CREW Project
Research Findings of Diagnostic Country Report
(DCR), India
Staple Food and Bus Transport Sector
Staple Food Sector
Coverage of the Study
Key Findings
• The study covered production, agricultural
marketing, procurement, warehousing and
distribution aspects
• Fertilizer - Policies have neither been able to
foster competition in the market, nor able to
unambiguously enhance the farmers’ welfare.
• Both secondary and primary survey were used
• Seed – Policies have significant impact
through improved seed quality, better
access and higher seed replacement rate
• Secondary data – various policy documents,
research papers, data on fertilizer, seed,
production etc.
• Primary survey
• Rajasthan (Districts - Alwar and Bhilwara)
• Farmers - 200
• Consumers - 200
• Bihar (Districts - Vaishali and Saran)
• Farmers - 200
• Consumers - 200
• In-depth interviews of the state officials
• Discussions with other stakeholders
• Agriculture marketing - Divergent
experiences; limitations of the in
attracting investment; the study also finds
that complete abolishment of APMCs is
not the right solution.
• Procurement – Current public monopoly
may not improve accessibility and better
price realisation, especially for marginal
and small farmers.
• Warehouse – The weakest node in the chain
• Distribution – Characterized with severe
loopholes;
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Agriculture Produce Market Committee (APMC)
Reform:
Limited ground level impacts in both states
Issues in APMC provisions:
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Continued government control despite limited market access
Licensing rules inhibits competition by acting as entry barrier
Severe infrastructural bottlenecks in the APMC markets
High intermediation cost
No national level integrated market in the face of regulatory barriers
Lesser price realisation for farmers
High wastage due to long supply chain
Lessons Learnt
Agriculture Marketing
• Contrasting reform experience – Bihar vs. Rajasthan
• Both enables greater private participation on paper; but little impact on beneficiaries
due to implementation issues
• Policy Implications:
- Withdrawal of government will not automatically attract private players
- Need an integrated policy framework encompassing infrastructure policy, credit
policy, etc.
- Flexibility to adapt to heterogeneity among stakeholders
- Planning and implementation of reforms, keeping in mind the ‘needs’ of specific
target groups
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APMC Reform and Implications
Bihar Story - APMC scrapped
• All market barriers removed, to achieve
• Greater private participation in market
development
• Better access for buyers to directly procure from
farmers
• Engaging farmers in contract farming
• Ground experience, however, belied the potential
• Little or no private investments in infrastructure
• Complementarity with public investment
• Farming community largely of marginal or small
farmers
• Benefits are reaped majorly by medium/large
farmers (selling in organised markets)
• Decline in transaction cost (savings by farmers
selling in organised markets)
• Thriving ‘middle layer’ – largely perceived as a
win-win
Rajasthan Story - APMC Embraced
• Compliant with all three provisions of Model
APMC Act: Direct marketing, contract farming
and private markets
• Even with ‘full’ reform, ground condition has
not changed much
• No operational farmer-consumer market
• Only 2 licenses issued for private markets; still
non-operational
• Only 1 license for trading in multiple markets
• No registration of contract farming
• 76 direct marketing licenses issued, but limited
operationalization
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Bus Passenger Transport
National Policy Framework: Reduced Role of Private Sector
• Motor Vehicles Act
- MV Act, 1914 failed to deal with burgeoning road transport sector
- Mitchel-Kirkness Committee (1932)– restriction on no. of licenses/route, fixation
of schedule and fare, compulsory motor insurance, etc.
- Spirit largely incorporated in the MV Act, 1939 (revised in 1988)
• Given effect through Road Transport Corporation Act 1950 and concomitant addition
of special provisions for State Road Transport Units (SRTUs) in the MV Act
- Reservation for SRTUs in partial/complete exclusion of private players at the
discretion of the state
- State discretion led to wide variation in the transport set up across states
• Road transport placed in Schedule B of Industrial Policy Resolution 1956, indicating
move towards progressive state control and only supplementary role for private
players
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Case of MPSRTC – Abolishment in 2005
Impact on producers
Impact on Commuters
• Open entry for private operators
• Freedom for private operators to
choose type of permit, route,
schedule under regulatory oversight
• Control on fare, route, schedule in
hand of RTA
• Fragmented market dominated by
private players
• More than half the passengers report
some level of improvement in almost
all parameters post abolishment
• Most respondents also report only
marginal increase in fare, which has
been largely in line with general price
rise
• Estimated to have around 200 private
operators
• A heterogeneous group - fleet size
ranging from a single bus to 20-25
buses
• A limited number of public operators
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Policy Lessons
• Competition seem to be providing benefits to commuter, but needs to be
strengthened, structured
• Weak regulatory oversight poses challenges – operators not following schedule,
route, fare, etc.
• So need a strict but smart regulatory framework to be implemented by a wellresourced institution – M.P. State Public Transport Regulatory Authority
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Case of GSRTC – Monopoly over ‘Stage Carriage’ Permits
Impact on supply side
Impact on commuters
• Truncates competition
• Majority of commuters aware of
‘illegality’
• But, 2/3rd of the respondents are
indifferent
• No significant increase in fare
• No significant fare difference
• ‘Illegal’ entry of private players to cater to
demand-supply gap due to supply side
bottlenecks favor larger operators
• Impact on GSRTC
• No competitive benchmark PLUS continued
budgetary support leads to persistent
inefficiency and market distortion
• Impact On Private transport operators plying
in ‘stage carriage’ mode
• Illegal nature of operation, as only have
‘contract carriage’ permits
• Additional cost (rents)
• Likely domination of larger, influential players
• Unregulated competition
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Policy Lessons
• Legal restriction on supply side, even when GSRTC cant meet demand
• No competitive benchmark to improve operational efficiency of GSRTC
• Unregulated entry of private players, imposes additional cost on operators (promotes
corruption)
• Commuter’s implications:
- Additional costs (rents) likely to be passed on to passengers
- No published time schedule, fare chart, route, etc.
- No dispute resolution mechanism
- Could pose safety and security issues; legal tangles
• Commuters are enjoying some benefits from public-private competition, which raised
question - Should the 1994 policy be continued
?
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Case of AMTS – Monopoly over Intra-City Regular Bus
Transport
Impact on supply side
Impact on Commuters
• Sustaining on large dole of public fund infusion
• Cost of Rs 3.16 bn in 2013-13 vs. revenue of
Rs 1.44 bn in 2012-13
• Subsidized fare
• No ‘local’ benchmark
• Insufficient annual fare adjustment
• Stifles innovation – administrative laxity, financial
constraint
• No alternate option/choice
• Limited service availability
• Falls behind Bhopal in terms of incremental
changes, despite higher overall satisfaction
• To reduce cost, it has leased out 170 of AMTS
buses to private operators and also have hired
another 210 buses from them
• Thus, Pvt operators are running half of the
city services
• But, presence only as service provider to
AMTS
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Policy Lessons
• Diminishing scale of ‘own’ operation; low efficiency
• Limiting competition and private participation puts considerable pressure on
state resources
• Hemorrhage of public resources with high opportunity cost – Rs 1.72 billion
deficit on Rs 1.44 billion revenue!
• Limited possibility of innovation in service based on passenger needs
• Raises question on utility of following with this public monopoly
• Requires assessment of the element of competition in the ‘procurement’ of
services of private operators
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