IMPACT OF REFORMS IN TRANSPORT SECTOR

<h1>IMPACT OF REFORMS IN TRANSPORT SECTOR</h1>

<p align=right>by MANTHENA VARA PRASAD</p>

<div align=justify>The reform process has started in transport sector with the planning commission guidelines in the Eighth Plan to encourage private sector, as a means to improve the productivity and efficiency of the bus transport system.  By this step public sector has to compete with private sector by improving their operational and financial performance.  The incremental demand for passenger’s transport will be met by private sector. As a result of this policy, there was a check on State Transport Undertakings (STUs) to expand its fleet of buses, except where private sector is not willing to operate.  The budget support to provide capital to STUs by various state governments is totally withdrawn.

As a step towards this policy formulation, the government of Andhra Pradesh has withdrawn its contribution to Andhra Pradesh State Road Transport Corporation (APSRTC) since 1990.  It amended the Motor Vehicle Tax Act, (M V Tax act) 1998 and imposed 4%, MVTax on the total revenue of the corporation.  It slowly increased and reached 15% of total revenue by 2005.  The dilemma is that the corporation has to pay heavy tax rate and bear the burden of heavy concessions that are awarded to various social groups by the government.

The impact of the state government policy is that the corporation has resorted to heavy loans to finance capital rather than depending on internal sources that is by earning surplus.  The loan amounted to around Rs 1200crores.  It is beyond ones comprehension why APSRTC is incurring financial losses when it is very much efficient in operational performance.  In APSRTC fuel efficiency is 5.05 kilometer per litre, fleet utilization is 98.5%, vehicle utilization is 317kilometers per bus per day, staff productivity is 44.8 kilometer per worker  per day and Bus-staff ratio is 7.07 compared to 4.48, 89.8, 315, 43.5, 7.26 respectively of STUs at national level in the year 2000.  The answer is that the losses are imposed on APSRTC by the state government, not that the corporation has incurred losses.  The corporation would have gained around Rs. 80crores per annum for the period 1990-2000 if the M V tax had been 7% of total revenue rather than around 15% which is actually charged by the state government on par with private sector. When it comes to concessions awarded to various social groups by the state government, the corporation would have benefited by Rs. 74crores per annum during the period 1990-2000, if the reimbursements were made in time by the state government. 
	
	The net gain would have been around Rs.1240crores after excluding the financial losses around Rs.300crores during 1990-2000. This amount would have been sufficient to clear the borrowings in the form of loans.  In addition the corporation would have benefited much more if the government takes steps to control illicit private vehicles plying on remunerative routes.

The occupancy ratio(O.R) fell from 67% in 1990 to 69% by 2000, mainly due to increase in fare rate from 17.50 Paise per kilometer in 1990 to 32 Paise per kilometer by 2000. The other causes for this decline could be the increase in private vehicles by ten times during this period.  Every percentage decline in occupancy ratio is resulting in a net loss of around Rs.45crores in the traffic revenue.  
	
	Again, rather than trying to increase fare rate, the corporation should try to reduce staff cost, which has risen to 42% of total cost from 36% during 1990-2000, to compensate the loss incurred by the rise in price of fuel.  This will actually cut down the costs of input and the corporation start experiencing surplus provided the state government takes proper steps in this direction and stop indulging in private affairs of the corporation.</div>

<p align=center>Article source: <a href="http://www.ArticlePros.com/education/reform/article-1226.html">ArticlePros.com</a></p>
 
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		<p align=center><b>About the author</b></p>
		<p align=justify>I AM MANTHENA VARA PRASAD, A VISUALLY IMPAIRED PERSON WORKING AS LECTURER, PURSUEING Ph.D PROGRAMME. MAIL ID prasad_manthena@yahoo.com</p>
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