The Indian bus industry is looking up; is changing in-line with the profile of travellers and the development of road infrastructure.
Story by: Bhushan Mhapralkar
The statistics released by the Society of Indian Automobile Manufacturers for the 2015-16 financial year revealed that 43,885 passenger vehicles in the Medium & Heavy Commercial Vehicle (M&HCV) category were sold, clocking a growth of 19.13 per cent. In the Light Commercial Vehicle (LCV) category, 48,960 passenger carriers were sold during the same period, marking a growth of 9.25 per cent. M&HCV and LCV passenger carriers are actually buses (and bus chassis), which make one of the vital integral segments of the Indian automobile industry. They make a common widespread public transport in India, and are categorised into school buses, mini buses, tourist buses, deluxe buses, commuter buses and others depending on their use. The bus market in India, according to a report by Research and Markets is expected to be worth USD 10.34 billion by 2019-20 financial year. It is expected to grow at a CAGR of 9.36 per cent by 2020, driven by an increasing demand for luxury and value.
The development of infrastructure and roads has made it easier for people to avail buses as a preferred mode of travel. Demand for buses is on the rise, and across segments. New segments like sleeper coaches are witnessing rapid growth even as the government authorities work to draft rules to legally define such a development. P S Ananda Rao, Executive Director, ASRTU, is known to have expressed that over one-million buses are immediately needed in addition to 7.5 lakh buses present. In his speech at Busworld 2015, Rao expressed that 1.5 lakh buses move 1.583 million people. “The need is to reduce congestion, pollution and accidents by Bus Rapid Transport (BRT) system and high capacity buses. Over the costlier option of Metro and Mono-rail, it is the bus that can connect villages which are currently unconnected. To address the potential for rural connectivity through JNNURM, there is a need for 50,854 buses at 600 buses per 10 million rural population,” he added.
Government versus private operators
ASRTU has under its aegis 62 State Transport Corporations. These are government bodies, which account for a large chunk of the country’s inter-city buses. For city buses it is the city transport bodies like BEST of Mumbai. DTC of Delhi and BMTC of Bangalore, which are operating under the aegis of the respective municipal corporations. They too are government bodies. Compared to private fleet operators like SRS Travels, Parveen Travels or Neeta Travels, STUs and city bus undertakings are bigger and socially oriented. That does not mean that they are not agile or well managed, some of them could in fact make a business case suitable for study in a management course. The Maharashtra State Transport Corporation, for example, operates a whopping 16,500 buses. Neeta Travels, in comparison, operates over 170 different types of buses. BEST operates 4.143 buses in the city of Mumbai.
Participants in projects like BRTS, and in-line with the government’s move to upgrade the transport system of a city or region – the constitution of AMRUT under the Smart City initiative for example, STUs and city bus undertakings have been driving the growth of the bus industry in a big way. Examples include an order for over 5000 buses bagged by Tata Motors worth an estimated Rs. 900 crore. Both, Tata Motors and Ashok Leyland, are said to have bagged STU orders for 8,600 buses worth about Rs.1,500 crore in the first five months of the current financial year. More agile, the private operators have been greatly banking on profitability and sustainability by procuring buses that would help them best serve their business interests and the interest of their clients.
Both, the government as well as the private operators, continue to face challenges. The nature of the challenges may differ. The way the two deal with the challenges may differ. The way they serve the people of the country is however similar.
The biggest challenge the bus industry is facing today is the need to keep up with the rising need for efficient transportation. The bus industry is today competing with newer modes and ways of public transportation. Amidst such a scenario, there is a need for buses to be looked upon as efficient, comfortable and green mode of public transport. They need not be slow and noisy. In-line with the rising demand for efficient, comfortable and green buses, the bus industry is responding. It is moving away from supplying truck-chassis based designs even though they make for a highly cost effective proposition. Government help towards restructuring and strengthening of the Indian bus industry in the form of JNNURM Phase I and Phase II has worked. Some 25000 buses have been procured. More buses are being procured under new schemes like AMRUT and FAME, but there is a need for higher allocation. Higher allocation is especially important in the case of hybrid and electric buses to be successful. Opined an expert that there is a need for viability gap funding to turn buses into an efficient and cost effective mode of transportation over a metro and a mono-rail. That is a big challenge indeed.
Despite improvement, good infrastructure, which is absolutely essential for a conducive bus operating environment, is still some distance away. Greater participation of private sector in the bus industry is essential. For it to happen, the socialist agenda surrounding buses may need to be diluted in the interest of improved profitability and sustainability. According to Delhi-based Jaspal Singh, a transport analyst at Valoriser Consultants, cost based tendering using L1 criteria has an international company with much higher net worth competing with an Indian company having much less net worth. This creates an imbalance, which does not work well for the profitability and sustainability of an operation. With government fixing a fare, an operator is not protected against rising cost of operation. This is one of the important reasons why private participation has not picked up as much. Lack of parking infrastructure and maintenance space is an issue, which is increasingly faced by both, government as well as private operators. Primitive permit system is a challenge. Permit is allocated to an individual, and is hard to come by. As a result the bus market continues to be unorganised and fragmented. The rise in informal transportation in the form of autorickshaws and cabs is a challenge bus operators have to counter. Then, there’s the challenge of selection of buses on L1 principle of tendering. The technical standards specified by the ministry of urban development under Urban Bus Specifications, UBS1 and UBS2, are comprehensive. However, translating these standards into efficient bus procurement requires highly evolved organisational processes. The STUs lack in this. The challenge is to enhance their procurement paradigms for better articulation of performance specifications of buses and sub-systems for quality, durability, and failure rates
Expressed K T Rajshekhar, Proprietor, SRS Travels, “The government backs and supports STUs. The private operators, which pay taxes and insurance, also need to be supported. They too need good bus stands and amenities.” Harsh P. Kotak, Owner, Modern Travels, and General Secretary, Mumbai Bus Malak Sanghatan, opined, “The need of the hour is to familiarise bus operators with bus body code and insurance provisions.” “Insurance companies say they will not service claims over Rs.10 lakh. How is the bus operator expected to service the rest of the claim,” he questioned. He also drew attention to the RTO penalising bus operators for delay in fitness-certifying their buses in the prescribed time where upon the RTO has been refrained by the court from conducting fitness test for the lack of a test track measuring 250 m in length. Questioned Kotak, what is the role RTO is left to play when the ARAI and CIRT is certifying the bus as per the Bus Code. Said Nikhil Shetty of Vigneshwar Travels, “It is essential that the government facilitates payment of permit tax online. Despite the initial online payment under the pretext of going digital, bus operators have to visit the RTO.”
For bus body builders, the Bus Code has proved to be a disruptive change. It has also presented them with an opportunity to move up the value chain. The likes of Guru Ram Dass Body Builders are investing in compliance with Bus Code. They see it as a means to grow sharply as those who do not comply become redundant. Opined Mayank Kukreja, Chief Executive Officer, Guru Ram Das Body Builders, that the certification procedure is a tough nut to crack. Director of Karur-based Maaruthi Coach Builders, Soundararajan is of the opinion that small players like them are the most affected (by the Bus Code). His company and the other bus body builders of Karur formed an association, and invested in it to make a bus for Bus Code approval. Their effort however seems to have gone waste. Each bus body builder is now building a bus to get Bus Code accreditation. If the Bus Code has addressed the challenge of safety in buses to an extent, challenges like the preparation of an effective framework for bus types like sleeper coaches is a challenge that will have to be addressed sooner than later. One should not be surprised if bus body builders grow up to become independent bus producers tomorrow as they invest in advanced facilities like CAD and automation.
In the case of STUs, a big challenge has been efficient management of operations according to industry analysts. This is especially the case where the sole revenue providers are the buses. The social agenda behind the operation of buses by STUs makes them vulnerable for pressure from politicians who would want a bus to connect or pass through their constituency. Such moves often don’t make a sustainable business case for government transport bodies. For those that have other sources of revenue – like real estate, the going’s good. BMTC is one example, claim industry experts. They add that a chunk of BMTC’s revenue comes from the mall it owns. Delhi Transport Corporation (DTC), at the other end, is said to incur an annual loss of Rs. 35 billion. BEST of Mumbai is also said to be incurring a loss. What the DTC and BEST seem to reflect upon is the issue of congestion. Traffic congestion is an issue that seems to trouble the two city bus undertakings among others. It is affecting their efficiency and an ability to make profits.
In 2009, a growth opportunity presented itself under JNNURM Phase-I. The Ministry of Urban Development sanctioned 15,260 buses for 67 mission cities in February 2009. STUs and Special Purpose Vehicles (SPVs) placed an order for 15,260 buses, and 14,500 buses were purchased. Triggering a big change in the perception for bus-based transport system, JNNURM Phase I helped launch organised bus services in 31 new cities. The financing of buses was linked with institutional reforms in these cities. Some cities implemented various initiates such as the creation of UMTA (Unified Metropolitan Transportation Authority); creation of SPVs, and setting up of a urban transport fund apart from framing of parking and advertisement policies. Bus sales continued to grow as the government invested in infrastructure, and cities like Delhi and Pune explored new transportation initiatives like BRTS, albeit at the suggestion of new and existing players like Volvo Buses and others. By 2014-15, the bus market grew to over 81,000 units. In the 2015-16 financial year, 92,845 buses were sold as per the data released by the Ministry of Heavy Industries & Public Enterprises.
The new government at the centre renamed JNNURM Phase II, with an allocation of USD 40 billion, as Atal Mission for Rejuvenation and Urban Transformation (AMRUT). It was engineered to be a 10 year programme spanning 500 cities, and was linked with the Smart Cities initiatives. The other initiative that the new government announced was the formulation of FAME as part of the National Electric Mobility Mission Plan 2020 (NEMMP). Apart from these initiatives the government has also been encouraging other alternate fuel modes of public transport apart from metros and mono-rails. The Scania ethanol bus plying in Nagpur for the last two years is a prime example. Scania has bagged an order to supply 55 bio-fuel buses to the city of Nagpur. Under an agreement to buy five hybrid buses, the first Volvo 8400 hybrid bus has been plying in Navi Mumbai for some time. By the end of this year, the Tata Starbus Hybrid is expected to start plying in the Bandra-Kurla Complex of Mumbai as part of an order for 25 such buses. The Volvo hybrid bus and the Tata Starbus hybrid are claimed to cost in a region of Rs.2 crore to Rs. 2.15 crore. One Volvo hybrid bus has made an entry into the BMTC fleet at Bangalore. It is claimed to be a part of the undertakings decision to procure 400 CNG buses and 30 hybrid buses in an effort to replace its aging fleet with new eco-friendly buses.
The investment in AMRUT is in the region of Rs. two billion. Claimed an analyst, that an investment of over Rs.100,000 crore is required to upgrade bus transport in 100 largest Indian cities by procuring around 150,000 new buses and upgrading the ancillary transport infrastructure. This should provide an indication of the growth opportunities that are present. The recent order Tata Motors bagged for 5000 buses from STUs worth an estimated Rs.900 crore is reflective of the growth opportunities present. Mentioned B Anil Baliga, Executive Vice President – Bus & Application, VE Commercial Vehicles Ltd., that they have an (firm) order for 1500 buses under JNNURM.
Unfortunately, initiatives like BRTS have met with limited success due to various reasons. The focus may have shifted to metro and mono-rail for obvious reasons, for them to succeed, the need is for a feeder bus service. This is yet another growth opportunity for the bus industry. A part of the Smart Cities campaign, a feeder bus service was started in Delhi on January 01, 2016, by the Delhi Metro Rail Corporation. Prasanna Purple Mobility Solutions Pvt. Ltd., Vijay Tour & Travels, and Rajdhani Coach Cluster Service Pvt. Ltd. were chosen as operators. In May, BMTC also announced feeder services. Similar feeder services are claimed to be in the making as metros and mono-rails spring up in different parts of the country. The Chennai MTC is claimed to already operate the small buses it has in its fleet as feeder services to offer last mile connectivity. A careful study of why metro feeder services (operated by BEST) failed in places like Mumbai is essential to ensure growth opportunities like these are not wasted, expressed an analyst. He added that the need is to efficiently manage the operation and invest in the training of staff. A non-friendly and inefficient staff is a recipe for disaster in an increasingly competitive environment, he mentioned.
Where the government run bus corporations seem to be failing, the private fleet operators are making up for the void. They are efficient and agile. An interesting example of rising private participation is a ten year contract awarded to Bhagirathi Trans. Corpo. Pvt. Ltd. by the Vasai Virar Municipal Corporation to operate 48 buses in the city, consisting of 25 seater light buses and 45 seater heavy buses. Likewise the 162 BRTS buses at Ahmedabad are operated by Chartered Speed Pvt. Ltd. The ability to explore new growth opportunities is said to make private operators successful. Stated B Anil Baliga, Executive Vice President – Bus & Application, VE Commercial Vehicles (VECV) Ltd., that there is a huge demand for sleeper coaches. At Auto Expo 2016, the company displayed a 12 m sleeper coach made at its facility near Indore. At the manufacturing level, bus body builders like Guru Ram Dass are expanding their facilities even as they move up the compliance chain in anticipation of a growth opportunity.
Changing market dynamics
While players like Tata Motors are not supporting the demand for sleeper coaches in absence of a clear directive from the government, the overwhelming demand for sleeper coaches is said to compel even the premium luxury bus manufacturers to address this demand by providing a bus shell. Informed a source close to CIRT, that the draft for sleeper coach code and double decker bus code will be out soon. Stress on rear-engine bus is rising, albeit slowly because this bus costs considerably more than what it takes to buy a front- engine bus. With the ROI spread over a period of four years, it is clear, that the changing market dynamics are governed strictly by costs and some very detailed calculations. Demand for double decker buses seems to emerge if the source close to CIRT is to be believed. The emergence of double decker bus code will make the situation clear. Also whether they are about city bus application or about inter-city application will be clear too. Demand for air-conditioned. buses is rising according to Baliga. Such buses, he adds, call for more horsepower. “Where 90kW used to suffice, the demand is now for 110kW. Some even want higher output.. The market dynamics are changing quickly. The marketplace is fiercely competitive, and players are grasping for breath,” he adds. While attention towards the build quality, and fit and finish standards rises, stress on comfort and refinement is also rising. Opines Kukreja, that technological updates are particularly sought after. “The demand for air suspension is on the rise. Earlier, three to five buses were installed with pneumatic suspension. Today, the number has shot up to 20. Comfort is assuming importance as the traveller is ready to pay,” he adds.
In-line with Baliga’s expression that demand for powerful engines is rising, Sources close to SML Isuzu opine that the new 11 m long Isuzu FR1318 bus that they have introduced, is fitted with a modern and powerful engine to address the rising demand for higher speeds and support additional power hungry devices like air-conditioning, they add.
Going by the volumes, the bus industry may look much smaller than trucks. It is however no less promising. There may be some signs of a slowdown, but the bus industry has been steady in its growth. To counter disruptive change like the bus body code, the bus industry is changing itself. In an effort to address the changing requirements of its clients it is adapting itself. Like truck fleet operators, buyers of buses are well aware of what they want. Even the government organisations. They are demanding, and could express interest in buying buses that are technologically ahead of their times. Encouraging manufacturers to explore new possibilities in the area of design, development, manufacture and support, bus buyers are here to stay. It is because of them, that the bus industry is looking bright.
With inputs from
Anirudh Raheja, Ashish Bhatia, Anusha B and Bhargav TS.