Bus stop

Bus stop

Government has made state bus companies unprofitable, pricing the bus off city roads

Automakers prefer to sell cars--not buses--because they can sell to individuals, using the gimmicks of advertising, marketing and cheap loans. Buses are owned and operated by transport companies. Invariably, these companies operate in the red. This is because the cost of the bus and its service is often difficult to recover fully. It does not help that public bus companies, often driven by non-revenue concerns like hiring people they do not need, fall behind further in the race for efficient transport.

With Indian cities growing rapidly public bus services declining, private mini-bus operators step in. Their buses rush madly across cities, the most infamous example being Delhi's Blueline buses.Because most cities regulate their bus service only through allocation of routes and permits, nothing formal emerges without a clear public transport plan--just taxis in different shapes and forms.

According to the Union Ministry of Surface Transport, there are about 36 state-run bus utilities in the country. Their combined losses increased from Rs 2,000 crore in 2004-05 to over Rs 2,600 crore the following year.

This when these combined bus utilities earned total revenues of Rs 20,000 crore in that year. But, said the ministry, these figures are misleading. If the tax component of the costs is deducted from the cost incurred by the bus companies, the losses go down to less than Rs 900 crore. In other words, it is partly policy that drives these companies into the red (see table The loss they did not make).

Ungainly, unprofitable
Of the six biggest cities, only the Bangalore Metropolitan Transport Corporation managed to stay in the black--its revenues exceeded costs--making a profit of Rs 113 crore in 2005-06.

Now, the bus company has to use its financial muscle to start carrying more people and taking away the space from cars on the road. All other big bus companies struggled to make ends meet (see table City bus corporations in the red).

While staff salaries crippled large bus undertakings like dtc in Delhi, the cost of fuel and lubricants hit at the bottomline of all bus companies. During 2005-06, total costs increased by 9.7 per cent, with staff costs across the country rising by an average 5 per cent and fuel costs by 20 per cent. Given that new buses are less fuel efficient than the old, this does not augur well for the future.

The loss they did not make Without taxes, 36 bus utilities fared better in 2005-06
Total cost	Rs 22,699 crore
Total revenue	Rs 20,015 crore
Loss	Rs 2,600 crore
Taxes	Rs 1,710 crore
Losses after adjusting taxes	Rs 890 crore
Source Review of the performance of state road transport undertakings, Ministry of Shipping, Road Transport and Highways, Government of India, 2007

Inefficiency is only a part of the story. Running bus companies has a cost and when the cost of interest or depreciation of the 'rolling stock'-the bus-has to be paid, business buckles under. The higher the cost of the capital, the higher the investment to recover, and higher the cost per km.

Why bus services cost?
This provides enough reason to reduce the basic cost of the bus, through manufacturing innovation and slashing taxes, to make operations effective. Now, the trade-off for city operators is simple buy cheap buses or, better still, don't buy new buses at all. On an average, for the year ending March 2006, staff and fuel costs for the countrywide bus fleet was roughly equal-37 per cent and 34 per cent, respectively. The bulk of the non-operating costs was interest and depreciation (some 9 per cent) and taxes another 8 per cent.

But this is partly because the fleet has not been renewed-the non-operational costs were small. But where cities are beginning to buy new buses, these costs of operations are going for a twist.

Passengers pay for bus rides by the distance travelled. The question is what does each km of travel cost the bus company? The analysis of the Union surface transport ministry found the costs differ widely--from a high of Rs 82 per km in Mizoram to a low of Rs 12 per km in Uttar Pradesh.

Cost of modernization
But these costs will have to be reviewed to see how they work for modern bus services. In Bangalore, the Volvo buses cost the city roughly Rs 49 per km because of higher fuel costs as well as the cost of interest and depreciation. In Ahmedabad, the cost per km in the bus rapid transit system has been tendered for Rs 34 per km. In other words, the buses will cost; who will pay?

There is clearly a cost in the business of operating buses and users in Indian cities cannot pay the full costs. This cost increases dramatically when bus corporations try to modernize their fleet with comfortable buses and efficient services, such as well designed bus stops. Will the government, which bends backwards to subsidize car makers and owners, show some interest in filling the revenue gap?

City bus corporations in the red Bangalore is the only city with a profitable city bus service-it also has the largest fleet
Bus company	Fleet size	Average (years)	Fuel efficiency	Staff/ bus ratio	Vehicle productivity (km/bus /day)	Total revenue (Rs crore)	Total costs (Rs crore)	Net profit /loss (Rs crore)
Calcutta	1,144	6.4	3.70	6.65	124	72	177	-105
Mumbai BEST	3,391	5.56	3.31	10.11	194	850	1,088	- 238
Chennai Metro	2,773	8.39	3.77	6.40	209	472	557	- 85
Delhi DTC	3,467	4.70	2.99*	8.21	205	464	1,267	-803
Bangalore MTC	3,977	4.47	4.66	4.78	218	687	574	+ 113
Ahmedabad MTS	685	11	—	5.72	172	76	99	-23
*Runs on CNG, and price has not increased, so costs of fuel are under control Source Review of the performance of state road transport undertakings, Ministry of Shipping, Road Transport and Highways, Government of India, 2007