MINISTRY OF ROAD TRANSPORT & HIGHWAYS GOVERNMENT OF INDIA

Report of the Sub-Group on

Policy Issues

September, 2011

CONTENTS
Chapter No. Chapter Name Page No.

Executive Summary
I II III IV V

6 17 25 38 43 51

Overview of Road Transport Sector Barriers to Road Transport Motor Vehicle Taxation Modernization of Road Transport System Preferential Framework for Public Transport

LIST OF TABLES

Table No. 1 2 3 4 5 6 7 8 9

Title of Table Automation Requirement of Activities at Border Check Posts Share of Different Modes of Transport in GDP India-Road Network (in km) Compound Annual Growth Rates (in %) in Vehicles and Road Length Composition of Vehicle Population in India (% of total) Summary Statistics for the Delhi-Bangalore Route Comparison Amongst Ten Major Routes Comparison of Freight Rates amongst 4 Metros for 15 Tonne Truck Automation Requirement of Activities at Border Check Posts

Page No. 9 17 18 19 20 22 24 24 35

Constitution of the Sub-Group on Policy Issues under the Working Group on Road Transport constituted by Planning Commission for the Formulation of Twelfth Five Year Plan (2012-2017). Planning Commission, Government of India vide Order No. 18/3/2011-Tpt dated 6.4.2011 constituted a Working Group on Road Transport for the Formulation of Twelfth Five Year Plan (2012-2017) under the Chairmanship of Secretary, Ministry of Road Transport & Highways (MoRTH), Government of India. MoRTH, vide Order No. RT-21012/4/2011-T dated 7.6.2011 constituted a Sub-Group on Policy Issues for the Twelfth Five Year Plan in Road Transport sector with the following Terms of Reference :Terms of Reference (TOR) i) To review the growth of road transport for passenger and freight traffic during the Eleventh Five Year Plan period making a critical assessment of the problems faced and the remedial action to be considered in the context of Twelfth Plan preparation. ii) To recommend a policy framework for the development of Road Transport Passenger and Freight for the Twelfth Plan. The following policy issues may be considered for formulating the policy: iii) iv) Regulatory issues confronting road transport sector to ensure healthy and balanced growth. Modernization of Road Transport system to bring down transit costs and improve service levels. Preferential framework for public transport vis--vis private transport and steps required to be taken in this regard including support to bus transport in public and private sector. Efficiency and otherwise of the Inter-State Transport flows and bringing about a barrier free transport environment. To review Tax rationalization and other efficiency parameters. Strengthening the public transport system in the country. Any other matter considered important by the Sub Group.

Composition of the Sub-Group

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. Shri Nitin R. Gokarn, Joint Secretary, MoRTH Shri Arvind Kumar, Adviser (Transport Research), MoRTH Shri S.B. Basu, Retd. CE, MoRTH, Consultant, Indian Road Congress Shri V.L. Patankar, Member (Technical), National Highway Authority of India Shri H.M. Naqvi, General Manager (Transport Planning), National Highway Authority of India Shri P.R. Parhi, Director (Transport & Planning), Railway Board, Ministry of Railways Dr. Manoj Singh, Adviser (Transport), Planning Commission Shri Dinesh Kumar, Principal Secretary (Transport), Government of Andhra Pradesh Shri J.P. Gupta, Transport Commissioner, Goverment of Gujarat Shri Satyendra Garg, Joint Commissioner of Police (Traffic), Delhi Shri. Gaurav Gupta, Managing Director, Karnataka State Road Transport Corporation Prof. (Dr.) Dinesh Mohan, Volvo Chair Professor (Emeritus), Transportation Research & Injury Prevention Programme Shri S.R. Marathe, Director, Automotive Research Association of India (ARAI) Brig. (Retd.) G. Dinshaw, Director, Central Institute of Road Transport (CIRT) Shri Vishnu Mathur, Director General, Society of Indian Automobile Manufacturers (SIAM) Shri D.P. Agarwal, Vice Chairman & Managing Director, Transport Corporation of India Ltd. (TCIL) Shri Chittranjan Dass, Vice President, Secretary General, All India Confederation of Goods Vehicle Owners Association, Shri S. Murugaia, Commissioner, Transport Department, Government of Tamil Nadu Shri Pradeep Singal, Senior Vice President, All India Transporters Welfare Association Smt. Ishita G. Tripathy, Joint Director, MoRTH Chairman Member Member Member Member Member Member Member Member Member Member Member Member Member Member Member Member Co-opted Member Co-opted Member Convener

The Sub-Group held its meeting on 12th July, 2011 in New Delhi.

EXECUTIVE SUMMARY
Overview of Road Transport Sector Easy accessibility, flexibility of operations, door-to-door service and reliability have earned road transport an increasingly higher share of both passenger and freight traffic vis--vis other transport modes. Road transport has emerged as the dominant segment in Indias transportation sector with a share of 4.7% in Indias GDP in comparison to railways that has a mere 1.0 % share of GDP in 2009-10 as per the revised data on National Accounts released by the Central Statistical Organization (CSO).

Barriers to Road Transport

A typical truck operator has to face a number of different agencies for either obtaining clearances for carrying goods or paying certain charges at the check post. These agencies include (i) Sales Tax, (ii) Regional Transport Officer (RTO), (iii) Excise, (iv) Forest, (v) Regulated Market Committee, (vi) Civil Supplies (check on the movement of essential commodities, black marketing, weights and measures, food adulteration) and (vii) Geology and Mining. These checks are generally conducted by respective agencies at separate points, resulting in more than one detention. Detention of vehicles causes lower speed, loss of time, high fuel consumption and idling of vehicles, leading to under-utilization of transport capacity and adversely affecting their operational viability. Besides, it imposes economy-wide costs which are not easy to assess. By introducing checks at each inter-State border the road freight transport experiences significant inequity compared to the freight/cargo transport by the railways, aviation and even inland transport, which do not face such rigorous en route checking. The system in vogue hinders rather than facilitates smooth flow of freight and passenger movement across the country and has thwarted the formation of single common market. Further, road transport sector is subject to myriad levies/taxes (both Central and State) with no provision of set-offs in many taxes/levies leading to cost and price escalation which erodes competitiveness of domestic manufactures. Taxes and non-tax charges on road transport sector can be broadly classified into the following categories: (i) taxes on the vehicle purchase, (ii) taxes on operation of motor vehicles, fuel taxes, motor parts, tyres and tubes, etc., (iii) Sales tax/VAT levied by the States, (iv) Registration and Transfer fees, licence/permit fees, (v) periodical vehicle tax (also called road tax), (vi) tolls, (vii) parking fees, (viii) Octroi, (ix) Entry tax , (xi) Lease tax, and (xii) passenger and goods tax. Essentially the checks made at border posts aim to ensure that: Taxes in the State of destination paid on the goods being carried Trucks not overloaded Trucks being operated safely Trucks carrying valid papers.

Suggested Measures to Overcome Barriers in flow of Road Freight Movement a) Integrate Tax administration with inter-State road freight and passenger movement through online communication network system at national, regional and local levels. This will help move towards border-less and paper-less movement of freight traffic across borders aided by IT in a time bound manner. This will greatly reduce transaction cost and logistics cost of domestic trade. Presently checking/verification work is being done manually at check posts. However, electronic surveillance and computerization present vast opportunities for outsourcing. Adopt concept of Green Channel. Currently, Green Channel is being implemented in Gujarat and needs to be replicated. Freight with single destination accounts for a large proportion of consignment and is likely to go up with containerization. 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. Implementation of this proposal will also need some modifications to existing truck fleet, which can be locked/sealed and certified for the journey to their destination; introduction of smart cards for vehicle registered (Vahan) and driving license (Sarathi) will be a pre-requisite. Similarly, development of National Registers for vehicles and the traders, who are frequent users of Check Posts, will also be required. Adopt Single Window Clearance System for all authorized charges/clearances both at origin and at Check Posts. Most of the States are collecting various taxes at border check posts. Owing to non-integration of various offices (Motor Vehicles, Excise and Taxation, Forests, Sales Tax, etc.) dealing with taxes/checking of goods in many States, goods vehicles are detained at several places en route. In addition, manual processing of tax papers at inter-State checkposts, leads to delays and hampers smooth traffic flow. Single window integrated border check posts would help in drastic reduction of waiting time and smooth flow of traffic at State borders. Need to emulate innovative approach of State Governments of Andhra Pradesh and Gujarat towards automation and computerization of the Inter-State Check Posts (ICPs). In case of Gujarat this has enabled 100% checking of vehicles and more than four fold increase in revenue collection from Rs. 56 crore to Rs. 237 crore within three years of introduction. Similarly, Andhra Pradesh through common software has ushered in a Single Window Checking Facility covering 8 major departments at 5 ICP on National Highways (NHs) bordering adjoining States. This will result in faster delivery time, fewer opportunities for rent-seeking and predictable revenue cash flows. Freight agents and brokers are important actors in the trucking industry. They have now been brought under the purview of legislation, Carriage by Road Act, 2007. This provides for registration/accreditation of brokers and freight agents. Abolish requirement of a transit pass The question about erection of check barriers was considered by the Transport Development Council at its meeting in August 1980. The Council had emphasized that all efforts should be made by the States to unify check barriers along NHs having single combined ones at inter-State boundaries and that they should be proper design with separate lay so as not to hinder movement of the through traffic.
7

b) c)

d)

e)

f)

g) h)

Taxation a) Replace various road transport related taxes/levies (road tax, goods tax, passenger tax, etc.) by a single composite tax. This will both reduce collection cost and compliance cost of vehicle owners/operators. Phase out Central Sales Tax Provide tax credit for the inter-State movement of goods under State VAT.

b) c)

Motor Vehicles Act a) b) c) Amend MV Act, removing penalty payment clause and retaining only removal excess load from the trucks. Install WIM (Weigh-in-Motion) to identify violators. The colour of truck number plate of inter-State vehicles should be different from the intraState vehicles. This will help segregate goods vehicle and reduce the intermediate checking of inter-State freight movement. For enhancing inter-State road transport efficiency following amendments to existing MV Act are suggested: Punishment to common carrier found responsible for overloading. Deletion of Section 194 from the recitation of Section 200 for discontinuation of compounding vehicles. Limiting Section 158 of MV Act for curbing police powers for checking vehicle documents without the preliminary requirement of commission of any offence.

d)

Over Dimensional Cargo Over dimensional (OD) cargo is defined in terms of weight and dimension. In dimension terms, anything above 40 feet length, with 8.25 feet height, and 8.25 feet width is considered OD cargo. Government regulation usually permits 11 tonnes per axle. Practically, anything above 35 tonnes is considered OD cargo. There is an urgent need to have clear, well-set guidelines for heavy haulage by road. There are no clear norms or time-lines to get the necessary approval and permissions. These clearances take time and often add to cost overruns and delays in infrastructure projects. Clearances from multiple agencies such as the Public Works Department, the National Highways Authority of India for using roads and bridges; the State Electricity Boards for overhead wires; and the Railway Board for railway bridges is cumbersome and time consuming. Lack of standardized rules across the States makes this difficult. Internationally, there are defined routes for transportation of OD cargo. Australia which is a federal country like India has envisaged a National Heavy Vehicle Regulator (NHVR) which would be responsible for all vehicles over 4.5 gross tonnes. This is being done to ensure consistency in heavy vehicle regulation and would involve less procedural hassles.

Automate and use of Information Technology for cross border road freight transport management Activities at borders involve checking parameters related to vehicle, driver and cargo. Origin, destination, value, weight, tax paid and type of cargo is checked which either lead to compliance or violations related to weight and taxation. Non-compliance leads to payments of penalties and detentions, both of which require safe parking for both, short and long term. Issuance of tickets for complying as well as non-complying vehicles is also an activity. Also checked at the border are compliance related to vehicle and its driver including various certificates and licences. All of these activities above can be classified into following broad categories: (a) Weight check; (b) Commodity Documentation Check; (c) Payments (penalties and fees); (d) Issuance of tickets/certificates; and (e) Parking management (for waiting and detained vehicles) is given in table 1. It needs to be kept in view that IT also makes it possible to spatially segregate many of the activities from the exact border locations, e.g. a) b) Weigh-in-motion (along with Automatic Vehicles Identification which can be remotely communicated to the Border Check-Posts. Commodity certification for unitized cargo (in a manner similar to dry-ports) and communication of the same at check post enabling early preparation for inspection and regulation. Attempts at moving clearance centres away from the border with inland inspection, in a manner similar to dry ports in case of export cargo.

c)

Table: 1 Automation Requirement of Activities at Border Check Posts Type of Activity Automation Requirement Probable Technology Weight check Automatic weighment and Weigh-in-motion, license plate vehicle identification, electronic readers data interchange Commodity Electronic credentials, electronic Electronic manifest, smart card documentation check preprocessing, electronic data (with or without biometric interchange identification/thumb print), transponders Commodity check Electronic screening Vehicle X-ray, electronic sealing Payments (penalties and Electronic/cashless payments Smart card, debit card fees) Issuance of Electronic credentials, electronic Electronic manifest tickets/certificates preprocessing, electronic data interchange Parking management (for Queue end parking lot Queue end detection waiting and detained management vehicles

Motor Vehicle Taxation

Motor Vehicle Taxation (MVT) is being levied in all States and UTs except the UT of Lakshadweep. Existing tax structure for commercial vehicles shows wide variations among States. There are different bases for computation and different rates, leading to differing incidence of taxes per vehicle in different States. In fact, it is not easy to make comparisons of rates levied on different types of vehicles in different States. Inter-State comparisons are difficult for the following reasons: a) different classification principles for the taxation of vehicles in different States; b) variations in the application of lifetime and annual tax rates to vehicle categories; c) use of specific and ad valorem rates; and d) multiplicity of rates. To evolve the common tax rate strategy, two key approaches may be suggested on following lines: Light Motor Vehicles (LMV) and two wheelers: It is suggested that: a) b) Floor rate of these vehicles be pegged at 6% in all States and UTs. It would be desirable to move towards ad valorem taxation for non-commercial twowheelers, motor cars and jeeps from the point of view of administrative convenience and revenue buoyancy. The reasoning is that to have buoyancy in the tax system, it would be useful to resort to a tax system which is based on the cost of vehicles. Tax is levied on the basis of sale price of the vehicle eliminating all other bases linking it directly to the VAT. Further, it is progressive in incidence. Tax be collected as lump-sum tax for life time on the Sales on the basis mentioned above. To facilitate free movement across States of personalized vehicles which are on lifetime tax, those which have paid taxes in one State could be treated as tax exempt by others. A vehicle moving to another State after a period of two years of registration may be exempted from tax in the new State, obviating the requirement of refund and subsequent payment of tax in the new State.

c) d)

Transport Vehicles The scheme of national permit has been introduced to facilitate seamless movement of goods vehicles. However, basic motor vehicle taxes on transport vehicles vary. In such a scenario, a State which has a comparatively higher rate of tax, tends to lose the tax revenue whereas its share of national permit is fixed. Similarly, the reciprocal arrangement between two States becomes skewed when the basic tax rates between neighboring States differ considerably. Therefore, it is suggested that: a) b) c) d) Tax rate of all goods transport vehicles be brought to a floor rate. The basis of tax may be capacity of the vehicle. Tax is levied on an annual basis whereas the facility of payments may be given on a quarterly basis. In case of passenger vehicles like national permit holder tourist buses and taxis, a similar approach can be adopted to facilitate growth and free movement of transport vehicles in the country. For this purpose, a meeting of State Finance Ministers/Transport Ministers may
10

e)

be convened and appropriate decision be taken as was done in the case of Value Added Tax. Vehicle taxation is road damage related, but levied on the basis of gross vehicle weight rather than on the potential axle loads, resulting in under-taxation of two-axle trucks compared to multi-axle vehicles (MAVs). Since the former is a major source of revenue to States, there is a need for its rationalization, to ensure that the tax burden is distributed fairly among different types of vehicles according to Passenger Car Units (PCUs) as well as the road damage caused by each type of vehicle, according to the equivalent standard axle (ESL). Motor vehicle taxes could be used to encourage the plying of MAVs.

Modernization of Road Transport System

Introduce electronic toll collection (ETC) system: Presently, ETC is used at few toll plazas on NHs. Implementing ETC can improve throughput at toll centres by as much as three to four times over manual toll collection systems. ETC significantly reduces waiting time and consequently reduces fuel requirements. Besides, toll operators benefit from lower personnel requirements and reduced leakages. Improving Fuel Efficiency of Vehicles Introducing fuel efficiency norms for automobiles is another approach to address the twin problems of energy security and increasing emissions from transport. To this end, following measures are suggested: a) Label individual vehicles on a kilometre per litre (kmpl) basis to enable consumers to make a rational choice. This could be accompanied by either a star rating or a mention of the worst and best fuel efficiencies in that vehicle class. Begin with labeling that is based on a continuous function of weight and fuel efficiency. Define a minimum efficiency standard for the countrys vehicle fleet.

b) c)

Fleet Modernization Some options to modernize the vehicle fleet in the country by replacing older vehicles with newer ones (with better technology and lower emissions) need serious consideration. These include incentives to owners of commercial vehicles older than 15 years to modernize their fleet, encourage owners of private vehicles older than 15 years to replace their vehicles through a suitable tax regime, a vehicle recycling policy and drastic improvement in the inspection and certification regime. Encourage use of MAVs MAVs (gross tonnage including weight of truck of over 16.2 tonnes) are cheaper to operate compared to smaller trucks i.e. medium commercial vehicles and light commercial vehicles, by over 25%. In fact, cost per ton Km for 25 ton truck and 30 ton truck is estimated at 85% and 75%, respectively, relative to a 16 ton truck (Building India: Transforming the Nations Logistics
11

Infrastructure, Mckinsey & Company, 2010). The incremental cost of an MAV can be recovered in less than three years. Measures to promote the use of MAVs could be considered including excise duty reductions for MAVs, similar to small and fuel efficient cars, stringent monitoring of overloaded trucks and enforcing pollution and safety norms, which could lead to retirement of old trucks. Truck Terminals At present, there are few truck terminals in cities whereas Government should create truck terminals in almost all A, B and C class cities and towns. We suggest that in A class cities there should be four truck terminals in East, West, North and South, two in B class cities and in C class cities and towns. These truck terminals will ease the traffic congestion in the city and decrease pollution, facilitate emergence of hub spoke system for distribution of goods and greatly improve the turnaround time of goods carriages. On these truck terminals there will be medical facilities, rest room, restaurant and equipment handling facilities. It is suggested that while planning Special Economic Zone (SEZ) or Industrial Park, at least 10% of the area should be embarked for logistics and warehousing to support industrial activities efficiently. Vehicle Safety Standards, Inspection & Certification A phased approach would be necessary to inspect all vehicles on safety and emissions performance. Significant investments, improvements in regulatory and management practices, increased capacity and capability would be prerequisites for the effectiveness for such a regime. Hence, a phased approach has been suggested for ensuring effective implementation of inspection and maintenance programme. Thus, the following phasing is suggested: a) b) c) d) e) In the first phase, cities with significant transport vehicles (Metros) should introduce a modern Inspection and Certification regime In these cities, a modern inspection regime should be first introduced for commercial vehicles, and then subsequently to private vehicles. Within private vehicles, older vehicles (more than 9 years old) should be included in the regime earlier and then it must be extended to newer fleet (3-9 year old) Both emissions and safety tests should be introduced simultaneously for commercial vehicles. For cities where the regime would be introduced later or for vehicle categories that are not being covered at the first instance, the current PUC and fitness testing regime should continue. Here, the existing PUC regime should be strengthened by improving the efficacy of the tests carried out with improved instrumentation and test methodologies and a more effective auditing system.

While it would be ideal to have a large number of testing centres spread all over a city that could cater to the entire vehicle fleet so that vehicle owners are not inconvenienced, cost and investment considerations may make such an extended system unviable. The frequency of these tests should be based on the tradeoff between the cost implications for setting up the infrastructure for testing as also convenience to vehicle users. Initially, the focus should be on testing of commercial vehicles only. With gradual capacity building and increased number of integrated safety and
12

emissions testing centres, the frequency and tests can then be extended to private vehicles and other category of vehicles including two wheelers. Considering the growth of vehicle population, large number of I&M test centres needs to be established would need large investment to cover Heavy/Light Vehicles and Private Vehicles. Hence, the operation and establishment of Inspection and Certification (I&C) centre can be worked out on the basis of BOOT or PPP model and considering international experiences like UK model. For the implementation of effective I&C regime in India, there is a need for creating an independent centralized nodal agency like ARAI, which can provide necessary technical and administrative assistance to the Government of India in developing a comprehensive I&C regime, assist the state government in creating necessary infrastructure and monitor the implementation at State level. This agency can be built on the basis of similar agency like Vehicle Operator Service Agency (VOSA) in UK and National Vehicle Inspection Agency in Japan. Though initially the Government may provide funds to create the nodal agency, later self-sustainability should be achieved through functioning of the agency.

Preferential Framework for Public Road Transport

Major Issues concerning seamless road passenger movement in India a) b) c) d) Lack of uniformity in motor vehicle taxation including taxation for various passenger transport vehicles like tourist taxis, maxi cabs, All-India tourist buses, etc. Issue of Inter-State Agreements for Stage Carriage buses. Problems faced by private service vehicles and educational institutional buses transporting workers and students respectively between neighbouring States. Absence of any holistic transport planning including non-availability of benchmarks for bus operations in India, assessment of passenger and goods travelled demand on a regular basis. Absence of any inter-modal integration in terms of common ticketing, transfer stations, etc. Problems affecting State Road Transport Undertaking (SRTUs) including recurrent losses resulting from various internal and extraneous factors.

e) f)

Recommendations/Suggestions for improving the system (i) Rationalisation of tax structure in passenger transport

Immediate efforts should be made to harmonize the categories of vehicles and achieve uniformity in the taxation rates. Although, there could be specific issues relating to specific States. In a federal set up this would require consensus of all the States/UTs. (ii) Inter-modal integration

For the overall system to be efficient, it is necessary to establish linkages between different transportation systems. There is an urgent need to provide proper integration of modes such as
13

rail, bus, and other para-transit modes with respect to the following: (i) transfer station, (ii) ticket (iii) arrival/ departure schedule, etc. (iii) Regulation of various modes of transport operating in a State

There is a need to take a re-look at the regulatory framework, keeping in view the overall requirement of passenger transport for an area / region. The regulatory mechanism should give primacy to mobility to ensure access of people to socio economic services. (iv) Guidelines for Inter-State Agreements

The present system of entering into inter-State agreements between States as required under Section 88 of the MV Act is a long-drawn process and hampers smooth movement of passenger buses between States. Hence, it was unanimously agreed that the Government of India could frame basic guidelines for uniformity in the inter-State agreements on stage carriages including delegation of powers to Transport Commissioners of States for entering into inter-State agreements. This would facilitate speedy finalization of the inter-State agreements and provide better transport facilities to the public. Control over the inter-State agreements may, however, still remain with the respective State Governments. (vi) Seamless movement of passenger transport vehicles in line with the New National Permit System for goods vehicles. The New National Permit System (NNPS) for Goods Vehicles which came into effect from May 2010 has facilitated the free movement of goods vehicles throughout the country on payment of a composite fee of Rs. 15,000/- per annum together with the authorization fee to the home State where the vehicle is registered. It is essential that All India Tourist Taxi Cabs, Maxi- Cabs, All India Tourist Buses and buses covered by Special Permits under Section 88(8) of MV Act, 1988 should also be subjected to uniform fees for free movement throughout the country. (vii) Scientific assessment of passenger and goods travel demand

By carrying out traffic studies for major travel corridors of the region periodically, travel demand for both passengers and goods can be assessed scientifically for the present and over medium term. Based on travel demand (number of commuters and their need for travel), proper assessment of bus fleet, bus frequency, augmentation of routes, etc. can be done. Norms regarding minimum requirement of buses for different category of operations including hilly areas, mofussil and city operations should be evolved. Similarly, requirement for necessary infrastructure for goods transport such as parking facilities, rest facilities for operators, weighing bridges, fuel stations, etc. can be assessed and planned. (viii) Strategies to Revive SRTUs A framework should be evolved which could provide flexibility and freedom to SRTUs for automatic fare revision, depending on the increase of fuel and wage costs. SRTUs should be
14

enabled to mobilize funds for capital expenditure, on their own strength and financial capability from banks/ financial institutions in terms of soft loan, tax free bonds, etc. Expansion of fleet is needed to augment services in the rural areas. Government of India could consider providing financial assistance to SRTUs for purchase of new buses exclusively for rural operations in line with stimulus package similar to one sanctioned under JNNURM for purchase of buses with regard to urban operations. Technical capacity of SRTUs shall have to be improved through training programmes and workshops. Automatic Fare Revision for SRTUs: A framework should be evolved which could provide flexibility and freedom to SRTUs for automatic fare revision, depending on the increase of fuel and wage costs. The State Government of Karnataka has evolved a formula for automatic revision of fares based on the percentage of increases in cost of fuel and dearness allowance. Such mechanism for fare revision should be followed by all State Governments for their SRTUs. Facilitate access to financial markets/institutions for SRTUs: SRTUs should be enabled to mobilize funds for capital expenditure, on the strength of their balance sheet from banks/ financial institutions in terms of soft loan, tax free bonds etc. Presently, SRTUs are constrained by the Section 26 of the Road Transport Act, 1950 which requires prior approval from the Government. This may require modification in the Section 26 of the Road Transport Act, 1950. Improve rural bus connectivity: Expansion of fleet is needed to augment services in rural areas. Presently, less than one-third of the inhabitated villages (5,93,731) are connected by SRTUs. Government of India could consider providing financial assistance to SRTUs for the purchase of new buses exclusively for rural operations in line with the existing JNNURM for the purchase of buses for urban operations. The scheme for rural bus connectivity could be launched during the 12th Plan with one time Central assistance. It is estimated that 50,854 buses would be required if 600 buses were to be provided per one lakh of rural population at a cost of about Rs 9,154 Crore with Central Governments contribution at close to Rs 7,584 Crore in the form of grant assistance with the balance to be shared between the State Government and SRTUs. The operational modalities for the scheme would need to be worked out in detail. SRTUs should also explore the possibility of tapping non-ticket revenue sources as done by APSRTC, etc. The major non-ticket revenue sources could be through license fee on Canteens, Stalls in Bus stations followed by Ad revenues on Buses, Bus stations, CCTV, Bus tickets besides license fee through Parcel Service, Postal Mails, Person Weighing Machines, etc. Framework for Competitive Public Bus Passenger Transport Services A competitive environment in Road Passenger Services can be created in a variety of ways: (a) Competition in the market: this occurs where there is no restriction on entry. "Competition in the market" can be between individual operators within a mode of transport, between groups of operators within a mode or between modes; and (b) Competition for the market: where entry is restricted, it is possible to organize competition for the right to service individual routes, for the sole right to provide a whole network or to undertake particular functions as a subcontractor to a monopolist operator.
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Competition in the market", without barriers to entry is appropriate for the provision of many kinds of transport services and, in particular, where the size of the market is large or if there are good modal substitutes (metro rail, etc.), there are several ways in which firms can compete for a public transport market: Gross cost service contracting involves the procurement by a public Authority of specified services at a price determined through competitive tendering among competent operators. Contracts are usually for three to five years. The operator passes all on-bus revenues to the procuring authority and does not take any revenue risk. Gross cost service contracting requires that there is a secure means of ensuring that the procuring authority actually gets the fares that are paid on the vehicle, and careful monitoring to ensure that suppliers actually do provide the service for which they have been contracted. Net cost service contracting is similar to gross cost contracting, except that the operator retains the revenue and hence incurs both the demand and supply side risks. This increases the incentive to the supplier to provide the service contracted for (otherwise he loses his fare revenue) and removes the need for complex fare collection and security arrangements. However, it makes modal coordination more difficult and often involves a higher net cost for the authorities as the supplier is incurring an extra risk, the revenue risk, against which he will be averse, and for which he will require remuneration. Competition can work very effectively provided the competitive regime is appropriate to the objectives of the Government. Whichever system is chosen, effective competition between private sector suppliers can only be achieved if the public sector itself is appropriately structured. This imposes a number of institutional requirements. a) Separation of operations from policy planning; b) Setting up a third party regulator to oversee rote planning, franchising and tariff supervision ParaTransit: The public transport sector in many developing economies in recent years has seen the explosive growth of publicly available passenger transport services outside the traditional public transport regulatory system, often referred to as para-transit. This does not necessarily mean that they are operating illegally, as in many countries entry to the sector is effectively free, with operators subject only to the general rules of the road and law of the land. Nor does it necessarily mean that they are operating completely independently as many informal sector operators are members of associations of operators. Typically para-transit services are usually characterized by: (a) Services that are usually unscheduled and mainly on demand responsive routes, filling gaps in formal transit provision, such as public bus services and taxis; (b) Vehicles that are operated are typically small, including motor cycles (in case of Goa). Smaller vehicles are used partly because of the lower financing requirements, the flexibility of operation, and partly because controls over small vehicles are lax even in situations where entry to the large vehicle market is strictly controlled. The vehicles used are also often very simple, and include nonmotorized vehicles, auto rickshaws, and motorized improvised vehicles (jugad in rural India). Para-transit services are usually provided by informal operators and offer a range of services. There is need to evolve a policy framework for para transit mode.
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Chapter I Overview of Road Transport Sector

1.1 Introduction

1.1.1 Road transport is vital to the economic development as well as social integration of the country. It fulfills a major role in the Indian economy involving a wide array of industries and services which includes vehicle manufacturers, equipment and suppliers, to infrastructure builders, services, energy providers, public authorities, insurance and many others. Road transport, together with other modes of transport, provides indispensable mobility to persons and goods and contributes to the economic prosperity of a nation. It is a key factor to social, regional and economic integration, including the development of rural areas. However, the impact of road transport on the environment and health remains a major challenge. Easy accessibility, flexibility of operations, door-to-door service and reliability have earned road transport an increasingly higher share of both passenger and freight traffic vis--vis other transport modes. In addition to these factors, transit time, availability of capacity on alternative modes, quality and reliability of the service, associated costs like warehousing and demurrage etc. all influence the choice of the mode of transport. The alternative modes of transport viz. roadways, railways, waterways, airways, mass transit etc., each contribute to the transportation requirements of the economy. Transport sector accounted for a share of 6.5% in Indias Gross Domestic Product (GDP) in 2009-10. The composition of various sub-sectors of the transport sector in terms of GDP is given in Table 2. Table: 2 Share of Different Modes of Transport in GDP 2000- 2001- 2002- 2004- 2005- 2006- 2007- 2008- 200901 02 03 05 06 07 08 09 10 As percentage of GDP (at factor cost and constant prices) 6.0 5.9 6.2 6.7 6.7 6.7 6.6 6.6 6.5

19992000 Sector Transport of which: Railways Road Transport 5.9

1.3 3.8

1.3 3.9

1.2 3.9

1.2 4.1

1.0 4.8

1.0 4.8

1.0 4.8

1.0 4.7

1.0 4.7

1.0 4.7

Water 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 Transport 0.2 0.2 Air 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.3 Transport Services * 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.4 0.4 Source: Central Statistical Organisation * Services incidental to transport. Since 2004-05, values are at 2004-05 prices; prior to that at 19992000 prices. All shares in GDP are inclusive of Financial Intermediation Services indirectly Measured (F.I.S.M.). 1.1.2 However, the road transport sector has emerged as the dominant segment in Indias transportation sector with a share of 4.7% in Indias GDP in comparison to railways that has a
17

mere 1.0 % share of GDP in 2009-10 as per the revised data on National Accounts released by the Central Statistical Organisation (CSO). It may be noted that the entire increase in share of transport in GDP since 1999-2000 has come from road transport sector only, with share of other modes remaining nearly unchanged with a marginal decline in the share of railways. 1.2 Review of Trends in Road Transport: Road Network and Vehicles

Road Transport Infrastructure 1.2.1 Roads are essential for a country's economic growth. India has the second largest road network in the world. The total length of roads has increased over eight-fold in 57 years from 0.4 million km in 1950-1951 to 4.1 million km in 2007-08 reflecting a CAGR of 4.1%. While, the US tops the list with 6.5 million km of road network, China has only 3.7 million km of roads. As far as the density of roads is concerned, India is far ahead with 1.25 km of roads for every square km of land compared to the US (0.68), Brazil (0.21) and China (0.30). 1.2.2 Despite having the second largest road network in the world, Indian roads pose many problems. NHs constitute only 1.6% of the total road network, but carry a disproportionate share of the road traffic. NHs and State Highways (SHs) taken together constitute about 5.4% of the total road network. Of 66,754 km of NHs, 18,104 km (27.1%) is still single-lane and 38,621 km (57.9%) is double-lane. The length of four/six/eight-lane NHs is a meagre 10,029 km (15.0%) causing excessive congestion and delay with buses and trucks hitting a maximum speed of only 30-40 km per hour on highways. The growth of vehicular traffic on roads has been far greater than the growth in road network; as a result the main arterial roads in the country are facing capacity saturation (Table 3). Between 1991 and 2008 the total vehicle population grew at a Compound Annual Growth Rate (CAGR) of 9.8% vis-a-vis the CAGR of 3.4% in the total road length as given in table 4. A noteworthy aspect has been the step-up in the growth of NHs network in recent years which has grown at CAGR of about 4.1%. Table: 3 India-Road Network (in km) Road 1951 1961 1971 1981 1991 2001 2004 2008 Category National 19,811 23,798 23,838 31,671 33,650 57,737 65,569 66,754* Highways (5.0) (4.5) (2.6) (2.1) (1.4) (1.7) (1.8) (1.6) State 56,765 94,359 127,311 132,100 133,177 154,522 Highways (6.2) (6.4) (5.5) (3.9) (3.7) (3.8) 173,723 257,125 Other 276,833 421,895 509,435 736,001 719,257 863,241 (43.4) (49.0) PWD (30.3) (28.4) (21.9) (21.8) (19.9) (21.0) Roads Rural 206,408 197,194 354,530 628,865 1,264,154 1,972,016 2,140,569 2,450,559 Roads (51.6) (37.6) (38.7) (42.3) (54.2) (58.5) (59.1) (59.6) Project & 46,361 203,013 308,631 396,536 475,666 362,935 574,516 Urban (8.8) (22.2) (20.8) (17.0) (14.1 (15.5) (14.0) Roads Total 399,942 524,478 914,979 1,485,421 2,331,086 3,373,520 3,621,507 4,109,592
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1.2.3 According to the Total Transport System Study conducted by RITES for Planning Commission, in terms of billion tonne-kilometres, roads (highways) accounted for 50.1% of total freight traffic during 2007-08, followed by 36.1% by railways, 7.5% by pipelines, 6.1% by coastal shipping, 0.2% by IWT and 0.02% by airways. The contribution of road transportation to Indias GDP has been in the range 4.5-5%. Road freight volumes increased from six Billion Tonne Km (BTKM) in 1950-1951 to 706 BTKM in 2007-08 registering a compounded annual growth rate (CAGR) of 8.7%. 1.2.4 The vehicle (all types) population also grew from 306,000 in 1950-1951 to about 115 million in 2008-09 at a CAGR of about 10.8%. The population of goods vehicles increased from 82,000 to 6.0 million during the same period at a CAGR of around 7.7%. The share of goods vehicles in all types of vehicles decreased from about 27% to 5.3% given in table 5 and indicating higher growths of other vehicles such as two-wheelers and cars. Table: 4 Compound Annual Growth Rates (in %) in Vehicles and Road Length Vehicles
Period Two Wheelers Cars, Jeeps & Taxis Buses Goods Vehicles Others * Total NHs SHs& PWD

Roads
Rural Urban Project Total

2009/1951 14.8 8.2 6.7 7.7 14.4 10.8 2.2 3.2# 4.5# 4.2# 1961/1951 12.5 6.9 5.3 7.4 26.5 8.1 1.9 4 2.7 1971/1961 20.7 8.2 5.1 7.4 15 10.9 0 2.6 6.0 4.5 5.7 1981/1971 16.3 5.4 5.6 4.9 18.1 11.2 2.9 4.5 5.9 5.5 3.5 5 1991/1981 18.4 9.8 7.4 9.4 10.9 14.8 0.6 2.1 4 4.3 1.2 3 2001/1991 10.5 9.1 6.7 8.1 8.6 9.9 5.5 3.1 1.4 3 0.6 2.1 2007/1991 10.4 9.5 9.2 8.7 7.8 9.9 4.4 2.8 4.1 3 1.6 3.5 2008/1991 10.3 9.6 9 8.7 7.8 9.8 4.1 2.8 4 2.9 1.5 3.4 2009/1991 10.3 9.6 8.7 8.7 7.7 9.8 NA NA NA NA NA NA Note: NHs: National Highways; SHs: State Highways; PWD: other Public Works Department roads * Other include tractors, trailers, three wheelers (passenger vehicles/LMV and other miscellaneous vehicles which are not separately classified. NA: Not Available, # : CAGR for the period 2008/ 1951. Sources: 1. Calculated on the basis of data received from Offices of State Transport Commissioners/UT Admn 2. Basic Road Statistics of India, 2004-05 to 2007-08.

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Table: 5 Composition of Vehicle Population in India (% of total) Year Two Cars, Jeeps Buses Goods Others Total end Wheelers & Taxis etc. Vehicle Vehicles March (as % age of total vehicle population) (Million) 1951 8.8 52 11.1 26.8 1.3 0.31 1961 13.2 46.6 8.6 25.3 6.3 0.66 1971 30.9 36.6 5.0 18.4 9.1 1.86 1981 48.6 21.5 3.0 10.3 16.6 5.39 1991 66.4 13.8 1.5 6.3 11.9 21.37 2001 70.1 12.8 1.2 5.4 10.5 54.99 2002 70.6 12.9 1.1 5.0 10.4 58.92 2003 70.9 12.8 1.1 5.2 10.0 67.01 2004 71.4 13.0 1.1 5.2 9.4 72.72 2005 72.1 12.7 1.1 4.9 9.1 81.5 2006 72.2 12.9 1.1 4.9 8.8 89.61 2007 71.5 1.4 5.3 8.7 96.69 13.1 2008 71.5 1.4 5.3 8.6 105.33 13.2 2009 (P) 71.7 1.3 5.3 8.4 115.0 13.3 Note: Others include Tractors, Trailers, 3 Wheelers(passenger) & etc. (P): Provisional 1.3 Structure of the Road Freight Industry

1.3.1 The Indian trucking industry is deregulated, and is highly fragmented as in many countries, with more than 80% of the industry being accounted for by the unorganized sector consisting of small truck operators having five or less vehicles. The industry is primarily composed of (a) transporters, (b) truck operators and (c) brokers/agents. 1.3.2 Transporters are the primary interface with shippers. They take all the responsibilities of shipment of consignments including loss of cargo and damage claims. Transporters may have their own fleets of trucks and use them for shipping. However, since requirements always exceed availabilities, they have to rely on small truck operators for supply of trucks. The role of brokers or agents, who come in between transporters and truck operators, is to match demand and supply, i.e. they receive requirements from transporters and try to match them with trucks available in the market. 1.3.3 The trucking industry is extremely competitive, leading to thin profit margins or even losses. The industry is dominated by unorganized operators with five or fewer trucks that results in inefficiencies and diseconomies of scale. Unorganized truck operators may go directly to shippers bypassing transporters and can thus pose serious competitive threats to transporters. 1.3.4 Truck operators and transporters are not at a level playing field. Since large transporters or trucking companies are organized players, they have to pay various forms of taxes and abide by the
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rules and regulations stipulated in the Motor Vehicles (MV) Act, 1988 regarding weight and volume restrictions, quality of the driver and vehicle, etc. 1.4 Characteristics of Goods Carriers

1.4.1 Vehicles used in the Indian trucking industry are another source of diseconomies of scale. The industry deploys mainly two and three-axle rigid trucks with a low cubic capacity freight box. About 75% trucks on Indian roads are two-axle with 9 tonne capacity. 1.4.2 As far as the vehicle age is concerned, 40% of the vehicles are less than six years old while 34% are more than 10 years old. The useful life of a vehicle is about 20 years after which it is scrapped. A vehicle which is less than six years old can make about 8,000 km per month while a vehicle which is more than 10 years old can make only about 2,000-4,000 km per month. 1.4.3 The Indian trucking industry needs to increase the share of MAVs and tractor-trailer combinations with larger hauling capacities to reduce unit transportation costs, and bring in efficiencies and economies of scale. Introduction of tractor-trailer units not only reduces transportation costs, but also causes less damage to roads requiring less maintenance and saves fuel reducing the emission of pollutants. 1.5 Problems Faced by the Road Freight Industry

1.5.1 Under-capitalized small truck operators find it difficult to raise funds through organized banking or financial channels. Therefore, it is virtually impossible for them to invest in modern equipment and technology to increase efficiency and reduce the cost of transportation. Information on various transport markets as regards the availability of trucks and going rates is not available to truckers on a real-time basis forcing them to rely on brokers for loading their trucks. Shippers also end up paying higher-than-market freight rates, if return loads are not assured. 1.5.2 If market information were available to shippers and truckers on a real-time basis, shippers would have paid actual market rates. Also, very few transporters have real-time tracking facilities (GPS). Once a vehicle departs from the source, there is no way to track the movement of the vehicle on a real-time basis until it reaches the destination. 1.5.3 This may induce drivers to indulge in unethical practices such as pilferage, rerouting, overloading and converting LTL to FTL shipments Shippers may pay for LTL shipments, the rate being higher than that for FTL shipments; however, since there is no visibility once the vehicle leaves the loading point. truckers can still convert LTL to FTL shipments somewhere on the way and shippers end up paying LTL rates for FTL shipments Had shippers been provided with online tracking facilities, some of these problems would not have occurred at all. 1.5.4 In India, a truck can cover only 250-400 km per day compared to 700-800 km in developed countries. In a whole year, a truck on Indian roads can cover 60,000-100,000 km while in the US, a truck can travel up to 400,000 km a year. The average speed of trucks on Indian roads is about 20 km per hour. Slow speeds of trucks result in poor service quality in terms of reliability and on21

time delivery. While low rates-poor quality is acceptable for low-value commodity-like items, for high-value, perishable and time-sensitive items poor service quality is definitely a cause of concern. 1.5.5 Unsatisfactory conditions of Indian roads can be attributed to low axle-load bearing capacity and lack of maintenance. These coupled with frequent overloading result in road damage, increase in maintenance costs, equipment breakdown, loss of utilization time and accidents. 1.5.6 There are two types of check posts (a) inter-State check posts (border); and (b) intra-State. Inter-State Check posts are primarily for checking Sales Tax documentation related to the consignment and route permit and collection of entry tax, if applicable. 1.5.7 Intra-State check-posts, on the other hand, are for checking documents related to the driver (license) and the vehicle (registration, insurance, fitness, road tax, road permit. weight of cargo, etc.), and collection of highway toll and octroi, if applicable. Since there are several windows at a check-post and various forms need to be filled up to be produced for clearance at these windows, the illiterate or semi-illiterate drivers have no choice but to rely on the agents for filling up these forms and completing the formalities in return of a service charge. 1.5.8 Lack of enforcement and collusion truckers and enforcement agencies, allows trucks without proper documents and being overloaded. One sample data on the Delhi-Chennai route shows that delays constituted 10.43% of the transit time and unofficial payments made en route, amounted to 19.4% of the total expenses on road. The summary statistics based on data collected on the 30 trips are shown in Table 6. Table: 6 Summary Statistics for the Delhi-Bangalore Route Parameter Unit Minimum Maximum Distance Km 2,060 2,332 Journey time Hours 80 166 Average speed Km/hour 12.98 29.03 Mileage Km/Litre 3 4.11 Loading/ Documentation time Hours 1 5.50 No. of stops -18 38 Stoppage delay Hours 2.75 8.78 Stoppage delay per km Hours/km 0.0013 0.0042 Stoppage expenses Rs./tonne-km 0.09 0.25 Trip expenses Rs./tonne-km 0.86 1.15 Freight rate Rs./tonne-km 1.18 1.60 Contribution margin Percent 20.11 67.38

Average 2,155.83 102.18 21.73 3.60 3.06 25.30 5.16 0.0024 0.15 0.99 1.39 40.40

Source: Operational Efficiency of National Highways for Freight Transportation in India: India: A Joint Study by Transport Corporation of India (TCI) & Indian Institute of Management, Calcutta

1.5.9 It may be observed from Table 6 that the average vehicle speed is around 20-21 km per hour. Mileage is also below the desired mileage of 3.75 Km per litre for a 15-tonne truck. There are, on an average, 25 stops (15 for toll collection) on the way and the average stoppage delay is
22

five hours, about 5% of the journey time (though delay amounting to 15-25% of the journey time is also not uncommon). Toll stoppages account for almost 50% of the stoppage delay, on an average. The stoppage delay per km is within the corresponding range of 0.0012-0.0060 hours/km reported by an earlier World Bank study. 1.5.10 It may be noted that stoppage expenses (Toll/RTO/ST/Octroi/Police, etc), on an average, contribute 15% of trip expenses. Toll expenses account for nearly 47% of stoppage expenses, on an average; freight rate per tonne-km, Rs. 1.39 (USD 0028). Also, the contribution margin turns out to be 40%. 1.5.11 Trip expenses include fuel cost, on-road stoppage and other expenses, driver's wage/allowance and maintenance/repair cost. According to a joint study TCI-IIM (Kolkata), it was found out that fuel cost is the largest component of trip expenses, contributing, on an average, 55% of trip expenses. 1.5.12 The annual time-specific overhead expenses were Rs. 382,650 which divided by the annual operating hours gives the time-specific overhead expenses per operating hour, i.e. Rs. 76.53/hour. For a particular trip, when this figure is multiplied by the journey time, and then divided by the truck capacity and distance traveled, the time-specific overhead expenses per tonne-km are obtained. The average overhead (distance-specific and time-specific) expenses per trip were estimated at Rs. 0.33/tonne-km. Combining this with the average trip expenses of Rs. 0.99/tonnekm, one would get the actual trip expenses including overheads as Rs. 1.32/tonne-km. Considering the average freight rate of Rs. 1.39/tonne-km, the profit margin becomes 5.3% (or 5% revenue margin), which is of the order of margins achieved by Indian transporters. However, one should keep in mind that margins widely vary depending on routes, commodities, time periods and availabilities of trucks. The reported margin should not be taken as the all-India average. 1.5.13 As observed in table 7, the average cost of delay is about Rs. 124 per hour of delay. The average trip expenses after incorporating delay costs increase by merely Rs. 0.02/tonne-km or two percent. To account for the shippers inventory carrying cost due to delay, the value of commodity is multiplied by the cost of capital and delay time for each trip. After incorporating the shippers inventory holding cost, the average cost per hour of delay becomes around Rs. 149. This may seem insignificant but the annual cost of delay to the economy may be substantial.

23

Table: 7 Comparison Amongst Ten Major Routes

Route Delay as % of Journey Time Delay Per Km (Hrs/Km) Delay Cost per Hour (Rs/Hr) Average Stoppage Expenses (Rs/TKM) Trip Expenses (Rs/TKM) Freight Rate Rs/TKM Contribution Margin (%)

Delhi Bangalore 5.05 0.0024 124.18 0.15 0.99 1.39 40.40 Delhi Mumbai 5.05 0.0041 122.05 0.17 1.01 1.67 62.76 Delhi Chennai 7.83 0.0037 122.05 0.11 0.93 NA NA Delhi Kolkata 20.72 0.0148 124.36 0.11 0.84 1.12 35.95 Mumbai Chennai 5.72 0.0026 122.05 0.20 1.05 1.54 47.71 Mumbai Kolkata 15.11 0.0071 132.10 0.20 1.01 1.27 7.29 Chennai Kolkata 4.69 0.0026 122.05 0.17 1.01 0.98 -3.28 Indore Guwahati 24.93 0.0149 126.68 0.18 1.03 1.42 37.56 Pune Hyderabad 7.47 0.0034 164.91 0.15 1.00 1.77 79.26 Ahmedabad Coimbatore 6.30 0.0021 122.05 0.15 1.02 1.42 39.33 Source: Operational Efficiency of National Highways for Freight Transportation in India: India: A Joint Study by Transport Corporation of India (TCI) & Indian Institute of Management, Calcutta

1.6

Road Freight Rates and Profitability

1.6.1 Indian freight rates are among the lowest in the world. Freight rates depend on type of commodity, weight/ volume, source-destination pair, time of year, and demand and supply of trucks. Freight rates are very much seasonal in nature, vary with the gap between requirements and availabilities of trucks, and also depend on the possibility of a quick turnaround with return load from the point destination.
Table: 8 Comparison of Freight Rates amongst 4 Metros for 15 Tonne Truck Distance Freight Rate To Kilometre Rs Rs/Km Rs/Tonne km Mumbai 1,385 23,250 16.79 1.12 Chennai 2,300 48,000 20.87 1.39 Kolkata 1,471 33,000 22.43 1.50 Chennai 1,382 32,250 23.34 1.56 Kolkata 1.990 45,000 22.61 1.51 Kolkata 1,700 33.000 19.41 1.29 Average 20.91 1.39

From Delhi Delhi Delhi Mumbai Mumbai Chennai

Source: Operational Efficiency of National Highways for Freight Transportation in India: A Joint Study by Transport Corporation of India (TCI) & Indian Institute of Management, Calcutta

1.6.2 Table 8 shows the average freight rates for a 15-tonne truck between each pair of four metros, Delhi, Mumbai, Chennai and Kolkata, based on data provided by TCI. The average freight rate per tonne-km. i.e. Rs. 1.39 (USD 0.028) is one of the lowest in the whole world.

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Chapter II Barriers to Road Transport

2.1 Introduction

2.1.1 Barrier free movement of passenger and freight by road across the country is vital for promoting efficient economic development and growth. The Indian polity has a federal structure. While there is a general declaration in the Indian Constitution that trade and commerce should be free, the Centre and the States (especially the former) have the power to regulate. In India, Road freight carriers are stopped at State borders, checked for payment of central and state taxes on the goods carried and for compliance of various provisions of MV Act. This makes seamless flow of freight traffic across the India difficult. It needs to be noted that goods vehicles are not stopped when crossing borders between the provinces of federal countries like Canada, Australia and United States. Even within the European Union there is nothing similar to Indias domestic border checks, even though EU borders are international, not just domestic. A goods vehicle in India is answerable to all the checkpoints and travels through conditions which are not ideal leading to lower speeds, low utilization of rolling stock. Better roads and faster speeds may be offset by proliferation Inter-State Check Posts (ISCPs). 2.1.2 An important feature of the prevailing tax system is the existence of a large number of barriers for passenger and goods. Documents received by check-post help the transport department to monitor flow of goods into the State and also make an assessment of tax. A typical truck operator has to face a number of different agencies for either obtaining clearances for carrying out goods or paying certain charges at the check post. These agencies are mainly: 1. Sales Tax, 2. Regional Transport Officer (RTO), 3. Excise, 4. Forest 5. Regulated Market Committee, 6. Civil Supplies (check on the movement of essential commodities, black marketing, weights and measures, food adulteration) and 7. Geology and Mining. These checks are generally conducted by the respective agencies at separate points, resulting in more than one detention. Detention of vehicles causes lower speed, loss of time, high fuel consumption and idling of vehicles, leading to under-utilization of transport capacity and adversely affecting their operational viability. Besides, it imposes economy wide costs which are not easy to assess. By introducing checks at each interState border the road freight transport experiences significant inequity compared to the freight/cargo transport by the railways, aviation and even inland transport, which do not face such rigorous en route checking. The system in vogue hinders rather than facilitates smooth flow of freight and passenger movement across the country and has thwarted formation of single common market. 2.1.3 Further, road transport sector is subject to myriad of levies/taxes (both Centre and State) with no provision of set-offs in many taxes/levies leading to cost and price escalation which erodes competitiveness of domestic producers. Taxes and non-tax charges on road transport sector broadly classified into the following categories: (i) taxes on the vehicle purchase, (ii) taxes on operation of motor vehicles fuel taxes, motor parts, tyres and tubes, etc. (iii) Sales tax levied by the States (iv) Registration and Transfer fees, and license/permit fees, (v) periodical vehicle tax (also called road tax), (vi) tolls, (vii) parking fees, (viii) Octroi (ix) Entry tax (xi) Lease tax and (xii) passenger and goods tax.
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2.1.4

Essentially the checks made at border posts aim to ensure that: Taxes in the state of destination have been paid on the goods being carried Trucks not overloaded Trucks being operated safely Trucks carrying valid papers.

2.1.5 The impact of various laws governing movement of goods/passenger is accentuated by existing system marked by: Manual and segregated sales tax administration Manual and segregated vehicle registration records (license plate information) Manual and segregate Driving License records system Non standardized vehicle registration plate location (on the vehicle) Regulatory and inspection functions still fully carried out by Government agencies. 2.2 2.2.1 Major Reasons for delay at check posts Procedural/Operational Format for application forms relating to taxes (sales tax, State VAT) complex and cannot be filled in by the truck drivers. This provides ample opportunity for the agents, which results in the facilitation money payment. Agents also serve as money lenders to the drivers in distress. Inappropriate scheduling of duty norms and rest time of enforcement staff leading to accumulation of goods vehicles and delays. Malpractices False declaration of weights and values. The value and weight of goods in the invoice and consignment note is understated to remain within the permissible limit. Low priority accorded by enforcement staff to process through goods (transit traffic). The transit vehicles do not have to pay any penalties or taxes at the check post. Multiplicity of Laws

2.2.2

2.2.3

Multiple laws and agencies governing inter-state movement of goods and vehicles are major impediments. Following is the list of applicable laws governing movement of vehicles and freight across the country: 2.2.4 Laws Governing Access Control to National Highways National Highways Act, 1956 National Highways Rules, 1957 The National Highways Authority of India, 1988 National Highways (Land and Traffic) Act, 2002 Highways Administration Rules, 2003.
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2.2.5

Laws Governing Inter-State movement of goods Central Sales Tax Act, 1956 Various State Sales Act Various Local/Municipal Acts governing Octroi and Entry Tax Laws Governing Inter-state movement of Vehicles MV Act, 1988 The CMV Rules, 1989 (Amended in 1994, 2000 and in 2002) Various State MVs Act, 1989 Laws Governing Access to National Highways

2.2.6

2.2.7

As per Section 5 of National Highway Act, 1956 any highway corridor can be declared as NH from the perspective of national development. However, there was no provision until 2002 when controlling of encroachments and access to NH from the adjacent lands were empowered to the Central Government through National Highways (Land and Traffic) Act, 2002. Further, traffic regulation has been vested with NHAI as per Section 16(d) of Chapter IV of the NHAI Act, 1988 as the ownership always rest with the Central Government. Despite this provision States have set up Check Posts within the Right of Way of National Highway, NHAI. 2.3 2.3.1 Regulations affecting Trucking and Road Freight Industry Regulations affecting inter-state movement of vehicles

While the MV Act, 1988 and the Central Motor Vehicles (CMV) Rules, 1989 are Central elements of legislation, their enforcement is the responsibility of State governments. The Act prescribes conditions for regulation of all types of motorized road transport, as enumerated below. These are mainly carried out under the aegis of State Transport Authorities. 2.3.2 Safety/Quality Regulation: There are provisions in MV Act that deal with quality regulation. The existing quality regulations include roadworthiness of vehicles (fitness certificate Section 56 of the MV Act), competence in driving (driver licensing Section 9 of the MV Act), control of emissions (emission norms, inspection and maintenance programme of vehicles, pollution under control certificates) and observance of other regulations. As far as the fitness test is concerned, it is based on visual inspection system, which leaves much to be desired. Similarly, competency test for drivers is lax, resulting in liberal granting of licenses. Consequently, competency test does not ensure the availability of skilled drivers. There is ample scope for rent seeking in the licensing system and the competency test for drivers. Safety is a function of road worthiness of vehicle, design and condition of roads, competence of drivers and enforcement of safety regulations. 2.3.3 Environmental Regulation: CMV Rule No. 115 prescribes limits for emission of carbon monoxide, oxides of nitrogen, hydrocarbons and suspended particulate matter, etc. The Central government has the power to lay down emission levels for motor vehicles. Emission norms were
27

first prescribed in 1992. Stricter norms were prescribed for all categories of vehicles in 1996. These were made more stringent with effect from 1st April 2000. The tightening of emission norms has brought about better technology in the automobile sector. 2.3.4 Regulation of Axle Loads: Sections 113 and 114 of the MV Act empower the Motor Vehicles Departments of States to ensure that vehicles carry loads within prescribed limits. Due to unhealthy competition in the trucking industry, overloading is a common occurrence. The provision of off-loading excess weight is not being implemented for want of facilities. 2.3.5 Insurance: Third-party liability risk cover is mandatory under MV Act. Under third-party liability, the insurer provides indemnification to the insured against all sums that the insured shall become liable to pay in respect of damages to third-party property or death/bodily injury to any person arising out of the use of motor vehicles. However, MV Act does not make it compulsory to insure cargo carried in vehicles, for which, a separate policy is required. 2.3.6 Complex Paperwork: There are almost 58 forms contained in CMV Rules, 1989. In all, 186 different kinds of basic information are collected by the various transport departments of States and Union Territories. The forms are usually not user friendly and much of the information required to be filled-in is repetitive in nature. The entire range of forms (1-58) suffers from having redundant information. Each State has its own set of forms relating to vehicle movement and commodity transported which ultimately increases the operational/transaction cost indirectly. 2.4 2.4.1 Regulation by Law enforcing authorities Legal Provisions Creating Impediments under MV Act

Overloading not only damages the roads but has an economic price as well. It has kept downward pressure on road freight, leading to low utilization of trucking fleet as well as low profit margin. To curb overloading would require penalizing those who violate permissible load limit. Defaulters can be detected by Weigh in Motion (WIM) stations and static weight stations at suitable locations on NHs. Although MV Act allows the authorities to force unloading of goods but this is seldom done. Section 113 of MV Act should be strictly enforced i.e. excess goods should be off loaded. As an alternative, Sections 194 and 200 of the MV Act is frequently resorted to as it empowers the authorities to impose fines on truckers. However, this option provides flexibility but vests discretion which is often misused. There are several legal provisions which create impediments at the Check Posts. Some of the illustrative provisions commonly resorted to are. 2.4.2 Provisions Concerning Overloading

For curbing overloading existing legal provisions are adequate. However, it persists because of inadequate as well as negligible enforcement. The maximum permissible Gross Vehicle Weights were notified in the year 1996 and revised in the year 2000.

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Maximum permissible GVWs are as under:Category Two axle rigid truck Three axle rigid truck GVW in tonnes 16.2 25.0

Semi Articulate Vehicle: (i) Two axle tractor-single axle trailer (ii) Two-axle Tractor-Tandem-axle trailer (iii) Three-axle Tractor- Three-axle trailer (iv) Three-axle Tractor single-axle trailer (v) Three-axle Tractor Tandem axle trailer (vi) Three-axle Tractor-Three-axle Trailer Truck-Trailer Combination (i) Two-axle truck-two axle trailer (ii) Three-axle truck-two axle trailer 2.4.3

26.4 35.2 40.2 35.2 44.0 49.0

36.5 44.0

Legal Provisions Continued: Endorsement of GVW in the Registration Certificate (form 23 of CMV Rules, 1989). Plying of motor vehicles carrying load beyond the specified ceiling is prohibited (Section 11 of MV Act, 1988). In case overload is detected in a vehicle power to offload the excess weight at the cost of the owner/in-charge of the vehicle (Section 114). Levy of penalty besides payment of charges for overloading excess load (Section 194). Compounding of the offence (Section 200). Judgment of Supreme Court: Loophole existed in Section 200 of MV Act relating to compounding of offences; State Government resorting to Section 200 of MV Act levied penalty and allowed vehicle to proceed further without off-loading excess weight; Honble Supreme Court in its judgment dated 9.11.2005 plugged this loophole and held that after compounding of offences under Section 200 of MV Act, excess weight has to be necessarily off-loaded; Honble Supreme Court has further held that allowing a vehicle detected with overloading after compounding implies re-commissioning/continuation of offences. Barriers to Inter-State Freight Movement Regulatory Regime for Goods

2.4.4

2.5 2.5.1

The regulatory regime for goods is more complex than regulating trucking operations. A truck can have a single commodity dispatched by a single supplier to a single receiver. On the other hand, a
29

truck may carry multiple commodities dispatched by different suppliers to different buyers at different points for delivery. The regulatory regime for goods is commodity and location specific. In the event of any missing link in the multiple commodity carriers, detention of the carrier is inevitable. The Centre, along with State Governments, is empowered to enact laws pertaining to goods. Some of the regulations governing movement of goods across States are: 2.5.2 Essential Commodities Act (ECA): The emphasis of this legislation has been on regulating distribution rather than facilitating supplies. The provisions of the ECA are such that it imparts enormous discretionary powers in the hands of official agencies. All offences have been made non-bail able and appellate jurisdiction vests with executive and not judiciary. Consignee, nor the consignor, accompanies the goods. The person accompanying the goods is the truck driver and cleaner. In the event of any violation of ECA, the driver and other staff in the truck are the first to be booked for punitive action as accessories to the crime. The District Supply Officer (DSO) has powers to detain the vehicles to verify the contents. 2.5.3 Indian Forests Act, 1927: This empowers the Union and State Governments to make laws and regulations to regulate transit of timber and other forest produce. Chapter-VII of the Act is specifically meant for controlling and regulating movement of forest produce. Besides, the Central Government is empowered to make rules to prescribe the route by which alone timber or other forest-produce may be imported, exported or moved into the territories to which this Act extends. The Act also explicitly mentions breach of rules under Section 42. Chapter IX mentions penalties and procedures dealing with the provisions that may lead to detention of the carrier. Under the Indian Forests Act, all State Governments have erected checkposts at various locations in their respective territories to inspect vehicles that may carry forest produce and timber. Constitutional provisions on environment protection are backed by plethora of acts, rules and notifications. Besides there are rules regarding Handling and Management of Hazardous Waste Rules of 1989. 2.5.4 Dispute resolution: Efficient and quick dispute resolution is essential to reduce transactions cost of inter-state commerce. If a carrier is stopped at a district border or any other point on its way, the consignor and consignee must respond to the complaint at the point of detention (or within its jurisdictional area). In other words, if a vehicle carries goods from Mumbai to Kanpur, but on account of infringement of ECA or any other legislation if it is stopped at Agra, the matter can only be resolved at Agra. The consignor and consignee will have to respond in Agra courts and not at Kanpur, though the office of the enforcement agency is at both places, under a single State governments jurisdictional area. An obviously efficient way of handling such a situation could be to allow the truck to continue its journey to Kanpur, while endorsing its papers for violation and issuing necessary instructions to the Kanpur office to take action against the consignment. 2.5.5 Fiscal Regime: The fiscal regime governing road freight is both transport-specific and commodity-specific. Vehicles are detained for checking payment of commodity-specific taxes such as sales tax, octroi and other local taxes. These checks are generally done by the respective agencies at separate points, resulting in more than one detention for this purpose. At the same time, there are specific taxes levied on the transportation sector, for instance, road tax, national and state permits, etc. Taxation of motor vehicles is a widely used instrument for raising resources.
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2.5.6 Law & Order: The state of law and order situation also takes a heavy toll of goods transport in certain regions of the country. This adds to the cost. 2.6 Tax related impediments

2.6.1 Document Compliance Requirements related to Sales Tax/State VAT at the Check Posts under Sales Tax Regime As per the provisions of Central Sales Tax Act, declaration of goods is mandatory prior to the departure including the purpose of transportation by the dealers. There is a specific form that is available from the Sales Tax Office, which is to be obtained by the dealers. Although the content of Declaration Form does not vary but the state VAT applicable varies for each of the following movements: (a) Purchase (Import-bringing into the State): Form A Series; (b) Sale (Exportsending out of the State): Form B Series and (c) Stock transfer: Form C Series As per the provisions of the State VAT Act, a truck driver is expected to handover the following documents for checking by the Tax authorities at the commercial tax check post counter: Goods Invoice (Purchase/sale):crucial document for the determination of tax liability Declaration Form : It determines the compliance of tax payment Consignment Note/Weigh Bill/Freight Forwarding Note : Issued by the transporter to the consignor and copies given to the consignee on delivery Goods Challan (note): Prepared by the transporter if more than one type of commodity is carried and submitted for verification at the Check Post along with the above documents. Trip Sheet : Driver is required to fill in at the time of entry into a State at the Check Post (Applicable in few States only and drivers seek the assistance of Agents for filling up and submittal and scrutiny usually these agents are the middlemen for facilitating the SpeedMoney) 2.6.2 Under State VAT regime

VAT is a tax on sale of goods at every point in the sales by the registered dealer with the provisions of credit of input tax paid or payable at the previous point of purchase thereof. The State VAT has been adopted by a majority of States in India. However, in its present form it does not provide credit transfer for inter-State goods transfer. Besides, introduction of State VAT has not reduced or removed the need for border check posts. Under State VAT regime, documentation checking is more important than the physical check. Thus it might consume same time unless documentation procedures are simplified and instead of manual verification electronic checking is undertaken. Under State Vat it is essential for a dealer to get registered in order to claim tax credit. Secondly, a certificate is to be issued by a selling VAT dealer to a purchasing VAT dealer in respect of taxable goods for claim of input tax. Key to successful administration of State VAT lies in setting up of a national level IT architecture for tax payer identification, creating and maintaining data base of dealers and their transactions. Appreciating such needs the Government of India in November, 2004 awarded a contract called TINXSYS on BOOT basis for 5 years to a private consortium, covering 13 States in India. The system of levy of penalty and collection remains the same as in the earlier sales tax regime. In case a transporter is found to be in
31

connivance with a dealer to evade tax, vehicle can be confiscated. State VAT also deals with service tax. Transportation being a service, the ambit of VAT also covers service provided by the transporters which are outside the organized sector. With this provision, inter-State movement can be easily tracked, accounted and regulated. In a situation where CST is dispensed with the requirement for a State VAT Check Post would be greatly reduced. 2.6.3 Major drawbacks in State VAT It does not provide tax credit for the inter-State movement of good; Document compliance at the check post is no different from the past; Institution of check posts remains; As per the Sales Tax/State VAT provisions, transaction of inter-state movement of goods is considered non-compliance for either any of the following: Goods transported without valid document Wrong declaration of goods, be it value or volume or weight Transportation of restricted commodities 2.7 Cost of Check posts on Inter-state Trade

2.7.1 Check Posts imposes following economic costs: (a)Surveillance and enforcement costs (operational cost); (b)Cost of Compliance (time related VOC and cargo holding costs) and (c)Cost of Externalities (congestion at check posts imposes cost on other vehicular traffic leading to loss of time distance related VOC and value of Travel Time on the passenger vehicles). 2.7.2 The enormous economic cost imposed by the check post system has been vividly brought out in Grand Trunk Road Improvement Project (GTRIP, 2006). It shows that the present check post system leads to delays in road freight movement. The economic cost of such delay is estimated at a minimum of Rs. 3,200 Crore and a maximum of Rs. 4,300 Crore for the year 2004 which progressively goes up to Rs 60,168 crore by 2017. With one billion people in India, annual economic loss on account of the check post system was estimated at Rs. 32 per capita, at the minimum in 2004. 2.7.3 Savings in compliance cost and savings in time that is wasted at the check posts could improve the profit margin of truck operations without any additional investment. According to GTRIP Report faster turnaround of trucks alone in the absence of Check Posts will improve the operational efficiency of road transport sector by at least 5%. According to the study loss due to delays at the check post is estimated around 119 hours per truck per annum, which is equivalent to 5% of 2,370 hours that a truck on an average, operates in a year. This is equivalent to a total loss of 181 million truck hours for the inter-State trucking industry alone, without considering intrastate check posts that is likely to be more than the Inter-State border posts. Savings on this account alone is expected to benefit the trucking industry to the extent of Rs. 2360 crore in 2004, which was equivalent to 74% of the economic cost imposed. 2.7.4 The commerce and trade particularly inter-state trade would benefit directly in terms of savings in cargo holding cost i.e. inventory cost, which is estimated at a minimum of Rs. 550 crore
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or 17% of the total economic cost in 2004. international market.

It will also make export competitive in the

2.7.5 The economic cost imposed due to the present check post system ranges from Rs. 3120 crore to Rs. 4270 crore which is equal to 0.2% of Indias GDP at constant prices in 2004. As a percentage of total revenue receipts of the GOI in 2004-05, it is estimated in the range 1.0% to 1.4%. 2.7.6 Sample Survey of Enroute Expenses, (Mumbai-Delhi Route) undertaken by Rajiv Gandhi Institute for Contemporary Studies showed that a major share of around 52% of the total en route expenses goes for fuel and oil. In case of RTO and police expenses, it was as high as around 30% for the Mumbai-Delhi route, of which, major expenses were unofficial. This was due to overloading of goods. The other unofficial expenses include tips given to loading staff, security personnel of dockyards and donations extracted by locals on the way for festivals and fairs. 2.7.7 The percentage of actual moving time to the total trip time was about 69%, 54% and 38% for Mumbai-Delhi, Delhi-Kolkata and Kolkata- Chennai routes respectively. 2.8 Alternative to Check Posts

2.8.1 The alternative to Check Posts is to examine and certify authenticity of regular and large sized consignments by road at their points of origin say, either at factory or manufacturing unit or even at the warehouse in the city of the origin. Once the special trucks or containers are sealed their passage across the states should be unhindered. Such procedure is followed for international freight transport in many countries. Freight with one-destination is likely to be in large numbers for inter-State transport in India. The parcel freight, which is loaded or unloaded en-route, should be treated separately from large on-destination freight during its inter-State journeys. If the papers are prepared in advance and sent to the check posts for validation considerable time can be saved by offering these trucks an alternative of opting for Green Channel as followed in the aviation sector. Implementation of this proposal will need some modifications to existing truck fleet, which can be locked and certified for the journey to their destination. Initially high value freight and sensitive commodity could be given priority for such procedure. Security risks involved will also have to be attended carefully. The introduction of GST is likely to help in expediting implementation process, as it would enable the transporters carrying all tax dues paid in advance certificate. The ultimate endeavor of such efforts towards reducing delays at Check Posts is to make Indian trade and commerce globally competitive. The consigners should pay all taxes upfront at the origin and the transporter should carry a certificate during his trip for the goods with inter-State tax credited so as to avoid examination at Check posts. 2.8.2 India can possibly adopt a system similar to the TIR Carnet System used in the European Union (EU) to facilitate cross-border movement of goods. Under this system, vehicles normally carry high-value, perishable and time-sensitive goods, which are sealed at the source and opened only after reaching the destination.

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2.8.3 Drivers carry consignment documents, the formats of which have been agreed upon by all the member countries of EU, which serve as a passport for the consignment without being inspected at international borders. This saves a lot of time for passage of high-value items. The same system can be implemented at inter-State borders in India doing away with check-posts and saving all that delay time for time-sensitive shipment. 2.9 Introduce Single Window Clearance System

2.9.1 The need for evolving a Single Window Clearance System for all authorized charges/clearances both at origin and at Check Posts will greatly reduce the transaction cost of doing trade within the country. This will result in faster delivery times, fewer opportunities for facilitation money and more predictable revenue cash flows. 2.10 Automate and use of Information Technology for cross border road freight transport management 2.10.1 Activities at borders involve checking parameters related to vehicle, driver and cargo. Origin, destination, value, weight, tax paid and type of cargo is checked which either lead to compliance or violations related to weight and taxation. Non-compliance leads to payments of penalties and detentions, both of which require safe parking for both, short and long term. Issuance of tickets for complying as well as non-complying vehicles is also an activity. Also checked at the border are compliance related to vehicle and its driver including various certificates and licenses. All of these activities above can be classified into following broad categories:(a) Weight check; (b) Commodity Documentation Check (c) Payments (penalties and fees)(d) Issuance of tickets/certificates and (e) Parking management ( for waiting and detained vehicles) as given in table 9. It needs to be kept in view that IT also makes it possible to spatially segregate many of the activities from the exact border locations, e.g. Weigh-in-motion (along with Automatic Vehicles Identification which can be remotely communicated to the Border Check-Posts. Commodity certification for unitized cargo (in a manner similar to dry-ports) and communication of the same at check post enabling early preparation for inspection and regulation. Attempts at moving clearance centres away from the border with inland inspection, in a manner similar to dry ports in case of export cargo.

34

Table: 9 Automation Requirement of Activities at Border Check Posts Type of Activity Automation Requirement Probable Technology Weight check Automatic weighment and vehicle Weigh-in-motion, license plate identification, electronic data readers interchange Commodity documentation Electronic credentials, electronic Electronic manifest, smart card check preprocessing, electronic data (with or without biometric interchange identification/thumb print), transponders Commodity check Electronic screening Vehicle X-ray, electronic sealing Payments (penalties and Electronic/cashless payments Smart card, debit card fees) Issuance of Electronic credentials, electronic Electronic manifest tickets/certificates preprocessing, electronic data interchange Parking management (for Queue end parking lot management Queue end detection waiting and detained vehicles

2.11

Over Dimensional Cargo

2.11.1 Over dimensional (OD) cargo is defined in terms of weight and dimension. In dimension terms, anything above 40 feet length, with 8.25 feet height, and 8.25 feet width would be considered OD cargo. Government regulation usually permits 11 tonnes per axle. Practically, anything above 35 tonnes is considered OD cargo. Higher demand for handling OD cargo is being driven primarily by infrastructure investment which entails movement of huge construction equipment and machinery for power, steel and cement plants and Metro rail systems. One of the key concerns of road transporters is the lack of a well defined, standardized regulatory environment. Moving OD cargo requires clearances from multiple agencies. 2.11.2 There is an urgent need to have clear, well-set guidelines for heavy haulage by road. There are no clear norms or time-lines to get the necessary approval and permissions. These clearances take time and often add to cost overruns and delays in infrastructure projects. Clearances from multiple agencies such as the Public Works Department, the National Highways Authority of India for using roads and bridges; the State Electricity Boards for overhead wires; and the Railway Board for railway bridges is cumbersome and time consuming. Lack of standardized rules across the States makes this difficult. Internationally, there are defined routes for transportation of OD cargo. 2.11.3 Australia which is a federal country like India has envisaged a National Heavy Vehicle Regulator (NHVR) which would be responsible for all vehicles over 4.5 gross tonnes. This is being done to ensure consistency in heavy vehicle regulation and would involve less procedural hassles.

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2.12

Implementation of New National Permit Scheme

2.12.1 In pursuance of the agreement signed with All India Motor Transport Congress (AIMTC) during their strike in January, 2009 a Committee was constituted under the Chairmanship of Secretary (RT&H) to look into the issue of streamlining national permit system. a) The Committee recommended that the composite fee for national permit could be levied at Rs.15,000/- per annum per truck authorising the permit holder to operate throughout the country. The composite fee so collected would be distributed among the States/UTs on the basis of an agreed formula. Earlier, the national permit was granted on payment of Rs.5,000/- per annum per State per truck (not less than 3 contiguous States other than the home State) for operation within the authorised States. The recommendations of the Committee were further deliberated by the Empowered Committee of State Transport Ministers headed by Honble Transport Minister, Government of Rajasthan and subsequently endorsed by the Transport Development Council (TDC) in its meeting held on 16.4.2010. The CMV Rules, 1989 have been amended w.e.f. 8.5.2010 for implementation of the new national permit scheme as recommended by the Committee and endorsed by the TDC. As per the new system, national permit can be granted by the home State on payment of Rs.15,000/- per annum per truck for operation throughout the country. State Bank of India has been authorized for collection of consolidated fee of Rs.15,000/-. The system has been further streamlined and is now being implemented electronically through web portal developed by the National Informatics Centre (NIC). As per the information available with the Ministry, upto December2010, an amount of Rs.670.52 crore has been collected. Suggested Measures to Overcome Barriers in flow of Road Freight Movement Integrate Tax administration with inter-state road freight and passenger movement through online communication network system at National, Regional and Local level. This will help move towards border less and paper less movement of freight traffic across borders aided by IT in a time bound manner. This will greatly reduce transaction cost and logistics cost of domestic trade. Presently checking/verification work is being done manually at check posts. However, electronic surveillance and computerization present vast opportunities for outsourcing. Adopt concept of Green Channel. Currently, Green Channel is being implemented in Gujarat and needs to be replicated. Freight with single destination accounts for a large proportion of consignment and is likely to go up with containerization. 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. Implementation of this proposal will also need some modifications to existing truck fleet, which can be locked/sealed and certified for the journey to their destination; introduction of smart cards for vehicle registered (Vahan) and driving license(Sarathi) will be a pre requisite. Similarly development of national
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b)

c) d)

e) f)

2.13 a)

b) c)

d) e)

f)

g) h)

Registers for Vehicles and the traders, who are frequent users of Check Posts, will also be required. Adopt Single Window Clearance System for all authorized charges/clearances both at origin and at Check Posts. Need to emulate innovative approach of State Governments of Andhra Pradesh and Gujarat towards automation and computerization of the Inter-State Check Posts (ICPs). In case of Gujarat this has enabled 100% checking of vehicles and more than 4 fold increase in revenue collection from Rs. 56 crore to Rs. 237 crore within three years of introduction. Similarly, Andhra Pradesh through common software has ushered in a Single Window Checking Facility covering 8 major departments at 5 ICP on NHs bordering adjoining States. This will result in faster delivery time, fewer opportunities for rent seeking and predictable revenue cash flows. Freight agents and brokers are important actors in the trucking industry. They have now been brought under the purview of legislation carriage by Road Act, 2007. This provides for registration/accreditation of brokers and freight agents. Abolish requirement of a transit pass The question about erection of check barriers was considered by the Transport Development Council at its meeting in August 1980. The Council had emphasized that all efforts should be made by the States to unify check barriers along the NHs having single combined ones at inter-state boundaries and that they should be proper design with separate lay so as not to hinder movement of the through traffic. Taxation Replace various road transport related taxes/levies (road tax, goods tax, passenger tax) etc by a single composite tax. This will both reduce collection cost and compliance cost of vehicle owners/operators. Phase out Central Sales Tax Provide tax credit for the inter-state movement of goods under State VAT. Motor Vehicles Act Amend MV Act, removing penalty payment clause and retaining only removal excess load from the trucks. Install WIM (Weigh-in-Motion) to identify violators. The colour of truck number plate of inter-State vehicles should be different from the intra state vehicles. This will help segregate goods vehicle and reduce the intermediate checking of inter-State freight movement. For enhancing inter-State road transport efficiency following amendments to existing MV Act are suggested. 1. Punishment to common carrier found responsible for overloading. 2. Deletion of Section 194 from the recitation of Section 200 for discontinuation of compounding vehicles. 3. Repealing Section 158 of MVA for limiting police powers for checking vehicle documents without the preliminary requirement of commission of any offence.

2.14

2.15 a) b) c)

d)

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Chapter III Motor Vehicle Taxation

3.1 Introduction

3.1.1 In the Indian context, taxes on the vehicle purchase denote import duty/excise duty levied by the Central Government, State VAT levied on the sale value by the State Government and octroi/entry tax levied by the local government (where leviable). Excepting the last mentioned, the other taxes on motor vehicles are not uncommon elsewhere, although the excise duty and State VAT may be combined under a GST. 3.1.2 Taxation of road transport has two purposes: to charge users for the costs they impose on the road network and on other users (marginal costs) and to raise revenues for the government (pure taxation). The avowed purpose of motor vehicle tax is to defray the costs of road maintenance out of revenue realized from user charges. Besides, motor vehicle taxation is also geared to fulfill other objectives like the reduction of both congestion and pollution. However, multiplicity of objectives results in complex tax structures, cross-classifications and unintended economic and welfare effects.Higher taxation of heavy vehicles needs to be balanced against the requirements of vertical equity as public transport is more likely to be used by low income groups. Motor vehicle taxation results in higher acquisition cost of vehicle and reduces demand (particularly for privately owned and used vehicles); on the supply side, it increases the costs of transport services. The states levy tax on motor vehicles under entry 54 of the Schedule 7 of the constitution. This tax serves as a significant source of revenue to the states. 3.2 Classification of Vehicles for Taxation Purposes

3.2.1 MVT is being levied in all States and UTs except the UT of Lakshadweep. Existing tax structure for commercial vehicles shows wide variations among States. There are different bases for computation and different rates, leading to differing incidence of taxes per vehicle in different States. In fact, it is not easy to make comparisons of rates levied on different types of vehicles in different States. Inter-State comparisons are somewhat difficult for the following reasons: a) different classification principles for the taxation of vehicles in different States; b) variations in the application of lifetime and annual tax rates to vehicle categories; c) use of specific and ad valorem rates; d) multiplicity of rates. 3.2.3 Several criteria have been adopted to differentiate motor vehicles for taxation purposes across the States making comparisons of incidence difficult. 3.2.4 Two Wheelers: Most of the States have switched over to life time tax (LTT) except States like Haryana and a few in the North East (Manipur, Mizoram, and Sikkim, Tripura). Also certain UTs like Andaman & Nicobar Islands, Dadra & Nagar Haveli and Daman & Diu levy annual taxes. In Puducherry, there is a combination of one time tax and annual tax. In some States, tax slabs for LTT for two-wheelers are based on engine capacity (Daman & Diu, Himachal Pradesh, Nagaland, Puducherry, Rajasthan, Sikkim, Uttar Pradesh, Uttarakhand and West Bengal); in some
38

it is the unladen weight (Assam, Bihar, Dadra & Nagar Haveli, Haryana, Manipur, Orissa,). Other States follow life time tax based on purely the value/cost of the vehicle (Andhra Pradesh, Chhattisgarh, Delhi, Goa, Gujarat, Karnataka, Kerala, Maharashtra, Madhya Pradesh Punjab and Tamil Nadu). 3.2.5 Cars: Prior to the introduction of LTT, motor cars and jeeps were differentiated either on unladen weight or on engine capacity basis. The former reflects the fact that weight has an effect on variable road maintenance costs while engine capacity is an imperfect proxy for fuel use. Some of the States/UTs which follow engine capacity are Jammu & Kashmir, Sikkim and West Bengal. On the other hand, Dadra & Nagar Haveli, Daman & Diu and Puducherry follow unladen weight as the basis. In Himachal Pradesh basis of MVT is engine capacity in conjunction with the percentage of cost of vehicle (COV). Some like Chandigarh and Rajasthan follow the basis of seating capacity. However, most of the States now follow life time tax based on the value/cost of the vehicle (Andhra Pradesh, Assam, Bihar, Chhattisgarh, Delhi, Goa, Gujarat, Haryana, Karnataka, Kerala, Maharashtra, Madhya Pradesh, Meghalaya, Rajasthan, Tamil Nadu, Uttar Pradesh and Uttarakhand). States like Manipur and Uttar Pradesh levy varying amounts and rates respectively depending on fuel use (petrol and diesel). The system of lifetime taxation has now become fairly universal in case of personalized mode (two-wheelers and passenger cars). However, some States like Andaman & Nicobar Islands, Jharkhand, Mizoram and Tripura are among the few States, which still continue with annual taxation. Within one-time tax levying States, for certain States like Arunachal Pradesh (5 years), Meghalaya (10 years) etc validity is for less than 15 years. 3.2.6 Passenger Transport Vehicles: In the case of passenger transport vehicles like stage or contract carriages, for the most States the seating capacity forms the basis for levying tax. Motor vehicle taxation of passenger buses is mainly on the basis of an upper seating capacity limit (per seat per month/ quarter/annum) and treated differently from motor cars and jeeps. Sometimes it is extended to cover authorized standees as well (Kerala and Gujarat). However, in case of certain states , the basis of taxation differs e.g. Arunachal Pradesh levies a one-time tax; Karnataka charges varying rates on Revenue earned by Fleet Owner Buses for city services and mofusil services ; Andaman Nicobar Islands levy a flat amount per year ; Andhra Pradesh levies varying rates on Gross Traffic earnings for APSRTC buses differentiating between mofusil services or urban services while for Private buses specific amounts are charged on daily kilometerage depending on Ordinary or express services ;. In many States like Chhattisgarh, Orissa etc, differentiation in tax treatment of passenger buses is also accorded on the basis of type of service (Ordinary/Luxury/Express etc). Some States, for example, Andhra Pradesh, Chhattisgarh, Madhya Pradesh, Orissa, also include the distance that the vehicle is permitted to ply as an additional element for determining the quantum of tax. There is another system also. Routes are divided into different categories in terms of region with a different rate of tax for each. This system is prevalent in Andhra Pradesh, Himachal Pradesh, Karnataka, Nagaland, (based on region- rural, mofusil, Urban, hilly or plain). Another distinction peculiar to the taxation of commercial passenger vehicles is that between stage carriages (with fixed stopping points on specified routes) and contract carriages (including taxis) hired on time or distance basis. Rajasthan levies differing rates of Annual Road Tax on the cost of vehicle on (i) the complete vehicle and (ii) the chassis.
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3.2.7 Goods Vehicles: The terms heavy and light commercial goods vehicles are defined in MV Act, 1988, essentially on the basis of weight. In general, taxation of passenger vehicles depends on the seating capacity, while goods vehicles are almost always taxed on the basis of the registered laden weight (RLW) also known as gross vehicle weight (GVW) or unladen weight (ULW) or registered payload (the difference between RLW and ULW). For goods vehicles, in most of the States, the basis for taxation is registered laden weight (RLW)/gross vehicle weight (GVW). As far as tax on goods vehicle is concerned, the de facto tax rate everywhere is a specific rate calculated on the basis of ULW, GVW/RLW or payload. However, in exceptional cases ad valorem rates are charged on the cost of vehicles/ sales prices etc. This category of States includes Gujarat and Rajasthan. 3.2.8 Taxes on Transport vehicles plying on inter-state routes: Passenger Buses (SRTU or private) plying on inter-state routes covered by an inter-state agreement are subject to MVT only in their State (State of registration). However, buses (SRTUs or private) plying on inter-State routes not covered by such agreements are subject to MVT in both the States. The inter se tax structure between goods and passenger vehicles indicates that light passenger vehicles (personal and commercial cabs) are taxed lower than light goods vehicles, but rates on medium and heavy vehicles are much higher for passenger than goods vehicles. 3.2.9 The system of lifetime taxation has now become fairly universal in case of personalized vehicles although the vehicle categories covered by this procedure vary from State to State. The system of lifetime taxation results in advance tax collection, since the probable tax revenue from a vehicle, computed from an estimated lifetime of 15 years, is recovered upfront at the time of registration itself. Switchover to lifetime tax for most categories of non-commercial vehicles has led to a dramatic fall in the number of taxpayers to be dealt with regularly. 3.2.10 The bulk of the motor vehicle tax revenue is raised from the stage carriages, contract carriages, heavy as well as light commercial vehicles. The rate schedules are often complicated and run into several pages; this is primarily due to creation of large number of vehicle categories. One of the States having a less complicated motor vehicle tax structure is Delhi, where all buses are taxed according to seating capacity and all the trucks are taxed according to RLW. This system makes the tax structure quite a simple one. 3.3 State Tax on Motor Vehicles

3.3.1 Levy of Tax: Motor Vehicle Tax is leviable on all types of motor vehicles. Levy of tax is generally based on following two parameters: a) b) Lump sum tax based on the Value or sale price of vehicle or chassis; or Annual tax depending on weight or passenger carrying capacity of the transport vehicle.

3.3.2 Most of the transport vehicles fall in the second category while passenger cars and two wheelers predominantly fall in category one though there are exceptions. The tax revenue is collected by the different states under these categories.
40

3.3.3 Since levy of tax is a prerogative of states, there are state variations of basis of tax and rates which cause distortion in the market. If tax is lower in a State, vehicles tend to get registered there and are later on moved to other states. This results in loss of revenue to the State which has comparatively higher rate of tax; and all states, in sum, end up being loser. 3.3.4 Looking to the need of common national market and increased movement of vehicles across the states, there is a need to rationalize the tax structure and evolve consensus among the States for drawing of floor rate of tax. This will prevent 'race-to-the-bottom' in the tax rate and will in-turn benefit most of the states and vehicle owners. 3.3.5 To evolve the common tax rate strategy, two key approaches may be suggested on following lines: (a) LMV & Two wheelers

Legally, if a vehicle is permanently moved out of a State and taken to another State, the registration number of the vehicle is required to be changed and taxes in the new States is required to be paid. The mechanism to get refund in the earlier State is cumbersome and non-transparent. There are also reports that some unscrupulous elements particularly dealing in the luxury car segment get their vehicles registered in a State where the tax is levied at low rate and subsequently move vehicle to other state. Though, the tax on these vehicles may be collected but the mechanism to detect such vehicle in other State is neither fool-proof nor adequate. Looking to the above, it is suggested that: i. ii. Floor rate of these vehicles be pegged at 6% in all the States and Union Territories; It would be desirable to move towards ad valorem taxation for non-commercial two wheelers, motor cars and jeeps from the point of view of administrative convenience and revenue buoyancy. The reasoning is that to have buoyancy in the tax system, it would be useful to resort to a tax system which is based on the cost of vehicles. Tax is levied on the basis of sale price of the vehicle eliminating all other bases linking it directly to the VAT. Further it is progressive in incidence. Tax be collected as lump-sum tax for life time on the Sales on the basis mentioned above; To facilitate free movement across States of personalized vehicles which are on lifetime tax, those which have paid taxes in one State could be treated as tax exempt by others. A vehicle moving to other state after a period of two years of registration may be exempted from tax in the new state obviating requirement of refund and subsequent payment of tax in the new state. Transport Vehicles

iii. iv.

(b)

The scheme of national permit has been introduced to facilitate seamless movement of goods vehicles. However, basic motor vehicle taxes on transport vehicles vary. The National Permit fees in addition to the basic tax on these vehicles which is normally charged on an annual basis depending on the capacity of the vehicle. If a State has very low tax rate compared to neighboring a State, then there is incentive for the transporters to get their vehicles registered in low tax State
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and operate on National Permit in other States, thereby defeating basic purpose of the National Permit in evolving common national market. In such a scenario a State which has comparatively higher rate of tax, tends to lose the tax revenue whereas its share of national permit is fixed. Similarly, the reciprocal arrangement between two states becomes skewed when the basic tax rates between neighboring States differ considerably. Therefore it is suggested that: i. ii. iii. iv. Tax rate of all goods transport vehicles be brought to a floor rate; Basis of tax may be capacity of the vehicle; Tax is levied on an annual basis whereas the facility of payments may be given on quarterly basis. In case of passenger vehicles like national permit holder tourist buses and taxies, a similar approach can be adopted to facilitate growth and free movement of transport vehicles in the country. For this purpose, a meeting of State Finance Ministers/Transport Ministers may be convened and appropriate decision be taken as was done in case of Value Added Tax. Vehicle taxation is road damage related, but levied on the basis of gross vehicle weight rather than on potential axle loads, resulting in under-taxation of 2-axle trucks compared to MAVs. Since the former is a major source of revenue to States, there is need for its rationalization, to ensure that the tax burden is distributed fairly among different types of vehicles according to PCUs (Passenger Car Units) as well as the road damage caused by each type of vehicle, according to the equivalent standard axle (ESL). Motor vehicle taxes could be used to encourage the plying of MAVs.

v.

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Chapter IV Modernization of Road Transport System

4.1 Introduction

4.1.1 Indian Road Transport sector is on the throes of change with the induction of technology and new practices which would need lot of complementary changes in the structure of the road transport sector to enable it to realize its full potential. These changes will greatly influence the flow pattern of goods and passengers across the country. While Indias economic reforms have had a significant impact on foreign trade, industry and financial sector, the winds of reform and technological changes have eluded vital sector like road transport. An efficient road transport sector will not only cut down the transit time and inventory costs but greatly improve the competitiveness of Indian manufactures in the global market. Some of the measures to modernize the Road Transport sector are enumerated below. Besides, its modernization will significantly lower its carbon foot print. 4.1.2 Introduce electronic toll collection (ETC) system: Presently ETC is used at few toll plazas on NHs. This is in contrast to USA where 95% of toll centres have ETC systems. Implementing ETC can improve throughput at toll centres by as much as 3 to 4 times over manual toll collection systems. ETC significantly reduces waiting times and consequently reduces fuel requirements. Besides, toll operators benefit from lower personnel requirements and reduced leakages. 4.2 Improving Fuel Efficiency of Vehicles

4.2.1 Introducing fuel efficiency norms for automobiles is another approach to address the twin problems of energy security and increasing emissions from transport. To this end, following measures are suggested: a) Label individual vehicles on a kilometer per litre (kmpl) basis to enable consumers to make a rational choice. This could be accompanied by either a star rating or a mention of the worst and best fuel efficiencies in that vehicle class. b) Begin with labeling that is based on a continuous function of weight and fuel efficiency. c) Define a minimum efficiency standard for the countrys vehicle fleet. d) Fuel efficiency can be improved by imposing periodically tightened corporate fleet efficiency standards, with mechanisms to penalize non-conformance. These norms can be GHG based, and efficiency achievements may be traded. e) Given differential fuel efficiencies and fuel taxation, if the Government desires, it could consider imposing an up-front tax on personal vehicles to absorb the benefits accruing from differential taxation while passing on fuel efficiency benefits to the consumers. However, such an up-front tax would be unfair to the manufactures as up-front costs are an important determinant in vehicle choice. It may be better to simply get rid of the relative distortions in fuel pricing by letting petrol and diesel be priced on the same footing, and let fuel efficiency and technology govern the choice of vehicle for the consumers. f) The norms can initially be defined by BEE or MORTH and implemented by MORTH for cars, and can then be extended to other vehicles such as trucks, buses and two-wheelers.
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4.3

Fleet Modernization

4.3.1 Some options to modernize the vehicle fleet in the country by replacing older vehicles with newer ones (with better technology and lower emissions) need serious consideration. These include incentives to owners of commercial vehicles older than 15 years to modernize their fleet, encourage owners of private vehicles older than 15 years to replace their vehicles through a suitable tax regime, a vehicle recycling policy and drastic improvement in the inspection and certification regime. According to Planning Commission Report (Low Carbon Strategies for Inclusive Growth: An Interim Report, May 2011) these measures are expected to yield a one-time saving of about 1 MT CO (by 2015) after replacing about 3 million vehicles. 4.3.2 Fleet Modernizations coupled with recycling policies for existing old vehicles would have impact on reduction of local pollutants and carbon footprint from road transport sector. An incentive based fleet modernization programmme could be considered to replace old vehicle with a new one. The steps followed for this approach could be that the vehicle owner first gets the vehicles scraped at the scrap yard and procures a loan at a concessional rate from the financial institution. Government of India could further incentivize purchasing a new vehicle as replacement by reducing the excise duty and rebates on sales tax by the State Governments. Further, rebate on registration fee at the time of new registration of new vehicles could also be considered. To begin with, the scheme could consider extension of this fleet modernization programme for trucks and buses which are more than 15 years old. The co-benefits that would be accrued from this scheme would be reduction in breakdowns on the roads thereby reducing traffic congestion and lowering fuel consumption apart from environmental benefits of running a cleaner vehicle. 4.3.3 Simultaneously formation of Special Purpose Vehicle/s (SPVs) may be encouraged. These SPVs could specialize in evaluation of price of vehicle-to-be-discarded, own recondition vehicles of different vintage along with appropriate warranties. These SPVs would buy old vehicles, scrap the same and surrender the Registration Certificate to the concerned authority. Simultaneously, the SPV shall offer younger reconditioned vehicle to the owner of discarded vehicle. In this process, the Government shall chip in to contribute its exemption in tax, etc. 4.3.4 This scheme has to be supported through an organized programme for recycling of vehicles which would address the issue of waste disposal and ground water contamination by improper method of disposing old vehicles. The recovery of used material should be used for feeding it back to the industry. In the manufacturing process, vehicle manufacturers have already started avoidance of Hazardous substances viz. Mercury, Chromium, Lead and Cadmium, etc. in their production lines for manufacturing new generation vehicles. 4.4 Encourage use of multi axle vehicles (MAV)

4.4.1 MAV (gross tonnage including weight of truck of over 16.2 tonnes) are cheaper to operate compared to smaller trucks i.e. medium commercial vehicles and light commercial vehicles, by over 25%. In fact, cost per tonne Km for 25 tonne truck and 30 tonne truck is estimated at 85% and 75% respectively relative to a 16 tonne truck (Building India: Transforming the Nations Logistics Infrastructure, Mckinsey & Company, 2010).The incremental cost of a MAV can be recovered in less than three years. Measures to promote the use of MAVs could be considered including excise
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duty reductions for MAVs similar to small and fuel efficient cars, stringent monitoring of overloaded trucks and enforcing pollution and safety norms, which could lead to retirement of old trucks. 4.5 Truck Terminals

4.5.1 At present, there are few truck terminals in cities whereas Government should create truck terminals in almost all A, B and C class cities and towns. We suggest that in A class cities there should be four truck terminals in East, West, North and South, two in B class cities and one in C class cities and towns. These truck terminals will ease the traffic congestion in the city and decrease pollution, facilitate emergence of hub spoke system for distribution of goods and greatly improve the turnaround time of goods carriages. On these truck terminals there will be medical facilities, rest room, restaurant and equipment handling facilities. It is suggested that while planning SEZ or SER or Industrial Park at least 10% of the area should be embarked for logistics and warehousing to support industrial activities efficiently. 4.6 Vehicle Safety Standards, Inspection & Certification

Present Regime of Vehicle Inspection & Certification 4.6.1 Mandatory checks are presently required only for commercial vehicles. The private vehicles are also required to be checked for fitness once in 15 years. Further, all vehicles are required to be tested for emissions at least once in six months. Similarly Pollution under Control Check system should be made more effective and there should be a regular audit of pollution checks Centres. 4.6.2 Under Section 59 of MV Act, 1988, Central Government has powers to fix the age of motor vehicles of different categories. This Section has not been invoked. The Ministry has fixed the age of certain categories of vehicles for the purpose of tourist permit and national permit, under Rule 82 and 88 of CMV Rules, 1989. A vehicle can ply on the road as long as it meets the requirements of MV Act and CMV Rules, 1989 with regard to safety, emission and fitness norms. A transport vehicle has to undergo fitness test every year after two years of the date of initial registration. There is no such requirement for non-transport vehicle for 15 years once they are registered. Proper inspection and maintenance system must be put in place to identify the vehicles which do not meet the emission and safety norms. Such inspection and maintenance centres would need to be set up in various States. A well maintained old vehicle can be less polluting than an ill maintained new vehicle. Given the exponential increase in the vehicle population and rising tide of road accidents it is imperative to put in place a Vehicle Inspection & Certification system in a phased manner under PPP with strict supervision. 4.6.3 Private vehicles also need to be brought into the regular fitness regime. The system has to be implemented by State Transport Department. A third party vehicle inspection programme can be considered, where in, the State Road Transport Authority could monitor and audit the system. For the system to be successful, on road enforcement by transport department is pre-requisite to
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ensure compliance. The I&C programme could be a basis for identifying vehicles for end of life for recycling after the one time retirement of 15 years is implemented by the government. 4.7 a) b) Existing Regulations for Vehicle Safety Vehicle engineering also plays a very important role in improving safety on the roads. Rule making powers for construction and maintenance of vehicles are vested in the Central Government although limited delegation has also been made in MV Act, 1988 to the State Government. Vehicle construction has to conform to the requirements of both active and passive safety i.e., to prevent accidents and also to save the occupants and other road users coming in contact with vehicle in the event of an accident. Norms for safety components such as safety belts, laminated safety glass for wind sheet, instrument panel and lighting system, rear view mirrors, power steering in case of buses and heavy commercial vehicles etc. have already been mandated. The thrust of the efforts is to gradually harmonize our standards with the Economic Commission for Europe (ECE) standards. India has joined the World Forum for Harmonization of Vehicle Regulations (WP.29) by acceding to 1998 agreement on Global Technical Regulations in 2006. This has accelerated the pace of harmonization of the countrys standards with world standards. Vehicle Inspection & Certification

c)

d)

e)

4.8

Present System 4.8.1 The Central Government lays down the law and policy guidelines under the CMV Rules and the State Transport Department performs the functions of testing of the vehicle and issue of the fitness certificate. The implementation of these rules at the State level is to be done by the State Government by creating suitable and adequate infrastructure for carrying out the fitness tests. The details of the requirement of the test to be conducted for issue of the fitness certificate are given in CMV Rule No. 62. As per Rule No. 62, all transport vehicles should carry a Fitness Certificate, which is to be renewed every year. The valid Pollution Under Control (PUC) certificate issued by the State authorized test centres operated by the private operators are accepted for issue of the fitness certificate by the State Transport authorities. However all vehicles, both Transport and Non-Transport, are required to undertake mandatory idle emission test or free acceleration smoke test, as applicable, every six months or any other periodicity as notified by the state Government. 4.8.2 a) b) c) The existing vehicle inspection system in India is beset with lot of problems: At present, only visual inspection is carried out by the inspectors, and even that is mandatory only for commercial vehicles. The vehicle inspection is mandatory for the commercial vehicles only. Personal vehicle owners are required to pay only a one-time tax, at the time of initial registration of the vehicle. Therefore, presently there is no mechanism by which it is made mandatory for personal vehicles to go in for a regular fitness check.
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d) e) f) g) h) i)

j) k)

Mostly, the vehicle inspection centres do not have any instrumentation or equipment to carry out proper inspection of the vehicle The inspectors and other staff are not given regular training for skill up gradation. There is no set procedure for inspection and often the decision whether a vehicle is fit or not left to the discretion of the vehicle inspector. The number of vehicles per inspection centre is very high due to centralized nature of inspection, putting further pressure on the limited capacity of these inspection centres. There is no mechanism at present for auditing, monitoring performance and capability of these centres. Although the present PUC system is authorized by the State Governments, there is lack of control mechanisms like auditing/ inspecting for these PUC Centres. The criteria for authorising / registering a PUC Centre need to be augmented. The data collected in the inspection centre / PUC centre is not analysed to check the data validity and improvement in the system There is no organized industry for repair and maintenance of vehicles. There are number of roadside mechanics available that may or may not have adequate equipment and training for maintenance. As these mechanics are cheap and available next door, vehicle owners still use their services. Recent Initiative by MoRTH

4.9

4.9.1 It is pertinent to note that MoRTH has taken the initiative to establish 10 model I&C centres in India with the help of ARAI and other executing agencies. In this scheme, I&C centre Primary focus is to inspect commercial vehicles and it is expected that I &C will work in two shifts with 80% lane occupancy. With above assumptions and with existing test fee structure the I&C centre will be financially viable. Considering the huge requirement of I&M test centres in future, the operation and establishment of I&C centre can be worked out on the basis of BOOT or PPP model. I&C Regime Implementation 4.9.2 For effective implementation of an I&C regime in India, the following various components should be developed: (a) Institutional structure; (b) Legislative reforms; (c) Development of Regime; (d) Phasing of I&C regime; (e) Enforcement on road; (f) Auditing of the Vehicle Inspection Centres; (g) Human Resource Development; (h) Public Awareness Programmes; (i)Data Collection and analysis and Networking of centres; (j) Maintenance Programme; (k) Capacity Building - I&C centres; (l) Nodal agency and; (m)Action Plan 4.10 Overall Benefits of I&C Programme Improvement in overall vehicle condition is expected to ensure a. Safer vehicles b. Cleaner vehicles Reduction in Accidents & fatalities. Identification & reduction of gross polluting vehicles. Improvement in fuel consumptions.
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The programme will facilitate establishment of requisite number of garages with necessary equipments.

4.10.1 Institutional structure: The State Government should identify the agencies to carry out operation of I&M centres and nominate auditing agency to periodically validate the performance of centres, and should be responsible for on road enforcement. This could be based on PPP model. The programme should be linked to registration/ insurance of vehicles to make it more effective and in making it mandatory. No vehicle should be issued a registration or a re-registration certificate unless it possesses a valid vehicle inspection certificate. 4.10.2 Scope of I&C The I&C regime should have the tests for both safety and emission parameters. The inspection should be a combination with visual and automated test equipments. For the cities like Delhi, the CNG / LPG safety inspection should be included in the programme. For inspection of the vehicles in the automated vehicle inspection centres, detailed vehicle inspection manuals need to be developed. These manuals should prescribe the procedure for testing a vehicle, lists of tests to be conducted, methods for conducting the tests, and reasons for failures. These manuals would have to be prepared for different categories of vehicles and should be available at all test centres and others concerned with the I&C programme. For enforcing vehicle safety standards prescribed safety standards in line with international benchmarks need to be carried out. 4.11 Auditing vehicle inspection centres

4.11.1 A well functioning audit and quality assurance system is crucial for the acceptance and success of any I&C regime. The State Transport Department would have to out source the auditing to any of the renowned automotive testing centres in the country like ARAI. The auditing shall be conducted at least once in a year. The auditing should at least cover the following (a) Presence of necessary equipment and other infrastructure in working condition; (b) Proper calibration audits for equipment; (c) Proper inspection procedures being followed by the centre as detailed in the manual and verification of standard operating procedures (SOP) of each centre; and (d) Presence of qualified/trained manpower in the inspection centre. 4.11.2 A penalty system may be imposed for auditing the performance of the service centres based on the UK model, where, for every different type of offence committed certain penalty points are awarded and after a centre accumulates a certain number of penalty points its license is cancelled. This would enable a more transparent form of working. 4.12 Enforcement on road

4.12.1 The traffic police would be responsible for checking vehicles for the possession of a valid fitness certificate; mobile checking vans would have to be set up for randomly checking vehicles on the road. These mobile units would have the minimum equipment required. While the enforcement may be done by the State Transport Department, the inspection using the mobile
48

fitness testing can be outsourced to the private contractor who operates the I&C centres in the state. 4.12.2 To ensure that the new system responds to improvements in vehicle technology and increasingly stringent emission and safety norms, a centralized data bank is necessary. A wellfunctioning I&C system will include a data management system that ensures that all test data are transmitted on a regular basis to a central database. This will be easier if I&C stations are linked by computers that automatically transmit information on a real time basis. 4.13 Enforcement & Legislations concerning regarding fitness

4.13.1 Considering the growth of vehicle population, large number of I&M test centres needs to be established would need large investment to cover Heavy/Light Vehicles and Private Vehicles category. Hence, the operation and establishment of I&C centre can be worked out on the basis of BOOT or PPP model and considering international experiences like UK model. Based on experience of the I&C centres established as capacity building in each state, these centres will be replicated throughout country, depending upon state government initiatives and priorities. For the Union Territories, small states and remote locations considering the volume of the vehicles the concept of mobile test centre may be introduced. Depending upon the city fleet split of lanes in terms of Heavy Duty, Light Duty and Private vehicles in combination and shift operation may be worked out. 4.14 Proposed Implementation Plan

4.14.1 For the implementation of effective I&C regime in India, there is a need for creating an independent centralized nodal agency like ARAI, which can provide necessary technical and administrative assistance to the Government of India in developing a comprehensive I&C regime, assist the state government in creating necessary infrastructure and monitor the implementation at State level. This agency can be built on the basis of similar agency like Vehicle Operator Service Agency (VOSA) in UK and National Vehicle Inspection Agency in Japan. Though initially the Government may provide funds to create the nodal agency, later self-sustainability should be achieved through functioning of the agency. This agency should function with the following objective to develop an effective I&C regime for the country. a) Develop a detailed programme content in consultation with State Government b) Suggest necessary changes in the legislative framework for implementing a comprehensive I&C regime in the country c) Identify the number of centres required and develop an implementation plan for creating necessary infrastructure d) Recommend the type of tests and procedures for testing vehicles on emission and safety parameters e) Prepare necessary guidelines for setting up and operation of an automated vehicle inspection centres f) Develop vehicle inspection and audit manuals g) Develop a training course content, identify resources and prepare an action plan for providing training of necessary technical manpower
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h) i) j) k) 4.15

Frame specifications for a centralized software and networking of the Inspection centres Analyze the data and suggest further changes in the test procedures and standards Prepare an enforcement plan and monitor the implementation a the state level Setup an audit system and monitor the inspection centres Suggestion for Implementation/Phasing for I&C Regime for Vehicle Safety

4.15.1 A phased approach would be necessary to inspect all vehicles on safety and emissions performance. Significant investments, improvements in regulatory and management practices, increased capacity and capability would be prerequisites for the effectiveness for such a regime. Hence, a phased approach has been suggested for ensuring effective implementation of inspection and maintenance programme. 4.15.2 In the first phase, cities with significant transport vehicles (metros) should introduce a modern Inspection and Certification regime. In these cities, a modern inspection regime should be first introduced for commercial vehicles, and then subsequently to private vehicles. And then it must be extended to rest of India for commercial vehicle category. Within private vehicles, older vehicles (more than 9 years old) should be included in the regime earlier. Subsequently it must be extended to newer fleet (3 to 9 years old). Both emissions and safety tests should be introduced in parallel for both commercial and private vehicles, as and when these are included in the phased introduction. 4.15.3 For cities where the regime would be introduced later or for vehicle categories that are not being covered at the first instance, the current PUC and fitness testing regime should continue. Here the existing PUC regime should be strengthened by improving the efficacy of the tests carried out with improved instrumentation and test methodologies and a more effective auditing system. 4.15.4 The principles on which the frequency of tests should be based are the following: a) b) c) Commercial vehicles with a higher utilization should be tested more often Older vehicles should be tested more frequently than newer vehicles Private vehicles to be included in I&M regime

4.15.5 Initially, the focus should be on testing of commercial vehicles only. With gradual capacity building and increased number of integrated safety and emissions testing centres, the frequency and tests can then be extended to other category of vehicles which includes private vehicles and 2 wheelers.

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Chapter V Preferential Framework for Public Transport

5.1 Introduction

5.1.1 The public bus system comprises mainly of the buses run by SRTUs. There are 54 SRTUs operating in the country has fleet strength of about 1,47,000 buses today. Although the SRTU buses carry around 70 million passengers per day, many SRTUs are facing major problems resulting in unsatisfactory quality of service, running of over-aged buses, high fuel consumption and concomitant high emissions. The expansion of bus mode of public transport is constrained by the high level of net losses incurred by SRTUs due to a combination of relatively lower growth in revenue earned and a much higher rate of growth in operational costs (comprising staff cost and fuel close to 80% operational costs). Further, the cost structure reveals an element of rigidity with respect to manpower and fuel costs. The subdued growth in revenue is due to uneconomic fares, delay in revision of fares, financial burden due to concessions, free passes, high as well as varying levels of motor vehicle taxation on SRTUs, high excise duty on bus chassis together with high excise/ sales tax on fuel, spares, tyres. 5.1.2 Private bus operations have increased in the recent years with their major focus on (a) long distance (especially night time) contract carriage operations and (b) unauthorized or permitted city and sub-urban operations. One of the features of private bus operations in India is that they operate only on profitable routes ignoring other routes leaving commuters of such routes at the mercy of unorganised public transportation (often informal service providers). 5.1.3 The objective of all State Governments and Central Government is to provide efficient, adequate and affordable transport facilities to the public. The chief mode of transport of passengers in India is road transport. The following are the categories of passenger vehicles / buses on road: I) Stage Carriage vehicles II) Contract Carriage vehicles III) Buses covered by Special Permits u/s 88(8) of MV Act IV) Private Service vehicles V) Educational Institution Buses I) Stage Carriage Permits: An application for grant of stage carriage permit can be made at any time under Section 70 of MV Act, 1988. The application shall contain the particulars of the route or routes or the area to which the application relates and type and seating capacity of each such vehicle. The application shall also contain the minimum and maximum number of daily trips proposed to be provided and the time-table of the normal trips. A route for the plying of stage carriages is to be formulated by the Government under Section 68 (3) (ca) of MV Act. A Regional Transport Authority (RTA) or State Transport Authority (STA) having regard to the objects of MV Act shall refuse or grant of stage carriage permit under Section 72 of MV Act, 1988 in accordance with the procedure prescribed under Section 71 of MV Act, 1988. Inter-State Stage Carriage Permits: To promote uninterrupted road journey by passengers between the States, the State Governments enter into Inter-State Agreements as required under Section 88 (5) and (6) of MV Act and fix the number of permits which are proposed to be granted
51

or countersigned in respect of each route or area for stage carriages. Finalization of Inter-State Agreements by States involves protracted negotiations and is a time consuming exercise. Entering into multilateral Agreements by three or more States is a formidable task. Therefore, the Governments are not able to provide sufficient transport facilities to the travelling public to pass through three or more States. A stage carriage permit on the Inter-State route cannot be granted in the absence of Inter-State Agreement as pronounced by the Supreme Court in a case Ashwini Kumar Vs RTA, Bikaner (1999) 8 SCC 364. Hence it is mandatory to enter into Inter-State Agreement to provide passenger transport on the Inter-State routes. Inadequacy of stage carriages between the States on one hand and more facilities offered by the permit holders of contract carriages and All India Tourist Buses on the other hand lead to a situation where the latter facility/dispensation is being used as stage carriages. II) Contract Carriage Permits: An application for grant of Contract Carriage permit can be made at any time under Section 73 of MV Act to the concerned RTA or STA containing the particulars with regard to type and seating capacity of the vehicle and area for which the permit is required. An RTA or STA may grant a Contract Carriage permit in accordance with application or with such modifications as it deems fit or deny such permit under Section 74 of MV Act. The RTA if it is decides to grant Contract Carriage permit may subject to conditions under Section 74 (2) of MV Act. The following are the major categories of Contract Carriage vehicles which ply on the Inter-State routes: a) b) All India Tourist Taxi Cabs (upto 6 passengers)/Maxi Cabs (7 to 12 passengers) All India Tourist Buses (above 13 in all)

a) All India Tourist Taxi/Maxi Cabs: Tourist Taxi Cabs have seating capacity upto 7 in all and Maxi Cabs with seating capacity from 8 to 13 in all. An All India Permit is issued in respect of each vehicle to ply in the Home State and at least two contiguous States. If the applicant wants to ply in more States, that would also be allowed. However, the permit holder of All India Tourist Cab shall pay tax to Home State and other States in which he is authorized to ply his vehicle. The Permit holder shall ensure that tax is paid at the border checkposts concerned before entering the other State. Further, taxes on passenger vehicles vary across the States. This leads to delay at checkposts and is inimical to the seamless flow of passenger by road transport. b) All India Tourist Buses: For the purpose of promoting tourism in the country, a provision was made under Section 88 (9) of MV Act, 1988 to grant permits in respect of tourist vehicles valid for the whole of India, or in such contiguous States not being less than three in number including the State in which the permit is issued. The Home tax and tax to be paid to other States are varied. A Tourist Bus operator apart from paying home State tax, has to pay the tax to other States also in which he opts to ply his vehicle. III) Buses covered by Special Permits issued under Section 88 (8) of MV Act, 1988: A RTA of one region or STA of one State may for the convenience of the public grant a special permit to
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any public service vehicle including any vehicle covered by a permit issued under Section 72 (stage carriage) or under Section 74 (contract carriage) or under sub-section 9 of Section 88 (tourist permit) for carrying a passenger or passengers for hire or reward under a contract for the use of the vehicle as a whole without stopping to pick up or set down along the line of route passengers not included in the contract. The Special Permits issued by any authority shall be valid in any other region or State without countersignature of the RTA of other region or of the STA of the other State. The permit holders of the vehicles covered by Special Permits under Section 88 (8) of MV Act of any State have to pay tax to the States through which the vehicle passes. The rates of tax differ from State to State. IV) Private Service Vehicles: A private service vehicle means a motor vehicle constructed or adapted to carry more than six persons excluding the driver and ordinarily used by or on behalf of the owner of such vehicle for the purpose of carrying persons for, or in connection with, his trade or business otherwise than for hire or reward but does not include a motor vehicle used for public purposes. An application for grant of Private Service Vehicle permit shall be made under Section 76 (1) of MV Act, 1988 and will be considered under sub-section (3) of Section 76 of the said Act. A permit granted by one State is required to be countersigned to ply in another State. To fix the number of permits to be granted or countersigned, an Inter-State Agreement under Section 88 (5) and Section 88(6) is required. However, these conditions hamper mobility as they restrict movement of private vehicles in situation where people have to cross inter-state borders to reach their place of work from their homes which may be short distance away. V) Educational Institution Buses: An educational institution bus means an omnibus, which is owned by a college, school or other educational institution and used solely for the purpose of transporting students or staff of the educational institution in connection with any of its activities. Educational Institution Bus permits will be granted permitting to ply the vehicle in a specified area. A permit granted by one State is required to be countersigned to ply in another State. To fix the number of permits to be granted or countersigned, an Inter-State Agreement under Section 88 (5) and Section 88(6) is required. In the borders areas of many States schools/colleges are functioning. The Schools/Colleges are providing transport facilities to their students and employees from nearby villages/towns either located in the Home State or in the neighboring States. For grant of pucca permit or countersignature for an Educational Institution bus, an Inter-State Agreement is required. 5.2 (i) Recommendations to facilitate seamless movement of road transport passengers: Rationalisation of tax structure in road passenger transport

At present, the taxation levels of passenger and motor vehicle taxes followed by various States is not uniform. Both the basis of taxation and the rates vary widely from State to State. Similarly,
53

there is non-uniformity in motor vehicle tax structure in respect of SRTU buses resulting in varying incidence of tax on passenger vehicle. Thus it is imperative to move towards uniform motor vehicle tax regime across all States. Attempt should be made to harmonize the MVT on public passenger vehicles. For SRTUs buses the basis of MVT could be turnover rather than per seat basis. For private bus operators it could be per seat basis rather than a combination of per seat, mileage, area of operations, etc which escalates the incidence and makes collection a daunting task. Although, there could be specific issues relating to specific States. In a federal set up this would require consensus of States/UTs. Besides, travel by bus passenger mode has become costlier due to levy of passenger tax (which varies across States and is as high as 17.5% of basic fare in certain States) in addition to MVT. (ii) Intermodal integration

For the overall system to be efficient it is necessary to establish linkages between different transportation systems. As a case in point, at many railway stations across India there is a cycle stand, an auto rickshaw stand, a two wheeler stand etc. but rarely do we find a bus station which would enable a commuter to continue his onward journey in a seamless manner. There is an urgent need to provide proper integration of modes such as rail, bus, and other para-transit modes with respect to the following: (i) transfer station, (ii) ticket and (iii) arrival/ departure schedule, etc. Hence, it is essential to lay down the guidelines to facilitate inter-modal integration and identify locations where these kinds of facilities and services could be taken up. Common transfer station or closely spaced stations catering to different modes would facilitate easy transfer of passengers from one mode to another. Another dimension of multi-modal integration is common ticketing and fare collection mechanism with smartcards. By providing common ticketing for integrated modes of transport, passenger is saved from inconvenience in purchase of tickets for different modes of transport. With the availability of Global Positioning System (GPS), transport/passenger movement through different modes can be monitored. Information on arrival/departure can thus be easily to disseminate through electronic display of SMS. (iii) Regulation of various modes of transport operating in a State.

There is a need to take a re-look at the regulatory framework, keeping in view the overall requirement of passenger transport for an area / region. The regulatory mechanism should give primacy to mobility to ensure access of people to socio economic services. To this end, the Transport Authority could define the overall level of services and monitor the same with private sector rendering the passenger services on a fee-based system. The schedules for buses and the level of services may be mandated by the State Government. The system should ensure that the private sector operators serve uneconomic routes as well. At the same time, there should not be any monopolisation of routes by SRTUs. The aim of policy should be to foster competition by denationalisation of routes. Hence, the Government should define the transport connectivity framework and then think of contracting out wherever necessary, ensuring proper frequency of services and flexibility of operation.
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Another issue needs to be addressed is safety of passengers. This would need strict enforcement of road safety regulations focusing on proper driver selection, training and regulating their driving conditions and hours of work. There is a need to recognize unregulated service providers like share- autos and set certain core standards. The aim should be on provision of low cost/safe means of transport. Smaller vehicles like three-wheelers should ideally serve as a complementary system or render feeder service to the public transport instead of supplementing it. (iv) Guidelines for Inter-State Agreements

The present system of entering into inter-State Agreements between States as required under section 88 of the MV Act is a long drawn process and hampers smooth movement of passenger buses between States. Hence, it is essential that the Government of India should provide guidelines for uniformity in the inter-State agreements on stage carriages and delegation of powers to Transport Commissioners for entering into inter-State agreements. This would facilitate speedy finalization of the inter-State agreement and provide better transport facilities to the public. Control over the inter-State agreements may, however, still remain with the respective State Governments. Private Service Vehicles and Educational Institution buses should not be subjected to inter-State agreements. Students and employees located in one State often travel to educational institutes/companies and factories located in the adjacent State. The exemption from entering into inter-State agreements would enable such vehicles to move smoothly between the States and facilitate the easy movement of students/employees. The Private Service Vehicle and Educational Institution bus permits are in use for limited purposes. It may not be possible to assess the exact number of permits required to be granted or countersigned by each State. Hence, necessary exemption may be provided from the purview of inter-State Agreements. These types of permits may be countersigned by each State depending upon need without restriction in quota on payment of tax to the reciprocating State (Double Point tax). Therefore, Section 88 (5) and 88 (6) of MV Act may be modified exempting the Private Service & Educational Institute Vehicles from the purview of inter-State Agreements. Enclave routes wherein starting point and terminal point are situated within the same State, but part of such route falls in other State(s) and the length of such part does not exceed 16 kms may not be subjected to inter-State agreements. Accordingly, the 2nd proviso to Section 88(1) of MV Act would need suitable amendment. (v) Seamless movement of passenger transport vehicles in line with the New National Permit System for goods vehicles. NNPS for Goods Vehicles which came into effect from 1st May 2010 has facilitated the free movement of goods vehicles throughout the country on payment of a composite fee of Rs. 15000/per annum together with the authorization fee to the home State where the vehicle is registered. It is essential that All India Tourist Taxi Cabs, Maxi- Cabs, All India Tourist Buses and buses
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covered by Special Permits under section 88(8) of the MV Act should also be subjected to uniform fees for free movement throughout the country. The Government of India can frame a scheme on lines similar to the NNPS to ensure seamless movement of passenger transport vehicles in the country. The fee / rate of tax for each of the above category of vehicles can be decided by the Government of India in consultation with the various State Governments. On the payment of the consolidated fee, the vehicle would be permitted to move anywhere in India. One portal would be sufficient for All India Tourist Cabs, Maxi Cabs and Tourist Buses. A National Permit portal could be hosted by Government of India into which consolidated fee is paid by the permit holders which could be distributed amongst States and Union Territories according to a formula. (vi) Scientific assessment of passenger and goods travel demand

Generally, traffic and transportation studies in India are carried out for urban areas/cities. The regional level transportation planning studies have not been carried out periodically. Therefore, any scientific assessment of passenger and goods travel demand is a difficult task. Presently, the regional level passenger and goods travel demand are catered to by the respective SRTUs, Private Bus Operators and unorganized truck/lorry operators respectively. In passenger transport, SRTUs are providing connectivity to remote parts of the State, whereas Private Operators are mostly focusing on lucrative routes. Though SRTUs provide extensive connectivity in their respective states, the frequency of the bus transport is not matching with passenger travel demand. Eventually, passengers opt out of bus transport system and look for other modes of transport such as personalized transport or intermediate public transport (IPT) such as improvised six-seaters. Further, poor frequency of bus transport forces passengers to board over-crowded six-seaters, etc. which are highly unsafe particularly on SHs/ NHs. By carrying out traffic studies for major travel corridors of the region periodically, travel demand for both passengers and goods can be assessed scientifically for the present and over medium term. Based on travel demand (number of commuters and their need for travel), proper assessment of bus fleet, bus frequency, augmentation of routes, etc. can be done. Norms regarding minimum requirement of buses for different category of operations including hilly areas, mofussil and city operations should be evolved. Similarly, requirement for necessary infrastructure for goods transport such as parking facilities, rest areas for operators, weighing bridges, fuel stations, etc. can be assessed and planned. With the proposed weigh bridges as well as godowns cum site offices for Motor Vehicle department along major road corridors, the overloading problems by lorries can be addressed significantly. However, it should be noted that Origin Destination matrix is changing very fast in India. Hence, every State should assess the demand being fulfilled by various service providers in their State and should also outline what is legally permissible. (vii) Strategies to Revive SRTUs

Automatic Fare Revision for SRTUs: A framework should be evolved which could provide flexibility and freedom to SRTUs for automatic fare revision, depending on the increase of fuel and wage costs. The State Government of Karnataka has vide its order dated 30.9.2000 evolved a formula for automatic revision of fares based on the percentage of increases in cost of fuel and dearness allowance. The formula has enabled the revision of fares in a transparent manner on a
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regular basis rather than discreet steep increase after a long time lag. Such mechanism for fare revision should be followed by all State Governments for their SRTUs. Facilitate access to financial markets/institutions for SRTUs: SRTUs should be enabled to mobilize funds for capital expenditure, on the strength of their balance sheet from banks/ financial institutions in terms of soft loan, tax free bonds etc. Presently, SRTUs are constrained by the Section 26 of the Road Transport Act, 1950 which requires prior approval from the Government. This may require modification in the Section 26 of the Road Transport Act, 1950. Improve rural bus connectivity: Expansion of fleet is needed to augment services in rural areas. Presently, less than one-third of the inhabitated villages (5,93,731) are connected by SRTUs. As a consequence, rural population is suffers from access/connectivity vital for mobility and well being and is forced to avail services which are neither safe, either reliable or affordable. Government of India could consider providing financial assistance to SRTUs for purchase of new buses exclusively for rural operations in line with the existing JNNURM for purchase of buses for urban operations. The scheme for rural bus connectivity could be launched during the 12th Plan with one time Central assistance. It is estimated that 50,854 buses would be required if 600 buses were to be provided per one lakh of rural population at a cost of about Rs 9154 Crore with Central Governments contribution at close to Rs 7,584 Crore in the form of grant assistance with the balance to be shared between the State Government and SRTUs. The operational modalities for the scheme would need to be worked out in detail. SRTUs should also explore the possibility of tapping non-ticket revenue sources as done by APSRTC etc. The major non- ticket revenue sources could be through license fee on Canteens, Stalls in Bus stations followed by Ad revenues on Buses, Bus stations, CCTV, Bus tickets besides license fee through Parcel Service, Postal Mails, Person Weighing Machines etc. Other innovative schemes such as the following could also be considered: (i) Advertisements on both side and rear glasses and rear panel of buses; (ii) Provision of First Aid Boxes with Advertising rights over them in buses through reputed Pharmaceutical Agencies; (iii) Installation of Public Telephones in buses; (iv) Provision of Drop Boxes in buses; and (v) Provision of safe drinking water plants at Bus stations/Bus Depots. Framework for Competitive Public Bus Passenger Transport Services A competitive environment in Road Passenger Services can be created in a variety of ways: (a) Competition in the market: this occurs where there is no restriction on entry. "Competition in the market" can be between individual operators within a mode of transport, between groups of operators within a mode or between modes; and (b) Competition for the market: where entry is restricted, it is possible to organize competition for the right to service individual routes, for the sole right to provide a whole network or to undertake particular functions as a subcontractor to a monopolist operator.

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Competition in the market", without barriers to entry is appropriate for the provision of many kinds of transport services and in particular where the size of the market is large or if there are good modal substitutes (metro rail etc) There are several ways of introducing competition in the market. One is the Route franchising as a means of maintaining some public control over the level of services and prices in the public passenger transport market, while using competitive forces to secure supply at the lowest cost. The other is through Competition between groups through competition between different kinds of road passenger services like minibuses competing with regular bus services. The most extreme form of competition is that of a totally open market in which there are no restrictions on transport operators, except those imposed by general law on business practices, vehicle construction and use, vehicle emissions, and highways and traffic matters. There are several ways in which firms can compete for a public transport market: Gross cost service contracting involves the procurement by a public Authority of specified services at a price determined through competitive tendering among competent operators. Contracts are usually for three to five years. The operator passes all on-bus revenues to the procuring authority and does not take any revenue risk. Gross cost service contracting requires that there is a secure means of ensuring that the procuring authority actually gets the fares that are paid on the vehicle, and careful monitoring to ensure that suppliers actually do provide the service for which they have been contracted. Net cost service contracting is similar to gross cost contracting, except that the operator retains the revenue and hence incurs both the demand and supply side risks. This increases the incentive to the supplier to provide the service contracted for (otherwise he loses his fare revenue) and removes the need for complex fare collection and security arrangements. However, it makes modal coordination more difficult and often involves a higher net cost for the authorities as the supplier is incurring an extra risk, the revenue risk, against which he will be averse, and for which he will require remuneration. Competition can work very effectively provided the competitive regime is appropriate to the objectives of the Government. Whichever system is chosen, effective competition between private sector suppliers can only be achieved if the public sector itself is appropriately structured. This imposes a number of institutional requirements. i. Separation of operations from policy planning; ii. Setting up a third party regulator to oversee rote planning, franchising and tariff supervision Para Transit The public transport sector in many developing economies in recent years has seen the explosive growth of publicly available passenger transport services outside the traditional public transport regulatory system, often referred to as para-transit. This does not necessarily mean that they are operating illegally, as in many countries entry to the sector is effectively free, with operators subject only to the general rules of the road and law of the land. Nor does it necessarily mean that they are operating completely independently as many informal sector operators are members of
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associations of operators. Typically para-transit services are usually characterized by: (a) Services that are usually unscheduled and mainly on demand responsive routes, filling gaps in formal transit provision, such as public bus services and taxis; (b) Vehicles that are operated are typically small, including motor cycles (in case of Goa). Smaller vehicles are used partly because of the lower financing requirements, the flexibility of operation, and partly because controls over small vehicles are lax even in situations where entry to the large vehicle market is strictly controlled. The vehicles used are also often very simple, and include non-motorized vehicles, auto rickshaws, and motorized improvised vehicles (jugad in rural India). Para-transit services are usually provided by informal operators. Para transit also provides a range of services including: a) b) c)
d)

Feeder services linking inaccessible areas to the main transport routes; Local distribution in accessible areas that are not served by conventional public transport; Trunk services complementing or competing by quality differentiation with, the formal sector on major routes; Direct long distance services in areas where the formal sector supply is sparse or infrequent.

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