The economic liberalisation in India commenced in the 1990s and had a profound impact on the transportation sector in the country. Post independence in 1947, the government played a dominant role in bolstering the transport sector but the role of government-owned entities in the public transport realm has remained a subject of debate. In order to promote competition, the transport ecosystem must be liberalised, which entails removing government regulations and barriers from the transportation sector and permitting unrestricted entry for private operators. This blog discusses the entrenched issues in nationalised schemes in the public transport sector and the role of liberalisation to achieve better outcomes. The blog also explores the future scope of public transport liberalisation.
Currently, India has a mix of both nationalised and liberalised forms of transport routes and the liberalisation policy has evolved over time. The role of State Road Transport Undertakings (SRTUs) and state owned and operated buses is under contention. The Road Transport Corporation Act of 1950 focused on the nationalisation of public transport and establishing state control. But, soon, there were changes to the contrary; there were efforts leading towards privatisation and deregulation of the public transport ecosystem owing to several operational and financial inefficiencies of SRTUs and the demand for efficient and reliable transport infrastructure by the economically liberalised Indian population. Global institutions like the World Bank have supported and encouraged the involvement of private operators in stage bus services and have also advocated for deregulation in the transport ecosystem.
The World Bank has been a major investor in the transport sector in India and has financed various infrastructure projects, rural road development, urban transport modernisation and promoted sustainable mobility solutions across the country. The World Bank has been actively involved in several projects in the transport portfolio, including seven state road projects and one each for national highways, rural road and urban transport. In 2002, the privatisation of public transport in India was strongly encouraged by the World Bank, highlighting the poor quality of services and unresponsiveness to market demands. It also claimed that publicly owned and operated transport systems were inefficient and highly unprofitable.
There are multiple government initiatives that have tried to foster competition by bringing in Public Private Partnership (PPP) models such as the Jawaharlal Nehru National Urban Renewal Mission, the Atal National Renewable Mission, the National Urban Transport Policy, and the National Road Transport Policy. However, the degree of liberalisation and operational autonomy granted to the private sector in this model remain unanswered.
The introduction of the National Urban Transport Policy (NUTP) in 2006 emphasised the promotion of public transport and sustainable mobility, which aligns with the broader goals of liberalising and improving urban transportation systems. The policy aimed to create sustainable transportation with a focus on improving public transport by enhancing accessibility, affordability, and safety for urban residents and emphasised the need for an integrated transport policy that considers all modes of transport, including road, rail, and air. The NUTP contributed to the equitable allocation of road space, giving priority to sustainable and inclusive forms of transport. Under the policy regime, the Central Government identified several activities, especially those like the operation and maintenance of parking facilities, certification facilities, repair facilities, construction and management of terminal facilities, etc., in which the private sector can be beneficially engaged to save financial resources. The initiative encouraged a more liberal use of the private sector to strike a fair balance between the universal obligations of the government to provide accessible, affordable public transportation and the profit motive of the private operator. Further, the policy aimed to support projects taken up through PPPs by funding 50% of the total cost. Until the mid 1980s, most public transport services were largely provided by publicly owned State Transport Corporations. Since then, however, some states have permitted privately run services. NUTP encouraged the state governments to involve the private sector in providing public transport services under well structured procurement contracts.
The National Road Transport Policy underscores the need for a policy framework to promote Public Bus Transport (PBT) by focusing on infrastructural development and technology development to improve the quality of service. The policy also emphasises the need for an independent road transport regulator to ensure transparency, service improvement, and enhance competition in the transport sector, thereby promoting a conducive environment for innovation and encouraging private participation.
The Jawaharlal Nehru National Urban Renewal Mission (JNNURM), launched in 2007, played a significant role by financially assisting the development of sustainable and inclusive transportation systems in cities by modernising their transportation systems, improving infrastructure, and enhancing the quality of services through its ‘Bus Funding Scheme’. The JNNURM provided guidelines to prioritise the sanctioning of buses in cities that have adopted the Public-Private-Partnership model for operation.
JNNURM was replaced by the Atal National Renewable Mission (ANRM), which was launched in 2015. It changed the public transport landscape and the ANRM further encouraged the use of the PPP model. The scheme focused on leasing electric buses instead of purchasing them. ANRM continued its funding to buses sanctioned under JNNURM Phase II until 2017. To further support PPP-based public transportation services, during the Union Budget in 2021, the Finance Minister made the announcement to launch a scheme with an overall cost of Rs. 18,000 crore to finance, operate and maintain over 20,000 buses.
Liberalisation in public transportation will potentially bring about revolutionary changes in the transport ecosystem, such as increased passenger comfort, advanced technology integration, and increased job opportunities in the transportation sector. To further bolster the effectiveness and efficiency of liberalised public transport services, it is important to address any likely gaps, such as the lack of data, the limited knowledge of the operational and financial performance, and the reliability and safety records of the private sector participants. This can be addressed by establishing a transparent and accountable monitoring and evaluation system to track the performance of the private participants in the public transport sector. Additionally, the government can encourage private operators to invest in R&D to increase the effectiveness and efficiency of their operations and services. Finally, the public and private sector partners must follow a coordinated approach and develop strong regulatory frameworks to ensure safety, reliability and affordability in public transportation services.
Blog written by Chaithra Jayanath, Research Intern at Centre for Public Policy Research.
Views expressed by the author are personal and need not reflect or represent the views of the Centre for Public Policy Research.
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