Efficacy of Public Private Partnership (PPP) for City Bus Operations: experience from Indian cities

Document Type

Conference Paper

Publication Date


Subject Area

place - asia, mode - bus, organisation - structures, organisation - privatisation


Public Private Partnership (PPP), bus, India, State Transport Undertakings (STUs), Net-cost, Gross-cost


City Bus Systems (CBS) have traditionally been managed and operated by various State Transport Undertakings (STUs) in Indian cities. However, other than few exceptions, the experience suggests that STUs have always treated City Bus Operations as a liability as compared to rural and inter-state services. Thus, managerial problems and accruing financial losses to the STUs on account of CBS has resulted in neglect of the latter and the image of bus based urban public transport has severely suffered over the past decades. On the other hand, growing interest from the private sector in urban bus services over the last five years has resulted in the evolution of various Public Private Partnership (PPP) models for city bus operations. As a result, more than twenty cities in the country have started city bus operations on PPP mode in the last five years. After a successful inception year, however, most of the systems have not been able to sustain themselves on a long-term basis and have either been terminated or are merely surviving. Over the past two years, city bus operations on PPP mode has gained further weight after the launch of "Funding for purchase of buses for urban transport systems under Jawaharlal Nehru National Urban Renewal Mission" scheme by the Ministry of Urban Development, Government of India that encourages operation of buses on PPP basis. This paper documents the experience of various Indian cities that have adopted various PPP models for financing, operating and managing their city bus operations and attempts to suggest a more sustainable framework for operating city bus services. Two basic models of PPP have been adopted over the years by cities for urban bus operations: Gross Cost Model and Net Cost Model. Under the Gross Cost Model, the operator is paid a specified amount to provide the specified service for a specified period whereas the entire revenue accruing out of fare, advertisement rights, etc. is collected by the city authority. Under this model, the financial risk lies with the city authority contracting the services. Under the Net Cost Model, the operator provides a specified service for a specified period and retains all the revenue. The operator pays the authority a royalty per bus per month in lieu of this. Under a net-cost contract the operator has to forecast his cost, revenue and risk over the entire concession period. The study has picked up case studies from cities like Indore, Jodhpur, Kota, Udaipur, Jalandhar, Surat (Net-cost) and Ahmedabad, Delhi (Gross-cost) that have adopted these two models for managing CBS on PPP basis. For each case study, the contracting models used are studied and evaluated under various indicators, such as sharing of risks and responsibilities between the operators and authority, fleet expansion after inception, coverage (equitable/inequitable), existence of fare revision mechanism, institutional framework & capacity building at the level of authority, etc. Further, for each case study, the problems faced by the authority and the private operator since the inception of services and the resulting impacts of the overall quality of the city bus service are documented and possible relationships established between the contracting framework and the problems faced. The study further documents some of the best practices in STU running CBS in India and examines them against the same aspects as for the PPP models. The study aims to conclude by answering the following questions: (i) Whether cities really need to adopt PPP models for CBS and under what conditions is it advisable to go for it? (ii) What should be the considerations while choosing a gross-cost or net-cost model and how each can be improved? (iii) How can the risks be minimised while structuring CBS on PPP mode? Overall, the paper seeks to establish a framework to make the PPP model of city bus operations more sustainable


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