India’s road network carries close to 90 per cent of the country’s passenger traffic and about 60 per cent of its freight. This sector also includes the socially important State Road Transport Undertakings (SRTUs), which have a modest share in India’s total fleet of buses but play an irreplaceable social role. By providing affordable transportation to a large majority of ordinary citizens, SRTUs open up opportunities for economic advancement. Although it is inevitable that such public undertakings with social obligations incur losses, their sustainable viability is equally important.
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In this article, S. Raja Sethu Durai, Professor of Economics, University of Hyderabad, uses official data to analyse the reasons for their poor performance that go beyond social obligations and suggests ways to reinvent the services using inputs from best practices from India and elsewhere. Transport, he points out, is a service that enables citizens to access freedoms that are enshrined in the Constitution, and needs to be considered as a basic right. Some policy modifications that are required to improve the functioning of SRTUs include effective resource allocation, exploring new sources for revenue generation, and changes in the ownership and governance structures.
As in the case of the Indian Railways, freight services are an area that SRTUs can consider to improve their financial viability.
1. Introduction
Transportation is central to the nation-building process. Its role in economic development is significant in terms of its multiplier effect on employment and growth in GDP. From the lens of Nobel Laureate Amartya Sen’s ‘capabilities’ and ‘functioning’ logic, mobility should be considered as an equal opportunity tool and , by implication , a fundamental right. Access to low-cost and wide transport networks enhance the capability of individuals to move from one place to another. This opens up wider opportunities, expands their social and economic reach, and delivers several other advantages that increase their ‘function’, resulting in productivity gains for the economy.
“When transport systems are efficient, they provide economic and social opportunities and benefits that result in positive multiplier effects such as better accessibility to markets, employment, and additional investments. When transport systems are deficient in terms of capacity or reliability, they can have an economic cost such as reduced or missed opportunities and lower quality of life.” 1
However, there are areas of concern that cannot be ignored. For instance, despite India having the world’s second-largest roads network, there is still what can be termed “transport poverty” in the country. Transport poverty refers to a condition where no transport option is available that connects people’s capability to fulfill their needs for a decent life or spending more time and amount towards traveling pushes them below the poverty line and social isolation 3 . Further, it limits their social mobility resulting in intergenerational consequences, including on income deprivation. The economic potential of marginalised individuals (e.g., low income, low education, limited digital literacy, precarious employment) who do not have access to public or private transportation remains unrealised 4 . International literature has also pointed out the need for Universal Basic Mobility, with attempts already underway in parts of Europe to move towards providing free public transport for all within specific geographic locations. 5
2. The Constitutional case for public transport
India, however, continues to grapple with issues relating to transportation that have negative externalities on individuals in terms of access to opportunities. The fundamental right to freedom of movement, enshrined in the Constitution of India’s Article 19 (1) (d), provides all citizens the right “to move freely throughout the territory of India.” 6 However, this “freedom” would be reduced to a mere nominal right without adequate and affordable modes of transportation. Public transport, therefore, plays an “enabling” function to the state’s political obligation to ensure that all the rights provided by it translate to the empowerment of all its peoples, in particular the marginalised and vulnerable sections. For instance, the Right to Education for a child in a remote village will be brought to naught in the absence of physical connectivity to the outside world ; not merely a transport arrangement to and from the school but a comprehensive one that links such far-flung hamlets to the socio-economic mainstream.
At a conceptual level, the U.S. Supreme Court observed that “the right to travel, though not explicitly granted in the [U.S.] Constitution, is considered to be a basic right necessary to secure personal liberty and overall strength of the Union.” 7 In such a world which is moving towards a framework where access to mobility “should be considered a basic right”, the importance of an effective public transportation system is undeniable. More so for a highly populated and inequalities-ridden country like India, which requires transportation networks that provide access to affordable mobility to every stratum of people. This core objective is the basis and foundation for The Road Transport Corporations Act, 1950 8 , that allowed almost all the States to start public bus transportation and provide equitable services for all.
In the pre-Independence period, railways were the primary mode of transportation for both passengers and freight. It was then believed that there should be inter-modal coordination between the railways and road transportation. Like railways, road transportation is also capital-intensive and requires big players to operate it efficiently by covering both profitable and non-profitable routes 9 . This credence put the onus on the state to operate transport services, first by princely States and after independence, as the idea of nationalisation swept the country, by the State governments in the case of road transport and the Union government for the Railways.
State transport corporations have played a significant role in transporting passengers but have fallen behind in moving freight.
The Road Transport Corporations Act paved the way for many States to start their own road transport corporations. Later on, private players were also allowed to enter the market to enhance this service provision to supplement government entities. Over the years, state-owned transport corporations have played a significant role in providing passenger transportation, although their function as freight transporters has gradually decreased.
The role played by these SRTUs cannot be delinked from the socio-economic growth of the States that operate them. There is a lot of evidence on the positive relationship between an efficient public transportation system and the economic well-being of ordinary citizens in many ways 10 . First, it provides essential mobility services at a lower cost, thereby enhancing equitable access to health care, employment and education. Second, in doing so, it lowers pollution levels and related incidence of health hazards by reducing congestion on the roads. Third, the strong association between transportation and economic activity can be seen by the fact that the southern and western States like Andhra Pradesh, Kerala, Tamil Nadu, Gujarat, and Maharashtra, the first ones to start transport corporations, are well ahead even today in terms of economic prosperity.
The phenomenal development of the Indian economy and the road infrastructure in the last three decades have altered the landscape of transportation with more private and personalised modes preferred by the people. However, the increase in the number of two-wheelers and cars on Indian roads has also had its costs in terms of pollution. Two scientific reports 11 suggest that the emission factor per passenger kilometre is higher for two-wheelers and cars compared with buses, indicating that the growth of private modes of transportation will hurt the country from an environmental angle. Despite the higher levels of economic growth witnessed in recent years, India is still one of the lowest in vehicle ownership and bus penetration among developed and developing nations.
Total vehicle penetration stands at 32 per 1,000 people in India, while it is more than 500 per 1,000 people for most developed countries. For developing countries like Brazil, the number stands at 330, while highly populated China has 134 per 1,000 people 12 . As much as this indicates India’s poor state of affairs in terms of transport accessibility, it is also a pointer to the potential that remains to be covered. Despite this space and need for improved provision of public transportation, the economic and financial performances of the SRTUs are not at par, with most of them reporting losses continuously for the last 10 years.
This article explores the reasons and tries to find out the origins of the poor financial stature of these SRTUs by evaluating their efficiency in comparison with benchmarks and suggests possible ways to improve them, with the lessons that can be drawn from best practices followed by other transportation modes and systems.
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1. Rodrigue, J. and Notteboom, T. n.d. Transportation and Economic Development, The Geography of Transport Systems. [https://transportgeography.org/contents/chapter3/transportation-and-economic-development/]. Return To text.