PURSUING COMPETITION REFORMS IN STAPLE FOOD & BUS TRANSPORT SECTOR Neha Tomar & Shreya Kaushik, CUTS International

Outline Introduction & Purpose Staple Food (Wheat) - Key Findings - Further Research and Advocacy - Envisaged Outcomes Bus Transport - Background - Key Findings - Further Research and Advocacy - Envisaged Outcomes 2

I. Introduction & Purpose 3

CREW Project Background To enhance visibility of Competition Reforms among Dev Country Policymakers & Key Actors - CUTS experience Objective: Link reforms to consumer and producer welfare Four Countries & Two Sectors (Choice based on Background Research and Consultations) 4

Methodology Selection of sectors Identification of States in India (based on literature review and internal/external discussions with experts) - Staple Food: Rajasthan & Bihar - Bus Transport: Gujarat & Madhya Pradesh Selection of relevant reforms (staple food and bus transport) – national and state-level Collection of data – primary and secondary - Secondary data: policy documents, relevant data, SH views - Primary data: survey in 4 states, interviews with key SHs Data analysis Further details of Methodology in FCR-PG 5

2. Staple Food 6

Key Findings Seed - Reforms have had significant impact on users (farmers) through improved quality, low cost and access - Number of private players has also increased (over past ten years) Procurement (PACS in Bihar): - State monopoly since Present at every Panchayat level - Limited impact on ground – however, high potential to reach out to the farmers 7

Key Findings Marketing Rajasthan - Adopted APMC Model Act in Only 2 licenses for private markets and 76 licenses for direct marketing - Entry barriers: excess documentation, security deposit, location of buying points, minimum produce to be bought Bihar - Abolished AMPC Model Act in Slow but gradual increase in private players - No investment in infrastructure - Only large farmers (and traders) seem to have benefitted 8

Further Research & Advocacy Issue: Impact of current procurement system of wheat & paddy on farmers welfare in Muzaffarpur, Bihar Methodology: - 4 Blocks - Kanti, Bochaha, Turki, Silaut (20 – 25kms from Bhagwanpur Mandi, Muzaffarpur) - Primary data  Focused Group Discussion - PACS Members, Farmers  In-depth interviews - Local Agriculture Officers, Local Aggregators, Private Players - Available Secondary data 9

Emerging Issues PACS - Delayed procurement order (wheat) - Lack basic equipment (Moisture Meter) - Limited storage facilities - No direct authorization to pay farmers - No technical/financial/administration support provided 10

Emerging Issues Farmers - Requirement of Land Possession Certificate - Sale at price lower than MSP to local aggregator (sometimes even the PACS), especially small farmers - Bias purchase by PACS - Dissatisfied with PACS Local Agriculture Officers - Irrational moisture content standard (wheat) - Lack of coordination between Government Deptt & PACS Aggregators - Paddy procurement below MSP, wheat during season is lesser than MSP then higher 11

Envisaged Reform Pathway PACS Reform PACS have potential to help small farmers and needs strengthening (institutional/technical/financial) Agriculture Markets Policy should differentiate between small farmer/medium farmer/large farmer Access to competitive and organised market for farmers (state oversight) Private Sector Enabling easier entry and better engagement of private players 12

3. Bus Transport 13

14 Background Motor Vehicles Act - MV Act, 1939 (revised in 1988): Post independence, road transport placed in Schedule B of Industrial Policy Resolution 1956, indicating move towards state control Given effect through Road Transport Corporation Act 1950 and concomitant addition of special provisions for State Road Transport Units (SRTUs) in the MV Act - Reservation for SRTUs in partial/complete exclusion of private players at the discretion of the state - State discretion led to wide variation in the transport set up across states

Key Findings (Gujarat) Current Situation Stage carriage monopoly to GSRTC on intercity routes (1994 Govt. Gazette) Shrinking fleet size of GSRTC, led to the entry of private operators High operational cost of GSRTC (about US$47mn in ), burden on the state exchequer Private operators deemed illegal on the stage carriage routes (Only 2%-18% respondents found service of the public operator significantly better than private competition) 15

Key Findings in Gujarat Emerging Issues Decline in GSRTC’s passenger carrying capacity from 1.27 billion in 2003 to 0.84 billion in 2013 Private operators incurring additional transaction costs/‘rents’ There is need to let private operators enter inter-city market Intra-city Transport: ⁻ AMTS enjoys a monopoly, even though incurring high operational losses (Rs1.7bn in alone) ⁻ Shrinking fleet size and private players are sub-contracted for fleet operation ⁻ They have to attach their fleet to AMTS with no individual recognition 16

Key Findings in Madhya Pradesh Current Situation Liberalised public transport sector after MPSRTC’s disbanding in 2005 DOTs function more as administrative body than performing regulatory functions (limited to licensing and fare regulation) Fare determination mechanism: RTA decides the fares that lacks an inclusive approach Low accountability of private bus operators: Gap in transport availability on non-profitable routes and off peak hours Provision under the Planned Road Transport & Safety Bill

Key Findings in Madhya Pradesh Emerging Issues Low access to passengers on non-profitable routes (~ 60% respondents complained about availability in intercity services) No accountability mechanism for private operators by the state: Delayed or cancelled bus trips (grievance mechanism absent) Lack of route rationalisation  unequal distribution of routes Lack of mechanism of PPP in intercity segment Intra-city transport: BCLL acts as both operator and regulator, creating a conflict of interest 18

Further Research & Advocacy Goal: Policy reforms for efficient bus transport sector in states Discussions on the need, structure & functions of a ‘State Road Transport Regulatory Body’ Approach ⁻ Development of ‘Concept Note’: Covering issues related to route rationalisation, better PPP mechanisms, fare setting etc. ⁻ Knowledge partnership with State Govt Transport Department ⁻ Close interaction with state level stakeholders for understanding the regulatory environment of the state 19

20 Further Research & Advocacy Goal: Policy reforms for efficient bus transport sector in states Gujarat Roundtable discussion with government officials: emerging willingness to abolish the 1994 Gazette order Discussions with private operators – willing to pass on the impact of reduced coast of operation vis-à-vis fare reduction Orientation on pro-competitive procurement (engagement of CCI) CUTS Inputs ‘Approach Paper’ good practices & possible reform options Input for ‘Blueprint’ on ‘Intercity Transport Regulator’ Facilitate discussions between State Govt & CCI

Goal: Policy reforms for efficient bus transport sector in states Madhya Pradesh Govt. has already passed a ‘Madhya Pradesh Intercity Transport Authority’ (MPITA) in February, 2015 MPITA in the inception stage and needs refining (functional and administrative) Orientation on pro-competitive procurement (engage CCI) CUTS Inputs ‘Knowledge partnership’ to DoTransport to refine MPITA Facilitate discussions between State Govt & CCI 21 Further Research & Advocacy

Further Research & Advocacy (National) Goal: Infusing competition principles in public procurement of bus services in Gujarat and MP Ahmedabad (Gujarat) and Bhopal (MP) have one operator each in the BRTS segment ⁻ Chartered Speed Carrier (Ahmedabad) and Capital Roadways (Bhopal) ‘Eligibility criteria’ for bidding like in the case of BRTS, limits the number of worthy operators hence limiting competition (lack of an institutional guideline on competitive procurement process) 22

Goal: Infusing competition principles in public procurement of bus services in Gujarat and MP CUTS Inputs Liasoning with CCI to facilitate discussions between CCI and relevant State Govt Departments/officials: 1) Possible ‘institutional guideline’ on competitive procurement’ of bus services 2) Guide the DoTs for facilitating competition among operators on selected routes 3) Capacity building of the DoTs vis-à-vis competition principles (Competition Act, 2002) 23 Further Research & Advocacy (National)

24 Emerging Reforms Pathway Policy framework need to be balanced: - State monopolies lead to burden on exchequer (in this case bus transport) - Withdrawal of government doesn’t necessarily promote sectoral efficiency (in this case wheat sector) PPP are the way forward for introducing innovation and reduced operation cost in bus transport (State level Capacity Building) State Transport Regulator (effective regulation to facilitate emergence of modern bus transport that benefits both operators and users)

Thank You! & 25