Annex 4 Domestic Case Studies of Good Practices

BMTC Scheme of Hiring Buses

Bangalore Metropolitan Transport Corporation (BMTC) took the major step of introducing private capital and entrepreneurship in 1997. The first four BMTC buses ran in December 1997. There are currently 102 buses, with applications for another 400 being processed. BMTC hires buses under an open tender scheme and intends to hire 500 buses, 25% of the fleet. The buses are hired on a first come, first served basis. The minimum number of buses an individual can apply for is 10 and the maximum 40. Operators are offered a pre-determined rate per km and are guaranteed a minimum of 250 kms a day. Since only new buses built under the supervision of BMTC are allowed, a commitment is made to use the bus for five years. In order to reduce operating risk and to ensure that the operator gets a fair return, the rate per kilometre is linked to factors such as distance travelled per day, price of petrol etc. Any change in these automatically changes the rate.


  1. The hiring of buses has resulted in substantial cost savings. The 102 hired buses plying under BMTC colours generate savings of Rs 3 per km operated, vis-à-vis BMTC owned buses. (Figure for 1999)
  2. There is no investment in depots. To run an additional 102 buses at least one depot would have been needed. The cost of each depot is about 1 crore. By opting for private buses Rs. 1 crore is the notional saving to the Corporation. There is also no investment in buses and bodybuilding.
  3. The Corporation is relieved of the burden of appointing operating staff, such as drivers, mechanics and even some supervisory staff.
  4. During emergencies such as strikes, a skeleton service can be provided by the private buses.


  1. There is scope for claiming unwarranted extra payments. Operators can claim money for kilometres not run, by manipulating records.
  2. Unauthorised trips may at times be made in the name of the STU.
  3. Higher cancellations take place due to poor maintenance. Reasons are as follows.
    • No spare buses
    • Harassment by law enforcement agencies. Vehicles are detained for long periods
    • Lack of proper garage and repair facilities
    • Inexperience in the field of urban transportation.
  4. Drivers are less amenable to control
  5. Operators prefer light long routes to high density routes.
  6. Operators are unable to provide spare vehicles in case of repairs/ breakdowns .

(Source: Hiring of Private Buses: A viable option. Indian Journal of Transport Mgmt. Vol. 23. No. 11. Nov. 1999.)

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Indore Model of Public Private Partnership

Indore City Transport Services Ltd. has been incorporated to operate and manage the public transport system. The new SPV is ideally constituted as a Public Limited Company, incorporated under the Companies Act, 1956. The initial paid up capital of Rs. 25 lacs is being held by the Indore Municipal Corporation and Indore Development Authority in equal proportions. The main objects of the company are:

  • To create specialized and effective regulatory agency to monitor cost effective and good public transport services within the city of Indore, with private partnership.
  • To establish and maintain a line of passenger coaches.
  • To develop support systems for improving the transport infrastructure.

The company surveys and identifies routes. These routes are then tendered and private operators offer a premium and the highest bidder is selected. The main sources of revenue are from the fare box, advertising and passes. The fare box revenue goes to the private operator. The advertising revenue is shared between the operator and the company and 80% of the pass revenue goes to the operator. At present there are about 100 buses operating under the system. Thus with no major investment from the government the system has proved to be self-sustaining. The very fact that the operators are offering premiums on routes shows that running buses is a profitable venture.

Other special features of the system are GPS-based vehicle tracking and bus information display systems; a fully-outsourced bus maintenance system and a self financing and revenue generating model for bus stops.

(Source: Extracted from the website of ICTSL:

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