On the route to privatisation

Print edition : January 03, 2003

The Tamil Nadu government's plan for the partial privatisation of the State road transport system is likely to do more harm than good to the public cause.

OVER one lakh employees of the 21 government-run transport corporations in Tamil Nadu are a worried lot. The reason for this is a recent State government decision to downsize the operations of the corporations as the first step towards the partial privatisation of bus routes.

At the Metropolitan Transport Corporation's bus terminus in Broadway, Chennai. The proposed withdrawal of 7,742 of the 12,905 buses involved in the operations in Chennai and the districts would deal a mortal blow to the policy of "progressive nationalisation" of the passenger transport system, which has been in force in the State for well over 40 years.-V. GANESAN

Thousands of workers now face the prospect of loss of jobs and a substantial number of those who can retain their jobs may face redeployment. Trade unions representing the workers are staging demonstrations and other protest actions, against the notification. They have drawn up plans for a long-drawn-out struggle "not only to save their jobs but also to force the government not to abandon its social responsibility to provide safe and affordable travel for all''. Sensitising people's representatives - legislators, municipal and panchayat councillors - on the implications of the government's move is also part of their mobilisation effort. Writ petitions have been filed in the Madras High Court challenging the notification.

The All India Anna Dravida Munnetra Kazhagam (AIADMK) government, which misses no opportunity to commit itself to the reforms regime, announced on November 12 in a Gazette Extraordinary its proposal to reduce by half its transport services in 28 of the 29 districts. The `proposed modified scheme', which seeks to replace the `approved modified scheme' in force since 1999, indicates the number of buses and trips the State-run corporations would pull out in these areas, including Chennai. The proposed modified scheme indicates, in an innocuous way, that the `permits' of the State transport undertakings would be "transferred" to private operators.

The notification issued in respect of each of the 28 districts (the hill district of Nilgiris has been left out) did not identify the routes to be opened up for the private sector, nor did it give their number. The government seems to be in a dilemma over identifying the routes to be handed over to private operators. If `uneconomic' routes are offered for `transfer', there may be no takers. On the other hand, if `remunerative' routes are given to them, how can the government manage with `uneconomic' routes if the purpose of the whole exercise is to make the operations of the corporations viable? Ultimately, it is likely to settle for a mix of both, observers say. The government's proposals and representations would come up for consideration and action at a hearing by the Home Secretary in Chennai. (The date of the hearing was first fixed for December 17, and later postponed.)

The proposal is believed to have been made in the light of a recommendation by a high-level committee appointed by the State government last June under the chairmanship of its Chief Secretary, after a "detailed" study of the finances of the corporations, most of which have been reporting losses for many years now. Announcing in the State Assembly on May 3 the decision to form the committee, Transport Minister R. Viswanathan said, amidst protest from the Opposition, that the government would go in for "structural reforms", the modern euphemism for "privatisation". Nine days later, Chief Minister Jayalalithaa clarified that there would be no privatisation of the transport corporations and what the government proposed to do was "to privatise select routes and services". She assured the House that bus services in rural areas would not be affected.

The first indications of the government's plans came in October 2001 when it went all out to defeat the strike called by the employees of the transport corporations demanding bonus at the same rate as in previous years. The government rejected the demand on the ground that the State was in the grip of a serious financial crisis, and offered to pay only the statutory minimum. It appointed untrained drivers and deployed private buses and vans in an attempt to maintain the services. The employees withdrew the strike in the face of severe repression and the threat to discontinue other benefits.

A human chain in Chennai on December 12 to protest against the privatisation move. A large number of women and students, apart from transport workers, participated in it.-R. RAGU

Labour leaders did not give much credence to the `financial crisis' theory. Many of them said that it was only a ruse to get into the reforms regime under pressure from the Central government and international finance agencies. An orchestrated campaign in the form of newspaper articles and media interviews in support of privatisation of road transport was also on (Frontline, December 7, 2001).

The November 12 notification sparked protests from trade unions and major political parties. Trade union leaders fear that 50,000 to 60,000 workers will lose their jobs if the government implemented its modified proposal. Home Secretary Syed Munir Hoda, however, put the figure at "not more than 30,000". Leaders of Left parties said that the proposal, apart from leading to massive retrenchment, would mark the government's withdrawal from the vital social sector.

THE proposed withdrawal of 7,742 of the 12,905 buses involved in the operations in Chennai and the districts would give a mortal blow to the policy of "progressive nationalisation" of the passenger transport system, which has been in force in the State for well over 40 years. The State government has been in this business since the mid-1950s, when it took over the city bus services in Chennai. These services, and the State transport bus services that came with the transfer of Kanyakumari district from the erstwhile Travancore-Cochin to the then Madras State under the States Reorganisation Scheme in the late 1950s, were run by the Transport Department of the government. Long-distance express bus services that connected important towns to Chennai and also provided inter-town links were soon introduced. When the Dravida Munnetra Kazhagam (DMK) first came to power in 1967, it took over the operations of long-distance bus services, upon the expiry of the private operators' permits. This helped the government avoid payment of compensation to the private fleet owners. In the early 1970s, the State government embarked upon large-scale direct investment in the road transport sector by launching four corporations, named after ancient Tamil dynasties - Cheran, Chozhan, Pandiyan and Pallavan.

The nationalisation of transport services on a larger scale at the State level was brought under the purview of the Tamil Nadu Stage Carriages and Contract Carriages (Acquisition) Act, enacted by the State Assembly in 1973. The Madras High Court struck down the Act, but the Supreme Court upheld its constitutional validity in 1984 on the grounds that it envisaged the nationalisation of the public transport system in conformity with one of the Directive Principles in the Constitution. All the four corporations were formed under the Companies Act, 1956, and not under the Regional Transport Corporations Act, 1950, unlike in other States. The declared objective was "to confer upon these companies maximum autonomy to perform and flourish following principles of commercial prudence". Direct investment by the government as equity was limited, and the Tamil Nadu Transport Development Finance Corporation, a non-banking organisation, was formed to finance the corporations. Over the years, the transport corporations have recorded remarkable growth. Today there are 21 corporations with about 17,000 buses (against a mere 2,000 in the 1970s) and a labour force of a little over 1.25 lakhs (in the 1970s its strength was less than 10,000). The nationalised service touches even hamlets with a population of one thousand. Over 18 million people travel every day by 15,379 buses, which cover 63.7 lakh kilometres and generate a daily revenue of about Rs.7.5 crores.

The various corporations have won national awards for performance in the fields of productivity, fuel efficiency, maintenance, service, and so on. Visitors from other States often have a word of praise for the relatively efficient and well-knit transport system in Tamil Nadu, although recently there have been complaints from the user-public regarding the condition of the vehicles, the quality of service, and so on.

The transport corporations suffered their first major setback in the early 1990s following the shortage and steep hike in the price of diesel in the wake of the Gulf War. Services had to be drastically curtailed for months together and many of them could not be restored. The government's failure to revise the fare structure, on a reasonable basis in tune with the general price level, for political reasons, in the context of increasing establishment costs brought down the corporations' viability. The corporations also suffered heavy revenue losses owing to stiff competition from short-distance private buses in several districts and from private "omni buses" clandestinely operated in large numbers from Chennai to far-flung places in the State with the tacit support of the authorities. Mini-buses, run by private operators who were granted permits in 1999 in the name of "serving rural needs'', also substantially ate into the earnings of the corporations. Administrative inefficiency, poor maintenance of vehicles and large-scale corruption at various levels have also been responsible for the losses. The government's failure to honour its commitment to reimburse to these corporations the amounts involved in the issue of free travel passes and tickets at concessional rates to special groups such as students and the disabled - which run into hundreds of crores of rupees - is another reason for the cumulative loss. The loss accumulated over the last 10 years is estimated at over Rs.2,000 crores.

PETITIONS challenging the November 12 notification have been filed in the Madras High Court by, among others, Communist Party of India (Marxist) State Secretary N. Varadarajan and leaders of trade unions affiliated to the Centre of Indian Trade Unions (CITU), the Labour Progressive Federation and the All India Trade Union Congress (AITUC). The petitions are now before a Division Bench. Varadarajan and A. Soundararajan, general secretary of the Tamil Nadu State Transport Workers' Federation affiliated to the CITU, have stated in their petitions that the notification is "illegal and unconstitutional". The petitioners have contended that in Chapter VI of the Motor Vehicles Act, which governs the State transport undertakings, there is no provision for the transfer of permits granted under the Chapter. "The government cannot decide upon the transfer of permit granted to the State transport undertaking to private operators as proposed in the (proposed modified) Scheme," says the petition. This power rests with the State or Regional Transport Authority, according to the petition. Another point highlighted at the admission stage is the lack of legislative sanction for the government's move.

DMK president M. Karunanidhi who played a premier role in the nationalisation of public transport first as Transport Minister and later as Chief Minister, State secretary of the Communist Party of India R. Nallakkannu, and Tamil Nadu Congress Committee working president E.V.K.S. Elangovan are among the leaders of political parties who have issued statements criticising the privatisation attempt.

Deploring the move as short-sighted and anti-people, Soundararajan said that it would throw to the streets the families of thousands of workers and cause great hardships to the travelling public, particularly the rural poor. A voluntary retirement scheme, howsoever attractive it may be, would not adequately compensate the workers deprived of their permanent jobs, he said. Although the government hoped that the displaced crew of the corporations would be employed by private operators, the salary they could get would not be commensurate with their experience and seniority, he pointed out.

A large number of people, particularly the poor, who are fully dependent on the relatively cheap State transport facility, will be among the worst affected. About 25 lakh students, who travel long distances to schools and colleges, may also possibly lose the full/half fare concessions extended by these corporations at a cost of over Rs.77 crores a year. Other beneficiaries, such as the disabled, the mentally retarded, and cancer patients, would lose substantial fare concessions. Privatisation will also lead to unsafe travel and increased road accidents, because of possible competition among the operators. The private operators, whose sole motive will be to earn the maximum profits, as experience everywhere else has shown, cannot be expected to serve the needs of the people of remote villages by taking up uneconomic routes. Agriculturists will lose the facility to carry their produce to the Uzhavar Santhai (farmers' market) free of charge. Rural education efforts will suffer a setback with the withdrawal of fare concessions. Frequent increases in bus fares, which are quite likely in a private sector regime, would deter poor parents from sending children to schools. Private operators indulge in unfair competition and care the least for passenger safety, according to surveys conducted by road transport researchers.

The reduction of the corporations' activities by half will cut into the employment opportunities provided by these corporations. In the absence of any compulsion on private bus operators to follow the reservation system in the matter of appointments, it is feared that employment-seekers among Dalits and backward communities will be badly affected.

Trade union leaders do not agree with the argument that the corporations were making heavy losses and therefore had to be ditched. Since they are public utility services, the ability to make profit should not be the sole criterion for deciding their social necessity, said Soundararajan. In fact, these corporations had made profits for many years and with the incomes they had generated they built assets worth hundreds of crores of rupees, in the form of their own bus stands, depots, workshops, office buildings and so on. In addition, these corporations, he said, were running a medical college, an engineering college, three polytechnics, eight industrial training institutes, a road transport research organisation and a driving school of high standards - all with their own earnings and with long-term deposits collected from the employees. These institutions were worth hundreds of crores of rupees, he said.

Soundararajan said that the corporations seemed to be already on the road to recovery: they had earned an estimated profit of Rs.73.66 crores in the half-year ending September 30, 2002 (against a loss of Rs.113.09 crores in 2001-2002). This, he said, was made possible by the steep increase in fares, austerity measures and the denial of the legitimate bonus and other monetary benefits to its workers.

Many among the user-public complain that there has been a steady decline in the standard of service provided by State-owned bus services and they prefer a judicious mix of State-run and private buses in order to bring about a healthy competition and more efficient services. They stress that there should be constant monitoring of the services so that there is no violation of rules and denial of benefits to the poor and the needy.

States such as Rajasthan, Madhya Pradesh and Andhra Pradesh have opted for the denationalisation of the transport sector on similar grounds. But what has happened in these States? This information from Urban Bus Transport in India: Half a Century's Stride by M.K. Thomas, who edits the Indian Journal of Transport Management of the Central Institute of Road Transport, Pune, may be of some interest: "Though on the pretext of providing better service to the travelling public some of the State governments handed their urban bus operations to private operators, they later realised that their decision was wrong. The private operators, being profit-motivated, ignored the interest of the travelling public and the safety of citizens and in some cases disturbed the city life. People in these cities then collectively forced the government to nationalise the bus operation in these cities.''

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