Government Must Revive Public Transport To Shore Up India’s Economy

Prasanna Patwardhan Aug 29, 2020

The effects of COVID-19 have been seen across all strata of society and across all industries. The public transport sector has been one of the prime victims of the pandemic along with the tourism and hospitality, all big sources of employment. The public transport sector, one of the largest contributors to the GDP (8% share) is facing tumultuous times. The sector is a major revenue source to the government in the form of various taxes such as road tax, motor vehicle tax (varying from state-to-state for private operators), Passenger tax, GST, Toll etc. The sector is the largest mover of passengers nationally, providing first & last-mile connectivity to over 300 million passengers daily. It also provides livelihood to around forty million people. Sustenance of Many other sectors is dependent on the smooth functioning of this sector.

Extended and repeated lockdowns have hit the operators hard. There are many factors that have contributed to the current state of affairs. Lockdowns and ban on public transport meant that there was no business for the operators and all others that are part of the transport industry. Without adequate business, loans taken on vehicles, salaries and livelihoods have become a challenge for operators. Indian public transport receives no financial support from the government while the burden of taxes keeps increasing including GST, insurance, vehicle; spares, fuel and toll taxes among others. There is marked discrimination between state-run operators and private ones because of nationalization of public transport however both are being neglected for many years by Government and are being looked upon only as a source of revenue. On one side the Government expects these services to be managed by charging economical fares and on the other hand, this sector pays huge taxes and that too in advance. Taxation on Public Transport is highest in India compared to any other country in the world and that too in a country where poor people i.e. 85% of the population is dependent on its services.

For public transport to return, survive and thrive action needs to be taken now to help the industry. It must be kept in mind that for a large part of the Indian population, after the lockdown, in a post-COVID world, public transport will be the only affordable kind of transport. Therefore, there are two aspects to the future of public transport in India – one is the change that a post-pandemic world will bring and two, what the public transport industry needs to meet the challenges and serve the needs of the country.

Public transport sector – The Roadblocks

Despite the moratorium announced by the Central government, which merely allows operators to defer payments, small business owners must pay the entire loan and interest amounts. This apart from all the expenses to maintain their existing fleets, salaries – and all of this with little to no revenue coming in. Most of the public transport in India like autos, taxis, smaller vans have drivers who are daily wage earners. In a post-COVID world, consumers are going to demand more from public transport in terms of safety, hygiene etc. but at the same cost as the pre-COVID era.

For public transport to resume, decision and policymakers must draw up plans, understanding the inevitable changes in commuter behaviour. Whatever policies and regulations will be announced for the public transport industry must be done taking the sector’s opinions into count. Ideally, public transport restoration must be done in a phased manner so that operators have a fighting chance to streamline operations. Public transport operators will have to figure out the best way to provide quality service at the best costs so that they can grow and expand. Success for operators also means that they have the money to invest in better practices that can enhance the commuter experience.

The Government has its task cut out

The public transport industry has been seeking a few allowances that will ensure both proper service to the public as well as a continued livelihood for people within the industry. The tax structure itself is around 35 to 40% of the total cost of operation, including taxes on fuel and spare parts, things that the industry and operators cannot do without. The government needs to make some quick decisions to lift the burden off an industry that the general public relies on.

To overcome these issues and help the sector, government should waive off tax such as GST, MV and toll tax for at least one year and increase the passenger fare by another 30 per cent. Also, banks should extend the mortarium by waiving interest to existing loans because around 70% to 80% of the vehicles in the segment are usually financed and many are availing the moratorium, However, after six months even paying EMIs may not be possible and it is estimated that around 30% of operators will go bankrupt.

Increasing the validity of insurance policies by at least three months and not increasing annual premiums for the next year will also be a good boost. The government needs to allow for fixed quantity fuel per vehicle without charging excise and CESS at basic rates. To support the sector and grow the economy, public and private companies should be able to buy more buses without GST for the next year.

Other measures like providing vacant government lands for free parking, paying employees’ salary through ESIC/PF fund till social distancing norms last and getting it recouped in the next three to five years with Intercity services are some other things the government can do. These solutions will need to be applicable to intercity operations as well because, with social distancing and passenger capacity reduction, the challenges in that area will be the same as city services.

The critical role Public Transport will play in the post-COVID era

A gradual and eventual return to work for a large number of employees may mean different things at various levels. Some companies will take care of the expenses of dedicated transport arrangements for their employees and this will help operators. Because of social distancing and not all seats being used, the costs may go up. For those employees who must pay for their own travel, because of safety reasons, they may choose to switch to other kinds of travel. A similar situation will be seen with schools and other educational institutions as well. Private schools can pass on higher transport charges because of social distancing norms to parents. For standard schools, the challenges posed by costs will have to be addressed by maybe staggered hours for different classes etc.

The government’s intervention and financial support will be critical to help the public transport industry get back on its feet. The transport industry is the backbone of industries and commuters alike and therefore is important to the economy of any country, especially one like India where 85% of the population which can not afford to buy own vehicles is dependent on Public Transport for the commutation. The government needs to see whatever measures it takes as less of a bailout and more of an investment into the future of the economy and confidence building of the country. Unlike many other manufacturing or service sectors, most of the industry and service sectors are dependent on Public Transport, in absence of any support to Public Transport, many sectors will be affected having a long-lasting damaging impact on the Indian economy.