Towards a discussion of support to Urban Transport development in India Energy & Infrastructure Unit South Asia Region



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3. Urban Transport Issues

3.1. The unfavorable evaluation of urban transport performance in the preceding section may be seen as unfair by those actively involved in the operations and planning of transport systems in Bangalore and Chennai. After all, major efforts have been made in both cities. In Bangalore, the last 6 years have seen an impressive revival of BMTC, including fleet renewal, increased punctuality, and lower number of breakdowns. All productivity indicators are up and the company has been making a profit for several years in a row. As for traffic congestion, there have been major road improvements, including an Outer Ring Road, the gigantic 5-km Hebbal flyover (the largest in India), and other smaller flyovers and underpasses at worst-congested intersections. More multi-grade projects are under construction and/or being tendered. The work on building the new international airport has started, and its road connections will be much better than is the case with the current airport. Chennai has constructed an Inner Ring Road and started on the Outer Ring. The most important radial roads in the city have been widened, and some have included pedestrian underpasses, and separate lanes for pedestrians and bicycles. Many intersections have been improved. A major effort was put in traffic law enforcement, lowering traffic accidents from a high of 5,280 in 2001 to 3,680 in 2002, and traffic deaths from 680 to 485 in the same period. New bus and truck terminals have been constructed. Phase I of the rail-based Mass Rapid Transit System (MRTS) was placed in operation in the late 1990s, and a gradual progress of gauge conversion has already made possible serving cross-radial trip ends without transfers. The completion of Phase II of the MRTS is imminent, creating a rapid urban railway of about 20 km which complements the existing suburban rail system.17

3.2. While acknowledging that valiant efforts have been made in both cities, and real improvements have been achieved, it is clear that the efforts have not sufficed to keep up with loads and expectations generated by the demographic and economic growth. Neither financial nor institutional capacity of state and local governments were up to the task. In addition, some questionable policy and investment choices have been made, and others were left untouched. The rest of this section brings out the major among these factors, choices and underlying issues. Since all these are strongly interconnected, the order of presentation is to start from the most general factors. The working hypothesis is that the ensemble of state/city institutions in charge of the urban transport systems (with links to national institutions) are supply-focused rather than demand-focused. The resulting policy orientations and decisions on how to spend available funds have left large economic and spatial segments poorly served, and have not been as effective as they could have to make these cities competitive.

A. Finances

3.3. The structural problem with urban transport funding, which Bangalore and Chennai share with other Indian cities, in fact with many cities the world over, is that the sector does not generate any surplus revenue directly available to those who regulate, operate the transport systems and plan their development. Thus a growth sector (e.g. demand for roads) in an economically strong local environment (cities that are their states’ and the country’s leaders) cannot get an adequate supply response.

3.4. In public transport services, the Bangalore Metropolitan Transport Company (BMTC) has started to generate revenue surpluses, but this has yet to be enough to upgrade the company’s fleet for a visible rise in the quality of service. In Chennai, both the MTC and the commuter rail lines generate losses, cited above as Rs.1,347 million (US$ 28 million) in last year, and the prospect is that these losses will increase considerably when the MRTS Phase II becomes operational. The chances that fares could be raised in a significant way are not high (more on this subject below).

3.5. On the road side, vehicle owners generate large revenues, through a state and national system of vehicle and fuel taxation. The states’ taxes focus more on vehicle ownership, while the national tax is somewhat more use oriented. Most of the proceeds, however, are treated as general taxes: road sector expenditures are only 25% of the total amount collected in road user taxes. 18 The stress on vehicle taxation rather than fuel taxation is unfortunate, since it tends to reduce the potential of road use fees as an instrument for demand management. Moreover, the agency chain between what a vehicle owner in Chennai pays in vehicle and fuel taxes and what comes back to bear on road maintenance, traffic control, road rehabilitation and expansion in Chennai is quite long and indirect. In short, there is no close correspondence between increased demand for road space by motor vehicles and resources available to respond to that demand.
3.6. Funds come to the urban transport sector in a variety of ways, from the state budget, from the Ministry of Railways budget (Chennai only) and through various national programs like the Megacities Scheme and the Urban Challenge Fund.19 While this is not an uncommon approach to urban transport funding, it is not well suited for a situation where an urban economy is stronger than its state’s and its country’s. Illuminating examples of a different approach, where locally generated funds are at immediate disposal of local institutions, accountable to local constituencies, include that of urban roads in Oslo and Bergen (Norway) and public transport systems in French cities outside Paris.20

B. Institutions

3.7. The process of transferring the jurisdiction and resources from state to local governments, in line with constitutional reforms of 1992, has been slow, though accelerating in recent years.21 Municipal Corporations in Bangalore and Chennai are incomparably weaker in both authority and staff capacity. Their resource generating capacity is quite limited, the majority of funds coming in as transfers from their states. The capacity of smaller local bodies, outside the city limits but within the metropolitan area, is correspondingly lower. Given the joint nature of much of the transport infrastructure and services, the State Governments are de facto metropolitan governments. This would not be necessarily problematic if the distribution of political power (and therefore accountability) in state legislatures reflected the weight of large cities, their population and economic output. This has not been the case in either Karnataka or Tamil Nadu, at least not as far as the number of deputies in state assemblies is concerned.22

3.8. There are several essential aspects in which the distribution of power and accountability between state and local government institutions affect urban transport matters. Risking a broad generalization, state transport agencies have an “aggregate” approach to the sector and ally themselves with big actors in the road and/or rial construction industry and others. This tends to lead to a preference for larger-scale investment projects, such as fly-overs and elevated roads in Bangalore, or even the MRTS in Chennai. City governments, council members as well as the bureaucrats, tend to be more responsive to local economic interests and local voters (including low-income populations). Whether this would also make them follow equitable and efficient urban transport policies has yet to be tested.

3.9. Reflecting the state/local split, neither city has vested the prime responsibility for all aspects of urban/metropolitan transport in one institution. Pieces of decision authority, control over resources and accountability are spread widely between state governments, local governments, and state and national parastatals. It is readily acknowledged that some fragmentation is both necessary and unavoidable. But, at any given level of fragmentation, there should be stable umbrella arrangements to coordinate various institutions. This is not the case here. In Bangalore, the fragmentation is truly extreme: in addition to state and city governments, plus local bodies outside Bangalore Corporation limits, plus two metropolitan area development authorities, the State has set up special-purpose parastatals (Bangalore Mass Rapid Transit Ltd., Karnataka Road Development Corporation, Karnataka Urban Infrastructure Development and Finance Corporation, this last a nodal agency for the Megacities Scheme) all of whom pursue some urban transport activities. The State has attempted to overcome the fragmentation by creating ad hoc bodies, such as Agenda for Bangalore, Transport Advisory Forum, and Task Force for Traffic and Transport, but these appear also to hold merely pieces of the pie. Bangalore Development Authority has no transport group, apparently no transport professionals at all. Indeed, its charter does not include transport planning. The last study with a comprehensive coverage was done long ago.23 In this forest of institutions, no single body appears to make comprehensive policy or medium-to-long term investment plans.24

3.10. In Chennai, the situation is somewhat better. The charter of the Chennai Metropolitan Development Authority (CMDA) includes transport planning and the institution has a history of involvement with this subject, a team of experts and a well-developed network of local consultants. What Chennai lacks, and CMDA is not authorized to do, is public transport regulation. This subject may not have mattered in the past, but it does now.

3.11. The complicating aspect in Chennai is that the commuter rail services provided by Southern Railway network of Indian Railways play such a vital role in metropolitan transport. Service levels, prices and expansion plans of the commuter rail lines and the new urban railway (MRTS) are decided by different people than those for the bus system. This situation has multiple aspects. For the State of Tamil Nadu and the local governments in the Chennai metropolitan area it is advantageous that Indian Railways provide commuter rail services without any financial input from the state/local level. The gap between fare revenues and direct operating costs of these lines is about 50%, amounting in 2001-02 to Rs.834 million (US$17.4 million). This compares to Rs.512.7 million (US$ 10.7 million) received in the same year by the CMTC, as a compensation for non-economic fares and services. On the negative side, the state and local governments have little leverage in situations where the interest of Indian Railways’ main lines of business diverges from that of the area’s population. This works in the opposite direction as well, in that local government have had little incentive to organize things so as to maximize the ridership on commuter rail lines. In fact, some important decisions may have gone awry because the costs and benefits fell on different parties. The MRTS is a case in point. Phase I of the system was built with the federal funds (the State of Tamil Nadu contributed some land) and its large operating deficit has been met from the Railways budget. It is evident that Phase I has been nothing short of a functional and financial failure (carrying 9,000 passengers per day), made even worse by the CMTC running competitive bus lines. Had the funds used for the MRTS been available to spend locally, with operating subsidy also being a local responsibility, would the MRTS have been built? This said, MRTS Phase II is being built with 2/3 state participation, already a discipline-imposing move. The next step in this process is likely to be a transfer of the operating subsidy load onto the state government.

C. Regulatory Policies in Urban Public Transport

3.12. Historically, state transport undertakings (bus companies) have been the prime providers of public transport services in most Indian cities, including Bangalore and Chennai. Fares have traditionally been set low by state authorities to permit travel by low-income citizens, especially those covering long distances. The inability of the state to pay fair and regular compensation, interacting with inefficiencies on the supply side stemming from the nature of public monopolies, chained public transport services to a low-service, low-priced equilibrium. A traditional and entrenched focus on production rather than service, rigidities regarding staff levels and remuneration, and low financial capacity combined to create a formidable barrier to change. With its ups and downs, this approach was acceptable while a great majority of passengers were captives, interested mainly in low fares. Greater incomes in the 1990s and an increased affordability of motorized 2-wheelers resulted in a large loss of public transport passengers, a process which is still underway and may acquire crisis proportions. In Bangalore, there was a rise in private buses, as businesses moved to ensure that their employees came in on time and in comfort. Raising the level of public transport services therefore became essential. Since the public sector alone was not seen up to the task, the 1988 liberal legislation opened the door to private transport operators. What the legislation failed to do was to create a regulatory apparatus on each of the three levels of government, capable of dealing with a mixed public/private market so that the ensemble would evolve in the public interest. Very high levels of traffic congestion, pollution and safety hazards experienced in cities like Kolkata have demonstrated the dangers of un-restructured public sector combined with un-regulated private providers of public transport services.


3.13. The response to these changes in Bangalore, where the level of services by Karnataka State Road Undertaking had hit the bottom, was not to deregulate but to “cure” the public monopoly.25 This was done through a combination of actions, some on the relation state-company, others company internal. In 1997, Bangalore MTC was separated out of the state-wide company, and its organization re-structured, removing one layer of management. A fare adjustment formula, based on major input costs, was introduced, putting an end to the previous practice of fare approvals arbitrary in both scale and timing. An internal improvement program, focusing on both staff and management conduct, was implemented. The use of information technology was increased. The last but not the least is that BMTC opened the door to the private sector through outsourcing, even in its main business line – transport services. This consists of a “kilometer scheme” whereby private operators compete on gross cost basis to serve specific routes. In 2001-2002, close to 300 private buses were in operation, equivalent to about13% of the BMTC’s fleet. The sum of these efforts is evident in all technical performance indicators (fleet availability and utilization, passengers carried per vehicle, number of breakdowns, etc). It is also evident in its financial performance: the loss of Rs.78.2 million (about US$ 2 million) in 1997-98 turned to a small surplus of Rs.39.6 million in 1998-99, rising to Rs.267 million (US$ 5.6 million) in 2001-2002. The situation in Chennai had not been as dramatically bad as in Bangalore, so changes have also been less striking. CMTC has increased its cost recovery to 80% in 2001-2002 and 90% in 2002-2003, and the compensation payments have visibly increased over the last 5-year period, greatly improving the company’s financial position. CMTC also is trying to introduce outsourcing of transport services to transport operators, but this has been challenged by the unions and the matter is in courts.

3.14. Missing from the above account are two essential variables. First, are MTCs in Bangalore and Chennai cost efficient? This question, politically very sensitive, has yet to be tackled. By international standards, both companies are overstaffed (more than 6 staff per vehicle in service). The average staff cost per month (about Rs.10,000) is in excess of what the majority of MTC’s passengers receive. Second, what has been the impact of changes in the companies’ performance on the service quality offered to passengers? Annual reports of both companies reflect very little interest in this subject. The performance indicators, other than the total number of passengers, are all supply-related. This may have been a normal and acceptable approach when most passengers were captives, but not when more than a half of them already own 2-wheelers, not to mention those who have already given up on bus services.
3.15. The essential remaining question is this: can the current regulatory arrangement, a public-sector monopoly, with an outsourcing complement, produce the cost efficiency and service levels to make this mode competitive with individually owned motor vehicles? A clear and promising option is to move toward a market-based arrangement, by separating regulatory and service planning functions from the provision of operations, organizing the latter through the medium of competitively awarded service contracts.

3.16. A similar dilemma has to do with the organizational status of commuter rail lines in Chennai, with the added complication that the current public sector owner is not the State of Tamil Nadu but the nation (through Ministry of Railways). While the nature of competition available to with rail-based lines is much more limited than with street-based buses, the potential of service concessions is real.


D. The Fare/Quality Nexus

3.17. The co-existence of large “captive” and “choice” markets for passenger transport services, and the growth of the latter in proportion to the economic growth in cities places urban transport regulators in a dilemma. Keeping the fares low to assist low-income and poor travelers creates pressure on the budgets available for subsidies and involves a leakage of benefits to better off passengers. The lower the fare, for a given level of service, the higher the subsidy load becomes and so does the leakage. Conversely, for a given fare, increasing the level of services will also increase the subsidy load. Rail-based modes are especially sensitive to this, due to rigidities of large fixed costs. This in part explains exceptionally low fares on Chennai commuter rail lines.

3.18. The practice in both Chennai and Bangalore, low fare and a low level of service, has produced a flight to 2-wheelers. This in turn has produced a very heavy load on the road system. Both companies have introduced differentiated services (e.g. express and skip stop), and commuter rail in Chennai has different classes, to try to capture the quality-seeking passengers. Still, the flight continues and it will intensify if the current pace of motorization continues. The fare/quality issue has yet to be tackled as a strategic matter in either city. Proposals to increase fares have been made, but arguments for doing so were limited to the finances of public transport operators. A full argument would include the predicament of lower-income and poor travelers. This would allow a full range of options to be considered, not just in the fare and service quality dimension, but also regarding the regulatory framework and the approach to social assistance. In other words, certain “informal” public transport modes may be better suited to serve low-density, low-income communities than the conventional ones. Also, direct financial assistance to poor travelers may be “cheaper” than keeping fares low. At this point, it would be difficult to have such a consideration, since demand-related data are so inadequate and the relevant technical skills are in short supply in the state and local institutions.


E. The allocation of road space

3.19. The subject of road space is a frequently visited one in the Indian urban transport context. It is most often argued that the available street space is much too low in all large cities except Delhi. This position is then used to argue not only for widening and building more (elevated) roads, but also for the construction of off-road public transport systems, be these metros, sky buses, etc. Other authors argue that the road space is not a problem, but its management is.26 In all likelihood, both parties are right. The street space needs to be managed much better, and building new roads and exclusive-track public transport system is warranted in cities which are coping with traffic loads for which their networks certainly were not designed. The essential questions are, of course, who is going to get the street space available at present, how much new road space is to be provided and which off-street systems are going to be built.


3.20. The way this subject is approached in both Bangalore and Chennai has been to: widen the existing roads to a maximum possible, leaving a meager sidewalk width for pedestrians; and apply a laissez-faire attitude to what happens in traffic lanes. What happens is of course that (a) motor vehicles push off the bicycles, and (b) public transport vehicles lose the battle with more nimble 2-wheelers and cars. In addition, parked vehicles generally are allowed to obstruct the moving lanes. Save for some prohibitions against the use of goods vehicles in certain hours, there is no policy of traffic restraint. This omission is deleterious from both fairness and efficiency point of view.

3.21. A special case of traffic restraint has to do with public transport services. No matter how excellent the supply side of public transport operations may be, the service will only have as much quality as the traffic conditions will allow. In both Chennai and Bangalore, this is truly a strategic issue. Neither city has introduced public transport priority measures on city streets, not to mention the creation of at-grade, exclusive-use corridors and networks for bus services. This is not for the want of trying by planners. In Chennai, a busway on Anna Salai was designed and made ready for inclusion under one of Bank-funded urban development projects, but was withdrawn. Only a short exclusive bus lane remains from this scheme. The 10-year investment plan for Chennai contains an elevated highway along Anna Salai, but not an elevated busway. In Bangalore, BMTC commissioned a feasibility study for a bus-based mass rapid transit system. The study, completed in 1999, identified a promising network of 20 bus routes, composed of a Syamese-twin central rings intersected by 8 radial routes. A pilot 12-km line from Jayanagar in the south to Shivajinagar in the north, was estimated to cost Rs 394.9 million (US$ 8.6 million). This includes the corridor and depot infrastructure and 35 special-purpose buses.27 So far, there is no move from the authorities.

3.22. The consequences of this approach are negative for both street-based bus operations and for chances to acquire an off-street public transport system. When low-cost options for the latter are neglected or rejected, only the expensive ones stay on the table. At the very least, this means that fewer corridors can be provided with off-street public transport modes. The best available advice, based on comparative studies of strategic responses to motorization in many Asian countries, is that the provision of separate space for public transport vehicles and private vehicle restraint are crucial at an early stage of motorization.28

F. Metros

3.23. The neglect of bus-based rapid transit modes in Chennai and Bangalore, indeed in India generally, is proportional to the affection for rail-based modes, especially metros. Rare is an account of urban transport in India which does not mention the Kolkata Metro and the Chennai MRTS, or more recently the Delhi Metro.29 This may have to do with the larger-than-life role that railways played in Indian history and a common association of metros with great cities of the world.30 The resulting bias has an operational form in the view that railways belong to the exclusive tracks and buses belong on the street, or to connect villages.

3.24. The history and the present of transport planning in both Chennai and Bangalore is replete with plans to build a metro or some kin form of urban rail. Chennai actually went ahead and built the first short section of the MRTS and is about to complete the second (a combined length of about 20 km). In addition, the city plans to continue the MRTS (in the circumferential direction), and place a rapid railway line in the middle of the Outer Ring Road. A metro in Bangalore was recommended as early as 1982, then again in 1983 when Southern Railway produced a comprehensive commuter rail development plan. Another study in 1988 (funded by the World Bank) focused on the commuter rail, whereas the next one in 1993 returned the focus to a 2-line metro. In 1994, the attention shifted to a light-rail-based, 6-route, partially elevated network. This was to be developed as a private-public partnership, and operated on a concession basis. This project proceeded beyond a mere proposal, but stopped when the private partner (after more detailed demand studies) asked for a much higher public participation than initially proposed.31 Finally, in 2003, a new feasibility study proposed a 2-line metro (18 and 15 km), a cross-shaped system designed to connect all major rail and bus terminals, and most activity centers. It is estimated to cost Rs.49.89 billion (roughly $1 billion) in 2003 terms. The financial engineering would follow a successful approach used to build the Delhi metro, i.e. 33% the state of Karnataka, 22% national government, the rest to be borrowed long term from both domestic and external sources. In the fall of 2003, a feasibility study for another metro in Chennai, using the Delhi and Bangalore approach, was being considered by the Government of Tamil Nadu.

3.25. Without prejudice to any of the past or current metro proposals, two general issues are involved here. The first is that the attention to metros may be an obstacle to doing something tangible to improve the position of street-based bus lines, i.e. some combination of exclusive lanes with priority of passage at signals, and constructing bus-based rapid transit lines in one of many candidate corridors. The second is the approach to doing feasibility studies. Investments estimated to cost billions of rupees tend to be put forward with single-valued outcomes of major items, i.e. construction and operating costs, passenger volumes and revenues. The notion of risk is absent.32 This is troublesome, especially given the abysmal record on cost, construction period length and traffic forecasts in Kolkata and Chennai urban rail projects. Also, the studies do not focus on alternatives to the proposed system. This may have to do with a trend that all feasibility studies for large rapid transit investments (rail or bus) are done by promoters of various systems, rather than commissioned by the transport planning authorities from independent consultants, with safeguards written into the terms of reference.


Painful decisions to be faced:

  • allocation of street space between pedestrians, NMT modes, PT vehicles and individual vehicles

  • fare/quality and subsidy policy: social protection vs. modal split

  • maintaining the monopoly in the provision of public transport services

  • type of mass rapid transit systems: which combination of bus and rail


G. The underlying strategy

3.26. Neither city has formalized a comprehensive urban transport strategy, linked to an urban development strategy.33 What underlies the ensemble of actions, plans and proposals cited in this report appears to be: negligent of pedestrians, non-motorized and local area travel; (engineering) supply-driven; overly accommodating to individual motor vehicles; conservative in public transport regulation; non-protective of street-based public transport modes; and overly focused on large-scale investments, rail-based public transport investments and primary roads, in apparent belief that these visible structures will increase the image of competitiveness of their city.



A supply-driven approach is focused on input features of infrastructure and services. For roads, these are: road lengths, cross-section, network structure, volume/capacity ratios; spot speeds, etc. For public transport, the common ones are ratios between fleet in service and total fleet, vehicle-km and passenger-km per vehicle, commercial speed, etc.

A demand-driven approach focuses on the passenger and community point of view, in total and disaggregated by income, location, age, gender, transport mode, etc. Typical measures are time and cost of access to public transport lines, employment, and various services, travel speed, safety, comfort, pollution, etc. It






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