better education, employment, and public services.

Until next time…

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