Sunday, February 7, 2010


The Andhra Pradesh government has increased the passenger fares in the State Road Transport corporation run buses by a whopping 22 percentage. In a single stroke, the state government has increased the bus fares so heavily imposing a huge burden on the bus commuters. This issue does not have relevance for the state of Andhra Pradesh only. The arguments that defend or oppose the measure are relevant for other states too. Infact, this debate is continuing internationally. Who should bear the cost of public Transport? To what extent, the passenger fares can contribute to the total cost of public transport system?

First, let us look at the reasons cited by the public transport authorities for affecting such a steep hike in passenger fares. The state government has not increased the passenger fares for several years. Despite repeated rise in the cost of diesel prices, the Andhra Pradesh State Road Transport Corporation (APSRTC) has not increased the prices but has managed from its own resources. The RTC has suffered huge losses due to public anger in the agitations in the last few months. There has been a pay revision for the employees of RTC which means a huge financial burden on the RTC.

All these arguments can not be rejected. But, it is also a fact that common man in the state is already reeling under severe food inflation. The prices of almost all essential commodities have sharply increased in the recent past. This trend still continues. Is it right on the part of government or the public transport authority to impose such a huge additional burden on the people at this point of time? Are there any other alternatives to meet the financial burden on the RTC?

The government or the RTC authorities should have done this exercise before embarking upon such a measure. But, instead the government and the RTC authorities have taken a unilateral step. As an eye wash, the state government marginally reduced the increased price. This is not going to provide substantial relief to the people.

The government claims that it is going to garner additional resources to the tune of over 500 crores by this fare hike. This claim is flawed in its understanding.

The international research shows that there would be a decline of around 3.8 percent rider ship for every 10 percent hike in the passenger prices. In fact, this was the experience of APSRTC too. In 1998, the then state government increased the passenger fares by 25 percent. This resulted in the fall of about 7 percent in the rider ship or occupancy Ratio(OR). The OR has fallen from 68 percent to 61 percent after the fare hike. It took several years for the RTC to regain this lost OR. As the government has not increased fares for several years, the OR has now increased to 72 percent. But, due to steep increase in the passenger fares, there would be steep fall in the OR resulting in a huge revenue loss. According to some estimates one percent drop in OR would result in a fall of revenue to the tune of Rs.50 Crores. Therefore, the projected revenue due to fare hike is not reliable.

The public transport has several advantages apart from providing citizens cheaper, reliable and safe transport. A good city is expected to provide public transport catering to at least 70 percent of its population. Greater use of public transport reduces emission of polluting gases thereby contributing to the fight against global warming. Public transport buses occupy lesser per capita space on roads, lesser per capita emissions. Thus efficient public transport is a solution for traffic problems, road congestion. Thus, public transport should not be viewed as mere commercial proposition. The concept of profit and loss will not apply for the RTC. In the modern society, transport is a basic right of every citizen. In fact many parts of the world, there are even free public transport models. In these models, passengers need not pay for traveling in buses. The funds required will be mobilized by other means. Even in many advanced capitalist countries which believe only in private sector, citizens are provided cheaper and affordable, efficient public transport. No where in the world the cost of public transport is fully met by the passenger fares? Infact in Andhra Pradesh, passenger fares constitute major chunk of the total cost of running public transport. The international experience suggests that passenger fares account for 34 to 60 percent of total cost of running public transport.

The public transport authorities should explore alternate means of revenue mobilisation rather than resorting to steep hike in passenger fares. Let us look at some of such alternate means.

In fact there are several ideas which would not levy any burden on state government resources. The Indian Institute of Management, Bangalore which studied APSRTC, in its report estimated that the revenue loss due to different forms of illegal private transport is to the tune of about 28 percent of RTC revenue. It means the public transport authority APSRTC is loosing around Rs.1450 crores annually due to illegally running private buses. The state government can bring in huge revenue for RTC by clamping on the illegal private buses which it is expected to do as an obligation.

In fact any public transport subsidises its operations through express service routes only. But, these private buses ply only on express routes that have prime value. This is nothing but privatization of profits and nationalization of losses.

The Air ways and Railways are also getting income through freight transport only. The profits obtained from freight transport subsidises the passenger transport. But, APSRTC does not have any full scale freight transport service. The public Transport authority like APSRTC can provide quicker, safer, reliable and cheaper transport of goods. The APSRTC already has infrastructure to do this like depots, staff, network etc. It does not need to procure special vehicles to transport goods. The existing buses can be used with some modification if necessary. The state cabinet sub committee accepted this suggestion as early as in 2005 only. But, it is not implemented till now. If it was implemented, fare hike is not necessary. The implementation of this suggestion does not entail any additional financial burden on the government or APSRTC. In fact, it would bring in income to the government through more taxes.

The RTC is discriminated even in terms of taxation. The APSRTC is paying 23 percent sales tax on diesel while there is only 4 percent sales tax on aviation fuel. The sales tax on diesel for railways is only 4 percent. The APSRTC will save Rs.400 crores if the tax is reduce to 4 percent. The government can not look at the public transport service as a commodity that would yield revenue.

The IIM study also recommended that motor vehicle tax should be fully exempted at least on loss making rural routes. But, this is not implemented. Why should RTC pay taxes on a service which it is giving to people on behalf of government?

Apart from sales tax, APSRTC pays motor vehicle tax of 5 percent on city services and 7.5 percent on rural services. Earlier committees suggested reducing this tax to 2 percent.

The RTC has huge physical assets like buildings, bus stands, vacant lands, work shops. These physical assets can be commercially developed to earn income. The government or the RTC do not incur any additional financial burden to implement this. The fare hike should only be a last resort after exhausting all the other avenues. But, it is unfortunate, that the state government has not done any such exercise but instead chose to levy burden on the commuters who are already bearing the burden on spiraling prices of essential commodities.



No comments:

Post a Comment