Chapter III

Profile of Maharashtra State Road Transport Corporation

The third chapter highlights on Profile of Maharashtra State Road

Transport Corporation it also gives the details of State Road transport
Undertakings, MSRTC at glance, The vision of the corporation,
Organizational set up, Powers and duties of corporation, Financial
position, Central assistance for strengthening Public Transport System,
Market Structure and Reported Competition Issues, Reformation of
State Transport Undertakings, Marketing Orientation in Management
and Private Inter-City Bus Transport.

Introduction
India`s passenger transport for short and medium distances is essentially
bus oriented. Buses even compete with railways on certain long-distance
routes by offering night services. The Indian bus transport industry is
dominated by the publicly owned State Road Transport Undertakings
(henceforth. STUs). Most of the STIJs have, over the years. accumulated
deficits and have not been able to meet the increasing transport needs of
the public. The state government controls the STLTs’ fares and. to a
large extent. the most relevant aspects of their supply. Hence. the STUs
have relatively few incentives to run their business efficiently. Public
transport system mostly comprises of passenger bus transport service
offered by the State owned road transport undertakings and the private
operators plying their vehicles under stage carriage permits. The private
mode of transport is quite dominant as compared to State Road
Transport Undertakings (SRTUs). At present there are 53 State Road
Transport Undertakings having a total number of 1.13 lakh buses of
varying fleet size. The SRTUs carry more than 6 crore passengers per

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day performing about 449 billion passenger kilometers. The share of
buses as compared to the overall number of registered vehicles has
declined from 11.1% in 1951 to 1.1% today even though they account
for about 50% of all journeys performed by road. In contrast there has
been an exponential growth of personalized mode of transport during
this period especially during the last two decades. The proliferation of
the personalized mode of transport has led to enormous problems of
traffic congestion and pollution besides being a factor for increase
number of road accidents. One of the reasons for the growth of the
personalized mode of transport is the continuous degeneration in quality
of service rendered by the public transport system and rising level of
expectation of public/passengers. Despite rising demand of public
transport in the rural/mofussil areas, there is hardly any established
public transport system operating in rural/mofussil areas for connectivity
with nearest towns/cities. In most of the areas the number of public
transport buses operating under Stage Carriage permits is significantly
low as compared to the demand. Thus, the buses operating in these areas
are overcrowded. Moreover, in many areas people are forced to use
substandard vehicles for commuting to/from these areas. The use of
substandard vehicles is not only unsafe but also a major source of
vehicular pollution. It is, therefore, felt that there is an urgent need to
improve the quality of public transport in these areas with focused
attention on improved connectivity to rural/mofussil areas.
Public Road Transport system for the movement of passengers
over short and medium distance is essentially based on bus services. It is
a basic infrastructure and a public utility service that meets the travel
needs of the general public connected with work, education, social
purposes and entertainment purposes. Now buses even compete with the
Railways in some long distance routes with convenient and comfortable

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services throughout day and night. Passenger road transport sector is
dominated by publicly owned State Road Transport Corporations or
Undertakings in some states like Andhra Pradesh, Maharashtra, Tamil
Nadu, Karnataka, Gujarat, Utter Pradesh etc, while in some other states
like Maharshtra it is dominant only in certain areas of the state. About
80% of the land passenger transport needs in India is met by the bus
transport system (Kulkarni, 2000). These transport undertakings as
public enterprises are conceived and organized to function as
commercial enterprises engaged in economic activity involving huge
outlays of public investment. Social and economic objectives of
providing efficient and economical transportation facilities to the masses
have been the prime consideration for bringing the passenger road
transportation system under the umbrella of the state which was sought
to be achieved by the Road Transport Corporation Act of 1950 of Indian
Parliament which paved the way for the nationalization of the passenger
road transport to a large extent leading to the formation of State Road
Transport Undertakings or Corporations in almostall States in India. In
this context this is a case study of bus-based public passenger transport
system in Maharshtra. There are enough economic and environmental
factors which suggest that the demand for better transport system
(passenger bus service) would continue to increase if minimum quality
of service is ensured and the quality of public transport and service is
such that it can be sold as branded product to public. The financial
position of the State Governments is well known. It has been observed
for quite some time past that they are not able to provide adequate
financial support required for upgrading the depleting public transport
system in their respective states. Keeping the overall situation a need has
been felt to address the problems faced by the public transport
institutions so as to ensure that a better public transport mechanism is

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put in place which could be able to provide world class passenger bus
service across the country.

State Road transport Undertakings

Passenger road transport services in India are operated partly by public
sector and largely by private sector in the proportion of about 29% and
71 % respectively. The extent of nationalisation of public passenger
transport in different states also varies considerably with the highest
being about 70% in Maharashtra State. The public sector passenger road
transport system in India is operated by 71 passenger Road Transport
Undertakings owning 1,13,370 buses with individual fleet strength
ranging from 5 to 17000 buses among these organisations under single
management(Kulkarni, 1998).There are twenty bus transport
undertakings having more than 1000 buses in their Fleet, as on 31-3-
1997. The largest among these are ‘Maharashtra State Road Transport
Corporation’ and ‘Andhra Pradesh State Transport corporation’ with
about 17000 buses each. The organizational form for public sector bus
transport also varies from state to state; the most common being that of
the ‘statutory corporation’ form under the provisions of the Road
Transport Corporation Act, 1950. There are 21 such corporations, while
31 undertakings are formed under Indian Companies Act, 1956. Urban
bus transport systems are being operated by 10 Local Municipal
Councils and the remaining 9 undertakings as part of government
departments.

MSRTC at glance
Gradually the state of society got developed, like from ancient period to
today’s modern world, society has seen various types of progresses and
one of the major progresses is establishment of government in the

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society. Here, after establishment of government, one need intensely
come forward that is need for “Road and Road transport”. Regarding
this, an economist Jeremy Bentham said “roads are the veins and arteries
of a country through which channels every improvement circulates”.
One more quote about importance of roads is, “the road is one of the
great fundamental institutions of mankind. Its history dates back to
drawn of recorded history and beyond. I develops with man’s advance,
it retrogrades with breakdown of a social order. People without roads
would be people without interaction with the outside world without the
attributes of civilization. Man – road builder; thus, cannot be separated
from man the builder of civilization.” So, given quotes make it clear
that, if a country wants to become economically developed and civilized
then that country must develop its roads as first priority. Sixty three
years before Maharashtra state government has established
“Maharashtra State Road Transport Corporation” (MSRTC or ST) and
since 63 years it is working as safe, dedicated public Transport service.
MSRTC is third largest Corporation in India. Form the year 2006-2007
corporation is moving towards economic self efficiency. Whether in the
year of 2005-2006 Corporation was in loss but with the help of
providing creative and innovative schemes for Passengers, Corporation
gradually comes out from economic crises and it has registered profit of
71.02 crores in the year 2009-2010. As MSRTC is working with the
help of 17,573 buses, it is conducting 85000 fleets every day and all
these functions are done by 1, 01,153 employees, so MSRTC maintain
and develop such large number of employees through Personnel
Department. Personnel Department carries out all important and needed
functions like Recruitment and Selection, training and Development,
Industrial relations and employee welfare etc. The corporation tries to

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meet passenger needs by providing Passenger Transport and Amenities.
Amenities include refreshment rooms, Tea and cold drink stalls, public
telephone booths, free drinking water facility, urinals and toiled blocks.
In the year 1996-1997 MSRTC carried 272.2 crore passengers, but this
number of passengers get decreased in 2002-2003 because of rise in
private buses. And then it was the time of improvement and change. At
that time with considerable efforts MSRTC has again developed its
number of passengers. As a part of improvement MSRTC introduced a
concept of “Loss free Depots” in 2010. For implementation of this
concept, the officers and employees are encourages to maximize
passenger revenue and reduce the cost. For supporting this concept,
MSRTC has provided Electronic Ticket Issue Machine, computerized
reservation system, online reservation facility and reservation through
mobile. Corporation always takes efforts for developing positive image
of safe traveling in the eye of passengers. For fulfilling promise of safe
traveling corporation gives stress on maintenance of buses and training
for drivers. For motivating drivers corporation gives rewards to drivers
who have not done any accident during his services. Corporation
provides extra services on the occasion of festivals, Yatra and
Jatra(special occasions related to particular place, god etc.) and causal
contract services. Corporation has earned 41.96 crores through these
extra facilities in the year 2009-2010. Corporation also provides
periodical passes and its income was 45.22 crore in same year. For more
improvements corporation has implemented some new schemes and for
attainment of these schemes, corporation is working in the area like: (as
per the administration report-2009-2010)
1. 1,992 new buses were included into service.
2. 56 hired Air Condition buses were brought into services.

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3. The inauguration of use of Electronic Ticket Issue Machine and
computerized advance reservation system was started on 08-01-2010.
4. Toll free help line 10800221250 of corporation is started.
5. The service of E-ticket is started.
6. 98 midi buses having seating capacity of 31 were pressed in to service
in hilly backward areas of state.
7. 105 semi luxury buses built by M/s. ACGL, Goa were induced into
services.

The vision of the corporation

For meeting newly emerging challenges and for attracting sizable
number of passengers towards the services of MSRTC, the Visions of
corporation in the year 2006-2007 is as follows.
1. Branding of services.
2. Addition of well equipped modernized high tech buses, Semi luxury
buses with 2*2 push back seats and Parivartn buses with 2*2 seating
arrangement.
3. More Air conditioned buses will be introduced soon throughout the
state.
4. 60-65 seater new CNG buses will be introduced on selected routs like,
Mumbai Panvel, Boriwali Thane, Bhiwandi Kalyan and Thane Panwel.
5. Computerized reservation facility based on VPN Technology will be
extended to Pune, Satara, Mahabaleshwar, Pandharpur and Baramati.
6. Initially “Electronic Ticket Issue Machine” is to introduced in 6
depots.
7. Out sourcing of the job of cleaning of buses and bus stations along
with use of modern technology.
8. More emphasis on Depot Computerization.

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For improvement in the quality of services and working of the
corporation, corporation has decided some Visions in the year 2009-
2010 as follows.
1. The age of the vehicles of the corporation for scrapping will be
brought down to 8 years as against 10 years.
2. in all 520 Semi Luxury Buses will be get built by M/s.ACGL Goa.
3. 250 Midi buses will be purchased for providing services in hilly and
remote areas of state.
4. 160 Semi Luxury buses with rear air suspension will be built during
2010-2011.
5. Air condition semi luxury “Sheetal” with rear suspension will be
presented in operation.
6. Modernization of Central workshop.
7. Help from IIT, Pawai and JJ school of Arts will be taken to modify
bus body design and Color Scheme respectively.
8. Electronic Ticket issue Machine will be introduced in all depots and
computerized on line Advance Reservation System at selected 280 Bus
Stations will be made operational during 2010-2011
9. Static website of the corporation will be made dynamic.
10. More emphasis on computerization of working of all the
departments of thecorporation.
11. EOIs are to be called for computerization of working of account
department and stores and purchase department.
12. The amenity of sale of Snakes and Cold drinks will be provided in
the air condition buses.

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 Table No:-3.1
Organizational set up (MSRTC)
Tyre
Centr
Region Division Central Retrea Staff
Sr al Depot Printin
Year al al Workshop d Positio
.. Offic s g Press
Office Offices s ing n
e
Plants
2001
1 - 1 6 30 243 3 9 1 110361
2002
2002
2 - 1 6 30 242 3 9 1 106735
00
2003
3 - 1 6 30 248 3 9 1 103123
‘004
2004
4 - 1 6 30 248 3 9 1 103848
2005
2005
5 - 1 6 30 248 3 9 1 103107
‘006
2006
6 - 1 6 30 247 3 9 1 102299
‘007
2007
7 - 1 6 30 247 3 9 1 100774
‘008
2008
8 - 1 6 30 247 3 9 1 98134
2009
2009
9 - 1 6 30 247 3 9 1 101153
‘010
10 2010 1 6 30 247 3 9 1

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 -
‘011

Source – administration reports of MSRTC

MSRTC has well planned organization setup; Table No. 3.1 gives
particulars about same. There is one central office at Mumbai, six
regional offices, 30 divisional offices from 2001-02 to 2010-11. But the
numbers of depots are changing in different years like 2001-02 then in
2003-04, 2006-07. The numbers of central workshop, tyre retreading
plants and printing press is same for all given years. Staff position is
also changing in given years.

Board meetings-
Road Transport Corporation Act 1950 gives some conditions regarding
Board Meetings of corporation. Act tells that, A corporation shall meet
at such times and places, subject to the provisions of sub section (2) and
(3) observe such rules of procedure in regard to transaction of business
at its meeting as may be provide by regulation made under this Act:
Provided that the corporation shall meet at least once in every three
months. Section 2 explains that, the person to preside at a meeting of
corporation shall be the Chairman thereof, or in his absence from any
meeting, the Vice – chairman, if any, or in the absence of both the
Chairman and Vice Chairman, such member as may be chosen by the
members present from among themselves to preside. And section 3 tells
that, all questions at a meeting of a corporation shall be decide by a
majority of votes of the members present and in the case equality of
votes, the chair man or, in his absence any other person presiding shall
have a second or casting vote.

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Powers and duties of corporation:
The Road Transport Corporation Act 1950 gives some Powers as well as
some Duties to corporation. According to given duties by RTC Act,
MSRTC has to exercise its powers as progressively to provide or secure
or promote the provision of, an efficient, adequate, economical and
properly coordinated system of road transport services in the state or
part of the state. As per the power given by RTC Act 1950, MSRTC can
operate road transport services in the state and in any extended area.
Further to this the Act also states that MSRTC can provide for any
ancillary services. It also has to provide: to its employees suitable
conditions of service including fair wages, establishment of provident
fund, living accommodation, places for rest and recreation and other
amenities; MSRTC has authority to issue passes to its employees and
other persons either free of cost or at concessional rates and on such
conditions as it may deem to impose, here it means that MSRTC has
power to issue monthly, seasonal and other types of passes to its
employees and to others. These passes may issue without any charges or
may on concessions basis. Corporation can issue these types of passes to
students or employees of other organizations also as per the said
conditions. Subsections of RTC Act clause 19 gives power to MSRTC
that, it can manufacture, purchase, maintain and repair rolling stocks,
vehicles, appliances, plants, equipments or any other thing required for
the purpose of any of the activities of the corporation, for purchasing
vehicles of such type as may be suitable for use in the road transport
services operated by MSRTC. Apart from purchasing equipments or
vehicles MSRTC can acquire and hold movable and immovable
property, corporation also deem necessary for the purpose of its
activities, it can lease, sell or otherwise transfer any property owned by
it. Furthermore the RTC Act give power to MSRTC that, “to prepare

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schemes for acquisition of, and to acquire, either by agreement or
compulsorily in accordance with the law of acquisition for the time
being in force in the state concerned and with such procedure as may be
prescribed, whether absolutely or for any period, the whole or any part
of any undertaking of any other person to the extent to which the
activities thereof consist of the operation of road transport services in
state or in any extended area.” One of the most effective powers of got
by MSRTC is, it can purchase by agreement or on lease, any land and
further it can erect such building as may be necessary for the purpose of
carrying on its undertaking. MSRTC gained some more powers given as
below.
(Clause 19-2(e)) to authorize the disposal of scrap vehicle, old tyres,
used oils, or any other stores of scrap value;
(Clause 19-2(f)) to enter into and perform all such contracts as may be
necessary for the performance of its duties and the exercise of its powers
under the act;
(Clause 19-2(g)) to purchase vehicles of such type as may be suitable for
use in the road transport services operated by the corporation;
(Clause 19-2(h)) to purchase or otherwise secure by agreement vehicles,
garages, sheds, office buildings, depots, land, workshops, equipment,
tools, accessories to spare parts for vehicles or any other article owned
or possessed by the owner of any other undertaking for use thereof by
the corporation for the purposes of its undertaking.
(Clause 19-2(k)) to provide facilities for the consignment, storage and
delivery of goods;
(Clause 19(5)) where the corporation acquires the whole or any pars of
an undertaking of any other person, the corporation shall, in appointing
its officers and servants, take into consideration the claim of employees
employed in that undertaking.

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(Clause 19-20(2)) if the government of the other sate approves the
proposed extension, the corporation shall prepare a scheme for the
purpose and forward the same to other government for its consent, and
after such consent has been received, the corporation may, with the
previous approval of the state government, sanction the scheme.

Financial position:
According to RTC Act (23) the central Government and the State
Government may provide to a corporation established by the State
Government in such proportion as may be agreed to by both the
governments, any capital that any be required by the corporation for the
purpose of carrying on the undertaking or for purposes connected
therewith on such terms and conditions, not consistent with the
provisions of this Act, as the State Government may with the previous
approval of the Central Government, determine. The shares of a
corporation shall be guaranteed by the State Government as to the
payment of the principal and the payment of the annual dividend at such
minimum rates as may be fixed by the State Government by notification
published in the official Gazette at the time of issuing the shares. Every
corporation shall have its own fun and all receipts of the corporation
shall be carried there to and all payments by the corporation shall be
made there from very corporation shall by such date in each year as may
be prescribed prepare and submit to the State Government for approval a
budget for the next financial year showing the estimated receipts and
expenditure during that financial year in such form, as may be
prescribed. No provisions of any law relating to the winding up of
companies or corporation shall apply to a corporation and no
corporation shall be placed in liquidation save by order of the State
Government concerned and save in such manner as may be directed by

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that Government: Provided that no such order shall be made by any
State Government except with the previous approval of the Central
Government.
Table No:-3.2
Total Operating Revenue of MSRTC in last 10 years
Passenger
Sr. Sale of Casual Carriage of
Year Luggage &
No. Ticket Contract Postal mail
Parcel
2001-
1 2552.90 23.90 10.97 2.15
02
2002-
2 NA NA NA NA
03
2003-
3 2646.28 24.66 11.90 240
04
2004-
4 2861.49 33.21 12.40 2.62
05
2005-
5 3153.S1 31.78 11.78 30S
06
2006-
6 3415.82 40.98 10.76 3.23
07
2007-
7 3680.82 46.27 10.61 3.20
08
2008-
8 4024.42 51.79 12.45 3.30
09
2009-
. 4195.S4 615S 13.60 314
10
2010-
10 4762.46 60.91 14.19 3.30
11

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Source – administration reports of MSRT (Rs. In Crore)
Table No.3.2 gives detail information about operating revenue of
MSRTC of given years. These figures indicates that the total operating
revenue of organization is increasing every year that is from 2001-02 to
2010-11 and we can there is consistency in this increase of operating
revenue. As operating revenue consist of sale of tickets, casual
contracts, passenger luggage parcel, carriage of postal mail all these type
of revenue is showing consistent rise.

Table No:-3.3
Total Non-Operating Revenue of MSRTC in last 10 years
(Rs. In Crore)
Sr RFSOS RFSO
Year Advertising Rent Interest OMR
No. M SV

1 2001-02 2.24 1.26 13.49 13.51 1.03 20.47

2 2002-03 NA NA NA NA NA NA
3 2003-04 1.22 1.36 12.53 12.12 1.60 33
4 2004-05 1.51 1.24 27.05 27.51 0.26 296.16
5 2005-06 1.56 1.44 14.85 2154 0.86 54.27
6 2006-07 1.90 1.41 22.53 3613 0.33 60.80

7 2007-08 6.12 1.68 25.54 23.18 1.90 70.23

8 2008-09 2.32 1.42 25.57 18.26 11.60 45.06
9 2009-10 4.32 1.64 9.42 9.73 21.90 48.99
10 2010-11 5.00 1.78 34.55 47.57 8.55 41.36
Source – administration reports of MSRT
(RFSOSM- Revenue From sale Of Scrap Material
RFSOSV- Revenue From Sale Of Scrap Vehicles
OMR – Other Miscellaneous Receipts

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Grand Total = Total of Operating Revenue + Total of Non operating
Revenue) Table No.3.3 also gives detail information about non
operative revenue of MSRTC, it consist of advertising, rent, Revenue
from sale of material and vehicle, interest and other miscellaneous
receipts, which also increase in every year except revenue from Revenue
from sale of material and vehicle.

Table No:-3.4
Number of passenger carried in last ten years by MSRTC

Sr. No. of Passenger Average No. of buses

Year
No. Traveled (in Crore) on the road

1 2001-02 226.90 15804

2 2002-03 223.74 15512

3 2003-04 206.51 15179

4 2004-05 214.08 15229

5 2005-06 211.63 14679

6 2006-07 216.73 14457

7 2007-08 224.03 14640

8 2008-09 239.90 14797

9 2009-10 238.58 15040

10 2010-11 253.68 15359

Source – administration reports of MSRT

With the help of Table No. 3.4 it is observed that in the year 2003-04 the
number passenger traveled in MSRTC buses decreased, one of the
reason behind this was entry of private transport facility. But again in

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the year 2008-09 the number of passengers got increased and it is
increasing by the year 2010-11.

Central assistance for strengthening Public Transport System

Scope/Objectives of the scheme
a. To provide financial assistance for use of latest technologies such as
GPS / GSM based vehicle tracking system, computerized reservation
system, Automatic fare collection system, electronic ticket vending
machines, inter-modal fare integration, passenger information system
etc. for services covering inter-city and mofussil areas.
b. To provide financial assistance for preparation of total mobility plan
for the entire State.

Eligibility
The State Transport Undertakings/Public Private Partnership
organizations/ State Government Bodies entrusted with providing of
public transport facilities shall be eligible for assistance under the
scheme subject to the condition that the State Government fulfill the
following criteria/undertake to take the out lined reform measures:
i. The States/UTs shall have to submit a Detailed Project Report (DPR)
to apply for assistance under this scheme.
ii. The State Government may identify profitable/non-profitable routes
and bundle them together before inviting bids. While inviting bids the
State Government may indicate the frequency, timing of service,
maximum permissible age of the buses to be deployed on these route(s).
iii. State Governments/UTs shall have to outline the quality of service
required from the participating bidder. The quality of service shall
include the components such as compliance to the standards and
specifications notified under the Bus Body Code, adherence to proper

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timetable, number of break downs, proper discipline of bus crew,
adherence to traffic rules, application of IT, etc.
iv. State Governments/UTs shall decide the minimum fleet size of the
operator (company/cooperative society/individual owner) to bid for a
route. In no case the fleet size should be less than 10. Similarly, State
Governments may fix other criteria such as minimum annual turnover /
paid-up capital etc. to ensure better quality of service.
v. State Governments/UTs shall set up regulatory body to oversee all the
activities relating to passenger bus transport service.
vi. State Governments/UTs shall have to take adequate measures to
rationalize their taxation structure favouring development and growth of
public transport system. Specifically the sale tax on bus body/chassis
should not be more than five percent.

Mode/extent of assistance
• One-time assistance to the extent of 50% of the project cost shall be
admissible for IT related projects.
• An indicative list for State-wise ceiling is at annexure.

Procedure for seeking assistance

• The State Governments/UTs shall apply in a proforma as prescribed by
the Central Government, to seek financial assistance under this scheme.

• In case the State Transport Undertaking/other eligible organization

seeks assistance under this scheme, the same should be recommended
and forwarded through the concerned State Government.

• Separate application is to be sent for each project such as, application

for IT projects, mobility plan, etc.

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• The State Governments/UTs shall have to sign the Memorandum of
Understanding with the Central Government to adhere to its guidelines
for seeking financial assistance.

• The application shall be supported by all necessary documents, such as

copy of DPR, route survey report etc.

Procedure for project appraisal/sanction and disbursement:

i. The proposals received from the States/UTs shall be considered on
first come first serve basis.
ii. The proposal received from the State Government will be initially
scrutinized by Central Institute of Road Transport (CIRT), Pune and/or
any other institute designated by Deptt of RT&H. On the basis of their
recommendations the project will be considered by an Appraisal-cum-
Sanction committee headed by Secretary (RT&H). Other members of
the Committee shall be AS&FA, M/o S,RT&H, Joint Secretary(T), D/o
RT&H. and representative from Planning Commission.
iii. The funds will be released in the following manner:
The amount may be released in three installments, i.e., (i) 50% of the
total sanction amount shall be provided in advance after the State
Government signs a MOU to undertake the reform measures enunciated
in the scheme; (ii) 30% of the sanctioned amount shall be released after
receipt of the, utilization certificate of the earlier released amount and an
interim progress report; and (iii) remaining 20% to be released after
submission of completion report along with the utilization certificate for
the sanctioned amount.

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Market Structure and Reported Competition Issues
Like many economic activities that are intensive in infrastructures, the
transport sector is an important component of the economy impacting on
development and the welfare of populations. When transport systems are
efficient, they provide economic and social opportunities and benefits
that result in positive multipliers 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. Transport also
carries an important social and environmental importance, which cannot
be neglected. Thus, from a general standpoint the economic impacts of
transportation can be direct and indirect:

Direct impacts related to accessibility change where transport
enables larger markets to save time and costs.

Indirect impacts related to the economic multiplier effects where the
price of commodities, goods or services drop and/or their variety
increases.

Mobility is one of the most fundamental and important characteristics of

economic activity as it satisfies the basic need of going from one
location to the other, a need shared by passengers, freight, etc. and
information. Reduced mobility impedes development while greater
mobility is a catalyst for social and economic development. Mobility is
thus a reliable indicator of development. Providing this mobility is an
industry that offers services to its customers, employs people and pays
wages, invests capital and generates income. The economic importance
of the transportation industry can thus be assessed from a
macroeconomic and microeconomic perspective:

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At the macroeconomic level (the importance of transportation for a
whole economy), transportation and the mobility it confers are linked to
a level of output, employment and income within a national economy. In
many developed countries, transportation accounts between 6% and
12% of the GDP.

At the microeconomic level (the importance of transportation for
specific parts of the economy) transportation is linked to producer,
consumer and production costs. The importance of specific transport
activities and infrastructure can thus be assessed for each sector of the
economy. Transportation accounts on average between 10 and 15
percent of household expenditures while it accounts around 4% of the
costs of each unit of output in manufacturing, etc.

Passenger Transport (Land)

In India, the British developed the railways for improving trade and to
move troops to control the law and order situation arising out of the
independence movement. British interests were paramount in nurturing
and expanding the railway network. Road transport was used as a source
of revenue through taxation. After independence, the Government of
India gave high priority to building roads and road transport for rural
development. Since independence, though the Indian Railways
improved its services and expanded its network substantially, it could
not compete effectively with road transport for transporting passengers.
With the enactment of the Road Transport Corporations Act (1950) and
amendments to the Motor Vehicles Act (1939), the Government of India
paved the way for speedy nationalisation of passenger road transport,
establishment of STUs, and empowering these to grant permits.
Consequently, all the Indian states established STUs and started
nationalising bus operations. As a result of STU initiatives in many

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states, basic infrastructure such as bus depots, service centres, modern
bus stations, etc. were built. STUs created and cultivated the ever-
expanding market in passenger road transport from the 1950s through
the 1980s. According to the Association of STUs, the share of STU
buses in the total number of buses in the country grew from 20 percent
in 1950 to 50 percent in 1980. However, with the liberalisation of
economy arising out of changes in the policy environment, implemented
through amendments to the Motor Vehicles Act in 1988, STUs started
facing severe competition from private vehicles and operators since the
early 1990s. Changes in the Motor Vehicles Act in 1988 led to the
scrapping of overriding priorities and privileges conferred upon STUs,
providing an easy (and unregulated) entry to private operators (of buses,
mini-buses, jeeps, three-wheelers, etc., with and without stage carriage
permits) into the public transport sector. Simultaneously, changes in
industrial policy resulted in serious competition in the automobile
industry. Free availability of two-wheelers and cars resulted in the upper
middle and middle class drifting away from public transport. Customers
were quite justified in exercising their options. Owing to increasing
personal incomes, long-distance passengers aspired for luxury services
in rural operations. But STUs forced these passengers to travel by
uncomfortable ordinary buses. Exercising monopoly rights, STUs
neither catered to changing passenger needs nor allowed others to come
in and take care of their needs till the liberalisation of the economy in
the early 1990s. These two trends have contributed significantly to the
erosion of market share, occupancy ratio and profitability of STUs. A
majority of STUs registered negative growth and losses in the 1990s. To
improve financial viability, STUs were compelled to withdraw
operations that involved unprofitable trips, services and routes.
Predictably, private operators have also not introduced services on low-

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density routes because these are not profitable. Therefore, in a
liberalised environment, it becomes a greater responsibility of the state
to protect the interest of consumers, especially those passengers who are
compelled to travel in public transport, as they are too poor to afford
quality transport or high taxi fares. In many post-liberalised economies,
such problems were effectively tackled through a variety of measures
like packaging of routes, subsidies, and tax concessions, among others,
through the establishment of a regulatory mechanism, which is absent in
India. Hence, there is an urgent need to address two issues in passenger
road transport in India:

First, reforms in existing STUs to improve their competitiveness in
the liberalised environment while fulfilling the objectives for which they
were set up in the first place. take care of contractual compensation, fare
management and above all, consumer interest. This two-pronged
approach will sustain a competitive environment, develop scientific
methods in evolving an effective road transport system that is
economically viable and protects consumer interest. It calls for political
will to conceive, introduce, support and sustain the process.

Freight transport (Land)

The roads goods transport industry in India has never been regulated the
way it has been in many other countries. But as mentioned earlier, a
regulatory framework in the form of the Motor Vehicles Act has been in
place since 1939. This did provide for restrictions on permits but over a
period of time these have been relaxed to a very large extent permitting
easy entry into the industry and for movement all over the country. This
is perhaps the only deregulatory move that has taken place in India as
far as the trucking sector goes. The credit for this development goes to
the Indian railways, which had no capacity to offer on a regular basis

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even with regard to bulk items. But as observed by the various
committees and pointed out by the different studies, the Motor Vehicles
departments of states have mainly focused on the collection of revenue
(tax and otherwise) rather than on effective enforcement of the
provisions of the Motor Vehicles Act. As a result, an effective
regulatory framework has, never been attempted to be put in place. This
has emerged over the years as a major external impediment (in terms of
a number of dimensions) to the effective growth of the trucking industry
in India. This is a matter of concern especially when viewed in the
context of an emerging globalised competitive economy.
Key Players
Structure of the road freight transport industry in India is highly
fragmented. The industry broadly consists of players who provide the
transportation services, intermediaries (transport contractors/booking
agents) who offer haulage services, brokers supplying equipment,
drivers for commission and the consignors constituting the ultimate
demand for the services.14 It is primarily composed of three key players
as described below.

Transporters: These are trucking companies which have the primary
contact with shippers and receiving customers. They solicit freight,
largely on an annual price quote basis, bill, collect, and carry the
accounts receivable, are responsible for cargo loss and damage claims
and perform the other customer service functions. Some, like the
Transport Corporation of India (TCI), are fairly substantial enterprises
with many business locations. They typically own a fleet of trucks and
often warehouses and terminals as well. But they rely primarily on small
truck operators for their line-haul (intercity) transportation.

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Truck Operators: These individuals (often called owner-operators)
typically own one or a very small fleet of trucks, which usually are
financed by high-leverage debt. In a few cases, these operators own 5 to
10 trucks. This category includes the single (or small truck operators
owning 1-5 trucks) truck operator, who are very large in number. Entry
barriers are low in the sense that: a) there are low capital requirements,
b) ease of availability of capital though at high cost, c) very little
expertise required in terms of educational skills, and d) ease of obtaining
driving licenses and permits.
The presence of a large number of operators has led to a
fragmented industry structure. Moreover, though the entry into this
market is supposedly easy, however, information regarding availability
of freight is a formidable problem. There is dependence on the brokers
who give them business. The trucks are not registered in one name,
presumably to avoid income tax obligations and labour legislation.
Small truck operators are involved only in the physical movement of
goods and depend on booking agents and other fleet
operators/transporters for obtaining business. Some of them are attached
to major transport companies, brokers and vehicle suppliers.
As a general practice, small operators do not come into direct business
contact with consumers. One of the key reasons for the dominance of
small operators is the type of experience in business. Most operators in
this industry are in their family business –56 percent of truck owners
surveyed have been in the business from 1 to 10 years, 30percent from
11 to 20 years and 15 percent for over 20 years. Though the exit option
also seems likely in regard to these operators, it is observed it is a very
difficult one since there is no alternative to this work. Therefore, there is
hardly any scope for easy exit.

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Intermediaries
Booking agents/transport companies/transport contractors: Booking
agents are firms or persons who accept and store goods, both parcels and
bulk and arrange for their movement through operators. This agent is
really the person who represents the demand, i.e. negotiates with and on
behalf of users. He is responsible for collecting, forwarding or
distributing goods carried by goods carriages and also for cargo loss and
damage claims while performing other customer service functions. In
some cases, the agents own trucks and also function as operators. In
addition to these services, the agents also advance money to operators
(especially small ones) to help meet their working capital requirements
and by discounting bills on unloading. As regards the volume of
business handled by this category of intermediaries, it is generally
accepted that they have a virtual monopoly of most inter-state and long-
distance movement.

Brokers/commission agents/suppliers of vehicles: A broker is

normally expected to represent the supply side, i.e. truck operators, and
though in the past there have been booking brokers who have
represented user interests for a commission. The broker takes a
commission from the truck owners and ensures the supply of trucks to
the transport company/booking agent. Given that the dependence on
small operators is significant, there are issues of reliability of the
operators, the movement etc. from the perspective of the user which is
supposedly taken care of by the broker who normally is sought out by
truck operators for loads. The World Bank (2005) also observed the
necessary role played by brokers in terms of ensuring a quality control
on the reliability of the operator and also as a means of facilitating
prompt loading by the operators. Large fleet operators depend on these

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brokers for moving a certain volume of traffic over and above what their
own fleet would permit. The evidence that has emerged over quite some
period of time is that the middlemen/ intermediaries, which include
booking agents and brokers, are the dominant players in the market and
they in fact are the real “makers” of the market. Given this feature, the
issue is: who and/or what determines the freight rates? National Council
of Applied Economic Research (1979) indicated that booking agents,
besides other functions, also had a role in fixing freight rates, i.e. the
rate charged to the user and the rate given to operators. Despite many
remaining impediments, mainly concerning the existing infrastructure,
India has achieved a highly competitive, low-cost road freight transport
industry for basic services, with highway freight rates among the lowest
in the world. The industry is deregulated and, as in many countries,
highly fragmented with many small operators, as mentioned above. The
industry‟s structure, comprising transporters, truck operators, broker
agents, etc. is market-driven and appears to be serving the market
reasonably well.18Given the very low freight rates, one has to conclude
it is an effective industry structure. It is the constant pressure of a highly
competitive market that delivers to India‟s shippers some of the world‟s
lowest freight rates. While the industry delivers very low freight rates,
service quality is poor, with low reliability and transit times nearly
double that of developed countries.

Creation of a Seamless National Market

While there is a general declaration in the Indian Constitution that trade
and commerce should be free, the Centre and states have the power to
regulate. While mandating free trade within the country, the Indian
Constitution, nevertheless provides that restrictions can be imposed by
the Parliament on internal trade as may be required in “the public

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interest”. Complaints from the transport sector, relates to the issues of
taxation (both Centre and state), regulation by states on the movement of
goods, frequent stoppages and delays under administrative rules and
inspectionagencies. Barrier free movement of passenger and freight by
road across the country is vital for promoting efficient economic
development and growth. In India, road freight carriers are stopped at
state borders, checked for payment of taxes/levies on the goods carried
and for compliance of various provisions of Motor Vehicle Rules.
Multiple and sequential checks conducted by various agencies result in
manifold detentions. Detention of vehicles causes lower speed, loss of
time, high fuel consumption and idling of vehicles, leading to under-
utilisation of transport capacity and adversely affecting their operational
viability. As a result of excessive taxation and delays, transportation and
transaction costs increase, which further increase the final cost of the
product, distorting competition in the domestic market. The economic
cost of such delay is estimated at a minimum of Rs 3,200 crore and a
maximum of Rs 4,300 crores for the year 2004. With an economy
dominated by roads and road transport, it is increasingly important that
truckers have much the same right as the railways to travel interstate
with a minimum of delays. Legal and administrative reforms in this area
are needed for India to function effectively as a single market. At the
national level, “Some states like Gujarat have taken up the matter
seriously and have initiated measures to have Computerised Inter-State
Check posts. Through the use of computers and other electronic devices
at 10 remote inter-state border check posts in Gujarat, a team of savy
public officials have reduced corruption and significantly increased the
State‟s tax revenue by automating the highway toll and fine collection
system. The system was a good investment. Within one year a system
had paid for itself, illustrating how strategic investments, properly

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planned can lead to long-term benefits” (ADB, 2003). This new system
could be used by the sales tax department of the State, which would
monitor the movement of goods in the state, as well as transhipments.
As a measure of competition advocacy, the CCI needs to emphasise on
the importance of elimination of regulatory and physical barriers, which
can pave the way for a seamless national market for the benefit of the
market players and consumers. CCI should engage with respective state
governments and encourage them to carry out competition related audit
of rules/regulations that create such barriers and ensure the same are
removed. CCI could engage with relevant government institutions and
also propose the following steps to ensure seamless national markets:

Adopt concept of “Green Channel”. Freight with single destination
accounts for a large proportion of consignment and is likely to go up
with containerisation. Such cargo by road could be accorded “Green
Channel” treatment provided papers are prepared in advance and sent to
the check post. Initially high value freight and sensitive commodities
could be covered under “Green Channel”.

Adopt “single Window clearance System”. It could be applicable for
all authorised charges/clearances both at origin and at Check Posts.

Reformation of State Transport Undertakings

Given that the mandate of CCI is to also ensure facilitation of
competition in the various sectors in the economy, CCI could advocate
for reform in the Inter-City Bus services. As part of reforms, the sector
should include deregulation of tariffs, restructuring and
commercialisation of STUs, elimination of STU monopoly rights,
changes in the tax regime to achieve uniformity of tax treatment of all
buses operating in the inter-city markets. The appropriate public policy
for the inter-city bus services sector would be to remove quantitative

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regulations restricting entry into the inter-city bus transport markets, and
to allow market forces to determine both tariffs and the types of services
offered.

Curbing Cartels in Transport Sector in India

There are services provided at the local-level and used by businesses
that are anticompetitive in nature. For instance, in the transportation of
goods via trucks, most of the trucks plying on Indian roads are under
single ownership and there are few large-fleet operators. Although there
appears to be competition, given the large number of truck owners, the
fact is that about 5000 cargo operators handle the entire cargo in the
entire country. These cargo operators cartelise and decide the freight and
there is no competition at their level. There are also instances of
cartelised operation of truckers‟ union around major production sites
and factories. Truck operators‟ cartel result in higher transport costs,
since trucks bringing in goods charge two-way fare, as they are made to
return empty, while transportation costs on out-going goods are about 40
percent more. Given below are few examples, of cartelisation formed by
truck operators across India:

In case of Baddi, Himachal Pradesh, the Baddi Nalagarh Truck
Operator Cooperative Transport Society, monopolised the movement of
goods from the state. Controlled by the local MLA, the truck union
charged 30 percent higher on the Baddi-Delhi route and 15-20 percent
on the Baddi-Mumbai route. Trucks coming in with supplies went back
empty, because they were not allowed to pick up freight, which only
added to the cost.

In the case of Orissa, the Angul Truck-owners Association, a
Government registered body operating at the National Aluminium Co.
Ltd.‟s factory charged as much as 200 percent more for transportation of

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ingots under the obliging eyes of the authorities. Such official cartels are
known to still exist in other parts of Orissa also like in Sukinda Mines,
Paradeep Port and Balasore.

In Punjab`s Derabassi, truck unions had drafted their own tariffs,
increasing costs of production for local units, thus rendering them
uncompetitive. A cartel of around 500 truck operators was troubling the
area, since Derabassi‟s inception as an industrial town in 1987. In
Sirhind, near Mandi Gobindgarh, such unions stalled industrial growth,
resulting in industry to flourish in nearby Khanna and Amloh.

Similarly in Makrana in Rajasthan the cartel of truck operators‟ union
had killed the marble business. The Union was charging tariffs almost
35-40 percent higher than the prevailing market rates. This led to an
increase in transportation costs of marble from Makrana and the usual
harassment of dealing with a monopolist union. The harassment grew to
such proportions that several marble-sawing plants had to move to
Kishangarh on the Jaipur-Ajmer National Highway No. 8.

Similar situation existed in Bikaner, Rajasthan where the truck
operators‟ union were creating problems in the smooth movement of
minerals from the area. Due to obstruction in the supply, the ceramic tile
industry, which uses these minerals as raw material were facing
hardships, and even closure.

Marketing Orientation in Management

Marketing is essentially the analysis, implementation and control of
carefully formulated programmes designed to bring about voluntary
exchanges of values with target markets for the purpose of achieving
organisational objectives(Kotler,1977). This relies heavily on designing
the organization’s ‘offering’ in terms of the ‘needs and desires’ of the
‘target market’; here, the passengers and the public at large. The basic

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reason why any firm/organisation should be committed to formal
marketing principles is that it will enable the organisation to be more
effective in achieving its objectives. Organisations in a free society
depend upon voluntary exchanges of values to accomplish their
objectives. A marketing orientation in management helps in that: as it is
the technical knowledge about how various marketing variables perform
separately and together in influencing the target market of the
organization which it aims to service. Marketing orientation gives the
organisation the skills for regulating the level, timing and character of
demand of a product, service, place or idea and it equips the
organization to face different demand situations which it might
encounter, such as conversional marketing, stimulational marketing,
developmental marketing, re-marketing, synchro-marketing,
maintenance marketing, de-marketing and counter-marketing and to
plan accordingly as each demand situation calls for a particular set of
psychological and behavioural concepts and marketing strategies to cope
with (Kotler,1977). Thus a company offering a product or service in
such an environment will have to tailor-make its ‘offerings’ in such a
way that it satisfies the needs and wants of the consumer or user of that
‘offering’. For this, the pre-requisite is to understand the
users/customers and what they are looking for in the product or service
to satisfy their needs and wants. This will require a systematic
assessment and analysis of the consumers/users comprising the target
market, by monitoring and understanding the perceptions, attitudes and
impressions of the consumer towards the service on a continuing basis
to help in initiating appropriate management actions to match with the
changing market scenario. This requires that the organisation be
responsive to the needs and desires of their target market and
implements the ‘marketing concept’ in its management process which

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essentially is ‘marketing orientation’. The ‘Marketing Concept’ holds
that the key to achieving organisational goals consists in determining the
needs and wants of target markets and delivering the desired satisfaction
more effectively and efficiently than competitors (Kotler,1990).

Responsiveness of the Organisation:

Marketing orientation implies that the organisation is willing to design
its ‘Product/Service/Offerings’ in terms of the needs and desires of the
target market. Thus it responds to the customers’ needs and desires. An
organisation which is termed a ‘highly responsive’ organisation is that
which shows concern and interest in learning about the needs,
perceptions, preferences and satisfaction of its customers and relies on
systematic information collecting-procedures and in sifting incoming
information and taking positive steps wherever necessary to adjust its
products/services/offerings and organizational policies and procedures.
On the other hand, an ‘unresponsive’ organisation is one which does not
bother to do anything to measure the needs, perceptions, preferences or
satisfaction of its constituent public with the changes in time and the
environment in which it is functioning and it becomes increasingly
maladapted to its environment. A responsive organisation grows and
prospers with time as it is able to meet the needs of its customers with
the changes in time, demand and preferences (Kotler,1977,’90). So the
‘degree of responsiveness’ is an indicator of how much an organisation
is marketing-oriented oradopts a marketing approach in the management
of its activities which in turn determines the effectiveness of that
organisation. The service (product) of the transport undertakings is not
one that can be stored over a period of time and sold later. If it is not
used as soon as it is made available, it is left out and it is irretrievably
lost that is, it has only ‘time value’. Hence the success of any

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undertaking depends on how well it is able to judge the requirements of
its ‘Product’ (service) in terms of time, place and volume(frequency).
This brings out the necessity for planning the transport operations such
that it will be customer oriented and market-responsive. Such an
undertaking which is highly responsive can be termed a ‘marketing
oriented organisation’ or following the current usage, as ‘Market
Oriented’ as proposed by Kohli & Joworski (1990) and Narver &
Slater(1990), emphasising on ‘market intelligence’ and ‘dissemination’
of the same across the departments of the organisation and their
‘responsiveness’ to customers.’

Assessing the Service Features, Responsiveness and Profile of the

service
Passenger Road Transport having been nationalized only partially in
Maharshtra, there is the option of other modes to the travelling public in
a large geographic area of the state, to some extent. This presents a
competitive market scenario to MSRTC and other bus service operators
as well. The studies which were done and recommendations made had
centered mostly on the operational aspects of bus services. From the
initial exploratory studies it was apparent that the public in the state at
large were not satisfied with the services of MSRTC and so they tended
to prefer other modes where ever such options are available as in the
central and northern districts of Maharshtra. So this scenario needs to be
looked at in a comprehensive manner, taking the MSRTC, its publics, its
competitors and external environment into consideration In any
enterprise, firm or organisation, marketing is intended to achieve certain
corporate objectives such as the targeted level of sales and profitability
(Kotler,1977) by:
a. Identifying and defining the needs and wants of customers

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b. Translating these requirements into product and service
specifications, by
c. The formation and implementation of demand influencing policies
and delivering the resulting products and services to the firm’s various
markets.
Thus the organization’s marketing programme needs to be based upon
the information about its present and potential(future) market, the
number, type and location of customers involved, the economic, social,
competitive and other environmental factors which influence their
responses and choice behaviour. Viewed in this perspective, the
questions that arise are whether a ‘marketing approach’ or ‘market
orientation’ as is currently being termed would enable MSRTC to
respond to the needs and wants of the travelling public and whether it
would lead to the development of a management strategy and
organizational adaptation aligned with the consumers’ needs, and be
sensitive to the opportunities and threats posed by the external
environment and whether this would help MSRTC to become effective,
efficient and commercially viable organisation. Thus the main research
question is whether the gauging of the perceptions about and the rating
of the bus services of MSRTC in terms of the service attributes or
features vis a vis the other services in the routes would help to identify
the weak and vulnerable aspects of the services of the MSRTC and
whether that can guide the management actions required to be adopted
to improve the services and the RTC as a whole by such adoption of a
marketing oriented management approach in the MSRTC.

Private Inter-City Bus Transport

In recent years the private sector has won back a rapidly increasing
share of the road passenger market, and in a few states private operators

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have already entirely supplanted state-owned services; only Andhra
Pradesh reportedly has as yet no substantial private bus competition to
the STU. Private bus operators have also established a new standard of
service in long-distance inter-city services (particularly in Southern
India), while the market for shorter-distance transport is being
transformed by the introduction of modern small to medium (10-18
passenger) buses, which operate more efficiently on the rural routes. In
other states, a policy of hiring private buses by STUs to supplement
their fleet strength and to operate under STU management on still-
nationalized routes has recently been introduced. Altogether, from a low
of about 55 percent of the bus fleet in 1981-1982, by now more than 80
percent of the nation’s bus fleet is reportedly in the hands of private
owners.
However, far less is known about the private bus carriers who are
now thought to meet about three-fourths of the bus transport demands in
India than is known about the STUs that provide about one-fourth. That
is partly because, in competitive markets without market distortions, the
economic characteristics of the industry — few economic or technical
barriers to entry and few economies of scale to firm size — dictate an
atomistic industry comprising many very small suppliers who have little
need for complex management information systems — in contrast to the
huge state owned enterprises that comprise the STUs, which came about
solely because of government intervention. Confidentiality of
information in such competitive markets is also normal management
practice.
Revamping Government Policy to Better Serve the Public Interest
Governments have multiple (oftentimes conflicting) objectives and are
universally constrained by resource availabilities. In the case of
passenger transport, equity considerations may weigh as heavily, or

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possibly even more heavily, than economic efficiency. Equity
considerations in this case include the concept that bus riders throughout
a state (or particular sub-region thereof) should pay the same fare
regardless of costs of providing the specific service and also the concept
that certain groups in society (e.g. retired persons, school children,
military personnel) should enjoy significant fare discounts. It is
reasonable to infer that such equity considerations were key factors in
the original decision by the GOI to establish the STUs in 1950, and the
concomitant decision to restrict licensing for stage services as a
monopoly for the STUs in order to create profitable routes that could
cross-subsidize the unprofitable routes where the standard fare was in
fact below the costs of service. Such structures, which were quite
common around the world at one time, have generally proved difficult to
sustain, as the market disequilibrium thus created offers a very great
temptation to private providers to enter the market in cream-skimming
competition. As noted above, that has typically left the licensed
franchisee saddled with a heavy burden of unprofitable mandatory
public services and the government saddled with an ostensibly heavy
regulatory enforcement burden that in India has, of course, as we have
seen, been circumvented by the market, undoubtedly aided from time to
time by illicit payments to encourage enforcement officers to look the
other way.
From an economic perspective it is fortunate that the market has
managed to circumvent these restrictive regulatory policies, as the result
is a more flexible transport system, more responsive to the specific
needs of the passengers and the Indian economy. However, from the
perspective of public governance, having government regulations
flaunted so openly undermines the public’s respect for law and order
more generally. In this context, the appropriate public policy

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prescription is to remove quantitative economic regulations restricting
market entry, and instead allow markets to determine what services will
be offered. At the same time, qualitative regulations to ensure safe,
reliable services, and environmental protection, should be further
developed and seriously enforced. In this manner the government could
best ensure well functioning markets that provide the array of services
the various market segments demand and at least cost.

Controlling and Other Functions

Control is closely related with other functions of management because
control may be affected by other functions and may affect other
functions too. Often it is said: planning is the basis, action is the
essence, delegation is the key, and information is guide for control. This
reflects how control is closely related with other functions of
management. In fact, managing process is an integrated system and all
management functions are interrelated and interdependent. When
control exist in the organization, people know what targets the are the
striving for, they know how they are doing in relation to the targets, and
they know what changes, if any are needed to keep their performance at
a satisfactory level.

Steps in Controlling
The systems, processes and techniques of control are same whatever the
area of their applications may be. As pointed out earlier, control is
reciprocally related with planning. It is performed in the context of
planning and aids planning in two ways: it draws attentions to situations
where new planning is needed; and it provides some of the data upon
which plans can be based. Apart from reciprocal relationships, it has
circular relationship with planning as explained by figure:

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The figure identifies the various steps in control process which are
necessary for its relationship to planning. These steps may broadly be
classified into four parts: (i) establishment of control standards, (ii)
measurements of performance, (iii) comparison between performance
and standards and the communication, and (iv) correction of deviations
from standards.

Chart No: -3.1

Steps in Controlling

Management Control Related To Utilization Of Resources

The Government “in business”- The nationalization of Road Transport
in India reflects the socialist philosophy of the Government under which
all major utilities will come progressively under public management.
The objectives of nationalization road transport undertakings laid down
in the Road Transport Corporation Act 1950 clearly indicate that they
are formed to provide adequate, economic, efficient and properly
coordinated transport services to the traveling public.Although the
Government’s funds are invested in the nationalized transport, its
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management is not the “business of the Government.” This does not
mean that the undertakings need not follow the business principles. It is
very essential to follow the business principles to survive on its own
besides aiming the above objectives. The fact that they are public
undertakings in no way absolves them from the responsibility of careful
management of the public fund with them since they are managing a
public trust.

Optimizing Utilization of the Main Assets Vehicles- Vehicles being

the most important resource available to the bus transport undertakings.
Its utilization are measured in terms of kilometers obtained per vehicle
on road per day i.e. average vehicle utilization and it determines to a
large extent the operational efficiency of the undertakings. Optimizing
the utilization of resources is the basic requirement for the management
of public sector undertakings and more so the transport undertakings in
which a formidable capital is invested. About 80% of the capital in any
nationalized transport undertaking is in the form of vehicles. Optimizing
the use of vehicles is thus a basic responsibility of the management.
There have been no accepted standard fixed about the vehicle utilization
but according to one estimate by Dr. Sudarshanam in his article, the
vehicle utilization should be at least 300 Km. per day. It generally varies
between two hundred to four hundred Km. per day. Higher vehicle
utilization is much favorable because it reduces fixed cost per Km. The
important in vehicle utilization gives strength to the economy of
undertaking by reducing the need of new vehicle. Optimizing utilization
of resources in road transport undertakings mainly involves:
1. Optimum fleet utilization in terms of buses in services (on road) and
2. Optimum vehicle utilization (vehicle in service) in terms of
kilometers runs.

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For example, in a big Corporation, which operates daily 30 lakh Kms,
with vehicle utilization is increased by 10 Kms, i.e., the vehicle
utilization is increased to 310 Kms per day, and then the requirement of
vehicles would reduce to 9677 vehicles. Thus there will be considerable
savings (on capital investment) in fixed cost and also the profitability of
the operation will increase.

Optimizing Utilization of Human Resource- The human resource of

an organization is its precious wealth and backbone and hence plays a
stupendous role in its developmental and productive activities. The
development and the progress of an organization of its available human
resource. In the same analogy, if this human resource is not being
utilized properly. It is certain that its developmental activities and
therefore, its progress are bound to be retarded. In simple terms, the
human resource can ruin an organization which is working well or it can
put an organization which is counting days on the right. Track against
this background, creation of proper environment to put the human
resource for productive purposes also assumes equal importance.

Fleet Utilization- The objective of providing sufficient transport facility

to the public is only fulfilled when the corporations posses sufficient
number of buses and put them are regular use. “Fleet utilization of
percentage of vehicles pressed into services against the total number of
vehicle available and held by the organization.” So the parameters
showing the fleet utilization reveal not only the extent of utilization of
buses but are also an indicator of efficiency of engineering department
and control of a transport undertaking. That how many the vehicles are
treated for mechanical maintenance by following a well regulated
preventive work in order to avoid breakdowns? Which deplete the fleet

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available for operation? All the vehicles held by the transport
undertaking can not always be expected to put on road as a certain
vehicles are likely to be held in the workshops for routine maintenance,
besides the need to maintain traffic spares. According to the
recommendation of the study group setup by the association of the state
road transport undertakings, the fleet utilization should be as follows:-
1. Vehicle in operation – 90%
2. Road worthy but not in operation (traffic spares) – 2%
3. Off – road vehicles – 8%

Management Control on Cost of Operation

Minimizing Operating Cost- Apart far as basic need to make
maximum use of resources in term of vehicle and crew utilization. The
transport undertakings should also be concerned with reducing operating
costs. The minimum cost concerned with, however, must be judged on a
long-term rather than short-term basis. In the short term, one might
reduce the cost by omitting adequate maintenance but such a policy
could have the adverse effect on the health and life of the recourses in
the long term.

Route Economic (Route planning)- As far as possible, stress should be

laid on selecting such routes which offer a higher and regular traffic
potential together with adequate vehicle utilization, although operation
of uneconomical routes cannot be ruled out on account of the state
Government policy to operate such route for the social and economic
enlistment of the social cost as also to deduct such costs while
determining the efficiency of the as a business industry.

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The “Perishable” Product- The study of Route economic is thus one of
the prime factors for effective operations. Traffic officers, at all levels,
should consider their task as that of a Sales Manager and assess the
“market” for the services they sell. They should ensure that the seat kms
produced are always sold to a maximum extent. The analogy of keeping
stock of the production turned-out in any factory operations do not hold
good because the “seat kilometers produced” cannot be kept in the
stock. They must be sold as and when they very close to his market than
any average Sales Manager must be very close to his market than any
average Sales Manager and he must be sensitive to the day to day
fluctuations of the business.

Earning Per Kilometer- There is another kind of utilization for every

vehicle, which varies from vehicle to vehicle, though the productivity of
the vehicle is measured through vehicles utilization i. e. the number of
passengers carried in the vehicles for every kilometer it is operated. In
reality, the provision of a particular service can be thought of as the
provision of a specific number of passenger seats for a specific number
of kms. In fact, these seats will rarely be occupied fully over the whole
distance the bus travels. The extent to which the seats provided are in
fact occupied is usually named and calculated as “load factor” Different
hours at the scheduled time. Earnings per kilometer are reflected to
some extent by this load factor but it is also affected substantially by the
number of seats provided and actual seats occupied.

Control to separate Social Objective Losses and Optimize Earning-

Having provided route-wise control data based on the kind of targets
which statistical analysis supplies will reflect the profitability of each
route. It may be stated that the unprofitable routes are deliberate because

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of the social objectives of the Government. It is quite possible to
separate the losses of such routes and on account of other social costs
due to concessions and arrive at their total losses so that the figures can
be available as a memorandum note to the Government for
reimbursement. As regards the routes where no social objective applies,
it should be the Depot Managers’ job so as to operate the schedules to
produce the best profits. In order to operate the schedules effectively it
may be desirable to invest more delegation of authority and
responsibility to the Depot Manager.

Controls to minimize operating cost- It is an era of competition and

the situation has been changing slowly from a healthy competition to an
unhealthy competition and from a constructive competition to
destructive competition leading to cut-throat competition. In this type of
situation, the management has to exercise maximum control over the
cost. Only those companies which are capable of producing the product
more economically than the others have good prospects of progress and
expansion as compared to others. This will have a favorable effect on
cost, price, demand, profit, profitability; etc.This applies to all the
organizations- whether they are profit-oriented or service-oriented,
public or private. Control should be exercised on staff, fuel, tyres,
spares, and other miscellaneous costs. (MVT depends on the revenue
released as a percentage).

Staff Cost- The cost associated with this precious manual labour force
forms the most important item of operating cost. The labour force of the
Corporation comprises of drivers, conductors, traffic supervisors, office
staff, class-I and II officers, mechanical staff, etc. All these employees
work on a regular basis who are entitled to receive monthly salary

127
irrespective of the work. They are also eligible for the receipt of
additional pay at higher rates for the work done in excess of their normal
work. In order to cover the staff cost fully, it is laid down that the staff
cost which the Corporation has to incur on account of contribution
towards provident fund, employees state insurance, provision for
gratuity, etc., should be included.

Fuel Cost- There is a direct correlation between fuel consumption and

cost of operation. So better fuel consumption reduces the cost of
operations. Better average of fuel is one of the better determinants of an
ideal bus services undertaking. The performance of vehicle in respect of
fuel consumption is measured in terms of average kilometers per liter of
High Speed Diesel (HSD) oil, which is commonly referred to as
kilometer per liter (KMPL).KMPL is affected by internal as well as
external factors. The internal factors mainly include age and condition
of vehicle, driving habits, efficiency and load factor etc. and the external
factors may be road conditions and purity of diesel etc. The internal
factors are under the direct control of the transport undertaking. So it is
expected from them to improve KMPL. Besides this, drivers should be
well- trained in their driving habits to improve the fuel performance.
They should also be educated about the importance of fuel conservation.
Each driver should be provided with a pocket book to record daily
kilometers performed, fuel consumed and KMPL achieved. If there is
excess fuel consumption, that driver should be made accountable. This
type of management control should be effectively enforced.

Cost of tyres and tubes- Another important item of material cost is the
cost of tyres and tubes. Six tyres and tubes are fitted to each vehicle and
one is kept as spare for emergency purposes. These tyres may be new or

128
retreaded. Cost of tyres and tubes is calculated on the basis of their issue
price and to calculate the cost of tyres and tubes per kilometer operated.
The issue price is divided by the estimated or actual useful life. Useful
life depends upon- whether the tyres are new or retreaded, driving habit,
and types of roads, etc.

Other Material Costs- Cost of fuel, tyres and tubes account for about
80 percent of the material cost and 26 percent of total cost. The
remaining 20 percent of material cost comprises of spare parts,
lubricants, batteries and other consumables including reconditioning. At
the time of assembly of vehicles, the manufacturer uses hundreds of
items of spare parts. Even after the vehicle is commissioned to
operation. It is necessary to replace the old and worn out spares by new
spares. Out of these, some are vital. Vital in the sense, they are very
essential without which it is impossible to play the vehicle. For
example-driving equipment, batteries, etc. There are some other items of
spares which are essential but the vehicle can be operated without them
for a short period. For example-horn system, water wiper, etc. Other
items, though not essentials are desirable and without these the vehicle
can be operated. The absence of these spares will not make any adverse
impact on the quality of service. Still the corporation uses these as they
render some additional service and these are called desirables items. For
example-seat covers, standing holds, etc. It is necessary, therefore, to
purchase these as required and use them properly. The cost of these
spares is calculated keeping their issue price and the estimated useful
life as the base. Cost of lubricant oil is another item of material cost. It is
required to keep the vehicles, engines,etc., in good running condition.
The cost of batteries used is calculated in the same manner as the cost of
tyres and tubes. Costs of all other items of materials are included under

129
the head, other consumable stores. This is a brief account of various
elements of other material cost and it reveals their importance and also
the fact that the corporations have to tackle this material cost with great
vigour if it wants to control its operating cost as the material cost
provides the most potential avenue for cost reduction.

Social Costs- The corporation is asked to operate on business principles

by the government (that is through the provisions of the Act) and at the
same time the government directs the corporation to shoulder some
social responsibilities such as :
Providing free and concessional fare travel facility to the student, aged,
home guards, sports teams, drama troupes, police personal, blind,
handicapped etc. Providing transport service to some of the rural areas
through the revenue from some routes is not adequate enough to cover
the operating cost; Providing some amenities to the passenger such as
bus stations, bus shelters, drinking water facility, lavatory etc. It is said
that this is enough the reasons for the continuous loss of the
corporations. It is necessary, therefore, to quantify the cost of these
facilities so that the entire cost can be got reimbursed from the
government.

Quality of Public Transport Services- After the amendment of Motor

Vehicle Acts 1988 and the liberal policy adopted by the Governments,
both central and state, a number of private operators, tempos and
matadors have come into the transport field. Since the private operators
are attracting passengers by providing new and comfortable vehicles.
The STUs operations affected badly and their earning have dropped
considerably. In the present modern society, passengers want door to
door service in a short time with all the traveling comforts. When

130
multiple modes of transport are available, passengers will have choice
their own. Thus, the field has become the buyers market. Now the
situation has become very competitive and the STUs fit their survival
have to compete with the private operators by improving the quality of
their services.

Concluding remarks:-
The result concerning the STU cost structure confirms the existence of
U-shaped average cost curve. In the long-nm. both large as well as
medium size STUs experienced diseconomies of scale. Evidence of
higher costs in a non-competitive context. together with decreasing
returns to scale, shows that the division of large size STU into smaller
firms covering different market segments for which they should
compete. Would lead to a higher level of productivity. As far as relative
efficiency is concerned. On an average, smaller STU appear to be more
efficient than their larger counterparts. It seems that there is inverse
relationship between ranking based on efficiency measures and size. It is
also found that the STU. Which operates with larger route length per bus
is more likely to experience a higher level of productivity. Furthermore
there is scope for managerial manpower to improve efficiency of the
respective STUs. A higher level of utilization of buses and their capacity
would lead to a higher level of productivity. Therefore. the STU. which
have better supply-side management. is more likely to experience a
higher level of productivity.

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