[sustran] Why Bengaluru’s Bus System Is India’s Best And Loses Least Money

[Vinay Baindur]

http://www.indiaspend.com/cover-story/why-bengalurus-bus-system-is-indias-best-and-loses-least-money-91127
Why Bengaluru’s Bus System Is India’s Best And Loses Least MoneySravan
Pallapothu, August 17, 2018

[image: BMTC_620]
<http://www.indiaspend.com/wp-content/uploads/BMTC_620.jpg>



*Mumbai*: Bengaluru is India’s third most-populous city, but its bus system
is not only India’s largest with 6,448 buses (in 2015-16), it also lost the
least money (Rs 101 crore) over six years to 2016 among eight metropolitan
bus systems, according to an *IndiaSpend *analysis of transit data
<http://morth.nic.in/index2.asp?slid=946&sublinkid=545&lang=1>.



Buses tend to be the mass transit option of choice for a city’s poorest
inhabitants. For instance, the cheapest bus ticket in Delhi is Rs 5 for non
AC buses and Rs 10 for AC buses, according to the Delhi Transport
Corporation (DTC) website
<http://delhi.gov.in/wps/wcm/connect/DOIT_DTC/dtc/home>, compared to Rs 10
for the cheapest metro ticket
<http://www.delhimetrorail.com/metro-fares.aspx>; in Bengaluru, the minimum
fare on the metro is Rs 10, compared to Rs 5 for the bus (general service
<http://www.mybmtc.com/en/basic-page/general-service>).



Managed better than its metropolitan counterparts, the Bangalore
Metropolitan Transport Corporation (BMTC) lost money in 2013-14 and
2014-15, the only Indian metropolitan bus-transit system to make profits
over the six years we considered.



Mumbai’s Brihanmumbai Electric Supply and Transport (BEST) with 4,094 buses
and Delhi’s DTC with 4,564 buses, in 2015-16, made the largest net losses
over six years to 2016: Rs 4,037 crore and Rs 14,950 crore, respectively.



Cumulative losses of Mumbai’s BEST and Delhi’s DTC are enough to buy 34,521
low-floor buses of the kind the DTC uses
<https://economictimes.indiatimes.com/slideshows/infrastructure/what-ails-dtcs-rs-55-lakh-each-low-floor-buses/incapable-of-taking-load/slideshow/19575016.cms>
 (each bus costs Rs 55 lakh) or 30,138 Certia buses, a model operated
<http://www.dnaindia.com/mumbai/report-best-s-costly-cerita-busses-are-being-converted-for-enhanced-performance-2262006>
 by the BEST, Rs 63 lakh each (at 2007-08 prices).



On average, between 2010 and 2016, the BMTC spent 35% of its budget on
fuel, compared to 19% in Mumbai and 11% in Delhi, indicating that it was
using its money on its core function–keeping buses running; of the eight
metropolitan bus-transit systems, BMTC used its fleet best with 91% of the
buses in use across the six years.



Chennai’s public bus system, the Metro Chennai Transport Corporation
Limited, was next in spending the largest proportion of its budget (29%) on
fuel, also indicating that it was better at keeping its buses on the road
than the other six metropolitan systems. Chennai’s average fleet
utilisation rate was 86%, behind Bengaluru (91%) and Chandigarh (89%).



Chennai and Bengaluru also reported the best fuel efficiency (4.7 km/litre
and 3.9 km/litre, respectively). This could perhaps explain why they are
more profitable than others despite the cost of fuel, which tends to be
higher in the south than the north.



*Bengaluru depends on buses*



With 8.4 million people living over 709 sq km, Bengaluru still depends
overwhelmingly on its buses, although some pressure has been relieved by a
seven-year-old 41-station, two line 42.3-km metro-rail system. In 2015-16,
the metro carried 16.8 million people–about 46,000 people a day–whereas the
BMTC carried 144 million–about 365,000 a day–almost eight times more, that
year.



Mumbai’s 12.4 million people–more than 20 million in the larger urban
agglomeration, some of which are independent municipal corporations, such
as Thane and Navi Mumbai–live across 4,355 sq km (Greater Mumbai, including
Thane and Navi Mumbai) and depend primarily on a 135-station, 465-km
suburban commuter-rail system, supplemented by a four-year-old 12-station,
11.4-km metro rail line; four more metro lines are under construction. The
city’s suburban lines carry close to 8 million passengers every day,
compared to the BEST, which carried 1.06 million, according to 2015-16
government data. The only working metro line carried 335,000 passengers
every day in 2017-18.



Delhi’s 11 million people–16.3 million in the National Capital Territory,
which sprawls across 1,484 sq km–rely on a 16-year-old, 214-station, 296-km
metro network with six fully operational and two partially operational
lines. In 2015-16, the Delhi metro ferried around 2.6 million passengers
whereas the DTC ferried around 3 million passengers per day


Bus Transit Services Across Select Indian Cities: A Comparison
Bus Operators Population, 2011 census (in million) Population, of Urban
Agglomeration, 2011 (in million) Cumulative Net Profit After Tax Between
2010-16 (in crore of rupees)
Ahmedabad Municipal Transport Service (AMTS) 5.6 6.3 -228568
Brihanmumbai Electrical Supply & Transport Undertaking (BEST) 12.4 18.3
-403748
Bangalore Metropolitan Transport Corporation 8.4 8.5 -10187
Calcutta State Transport Corporation (CSTC) 4.5 14 -96062
Chandigarh Transport Corporation (BMTC) 0.96 1 -26498
Delhi Transport Corporation (DTC) 11 16.3 -1495005
Metro Chennai Transport Corporation (MCTC) 4.6 8.7 -114436
Pune Mahanagar Parivahan Mahamandal (PMPML) 3.1 5 -51047

Source: Review of the performance of state road transport undertakings,
ministry of road transport and highways
<http://morth.nic.in/index2.asp?slid=946&sublinkid=545&lang=1>



*Where do bus-transit systems spend their money?*



We found that the biggest contributors to bus-transit system’s costs were
staff and fuel/lubricant-related expenditure–ranging, on average, from
27-61% and 13-27%, respectively, between 2010-16. Despite being the least
profitable system, the DTC, on average, had the lowest percentage of staff
costs as well as the lowest percentage of fuel/ lubricant costs, 27.78% and
10.32%, respectively



Source: Review of the performance of state road transport undertakings,
ministry of road transport and highways
<http://morth.nic.in/index2.asp?slid=946&sublinkid=545&lang=1>



BEST and the Calcutta State Transport Corporation (CSTC) had the highest
proportion of staff costs–60% and 62% respectively–whereas, on average,
BMTC and MCTC had the highest proportion of fuel costs– 35% and
28%–respectively. In 2015-16, BEST was the second-largest employer with
35,705 employees (after BMTC with 36,474); the CSTC stood at 7th with 4,998
employed. However, in 2015-16, BEST and DTC had higher staff costs–Rs 1,689
crore and Rs 1,475 crore, respectively–than BMTC (Rs 1,096 crore), even
though BMTC employed 769 more people than BEST and 3,610 more than DTC.



This could indicate that the DTC (established in 1948) and BEST
(established in 1947) are facing legacy costs, as they are almost 70 years
old; BMTC (established in 1997) is 20 years old, in its current avataar
(its forerunner, the Bangalore Transport Service, started operations in
1962 after the nationalisation
<https://timesofindia.indiatimes.com/city/bengaluru/a-transport-history-of-bengaluru/articleshow/56047192.cms>
 of the Bangalore Transport Corporation, which had been running buses since
1940).



Source: Review of the performance of state road transport undertakings,
ministry of road transport and highways
<http://morth.nic.in/index2.asp?slid=946&sublinkid=545&lang=1>



Mumbai’s overstaffed BEST decided
<https://www.thehindu.com/todays-paper/tp-national/tp-mumbai/best-to-scrap-4894-posts-to-cut-costs-downsize-staff/article21996245.ece>
 in December 2017 to scrap 4,894 posts of conductors, bus drivers,
mechanics and cleaners to cut staff costs and dispense with redundant
posts. BEST employed 34,174 people in 2015-16, second only to BMTC that
employed 35,554 people over the same year but with 2,354 more buses.



*DTC is the biggest borrower*



The DTC may save on fuel and staff–fuel saving, as we said, is not an
indicator of efficiency–but it more than compensates through spending the
largest proportion of its budget on interest payments, an indication that
it borrows money to keep running.



Over the six years to 2016, the DTC’s interest payments as a percentage of
its expenditure ranged from 46% to 74%, compared to single digits for other
bus-transit system. The DTC has been subsidised by the Delhi government for
20 years with its last-known cumulative debt at Rs 11,676 crore for the
financial year 2014-15, according to a 2016 Comptroller Auditor General
(CAG) report
<https://cag.gov.in/sites/default/files/audit_report_files/Report%201%20of%202016%20-%20PSUs%20-%20Revenue%2C%20Social%2C%20Economic%20Sector%20Government%20of%20Delhi.pdf>.
DTC’s revenue the same year was Rs 1,113 crore, approximately 10% of its
debt.



“Despite getting bailout packages since 1996, DTC is unable to repay its
debts,” Amit Bhatt, director of Integrated Urban Transport, at the World
Resources Institute, a think-tank <http://www.wri.org/>, told
<https://www.hindustantimes.com/delhi-news/loss-making-delhi-transport-corporation-needs-fresh-ideas-to-stay-afloat/story-qotMav3FDprO6cPzuoHn8H.html>
the *Hindustan Times* in October 2017. “An alternative source of finance
needs to be found (for the DTC).”



Source: Review of the performance of state road transport undertakings,
ministry of road transport and highways
<http://morth.nic.in/index2.asp?slid=946&sublinkid=545&lang=1>



*The need to increase fares and rationalise routes*



Buses are, as we said, the transit system of choice for the poorest
commuters in Indian cities, but the losses they incur stem from a failure
to raise fares.



In Delhi, for instance, the fare is supposed to be revised twice a year in
line with the consumer price index, but that is often delayed due to political
pressures
<https://www.hindustantimes.com/delhi-news/dtc-runs-a-loss-of-rs-3-crore-every-day-needs-funds-to-keep-fleet-going/story-cFfPARpvpa9jzkx9zR0eSO.html>.
DTC had the lowest
<https://www.hindustantimes.com/delhi-news/dtc-runs-a-loss-of-rs-3-crore-every-day-needs-funds-to-keep-fleet-going/story-cFfPARpvpa9jzkx9zR0eSO.html>fares
among all metropolitan bus transit services, with tickets starting from Rs
5.



The DTC last witnessed a fare hike
<http://archive.indianexpress.com/news/dtc-fares-to-go-up-from-november-1/533735/>
 in 2009, the cost of the cheapest ticket rising from Rs 3 for the first 4
km to Rs 5 for the first 3 km. This hike came at time when the cost of
compressed natural gas (CNG) was Rs 19 per kg and outstanding debt was Rs
6,500 crore. The CNG price
<https://economictimes.indiatimes.com/industry/energy/oil-gas/cng-price-in-delhi-raised-by-rs-1-36/kg-second-hike-in-two-months/videoshow/64364739.cms>was
Rs 42 per kg in May 2018.



In other words, DTC ticket prices rose 166% from while fuel costs rose 221%
in nine years. The Delhi metro, in comparison, witnessed
<https://timesofindia.indiatimes.com/city/delhi/dtc-fares-well-as-metro-ride-costlier/articleshow/61989896.cms>
 two fare hikes in 2017 itself.



In Mumbai, none of the BEST’s 18 new routes since 2013 make profits and
accumulated Rs 52 crore in losses over five years to 2018, the *DNA *
reported
<http://www.dnaindia.com/mumbai/report-no-new-best-service-made-profit-in-last-five-years-2625554>
 on June 15, 2018.



Bus-transit systems also require periodic “route rationalisation”, the
process of reassessing routes and stops. The DTC’s last
route-rationalisation study
<https://www.hindustantimes.com/delhi-news/loss-making-delhi-transport-corporation-needs-fresh-ideas-to-stay-afloat/story-qotMav3FDprO6cPzuoHn8H.html>
 was nine years ago in 2009. Since then, new roads and routes have been
added, so the lack of reassessing routes pushes up costs and requires fare
hikes.



Many routes are not inherently profit-making, since they are supposed to
serve underserved communities but as BMTC’s example shows, laying out a
route that covers both profitable and unprofitable areas can make a
difference.



“Some (BMTC) routes even go as far as connecting peri urban areas and
adjoining suburbs; something which BEST could not do,” Madhav Pai, India
Director for the Ross Centre for Sustainable Cities, a think-tank
<https://wrirosscities.org/> told *IndiaSpend*, because Thane and Navi
Mumbai have their own bus services.



*How BMTC does better than the rest*



“BMTC is a more modern organisation and has fewer legacy costs to deal
with, as opposed to BEST and DTC, which have been around for decades,” said
Pai.



BMTC has “superior marketing and supply chain strategies” than the other
seven bus-transit systems in our analysis, said the Ross Centre’s Pai. For
instance, its depots offer advertising and its top-end buses are brought in
cheaper, bulk rates from Swedish bus-maker Volvo, which has a factory
outside Bengaluru.



“Furthermore BMTC has low staff costs because a lot of work is outsourced,
which means that there is less scope for redundant labour,” said Pai.
“Another area BMTC really stood out was depots; they are in accessible
locations with more facilities, such as rest houses for drivers.”



The DTC also wants more depot space to acquire more CNG buses but is unable
to do so due to a lack of land adds Pai



Delhi needs 460 acres of land to accommodate its 5,583 buses but no more
than 257 acres are available, according to a May 2016 environment pollution
control authority report
<http://www.epca.org.in/EPCA-Reports1999-1917/Report-no.57.pdf>.



*(**Pallapothu**, an Msc student at the Symbiosis School of Economics,
Pune, is an intern with IndiaSpend.)*



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