Bus transport financing is a global challenge. In most Indian cities, bus transport systems have fare box recovery ratios less than 1 and incur large losses. Traditional financing sources like fares, budgets and grants have limitations and are often insufficient. There is a need to tap innovative financing mechanisms like taxes on employers and commercial development of land around bus terminals. A dedicated institutional fund with legal backing is also needed to effectively manage identified funding sources and ensure accountability.

1. INNOVATIVE FINANCE IN
BUS TRANSPORT
SUMIT MISHRA
17th November 2016

2. Bus transport is the backbone of urban mobility….
In France, contributions from users covers only 25% of
the operating costs of public transport systems, while
over 35% of the operating expenses are covered by
Employer Tax (Versement Tax).
Fare box Recovery Ratio (Total Fare Revenue/ Total operating
Expenses) of bus transport systems in most cities is less than 1
…..However, bus transport financing is a challenge globally….
• Rapid population growth and urbanization place pressure on existing transport resources
• GoI is placing huge emphasis on enhancing use of public transport modes
• Buses cater to 90% of public transport in India

3. Financial health of SRTUs is usually weak…
Most Indian SRTUs are loss making (combined losses of over Rs. 10,000 crore in 2014-15)
and revenue is barely sufficient to cover even operating costs
Loss of Rs.
64 crore
Loss of Rs.
846 crore
Loss of Rs.
224 crore
Loss of Rs.
3,986 crore
(Figures for revenue and costs for 2014-15, in Rs. lakh), Source: Review of the performance of SRTUs for 2014-15, MoRTH, GoI)

4. ….Traditional sources of financing bus transport have certain
limitations….
Option 1
PASSENGER FARES
 Public transport driven by a social objective
 Fares need to be kept at an affordable level
 Low fares incentivize commuters to use public transport
Option 2
BUDGETARY ALLOCATIONS
 Conflicting demands of the exchequer
 Budgetary allocations often driven by political & social agenda
 Budgetary provisions are subject to change
Option 3
SCHEME BASED FUNDING (AMRUT/JnNURM)
 Is usually accompanied by several terms and conditions –
Limited flexibility regarding use of funds
 Not a sustainable source, usually do not provide for operating
costs
TRADITIONAL FUNDING SOURCES face several limitations, and are often insufficient to cover even operating costs of
bus transport services.
Thus arises the need to tap INNOVATIVE FINANCING MECHANISMS.
MEDIUM MEDIUMLOW
LOW LOW LOW
LOW HIGH HIGH

5. ….Thus arises the need for tapping innovative sources…
Tax on employers
• Public transport plays a key role in enhancing business and economic activity in a region
• Logical that businesses contribute to funding public transport
• Employees to contribute certain % of the total salaries cost as Employer Tax
• E.g: Versement Tax, France – in Paris, 40% of operating revenue is covered from Versement
Tax
Naming Rights
• Selling the right of naming on public infrastructure assets such as bus stations for a specified
period of time
• Reliable and predictable revenue source
• Has been widely implemented in metro rail, may be replicated to bus stations and bus
terminals
• E.g.: Vodafone Metro Station, Bank of Baroda Sikanderpur Metro Station (Semi naming right)
• E.g.: Southeastern Pennsylvania Transportation Authority changed name of Pattison stop to
AT&T Station
Option 4
TAP INNOVATIVE FUND SOURCES
 Innovative funding sources are currently untapped and possess huge potential
 Such sources are usually sustainable in nature

6. Tapping the untapped sources – Key innovative sources
• Many Indian SRTUs posses huge land areas that are currently unutilized
• Commercial exploitation of such land around bus terminals and other bus transport infrastructure
has not been fully undertaken
• Commercial development could include multiplex, shopping mall, hotel, etc. depending on
demand
• For greater efficiency, commercial exploitation may be outsourced to a competent private operator
• PPP model may be implemented, wherein SRTUs manage bus and terminal operation activities,
while commercial exploitation is undertaken by a private player
Commercial
exploitation
Leveraging Revenue
Stream
• Predictable and continuous revenue stream for SRTUs (through identified sources) may be
leveraged as security for making borrowings and raising additional funds
Betterment Levy
• A charge on the increase in value of property arising on account of improved infrastructure such
as transport connectivity
• May be imposed along the bus corridor for city bus operations, BRT and bus terminal projects

7. Tapping the established sources of fund
KEY RATIONALE BEHIND
ALLOCATING A PORTION OF CRF
FOR BUS TRANSPORT:
Mere construction of roads would
not ensure mobility.
It needs to be supplemented by a
robust public transport system
(specifically bus transport) to
provide mobility to people.
Central Road Fund
(Rs. 2 on diesel & petrol)
Rs.1.5 (of diesel
& petrol)
50% of diesel
(Rs.0.75)
Rural Roads
50% of diesel &
100% of petrol
(Rs.2.25)
57.5% for
development &
maintenance of
National
Highways
12.5% for ROBs
& safety work at
unmanned
railways
crossing
30% for
development &
maintenance of
state roads
Rs.0.5 (of diesel
& petrol
100% of diesel
& petrol
(Rs.1.0)
National
Highways
Public Transport Fund
Allocate some fund
for public transport

8. Tapping the established sources of fund
State & City level
UTF in Karnataka
Mukhyamantri
Nagarothana
Scheme
Bengaluru
Infrastructure fund
Public
Transport
Funding
State level UTF created through
executive order to facilitate
implementation of urban transport
projects (1% cess on motor vehicle
tax, 2% cess on property tax &
budgetary allocations)
Mukhyamantri Nagarothana
Scheme is a kind of dedicated
budgetary allocation for
development city.
Bengaluru Infrastructure Fund
created to develop infrastructure
through betterment levy.

9. Portion of funds
from NUTF
• Working Group on Urban Transport has recommended to be set up National Urban Transport
Fund (NUTF).
• Apart from meeting capital needs, this fund will cater for possible support to certain systems
during the operations stage too.
• A portion of funds from NUTF could be earmarked specifically to fund bus transport operations.
Tapping established sources of fund
Green cess on existing personalized vehicle – Rs.18,800 crore
(base year)
Green surcharge of Rs.2 on petrol sold across country – Rs.3100
crore (base year)
Green cess on existing personalized vehicle – Rs.18,000 crore
(base year)
Proposed sources of revenue for NUTF
NATIONAL
URBAN
TRANSPORT
FUND
Public
Transport
Funding
Earmarking of NUTF
to cities/states

10. ….Robust institutional mechanism needed to effectively
channelize & manage identified sources….
Identification of innovative sources needs to be
backed by an effective implementation mechanism
This calls for the establishment of an institutional
framework in the form of a dedicated Fund
The Fund should have legal backing
Are the funds identified
being collected in the
right amounts ?
Are the funds being used
for the intended
purposes ?
How to keep track of the
fund inflow and outflow
?
What should be the
order of priority in fund
utilization ?
KEY QUESTIONS FOR SRTUs IN THE ABSENCE OF A
FUND MANAGEMENT MECHANISM
How the fund should be
managed?
How the accountability
& governance can be
ensured ?

11. ….Strong institutional mechanism for bus transport finance
offers several advantages…
Benefits of
defined
institutional
framework for
fund
management
Enables accountability in fund collection and management
Enables prudent management of collected funds through financial budgeting
and planning undertaken by a Fund Management Division/ Committee
Provides a platform for efficient utilization of funds, following a defined
prioritization order
Enables audit of collected funds
Helps separate fund management function from bus transport planning and
implementation

12. Thank You

13. ….Enhancing efficiency of bus operations increases profitability...
In addition to tapping additional fund sources, revenue for bus operations can be enhanced by optimizing operations
and fully exploiting the existing sources such as fare box revenue potential.
Enhancing efficiency of bus transport system
ENHANCING
OPERATIONAL
EFFICIENCY
ROUTE
RATIONALIZATION
INTEGRATED
MULTIMODAL
PLANNING
ENHANCING USE
OF BUS
TRANSPORT
• Optimize costs of the organization
• Improve fleet utilization and occupancy
ratios
• Enhance staff and vehicle productivity
• Integrated service planning of various
modes such as buses, metro, IPT, etc.
• This would avoid unnecessary
competition wit other modes and
streamline operations
• Fare box revenue would increase, as
overall ridership goes up
• Scientific assessment of demand and
consequent route planning to avoid
overlaps, thereby enhancing demand and
revenue
• Enabling modal shift towards public
transport modes (specifically bus transport)
by public awareness campaigns and
programs educating citizens about
environmental benefits of using public
transport
• Implementation of ITS for providing greater
information and convenience to passengers

14. Bus transport forms the backbone of urban mobility…
Current urban transport scenario in India
• India is the 2nd fastest country in terms of urbanization pace, 2nd only to
China
• Rapid urbanization and population growth place pressure on urban
transport services
• GoI is placing huge emphasis of enhancing mobility through use of Public
Transport, with the objective of “moving people, not vehicles”
• Buses cater to more than 90% of public transport in India
• GoI schemes such as JNnuRM and NUTP place huge emphasis on
enhancing bus transport
• No. of passengers carried by STUs in 2013-14 : 251,111 lakh
• Currently, over 64 State Transport Undertakings (SRTUs) operating in India
across various states
• Currently, SRTUs are required to provide the bulk of infrastructure
facilities like bus stations, bus shelters, and other passenger amenities