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Is the idea of state running large buses the solution to improve public transport experience?

Every one of us commuting in public vehicles in the city can recognize the awful experience in travelling by heavily crowded unmaintained buses while being squeezed up among commuters in most uncomfortable ways. The chronic victims are in fact the ones traveling to work on busy commuting hours when this recklessness is at its peak. For such commuters as we know, travelling between home and work has mostly been the area of tension besides work.

In recognizing the tragedy of the commuters, the central government has made a decision to urge the municipalities of Kathmandu Valley to jointly form a company to operate 50 large buses running around the city. And, given our common belief that state is somehow responsible for taking care of our fundamental necessities like proper public transport system, this decision can easily be perceived as virtuous effort. After all, this government commitment to provide better public commutation service to people seems as a move to rescue us from the daily bad commutation experience. However, this common logic doesn’t draw the complete picture for this matter. There are actually relatively unaddressed but severe realities that can lead us to come at more thoughtful conclusions.

In digging deeper down in search of the root cause of the terrible realities of our public transport service, one has to come across the existence of mafia-like transport syndicate. The transport syndicate being formed by influential associations of transport operators has enabled them to dominate the public transport sector in Nepal despite the horrible transportation service they are providing since decades. By preventing the entry of new transport entrepreneurs in the public transport sector by means of coercion and vandalism, the syndicate of public transport associations has heavily protected the limited number of below standard service providers from the mechanism of free competition that guarantees quality service. Meanwhile, their strong political connection and presence in regulatory committee (i.e., Transport Management Committee) that awards permits to new entrepreneurs in this sector has retained their impunity from law despite their illegal attempts to maintain monopoly.

The idea of government running its own bus fleets to put competitive pressure on the syndicate is understandable. But, it may not be the most sustainable solution to the benefit of public vehicle commuters and taxpayers at large. To clarify such contention, one can always refer to the misery of the state-run enterprises in having to hugely rely on state coffer financed by taxpayers to somehow run its inefficient and loss making operations producing below standard services. Though they carry the objective of running in a profit-model concept that expects them of surviving on their own revenue, the state-system instead offers them the facility to encroach on tax payer’s wealth indefinitely as they lose track of profits. And, given the upcoming transport company is to be functioning within the same system and incentive, we can logically expect same fate for this transport based public enterprise too. Alas, state could be only adding another avenue to leech taxpayer’s wealth in name of providing so-called “basic transport service” to the people without considering the financial burden it generates among the very people.

Having said this, utilizing regulatory tools to establish competitive market environment in the public transport sector can instead lead the state to create an effective solution that doesn’t require manipulating taxpayers’ wealth. By neutralizing the condition generated by the syndicate to keep new transport entrepreneurs away from the market, such measure will compel service providers to compete among each other to provide competitive service efficiently to survive in the market on profits. Most importantly, besides preventing taxpayer’s from the burden of financing transport service, it will enable commuters to travel more conveniently with impressive solutions that yield out of continuous innovation through sustained competition.

Prience Shrestha

About Prience Shrestha

Prience works in the research department at Samriddhi Foundation. And, he attempts to specialize in the field of Development Economics

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Budget and the Transportation Sector – Promising yet Incomplete

The budget allocated for the development of transportation sector for the upcoming fiscal year is Rs 24 billion (approx.). This year’s ambitious budget plans for building fast tracks, highways, and even foresees Nepal using trains and ships. Although the budget might look like the government has acknowledged that travelling in Nepal (both public and private) is arduous and inconvenient, it does not solve the major problem in transportation sector of Nepal – syndicate.

It is an open secret that the transport association practically controls the entire transport system in Nepal. It decides who gets into the industry and who doesn’t; it lobbies on price setting, among others. The budget envisages a country full of excellent roads with the aim of facilitating cheap and easy transportation of goods and people, but if the budget cannot (followed by pro-competitive policies) limit this anti-competitive practice by the syndicate these policies might not be efficacious.

In addition to this, one of the provisions (i.e. No. 85) of the budget mandates all taxis plying in Kathmandu valley to be equipped with a digital meter system. Although this looks propitious, the government’s inefficient monitoring system would make existing day light robbing perennial. Even with the existing meters in taxis, taxi drivers, on their discretion, decide the price before taking in passengers. But, due to the limited number of taxis plying in the valley, passengers have no choice but to agree on the rate drivers set. Although, one might argue that even passengers could bargain on the price but, how convenient is it if you commute on taxis everyday? When the number of passengers is far more than number of plying taxis, the drivers would always have better bargaining power.

So how can the government achieve its intended result of smooth and cost effective transportation system? One way of achieving its goals is by encouraging competition in this sector. To make it competitive, there are several provisions the government could make. The most important is by facilitating entry of new public vehicles by limiting syndicate’s influence in the registration process. From 2001 to 2011, the number of registered vehicles in Kathmandu valley increased 3.75 times. But public transportation comprises of only 1% of those vehicles. This shows there is a barrier that stems entry into the transportation industry. Similarly, with regards to taxis, since the year 2000, the number of taxis has dropped from 8000 to 5500, while the population of Kathmandu valley has risen from 1.6 Million to 3.5 million from 2001 to 2011. Opening up new taxi registration (it was closed in 2000; once opened in 2015) would reduce the ratio of taxis to population, which would instead increase passengers bargaining power, as now taxis’ would compete for passengers not the other way around.

Although the government has prepared and allocated budget for transportation sector development in good faith, it still doesn’t address Nepal’s major problem of anti-competitive behavior in transportation sector. Policies such as limiting syndicate’s influence in public vehicle registration, and opening up taxi registration are two of the several ways that government’s policies could engender competition.

 

Abyaya Neopane

About Abyaya Neopane

Abyaya Neopane is an independent researcher. He comes from an Economics background.

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Why transport syndicate is an ill system

Existence of public transport syndicate in Nepal is a common knowledge. Those who commute by bus, micros, and taxis, our stories might be somewhat similar. Clinging to the bus door, constantly struggling to grab a seat and getting stuck in the back end of the bus and not being able to get off on our stop because of the endless crowd inside it is an everyday bus trip.

While an ideal market would’ve had many public transport entrepreneurs, giving choices to the consumers, better quality service and competitive prices, it is not the case with this industry. The public transport syndicate is an ‘ill system’, as pointed out by the Supreme Court, which has in store a number of problems for commuters and prospective entrepreneurs alike.

1. Overcrowding

First of all, overcrowding makes our travel hectic. Passengers are asked to squeeze in so that the bus can carry as many passengers as possible. The incentive behind this – more passengers, more revenue. Altogether this makes the journey unpleasant.

There is another more serious problem at hand – insurance coverage. The Act governing the public transportation – Motor Vehicle and Transport Management Act, 1949 mandates insurance of the passengers of a public transport vehicle according to the number of seats. That means the ones who get a seat on the bus are insured, while the ones clinging to the door aren’t… Like hanging on to the bus door wasn’t risky enough.
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2. Barrier To Entry

For an entrepreneurial individual, getting into this industry is very costly – from making sure that one is in the good graces of the syndicate, to spending tons of money for acquiring a license for the vehicle. The syndicate has put a huge price tag on getting a route permit, without which one can’t ply the roads. This cost has kept competition at bay. An existing association’s recommendation is practically mandatory for one to acquire a permit and make sure that he gets to run his business without any threat after he does. How the syndicate has been able to erect this barrier would make for a story for another day, but this has effectively put prospective entrepreneurs at check.
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3. Limited Choices

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So why don’t buses with vacant seats ever show up? Well, the answer is the aforementioned barrier to entry created by the syndicate. Limiting competition and taking away all the profit from the industry is what the syndicate stands for. And while it does that, the ones who suffer are the consumers. Consumers are compelled to board those overcrowded busses with worn out seats and poor services because the syndicate restrains supply.

Arduous, frustrating and hectic are probably the three words that best describe travelling in a public transport in Nepal. Breaking this syndicate would not only bring competitiveness into the industry, but also bring more choices and better services for the consumers. And yet (even after the Supreme Court’s order to deal with the syndicate) the law enforcement mechanism lays mere witness to the nuances of the syndicate.

Abyaya Neopane

About Abyaya Neopane

Abyaya Neopane is an independent researcher. He comes from an Economics background.

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Transportation Syndicate: Burden on Consumers

transport syndicateIf you’ve ever travelled on public vehicles in Kathmandu, I believe our story would be somewhat similar― a constant struggle to grab yourself a seat, loads of frustration and anger. What if that overcrowded vehicle is your only option? You might complain, but that would be all. I am a student who has to communte to his college in Baluwatar, Kathmandu and I use one particular public vehicle – “Nepal Yatayat.”

The bus plies the Koteshwor –Baluwatar– Chabahil route. I always wondered why the number of buses on this specific route is limited. That the buses are always overloaded with passengers. Therefore, it is obvious that there is high demand. But why aren’t people investing in this industry despite such profitable prospect it offers. This sure is a question that seeks an answer.

So one day, one of my daily commutes, I was seated beside the bus driver. After easing myself up (somehow) into the dilapidated seat, I initiated a casual conversation. I inquired about the limited availability of buses. He replied, “Our bus association determines the number of vehicles that are allowed to ply this route”. He further added that operating a bus on this specific route would cost four times the actual amount of buying a bus. The association charges this three-fold fee to permit a new bus to entering the business. Based on our dialogue and my personal experience, it was crystal-clear to me that transport entrepreneurs were operating a syndicate. Now this was supposed to have ended by fiscal year 2011/12 as supreme court had termed these forms of fraudulent associations illegal. The duty of an accountable state then would have been to enforce rule of law and serve the consumers – the people that were bearing the cost of such illegal activity. It is a pity that the government could not, and till date, has not been able to do its duty to the people. Supreme Court’s order against transport syndicates has not yet been translated into any form of action. All attempts of consumer rights advocates have gone in vain.

What if someone wants to operate a bus on a specific route? Why should the route permit cost thrice as much as the cost of the vehicle itself? The entrepreneurs’ association seems to have created an artificial entry barrier in Nepal by offering special previleges to a bunch of cronies allowing them to reap the benefits of a public infrastructure built by the state by taxing lawful citizens of the state.

What syndicates do is limit the resources by creating entry barriers and playing around the market causing unnaturally high prices which in the end has to be borne by consumers like you and me. By killing quality and stifling innovation, syndicates allow for market monopolies to firmly set themselves into the system and we, the consumers, are made to pay exorbitant prices for low quality goods and services in the wake of lesser options being available to us.

As a consumer, and as a future taxpayer, it gives be great displeasure in learning that the state has been unable to acknowledge these day-to-day practicalities that rob the taxpayers of the kind of quality service that they are entitled to. All it requires from the state’s side is to monitor these market malpractices and instate the rule of law. I firmly believe that competition in market renders better services to consumers at lower prices and I wish that these syndicates are broken as soon as possible for the sake of protecting consumers’ rights.

Suraj Dhakal

About Suraj Dhakal

Suraj Dhakal, a student of Development Studies works with Research Department at Samriddhi, The Prosperity Foundation. Mr. Dhakal was previously associated with We Inspire Nepal (WIN), a youth led leadership and personal development organization.

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