sectorial 1

Competitive assessment of road transport sector

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COMPETITION COMMISSION OF INDIA

INTERNSHIP PROJECT REPORT

TOPIC:

Competitive assessment of road transport

sector

PROJECT MENTOR : MR.SUKESH MISHRA

JOINT DIRECTOR (LAW)

COMPETITION COMMISSION OF INDIA

SUBMITTED BY: SUBMITTED TO:

ZUBEDA MAJID KHAN COMPETITION COMMISSION OF INDIA

8th

semester B.A.LL.B.(Hons.)

ALIGARH MUSLIM UNIVERSITY (Aligarh)


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TABLE OF CONTENT

DISCLAIMER................................................................................................................................ 4

UNDERTAKING ........................................................................................................................... 5

ACKNOWLEDGEMENT ................................................................................................................ 6

INTRODUCTION ................................................................................................................ 7

Research Methodology .................................................................................................. 9

Scope objective and significance ................................................................................. 10

Research Question……………………………………………………………….………………………………...10

Chapter 1: ASSESSMENT OF ROAD TRANSPORTATION AND EXISTING COMPETITION

ISSUES………………………………………………………………………………………………………………………………..11

Chapter 2-ASSESSMENT OF PASSENGER ROAD TRANSPORT (LAND)…………………………………..13

How competition can be introduced in this sector……….……………………………………..16

Impact of competition on consumer…….……………………………………………………………..17

Evidence of anti-competitive activities in this sector……………………………………………18

Chapter 3: ASSESSMENT OF FREIGHT TRANSPORT AND ITS IMPORTANCE (LAND)………………21

Major Players in road transport business…………………………………………………………...21

Road freight transportation and evidence of cartelization………………………………...25

Chapter 4: ASSESSEMENT OF COMPETITION ISSUES IN ROAD CONSTRUCTION SECTOR……..26

Bidding procedure and design of tender…………………………………………………………….26

Entry barriers……………………………………………………………………………………………………..27

Need for road construction materials…………………………………………………………………28

Outsourcing of maintenance work……………………………………………………………………..28

Contracts should be contract based……………………………………………………………………28

Capacity building………………………………………………………………………………………………..29

Need for a regulator…………………………………………………………………………………………..29

Chapter 5: THE THIRST OF PUBLIC PROCUREMENT…………………………………………………………….30


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The fiasco of Golden Quadrilateral……………………………………………………………………..31

Chapter 6: REGULATORY FRAMEWORK COVERING ANTI-COMPETITIVE PROVISIONS OF

MOTOR VEHICLE ACT, 1988………………………..…………………………………………………………………….35

Chapter 7: TAX STRUCTURE OF INDIAN ROAD TRANSPORT SECTOR……………………………………38

Collection Agencies…………………………………………………………………………………………...38

Tax Collection………………………………………………………………………………………………......39

Motor Vehicle Tax……………………………………………………………………………………………..39

What has to be done? ............................................................................................39

Need for change…………………………………………………………………………………………………40

Chapter 8: CONCLUSION AND RECOMMENDATION……………………………………………………………41

BIBLIOGRAPHY……………………………………………………………………………………………………………………43

STATUES REFERRED……………………………………………………………………………………………………….……44

SECTIONS INVOLVED………………………………………………………………………………………………………..…44

WEBLIOGRAPHY………………………………………………………………………………………………………………………………44


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DISCLAIMER

This project report/dissertation has been prepared by the author as an intern

under the Internship Programme of the Competition Commission of India for

the period of one month i.e. from 1st July 2013 to 30

th July 2013, for academic

purposes only.

The views expressed in the report are personal to the intern and do not

necessarily reflect the view of the Commission or any of its staff or personnel

and do not bind the Commission in any manner. This report is the intellectual

property of the Competition Commission of India and the same or any part

thereof may not be used in any manner whatsoever, without express permission

of the Competition Commission of India in writing.


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UNDERTAKING

I do hereby undertake that this particular report has been prepared as a part of

the internship program at the Competition Commission of India by the intern.

All the information contained herein is true to my knowledge and

understanding.

The report has been drafted from various resources and is the result of the

research carried on. Various resources from which the data is taken and

incorporated have been duly acknowledged.


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ACKNOWLEDGEMENT

I do hereby acknowledge that all the information contained in this project is true

to my knowledge and understanding. I want to thank various sources which

assisted me in the successful completion of this report.

First of all I would like to express sincere gratitude towards the Competition

Commission of India (CCI) for selecting me for such a valuable internship

which has been a great learning experience for me.

I would sincerely like to thank my guide Mr. Sukesh Mishra (Joint Director,

Law) and Ms. Prachi Gupta (Expert, Law) for assigning me this particular topic

to research upon. They have been very supportive and without their supervision

and guidance this report would not have successfully completed.

Lastly I would like to thank Ms. Manisha Gupta (Office Manager) and the

library staff who have been very co-operative throughout.

ZUBEDA MAJID KHAN 8TH

SEMESTER B.A.LL.B.(HONS)

ALIGARH MUSLIM UNIVERSITY (ALIGARH)


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INTRODUCTION

A market is a collection of products and geographic locations, described as part of an inquiry

aimed at making inferences about market power and anticompetitive effect.1A market defined

for this purpose is often termed a “relevant market”. Market is divided into different sectors

and we all know that, if there is market then competitions ultimately exist. For the existence

of any market, what is required is that there should be Competition among the players

prevalent in that particular sector. If there is no Competition among them and some of them

are exercising their dominant position thereby curbing Competition that market will collapse

sooner or later.

This research paper focuses on road transport sector, identifies and list provisions in statutes,

rules, policies and practices, which limit competition or have the potential to limit

competition in a sector. So in this report the area of study is assessment of road transport and

competition within it.

Road transport plays a dynamic role in economy of any country. From thin to thick it

facilitates and plays a pivotal role. A well developed transport network facilitates the

integration and interdependence of the different sectors by aiding quick and adequate

movement of people and material.

Therefore, it can be very well said that if agriculture and industry make up the ―body of the

Indian economy, transport and communications constitute ―nerves of the Indian

economy.2

Road transport constitutes a major role in infrastructure sector also. Earlier the Infrastructure

sectors were under control of government and were operating without significant competition

either from the public sector or private. Here the crux of the matter lies in the overall

development of the economy along with free and fair competition. It provides social-

economic benefits to the people because of well developed road network. In rural areas it

1 ABA Section Of Antitrust Law, Antitrust Law Developments 525-602 (5th Ed. 2002)

2 NCAER (April, 2007), ―State policies affecting Competition: Passenger Road Transportation sector‖,

available at http://www.cci.gov.in/images/media/completed/2statepolicesaffecting_20080508111218.pdf

http://www.cci.gov.in/images/media/completed/2statepolicesaffecting_20080508111218.pdf


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helps in terms of increased employment opportunities due to use of labour-based methods in

road construction projects, access to education, health and nutritional facilities, strengthening

of local market towns as economic centres, movement of farm inputs, collection of the

harvested crops, crop marketing etc. An efficient Road Transport Sector, in particular, plays

a crucial role in a country’s economic progress and growth. Bringing together both supply

and demand sides, road transport sector influences entire gamut of social and economic

activities of a country. But if we see road transportation from the competition prospective

under competition Act, 2002, it plays a vital role in determining the economic growth and

human resource development within a specified geographical region of the territory of any

country.

We have various glaring examples before us to prove that how roads have helped in

developing Nations. The Autobahns in Germany shows how road network can help country’s

economy as a whole. Providing employment opportunities at stage of its construction to

providing economic benefits after its completion, Autobahns have united remotest corners of

Germany and the major cities with each other. The US Interstate System is another example

of how roads can build nations. It is one of the most efficient road transport systems in the

world currently and connects coasts, borders, cities and small towns leading to vast expansion

of business in USA.3

3 Details have been outlined in The Road That Built America, The Incredible Story of the U.S. Interstate

System, Dan Mc Nichol


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RESEARCH METHODOLOGY

The methodology adopted by the researcher for the project is the Doctrinaire Method of

Research. The researcher has gone through various texts and research papers for the study.

Serious thought need to be given immediately to the need of having sustainable growth in the

transport sector. The regulatory and legal frameworks governing the sector need to be

comprehensive with regard to infusing competition in the sector so that both prices (to the

consumer) and costs (to the producer) are kept low. We need to frame policies to keep up

with the rising demand of road transportation and with the best international practices.


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SCOPE, OBJECTIVES AND ITS SIGNIFICANCE:

The objective and scope of competition Act, 2002 is much broader. It was enacted to provide

for the establishment of a commission to prevent practices having adverse effect on trade-

related competition, to promote and sustain competition in markets, to protect the interest of

the consumers and to ensure freedom of trade carried on by the other participants in the

relevant market in India. Road transportation under the competition act, 2002 plays a major

role in mobility, economic growth and overall human development and in securing social and

efficient movement of people, freight etc which help in economic growth of the country. Here

the Competition Act, 2002 help in identifying growth and competition existing in particular

region of the country by the way of “relevant market” and further distinguishing into

“relevant product market” and “relevant geographical market.”

The main object is to study the regime of abuse of dominant position4 so that the doubt

relating to legal behavior and anti-competitive agreements5 and anti-competitive behavior can

be differentiated in the road transportation sector.

Research Questions

How road transportation plays a unique role in development of economy of a country?

What is the significance of the competitive assessment of road transportation?

Whether existing regulation and taxation method is sufficient or it needs to be

modified?

What steps can be initiated to prevent anti competent activities in this sector?

How can anti-competitive activities, specifically the formation of cartels be prevented

by the Competition Commission of India?

4 Section 3, The Competition Act,2002

5 Section 4, The Competition Act,2002


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CHAPTER –I

ASSESSMENT OF ROAD TRANSPORTATION AND

EXISTING COMPETITION ISSUES

Road transportation plays an important role in overall economic activities that are intensive in

infrastructures and socio-economic welfare. It’s an important component of the economy

which have an impact on overall growth and the welfare of populations in terms of social and

economic benefit. When we will have efficient transport system, it will provide us economic

and social opportunities and benefits that result in positive multipliers effects such as better

accessibility to markets, employment and additional investments. But when transport systems

are not efficient then it will have an adverse effect in terms of capacity or reliability, they can

have an economic cost such as price rise, over inflated product rate.

Road Transportation also carries an important social and environmental importance, which

cannot be discarded or overlooked. Thus, from a general viewpoint we can say that road

transportation have direct as well as an indirect impact on economy of our country. Direct

impacts related to accessibility change where transport enables convenient access to larger

markets within quick succession of time. So in terms of time and money it provides us

benefit. Indirect impacts can be related to fluctuation of price of commodities, goods and

services.6

Mobility or movement is one of the most basic and important feature of economic activity as

it satisfies the fundamental need of going from one place to the other, the present world

require a free flow of information as well as a movement of passengers, freight, etc. Road

Transport also helps in increasing mobility of labour and Capital. Reduced mobility impedes

development while greater mobility is a catalyst for social and economic development.

Mobility is thus a reliable indicator of development. Providing this mobility in an industry

that provides services to its customers, employs people and pays wages, invests capital and

generates income. A well developed transport network facilitates the integration and

interdependence of the different sectors by aiding quick and adequate movement of people

and material. Therefore, if agriculture and industry make up the ―body of the Indian

6 Rodrigue, J-P et al. (2009) The Geography of Transport Systems, Hofstra University, Department of Global

Studies & Geography, http://people.hofstra.edu/geotrans

http://people.hofstra.edu/geotrans


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economy, transport and communications constitute its nerves.7 The road transportation is a

system which plays a pivotal role in growth of the country even in some country it

contributes 6 to 12% of the gross domestic product (GDP). It facilitates a level of output,

income, employment and education within the economy of a nation.8 Transportation is linked

to producer, consumer and production costs. The importance of specific transport activities

and infrastructure can thus be assessed for each sector of the economy.9

The significance of transportation is relative to economy and the population of a country and

India being world’s second fastest growing economy and being the second most populated

country, transportation plays a very crucial role in its economic development and sustainable

growth.

Road transportation is growing at a much fast rate as compared to other modes of

transportation like railways, airways, inland waterways, despite various barriers been faced to

inter-state movement of freight and passenger by road.

7NCAER (April, 2007), ―State policies affecting Competition: Passenger Road Transportation sector‖,

available at http://www.cci.gov.in/images/media/completed/2statepolicesaffecting_20080508111218.pdf 8http://www.tcd.ie/civileng/Staff/Brian.Caulfield/Intro%20to%20Transport/Economic%20impacts%20of%20trn

sport_MSC.pdf 9 Supra note 4

http://www.cci.gov.in/images/media/completed/2statepolicesaffecting_20080508111218.pdf

http://www.tcd.ie/civileng/Staff/Brian.Caulfield/Intro%20to%20Transport/Economic%20impacts%20of%20trnsport_MSC.pdf

http://www.tcd.ie/civileng/Staff/Brian.Caulfield/Intro%20to%20Transport/Economic%20impacts%20of%20trnsport_MSC.pdf


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CHAPTER II

Assessment of Passenger Road Transportation (Land)

When British came to India the first and foremost thing they did was construction of railway

track in early 18th

century, because they were traders and they very well understood the

importance of free flow of movement and communication in terms of product, goods and

services. The British developed the railways for improving trade and to move troops to

control the law and order situation arising out of the independence movement. The main

motive of the British was to maximize their revenue by way of trade or by suppressing local

traders. They also collected heavy tax and interests from local traders in the name of taxation.

But After independence, the Government of India understood the importance of mobility and

free movement of product, goods and services so they started giving their high priority in

constructing roads and road transport for rural development.

After independence, Govt. of India has done substantial work for the mobility of the

passenger and goods. Even they allocate a hefty sum of money for the development of

railways. Indian Railways improved its services and expanded its network substantially, but it

could not compete effectively with road transport for transporting passengers. If we look at

the present situation we come to know that the passenger have to wait for 3 to 4 hour in the

morning for booking a railway ticket under Tatkal scheme introduced by Indian railway. This

shows the inefficiency of railway in coping with the problems of passenger in providing

proper accommodation. These days it has become increasingly difficult to get a railway ticket

even two or three days before the scheduled date, forget getting ticket on the very scheduled

date. Whereas the roads transport system which provides the inter-state communication

services is maximizing their profit day by day. But With the enactment of the Road

Transport Corporations Act (1950) and amendments to the Motor Vehicle Act (1939), the

Government of India paved the way for speedy nationalization of passenger road transport,

establishment of State Transport Undertakings (STUs), and empowering STUs to grant

permits. Consequently, all the Indian states established STUs and started nationalizing bus

operations. As a result of STU initiatives in many states, basic infrastructure such as bus

depots, service centers, modern bus stations, etc were built.10

10

Udai S. Mehta, Research Study of the Road Transport Sector in India, the Ministry of Corporate Affairs,

Govt. of India, 2012ASSAZS


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Sate transport undertaking (STUs) is grown substantially and it is still expanding and

contributes a large portion in growth of economic development of the country. Road transport

has a great influence on ever-expanding market of passenger road transport from the 1950s

through the 1980s. We see a drastic change during 1950 to 1980s, According to the

Association of State Transport Undertakings, the share of STU buses in the total number of

buses in the country grew from 20% in 1950 to 50% in 1980. However, with the

liberalization of economy, govt. allows free market economy arising out of liberalization,

privatization and globalization (LPG). Free market economy allows a great change in Motor

Vehicle Act in 1988 and implementation takes place through amendment. After coming of

LPG State transport undertaking starts facing severe competition from private vehicles and

private operators since the early 1990s. Changes in the Motor Vehicle Act in 1988 led to the

scrapping of overriding priorities and privileges conferred upon STUs, providing an easy

(and unregulated) entry to private operators (of buses, mini-buses, jeeps, three-wheelers, etc.,

with and without stage carriage permits) into the public transport sector. Simultaneously,

changes in industrial policy resulted in serious competition in the automobile industry. Free

availability of two-wheelers and cars resulted in the upper middle and middle class drifting

away from public transport.

Customers were quite justified in exercising their options. Owing to increasing personal

incomes, long-distance passengers aspired for luxury services in rural operations. But STUs

forced these passengers to travel by uncomfortable ordinary buses. Exercising monopoly

rights, STUs neither catered to changing passenger needs nor allowed others to come in and

take care of their needs till the liberalization of the economy in the early 1990s. These two

trends have contributed significantly to the erosion of market share, occupancy ratio and

profitability of STUs. A majority of STUs registered negative growth and losses in the 1990s.

To improve financial viability, STUs were compelled to withdraw operations that involved

unprofitable trips, services and routes. Predictably, private operators have also not introduced

services on low-density routes because these are not profitable.11

Therefore, in a free market environment where there are no entry barriers, the responsibility

of the state increase day by day to maintain free and transparent competition in the

11

National Road Transport Policy; See also

http://morth.nic.in/writereaddata/sublinkimages/Road_Transport_Policy27333191.pdf

http://morth.nic.in/writereaddata/sublinkimages/Road_Transport_Policy27333191.pdf


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transportation sector so that the interests of consumers not get harmed, especially those

passengers/ consumer who are compelled to travel in public transport, as they are too poor to

afford quality transport or high taxi fares. It is experienced in many post liberalized

economies, such problems were effectively tackled through a variety of measures like

subsidies, packaging of routes, and tax concessions, among others, through the establishment

of effective regulatory mechanism, which is now absent in India. Hence, it is important to

look on the existing issue and it needs to address. I have identified such two issues in

passenger road transport in India which have to address in my opinion:

i) First, reforms in existing STUs to improve their competitiveness in the liberalized

environment while fulfilling the objectives for which they were set up in the first

place.

ii) Second, establishment of effective regulatory commissions, both at the centre and

in states, to take care of contractual compensation, fare management and above

all, consumer interest.

This two-sided approach will sustain a competitive atmosphere, develop scientific

methods in evolving an effective road transport system that is economically viable and

protects consumer interest. It calls for political will to conceive, introduce, support and

sustain the process.12

Historically, investments in the infrastructure sector, particularly in the highways, have

been made by the Government. Roads were earlier cited as “Public Goods” but that

perception has changed over the years.13

The increasing resource requirements and the

concern for managerial efficiency are some of the factors that have given a policy shift to

an increasingly active involvement of the private sector in India and one of the significant

steps taken in this direction was amendment in 1995 in National Highway Act, 1956 to

encourage private sector participation in the development, maintenance and operation of

national highways.

12

Y. Satyanarayana (Vol 29, 2000), Reforms and regulation in passenger road transport and state transport

undertakings‘ ASCI Journal of Management 13

Competition, Entrepreneurship, and the Future of Roads, Ed. Gabriel Roth. The author has discussed how

thousands of miles of roads were covered under privatization in 18th and 19th centuries.


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In order to take up the improvement and development of National Highways, National

Highways Development Project (NHDP), has been initiated on a large scale. With an

estimated project construction cost of Rs. 337,959 crore upto 2017, the project has been

undertaken in the country under National Highway Authority of India (NHAI)14

. Besides

NHDP, Special Accelerated Road Development Programme for North East (SARDP-NE)

and Special Programme of Development of roads have been initiated in North Eastern

and Left Wing Extremism (LWE) areas respectively.

A change has been announced by NHAI restricting a bidder from being able to bid for

more projects, while it currently has three or more letters of award of contract

outstanding. This has been introduced to prevent bidders overstretching themselves even

when they do have adequate resources to complete the projects. Although this should

generate competition in long run, however, if projects are not efficiently processed,

apprehensions have been raised, that this change may also lead to reduced pool of

available bidders in future.15

How Competition can be introduced in this Sector?

Efforts must be done to introduce fair competition in the passenger transport sector. A

study16

of state of competition in Seven States of India- Rajasthan, Orissa, Kerala, Tamil

Nadu, West Bengal, Himachal Pradesh and Maharashtra conducted by National Council

of Applied Economic Research (NCAER) as commissioned by Competition Commission

of India, on the basis of the performance of three important indices, namely,

Competitive index,

Efficiency index and

Consumer Satisfaction index,

has noted that the degree of competition in passenger road transport varies from state to

state.

14

Ministry Of Road And Transport And Highways, An Analysis On The Development Of Highways. 15

http://www. Ashurt.com/doc.aspx?id_constant=505

.The study also gives details of the recommendations of Chaturvedi Committee and its further implementation.

Part of which has been discussed here as well. 16

Report on state policies Affecting Competition: Passenger Road Transport Sector: Competition Commission

Of India,2007


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After doing analysis of the Passenger Road Transport (PRT) sector; the study has

recommended following to improve the competitiveness of bus passenger transportation:

i) Public sector monopoly may be put to an end to let competition prevail on each of

the routes, and to allow private sector participation in this sector.

ii) Registration time should be reduced since it has been found to be the one of the

barriers of competition in the transport sector.

iii) Need for reduction of permit charges since such charges for more than one

region are considered as barriers for free entry.

iv) Asymmetry of information must be corrected since without perfect information,

competitive environment cannot prevail.

Taking the bus routes into two parts: commercial and non-commercial routes, (the former

being profitable routes while the latter non-profitable) and keeping in view also the social

requirements, the study has proposed competitive tendering on commercial and competitive

bidding on non-commercial routes. While in case of former, competitive tendering may

remain the criteria for awarding the contract, whereas in case of latter, the lowest subsidy

bidder may be awarded the contract.17

What is the impact of competition on consumers?

It is important to see the impact of competition in this sector on the consumers who are the

ones who uses the sector. Increase in number of players has a positive effect on the

competition in market. Its positive effect can be seen in terms of reduction in prices for

consumers. This is evident from the example of Airlines industry. By allowing private sector

participation in the airlines sector, the competition in that sector has increased manifold

thereby giving better opportunities at lower price rate to the consumers and thus benefiting

customers. E.g.- Delhi-Dehradun sector, where the number of operators is less has clocked

the highest fare per kilometre, as against Delhi-Bangalore route having comparatively more

number of operators, thereby clocking less fare per kilometre.

17

Report on Competition and Road Transport Sector by Shri Dhanendra Kumar, former chairman of

Competition Commission Of India


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Positive outcomes of competitive process has also been realised in countries like United

States, Chile, France and Finland and thus needs to be followed in India as well.

Evidence of Anti-Competitive activities going on in this sector-

A case study was done in Rajasthan and it can very well explain the situation and the anti

competitive activities going on. The Rajasthan State Road Transport Corporation

(RSRTC) issued a notification in 1985 under Section 68-C of the Motor Vehicles Act, 1939,

by which various routes in the state were to be serviced by RSRTC buses to the exclusion of

private players. Among the routes included in the notification, one was the Nathdwara-

Choti Sadri route. RSRTC failed to run its buses on that route, citing shortage of buses as

the reason behind it. Any application by any private player applying for license on the route

was turned down on ground that it was reserved to used by RSRTC. RSRTC failed to use the

route and the private operators were not allowed, so this route was without any operator,

resulting in illegal transportation in that area, characterised by poorly-serviced trucks and

vehicles where commuters had to travel in discomfort, in complete disregard to safety,

resulting in accidents.18

Upon receiving complaints from private operators, RSRTC

temporarily started to ply the route, and stopped when the temperature had cooled down after

getting a judgement in their favour. This clearly is evidence of abuse of dominance by the

RSRTC. In addition, RSRTC was also seen plying buses only on a part of the route that it

considered economically viable rather than the whole route. This is clearly an abuse of a

dominant position, where CCI has every right to try and correct.

This shows that competition matters are closely knitted with consumer welfare. Poor

commuters on the Nathdwara-Choti Sadri route, in absence of any conveyance wait for hours

to board small jeeps and other such vehicles which are overloaded and inconvenient.

Nathdwara, being a famous pilgrimage site is thronged by people coming from every part of

the country. A proper and efficient transport service thus may have contributed to the growth

of adjoining areas. Apathy by the RSRTC, short sightedness of the administration and the

legislative provisions in the Motor Vehicles Act has resulted in other related problems.

18

Mehta. Pradeep S (2011), “Highway robbery by state transport companies” , Financial Express


of 44

There are various international examples of this as well where publicly-run bus companies

end up being abusive and exercise their dominance.

In 2008, it was reported that private bus operators in Ireland, Circleline and Mortons

Coaches had lodged a multi-million euro law suit against a state-owned bus company, Dublin

Bus, alleging anti-competitive practices on bus routes from Lucan and Celbridge to Dublin

city centre. Dublin Bus was accused of engaging in predatory practices on the route, using its

dominant position arising from advantages of being government-owned, by engaging in

practices that had effectively forced private companies to cease operations on two lucrative

routes.19

In early June, 2011, Sweden‘s Competition Authority had launched proceedings against

government-owned bus company Skelleftebuss. It was alleged that the company was abusing

its dominance in the transport market by trying to push small and medium-sized enterprises

out of business.

Apart from abuse of competition by public sector, there are instances in private sector bus

services market, which has also fell a prey to cartelisation by private players. The bus

operators charge uniform price, a pattern which is attributed to competition, which in many

cases would be a reflection of cartelisation.

The Competition Commission of Singapore had also taken a decision in November 2009,

against 16 coach operators and their trade association for fixing the price of bus services from

Singapore to Malaysia and Southern Thailand.

In 2010, press reports also indicated that the competition authority of Serbia had taken action

against five bus operators fixing ticket prices on the regular routes between Serbia and

Germany. 20

Another example can be seen in the following form. In early June, 2011, media reports

indicated that Chile‘s National Economic Prosecutor had launched two proceedings at the

country‘s Competition Tribunal against five bus companies, which had colluded to fix prices,

19

Supra note 15 20

Supra note 16


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allocate markets, and block new entrants across the country. The first case resulted in fines

being recommended against four companies—Pullman Bus, Tur Bus, Romani and Cometa—

for colluding to engage in behaviour designed to block rival Buses Línea Azul from entering

the market.

So by these glaring examples we can see that illegal transportation is mushrooming on

various routes, which is causing huge loss of revenue to the state government and this

positively needs to be assessed. So, crux lies that where it becomes too cumbersome for state

transport to operate, private players should also be allowed to operate their services.

As we have seen that the deregulation of the airline sector after 1991, which allowed private

sector participation after liberalisation. Air travellers have been benefited largely due to

increase in competition among the players in the airline sector. Fares have become cheap and

now quality services are being rendered to the passengers due to this competition.

The ousting of private sector in few places from the road sector is regularly being justified by

saying that the private sector do not adhere to the safety norms and they overcharge

consumers. There are also allegations that the service quality is poor, but to all this solution is

not ousting the private sector.

Solution to this can be seen in the form of effective regulatory system as we have witnessed

in case of airline sector. Thus what is important is to check the regulatory deficit in the road

transportation sector rather than ousting private players and thus stifling competition.21

21

CUTS (2011), ―Anti-competitive Provisions in the Motor Vehicles Act, 1988 Case Study of Private Bus

Operators in Nathdwara‖, Policy Options Note, available at

http://www.cuts-ccier.org/pdf/Anticompetitive_Provisions_in_the_Motor_Vehicles_2011.pdf


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CHAPTER- III

Assessment of Freight Transport and Its Importance (Land)

The roads goods transport plays an important role in mobility of goods and services. It plays

a major role in growth of Indian industry which thus helps in its economic growth from very

ground level. But if we compare it with other developed countries we come to know that it

has never been regulated the way it has been in other countries. But a regulatory framework

in the form of the Motor vehicle Act has been in place since 1939. Earlier the said Act had

stringent procedure for getting inter-state permit. But as demand of prevailing circumstances

this get flexible and over a period of time these have been relaxed to a very large extent

permitting easy entry into the industry and for movement all over the country. This is

perhaps the only deregulatory move that has taken place in India as far as the trucking sector

is concerned. The Indian truck industry got boost because of this.

Earlier it was observed by the various Committees and pointed out by the different studies,

the Motor Vehicle departments of the States have mainly focused on the collection of revenue

(tax and otherwise) rather than on effective enforcement of the provisions of the MV Act. As

a result, an effective regulatory framework has, never been attempted to be put in place. This

has emerged over the years as a major external impediment in the effective growth of the

trucking industry in India. This raises a matter of concern especially when viewed in the

context of an emerging globalised competitive economy.

Major/ Key Players in the Road Transportation Business

The road freight transport industry in India, it is highly fragmented these days. The road

transport industry broadly consists of players who provide the transportation facility,

services, intermediaries (transport contractors / booking agents) who offer hauling/carrying

services, driver for commission, brokers for supplying equipment and the consignors

constituting the ultimate demand for the services. The main three players which dominate this

industry in providing services are discussed below.22

And the main problem existing in the

22

The World Bank (2005), ―Road Transport Service Efficiency Study‖, Energy & Infrastructure Operations

Division, South Asia Regional Office, available at


of 44

industry is based on the presumption that these key players might take undue advantages of

consumers so this needs to be regulated.

Transporters: These are big trucking companies which have their own union and they

have contact with shippers and receiving customers. Their work includes the mobility of

goods, and solicits freight, largely on an annual basis and is also responsible for cargo loss or

any damage done to goods. One of these is Transport Corporation of India (TCI), which is a

fairly substantial enterprise with many business locations and offices throughout India. They

have their own fleet of trucks, warehouses and terminals as well. But for the intercity service

they rely heavily on small truck operator for intercity transportation facility.

Truck Operators: The Truck Operator is a single individual who typically own one or a

very small fleet of trucks, which usually are financed by high-leverage debt. In some cases,

these operators own about 5 to 10 trucks. This category includes the (single) or (small truck

operators owning 1-5 trucks) truck operator, who are very large in number.

To enter the market, entry barriers for them are low in the sense that:

a) There is Ease of obtaining driving licenses and permits,

b) There are low capital requirements and for that financers are available,

c) Ease of availability of small capital though at high cost, and

d) They also don’t require a high education qualification.

e) Only they require is expertise in their driving skills.

The entry into this market is apparently easy, but, information concerning availability of

freight is a difficult problem. But to cope up with this problem the truck operators rely mainly

on brokers who is suppose to give them business and take brokerage charge. To avoid the

income tax and labour legislation they find an escape route where they don’t register their

truck on one name.

Small truck operators usually based in mobility of the goods and services and for that they

rely on booking agent who give them business by contacting the parties. So the broker and

booking agent plays a role of intermediary. But some of the operators are attached to major

http://siteresources.worldbank.org/INTSARREGTOPTRANSPORT/PublicationsandReports/20747263/Final_ve

rsion03NOV2005.pdf


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transport companies, brokers and vehicle suppliers. As a general practice, small operators do

not come into direct business contact with consumers. Most operators in this industry are in

their family business - 56 per cent of truck owners surveyed have been in the business from 1

to 10 years, 30 per cent from 11 to 20 years and 15 per cent for over 20 years. Though the

exit option also seems likely in regard to these operators, it is observed it is a very difficult

one since there is no alternative to this work. Therefore, there is hardly any scope for easy

exit.23

Truck Operator and Their bargaining power

The bargaining power of the truck operator sometimes seems very high. As already mention

they have their own union. They know their importance and sometime they take undue

advantages from consumer. Few years back they went for hartal/ strike known as chakka jam.

The strike lead to drastic downfall in the economy of the country and the price of

commodities got rise because of the unavailability of the goods. We see the price rise in fruit,

vegetable market and household commodities. So this kind of unequal bargaining of truck

operator needs to be addressed.

Intermediaries:-

Booking agents/Transport companies/transport contractors:

Booking agents are firms or personnel who enter into contract with consumers for

safekeeping, store/ keep goods, both parcels and bulk and arrange for their movement

through operators. This booking agent is really the person who is responsible for demand i.e.

he work as intermediary and negotiates with and on behalf of the users. He is accountable for

collecting, forwarding or distributing goods carried by goods carriages and also for cargo loss

and damage claims while performing other customer service functions i.e. packers and

movers, blue dart, FedEx etc. At some instances, the agents himself own trucks and also

functions as operators. In addition to these services, the booking agents also advance money

to operators (especially small ones) to help meet their working capital requirements and by

discounting bills on delivery. As regards the volume of business handled by this category of

23

Debroy,B. and Kaushik, P.D. (2001): Barriers to Inter- State Trade: the Case of Road Transport, Paper

submitted to the Ministry of Law, Justice and Company Affairs, Government of India


of 44

intermediaries, it is commonly accepted that they have an implicit monopoly/domination of

most inter-State and long-distance movement.24

Brokers / Commission agents/ Suppliers of Vehicles: A Broker or a commission

agent usually expected to represent the supply side. He charge his commission or you can say

share from the truck operators because he provides them business, though in the past we see

there have been booking brokers who have represented user interests for a commission. The

broker ensures the supply of trucks to the transport company/booking agent. Large fleet

operators heavily depend on these brokers for mobility of a certain volume of traffic over and

above what their own fleet would permit.25

From the past experience and continuous study there is strong evidence that shows that the

middlemen/ intermediaries, which include the booking agents and the brokers, are the

dominant players in the market and they in fact are the real “makers” of the market. They

emerged over quite some period of time which forces to question ourselves who is going to

determine the rate charge by them for their services? Whether it is govt. or any other govt.

body which regulate their functioning?

NCAER (1979) indicated that the “booking Agents, besides other functions, also had a role

in fixing freight rates i.e. the rate charged to the user and the rate given to operators.”

As presently, there is no regulation covering the booking agents and the brokers, so there is

need to bring the intermediaries under the purview of a regulation.

Despite many remaining impediments, mainly concerning the existing infrastructure, India

has achieved a highly competitive, low-cost road freight transport industry for basic services,

with highway freight rates among the lowest in the world. The industry is deregulated and, as

in many countries, highly fragmented with many small operators, as mentioned above. The

industry‘s structure, comprising transporters, truck operators, broker agents, etc, is market

driven and appears to be serving the market reasonably well.

Given the very low freight rates, one has to conclude it is an effective industry structure. It is

the constant pressure of a highly competitive market that delivers to India‘s shippers some of 24

S. Sriraman, Venkatesh. A and Karne. M (September, 2006), ―Competition Issues in the Road Goods

Transport Industry in India with special reference to The Mumbai Metropolitan Region‖, submitted to The

Competition Commission of India 25

Supra note 24


of 44

the world‘s lowest freight rates. While the industry delivers very low freight rates, service

quality is poor, with low reliability and transit times nearly double that of developed

countries”.

Road freight transportation and evidence of Cartelisation26

Further, there are also instances of cartelisation being facilitated by truckers union and

operators around major production sites and factories, which also impairs competition in the

sector. For example, in 1977, an enquiry (RTP Enquiry No. 32 of 1977) was instituted against

Truck Operators Union by the Monopolies and Restrictive Trade Practices Commission

(MRTPC). It was held that the Constitution of the Union enabled the existing members to

keep out new entrants from the market of transportation of fruits and vegetables on arbitrary

grounds. It was alleged before the Commission that if any transporter attempted to enter the

market and offered to transport fruits and vegetables, he was restrained to do so by force. A

‘cease and desist’ order was passed against the Union, inter alia, prohibiting it from stopping

any truck operator, whether member of the Union or not, from entering the fruits and the

vegetable market and offering to undertake transportation services (Order No. 20th February,

1978).

Concerns have been raised regarding cartelization practices in local movements and bid

rigging practices in the context of attempts to compete for the market by way of tenders and

open bid procedures. These concerns need to be looked into and such practices removed/

curbed.

The two principal manufacturers of trucks, TATA Engineering and Locomotive Company

(TELCO) and Ashok Leyland, account for more or less the entire fleet of heavy vehicles in

the country. Inadequate competition among manufacturers has resulted in little or no

incentive for regular technological up-gradation of the vehicles.27

26

Term ‘Cartel’ has been defined under Section2(c) of The Competition Act, 2002 27

Planning Commission of India, Report of the Working Group on Logistics, available at

http://planningcommission.nic.in/reports/genrep/rep_logis.pdf


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CHAPTER-IV

Competition issues in Road Construction Sector

If we have a look at construction sector also, we will see that this sector is also not clean and

various anti-competent activities are going on here also. From floating a tender by a company

to awarding tender to the winner of a bid by contracting authority, there are cases of abuse of

dominance28

being exercised by the major players, and also about sub-contracting the work to

other contractors who are not having experience and technology to do the same These

problems needs to be tackled soon.

Bidding Procedure and Design of tender

There should be a transparent evaluation of the bidding procedure. Prequalification process

needs both technical and financial values and from these two, technical scores having high

subjectivity and therefore requires careful consideration.

The technical specifications if are too stringent, then the competition is reduced typically.

Behaviour of bid rigging and collusive bidding is expected in the road construction industry

as it is highly concentrated and players compete with each other repeatedly. Some of the

symptoms of existence of anti competitive behaviour can be noticed when similar rates are

quoted by everybody participating in the tender e.g. for a particular stretch if 5% above

estimates are allowed, all participants will increase rates by say, 4.99 or 4.79% together.

Steps must be taken by the agencies who award the contract to ensure that transparent

bidding procedure takes place. It may among other things involve a well developed, fair and

transparent pre-qualification system, well-defined system of invitation of bids, uniformity of

policies and standards. Sometimes it happens that even though two-three players bid for a

project, but more often, the one who is awarded the contract, eventually sub-contracts the

work to the other remaining players, its so-called competitors. Therefore, bids should not be

structured in a manner which allows only a few large players to bid and corner the projects.

Korea has evolved a unique electronic based procurement process. The platform undertakes

easy monitoring of certain patterns of conduct like some bids much higher than the published

28

Section 4. The Competition Act, 2002


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price, fewer than normal competitors submitting the bids, inexplicably huge margin between

winning bidder and another bid, low bid regular recurrence etc. which may indicative of

collusive bidding or bid rigging. Govt. may consider evolving such a system for all

procurement systems including award of contracts in road construction projects.29

As per Section 3 (3) (d) of the Competition Act,2002, any agreement which directly or

indirectly results in bid rigging or collusive bidding, shall be presumed to have an appreciable

adverse effect on competition. The CCI is mandated not only to prohibit such anti-

competitive agreements but also penalise the players involved in these kinds of activities. The

authorities concerned must ensure that tendency of high bid prices, collusive bidding is kept

under check and any such practices reported to CCI for conducting appropriate inquiries.

Entry Barriers must be made easy

It is a mandatory requirement that the contractors needs to be registered. There have been

instances when this requirement has led to creation of entry barriers leading to territorial

allocation among different contractors, ultimately leading to the monopoly at the

implementation level and thus requires to be corrected. This monopoly needs to be checked

for bringing significant changes in this sector.

National Highway Fee (Determination of Rates &Collection) Rules, 2008 enables

Government to collect fee for usage of any section of national highway, permanent bridges

etc. In most of the toll highways, since no alternative route has been provided, the user is

forced to use the highways. This fee is in addition to cess being charged on petrol meant for

development of roads and the taxes being paid. This may give rise to a situation of abuse of

dominance creating high cost services and proper regulation to check that is required.

Thus we can say that the need of hour is to bring about few changes in this sector so as to

check the monopoly of few dominant players in the construction market and gives equal

opportunities to other players also to enter the market and to increase the competition. By

easing such barriers, we will take a step further towards pushing towards a more competitive

market.

29

Supra note 17


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Need for Road Construction materials

There is high demand of construction materials like Aggregates, Cement, Bitumen, Steel etc.

due to large scale construction activities going on everywhere. There is need to ensure

continued supply on competitive rates of these construction materials. The process of

provision of vital inputs for construction of roads must be monitored closely to ensure that

anti-competitive agreements and cartelisation like noticed in some European Countries do not

lead to higher project costs.

Requirement of Outsourcing of the maintenance work

The maintenance of roads is largely in the hands of Government. Outsourcing road

maintenance to the private sector has been found to be instrumental in massive reduction in

road maintenance costs. Substantial savings ranging from 20% to 50% have been noted in

Brazil and Columbia on this account. It is important to create enough competition to keep the

market away from the clutches of few big players; otherwise there will be denial of expected

benefits.30

Contracts should be Performance Based Contracts

The traditional way of contracting out road maintenance was based on the amount of work

measured and payment was done on the agreed rates for different work items, giving the

contractor little incentives for efficiency. By contrast, Performance-based Road Management

and Maintenance Contracts (PBC) are based on how well the contractor manages to comply

with the performance standards defined in the contract and not on the amount of works done.

This is a good incentive taken, as now the contractors will be bound to do quality work as

they’ll be now paid as per their performance and not as per the quantity of road made by

them. So this will help in getting a quality work out of the contractor. Although this allocates

higher risk to the contractor compared to the traditional contract arrangements, it also opens

up opportunities to increase his margins, since improved efficiencies and effectiveness of

design, process, technology or management are able to reduce the cost of achieving the

specified performance standards.

30

Supra Note 17


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Need of Capacity Building

Capacity building of contractors, concessionaires, qualified engineers, technicians,

consultants for the massive Highway Development Programmes under way, what is needed is

capacity building. In the absence of adequate number of Engineers/Technicians,

Concessionaires/contractors and consultants, the competition is restricted among the few

existing bodies/organisations and then again there are chances of abuse of dominance by

these existing players.

Need for a Regulator

Government may also consider appointing a regulator in road sector who will look into not

only financial claims by the concessionaire but also issues involved in fixing toll rates with

increase/decrease in toll collection because of competing facilities and modes of transport.

Apart from regulating fixation of tolls and claims, control over anti-competitive behaviour

would also be a regulatory institution to prevent the acquisition and exploitation of excessive

market power.

So, these are the problems that have clubbed in the road construction sector, and there is need

to curb these practices that are against the mandate of Competition Act and so for this a lot is

needed to be done. We need to clean our system against the anti-competitive going on in it,

and for this Government should take the matter seriously, and should keep a check on the

problems.


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CHAPTER-V

THE THIRST OF PUBLIC PROCUREMENT

The term contracting authorities for the purposes of public purchasing regulation should not

pose considerable conceptual difficulties; it should cover authorities which disperse public

funds in pursuit of or on behalf of public interest. One of the most important principles of the

Public Procurement Directives is the principle of transparency. The Working Group on

Transparency in public Procurement examines questions such as: does a particular

government publish the criteria upon which it bases its procurement decisions? Does it

publish the opportunities for procurement so that all suppliers know about them? Does it

encourage competition among potential suppliers? After investigating these questions and

others, the working group will try to create policies to open competition for government

contracts. The principle of transparency serves the main objectives: this is to introduce a

system of openness into public purchasing, so a greater degree of accountability should be

established and potential direct to be eradicated. Transparency in public procurement is

achieved through community-wide publicity and advertisement of public procurement

contracts by means of publication in newspaper, weekly digest and media.

The concept of public procurement relating it with road transport sector goes like- the

contracting authority (which represents the government side) calls the private sector to invest

in a particular project. Bidding is done and the one, who wins the bid, is given the tender to

work on the project. All investment is done by that very investor. After completion of project,

operation, revenue control and management is in hands of the investors for a specified time

during which they have to take out their revenue and profits. After specified time and after

investors have taken their revenue and profits, the project is handed back to the government.

Transparency, as a principle in public purchasing has an obvious trade effect, that of price

competitiveness. If more interested suppliers are aware of a contracting authority’s

determination to procure, an element of competition automatically occurs; this type of

competitive pattern will probably be reflected in the prices received by the contracting

authority when it evaluates the offers. The fact that more suppliers are aware of a

forthcoming public contract and the fact that interested suppliers are aware that their rivals

are informed about it indicates two distinct parameters. Under road transportation sector


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transparency plays a major role in identifying the suitable candidate who is capable and

having past experience in the sector. Because the objective of contracting authority who is

govt. representative is to provide contract to somebody who have prior knowledge of the

sector so that he will use the resources in sustainable manner.

Proponents of a multilateral Public procurement also see it as part of a "good governance"

agenda for the developing world - the more transparent procurement processes are, they

argue, the less opportunity there will be for corruption and rent-seeking on the part of

domestic governments and suppliers.

THE FIASCO OF GOLDEN QUADRILATERAL

The Golden Quadrilateral is a highway network connecting majority of the industrial,

agricultural and cultural centres of India, as the name very well suggests (quadrilateral). A

quadrilateral is formed by connecting Delhi, Mumbai, Kolkata and Chennai. It is the the

largest highway project in India and the fifth longest in the world. It is in the first phase of

the National Highways Development Project (NHDP), and consists of building 5,846 km

four/six lane express highways at the expense of 600 billion (US$10 billion). The project

was launched in 2001 by the then prime minister Atal Bihari Vajpayee under the NDA

government, and was planned to be completed by January, 2012.The GQ project is managed

by the NHAI (National Highway authority Of India) and is under the control of Ministry of

Roads, Transport and Highway.

The Then Prime Minister Atal Bihari Vajpayee laid the foundation stone for the project on 6

January 1999. In January 2012, India announced the four lane GQ highway network as

complete. India's government had initially estimated that the Golden Quadrilateral project

would cost 600 billion (US$10 billion) at 1999 prices. However, the highway has been built

under-budget. As of August 2011, cost incurred by Indian government was about half of

initial estimate, at 308.58 billion (US$5.3 billion).

In September 2009, it was announced that the existing four-laned highways would be

converted into six-lane highways. The expansion project got delayed, mainly due to land

acquisition constraints and disputes with contractors which had to be re-negotiated.

http://en.wikipedia.org/wiki/Quadrilateral

http://en.wikipedia.org/wiki/Delhi

http://en.wikipedia.org/wiki/Mumbai

http://en.wikipedia.org/wiki/Kolkata

http://en.wikipedia.org/wiki/Chennai

http://en.wikipedia.org/wiki/Highway

http://en.wikipedia.org/wiki/National_Highways_Development_Project

http://en.wikipedia.org/wiki/Atal_Bihari_Vajpayee

http://en.wikipedia.org/wiki/Atal_Bihari_Vajpayee


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The GQ project had strict controls to ensure that the construction work would be carried on

by experienced firms with proper systems and innovative technologies. In August 2003,

Jharkhand-based project director Satyendra Dubey discovered that the contracted

firm, Larsen and Toubro, had been subcontracting the actual work to smaller low-technology

groups, controlled by the local mafia.

Dubey, in a letter to the Prime Minister, outlined a list of malafide actions in a segment of a

highway in Bihar. "A dream project of unparalleled importance to the nation, but in reality a

great loot of public money because of very poor implementation at every state" wrote Dubey

in a letter to then Prime Minister Atal Bihari Vajpayee. Pointing out large-scale corruption

and poor quality control, Dubey tried to expose a conspiracy between contractors building the

roads and the officials appointed to check them.

His claims included that NHAI officials were well aware, that the contractors for this stretch

were not executing the project themselves (as stipulated in the contract) but subcontracting

the work to small builders who lacked technical expertise. Dubey's name was leaked by the

PMO to the NHAI, and he was transferred against his wishes to Gaya, Bihar, where he was

murdered on 27 November.

Knowing the dangers that surround honest people bucking the whole corrupt system, in his

letter, Dubey had requested that his name be kept secret, a request that wasn't honoured-the

letter was sent from the PMO to the Ministry of Road, Transport and Highways and then to

the National Highway Authority of India, with which Dubey was working as Deputy General

Manager. His death speaks volumes about the growing nexus between politicians and

mafia and also highlights the illegal procedures/ways involved in awarding contracts and also

the allegedly fraudulent pre-qualification bids in connection to big development projects.

The NHAI eventually admitted that Dubey's charges were substantiated, and implemented

"radical reforms" in selection and contract procedures. Looking at the facts of the case, it

seems a case of robbery and murder , as alleged by CBI in its report, but looking at the death

and disappearance of certain witnesses and accused , there is widespread speculation about

involvement of some big names in the murder of Dubey. As Dubey was exposing the

illegality and the corruption going on in the construction of the golden quadrilateral, there are

chances of he being murdered for the same. Three people were sentenced for life by a fast

http://en.wikipedia.org/wiki/Larsen_and_Toubro

http://en.wikipedia.org/wiki/Bihar

http://en.wikipedia.org/wiki/Gaya,_India

http://en.wikipedia.org/wiki/Bihar


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track court in Patna for the same , but the family of Dubey abstained from the trial saying that

little interest has been shown by CBI as only the small fishes are being sentenced not the big

ones.31

A Special Central Bureau of Investigation (CBI) Court on 27 March 2010 awarded life

sentence to the three convicted killers of Dubey. The three accused Mantu Kumar, Udai

Kumar and Pinku Ravidas were convicted by the Patna Court on 22nd

March 2010 for

murdering Dubey in 2003.32

The negative effects of sub contracting can be seen in the form of sub delegation of work to

the non competent firms because of which the quality of project gets compromised with. One

of the main drawbacks of the sub delegation can be the sub contractor focusing on profit

maximization rather than quality project. The objective or rationale of any business is profit

maximization. So, when the main contractor sub delegate its work to another contractor he

charges his own profit from sub-contractor and moreover, he keeps himself aside and

delegate all his work to sub contractor which he was suppose to do. So, again the person who

got the sub delegated work will try to maximize his own profit on the cost of quality of the

project. This is the way sub delegated project is usually done and the qualitative work which

is supposed to be done is turned into a means of profit maximization for the entrepreneur

involved in this kind of project or business.

While making my report I came across few examples of the under quality work done by few

contractors on the GQ. Due to the poor quality work, commuters are the one who faces

accidents and they are the people who suffer due to poor quality work.

This is evident from the following glaring example.

Belgaum is part of the golden quadrilateral project and the new four laned highways have

been a great success. The Belgaum to Kolhapur highway was completed before time by Punj

Lyod Ltd. is in very good condition and well maintained, where as the Belgaum to Dharwad

stretch which was built by Sunway Construction Ltd. – Berhad & R N Shetty & Co.

31 BBC 10 December 2003 Vajpayee demands murder enquiry

32http://news.oneindia.in/2010/03/27/satyendranath-dubey-killers-get-life-imprisonment.html

http://news.bbc.co.uk/1/hi/world/south_asia/3306075.stm

http://news.oneindia.in/2010/03/27/satyendranath-dubey-killers-get-life-imprisonment.html


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Malaysian – Indian Joint Venture was in trouble since the beginning. The project was

abandoned for a while and then again the NHAI completed the said project.

Now there are potholes that have occurred on the stretch near Shivabasava Nagar and Shree

Nagar on the Halaga to Honga stretch. There are a few more pot holes near Kakti as well.

Regular commuters on the road say that these pot holes can cause accidents as normally all

vehicles are on high speeds and suddenly you have to slow down and this causes a lot of

hardships.33

33

http://allaboutbelgaum.com/infrastructure/potholes-on-belgaum-bypass-road/

http://allaboutbelgaum.com/infrastructure/potholes-on-belgaum-bypass-road/


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CHAPTER-VI

REGULATORY FRAMEWORK COVERING ANTI

COMPITITIVE PROVISIONS OF MOTOR VEHICLE

ACT,1988

The Motor Vehicles Act, clearly proceeds on the negative presumption that private bus

operators are incapable of providing efficient, adequate, economical and properly coordinated

road transport services. Though it may also be inferred that at the time, when the legislation

came into force, there were different policies and circumstances, prevailing in the country.

Now, almost every sector in the economy has opened up to embrace private participation,

roadways still remains a sector on which Governments, Centre and State, exercise substantial

monopoly and control.

S.66(3) of the Motor Vehicle Act,1988- This provision can be used to protect public

transport vehicles against investigations on the pretext that the provisions are meant to protect

such vehicles for sovereign functions of the Central and State Governments.

Section 67(1) (d) of Motor Vehicle Act, 1988 gives the state government power to intervene

in the market to control competition. It is difficult for competition to become uneconomic,

especially if this is not defined and is used to the discretion of the government. Further, the

power vested with the state government to control road transport in this case clearly intrudes

upon the autonomy of the market players.

Section 71(3) and Proviso to section 74(3) of Motor Vehicle Act, 1988 shows preferential

treatment of the government towards its own undertakings may it be state transport

undertakings or regional undertakings.

The provision pertaining to necessarily setting the number of contract carriage by

administrative order and not giving preferential treatment to state entities over private

companies, is anti-competitive.

Section 67(1) read with Section 79(2)(iv) of Motor Vehicle Act, 1988 Fixing fares is an

undue intervention by the Government into operations of private enterprises. Arbitrary

conditions may be imposed by the Regional Transport Authority. If it is necessary for the


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Government or its authorities to intervene in the fare fixing, sound and justified reasons have

to be provided. Such requirement should be provided by law as well. Reasonable conditions

are to be imposed for granting a permit.

Section 79(2) of Motor Vehicle Act, 1988 - Imposition of the conditions as provided in

section 79(2) by the Regional Transport Authority can be arbitrary and unreasonable, unless

accompanied by justifiable reasons.

Section 93 of Motor Vehicle Act, 1988 - This section covers activities of only agents or

canvasser, but booking agents and brokers are not distinctly covered in the Act.

There is need to cover them under regulation to avoid any possible anticompetitive

agreements among them. A modification in this section is required to define brokers and

booking agents and mandate their registration.

Section 99 of Motor Vehicle Act, 1988- Where any State Government is of opinion that for

the purpose of providing an efficient, adequate, economical and properly co-ordinated road

transport service, it is necessary in the public interest that road transport services in general or

any particular class of such service in relation to any area or route or portion thereof should

be run and operated by the State transport undertaking, whether to the exclusion, complete or

partial, of other persons or otherwise, the State Government may formulate a proposal

regarding a scheme giving particulars of the nature of the services proposed to be rendered,

the area or route proposed to be covered and other relevant particulars respecting thereto and

shall publish such proposal in the Official Gazette of the State formulating such proposal and

in not less than one newspaper in the regional language circulating in the area or route

proposed to be covered by such scheme and also in such other manner as the State

Government formulating such proposal deem fit.

So, Public Interest cannot be cited to discriminate between public and private players

especially in the case of providing efficient, adequate and economical services to the

consumers.

Section 104 of Motor Vehicle Act of 1988-Restriction on grant of permits in respect of a

notified area or notified route.


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Section 104 of the Motor Vehicles Act provides for the restriction on grant of permits in

respect of a notified area or route. The proviso to Section 104, in violation of competition,

mandates that temporary permits to private parties in respect of notified area or route can be

provided only if the STU has not applied to ply their vehicles on that particular route. And in

case the STU applies for permit on such routes, the existing permits to private parties will

stand cancelled. Thus, merely on the basis of application a route can be reserved for the STU

even if they are not plying any vehicle on the route.

So , this also shows Clear preferential treatment being given to STU over other competitors

from the private sector.

Section 99 of Motor Vehicle Act, 1988 speaks that a STU may make a scheme ousting

private bus operators from any area or route and ply their own buses at that particular area or

route. The grounds of ousting private players’ lies in grounds of public interest i.e. to provide

efficient, adequate, economical and properly coordinated road transport services. However,

the judiciary have been able to justify the incorporation of such provisions, but today when

almost all the sectors have opened up to enter private sector , than in this regard such

provisions can be seen as anticompetitive.

The question that comes to minds is that why there is such a differential treatment in India so

far at involvement of private sector is concerned?

Why is there a negative presumption about private sector bus operators that they can’t

provide efficient, adequate, economical, coordinated services?

Section 104 of MV Act provides for the restriction on grant of permits in respect of a notified

area or route.

Proviso to Section 104 makes it a mandatory requirement that temporary permits on the

notified areas or routes can be given to private parties only if STU has not applied to ply their

vehicle on that particular route. And if STU’s apply for permit on such routes, the existing

temporary permits to private parties will stand cancelled. Thus on basis of mere application

by STU, a route can be reserved for STU, even if they are not plying on the same.

This way state run STU’s are able to exercise their monopoly over some routes and even just

on basis of application by STU even if they are not operating their vehicle on that route.


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CHAPTER-VII

TAX STRUCTURE OF INDIAN ROAD TRANSPORT SECTOR

Revenue from taxation of motor vehicles is one of the increasing sources of revenue for the

States. Levied primarily as a regulatory measure, it has over the year’s attained importance as

an elastic source of revenue for the Government. With a growth rate of 13.3% and a 1.08

buoyancy during 1993-94 to 2007-08, taxes on motor vehicles has contributed 7.7% to the

States’ own tax revenue.34

The main aim behind collecting road user taxes is to divert it for the growth of Indian

infrastructure primarily the road networks which act as the nervous system if the Indian

economy. Post-independence it has been collected via different means viz. customs duty,

CenVAT, and central sales tax levied by the Government; motor vehicles tax, passengers and

goods tax, state VAT, and toll taxes. These taxes in spite of being in the same nature are not

uniform throughout the country which creates uneven competition atmosphere for the road

transport sector.

Collection agencies:

Both the central and state authorities are entitled to collect such taxes on their respective

needs and authority as per regulated under the relevant acts and provisions.

Looking above via going through acts, regulations and provisions the system would look very

efficient but the fact is that there are many loopholes and deficiencies under the present

system. This system makes the Indian export system quiet uncompetitive by increasing the

time taken by goods to travel across the length and width of the country. Inspite of collection

of road tax in form of toll taxes the service provided is of very low quality compared to other

G20 economies. Also in the BRICS group India ranks at the bottom on the road transport

structure. Here one would argue that India has the lowest freight rates in entire world; here

34

This figure was given by the parliamentary Budget Office in July 2011


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my contention would be that even if the passenger service sector may not absorb higher rates

but the freight sector can absorb such rise if it comes with better quality facilities.35

Toll collection

The collection shall be uniform throughout the state following a uniform policy of taxation

collected by a Fully Automatic - Electronic Toll Collection System. This would not only

create competition on all routes but also curb corruption and save precious time of the truck

operators. And the entire fund so collected would be again invested transparently towards

development of the road structure.

Many bogus taxes like that of “Octroi” shall be eliminated which not only hammer upon the

truck operators but also give boost to corruption.

Motor Vehicle Tax

This tax is one of the important sources of revenue for the states collected separately by

individual states. This tax is taken from the vehicle owners, when they go to get their vehicle

registered. One of the major loopholes behind it is that there is no uniformity in the MV tax.

Different states have different rate of MV tax, which they levy from consumer during time of

registration. If MV tax is having rate “x” in New Delhi, than its rate is “y” in Maharashtra.

It’s a very general phenomenon that these days people from one state go to another state for

getting their vehicles registered either on fake address or some other proxy address only to

avoid tax. This leads to loss of revenue to respective states. So if this is made uniform in the

entire country it would only generate revenue which in turn may be invested again to provide

better road facilities to the users.

What has to be done?

The road transport sector must be governed centrally enacting a uniform structure of

taxation policy for the road transport sector which would create a uniform taxation policy

which in result would make this sector highly competitive. For example at present congestion

35

Annual world bank report on world economies, year 2011-2012


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and bureaucratic delays en route ensure that trucking goods from Gurgaon to the port

in Mumbai can take up to 10 days, which after proposed changes would only take 4-5 days.36

And as per the traffic flow and share the centre may allot shares of the revenue collected to

the respective states.

Indian road system is the third largest in the entire world but the fact is that if we compare it

to the population of India we are still far back from many other economies of the world.

Despite ongoing improvements in the sector, several aspects of the transport sector are still

riddled with problems due to outdated infrastructure and lack of investment in less

economically active parts of the country. The demand for transport infrastructure and

services has been rising by around 10% a year. With the current infrastructure being unable to

meet these growing demands. According to recent estimates by Goldman Sachs, India will

need to spend US$1.7 trillion on infrastructure projects over the next decade to boost

economic growth, of which US$500 billion is budgeted to be spent during the Eleventh Five-

Year Plan.37

Need for Change-

There is need to convert the entire highway system of India into “controlled-access

highways.”

It would provide an unhindered flow of traffic, with no traffic

signals, intersections or property access. They are free of any at-grade crossings with other

roads, railways, or pedestrian paths, which are instead carried by overpasses and underpasses

across the highway. Entrance and exit to the highway are provided at interchanges by slip

roads (ramps), which allow for speed changes between the highway and arterial

roads and collector roads. On the controlled-access highway, opposing directions of travel

would be separated by a central reservation containing a traffic barrier or just a strip of grass.

36

Nandini Lakshman. “the trouble with India: crumbling roads, jammed airports, and power blackouts could

hobble growth” Online edition of Business Week, dated 2007-03-19 , retrieved 2009-06-06 37

Shobhana Chandra (17 September 2009) “U.S. pension funds may invest in Indian road projects, Nath says”

Bloomberg (New York)

http://en.wikipedia.org/wiki/Gurgaon

http://en.wikipedia.org/wiki/Mumbai

http://en.wikipedia.org/wiki/Eleventh_Five-Year_Plan_(India)

http://en.wikipedia.org/wiki/Eleventh_Five-Year_Plan_(India)

http://en.wikipedia.org/wiki/Traffic_signals

http://en.wikipedia.org/wiki/Traffic_signals

http://en.wikipedia.org/wiki/Intersection_(road)

http://en.wikipedia.org/wiki/Frontage

http://en.wikipedia.org/wiki/At-grade_intersection

http://en.wikipedia.org/wiki/Overpass

http://en.wikipedia.org/wiki/Interchange_(road)

http://en.wikipedia.org/wiki/Arterial_road

http://en.wikipedia.org/wiki/Arterial_road

http://en.wikipedia.org/wiki/Collector_road

http://en.wikipedia.org/wiki/Central_reservation

http://en.wikipedia.org/wiki/Traffic_barrier


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CHAPTER-VIII

CONCLUSION and Recommendations

This report is aimed to analyze the road transport sector in order to identify the probable

anticompetitive issues in the industry. After a study of the sector, I came across various anti-

competitive activities going on in this sector which are posing a harmful impact on the

consumer, thereby affecting the economy at large. I in this report would like to mention a few

recommendations that as per me can be fruitful in rebuilding competition and curbing

monopoly of few big players in the road transport sector.

I would conclude my report with following suggestions that might be useful for this sector.

Following are my recommendations.

RTA (Regional Transport Authority) may provide parking spaces where operators can

be located and also notify price band within which operators could keep prices for

different routes. This would remove the dependence on intermediaries and users will

come directly in contact with the operators. And so the extra price that users had to

pay earlier to the agents and to the brokers can be escaped and the price to the truck

operators only needs to be given.

Funds are available easily to big transport operators under the priority scheme of

banks, and the small operators have to rely on private financers with high rate of

interest, which is burdensome for them. So efforts should be made to provide easy

availability of finances at less interest rate to small operators as well, in order to

increase competition in this sector. Public Banks should relax their money lending

policies in such a manner that it’s reachable even to small truck operators.

The system of interstate check post should be done away with. There is need to

provide speedy clearance of movement of vehicles across states. So Green Channel

Concept and adoption of Single Window Clearance may improve freight movement

and may reduce the large monetary loss faced by the sector due to delays.


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Government shall thrust upon innovation so as dependency upon importing

automobile parts shall be curbed and for the purpose we may set up a dedicated

institution for the same. I am advocating this because even if we look at the present

situation dollar is roaring which increases the cost of everything such as tyres,

lubricants, vital spares etc which in result proves burden upon the truck operators and

then on to the customers. So if this problem is done away with, we may somehow be

able control prices upto some extent.

Just like private motor vehicle sector, the truck/buses agencies should offer the

registration of vehicles via agency itself which would save the precious time of truck

operators and curb corruption and create competition as well.

Government shall enact guidelines which would make it mandatory for all the

manufacturers to sell trucks with inbuilt GPS systems which would save time and be

help in safe driving and by this the truck owners will be able to track the route of the

truck drivers and this will have positive effects.

Commission must also take initiatives in this regard. Few provisions in the Motor Vehicle Act

are anti-competitive; the Commission can’t set aside these provisions, but can bring it in kind

notice of the concerned ministry so that the amendments can be done on the same.

Competition advocacy must be spread by the Commission.

Commission can take suo moto action of some cases which it comes across.

Commission must impose exemplary penalty on those who are found guilty and that would

set examples for others.


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BIBLIOGRAPHY

NCAER (April,2007), State policies affecting competition: Passenger Road Transport

Sector”, available at

www.cci.gov.in/images/media/completed/2statepoliciesaffecting20080508111218.pdf

Y Satyanarayana (Vol 29, 2000), ‘Reforms and regulation in passenger road

transport and state transport undertakings’ ASCI Journal of Management

Rodrigue, J-P et al. (2009) ‘The Geography of transport system’ Hofstra University,

Department of Global Studies & Geography, http://people.hofstra.edu/geotrans

Nandini Lakshman. “The trouble with India: crumbling roads, jammed airports, and

power blackouts could hobble growth” Online edition of Business Week, dated 2007-

03-19 , retrieved 2009-06-06.

Planning Commission of India, Report of the Working Group on Logistics, available

at http://planningcommission.nic.in/reports/genrep/rep_logis.pdf

CUTS (2011), ―Anti-competitive Provisions in the Motor Vehicles Act, 1988 Case

Study of Private Bus Operators in Nathdwara‖, Policy Options Note, available at

http://www.cuts-

ccier.org/pdf/Anticompetitive_Provisions_in_the_Motor_Vehicles_2011.pdf

Report on Competition and Road Transport Sector by Shri Dhanendra Kumar,

former chairman of Competition Commission Of India.

Mehta. Pradeep S (2011), “Highway robbery by state transport companies” ,

Financial Express,

Report on state policies Affecting Competition: Passenger Road Transport Sector:

Competition Commission Of India,2007.

Competition, Entrepreneurship, and the Future of Roads, Ed. Gabriel Roth. The

author has discussed how thousands of miles of roads were covered under

privatization in 18th and 19th centuries.

Udai S. Mehta, Research Study of the Road Transport Sector in India, the Ministry of

Corporate Affairs, Govt. of India, 2012ASSAZS

Competition issues in the road goods transport industry with special reference to The

Mumbai Metropolitan Region by S. Sriraman submitted to CCI, September,2006.

http://www.cci.gov.in/images/media/completed/2statepoliciesaffecting20080508111218.pdf

http://people.hofstra.edu/geotrans

http://planningcommission.nic.in/reports/genrep/rep_logis.pdf


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STATUTES REFERRED

o National Highway Authority of India, 1988

o Motor Vehicle Act, 1988

o National Highway Act, 1956

o National Highway Fee (Determination of rates and Collection) Rules, 2008

o The Competition Act, 2002

SECTIONS INVOLVED

o Section 66(3) of Motor Vehicle Act, 1988.

o Section 67(1) of Motor Vehicle Act, 1988


o Proviso to Section74(3) of Motor Vehicle Act, 1988


o Section 93 of Motor Vehicle Act, 1988




o Section 68-C of Motor Vehicle Act, 1939

o Section 3 of The Competition Act, 2002

o Section 4 of The Competition Act, 2002

WEBLIOGRAPHY

o www.cci.gov.in/

o http://morth.nic.in/

o http://wikipedia.com

o http://news.oneindia.in

http://www.cci.gov.in/

http://morth.nic.in/

http://wikipedia.com/

http://news.oneindia.in/

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