24457 Volume 1 India's Transport Sector: The Challenges Ahead Volume 1: Main Report May 10, 2002 Lion)~~~~~~~~~~I The World Bank Group THE WORLD BANK GROUP India's Transport Sector: The Challenges Ahead Volume 1: Main Report May 10, 2002 'Iz '2 GM 4~ 4 wW,worldbank.org.in VAM.vishwabank.org Currency equivalent (exchange rate effective 18 July 2001) Currency unit = Indian rupee (INR) INR 1.00 = US$0.022 US$ 1.00 = INR 46 INR one crore (Cr) = INR 1,000,000 Fiscal year April 1-March 31 Abbreviations and Acronyms ADB Asian Development Bank MOUD Ministry of Urban Development AIDS Acquired Immune Deficiency Syndrome MRVC Mumbai Rail Vikas Corporation BEST Brihanmumbai Electric Supply Transport MUTP Mumbai Urban Transport Project Undertaking NGO Non-Governmental Organization BOT Build-Operate-Transfer NH National Highway CAG Comptroller and Auditor General NHAI National Highways Authority of India CAS Country Assistance Strategy O&M Operations and Maintenance CMIE Center for Monitoring Indian Economy OECD Organization for Economic Cooperation and CONCOR Container Corporation of India Development CRF Central Road Fund ppp Public-Private Partnership GDP Gross Domestic Product PRI Panchayat Raj Institutions GNP Gross National Product PWD Public Works Department GOI Government of India RDC Road Development Corporation HIV Human Immunodeficiency Virus RITES Rail India Technical and Economic Services IBRD International Bank for Reconstruction and S&T Science and Technology Development SRDC State Road Development Corporation IDFC Infrastructure Development Finance Company Ltd. SRTC State Road Transport Corporation IIT Indian Institute of Technology STD Sexually Transmitted Disease IR Indian Railways TAMP Tariff Authority of Major Ports IT Information Technology TEU Twenty-foot Equivalent Units LRDSS Long Range Decision Support System TPU Transport Planning Unit MOF Ministry of Finance ULB Urban Local Body MORD Ministry of Rural Development UMTA Unified Metropolitan Transport Authority MORTH Ministry of Road Transport & Highways WPI Wholesale Price Index MOST Ministry of Surface Transport WTO World Trade Organization 3 Acknowledgements This report includes a main report (volume 1), and six supporting background papers (volume 2). The groundwork for the report was carried out by a team of Bank staff and consultants, jointly led by Zhi Liu from the Washington D.C. Office and Alok Bansal from the New Delhi Office. The main report was prepared by a core team comprising Alok Bansal, Anil Bhandari, Zhi Liu, Louis Thompson, and Piers Vickers. The authors of the background papers are Alok Bansal (highways, urban transport), Anil Bhandari (highways), Sanjeev Dhar (Consultant, ports), D. P. Gupta (Consultant, highways), Yash Pal Kedia (railway restructuring), Ashok Kumar (rural roads), Zhi Liu (rural roads, urban transport), Balakrishna Menon (urban transport), Arun Mokashi (Consultant, urban transport), N. Ranganathan (Consultant, urban transport), Jit Sondhi (Consultant, railways), and Piers Vickers (highways, rural roads). Sonia Kapoor and Mridula Singh contributed notes on transport-related environmental and social safeguard issues. The late Harald Hansen contributed extensively to the discussions on railways, ports and urban transport. Peer reviewers included Kenneth Gwilliam, Marc Juhel and Graham Smith, and the work was carried out under the general direction of Guang Zhe Chen, Vincent Gouarne and Christopher Hoban. Sangeeta Anand, Irene Christy, Douglas Gray, and N.S. Srinivas provided able administrative assistance throughout. Geetanjali Chopra and Githa Hariharan (Consultant) provided editorial assistance during the final production of the report. Preparing the report involved extensive consultations with, and the participation of, relevant ministries, state departments, public and private institutions, experts in the field, and non-governmental organizations. Five working groups, made up of representatives from these organizations, were created to assist the team. The groups interacted closely with the team through a series of discussion workshops and by contributing a number of technical discussion notes. The members of the working groups and their current or previous affiliation are as follows: (i) Roads: D. P. Gupta (Ministry of Road Transport and Highways), H. P. Jamdar (Roads & Buildings Department, Gujarat), R. L. Koul (National Highways Authority of India), V. Murahari Reddy (Public Works Department, Andhra Pradesh), and J. M. Saksena (All India Motor Transport Congress); (ii) Railways: Anurag Dwivedi (Tata Strategic Management Group), R. K. Jain (Ministry of Railways), Chand Khosla (Asian Institute of Transport Development), B. N. Puri (Planning Commission), Jit Sondhi (Consultant, World Bank), S. Suryanarayanan (Railway Board), and K. L. Thapar (Asian Institute of Transport Development); (iii) Urban transport: A. Chakrabarti (Ministry of Urban Development), M. Koteeswaran (Association of State Road Transport Undertaking), V. K. Phatak (Mumbai Metropolitan Region Development Authority), P. S. Rana (Housing & Urban Development Corporation Ltd.), and N. Ranganathan (School of Planning and Architecture), and B. I. Singhal (Rail India Technical and Economic Services); (iv) Rural roads: Ashok Kumar (World Bank), N. B. Lal (L. R. Kadiyali & Associates), M. M. Sangal (Rural Engineering Services), and J. S. Sarma (Ministry of Rural Development); (v) Private sector participation: Kasy Aiyar (Rail India Technical and Economic Services), Saugata Bhattacharya (Infrastructure Development Finance Co. Ltd.), R. K. Jain (Ministry of Railways), Partha Mukhopadhyay (Infrastructure Development Finance Co. Ltd.), B. N. Puri (Planning Commission) and T. C. A. Srinivasa Raghavan (Asian Institute of Transport Development). The team received written comments on the final draft of the report from the Ministry of Road Transport & Highways, the Ministry of Shipping, the Ministry of Urban Development, and L. R. Kadiyali & Associates. The team also received useful comments and suggestions from Shunso Tsukada of the Asian Development Bank, and a number of World Bank colleagues and consultants, including Kim Cuenco, Namita Datta, Edward Dotson, Edgardo Favaro, Fabio Galli, Juan Gavaria, Clell Harral, V. R. Krishnan, Ajay Kumar, Stein Lundebye, K. Mukundan, A. K. Swaminathan, Keshev Varma and Roberto Zagha. While deriving considerable benefit from the organizations and individuals listed above, the team assumes full responsibility for the views expressed in the main report, as well as the presence of any errors. The background papers have been prepared by individual authors, and their views do not necessarily represent the views of the World Bank. Contents Abbreviations and Acronyms 3 Executive Summary 7 1. The Context: Improving Transport Services to Facilitate Economic Growth 13 2. The Current Scene: An Overview of Demand, Supply and Outcomes 16 A. Demand for Transport 16 B. Provision of Transport Infrastructure and Services 18 C. Current Sector Outcomes 23 3. Diagnosing the Major Sectoral Problems 25 A. Unclear or Conflicting Responsibilities 26 B. Inadequate Resource Mobilization 27 C. Poor Asset/System Management 29 D. Inadequate Imposition of Accountability 30 E. The Underlying Problem: Balancing Economic Efficiency and Social Equity 32 4. Reforming the Sector: A Review of Recent Experiences 34 A. Transport Reform in the Early 1990s 34 B. Transport Reform in Recent Years 34 C. The Lessons Learned 37 5. The Way Forward: Reform Recommendations for the Subsectors 39 A. Highways: A Foundation for Private Sector Led Growth 39 B. Rural Roads: Ensuring Sustainable Investments in Basic Access 42 C. Railways: A Vital Part of India's Transport Sector 45 D. Ports: Furthering Reform to Raise Productivity 48 E. Urban Transport: Getting the Fundamentals Right 49 F. Concluding Remarks 52 Appendix Appendix 1 Tables for Selected Statistics 53 Appendix 2 : Transport Sector Components and Involvement of the State and Private Sector 60 Appendix 3(a): Institutional Arrangement at the Central Level 62 Appendix 3(b): Institutional Arrangement at the State Level 62 major cities, all built during the last 10 years. In India, economic losses from congestion and poor roads added the major economic centers are not linked by up to 120-300 billion rupees (or US$2.6-6.5 billion) a expressways. Most national highways are two-lane or less; year. Nearly two-thirds of the respondents to a 1999 only 3,000 km are four-lane. survey by the Confederation of Indian Industries viewed India's infrastructure as a hindrance to business. BUT INEFFICIENT USE AND MISMANAGEMENT Inefficient, unreliable transport and logistics systems have OF EXISTING CAPACITY IS MORE PERVASIVE., made India's exports less competitive. In addition, the death rate per 10,000 vehicles on India's roads is about 8. Highway capacity shortages are further 10 times the levels seen in the European Union. And the exacerbated by mixed traffic, encroachment, crowded and negative environmental consequences of poor unsafe urban crossings, and frequent stops at state and transport-such as noise and emissions, displacement of municipal checkposts. Widespread overloading by the non-motorized transport, and spread of HIV/AIDS - are outdated, rigid two-axle trucks has long been a major for the large part borne by the low-income sections of factor in the damage of road pavement and structure. society. POOR TRANSPORT PERFORMANCE HAS MUCH > .7TO DO WITH FOUR UNDERLYING r .,eINSTITUTIONAL PROBLEMS... 11. First, fragmentation and overlapping of 9 ,r''I ' .,,r,<.-responsibilities confuse and limit accountability, and as a = - ;' f fvresult, affect the pressure on various agencies to perform. !M: -,>.A;-"'ui-; q- S,Ži J _ o S The Indian Railways (IR), for example, is an enterprise |~ . n t +3' t K^-: ;-+ expected to provide-by way of social service -relatively cheap passenger fares and an uneconomic schedule; at the same time it is expected to meet its targets for profitability. In urban transport, many agencies have a role but not one 9. Till now, all major ports have handled more of them assumes overall responsibility. It is all too easy traffic than their "rated" capacities. Although the then to pass the blame for poor transport system outcomes situation has improved with capacity augmentation, the from one agency to another. capacities, as rated, are 50-60 percent lower than those at comparable ports elsewhere in Asia. The real berth 12. Second, resource mobilization is inadequate. capacities have not been used efficiently, mainly because Public investments in transport have been declining of low productivity of equipment and labor. Equipment relative to GDP, and the input from private finance is still use on berths is extremely low-about 30-35 percent. In very limited. Finance fior investment, operation and railways, wagon failures cause the largest share of train maintenance can come from two basic sources: through failures, which in turn cause a loss of about 20 percent of direct/lndirect user charges or through general taxation line capacity. In rural roads, there is almost a total lack of Developed and developing countries alike have at their imotn maneac caeore suc asgain .n own pBace, come to realize that in the diffilcult trade-offs important maintenance categories such as grading and ipsD ,yahr ugtcntan,cagn sr drainage, leading to extraordinarily rapid deterioration of imposed by a hard budget constraint, charging users roadsurface condition, more, and more explicitly, in return for improved transport services is the most feasible response. In India, the costs being recovered through user charges do not POOR TRANSPORT SERVICES IMPOSE HIGH DU seem to be increasing substantially. The revenues accruing COSTS TO THE ECONOMY AND SOCIETY... from the direct tolling of roads are very limited. IR's progress in financial self-sufficiency in the early 1990s has 10. Poor transport services imp act the Indianumbe been reversed-with about 45 percent of expenditure economy-and Indian society in general-in a number being met by own revenues in 1998, and with market of direct and indirect ways. An enormous amount of borwnsadbde.upotmkn pteblne time, and therefore money, is wasted because of the inefficient moving of people and goods. The 1996 13. Third, asset or system management is especially Rakesh Mohan Report on Infrastructure estimated that weak. It is characterized by inadequate attention to data 8 collection, analysis and use in decision making; excessive . Establishing the Mumbai Rail Vikas Corporation focus on new investment at the expense of adequate (MRVC), with joint ownership between IR and attention to asset maintenance; uneconomical the state government of Maharashtra, for the investments made under political influence; lack of planning and implementation of Mumbai competition in procurement; and overstaffing. suburban commuter rail investments. 14. Fourth, there is no working system for user Starting the privatization process for Indian representatives,to bring transport agencies to account for their performance. The failure to impose effective systems 17. While these efforts represent an important of accountability-beyond mere compliance with paradigm shift-from treating transport as a social budgets and regulations-is the result of limitations on service to an economic sector-overall progress has fallen citizens' rights to relevant information; the failure of short of what is needed for transport to facilitate faster public agencies to report all relevant information; the economic growth as well as poverty alleviation. And it has absence of independent bodies to verify information and also been slow relative to the major changes around the assess performance based on the information given; and world, changes such as transport deregulation, increased the failure to impose sanctions and rewards. private sector participation, and decentralized and 15. These four underlying problems are interlinked commercial management of transport assets and and need to be addressed in a comprehensive manner. operations. India's progress on institutional reform in Unclear responsibilities, for instance, inhibit proper transport varies by subsector, with roads and ports ,.,. , . , ~~~~~~moving ahead steadill while the railwa s and urban accountability; poor accountability mechanisms hamper trang spoy, yave the falling anr urban the imposition of suitable asset management. These transport have been falling far behind. problems also result from deep-rooted philosophical 18. Further reform will confront some tough political attitudes held by many in India-that transport should and institutional constraints. Political pressure continues to be viewed as a social sector in which economic efficiency divert resources from meeting high demand to fulfilling should not necessarily take precedence over social equity. basic needs without ensuring sustainability and effective Over several decades, however, most of the social equity targeting. The slow pace of civil service reform has objectives set by the transport sector have not been hampered progress in shedding redundant public sector achieved, while economic efficiency has been seriously employees. Institutional reform at the state level is not compromised. likely to occur easily, with many states struggling with fiscal stress and fiscal policy reform that will eventually redefine RECENT REFORM IS IMPRESSIVE, BUT government responsibilities at both state and city levels. NOT ENOUGH... Given the various political and institutional constraints, the progress of transport reform will depend critically on: 16. India has made substantial efforts in recent years * A continued and steady increase in the political to tackle the sector's shortcomings and to reform will for reform. transport institutions. These efforts include: * The emergence of transport users and stakeholders * Increasing public funding for transport in the as key agents and pressure groups for change. Ninth Five-Year Plan. * Creating a Central Road Fund (CRF) to finance THE WAY FORWARD... road development and maintenance through an eamre ta on dise an,asln. 19. In the short to medium term, much can be pearmationtaxing thel NatoionaleHighw gained through reform efforts that aim to: • Operationalizing the National Highways * Improve public sector performance and Authority to act as an infrastructure procurer accountability. rather than a provider. * Mobilize private sector participation and * Amending the National Highway Act to expedite investment. land acquisition, permit private participation in road financing, and allow tolling of public roads. 20. The highway agencies need to maintain their * Establishing a Tariff Authority for Major Ports strong reform momentum by: (TAMP) and amending the Major Ports Trust Act * Involving road users in planning, prioritizing, and to enable corporatization of major ports. ensuring the proper use of sector funds through 9 A -~~~~~~~~~~~~~~~ -w-n V .~~~~~~~~~~~~~~~~~~~~~~4 34 '' W /} \S As\ X broadly representative advisory committees and, 22. Road safety issues need to be addressed on an eventually, overseeing boards empowered for urgent basis. Efforts must be made to raise the level of decision making. public awareness; to assign responsibilities among * Moving toward a clear separation of client andprovider relevant agencies; and to provide funds for an integrated finctions, and using output-oriented performance approach to tackle problems. indicators and effective monitoring mechanisms. 23. Similarly, efforts are required to address road * Building consensus for the removal or reduction of transport market distortions through regulatory, fiscal any non-physical barriers to the movement offreight and institutional reform. Such reforms have the potential across state borders, including highway to trigger off as much benefit to the economy as do checkposts. infrastructure improvements; these reforms also have the , Monitoring closely recentinnovationsipotential for better targeting, as well as protecting the financing; evaluating the effectiveness of these new social obligations necessary to meet policies of equitable fapprachin; leveaging pbi secti o fiane and access to road transport services. In the short term, the transferring risk to the private sector (rather than need is to understand the extent and nature of various merely creating off-balance sheet liabilities for the distortions so that a case can be made for their removal. central or state budgets); and addressing In the medium term, the task is to implement the reforms regulatory and information bottlenecks that may necessary to remove the distortions have slowed down private investment in the 24. Given the long term need for major capacity sector. enhancements, India will need an expressway system. 21. Given the level of new resources provided by the This calls for active and immediate analysis and planning Central Road Fund, it can be seen as a critical potential on the part of the Ministry of Road Transport and lever to reward good performance, such as better Highways (MORTH), and social and environmental maintenance and roadsafey.Amongheareassafeguard capacity-building for highway implementing maintenance and road safety. Among the areas where the agnis Fund would benefit from reform are professionalizing the Fund's management by establishing an independent 25. The key reform need for rural roads is the secretariat; clarifying and ultimately regulating building up of accountable institutional structures that disbursement and audit procedures; and giving non- ensure maintenance, quality, and cost-effectiveness. governmental stakeholders an advisory role in fund Meanwhile, the states need to sort out, on an immediate allocation and overseeing. basis, the functional responsibilities for grading and 10 drainage maintenance. Both the Ministry of Rural remain to be dealt with. Further areas of reform clearly Development (MORD) and the states have to develop a include corporatizing ports; concessioning out policy framework that emphasizes the sustainable operations; and even developing landlord ports with management of rural road assets, and requires economic competition for rights to provide functions. The success criteria to guide investment decisions. Where applicable, of concessions will depend partly on alleviating a rural road master plan can be prepared-with unnecessary constraints on the concessionaire (a process community participation-to identify the core network that is under way), and on settling labor issues. Minor that provides basic access to every village. In addition, ports are becoming more and more similar to major progress and performance in the decentralization of rural ports, and the regulatory power of the TAMP should be roads management have to be closely monitored and extended to cover minor ports, so that any distortions assessed, so that critical capacity or incentive issues arising between major and minor ports can be effectively associated with this decentralization can be identified, resolved. A full-fledged customs modernization program, and further capacity-building action plans developed. backed by strong political will, will simplify and streamline customs clearance procedures. 26. India has high stakes in rail reforms - which must be based on proved principles derived from international 28. Multi-modal integration has become extremely experiences, and adjusted to fit the Indian environment. important to ensure that existing port and transport Though Indians often argue that their country is facilities be used more effectively, and that new ports be "different", the challenges facing IR have much in developed to be more economically sound and financially common with situations driving rail reforms elsewhere. attractive. This would entail setting up intermodal The question is how to define reform options, fit them into platforms at nodal points in the transport network. For the context of Indian conditions and objectives, and instance, establishing dry-ports outside main port cities implement the decided reforms. IR is still vital to the would facilitate interfacing with railways and road economy, so implementation must be carefully planned. transport, and possibly waterways in the eastern part of Any disruption of services would be disastrous-and many the country. The specific issue of railway interface in ports has to be addressed on a priority basis, particularly in places where the cargo transfer between IR and the _ 5 i S 1; l [local port railways involves inordinate delays. 29. The major challenge for urban transport agencies in India is improving the current urban 9' 7 e. Wttransport situation-or at least prevent it from ' ' , _ -, FtS i X w deteriorating further-while developing all the much needed institutional, financial, and technical capabilities, | @ k ,-,, .- li W fi especially at the local level. Again, these should be based V. k i 3 XL-5:- 5 5on proved principles derived from international experiences. The most important first step for local and -i> .. = -state governments is to develop an action plan to reform urban transport institutions, and to boost resources for of the necessary changes must be accompanied by safety urban transport. The 1998 Strategy developed by nets for affected groups. But it is essential to prepare and MOUD for urban transport institutions and finance implement a reform action plan quickly, and preferably on should provide useful direction for these action plans. the basis of recommendations from the recently published Transport for the poor is an increasingly important area Rakesh Mohan Report on rail restructuring. At the very of concern; but there is a huge knowledge gap on the least, there are rwo top priorities: transport needs of the urban poor, and the options for providing them with efficient and affordable transport * Improvine customer-responsiveness of the cor services. The Ministry could assist cities to build a rail business services. knowledge base, possibly through an urban transport * Focusing a much larger share of the capital budget strategic planning exercise. On economic priority investments. 30. Indian cities have great potential for the 27. Despite the impressive progress made with development of a competitive urban bus transport market, reform in the ports sector, critical institutional issues through contracting or franchising arrangements. 11 | l" F w ;,^; , ~~~~~~~~~~engineers, and traffic police, to prepare traffic management schemes, implement them, monitor the performance, and -. r- E inmX make improvement on a day-to-day basis. Alternatively, the ,:i,, -.traffic management planning and engineering design work i ~ - :. -- i, can be contracted out to the private sector. Finally, based on recent experiences from the largest cities, other cities should o ^>s 1!4;-< make similar and improved effort to reduce motor vehicle | - Y j i I rhzt ^T-< j (especially two-stroke engine vehicle) pollution. E -f A __ CONCLUSION 31. Three factors make it a particularly opportune time for India to expedite transport reform: _ / D grf7* First, the initial reform momentum has already been built up. - Second, there is growing consensus within India that transport should be managed as an economic sector. Third, there are many successful models for transport reform from around the world. The resistance to reform, however, should not be Metropolitan cities with publicly provided bus services underestimated. But such resistance has to be overcome, could develop and implement a time-bound action plan to keeping in mind the high costs of slow or inadequate first separate government procurement functions from action that will be borne by the Indian economy and operations. All cities need to improve the regulatory society. This report hopes, through the policy and framework in place-especially the enforcement institutional reform actions it suggests, to contribute to capabilities required to promote bus service competition. the momentum being built up for more speedy reforms, Cities should also set up traffic engineering and and in consequence, for a substantial performance management units with the participation of traffic planners, improvement in the Indian transport sector. 12 1. The Context: Improving Transport Services to Facilitate Economic Growth 1. Reducing poverty is an enormous challenge for supporting infrastructure to meet the rapidly growing India. There are more people living on less than a dollar demand for transport. In recent years, transport issues a day in India than in any other country in the world. It have been examined extensively by the Indian is widely accepted that faster economic growth is essential government and the World Bank. In 1995, the Bank for India to accelerate its rate of poverty reduction. The published a report, India: Transport Sector-Long Term progress the country has made over the last decade has, Issues, which examined ways in which the sector could on the whole, been good. India's economic reforms, respond to national economic reform initiatives and introduced in 1991 and aimed at market liberalization, other development trends, including urbanization, have triggered an unprecedented GDP growth of 6.0-6.5 technological changes, and growing social and percent a year. The first generation of reforms deregulated environmental concerns. The 1995 report proposed and expanded foreign trade, privatized and deregulated policy and institutional reforms that would improve the domestic industries, and cut government subsidies. The regulation of private transport operations, as well as the second generation of reforms, now under way, is focused provision and maintenance of physical infrastructure. on shedding redundant public sector employees, and attracting foreign and private investments. The 4. Since the release of the 1995 report, numerous Government of India's Ninth Five-Year Plan (1997- changes have taken place in India's transport sector. 2002) has set a target of economic growth at an annual Private participation in several subsectors has increased. rate of 7.4 percent over the next 10 years. There have been further studies by relevant ministries, by government committees and task forces, and by the 2. But poor transport has become a major drag on World Bank and Asian Development Bank (ADB). These economic growth. India's transport system-especially studies have identified surface transport-has serious deficiencies. Transport problems in the I W W II services are highly inefficient by international standards. transport sector in the adverise i,npact olz tbe Excessive time, and so money, is spent on moving people general -institutional, ecollomy caused byt poor° and goods. Economic losses from congestion and poor financial, and IMAM roads are estimated to be as high as 120-300 billion rupees regulatory, for instance. ai,ises ftomn ,, wisi na-bI (equivalent to US$2.6-6.5 billion) a year.I Inefficient and They have also pointed betivee,, supply and demand WithJ the transport sector unreliable transport and out problem areas in o)r trallsport se)l'ic(e5 aiiid beilg so centraZl t.o/ an logistics systems have specific transport slupportinlg ilfifastructure. beitig o eraltoii made India's exports less modes, and made eftJctively ope at ° i competitive. Nearly two- recommendations for modal strategies, policies, and become a.maordrom thirds of the respondents action plans. becii . a °ao- ia i to a 1999 survey by the economic growth. Confederation of Indian 5. Our synthesis of these studies identifies Industries viewed India's infrastructure as a hindrance to considerable agreement both about the nature of the Inustiess2 ved Ida infrastructure pascah ra to problem and the long term solutions within the structure businmess. And the general public, particularly low followed by this report (Figure 1.1). The phenomenon income groups in both rural and urban areas, suffer from that needs to be examined and understood is the adverse a range of negative social and environmental consequences impact of poor transport performance on the economy, of poor transport-such as social isolation, traffic accidnts, nd mtor vhicl emsin.' poor performance which arises from a "mismatch accidents, and motor vehicle emissions. between supply and demand for transport services and 3. This report addresses the central question of supporting infrastructure. Overall demand is increasing how India can improve its transport services and at about 10 percent per year. The demand for some Rakesh Mohan Committee, The India Infrastructure Report, 1996 Confederation of Indwan Industry Survey Report, 1999 13 services, particularly trunk movements of freight, is limited. Given the range of complex institutions, and the increasing even more rapidly. But neither service nor diverse state and local experiences in India, it is almost infrastructure capacity is augmented, or better managed, impossible for one report to review every issue in every to meet the growing demand. As a result, performance transport mode in every state and locality. Thus the declines and costs rise. In other cases, capacity is more report focuses on those modes in which the Bank has than adequate, and the maintenance of that capacity still been extensively involved in both lending operations and demands scarce resources. Essentially, the economic policy dialogue, including highways, rural roads, problem concerns the adjustment process. railways, ports, and urban transport. The report does not have much discussion of air, inland waterway, and Figure 11: The Structure of the Report pipeline transport. Nor does it try to identify or compare Adverse impact on the economy and society (Chapter 2) transport experiences among Indian states and localities. i 9. Given its focus, this report is intended to provide Demand Disequilibrium between Impact on the a basis for the policy dialogue between the World Bank change supply and demand for economy and society and the Indian government, and to serve as input to the (Chapter 2) transport services (Chapter 2) Bank's sector assistance strategy. Since the preparation of the report coincides with the preparation of an integrated Poor supply response transport policy by the central government's Planning (Chapter 2) Commission, the report is also meant to contribute its T input to that policy. l ~~~Causes of poor supply response (Chapter 3) 10. The report has two volumes. Volume 1 contains ib the executive summary and the main report, and Volume Attions 2 contains six supporting background papers on Reform to date Further actions by subsectors individual modes. The main report is aimed primarily at (Chapter 4) (Chapter 5) policy makers and politicians in the central, state, and local governments, as well as interested stakeholders in 6. What is the path the sector should take to the transport sector. The background papers should improve this adjustment process? There appears to be provide a basis for further discussion and consensus considerable consensus on the long term direction the building with individual modal ministries, departments, sector should take - so that it moves ahead, for instance, implementing agencies, and stakeholders. toward further transport market liberalization; better asset management; increased private sector participation; extensie onuta wih p ad t oe participatio n of, and well-focused public sector infrastructure expansion. rtensive consultateons wsth, and the partcpatlion of, transport ministries, statc departments, public and 7. But moving from consensus to actual plan of private institutions, experts in the field, stakeholders, action is proving to be difficult. Short and medium term and non-governmental organizations (NGOs). Several actions need to be carefully designed to suit India's social working groups of representatives from these and political dynamics, taking into account the lessons organizations were created for the purpose of learned from recent reform experiences. It is with this consultation. Once the Bank team prepared a Concept need in mind that Paper for this report, a participatory workshop was held This report examines general this report proposes to discuss and build consensus on the main issues facing issiues across the sectoi; aiid a range of short the transport sector. The working groups then prepared _mX i-W to medium term a number of technical notes and papers on these issues, s I s w r w actions based on and circulated them among stakeholders for comments BY;I"*#*tWIt#S#"XiSl/ZWtZ#Z/ its examination of and suggestions. The findings of these notes and papers All tlhe ivhile, it keeps in mind general issues across were discussed at a series of workshops before the main twto Ja;cts: that actions have to the sector, and report and the supporting background papers were wMi n I 3 I specific issues for each drafted. Finally, a participatory workshop was held to d/ynamiics, and thjat ce -taiut transport mode. discuss the final draft of the report. Formal and informal consultations with transport ministries lessons have beeui learned fiont 8. The report's have been conducted throughout the period of preparing the J-e(Y.ett iCeJOuti experienttces. coverage is necessarily the report. 14 12. The structure of the main report follows the major problems: unclear or overlapping responsibilities; framework illustrated in Figure 1.1. Chapter 2 provides an inadequate resource mobilization; poor asset/system overview of rapid demand change and poor supply management; and inadequate imposition of accountability. response, as well as the resulting adverse impact on the Chapter 4 reviews recent reforms and lessons learned. economy and on society in general. Chapter 3 examines Finally, Chapter 5 proposes short to medium term actions the causes of poor supply response by focusing on four for each of the main transport subsectors. 15 2. The Current Scene: An Overview of Demand, Supply and Outcomes A. DEMAND FOR TRANSPORT stagnates as a result of intense competition from road transport. And operational inefficiencies and capacity 1. Serving a land area of 3.3 million square km and constraints on key routes have also played a role in the a population of one billion, India's transport system is slow growth of India's rail traffic. one of the largest in the world. It consists mainly of roads, railways, and air services. In a few states, inland water 3. If GDP is tO grow at 7-8 percent a year over the transport plays a small supplementary role. And with its next 10 years or so-as intended by the government's long coastline, India has over 150 seaports. Ninth Five-Year Plan (1997-2002), then the demand for transport will, in all likelihood, grow by at least IO percent a 2. In most developing countries, transport demand year. But transport growth will materialize only if the level (usually measured in ton-km and passenger-km) increases of services and capacity of supporting infrastructure are somewhat faster than GDP. India is no exception. During able to meet this demand. Otherwise, unmet demand will the 1990s, India's economy has grown by 6 to 7 percent act as a constraint on economic growth, and impose high a year, and its total transport demand has grown by about costs on businesses and households. 10 percent a year. The rate of growth, however, varies by subsector (Figure 2.1), reflecting the structural changes in 4. The impact of the potential growth is greater when demand for different modes, as well as the effect of some the demand for high-qualhy services is considered. In supply-side factors that will be analyzed later. The road passenger transport, the demand for quality services is sector, which already enjoys an 80 percent share of land highly income-elastic, and it grows faster than total transport demand, has witnessed a 12 percent annual demand. The growing middle-income group, for growth in freight demand and 8 percent in passenger example, has been demanding more speedy, comfortable, demand. Meanwhile, both air and ocean transport have reliable, convenient, and safe services. Between 1994 and enjoyed healthy growth. But the demand for rail 2000, passenger rail demand for premier services grew transport has grown at a slower pace, at just 1.4 percent a faster than total passenger rail demand: 7.3 percent vs. year for freight and 3.6 percent a year for passenger. This 4.2 percent a year in the case of intercity rail, and 7.5 is not surprising: all over the world, rail transport percent vs. 3.3 percent in suburban commuter rail.3 In Figu-re 2.1. Transport Demand Growth in the 1990s 14 12_ >8 j Freight o6 i ii Pasne ;4 - i i 42 - Road Rail Domestic International Seaports Air Air Calculated from Indian Railways statistics (see Appendix, Table 4) Premier services include all air-conditioned classes, first class, and all sleeper classes in the case of interciry rail, and first dass in suburban rail. 16 urban areas, private passenger cars are in high demand, road transport, and it is likely that competition from road and car ownership is growing rapidly at over 10 percent transport will intensify, because substantial investments a year. are being made to improve the trunk highways that run parallel, for the most part, to the high-density railway 5. The demand for better quality services is expected to routes. With better vehicles, the road sector will offer grow rapidlyforfreight transport as well. The share of high- better sicetoer v and p osb ator pics The value consumer goods in total freight will increase with better servaces to users - and possibly at lower prices. The economic structural changes. The transport of these rality, t e,pand cuto orietation ovices goods~~~ ~ ~ istm-estveadhnln reqieet,r of quality, type, and customer orientation of services. All goods is time-sensitive and handling requirements are the same, roads have dominated India's land transport high, hence the need for better service. In addition, market since 1985, and it is clear that their dominance shippers of producer goods are not only looking for will continue, if not increase. speedy, reliable, door-to-door services, but also for a complete logistic solution that minimizes the costs of 7. The Indian government is making every effort to transport, logistics, and inventory. Faced with an expand exports as a key ingredient of rapid economic growth. expensive and unreliable transport system, And growth in exports will increase demand for manufacturing firms often have to keep large inventories international air and ocean transport, as well as for multi- and buffer stocks to compensate for unreliable deliveries modal transport. Multi-modal container transport is of intermediate inputs. These firms are increasingly currently one of the most underdeveloped business areas willing to pay more for reliable transport services that in the transport sector. But it is also the one area with reduce the need for large inventories, while meeting the great growth potential, a potential illustrated by the requirements of different traffic leads, varying success of the Container Corporation of India consignment volumes, and just-in-time, door-to-door, (CONCOR). Since its creation in 1991, CONCOR's and single-ticket delivery. business has grown at a rate of over 20 percent a year, from 109,000 TEU (Twenty-foot Equivalent Units) in 6. The growing demand for door-to-door transport 1991-92, to 900,000 TEU in 1 999-2000 4 will continue to boost road transport. This is partly due to the inherent competitive advantage of road transport, 8. In addition to the transport demand generated by. and partly to the failure of other modes, especially rail, to the expansion of economic activities, India still faces an attract the demand that would otherwise be more suitable enormous unmet demand - principally its poor population s for them. At present, rail carries mostly bulk freight- needfor basic access to transport. About 40 percent of India's such as iron, steel, grain and cement. Non-bulk freight 661,000 rural villages do not have all-weather access to accounts for just a dismal 2-3 percent of its total freight markets and social services. Peripheral states in the north in terms of ton-km. But even bulk freight is shifting to and northeast are not adequately connected with major CONCOR is still the only provider of container services in India The container transport business would have grown more if there were more service providers. 17 economic centers, so that they are prevented from accessing and intercity bus services. This division of responsibilities domestic markets. Providing poor rural areas with all- is not absolute; the central government also plays a weather access will improve their quality of life, and certain role in coastal shipping, motor vehicle transport, improving peripheral states' access to major economic and even urban transport, mainly through policy, centers will reduce regional disparities. Political pressure for regulations and funding supports. (For details on the government to target poor people and backward regions institutional arrangements for transport at the central and with transport assistance programs remains strong, though state levels, see Appendices 3 (a) and 3 (b).) effective targeting poses a challenge. 12. The responsibility for each mode rests with a 9. Affordable transport service for the poor is of modal ministry within the central government. Interaction increasing concern in urban areas as well. Currently, among these modal agencies is limited, and each agency about 70 million urban residents-one-fourth of the works within its own territory without fill knowledge of its urban population-live below the national poverty line,5 impact on the others.6 The allocation of responsibilities is and this number is expected to grow with urbanization more complicated at the state level. For example, highways and the subsequent shift of poverty from rural to urban are provided and maintained by the public works areas. Many urban poor households (especially those in department (PWD), and rural roads by the PWD or local the urban fringes) live in neighborhoods that lack basic government engineering department; traffic rules and infrastructure services, including affordable transport. enforcement are the responsibility of traffic police; and road While the upper segments of urban society have gained vehicle registration, permit issuance, and other road unprecedented mobility with the use of private motor transport regulations are duties of the transport vehicles, most poor people find it more costly (in terms department. Institutional arrangements for urban transport of time and share of transport expenditure over are the most complicated: many agencies have a hand in disposable income) to access jobs and social services. This urban transport, but none assumes overall responsibility. reality clearly illustrates the great challenge Indian cities face in making their transport systems efficient and HIGHWAYS affordable. 13. India has an extensive road network of 3.2 B. PROVISION OF TRANSPORT million km. It comprises national highways (57,700 km), state highways (124,300 km), district roads, rural roads, INFRASTRUCTURE AND SERVICES urban roads, and special purpose roads (for military, port, etc.). Responsibility for the national highway network is INSTITUTIONS divided between the Ministry of Road Transport and Highways (MORTH) and the National Highways I 0. India's transport sector has mixed ownership and Hgwy M RH n h ainlHgwy Authority of India (NHAI); but the maintenance of management, with the public and private sectors national highways under MORTH is delegated to state participating in both development and operation of PWDs. PWDs also manage other roads that are transport services (see Appendix 2 for details). The public considered highways-state highways, major district sector dominates transport infrastructure; while the roads, and other district roads. private sector is active in road transport services, consultant services, and civil works. 14. Road transport services are provided by both .. ...responsibilities private and public operators. The private sector provides 11. The Indan Constituion divide all trucking services, and about 70 percent of intercity for the transport system between the central and state bus services. The remaining 30 percent of the intercity governments. Roughly speaking, the central government bus services are mainly provided by the State Road is responsible for railways, national highways, major ports Transpor Crporains prTCsS R and international shipping, civil aviation, and national inland waterways. State governments are responsible for 15. The geographic coverage of India's highway state and rural roads, minor ports and coastal shipping, network, at 0.66 km of highway per square km of land inland water transport, urban transport, and trucking area, is almost identical to the level of the United States National Sample Survey, 13th Round, 2000 Before econiomic liberalization, the Planning Commission coordinated investments and developed policies to integrate transport modes, but this role appears to have bcen diluted since In 2(000, the central government created a Transport Committee to prepare a blueprint to develop tranisport in an integrated manner, and the coimnittee's report is due soon 18 w ~ ~~~~~~ - i¾$- \ yS! <- - ib~~~~~~~~~~~~~~~~~~~~~~~- . ~ ~ ~ ~ ~ ~ ~ _ _ *. -. . . .. (0.65), and much higher than that of China (0.16), and the rest single-lane or intermediate-lane.8 Most of Mexico (0.16), and Brazil (0.20).7 But India compares the other roads are single-lane. About a quarter of the very poorly with these countries in terms of lane capacity highways are surfaced with blacktop (bituminous) or and surface quality. China's road network is smaller than concrete, and a fifth are surface with water-bound India's, but it comprises over 15,000 km four or six-lane, macadam. The rest are unpaved. access-controlled expressways linking the major cities, all built during the last 10 years. In India, the major 16. More than 25 percent of national highways are economic centers are not linked by expressways. Most in poor surface condition, and more than half the state national highways are two-lane, single-lane, or highways are in poor or very poor condition (Table 2.1). intermediate-lane; only 3,000 km are four-lane. Of state The poor condition of roads' is exacerbated by an highways, one percent is four-lane, 22 percent two-lane, outdated freight vehicle fleet. Modern multi-axle trucks Figure 2.2: Capacity Composition of National Highways and State Highways National highways State highways 2% 22% 1 4~~>39% |0 Single lane| _ Smngle lane j ~ *Two-lane _ U *Two-lane 59% - OFour-lane WO Four-lane 7Data sources: Center for Monitoring Indianl Economy (CMIE). Infrasilucisre. January 2001. China Statistcal Yearbook. 2000, and Internanional Road Federation, WorldRoad Statistics. 1999 RIndian Roads Congress, Road Development Plan Vision 2021, 2000 19 account for only a tiny fraction of the truck fleet. national highways average 30-40 km an hour (compared Widespread overloading by rigid two-axle trucks has long with expected averages twice that). It often takes four or been a major factor in the serious damage of road five days for a truck to travel from Delhi to Kolkata-a pavement and structure. stretch of 1,500 km-and about a quarter of the travel time is spent at the state border checkposts. 17. India's highway network offers very low levels of service, partly because of poor physical conditions, the use 18. Poor driving conditions, mixed traffic, and encroachment activities also contribute to the high levels Table 2.1: Road Surface Conditions in India of road accidents. The annual road safety toll is estimated (Percentage of Length) at roughly 75,000 deaths, 1.7 million serious injuries and 6.4 million minor injuries, with economic losses of about International State Highways Rs 550 billion.10 The death rate on India's roads per Roughness National Single Intermediate Two 1 v i a 1 t t l s Index Hiha ae Ln ae 10 000 vehicles IS around 10 times the levels seen in the Index Highway Lane Lane Lane European Union. < 4 (Good) 50 7 110 10 8 11.2 4 - 6 (Fair) 23 6 23.4 31.8 48.4 6 - 8 (Poor) 25 7 35 3 34.6 35 5 RURAL ROADS >8 (Very Poor) 0.0 30 4 22.7 4.9 19. Seventy percent of India's population is rural, Source Road Maintenance and Corridor Management Study, and the country has 661,000 villages. The rural road National Highways and Strategic Options Studies, and state network consists of zilla parishad roads, village panchayat roads feasibility studies for various states during 1995-99 for roads, and community roads, with a total length of 2.7 consideration of World Bank funding million km. There are five types of rural road surfaces: of old vehicles, and growing traffic; and partly because of track, earth, gravel, water-bound macadam, and mixed traffic of fast and slow vehicles, highly crowded and blacktop.' 1 Neither track nor earth roads are all-weather unsafe urban crossings, encroachment activities along passable. If properly maintained, gravel and water-bound right-of-ways, and frequent enforced stops at state or macadam roads can be all-weather passable, but in rural municipal checkposts for permit inspection and tax India, many of these roads become impassable during collection. About 25 percent of national and state heavy rains mainly because of inadequate, defective, or highways are congested.9 Truck and bus speeds on missing drainage. s .*,s- '. L.- ----'----- J.~, L1261,11AW. Fs Based oni national highway traffic data available from a 1999 MORTH pre-feasibility study for expressways, and on state highway traffic data available from various projects prepared unider the World Bank-funded State Road infrastructure Development'Technical Assistance project G Tiwari, Transportation Safety Issues - Institutonal Restructuring Proposedfor India, IIT, Delhi, 2001 A track differs from an earth road in that the latter has earth formation A gravel road is made of a layer of gravel on top of an earth formation, and a water- bouind macadam road has one or two layers of water-bound macadam on top of an earth formation and a gravel layer 20 20. The lack of reliable data makes it difficult to services in major cities. In addition, IR owns and compare the performance of rural roads in India with those operates almost all other rail transport support services, in other countries. But it is clear that although the existing including design and manufacturing of rolling stock, rail Indian rural road network is extensive, about 40 percent of catering, schools, technical institutes, housing, hospitals, villages are not yet connected with all-weather roads to and hotels. The railway budget is presented a day before market centers and the main road networks. In areas the central budget is allocated to other sectors. Its regularly hit by monsoons, villages not connected by all- revenues account for about one percent of GDP, and IR weather roads are often cut off for long periods during the is also the Indian organization with the maximum wet season. There is also a wide disparity in connectivity number of employees, numbering 1.6 million. IR is between states: it is 95 percent in Maharashtra for example, managed by the Railway Board and is divided into nine while in Orissa it is 41 percent. The quality of this network zonal railways. is not known, but evidence from the preparation and implementation of various World Bank-financed rural 22. The rail network is extensive. Of the network's road investments indicates that the overwhelming majority 63,000 km of track, about 44,000 km are broad gauge is in poor or emergency condition, resulting in low vehicle and the rest are mainly meter gauge. But only 15,000 speeds and periodic impassability. In the United States, of km are double or multitrack. Not only is IR facing the 640,000 km of rural major collectors (11 percent is capacity constraints on its high-density corridors, but unpaved) for which data is available, only 19 percent is in its operations also suffer from maintenance backlog: poor or mediocre condition.12 over the last ten years, arrears in track renewal have increased from 3,500 km to more than 12,200 km.13 RAILWAYS Insufficient maintenance of rail tracks and rolling stock is leading to more accidents and train derailings, higher 21. The Indian Railways (IR) holds a prominent operating costs, and lost revenue from suspended position in the public sector. IR is a central government operations on the affected lines (Box 2.1). For the past monopoly with a mandate not only to provide rail 20 years, freight trains have run at an average of 23 km transport services, but also to fulfill certain social an hour; with electrification and modern locomotives obligations. The system provides intercity freight and the average speed should have increased to 40-50 km passenger services as well as suburban commuter rail an hour. 1 The United States Bureau of Transportation Statistics webpage, (http //www btEsgov/btsprod/nts/), figure for 1998. Rakesh Mohan Committee, The Indian Railways Report 2001 Policy Imperativesfir Reinvention and Growth, Volume 11 Part 1, July 2001. 21 Box 2.1: The Economic Impact of Asset Failure on Indian Railways A train failure not only delays the affected train, but also the trains that follow. A 1998 analysis found that wagon failures cause the largest share of train failures, and that the current rate of train failures causes a loss of about 20 percent of line capacity. Thus a 50 percent reduction in asset failures would result in a 9 percent gain in line capacity. The study concluded that any investment in reducing failures yielded high returns, and that the payback period was less than a year on saturated routes dominated by freight traffic. Further analysis, projecting to fiscal year 2007, found that the capacity released by a systemwide 50 percent reduction in asset failures would enable IR to carry 12 percent more freight traffic-that would in turn generate an additional 15 percent in freight revenue and reduce travel times. This clearly illustrates that improving asset reliability by reducing failures is a major issue for IR. Source. IR, Long Range Decision Support System (LRDSS), 1997. PORTS Instead, the problem seems to be that real berth capacities have not been used efficiently. Equipment use on berths 23. India has 12 major ports and 140 minor ports, is extremely low-about 30-35 percent-resulting in mainly serving foreign trade. Coastal shipping is limited. high turnaround times for vessels. In addition, low Major ports are operated by port trusts under the productivity of equipment and labor increases handling jurisdiction of the central government, while minor ports costs for cargo and containers. These factors inhibit are under the purview of their respective state governments. major shipping lines from bringing mother container In 2000-01 the major ports carried 76 percent of the 368 ships for handling at Indian ports, adding to the million metric tons of seaborne traffic. The tariffs at major transport costs of exports and imports. ports are regulated by the Tariff Authority for Major Ports (TAMP); those at minor ports are not. INLAND WATERWAYS 24. Until recently, all major ports have handled more 25. While India has 14,500 km of rivers and canals traffic than their "rated" capacities. Although the n a situation has improved with capacity augmentation, the transport is very limited, and in many states, it is capacities as rated are 50-60 percent lower than those at declining. Three major waterways have been declared comparable ports elsewhere in Asia. Thus berth capacities Nating. Waterways he Beenmdeclaren do not appear to be a problem for most ports in India. National Waterways (the Ganga, the Brahmaputra, and do not appear to beaproblemformostportsinIndia. the West Coast Canal, totaling 2,716 km), and their development and maintenance rests with the National Waterways Authority of India. Other waterways are managed by the respective state governments. Most waterways suffer from shallow depth and narrow width during the dry season, and from siltation, bank erosion, lack of navigational aid, inadequate fairways with desired least available depth, insufficient vertical and horizontal clearance at a large ,'*.; number of overhead structures, and 2 ~~obsolete terminal handling facilities. At .' l~ .i. _Z_ w-*ffiffiSz_ present, only about 5,200 km of major rivers and 485 km of canals are suitable for mechanized crafts. The entire subsector carries only 1.5 billion ton-km of cargo a - year, which accounts for less than 0.2 percent of the total inland cargo market of - the country.'4 14 Inland Waterways Authority of India, Proposalfor Obtaining ExtcrnalAtdifor Promects Related to Development of In/and Water Transport Infrastructure, August 2001 22 URBAN TRANSPORT traffic during bad weather. The government is in the process of corporatizing these two airports and inviting 26. Urbanization and motorization exert heavy the involvement of the private sector in their pressure on the urban transport systems, especially in the management. large metropolitan cities. At present, India has three megacities with a population of over 12 million, ten 30. In addition to the government owned and metropolitan cities with a population ranging from 2.1 operated Indian Airlines, there are two major private million to 5.4 million, and 22 cities of more than one airlines (Jet Airways and Sahara) operating in the million population. During the last decade, motor domestic market with about 50 percent share of the total vehicle ownership, including two-wheelers, has grown at air traffic. The government has recently announced plans 15 percent a year in the metropolitan cities. But the to privatize Indian Airlines and Air India (the streets in most Indian cities are old and narrow, international carrier), through the strategic sale of part of occupying only 6-10 percent of urban land area. There is its equity to allow private management of these airlines. little provision of facilities for bicycles and pedestrians. The process of selecting strategic partners for the two Growing traffic and limited road space, accompanied by airlines is ongoing. With the completion of this process, lack of traffic management, have reduced peak-hour the government will, for the large part, disassociate itself speeds to 5-10 km an hour in central areas in many from airline operations, and limit its responsibility to major cities. policy and regulation. 27. Bus transit is the backbone of urban transport in C. CURRENT SECTOR OUTCOMES most metropolitan cities except a few where it has never developed to be a significant mode. In the largest 31. Despite its extensive coverage, India's transport metropolitan cities, suburban commuter rail plays a system is highly deficient: its services are of poor quality significant role. In almost all cities, intermediate public and its costs are high. As a result, the Indian economy transport provides a viable supplement to buses and and the society at large suffer from a number of direct suburban rail. Except Kolkata, no Indian city has as yet adverse impacts. developed a rail rapid transit line. i The first impact is the enormous waste of time, 28. Many government agencies at the central, state, and so money, on moving people and goods and local levels are involved in providing urban transport inefficiendy. infrastructure and services. Urban roads are provided and ii The second direct impact is the high opportunity maintained mainly by PWDs, and to a lesser extent, by cost of public resources being channeled to the municipal corporations. Bus services are supplied by expand or maintain infrastructure capacity or to a combination of public and private operators, with subsidize certain services. This impact is especially variations from city to city. The private sector is also the major provider of intermediate public transport services. IR runs the suburban commuter rail services. CIVIL AVIATION goods iiiefficiently. 29. Airports in India are managed by the Airport maintain or expand infrastructure capacity', si Authority of India, which is under the central subsidize certain services. government. The infrastructure facilities such as - Poor safety outcomes in some sectors that otioton terminals and runways, and the operational and safety- human suffering, economic loss, and *uerwi*ta& oriented equipment, need upgradation-particularly at inequality. the international airports. Delhi and Mumbai, which , r. handle roughly three-quarters of the total international inefficient usey- ale and domestic passenger traffic, are well connected with additional loss of land and vegetation.) the rest of the country, and these airports serve as regional - Negative social impacts (displacement of hubs. These two major airports need to be upgraded to motorized transport, involuntary .gM4MII the level of world-class international airports, with state- , of-the-art air traffic control systems to increase the indigenous peoples, spread of HIV/AIDS). runway capacity, and to minimize interruptions to air 23 significant as the transport sector is run mostly by renewable energy resources; and additional loss of the public sector. As a developing country, India land, trees and vegetation for transport corridors has many worthy claims on the use of its limited and facilities, especially in cities and prime tax base in delivering public services. In a situation agricultural areas. Transport is a major contributor marked by an acute shortage of funds, the onus is to environmental stress in India, but improved on public implementing agencies to demonstrate environmental outcomes would be possible if the that the use of these public resources is either sector were better organized. generating the most economic returns, or meeting v The sector also creates negative social impacts social ends-such as making services accessible to that could be more effectively mitigated and the poor on the most cost-effective basis. Yet managed. These impacts include the displacement evidence suggests that a significant portion of of non-motorized transport, involuntary public funds are not being optimally used, and resettlement, damage to cultural properties and that this is raising the opportunity costs of such communities of indigenous peoples, and the public expenditure. This is especially true for facilitation of the spread of HIV/AIDS. Non- those items of public expenditure that are justified motorized transport modes (such as bullock carts, by social arguments. For example, operating bicycles, and pedestrians) are popular among the subsidies to state-owned bus companies, and poor. However, transport infrastructure cross-subsidies of IR from freight to passenger development programs in urban areas are often services, are not clearly targeted at the poor; many designed for faster motor vehicles, and these of the benefits may actually be captured by non- programs often claim their right of way by poor groups or by the monopoly suppliers displacing non-motorized transport. This themselves. Another example is the common use contributes to increasing inequality: the mobility of transport investment to encourage regional needs of the wealthy and middle-income groups development. Again, it is questionable whether are met at the expense of the needs of the poor. If this is always the most efficient method for they are not properly compensated, people living income redistribution among regions. adjacent to transport corridors could face iii The third impact relates to the poor safety dislocation and loss of livelihood as corridors are outcomes seen in some subsectors, most noticeably created or widened. The processes associated with in roads, and to a less but still significant extent, in involuntary resettlement remain a challenge to the railways. Not only do traffic accidents cause policy makers and project implementation enormous human suffering and economic loss, but agencies. Finally, the increased mobility generated they also cause an increase in inequality. Poor by better transport systems, together with the groups are more exposed to transport-related extended periods of time that drivers spend away accidents because they use vulnerable modes such from families, leads to increased opportunities for as walking and non-motorized transport. They are sexual activity and for the spread of HIV and also less able to protect themselves from the AIDS. HIV prevalence among truckers in Tamil economic consequences of disability or death of Nadu jumped from 2.7 percent in 1994 to 9.4 family members. percent in 1997.15 There are 2-5 million truckers iv A deficient transport system can also exacerbate and helpers on Indian travel routes. This group- the severity of adverse environmental impacts along with the sex workers, truck loaders, roadside which any transport system will produce. In workshop workers, gas station employees, and India, the most notable environmental impacts motel and lodge owners along highways-are at from transport are increasing vehicle emissions, tremendous risk of being infected and spreading particularly in the cities; inefficient use of non- the disease. Based on a study by Voluntary Health Services, Chennai. 24 3. Diagnosing the Major Sectoral Problems 1. Chapter 2 argued that while there has been a iv The lack of a proper system to allow transport significant change in the demand for transport services in users and their representatives to make transport response to various factors, the supply of services has been agencies account for their performance. slow to adjust to changing demand. The result is that the performance of the transport system has been below par, Thesepunderivng bemse to be addressedi leadig to numb r of diec neatv imac swihi a comprehensive way because they are interlinked; leading to a number of direct negative impacts whichin unclear responsibilities inhibit proper accountability, turn deter both growth and poverty reduction (Figure 31). Chapter 3 makes a preliminary diagnosis of the four npoor accountability mechanisms hamper suitable asset ke unelyn case fo thi indqaesupysd management and so on. These problems are also closely response: linked with a philosophical attitude that is both deep- Uncearan frgmnte reposibliiesfo rooted and prevalent in India. This is the belief that diffleare aspectsgof nte d management fo transport should be viewed as a social sector - so that different aspects of the supply and management of economic efficiency should not necessarily take precedence over social equity, and so that ii Inadequate resource mobilization. commercial enterprises can be expected to facilitate iii Weak asset/system management and sub-optimal social ends such as employment generation and allocation of scarce resources. redistribution of wealth. Figure 3.1: Transport Sector Problems: A Diagnostic Framework Indirect Impact: Slower economic growth and poverty reduction Direct Impacts: * Additional time wasted * Higher opportunity cost of public funds * Contribution to rising inequality * Poor safety * Additional negative social impacts * Additional environmental damage System Problem: Demand Changes due to Mismatch between supply and exogenous factors: demand for transport services * Higher growth A Structural change _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ tim e Poor Supply Response: l reliability * Poor transport services . comfort * Inappropriate levels of infrastructure Causes of Poor Supply Response (interlinked) Unclear or overlapping Inadequate resource Poor asset/system Inadequate imposition responsibilities mobilization management of accountability Underlying Causes: Traditional paradigm-transport perceived as social rather than economic or commercial sector. 25 A. UNCLEAR OR CONFLICTING 4. In urban transport-a subsector especially difficult to manage effectively-responsibilities are highly fragmented. As in most other countries, urban transport in India involves many government agencies. 2. The first major cause of unsatisfactory sector outcomes is that sector responsibilities are not clearly But the difference is that the mechanism for multi- assigned, .... teovra,oagency coordination is generally weak in India. Both asind* rte ovrlp orcofitin resoniblie state and local governments are the major players in are given to the same agency. The fragmentation and uran tansport fovrnmos tes though therent overlapping of responsibilities basically limits and obscures urban transport for most c t h government also plays a role-through IR (suburban rail accountability, hence pressure on agencies to perform. services in some cities) and the Ministry of Urban Conflicting responsibilities have also resulted in market Development (MOUD, the nodal ministry for policy distortions-such as the imposition of subsidies, cross- and coordination of urban transport matters). While subsidies, unnecessary regulations, and price controls. ., , . ,w, . , ,, . , . ,^ . . ~~~many agencies hlave a role in urban transport, and while These in turn have led to operational inefficiencies, many may indeed be clear about their individual roles, misguided industrial locations, inappropriate modal splits, no one entity assumes overall responsibility. As a result, and limited technological innovation, the blame for poor transport system outcomes can be 3. Indian Railways (IR) serves as a clear example of passed from any one agency to another, and nobody can conflicting responsibilities being assigned to the same be brought to account. Different agencies are allowed to agency. IR is expected to operate as a social service by pursue their own agenda, operating only on the basis of providing relatively cheap passenger fares and an their own departmental priorities and procedure, and uneconomic schedule-while still meeting targets for not necessarily driven by the need to respond in a profitability. The conflicting responsibilities lead to the coordinated fashion to evolving user and citizen need for cross-subsidies from freight to passenger services. demand. For 20 years, IR has been raising freight tariffs much 5. Responsibilities in the rural roads sector are also faster than the increases in input costs, while passenger disjointed and unclear. In most states, a number of fares have increased roughly at the same rate as the input organizations are involved in rural road construction, costs. As a result, freight tariffs have increased much faster alongside a multitude of financing mechanisms which than passenger fares (Figure 3.2), and the ratio of rail further complicates matters. The organizations involved fares to freight tariffs has fallen to 0.32, among the include national bodies (Border Roads Organization), world's lowest. This has forced more freight to divert to state level bodies (PWDs, Rural Engineering roads. Partly for this reason, the railways' share of freight Departments, Forestry and Agricultural Departments), traffic has dropped from 65 percent in 1978 to less than and local bodies (Panchayat Raj institutions or PRIs). 40 percent at present. Cross-subsidization also occurs This multiplicity of implementing agencies presents a between railway operations on high-density and low- problem not so much in new construction-although density (or money-losing) branch lines. there are inefficiencies due to agencies working in Figure 3.2: Trends in Freight and Passenger Rates 70 70 0 0i b 50 - | = Rail Freight i 40 4." -U-- Rail Passenger '44 2 30 ~ ,it *f* 4 %._ ___'_ r _ . ' - ; - 'Sw t,- .f, - ;} > , q Road Freight 20 __*-- 10 1980-81 1985-86 1990-91 1995-96 1998-99 Year 26 isolation or even competition with one anther-but in may be a strong case-as demonstrated by high forecast the resulting maintenance of rural roads. Managing rural economic returns-for the government to increase the roads on an ongoing basis to deliver lasting benefits to share of transport infrastructure investment in total communities requires, among other things, that roads are public spending, this will often be at the expense of other clearly assigned to competent road agencies. government priorities. Both developed and developing Unfortunately, the ownership of many rural roads in countries have, at their own pace, come to realize that in India is not clear; they are built by one agency, then the face of these difficult trade-offs imposed by hard effectively disowned or "orphaned." In such a case, rural budget constraints, the most feasible response is to charge communities and rural road users have no one to hold users more, and more explicitly, in return for improved accountable for the poor condition of the road; at the transport services. same time, these communities and users are unwilling or unable to undertake repairs themselves, because of the 8. Successful and sustainable transport policies perception that the road is a government asset. There is seek, among other things, to impose market discipline an almost total lack of some important maintenance and maximum cost recovery on as much of the system as categories such as grading and drainage. In Uttar Pradesh, possible. At the same time, they use general taxation to road maintenance is taken care of by the PWD, but fund high-priority capacity improvements (ideally drainage is the responsibility of the local governments leveraging private funds in the process), and to provide who rarely have the resources to meet this responsibility, targeted subsidies to meet social ends. India is moving slowly in this direction. The "user pays" principle is well 6. The main national and state road transport established in the railways, ports and air transport, and system also suffers from split responsibilities: it provides the principle is beginning to gain currency in highways both a means to move people and goods and a and to a far lesser extent, rural roads. However, general mechanism for the administration of tax collection. taxation remains, and is likely to remain, a major source Vehicles continue to encounter delays at state border of plan and non-plan finance for some parts of the inspection checkposts (commercial and excise tax transport sector. Most investments to increase transport inspection) and municipal border octroi (road tax) infrastructure capacity come from the public sector, with checkposts.16 Both types of checkposts undermine traffic the private sector providing no more than 5-8 percent of efficiency, often holding up goods vehicles for hours. the total.17 They also generally prove to be poor mechanisms for tax collection, given the random nature of searches and the 9. Allocations to transport as a share of public high levels of leakage. While octroi revenues are a major spending and GDP have fallen in recent years (see Table source of local revenue for some municipalities, the cost 3.1), though they have increased in absolute amounts; octroi collection imposes on trade and the national while transport as a share of GDP has been going up. economy is likely to be high. Table 3.1: Share of Public Expenditure for Transport for Each Five-Year Plan B. INADEQUATE RESOURCE Five-Year Plan I II III IV V VI VII VIII MOBILIZATION Transport sector 22.1 23.5 23.1 16.0 14.1 13.0 13.5 12 9 as % of Total Plan 7. The second major cause of poor sector outcomes is that resource mobilization has been inadequate to 10. But the amount of costs being recovered, either maintain existing infrastructure and to invest in new through direct or indirect user charges, does not seem to ones. Ultimately, finance for investment, operation and be increasing substantially. Contrary to popular opinion maintenance can come from only two basic sources: in India, in the highways subsector, road taxes-at 1.2 direct/indirect charging of transport users, or the general percent as a portion of GDP and approximately 6.2 taxation of the whole population. Countries throughout percent of total central and state government revenue- the world, whether developed or developing, face a are not especially high in comparison to international similar challenge in financing transport. Though there standards.18 The union excise duty on diesel and petrol 16 Gujarat, Maharashtra, Manipur, Orissa, Punjab, Rajasthan, and West Bengal still levy octroi, while Himachal Pradesh, Karnataka, Madhya Pradesh, and Uttar Pradesh have abolished it Andhra Pradesh, Assam, Bihar, Kerala, and Tamil Nadu never levied octroi. ' The levels of private financing in infrastructure vary across subsectors, with the port sector being the highest ' At the state level, however, there isa wide range in he share of road tax as portion ofstates' own tax revenues, from 2 6 percent in Tripura to 478 percent in Nagaland. 27 is levied at 16 percent and 24 percent respectively- infrastructure, though such investment remains small reasonable by international standards. Revenues for road relative to total public spending - about Rs 20 billion in related taxation have increased substantially over the last ports, and about Rs 10 billion in roads were actually 'few years. But it is debatable whether the levels of road invested during the 1990s.21 user charges have gone up sufficiently to ensure financial sustainability for the sector: the expenditure to revenue 12. Several problems currently limit the interest of ratio in road transport has declined from 0.55 in 1950 to private investors in transport infrastructure: 0.43 in 1991.19 The revenues accruing from direct tolling * The failure of reforms to address issues of of roads are very limited. In addition, some states have creditworthiness (Box 3.1). been accruing budget liabilities through market * The lack of an appropriate regulatory borrowings made possible by the creation of Road framework. Development Corporations (RDCs), while little effort has been made to levy more charges on users. In the * A gap in perceptions of risk between government railways sector, the progress in financial self-sufficiency sponsors and private investors. made in the early 1990s has now been reversed-with * The perception that revenue risks are too high due about 45 percent of subsector expenditure being met by to the affordability of tariffs or uncertainty of internally generated revenues in 1998, with market future traffic flows.22 borrowings and budget support making up 29 percent and 26 percent respectively.20 Commercially viable projects are unlikely to face financing constraints. The problem is to make projects 11. In terms of mobilizing resources through the commercially viable-either through granting investors private sector, the need to ensure an adequate revenue greater rights to collect adequate tariffs (and guaranteeing stream through sufficient cost recovery from users is a that right); and/or by establishing some form of public- binding constraint. It is only when the need to recover private partnership (PPP) where investments, risks and most costs from users is fully accepted, that private returns are shared. However, governments seem reluctant investment in transport infrastructure and rolling stock to sanction the imposition of new or raised tariffs, and assets can become a really significant part of the resource there is also a lack of experience in devising workable mobilization strategy. In recent years, India has seen a PPPs. As a result, private sources remain at the level of a considerable increase in private investment in transport minor player in the overall investment in the sector. Box 3.1: The Creditwortinessof Indian Road Agencies'' ,-.NHAI has raised'about-Rs 930 Cr ($21sO million) through two bond'issues.'Although theN government provided no explicit guarantee, it is"subject to a m6ral obligation as NI-LAI is still'considereda government agency.. So the bonds were rated'AAA andthey sold well.because oftlheir lonig term capiBiau t ffset. But further'bond issues are likely -tobe c6nstr.iined b' NHAI's credirxworthine,s. Road a.sets are not.o'wned;b y NHAI,and an' toll revenues (in .any. case limited to date)' are treated&S aaccoLIniS payable ito (he government. 'NHAI's onlv.income ists 3 percent' management tee. It. biggc%t source of funds is go%'ernmenr grants. Thcee grants are partiallk related to receipts ot the idt'l ces into the consolidated fund destined t;r the CRF; although [he CR- Act does not assure income for NALJ as appropriations are dependenit on Parliamentary endorsement. The situation is similar for other SRDCe. several of %hiich have also i,xued bonds or taken bank loans, all w%ith government guarantee. \W'ithout an unencumbered revenue s[ream. N-AI and the RDCs are unable to enter into the kind of inno%ai-e financing arrangements seen for example in Chind, and to de%elop their om n independent credit:.orthiness with wnhich to raise debt on aiffordable terms. \. 'fre ! ArnoIld Ft-,, / i rc. .'i t it-i, t it I i-. fr i'HAI. unpubliJ.icd report 20(i Rakesh Mohan Committee, The India Infrastructure Report Policy Imperativesfor Growth and Welfare, Volume III, 1996 Rakesh Mohan Committec, The Indian Railways Report2001 Policy Imperativesfor Reinvention and Growth, Volume 11, Part 1, July 2001 ' Price Waterhouse Coopers, Report on India Financial Market Assessmentfor Private Inftstracture Investments, 2000. 2 ibid 28 C. POOR ASSET/SYSTEM MANAGEMENT ___ __ ___ 13. A third key cause of poor sector outcomes is that attention to asset maintenance. agencies responsible for managing transport assets and ' Investment in assets Avith poor returns. systems-both infrastructure and rolling stock- ' Lack of incentive to maniage costs and MIlllM generally do not have adequate procedures and services efficiently. processes for managing these assets. Asset management ' Overstaffing and homogelnous skills mix. can be described as a systematic process of maintaining, ' IeIV -r |X;dulKI: :P:IIll.m ml upgrading, and operating assets, and of making decisions failure to let market conditions prevail. on how best to apply scarce resources to meet economic, ' * NMf IM F MIM social, and environmental outcomes. Such management ' Lack of informatioii management. combines engineering principles with sound business practices and economic rationale to make and implement financial and human resources than it deserves. As a appropriate decisions that also meet public expectations. result, neglected maintenance of assets leads to The vast majority of transport assets by value are owned deterioration that will require future reconstruction at a and managed by the public sector-road agencies, IR, much higher cost. It also leads to higher operational costs port authorities, municipal authorities and the SRTCs. and low system reliability. The burden of getting the most from existing public 16. Investment in assets with poor returns is assets and making decisions on future asset creation lies another symptom of a weak asset management system. A largely with officials in these public entities, good part of the public sector has not worked in a 14. Agencies generally do not devote enough commercial manner, and their investment decisions are attention to the regular collection, analysis and use of often guided by political and unjustified social basic data fundamental for proper management-data on considerations rather than economic and commercial the asset inventory, asset condition, traffic demand, merit. About 70 percent of new rail investments are at operating costs and revenues. This is an essential present considered to be politically driven and prerequisite for sound decision making, as well as unremunerative.23 Many rural roads are constructed or reporting on the performance of assets and the use of upgraded to standards higher than those justifiable by the public funds to legislatures and the public at large. Citing levels of traffic; typically, most of these assets are not inadequate resources to collect and analyze data on a maintained and allowed to fall into disrepair. regular basis, agencies often rely instead on antiquated paper-based systems, at the same time spending furiously 17. Apart from poor capital budgeting, transport on new investments. The failure to appreciate the critical agencies face little incentive to manage their costs or importance of information means that adequate deliver services efficiently. Additional costs are borne as a investment is not made to implement information result of a lack of competition in supply, poor management. It is this lack of information management procurement, overstaffing and incorrect staff skills mix, that undermines, at a fundamental level, transport asset limited use of technology and lack of the application of management in India. The lack of interest in data is incentives on agency staff to perform. Many agencies caused by the lack of accountability for results; the have been slow to adopt the principle of bringing absence of demand from external agents (politicians and competition into those areas of the system that are users) to receive performance related data; and the commercially viable. Hence a good deal of infrastructure application of non-rational criteria in decision making. design, supervision and civil work, together with the operations of railways, ports, and much of the bus 15. The classic indicator of a weak asset system, are all delivered in-house as a monopoly supply. management system is excessive focus on new investment This leads to many of the typical economic problems at the expense of adequate attention to asset that beset monopoly suppliers. Where the private sector maintenance. Maintenance generally has far higher is brought in to deliver commercial services, there is returns than new investment. However, largely due to frequent ineffective procurement of such services, which political imperatives, maintenance tends to receive fewer then retain inefficiencies and waste scarce resources. 2' Rakesh Mohan Committee, The Indian Railways Report 2001. Policy Imperativesfor Reinvention and Growth, Volume II, Part 1, July 2001. 29 18. Overstaffing is recognized as an obstacle to 20. A final aspect of asset management is the response improving the efficiency of transport agencies and public of transport agencies to the problem of encroachment and undertakings, but it has been an obstacle difficult to address. ribbon development, common along transport right-of- Despite staff reductions over the last decade, the labor ways. On the one hand, traffic brings economic productivity of IR is approximately half that of its opportunities to nearby residents. On the other hand, these counterpart in China, and a quarter of that in South Africa activities compromise traffic efficiency and create traffic (547 transport units in India, 1061 units in China, 2402 hazards. On national transport routes, central agencies do units in South Africa).24 The employee productivity at the not have the full authority to deal with encroachment typical Indian port is in the range of 200-440 TEU while in activities, which fall under state jurisdiction; yet state West Port Malaysia it is 1080 and in Singapore 2300.25 The agencies usually have little interest in enforcement. number of professional and administrative staff in the state Institutional and administrative coordination tends to be road agencies per 100 km ranges from 10 to 32; while most weak among multiple political and administrative modern road agencies in other countries have between 2-7 jurisdictions. There are clearly designated institutions (such staff per 100 km. Overstaffing in transport agencies is partly as the Ministry of Environment and Forest and the state the result of using these agencies for the distribution of pollution control boards) and clearly defined laws (such as political largesse; and pardy the result of employment laws the National Highway Act and Land Acquisition Act) for being so restrictive that even genuine redundancy due to the addressing the transport project related environmental and outsourcing of services or technological innovation does not social safeguard issues. But despite these, review and provide adequate cause for retrenchment. And overstaffing is clearance procedures tend to be long and do not adequately compounded by the homogenous skills mix in many involve affected people, stakeholders, and NGOs. transport agencies; typically, financial, planning, environmental and procurement skills are all in short supply. D. INADEQUATE IMPOSITION OF 19. Transport systems are also poorly managed in ACCOUNTABILITY terms of the various government taxes, regulations and enforcement systems that seek to control or manipulate 21. Government accountability is based on the belief transport operations. For example, distortions result from that citizens have a right to know and receive openly delared the different tax rates on two-axle and multi-axle trucks. facts on both financial and non-financial aspects of public These rates do not bear any relationship to the damage sector performance-facts that may lead to public debate caused by the two types of vehicles, leading to under-use among citizens and their representatives and subsequendy, to of multi-axle trucks even though they cause less damage necessary corrective action. To set and impose accountability, than the frequently overloaded two-axle trucks.26 a number of things need to be in place: Similarly, different tax rates and surcharges on the * The right to relevant information. purchase of buses and smaller private vehicles are not * The establishment of accurate and regular rational because they are unrelated to the space used by reporting as a duty. the two types of vehicles.27 In Mumbai, buses occupy * An independent body able to assess performance one-tenth the road space per passenger as do private on behalf of the public. vehicles, yet they are taxed several times more than both * The power to impose effective sanction or reward private vehicles and smaller intermediate public transport on the responsible agency.28 vehicles. Thus transport tax structures need to be reviewed and rationalized to remove distortions and 22. There are several levels of governmental allow market conditions to prevail. accountability, and clearly, there is an increasing degree of 24 World Bank Railway Database; Transnet Annual Report, 1999; and IR Yearbook, 1998-99. is Data collected directly by World Bank staff. The tax rate for trucks iS generally based on the laden weight and has no relation with the axle-load. A 2-axled truck with a laden weight capacity of 10.2t has to pay Rs 5430 per annum while the 3-axled with a capacity of 16 2t has to pay Rs 9360 per annum. An additional tax of R.s 410 is to be paid for every 0 5 tons. Similarly, for truck trailers, the tax per annum is Rs 9160 up to 16.2t, and an additional tax of Rs 410 for every 0.5t per annum V For example, in the state of Maharashtra, a one-time registration fee is at 3.5 percent of the car value, which translates into an average fee of about Rs 9000 For buses, an annual passenger tax is imposed in addition to the registration fees. Private buses pay a registration fee of Rs 41,600 per annum, and buses operated by the municipal bus company, BEST, pay over Rs 120,000 per annum As has been argued in the first section of this chapter, this last requirement is difficult to realize if it is not clear who is actually responsible This sectLon will examine the other aspects of accountability in greater detail 30 subjectivity in assessing these different levels of whatever little information is made public, means that accountabilities. The levels include: such information has limited impact on citizens' and * Compliance with budgets, laws and regulations. transport users' ability to make informed judgments on * Using adequate processes and procedures. transport agency performance. * Ensuring efficient operations. 26. Although all government transport agencies in * Achievement of established subsector goals or India are required to produce annual financial statements, targets. these statements are generally far from adequate when it Selection of policies pursued or rejected. comes to keeping transport users and taxpayers are suitably informed. Public agencies are not charged with 23. In India, there is a well-developed and generally the general duty of regular and accurate reporting on all well-implemented system for the first level of relevant information such as the efficiency of service accountability - ensuring, through the Comptroller and deLivery, labor productivity, condition of assets and Auditor General (CAG) Department's annual financial progress in meeting targets. Some transport agencies do auditing system, that the spending of public funds is in produce annual reports, though unfortunately they are accordance with approved budgets and in compliance not usually linked with business plans as they should be. with established bureaucratic procedure. But there are More agencies are beginning to present a broader array of practically no systems for imposing accountability at the information in their reports, and greater attempts are other levels. Transport agency performance is judged being made to disseminate these. Others -such as the solely on spending and physical output-rather than on Transport Department in Karnataka and the PWD in quality, cost effectiveness and reliability of products Uttar Pradesh-are delivered or services rendered. Indeed, some might argue moving towards the that there are excessive controls in terms of accountability publication of citizens' for budget and regulations compliance. These might, in charters that set down A fact, harm the efficient delivery of public services, as civil p e r f o r m a n c e oatput. servants seek to avoid possible censure by passing standards. However, vromW_ decisions up the chain of command or making decisions no standard format has accoultabihity at othier7 that are "by the book" but otherwise irrational. been applied to ars lwe//. those oj'qunlity. agencies delivering 4 24. The failure to impose effective systems of similar services-say accountability beyond mere compliance with budgets all the road agencies or and regulations has a number of causes: all the bus companies-and the value of these annual • The limitation placed on a citizen's right to reports and citizens' charters in assessing or enforcing relevant information. agency performance is still limited. The contents of the IR * The failure of public agencies to report all relevant financial statements presented to Parliament and the information as a duty. public, depart significantly from accepted commercial * The absence of independent bodies to verify accounting practices: indeed they have been described as information and assess performance based on the unintelligible to anyone outside IR and the Ministry."29 information given. These financial statements require updating to bring them *Thelack of imposition of sanctions and rewards. in line with generally accepted accounting principles in * The lack of imposition of sanctions and rewards. India so that current and potential investors, as well as rail 25. In India, there is no established right to users and taxpayers, can be better assured that their information granted to taxpayers or public service users, monies are being reasonably utilized by IR management. although some states have promulgated regulations on When offering bonds to the market, RDCs have produced disclosure of information, and are actively considering prospectuses. But again, not only do these provide litde passing laws that will enshrine this right. The form, the genuine value to potential investors, they are also, by their unreliable quality, and the method of dissemination of nature, irregular.30 Rakesh Mohan Committee, The Indian Railways Report 2001 Policy Imperatnvesfor Reinventionand Growth, VoJume 11, Parr 1, July 2001 3, In any case investors may not be all rhat interested in he road agency's performance. since such bonds are guaranteed by the stare government and so offer risks and returns similar to those of general stare bonds 31 27. Even if the information were there to be assessed, circumstances, making transport agencies accountable for there is a general absence of independent bodies that can their performance, and not just for financial and legal assess agencies' performance on behalf of transport users probity, is next to impossible. and taxpayers (though the CAG does undertake financial audits and some limited technical audit on an ad hoc E. THE UNDERLYING PROBLEM: basis). Indeed, self-regulation seems to be more or less the norm in the sector, with the exception of TAMP, which is BALANCING ECONOMIC EFFICIENCY moving towards a clear separation of implementation AND SOCIAL EQUITY from regulation. For the national road network, the potential basis for this division between an implementing 29. Promoting social and regional equity has long agency (NHAI) and independent assessing body been one of the main objectives of transport (MORTH) is present; however, such a relationship is development in India. Some transport policies and complicated by the fact that MORTH itself is an investments have indeed had remarkable success in implementing agency. For state roads, there is a total reducing poverty. For example, at the time of absence of any division between implementer and independence, only 10 percent of villages had all-weather assessor: road agencies are self-regulating, and no other road access; today that share is 60 percent. But this independent agency is able and willing to monitor road achievement did not come cheaply: the resources used agency performance on behalf of the legislature and were diverted from improving the main transport system, public. This is also the case with SRTCs, which belong, thus compromising system-wide efficiency. Many administratively, to Transport Departments so that they interventions designed to reduce poverty have been are not subject to external performance assessment. ineffective and unsustainable because they have failed to Again, in urbant transport, here are no independent emphasize cost-effectiveness and cost recovery. The four bodies empowered to assess the performance of transport causes of poor sector outcomes arguably stem from this infrastructure or service providers. In railways too, the emphasis-of direct use of the transport sector to deliver role of the Railways Ministry in making objective poverty reduction without adequate attention being paid assessments of IR performance is far from clear, to the actual outcome. Moreover, political resistance to transport sector reform often comes in the guise of 28. Finally, accountability is limited by the inability protecting efforts at poverty reduction. or unwillingness of those in powerful positions to impose effective sanctions or rewards on agencies or on their 30. There are two ways in which transport senior management. Agencies in general can be interventions can contribute to poverty reduction: sanctioned or rewarded with losing or gaining budget * First, transport helps reduce poverty indirectly by grants, through "naming and shaming" or by receiving supporting or promoting economic growth praise in public documents. Individual staff can be (through, for example, a market widening effect, motivated through performance-related pay and career and system-wide efficiency improvement). advancement, or, on the negative side, fear of losing their Second, there are opportunities for transport jobs. However, such sanctions and rewards do not appear intentions to directly target the specific needs to exist in the transport sector-at least not in a formal thentions as iroving basic nees and transparent manner-either in the case of individuals of the poor (such as improving basic accessibility or agencies. One case in point, for example: the allocations to the CRF for national, state and rural roads The two types of interventions can be are currently assigned to implementing agencies on the complementary; but often, they also have to compete for basis of principles apparently unrelated to performance. limited resources. The question then is how to strike the Senior staff in most transport agencies have little clear-cut best balance between the use of direct and indirect motivation to deliver better outcomes as their future is approaches in the transport sector to tackle poverty. assured; their salaries and other perks are secure. In any There is no clear or technical answer to the question; the case, with public sector career development being largely balance is struck on the basis of informed dialogue based on the time served, most of the very senior officials through the democratic process. are close to retirement and have little incentive to push up performance standards. The average tenure of the 31. Unfortunately, this dialogue is, all too often, rather senior official in a state PWD, an Engineer-in-Chief or poorly informed. It is impossible to provide quantitative equivalent, for example, is less than a year. Under these analysis to support any argument about the relative merits 32 4. Reforming the Sector: A Review of Recent Experiences l *>- l. This chapter reviews the recent experiences of national reform initiative to privatize and deregulate transport sector reform in India, and summarizes the domestic industry. Private airlines were introduced to lessons learned. Thus it defines a starting point, and provide domestic airline services and compete with the serves as a foundation, for the formulation of short to nationally owned Indian Airlines. In 1992, Delhi became medium term actions for each subsector (see Chapter 5). the first Indian city to liberalize its city bus transport market, facilitating the entry of private operators. About A. TRANSPORT REFORM IN THE 3,000 carriage permits were issued to bus owners with five EARLY 1990S or less vehicles, and the city routes were open for private operations.31 2. The transport sector reform during the 1990s 5. By the middle of the 1990s, a reasonably sound followed the market liberalization movement that began in enabling environment was in place for private sector 1991. Before that point, GOI made some important policy participation in operating trucking, bus, shipping, and changes that yielded substantial favorable outcomes. For airline services, although institutional capacity was still far example, the removal of the ceiling on the number of from adequate in the areas of safety, environment, and national trucking permits in 1986 made it possible for the economic regulations. But at the same time, transport trucking industry to become the most viable across the infrastructure was almost fully controlled and managed by transport subsectors. The "open skies" policy adopted in the public sector. That was the starting point for the 1995 1989 allowed foreign cargo airlines to enter the Indian Bank sector publication, India: Transport Sector-Long Term market, and almost immediately, the move relieved a Issues. Based on an assessment of transport reform progress critical transport constraint on India's high-value exports. made in the first half of the 1990s, the 1995 report 3. The transport reform actions in the early 1990s proposed a range of policy and institutional reform actions sough to set up a legal and administrative environment to (see Box 4.1) to speed up the sector's transition to a more sought to set up a legal and administrative environment to maktoineltts enable private sector participation in transport service operations, especially in ports and ocean shipping, both 6. In 1996, the GOI published a landmark report closely linked with India's foreign trade. The deregulation known as the Rakesh Mohan Report on Infrastructure.32 The and expansion of foreign trade obviously created report examined institutional arrangements, laws and substantial demand pressure on the transport system. In regulations, and sector-specific constraints that inhibited the response, GOI passed a Multi-Modal Transport Act to flow of resources to infrastructure, and also recommended facilitate international door-to-door shipments, and in policies to overcome these constraints. Among the changes the 1993, amended the Merchant Shipping Act to open report recommended to make services more efficient and raise private capital markets to Indian vessel owners and resources for needed investments, was its call for governments operators. In addition, GOI introduced new ways of to encourage private participation in infirastructure financing, providing needed services. For example, CONCOR was operations, and management (see Box 4.2). created under IR in 1991 to provide import and export multi-modal container transport services to and from B. TRANSPORT REFORM IN ports, and the Corporation operated under a sort of performance-based service agreement with IR. RECENT YEARS 4. At the same time, the transport sector was also 7. Since the two reports were published, the central influenced by the general climate created by the GOI's government and many state governments have made 3' The Delhi experience with private bus operations was disastrous in the first rwo to three years because of the failure in managing competition between public and private operators Rakesh Mohan Committee, The India Infrastructnre Report Po/ly Imperanvesfor Growth and We/fare, 1996 34 of the two approaches, or to hypothesize on whether India 32. In line with general international trends, it is would be better or worse off if the country had adopted a time perhaps for India to shift the balance in its different balance in the past. What can be said is this: approach to transport-in favor of focusing the experiences with using public investment, and regulation of sector's primary role in poverty reduction on the transport system to reduce poverty directly, have yielded contributing to the engine of growth. This requires a some useful lessons. Allocating resources to anti-poverty new paradigm that adopts a more commercial efforts can be wasteful if the emphasis on cost-effectiveness approach to sector management and financing. In is inadequate. Transport investments targeted at the needs such a paradigm, the sector's use in direct efforts to of the poor can be ineffective without a sustainable reduce poverty might be more circumscribed, with arrangement for funding recurrent costs. Transport greater effort made to ensure that such direct actions subsidies designed to help poor people can be captured by are indeed efficient in redistributing income and the non-poor and otherwise distort the market. sustainable in the long run. 33 &!! I > i. is-t 12. The ports sector has continued its reform -L .e momentum. Both the central and state governments have continued their fiscal, regulatory, legal, and policy . * . T .. =; ag .................. reforms to encourage private participation in port investment and operations. In coastal states, many new ports are being developed with private participation. TAMP was established in 1997 so as to regulate major port tariffs independently from port trusts. The Major Ports Trust Act was amended so that major ports could be *'~ -,'. 5 t \ 'corporatized. -,At- , ,2 \- 1 13. The government is also in the process of _ / >\privatizing Indian Airlines (the domestic carrier) and Air 1 . .r. . !' ; F,.X!. 't,wi *,: .. .4t 1~~~~~~~~~~~~~~~~~~~~A >:_ ' _,, ,_ Ar ,,ER s ; k £ * ;- Pv r ~~~~ 4 -3 11. Reforms are also necessary to develop and business interests. A table of performance could be enforce more comprehensive accountability systems for updated annually to benchmark progress and service level outcomes by: service delivery by individual states-even to * Producing, and disseminating to the public, all "name and shame" poor performers. Finally, the relevant information-not just information considerable inter-governmental transfers being related to financial probity (e.g. annual business made by the CRF could influence state action plans and corresponding annual reports linked through monitoring, minimum access hurdles, with government/agency framework agreements, and bonus funds for top performers. statewise comparison of performance by 14. Efforts will also have to be made to address road independent bodies, road user satisfaction transport market distortions, including the highway surveys). checkposts, through regulatory, fiscal and institutional * Creating opportunities for non-government reform aimed at maximizing the benefits of huge public stakeholders and road users to get involved in investments in infrastructure. Such reforms can lead to as overseeing agency performance. much benefit to the economy as infrastructure * Sharpening the focus on setting and monitoring improvements. They can also help towards better targets, and rewarding/punishing performance. targeting and meeting the obligations implied by policies of equitable access to road transport services. In the short 12. In the longer run, state road agencies will have to term, the need is to understand the extent and nature of tackle harder issues. These include: the distortions so that a case can be made for their * Improving human resource policies and practices, removal. In the medium term, the task is to implement and bringing them more in line with private the reforms necessary to remove the distortions. sector terms and conditions of service. . Fostering greater autonomy by maintaining a B. RURAL ROADS: ENSURING distance from the government, and by SUSTAINABLE INVESTMENTS IN corporatizing and privatizing commercial services. * Creating a formal role in decision making for road BASIC ACCESS users and other non-governmental interests. 15. Based on the value of construction work, the Both short and longer term actions will require current value of the existing rural road network is strong leadership, political commitment, and close links estimated at about Rs 2,400 billion. The maintenance of to broader civil service reform-elements already present the existing rural road network requires about Rs 50 in some states, but which need to be expanded to all billion per year, out of which only 20-30 percent is states. available. It is indeed a challenge to preserve this investment without adequate funds for maintenance. The 13. The performance of state road agencies will in all solution to this problem has traditionally been sought in likelihood vary. Thus the central government needs to more budgetary allocations rather than in improving the consider how reforms can be encouraged and facilitated efficient use of existing funds. 16. Great opportunities do in all states. There will certainly be a demonstration exist to enhance the efficiency of rural road investments effect, with the high-profile actions of the NHAI and through improved policies. The need is to develop a other effective road agencies encouraging states to national policy framework that emphasizes the undertake change. But other mechanisms should be sustainable management of rural road assets, and the use considered for using 'fast trackers" to prod "SlOW of economic criteria for rural road investment decision trackers." These mechanisms, which would ideally be making. In particular, the policy must emphasize managed by MORTH, might include: sustainable financing for, and community participation * Showcasing good practice through websites, email in, maintenance. All rural road programs must be networks, and workshops. undertaken within such a rational and comprehensive * Partnerships among PWDs. policy framework. * Annual awards for innovation presented by a well- 16. Great opportunities do exist to enhance the respected national institution such as the Indian efficiency of rural road investments through improved Roads Congress, Central Road Research Institute, policies. The need is to develop a national policy MORTH, or some organization representing framework that emphasizes the sustainable management 42 Box 5.1: Highway Financing-The Chinese Experience China has been investing about $24 billion annually-about 2.5 percent of GNP-in highway improvements. New highway construction has historically been dependent on public spending, through a combination of government grants, loans and user charges. The road maintenance fee and vehicle purchase fee account for about 70 percent of funding. (A fuel levy was authorized in 1997 although it is yet to take effect because its exact size and structure has to be finalized by the government.) Although China is often held up as an advanced model in terms of private participation in highways, during the 1990s, the private sector contributed only about 9 percent of total highways spending, totaling about $15 billion to date. Still, this has been an important contribution and is likely to become even more important as the highway financing system in China develops. It is worth noting that foreign investment has been very limited; most private funds have been domestic. China has to date experimented with five models to bring private finance to the sector: 1. Cooperative joint venture. This model, unique to China, has been used to invest about $12 billion in about 80 rehabilitation and expansion projects. The public partner (municipal or provincial governments) takes the main commercial and construction risks, sharing O&M and toll collection. 2. Long term debt secured in international financial markets. This has been limited due to the absence of a well- structured legal and regulatory framework. 3. Securitization of existing assets. Again unique to China, this method uses a provincial shareholding expressway development company (eight to date, raising $2 billion) to leverage existing assets. Mature highways, with well- defined traffic levels, are injected into the balance sheets of holding companies to generate immediate revenues that can be used to raise equity capital on domestic markets. 4. BOT. This has only been implemented in a limited number of schemes due to a number of outstanding policy issues (such as no regulator, absence of procedures for bidding, or land acquisition). 5. Private mainland toll road company. This concept was successfully undertaken by the Shanghai Midway Infrastructure Holding Ltd. It used 4 existing secondary toll roads in one province to expand and leverage 2 new toll roads in another province through private placement in the equity market. Source MSA Consultants, PPI Initiative in China, Transport Sector draft report prepared for the World Bank, July from reliance on explicit or implicit government and Tamil Nadu) have moved to enact legislation enforcing guarantees. modern procurement rules, and this reform, together with Resolving outstanding legal and regulatory associated implementation of the new rules, should be constraints that hinder private project finance, encouraged in all states. Continued focus on achieving transparency and accountability in contract administration 10. State road agencies also need to enhance their asset is needed, as also on emphasizing quality control and cost, management systems. This will require, first, far greater especially with more innovative activities such as emphasis on data collection, analysis and information performance-based maintenance contracts. Some management. It will also require investments in staff experiment with design and build or turnkey projects, development and information technology infrastructure to which are becoming increasingly popular internationally, is improve planning, programming, and budgeting of works. also warranted. Site readiness - land acquisition, To maximize the potential benefits of contracting out and resettlement and utility shifting - still delays minimize scope for corruption, efforts will need to be implementation on many projects, and further attention is directed at promoting improved procurement processes to required to improve these pre-construction activities. ensure adequate and fair competition, together with Finally, there is still room for improvement in the enhanced supervision, contract management and management of the environmental and social impacts of construction management. Some states (such as Karnataka roads, both at the strategic and project levels. 41 ensured with the lowest-cost design that achieves basic multiple agency funds and programs of rural roads all-weather access. Technical standards should be set in also needs to be managed by the center. line with traffic levels. The current design standards for rural roads are too general, and do not adequately reflect 20. The major responsibilities for rural roads- traffic levels, the populations served, and road functions. including financing, planning, execution, maintenance, The design standards suggested in the Rural Road and management-should continue to be with the state Manual recently developed by MORD should be tested governments. In the spirit of the 73rd Amendment to the in the field, and modified as appropriate to enhance Indian Constitution, which clarifies rural roads as local cost-effectiveness. government functions, Panchayat Raj bodies at district, block and village levels are expected to play an 19. In terms of institutional arrangement, the role of increasingly pivotal role in the construction and central, state, and local government should be clearly management of rural roads. Thus the need for defined. MORD has certain core responsibilities, but at establishing close coordination between various rural present, it is not clear that the Ministry is fulfilling the road organizations and local government levels has required roles and strategies. Both processes and skills acquired a new dimension and significance. Suitable need to be changed at MORD to reflect these core mechanisms as well as a framework have to be evolved for responsibilities, which include: the effective participation of these levels of government. * Assuming leadership in policy Perhaps the most important requirement is that the pace enunciation/adjustments and institutional of decentralization should not be set ahead of capacity changes that are essential, as well as in financing, building at the local level, since this may lead to the rapid technology transfer, human resources deterioration of rural road assets. development, and monitoring of rural road development in different states. 21. Community participation offers significant * Providing technical assistance to the states; potential for mobilizing the support of local communities i , 'lot schemesmacross the country to test in resource generation, land acquisition, and tailoring the organizing pilot schmsaros th ourest rural road programs to local needs. The government role new policies, standards or procedures, and is mainly to build up the capacity of local communities for disseminating the results of science and managing their road network. This is of special relevance technology findings, for access to small population groups, which generally * Assessing the efficiency of state-level organizations remain outside the reach of current government programs. in building, operating and managing their rural A suitable framework needs to be developed to encourage road network by adopting a system of local communities to assume responsibility for their roads performance monitoring. The coordination of through limited financial support from the government. 44 Box 5.2: Recommencted Actions for Highways Short Term * Involve road users in planning, prioritizing, and ensuring proper use of sector funds through broadly representative advisory committees and, eventually, empowered overseeing boards (national and state governments). * Move toward a clear separation of client and provider functions, establish mechanisms for non-governmental stakeholders to participate in decision making, and use output-oriented performance indicators and effective monitoring mechanisms (especially for state governments, PWDs, and senior road agency officials). * Build consensus for the removal or reduction of any non-physical barriers to the movement of freight across state borders, including highway checkposts (national and state governments). * Monitor recent innovations in road financing (including annuities and other cess or toll-based structured debt, SRDCs, and BOT); evaluate which of these new approaches most effectively leverage public-sector finance and transfer risk to the private sector (rather than just creating off-balance sheet liabilities for the central or state budgets); and address regulatory and information bottlenecks that may have slowed down private investment in the sector (national and state governments). * Review road user taxes and charges and consider options for raising additional revenue that may be required in 5-10 years (national and state governments). * Investigate market distortions in freight and passenger movement and analyze their causes so that they can be addressed with regulatory, fiscal, and institutional reforms at the national and state levels (national and state governments). * Start planning and pre-construction activities for expressways along major traffic corridors (MORTH), and improve environmental and social safeguard capacity building (road implementing agencies). * Improve road safety by raising public awareness,,'clearly assigning responsibilities among relevant agencies, and providing adequate funmds for an integrated appr6ach to tackling problems (national and state governments). Medium Termn * Encourage debate on further development of the CRF in areas such as institutionalizing its management, inviting road users and,,other non-governmental interests to, offer advice, and strengthening disbursement and audit procedures (MOF, MORTH). * Monitor the experience with procedures recently promulgated by MORTH for states to access and use their share of the CRF and adapt as needed to encourage'techiical. and financial. discipline in state road agencies (MOF, MORTH). *Evaluatetexperience gaed from the corridor management pilot programs to determine whether to replicate, adapt, or end the.pilots (NHAI). ; . ,v ._l of rural road assets, and the use of economic criteria for the desired standards through new construction, rural road investment decision making. In particular, the upgrading of the existing network, and maintenance of policy must emphasize sustainable financing for, and the core network. community participation in, maintenance. All rural road programs must be undertaken within such a rational and 18. Economic criteria need to be established to guide comprehensive policy framework. investment decisions and prioritize road links. Most rural roads have low initial traffic volumes, however, and most 17. District-level master plans should be prepared to of the expected benefits of investment come through identify a core network that ensures basic access-defined increased socioeconomic opportunities-which increase as one all-weather road connection to nearby market traffic but are hard to forecast and quantify in economic centers-for each village and habitation of a certain size. terms. If investment on low-traffic roads is justified by Priority should be given to bringing the core network to concerns of social equity, economic efficiency must be 43 agency would be established to set competition maintaining the status quo, in the belief that increased rules and pricing.) resources and autonomy of the Railway Board is all that * IR to be corporatized as a business entity with a it requires to turn the railways around. That only leaves clear commitment from the government that it the customers in desperate need for quality transport will have freedom to manage and be allowed to services, but they are relatively unorganized and operate on commercial lines. somewhat helpless in championing the required change. . A clear differentiation between social obligations It is evident then that an effective restructuring strategy and performance imperatives. should focus not only on developing a well thought out restructuring plan, but also on strategies for generating a Commcoerciaizaiones d tadpti includes ,sin-of momentum for change, and creating champions for change non-core businesses, and adopting lines of business in the process. structure and commercial accounting format. * New management that provides leadership teams 27. Broadly speaking, IR serves four markets: committed to changing the status quo. freight, intercity passengers, suburban passengers, and a wide range of non-core functions. Each of these poses * Reviewig and making changes In legislation as different challenges for establishing closer links with market forces. 25. While there is apparently an increasing realization at all levels - political, bureaucratic, and FREIGHT intellectual - that railway restructuring is essential, there R h b I is little evidence that something concrete is about to 28. IJ has been playing a shrinkng role In freight. happen. The reform actions proposed by the Expert his ispartly ecause of a shift toward trucks as Group Report are viewed in India as highly controversial, highways are built to fill the need for higher-value eve thug ths acton woul be cosdre ,eatvl transport; and partly because the railways have been conservative if compared to what has happened to many unable to meet shipper capacity or quality requirements otherraia aro d th world, at an acceptable price. Rail freight must play a larger role other railwaysaroudtheworldin the coming decades, but IR cannot fulfill that role 26. The reason for lack of action could be the unless,' it is allowed to create and respond to market absence of a real champion for change. There is strong incentives, and unless its social obligations are funded resistance from within the Ministry of Railways to the directly rather than by taxing freight shippers. If these proposed restructuring of the railways, to discontinuation social burdens were paid directly-by users, of the publicly supported loss-making services, and to governments, or both-freight tariffs could be cut by some extent to massive staff retrenchment-three almost more than 40 percent. Such a reduction would bolster unavoidable ingredients of a genuine rail restructuring the railways' competitiveness, possibly requiring it to plan. Many of the senior railway officers favor invest in considerable new capacity. 46 Box 5.3: Recommended Actions for Rural Roads Short Term - Clarify and fund responsibilities for missing but important maintenance categories such as grading and drainage maintenance (state governments). * Prepare a plan for, and provide adequate funding to, the maintenance of the core network (state governments). * Develop a rural road policy framework that emphasizes sustainable management of rural road assets and requires economic criteria to guide investment decisions (national and state governments). * Where applicable, prepare district-level plans for a core network that provides basic access to all villages through community participation (state governments). * Test the design standards suggested in the MORD Rural Road Manual, and based on field experience, modify the standards to enhance cost-effectiveness. * Initiate a debate on how to build up accountable rural road institutional structures that ensure maintenance, quality, and cost-effectiveness (MORD, state government, and rural road agencies). Medium Term * Closely monitor progress and performance in the decentralization of rural roads management, exchange experience with other countries that have decentralized road assets, and identify critical capacity or incentive issues associated with this decentralization (MORD, state governments). * Involve communities in providing and maintaining roads other than the core network (rural road agencies). * Develop planning, design and procurement capacity at local levels (MORD, state, governments). * Ensure inter-agency coordination of road wvork and cross drainage maintenance which' ,are earmarked as the responsibility, of different agencies (rural road agencies). C. RAILWAYS: A VITAL PART OF in common with the situations driving rail reforms elsewhere. The question as far as IR is concerned is not just INDIA'S TRANSPORT SECTOR the need for change, or even the general direction in which it should move. Rather, the question is how to define reform 22. to continu servingecl options, fit them to Indian conditions and obsectives, and address three crucial challenges, implement the decided reforms. IR is still vital to the . First, India's Increasing reliance on market forces economy, so implementation must be carefully planned. and its focus on foreign trade will force dramatic Any disruption of services would be disastrous-and the changes in the economy, the transport sector, and many required changes must be accompanied by safety nets especially IR. for affected groups. But all the same, the preparation and * Second, the planned economy imposed on IR swift implementation of a plan for reforming IR is essential. uneconomic functions will prove unsustainable in .. 1 24. Given GOI's concern about IR's future, an a competitive market. Expert Group on Indian Railways, also chaired by Rakesh . Third, as in every other country facing rail reform, Mohan, was set up to examine the key issues and to allowing IR to languish in a state of inadequate recommend policy imperatives. The recently released financing and conflicting policy leadership will report by the Group makes it clear that the imperative is eventually create a financial and transport disaster to get started-fast--on a program of restructuring and that will severely constrain economic growth. reform. It further emphasizes that the evidence for rapid, 23. India has high stakes in rail reforms-and they deep-seated change is clear, compelling and must be based on proved principles derived from overwhelming. It recommends: international experiences, and adjusted to fit the Indian * Institutional separation of policy, regulation and environment. Though Indians often argue that their business functions. (Policy makers would set country is "different", the challenges facing IR have much policy and pay for what they ask for. A regulatory 45 Box 5.4: Sale and Lease-Back-Leveraging Unencumbered Assets IR could work with international or domestic leasing companies suitable for railway rolling stock and equipment, selling unencumbered rolling stock with back-to-back leasing to the railways. Such sales would provide the railways with capital that could be used to rehabilitate, upgrade, and expand fixed infrastructure. The leasing company would use the railways' lease payments to service debt and other expenses. To maximize its return, the leasing company would raise the productivity of the leased equipment and help the railways modernize its operations. An operating lease is a variant of a normal lease. Under such a lease IR could sell fixed assets of its non-core activities-housing, hospitals, hotels-and have back-to-back leasing arrangements with the company for required services. A joint venture with a leasing company through an operating lease offers two advantages. First is the advantage of normal leases-the ability to leverage unencumbered assets. Second, with uncertain demand, leasing equipment will benefit the railways because it will be paying to use equipment as and when it uses it. The leasing company bears the risk of technological obsolescence and lower use of rolling stock due to a drop in demand. Source. Urjit R. Patel and Saugata Bhattacharya, IDFC, The Constraints in Pricing and Financing. separate rail enterprises from government influence, induding reform actions, performance is still far below that of public service obligations; setting commercial objectives for all comparable ports in Asia. When it is working, equipment rail enterprises; increasingly separating non-core functions; has low productivity. A large share of time is spent not and acquiring the tools and information needed to formulate working. And labor productivity is low, because of large and evaluate organizational options and objectives. labor gangs and restrictive labor practices. Many ports also suffer from draft limitations-resulting in slow D. PORTS: FURTHERING REFORM TO turnaround times for vessels; the use of small vessels; and trans-shipment of containers through better-performing RAISE PRODUCTIVITY ports such as Colombo (Sri Lanka), Dubai (United Arab Emirates), and Singapore, rather than direct calls by main 36. Although there has been significant liner vessels. All this has resulted in higher transport costs, improvement in port performance due to a series of undermining India's exports. Box 5.5: Recommended Actions for Railways Short Term i* Prepare an action plan for reforming IR, taking into account recent analyses, international experiences, and India's needs. * Improve customer-responsiveness of the core rail business. * Focus a much larger share of the capital budget on economic priority investments. * Rationalize passenger fares and freight charges to better reflect the cost of providing services. Any subsidies should be targeted and provided directly by the central government. * Replicate the CONCOR experience to the extent possible. MediumTerm * Separate railway enterprise functions from the government's policy, regulatory, and social support functions. * Corporatize enterprise functions and reorganize them along business lines-including social services, which should be performed under contract with government. * Restructure enterprise organizations according to objectives and markets. * Ring-fence and corporatize non-core activities such as locomotive and wagon manufacturing, with a future plan for their eventual divestiture. . Modify institutional arrangements to make state and local authorities more responsible for suburban rail services, particularly for their planning and funding. 48 29. As one promising initial step, IR could consider market economies, these non-core activities have become extending the success of the CONCOR experiment. IR uncompetitive (in cost and technological terms), and should license one or more independent have become a distraction for rail service managers. public/private/mixed operators to exclusively handle the different streams of freight traffic - such as oil, cement, IR IN THE COMING DECADE iron ore, coal, fertilizer, food grains, and petroleum products. By focusing on one commodity and a specific 33. IR faces several challenges in adapting to the new set of customers, and by offering customer-oriented economic environment. But experience elsewhere shows pricing and service packages, these companies would be that reform is possible, particularly if it is based on several in the best position to capture the targeted traffic. Also, increasingly accepted principles. the profit motive would drive productivity upward and First, railway enterprise functions should be costs downward. separated from the government's policy, regulatory, and social support functions-meaning that the INTERCITY PASSENGERS railways should be corporatized, while government 30. Intercity passenger services have evolved into ffunctions are lodged in appropriate ministries. two groups-longer-haul, higher-quality, and higher- * Second, enterprise functions should become priced services; and low-quality, extremely low-priced lines of business, including social services services. The higher-quality services are (or could be) performed under contract with government. roughly self-supporting, while the lower-quality services Third, the organization of the railways should serve a limited demand, generate large deficits, and reflect a mix of factors and objectives, including consume capacity on congested main lines. As part of its geography, market location and dispersion, social obligations, IR also runs an enormous number of balance of passenger and freight traffic, short-distance passenger services on branch lines. These competition within and between modes, and the services incur heavy losses due to low fares and few desired roles of the public and private sectors in passengers. Practice in other countries and, indeed, European Union law, are based on direct contracts * v between government and railways for providing social * Finally, non-core activities should be managed services. This setup provides two immediate benefits: separately, or even be fully separated from the economic damage to the railway and the economy is radways, so that management can focus on core eliminated; and government can directly define the activities. The separation of non-core activities should quality and cost of the social services to be provided. be planned with a view to their eventual divestiture. 34. There are a number of general options for rail SUBURBAN PASSENGERS restructuring. These include infrastructure separation, zonally based rail enterprises (to introduce competition 31. IR efficiently operates three of the world's largest within the rai sector), national operating companies, suburban passenger services in Mumbai, Chennai, and competition through track rights or overlapping franchises, Kolkata. These services have increasingly suffered from . . . . i for reouce wihnJ.easthshdt and concessioning or private Investment in operating competition for resources within IR because it has had to companies. In the specific context of India, the options focus on national objectives, leaving it unable to fund could include the licensing of specialized freight operators local investments. Practice elsewhere aims at such as CONCOR; the concessioning of track disentangling suburban services from entirely national infrastructure on a corridor-by-corridor basis; the funding and control, and shifting planning, and at least some funding requirements, to local agencies. is establishment of wagon and locomotive leasing companies approach has bee initiated in Mumbaiandco(see Box 5.4); the corporatization of wagon and locomotive aepoch ated in Mumbai and couldkbe manufacturing plants and maintenance workshops; and the privatization of non-core functions/assets. NON-CORE FUNCTIONS 35. All these options may sound radical to IR, but they can be implemented in a phased manner, beginning with a 32. IR has acquired a wide range of non-rail small pilot experiment. All that is required is a policy stance activities, including social support services, commercial and a strategic framework within which to evaluate options. activities, and manufacturing enterprises. As in other Thus the approach should aim at agreeing on policies to 47 37. Low port productivity may provide a temporary required is a fully-fledged customs modernization safety valve, in that port capacity can be increased quickly program, backed by strong political will. through better management and operations-especially 40. Multi-modal integration is of increasing through private concessions-with limited investments. 40. toe a t existin pof ancrasing The potential gains are clear: the recendy completed private importance to ensure that existing port and transport container trerminal at Nhava Sheva handled about 733 facilities are used more effectively, and that new ports are contneU atd ina itsarst yeavr ooeratn, ed wIt h developed to be more economically sound and financially 330 TEUs a day at the adjacent public container terminal attractive. This entails setting up intermodal platforms at nodal points in the transport network-for instance, 38. Critical institutional issues remain to be dealt with establishing dry-ports outside main port cities to facilitate in the short to medium term. Corporatizing ports and interfacing with railways and road transport, and possibly concessioning out operations is clearly the way to go. waterways in the eastern part of the country. One specific Further options may include the development of landlord issue that needs to be addressed on a priority basis is that of ports with competition for rights to provide functions. The railway interface in ports, where cargo transfer between IR success of concessions will depend partly on alleviating and the local port railways results in inordinate delays in unnecessary constraints on the concessionaire (a process some places. that is under way), and on settling labor issues. With minor ports becoming more and more similar to major E. URBAN TRANSPORT: GETTING THE ports, the regulatory power of TAMP should be extended to cover minor ports so that distortions arising between FUNDAMENTALS RIGHT major and minor ports can be effectively resolved. Further reforms may be needed to keep the regulatory mechanism 41. Similar to experience elsewhere, some urban ata reasonable distance from the political structure. transport problems in India-mainly road congestion, vehicle emissions, and traffic accidents-are growing acute 39. Finally, transport facilitation is a major concern. mainly because of rapid motorization. Others, such as poor Customs clearance procedures remain far too bus services, are due to weak institutional capacity. At the cumbersome and time-consuming, with 100 percent national level, technical knowledge and technical advice for physical controls for containers. Though electronic solutions to these problems are not lacking. Many urban messaging may help, the system is unlikely to change transport experts in India are familiar with successful much if there is no high-level recognition of the penalties experiences around the world, and they are aware of a wide these procedures impose on India's trade. What is range of policy and technological options. Some successful Box 5.6: Recommended Actions for Ports Short Term * Open up a larger share of port operations and investments for private sector participation. * Extend TAMP's role to cover minor ports. * Define government's role in ports-breakwaters, environmental requirements, and so on-and regulatory mechanisms for port tariffs and services. Medium Term * Address the size and productivity of port labor, to increase the productivity of port operations, decrease costs, and compete with ports elsewhere. * Accelerate corporatization of major ports and privatize port operations. * Develop an efficient inland transport infrastructure connecting ports. * Introduce a full-fledged customs modernization program using an electronic interface to streamline and expedite customs clearance procedures. * Set up intermodal platforms at nodal points in the transport network (for instance establishing dry-ports outside main port cities to facilitate interfacing with railways and road transport, and possibly waterways in the eastern part of the country). 49 experiences in mitigating the adverse impacts of the much needed institutional, financial, and technical motorization have also emerged from a few Indian cities in capabilities at the local level. There are a number of recent years. But most Indian cities have failed to effectively actions that cities need to take in the short to medium address these problems because they are not equipped with term. Improving bus operations, implementing traffic the appropriate institutional capacity and the necessary management, and controlling motor vehicle pollution are financial resources. The institutional weaknesses that prevent obvious items in the short term action list. In the authorities from translating knowledge into actions are: medium term, the need is for strategies to reform urban * Fragmented functional responsibilities for urban transport institutions, and to boost resources for urban transport among central, state, and local transport. The most important first step for local and authorities, without any one of them in charge of state governments is to develop an action plan based on overall coordination and outcomes. proved principles derived from international experiences . The lack of technical capacities for urban (see Box 5.7). The MOUD strategy regarding urban transport management at the local level, transport institutions and finance should provide a useful transort mnagemnt attne lcal lvel.direction for the formulation of action plans. * The lack of financial resources at the state and local levels for funding urban transport 44. At present, the state governments are the major infrastructure investments and maintenance, players in urban transport policy, planning, capital combined with insufficient attention to cost investment, regulations, and even operations in most recovery and user charges. cities. For this reason, the states will have an essential role * The absence of enabling policy, regulatory and to play in urban transport reform, especially in helping financial frameworks for private sector cities to build up their own financial and technical participation in a range of urban transport capacities. This has to be done in line with ongoing state operations and infrastructure financing. fiscal policy reform. It is unrealistic to expect that most cities can assume major responsibility for financing urban 42. The Ministry of Urban Development (MOUD) transport in the short to medium term. State funding of has made some specific policy recommendations to deal specific infrastructure and services is expected to continue with the preceding problems.36 Institutionally, MOUD for the foreseeable future, but the funding should be recommended that the municipal governments should gradually reduced in line with the growth of local financial have the major responsibility of planning, financing, capacity. It is also important that the devolution of state improving, regulating and operating all components of funds to local governments for capital improvement urban transport consistent with the land use plan of the programs be tied to improvements in institutional and city. Each city with a million plus population would then financial capacities, as well as to commensurate matching have a Unified Metropolitan Transport Authority (UMTA) contributions from the local government. to assist in this respect. In cities with a population of less than one million, a Transport Planning Unit should be 45. Improving public transport operations is created under the Planning/Development Authorities. In essential in the short term to prevent the exacerbation addition, all cities should create a Traffic Engineering Cell of urban transport problems. A great deal can be in local bodies to prepare and implement transport system achieved, for example, by introducing private operators management measures. Financially, MOUD suggested to compete, by allowing more flexibility on fares, and that each state should initiate a non-lapsable Urban by enhancing safety and environmental regulations. Transport Fund with revenues from dedicated levies on There are also opportunities for a marked improvement user/non-user beneficiaries in the concerned cities, and in the publicly operated bus services if the public make funds available to UMTAs to finance mass transit operators are made accountable, and subject to market facilities and capital-intensive infrastructure facilities, or to competition. With high population densities, Indian service loans taken for such purposes. cities have great potential for the development of a competitive bus transport market through contracting 43. The major challenge for urban transport or franchising arrangements. Fulfilling this potential, agencies in India is how to improve the current urban however, needs a policy framework that specifies the transport situation, or at least prevent it from role of the market and the government. With a policy deteriorating further-while at the same time developing framework in place, the local governments could work Rail Inidia lechnical and Economic Services (RITES), Traffic anid Transportation Policies and Strategies in Urban Areas in India, prepared for MOUD, 1998 50 Box 5.7: Allocating Urban Transport Functions to Appropriate Agencies Strategy Level Function Agency Comments National roads Min. of Construction Private sector construction. Public enterprises Min. of Economy Sometimes municipal. Tax levels Treasury "For the City" Inter-governmental transfers Treasury Regulation and competition policy Min. of Economy May be function of a quasi-independent commission. Vehicle registration and safety Min. of Transport Urban structure planning Planning department Strategic transport planning Transport department Local road management Roads department "Of the City" Public transport planning/ Public transport procurement agency Traffic management Traffic department Sometimes national. Law enforcement Police department Direct responsibility to mayor. Road Safety Inter-dept. unit Public transport operations Private companies Franchised or contracted. Road construction and Private companies Some force account "In the City" maintenance maintenance typical. Local facility consultation NGOs/individuals Sometimes under formal public inquiry laws. Source: World Bank, Cities on the Move. A World Bank Urban Transport Strategy Review, draft, 2001. out a reform action plan for bus transport. with the participation of traffic planners, engineers, Metropolitan cities with publicly provided bus services and traffic police, to prepare traffic management could then develop and implement a time-bound schemes, implement them, monitor the performance, action plan to first separate government procurement and make improvement on a day-to-day basis. function from operations. Alternatively, or when city authorities face a civil service hiring freeze, the traffic management planning 46. The current practice of state-level, regional an eniern .einwr cnb otatdort transport authorities being the nodal agencies for the private sector. regulating bus services and setting fares in most cities needs to be re-examined, since there is a need for 48. With motorization still at an early stage, there greater integration between transport planning, are opportunities to introduce pro-environment traffic management and public transport operations policies-with some initial cost but with relatively high at the local level. All major cities should develop their long term benefits. India has witnessed some own regulatory and enforcement capabilities to encouraging progress in controlling motor vehicle promote bus service competition, and put in place pollution in recent years. Emission control regulations transparent and independent fare setting mechanisms have been tightened. Some major cities are improving that will ensure the financial sustainability of such their monitoring and enforcement programs. Other operations. cities should make similar and improved effort to reduce motor vehicle (especially two-stroke engine 47. The need for traffic management is imperative vehicle) pollution. in Indian cities. International experiences demonstrate that prudent traffic management schemes can improve 49. Finally, urban transport for the poor is an traffic efficiency by up to 45 percent. Indian cities need increasingly important concern in Indian cities. But to set up traffic engineering and management units there is a huge knowledge gap on the transport needs of 51 the urban poor and on the options to provide them 51. On the basis of the 1995 report, the current report with efficient and affordable transport services. makes a critical assessment of the key policy and MOUD could assist cities to build a knowledge base, institutional issues that continue to contribute to the poor perhaps through an urban transport strategic planning performance of the transport sector in India. Most of these exercise. issues are not new. But examining them within a long term Box 5.8: Recommended Actions for Urban Transport Short Term * Refine and disseminate MOUD policy recommen'dations through the publication of policy guidelines, workshops for knowledge sharing, and financal'support for pilot reform program in selected cities (MOUD). * Develop a bus transport reform action plan (state governments and major cities). -* Develop a time-bound action plan to reform urban,trans'port instituttions and financial mechanisms (state governments and major cities). * Encourage the use of alternative fuels to minimize air' pollution, and enforce' relevant regulations including motor vehicle pollution control measures' (ULBs). " ` * Set up traffic engineering and management units with the participation of traffic planners, engineers and traffic police, to prepare traffic management schem'es,' implenment them, monitor the performance, and make improvement on a day-to-day basis; and where feasible, contract out the planning and engineering design work to the private sector '(ULBs). * Build a knowledge base on the transport needs of the'>urban poor and on options to provide them with efficient and affordable transport services, perhaps through,'an urban transport strategic planning exercise (MOUD and selected major cities). Medium Tesrm * Create a Unified Metropolitan Transport Authority for lirge metropolitan regions where feasible. * Amend municipal laws to make ULBs responsible for traffic regulation and management, and implement traffic management measures. * Improve funding for urban transport, including possible non-lapsable transport funds, with contributions from user charges arid from central, state, and muniipal agencies. The funds should be operated by autonomous bodies 'with user participation to ensure their effectivene,'' . F. CONCLUDING REMARKS strategic framework set forth by the 1995 report, along with the lessons learned from the reform experiences, results in a 50. In 1995, just a few years into the process of clearer picture of what can be accomplished in the short to market liberalization, the Bank published a report that medium term. Although there has been noteworthy examined the challenges and opportunities India's progress in reform in India's transport sector, the transport sector had to address to respond to the socioeconomic dynamics that drive the transport sector to national reform initiatives and the demographic trends, reform the world over are evolving even faster. This poses a to technological changes and growing social and tremendous challenge, and the cost of slow or inadequate environmental concerns. The report shed light on the action is very high indeed to the Indian economy in long term picture of the sector, and highlighted the particular, and Indian society in general. This report has as directions for reforms. Six years later, the report its starting point the hope that the policy and institutional remains highly relevant, even as the national reforms reform actions it suggests will add to the momentum being progress, and exogenous factors continue to shape the built up for more speedy reforms, and a more substantial transport sector. improvement of performance in the Indian transport sector. 52 Appendix 1: Tables for Selected Statistics Table 1: Share of Transport Sector in GDP and Domestic Investment GDP at Factor Cost Gross Domestic Investment Gross Domestic Investment by Industry of Origin by Industry of Origin in Public Sector Other Other Other Year Total Rail Transport Total Rail Transport Total Rail Transport 1987-88 5,691 87 260 1,400 36 75 582 36 17 1988-89 6,297 86 282 1,661 39 87 634 39 20 1989-90 6,731 90 312 1,698 35 100 678 35 30 1990-91 7,092 93 326 1,906 37 104 709 37 24 1991-92 7,150 98 344 1,696 35 106 658 35 29 1992-93 7,526 97 362 1,906 51 101 676 51 25 1993-94 7,991 96 383 1,821 56 127 708 56 46 1994-95 8,611 98 417 2,183 47 127 812 47 35 1995-96 9,264 106 445 2,611 46 145 751 46 29 1996-97 9,990 112 479 2,576 49 163 728 49 26 1997-98 10,492 115 501 2,774 43 166 794 43 32 AAGR 6.3% 2.8% 6.8% 7.1% 1.9% 8 2% 3.1% 1.9% 6.2% AAGR = Aggregate Annual Growth Rate. Source World Bank, Indza Reducing Poverty. Accelerating Development, Oxford University Press, 2000. Table 2: GDP by Transport Subsector (at 1980-81 Prices) Annual Growth Rate (%) 1980-81 1990-91 1996-97 1980-81 to 1990-91 to 1990-91 1996-97 Number (Rs Crores) GDP at factor cost 122,427 212,253 296,845 5.7 5.7 Railways 1,124 1,677 1,964 4.1 2 7 Road Transport 2,454 5,998 8,121 9.3 5.2 Water Transport 823 1,090 1,561 2.8 6.2 Air Transport 255 385 500 4.2 4.5 Service incidental to transport 251 618 839 9.4 5.2 Percentage GDP at factor cost 100 100 100 Railways 0 9 0.8 0.7 Road Transport 2.0 2.8 2.7 Water Transport 0.7 0.5 0.5 Air Transport 0.2 0.2 0.2 Servicc incidental to transport 0.2 0.3 0.3 Transport Total 4.0 4 6 4 4 Source. GOI, NationalAccounts Statistics, 1998. 53 Table 3: Freight and Passenger Traffic Growth by Mode 1991-92 1998-99 Growth Rate Freight Rail ton-km (billion) 257 284 1.4% Road ton-km (billion) 267 285 11 9% Goods vehicles excluding 3-wheelers ('000) 1,356 2,260 8.9% International air cargo ton-km (million) 115 158 8 3% Domestic air cargo ton-km (million) 76 103 * 7 7% Major port cargo tonnage (million) 152 252 7.5% Minor and intermediate port cargo tonnage (million) 13 36 15.7% Passenger Rail passenger-km (billion) 315 404 3 6% Road passenger-km (billion) 1,162 2,046 8.4% Passenger vehicles excl. 2- and 3-wheelers ('000) 3,285 5,150 7.8% 2-wheelers ('000) 14,200 25,693 10.4% International air passengers (million) 821 1,265 ** 11.4% Domestic air passenger-km (million) 793 1,070 7.8% Note (*) data for year 1997; and (**) data for year 1997-98. Source GOI, StatusticalAbstract of India, 1998 Note. Official statistics of road freight and passenger demand are based on various data sources and assumptions, and the reliability of the data is often considered questionable. To overcome the problem, trends in annual motor vehicle registrations and traffic count data from different segments of the road network can be used to cross-check trends in road demands The trends of road transport demand appear to be broadly consistent with the trends of motor vehicle registrations and road traffic counts from various highway project feasibility studies. 54 Table 4: Railway Passenger Traffic 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 AAGR Passenger Trips (million) Suburban 2,318 2,450 2,527 2,641 2,727 2,725 2,823 3.3% - First Class 121 132 159 172 178 181 187 7.5% - Second Class (M&E) I 1 0 0 0 0 0 -11.1% - Second Class (ordinary) 2,196 2,317 2,368 2,469 2,548 2,544 2,636 3.1% Non Suburban 1,406 1,485 1,534 1,575 1,691 1,744 1,087 -4.2% -AC First Class 1 I 1 1 1 1 1 7.1% - AC Sleeper Class 6 7 8 8 8 9 10 8.8% - First class (M&E) 12 10 10 4 4 3 3 -21 2% - First Class (ordinary) - - - 5 6 6 6 4.0% - AC 3 Tier Sleeper Class 1 2 3 4 5 5 55.2% - Sleeper Class (M&E) 80 89 96 99 106 121 125 7 8% - Second Class (M&E) 231 242 279 298 335 337 349 7.1% - Sleeper Class (ordinary) 3 4 5 7 5 3 3 3.4% - Second Class (ordinary) 1,071 1,127 1,127 1,144 1,216 1,252 1,298 3 2% -AC Chair Car 3 4 6 7 7 7 7 15.2% Total 3,724 3,934 4,061 4,216 4,418 4,469 3,910 0.8% Passenger-km (million) Suburban 63,147 68,115 73,651 77,104 79,475 83,507 93,274 6.7% - First Class 3,370 3,853 4,289 5,344 5,547 5,813 6,493 11.5% - Second Class (M&E) 70 74 41 24 22 34 38 -9 7% - Second Class (ordinary) 59,707 64,188 69,321 71,736 73,906 77,660 86,743 6.4% Non Suburban 233,200 251,376 268,708 280,470 301,053 321,098 335,461 6.2% - AC First Class 411 401 480 446 503 513 536 4 5% - AC Sleeper Class 3,729 5,669 6,458 5,819 6,139 6,642 6,939 10.9% - First Class (M&E) 4,203 3,985 4,419 2,310 2,596 2,274 2,376 -9.1% - First Class (ordinary) - - - 661 669 664 694 1.6% - AC 3 Tier Sleeper Class - 526 1,272 2,187 3,047 3,749 3,917 49.4% - Sleeper Class (M&E) 48,882 64,718 70,192 72,465 77,244 85,066 88,872 10.5% - Second Class (M&E) 88,356 85,990 94,568 100,917 110,331 111,211 116,186 4.7% - Sleeper Class (ordinary) 1,314 1,851 1,915 2,831 1,972 1,374 1,435 1.5% - Second Class (ordinary) 84,501 85,219 86,134 89,587 95,121 106,185 110,933 4.6% - AC Chair Car 1,804 3,017 3,270 3,247 3,431 3,420 3,573 12 1% Total 296,347 319,491 342,359 357,574 380,528 404,605 428,735 6.3% Earnings (Rs Crores) Suburban 576 651 748 842 931 1,023 1,126 11.8% -First Class 69 82 105 129 142 152 165 15.8% - Second Class (M&E) 2 2 1 1 1 1 2 -1.7% - Second Class (ordinary) 506 567 642 712 788 870 959 11 3% Non Suburban 4,319 4,813 5,376 5,792 6,642 7,527 8,358 11.6% - AC First Class 57 69 87 84 102 114 155 18.3% - AC Sleeper Class 306 456 574 581 667 743 879 19.3% - First Class (M&E) 249 241 232 175 195 180 184 -4.9% - First Class (ordinary) - - - 18 19 18 22 7.4% - AC 3 Tier Sleeper Class - 25 65 122 186 251 271 60.5% - Sleeper Class (M&E) 1,069 1,422 1,564 1,698 1,925 2,304 2,605 16.0% - Second Class (M&E) 1,648 1,588 1,767 1,964 2,204 2,361 2,431 6.7% - Sleeper Class (ordinary) 23 26 27 40 34 24 33 5 8% - Second Class (ordinary) 896 863 893 962 1,139 1,353 1,577 9.9% - AC Chair Car 72 123 137 148 171 180 201 18.6% Total 4,895 5,464 6,124 6,633 7,573 8,550 9,484 11.7% Source. CMIE, Infrastructure, January 2001. M&E = Mail and Express trains. 55 Table 5: Road Length by Category 1970-71 1980-81 1990-91 1996-97 Length (km) All roads 917,880 1,485,421 2,001,944 2,465,877 Highways total 714,934 1,181,083 1,605,408 1,993,764 PWD roads 357,436 547,875 670,396 940,225 National highways 23,838 31,671 33,650 34,849 State highways 56,765 94,359 127,311 137,119 Other PWD roads 276,833 421,895 509,435 768,257 Panchayat Raj roads 357,498 633,208 935,012 1,053,539 Zdlia Parishad roads 161,247 273,468 398,729 444,572 Village panchayat roads 107,215 179,848 313,374 444,737 Community dev./Panchayat samiti roads 86,068 175,549 222,909 164,230 Percentage of surfaced All roads 43% 46% 51% 57% Highways total 47% 49% 53% 59% PWD roads 77% 77% 82% 83% National highways 98% 100% 99% 99% State highways 91% 96% 98% 98% Other PWD roads 72% 71% 77% 79% Panchayat Raj roads 18% 24% 33% 37% Zilla Parishad roads 23% 33% 53% 55% Village panchayat roads 11% 15% 14% 19% Commurity dev./Panchayat samiti roads 19% 22% 24% 39% Source: CMIE, Infrastructure, January 2001 Table 6: Registered Motor Vehicles in India Number (in thousand) Annual Growth Rate 1981 1991 1997 1981-91 1991-97 Cars, jeeps, and taxis 1,160 2,954 4,662 9 8% 7.9% Buses 162 331 488 7 4% 6 7% Goods vehicles 554 1,356 2,260 9.4% 8.9% Multi-axled and articulated n/a n/a 16 - - Medium and heavy n/a n/a 1,747 - LCV, four and three-wheelers n/a n/a 497 - - Two-wheelers 2,618 14,200 25,693 18.4% 10.4% Others (*) 897 2,533 4,128 10.9% 8.5% National total 5,391 21,374 39,491 14.8% 10.8% Percent for metropolitan cities n/a 25 2% 31.4% Note: (*) Others include tractors, trailers, three-wheelers (passenger vehicles) and other miscellaneous vehicles. (**) Excludes light commercial vehicles (three-wheelers and four-wheelers) which have been shown under the category of goods vehicles. Source Ministry of Surface Transport, Motor Transport Statustics of India - 1997. 56 Table 7: Road Traffic Accidents 1970-71 1980-81 1990-91 1995-96 Number of road accidents 120,200 161,200 294,000 237,540 Persons killed 15,000 28,400 56,600 55,041 Persons injured 70,700 126,000 257,200 240,139 Accidents/1000 vehicles 64.4 31.1 13.8 7.0 Accidents/l 00 km of road 13.1 10.9 14.7 10.0 Vehicle density per 100 km of road length 203 349 1,068 1,427 Number of registered motor vehicles (mil.) 1,865 5,391 21,374 39,491 Source CMIE, Infrastructure, January 2001. 57 Table 8: Transport / Non-Transport Vehicles in Metropolitan Cities as of March 31, 1997 Transport Motor Vehides Non-Transport Motor Vehicles All Vehicles Passenger Goods Taxis Buses Trucks Two Cars Jeeps Tractors Trailers Others registered three- three registered registered registered wheelers registered registered registered registered vehicles wheelers wheelers registered registered registered registered Ahmedabad 631,019 35,176 7,419 3,856 14,640 8,465 488,547 65,961 5,812 101 163 879 Bangalore 972,375 47,957 13,543 6,023 13,579 27,096 707,863 139,649 6,332 4,456 3,952 1,925 Bhopal 241,773 7,539 2,972 1,111 4,399 6,661 173,423 15,509 16,009 8,911 3,411 1,828 Kolkata 587,576 10,007 - 29,008 7,084 51,300 261,325 217,383 - 4,609 - 6,860 Coimbatore 255,740 5,483 893 72 2,138 10,367 190,465 34,219 2,775 5,481 1,925 1,922 Delhi 2,847,695 80,210 - 15,015 29,572 140,922 1,876,053 705,923 - - - - Cochin 226,185 12,978 16,351 7,247 3,726 7,769 136,219 33,028 3,700 469 985 3,713 Mumbai 796,913 72,007 27,529 48,646 12,809 19,529 328,940 259,536 20,077 1,180 1,148 5,512 Hyderabad 769,401 35,642 14,622 2,034 2,342 20,319 668,674 15,425 8,494 187 - 1,662 Indore 360,549 9,122 4,768 1,139 6,679 20,903 266,173 34,494 3,991 6,911 5,052 1,317 Jaipur 448,625 7,602 - 3,667 12,386 22,153 331,261 38,744 13,886 15,377 2,669 880 Kanpur 246,801 4,644 1,057 579 1,635 8,730 194,547 14,827 3,354 15,527 1,014 887 Lucknow 330,753 7,719 2,339 2,591 1,768 5,117 263,241 28,174 8,745 7,921 829 2,309 Ludhiana 359,228 3,872 5,583 527 1,125 8,344 309,808 27,949 1,356 298 281 85 Chennai 889,819 29,578 3,405 290 5,198 21,350 652,990 156,521 6,445 1,061 1,019 11,962 Madurai 122,165 3,277 1,820 - 1,864 6,029 94,560 8,645 434 3,203 856 1,477 Nagpur 238,576 8,082 6,549 1,495 2,881 11,480 187,219 14,669 4,998 292 494 417 Patna 219,513 10,737 243 2,245 3,202 12,193 150,979 19,559 9,817 5,255 4,586 697 Pune 476,372 32,136 8,081 2,925 6,918 24,352 351,538 40,011 8,428 599 595 789 Surat 361,838 15,627 3,201 684 594 2,148 308,206 28,522 2,262 118 174 302 Vadodara 332,071 17,967 7,428 2,987 1,995 4,495 254,772 33,867 4,887 1,109 2,056 508 Varanasi 183,925 5,754 1,511 987 2,387 7,070 142,685 9,230 5,603 7,162 767 769 Vishakhapatna-m 206,834 7,171 1,758 2,066 1,497 6,490 173,655 11,419 1,860 175 119 624 Source: CMIE, Infrtastructure, January 2001 Table 9: Household Travel Characteristics in Various Cities Home Based Trips Walk Trips Modal Split for Mechanical Modes, % Purposewise Average Trip Length (km) City Bus Car, Taxi, 3-wheeler Rickshaw Cycle Work Education Others Non-home 2-wheeler based Ahmedabad 40.3 27.1 39.8 8.4 0.4 24.0 4.5 1.9 2.2 4.3 Kolkata 12.1 88.9 2.3 4.6 1 8 2.5 10.9 3.9 7.2 7.0 Delhi 31.8 62.4 24.5 2.9 3 6 6.6 9.5 3.3 8 4 - Hyderabad 19.9 43.9 19.8 3.0 6 0 27.3 6.7 5.6 11.3 Lucknow 35 0 1.0 35.6 9.3 23.0 31.1 5.6 3.1 6.2 - Chennat 29.5 60.6 12.5 3 1 3.7 20.1 7.0 3.5 4.9 5.4 Pune 25.9 28.9 45.7 9.2 0 3 15.9 6.2 4.7 5 3 6.1 Source Working paper by the Urban Transport Working Group for the Report. Appendix 2 Transport Sector Components and Involvement of the State and Private Sector Physical basis / assets Ownership t Control Air Rail Road Water Right-of-Way (State Controlled) (State Controlled) (State Controlled) (State Controlled) DGCA, AAI Indian Railways NHAI, PWD. urban Major ports- administrations, local Government of India, governments, defense State Maritime Boards, Port directorates Terminals (State controlled) (State controlled) (Open to all) (Partly Open) AAI, Defense Indian Railways SRTUs, large Major Ports- large industries for industries, trucking Government of India captive sidings companies, etc State Maritime Boards, Port Directorates, some private and captive ports Rolling stock and (Open to all) (State controlled) (Open to all) (Open to all) equipment IA, Al, other Indian Railways SRTUs, private SCI, Great Eastern, private airlines vehicle owners ESSAR, and others Maintenance Services Air Rail Road Water Right-of Way -NA- (State controlled) (State controlled) (State controlled) DGCA, AMI Indian Railways NHAI, PWD, Major ports- urban admsnistration Government of India, State Maritime Boards, Port Directorates Terminals (State controlled) (State controlled) (Open to all) (State controlled) AAI Indian Railways, SRTUs, large Major Ports- large industries for industries, trucking Government of India, captive sidings companies, etc. State Maritime Boards, Port Directorates, some private and captive ports Rolling stock and (Open to all) (State controlled) (Open to all) (Open to all) equipment IA, Al, other Indian Railways Innumerable small- Port Dry Docks, private airlines scale garages, large HSL, CSL, organized workshops Chokhani and other for SRTUs, few private sector large workshops Operations Operations Air Rail Road Water Right-of-Way (State controlled) (State controlled) (State controlled) (State controlled) DGCA, AMI Indian Railways Police Department Major Ports- in case of high traffic Government of India, density State Maritime Boards, Port Directorates, Light House Authority 60 Operations Operations Air Rail Road Water Terminals (State controlled) (State controlled) (Open to all) (Partly Open) DGCA, AAI Indian Railways, large SRTUs, large industties, Major Ports- industries for captive transport companies, Government of India, sidings Control and State State Maritime Boards, Warehousing Port Directorates, some Corporation private and captive ports Rolling stock and (Open to all) (State controlled) (Open to all) (Open to all) equipment IA, Al, other Indian Railways SRTUs, private vehicle SCI, Great Eastern, private airlines vehscle owners ESSAR and others Customer Services (associated) Air Rail Road Water Basic services (Open to all) (State controlled) (Open to all) (Open to all) IA, Al, private Indcan Railways SRTUs, private bus brokers, chattering airlines operators, TCI, Patel agents, forwarding Roadways, forwarding agents agents, etc. Special services (Open to all) (State controlled) (Open to all) (Open to all) IA, Al, private Indian Railways SRTUs, private bus brokers, chattering airlines operators, tour operators, agents, forwarding TCI, Patel Roadways, agents forwarding agents, etc Regulation Controls Air Rail Road Water Licensing DGCA IR RTO DG Shipping Environmental Controls DGCA Department of RTO DG Shipping Environment Safety DGCA CRS TrafFic Police DG Shipping Pricing Parliament, Railway DG Shipping, Rates tribunal TAMP Service Levels DGCA IR, Railway DG Shipping Claims Tribunal Source Reproduced from 3iNetwork, India Infrastructure Report 2001: Issues in Regulation and Market Structure, Oxford University Press, 2001, pp. 137-8. NOTE: Al : Air India NHAI : National Highway Aughority of India AAI : Airport Authority of India PWD : Public Works Department CRS : Commissionerate of Railway Safety RTO : Road Transport Office DGCA : Director General, Civil Aviation SCI : Shipping Corporation of India HSL : Hindustan Shipping Limited SRTUs State Road Transport Undertakings IA Indian Airlines TCI : Transport Corporation of India IR : Indian Railway 61 Appendix 3(a): Institutional Arrangement at the Central Level I I W~~~~f I (Pl~~~annn irnig [kIIlinn <'~~~~~~~~~~Plc & jdn Naj Ni iehX Linitnti ) 's <~~I Agusc 1