13 April, 2010

Private Companies For Public Transportation

News article :
http://economictimes.indiatimes.com/news/news-by-industry/transportation/shipping-/-transport/Urban-transport-goes-corporate-Spice-Jet-MD-to-run-bus-fleet-in-Delhi/articleshow/5793965.cms
He said that the company will strive to provide Delhiites clean buses
which arrive on time, better trained drivers and facilities like
automated fare collection systems and GPS tracking.

Announcing the project, Verma added: ‘‘ The funds available with the
government are limited and Public Private Partnership (PPP) is the way
forward. By bringing in private players, we will be able to augment
the city’s public transport.’’

The start of the corporatization scheme comes as a breather for the
city that has around 5,000 buses against the requirement of 11,000.
Sources said the cluster will have a total 573 buses running on 32
routes. Of these, half the fleet will comprise of DTC buses. For its
services, Star Bus will be paid a around Rs 85.77 crore for first year
(Rs 47.4 per bus per km). The revenue from ticket sales on the bus
will go into the government’s kitty.

The operator will bring in all low-floor CNG buses. Of all buses , 20%
could be airconditioned. The entire operation will be monitored by the
transport department to ensure that stringent quality standards are
maintained. The department plans to float tenders for the next 16
clusters from next month and is in the process of making the terms for
the tender more stringent so that it attracts more serious bidders.

Following are my thoughts about this MoU between Star Bus Pvt Limited  and Delhi Govt. 
Routes
I assume government traffic department will decide routes and frequency. Private operator will be paid fixed revenue per KM that covers his cost and profit margin. This guarantees profit for private operator (which is okay, public transportation is not anti-business).
Bus Ownership
I assume , that private operator will buy and own (100 %) new buses (all CNG, 20 % AC). 573 buses per clusters. Initially 16 clusters. Later 16 more clusters. I hope and it seems that there is not partial ownership of buses. Existing fleet is and will be owned by govt. and will be phased out. New buses are 100% owned and maintained by private player, to be inducted gradually over a period of time (as existing old fleet is moved out.
Maintenance
Maintenance is prone to corruption, stealing and other in-efficiencies. Private player will be responsible for maintenance of buses and will be efficient for the same reason why people keep their houses clean but not the public place.
Employees
Also private player will hire/fire/train employees. Private player is likely to take better care of employees
IT and Software Infrastructure
Govt. is typically not very good in Identifying correct IT applications and buying them. Private player will decide on relevant IT needs and can buy them without cumbersome tendering processes.
Performance Monitoring
Private player and its performance will be monitored by the traffic department. Some kind of service level agreement. Risk of contract abortion will disincentives private player from cutting corners.
Revenue For Traffic Department
Traffic department will get all revenue earned by tickets. Nothing is mentioned about advertising revenues. So all that traffic department has to do is ensure that they come up with schedule, route, trip frequency such that revenue is more than Rs. 47.4 per KM. They pay Rs. 47.4 to private operator and rest is profit. If profit is negative it  would be a subsidy for public transport.
Depot land
There is not mention of depots. I assume relevant govt. agency will rent depot land to private player.

This is a win-win situation. Public representatives and government has full control over routes/schedule and how much they want to invest in bus transportation. They anyway decide FSIs of different areas, so they can decide routes. Every thing that requires engineering, IT expertise, honest employees and fast decisions is done by private player. In fact this will even improve working conditions for employees, so I hope they do not oppose this. Things like health
benefits take too much time in govt., private player can just use industry standard procedures.


Now for places like Pune, where central government has already given money to buy new buses, it is bit too late. Schemes with Partial ownership of buses were proposed but seems to be complex. Perhaps it would have been better if central government had given subsidy, subject to involving private player (who will own and buy buses) and generating certain revenue (that indicate no. of people served). The subsidy could be used to give attractive fixed revenue per KM to
private player. But in future Delhi model could be copied. PMPML could continue to operate some routes, side by side. They have to just make sure that routes operated by private player and PMPML are not overlapping.

Important details are missing in the article, so my assumptions could be wrong. Anyone (journalist, student etc.)  interested obtaining details should contact public relations officers at DTC and Delhi traffic department and obtain copy of MoU mentioned in the news article.


http://dtc.nic.in/dt2.htm#d1  

http://www.delhi.gov.in/wps/wcm/connect/doit_transport/Transport/Home/General+Information/Directory