Sectorial 1

Competitive assessment of road transport sector
COMPETITION COMMISSION OF INDIA
INTERNSHIP PROJECT REPORT
TOPIC:
PROJECT MENTOR : MR.SUKESH MISHRA
JOINT DIRECTOR (LAW) COMPETITION COMMISSION OF INDIA
SUBMITTED BY:
SUBMITTED TO:
ZUBEDA MAJID KHAN COMPETITION COMMISSION OF INDIA th 8 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 sector18 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 materials28 Outsourcing of maintenance work..28 Contracts should be contract based28 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 SECTOR38 Collection Agencies...38 Tax Collection......39 Motor Vehicle Tax..39 What has to be done? ............................................................................................39 Need for change40 Chapter 8: CONCLUSION AND RECOMMENDATION41 BIBLIOGRAPHY43 STATUES REFERRED.44 SECTIONS INVOLVED..44
WEBLIOGRAPHY44
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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 30th 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 8

TH
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 socialeconomic benefits to the people because of well developed road network. In rural areas it
1 2
ABA Section Of Antitrust Law, Antitrust Law Developments 525-602 (5th Ed. 2002) NCAER (April, 2007), State policies affecting Competition: Passenger Road Transportation sector, available at 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 countrys 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 countrys 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
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 traderelated 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 5
Section 3, The Competition Act,2002 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. Its 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
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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 worlds 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.
NCAER (April, 2007), State policies affecting Competition: Passenger Road Transportation sector, available at http://www.cci.gov.in/images/media/completed/2statepolicesaffecting_20080508111218.pdf 8 http://www.tcd.ie/civileng/Staff/Brian.Caulfield/Intro%20to%20Transport/Economic%20impacts%20of%20trn sport_MSC.pdf 9 Supra note 4
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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
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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 15
Ministry Of Road And Transport And Highways, An Analysis On The Development Of Highways. 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 sectorA 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 NathdwaraChoti 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
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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, Swedens 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 Chiles National Economic Prosecutor had launched two proceedings at the countrys Competition Tribunal against five bus companies, which had colluded to fix prices,
19 20
Supra note 15 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 companiesPullman Bus, Tur Bus, Romani and Cometa for colluding to engage in behaviour designed to block rival Buses Lnea 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
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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 dont 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 dont 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
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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 industrys 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 Indias 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
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the worlds 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 27
Term Cartel has been defined under Section2(c) of The Competition Act, 2002 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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Competitive assessment of road transport sector 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 anticompetitive 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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Competitive assessment of road transport sector 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 theyll 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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Competitive assessment of road transport sector 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 authoritys 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.
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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
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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 32
BBC 10 December 2003 Vajpayee demands murder enquiry 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/
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Competitive assessment of road transport sector 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 cant 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 STUs 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 STUs 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 years 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. Its 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 FiveYear Plan.37
Need for ChangeThere 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)
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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 anticompetitive 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 its 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 cant 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.
Page 42 of 44
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 200703-19 , 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.cutsccier.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.
Page 43 of 44
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 Section 71(3) of Motor Vehicle Act, 1988 o Proviso to Section74(3) of Motor Vehicle Act, 1988 o Section 79(2) of Motor Vehicle Act, 1988 o Section 93 of Motor Vehicle Act, 1988 o Section 99 of Motor Vehicle Act, 1988 o Section 104 of Motor Vehicle Act, 1988 o Section 193 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
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Competitive assessment of road transport sector

COMPETITION COMMISSION OF INDIA

INTERNSHIP PROJECT REPORT

Competitive assessment of road transport sector

Competitive assessment of road transport sector

Competitive assessment of road transport sector

Competitive assessment of road transport sector

Competitive assessment of road transport sector

ZUBEDA MAJID KHAN 8

ALIGARH MUSLIM UNIVERSITY (ALIGARH)

Competitive assessment of road transport sector

Competitive assessment of road transport sector

Competitive assessment of road transport sector

Competitive assessment of road transport sector

SCOPE, OBJECTIVES AND ITS SIGNIFICANCE:

Section 3, The Competition Act,2002 Section 4, The Competition Act,2002

Competitive assessment of road transport sector

ASSESSMENT OF ROAD TRANSPORTATION AND EXISTING COMPETITION ISSUES

Competitive assessment of road transport sector

Competitive assessment of road transport sector

Assessment of Passenger Road Transportation (Land)

Competitive assessment of road transport sector

National Road Transport Policy; See also http://morth.nic.in/writereaddata/sublinkimages/Road_Transport_Policy27333191.pdf

Competitive assessment of road transport sector

Competitive assessment of road transport sector

How Competition can be introduced in this Sector?

Competitive assessment of road transport sector

What is the impact of competition on consumers?

Competitive assessment of road transport sector

Competitive assessment of road transport sector

Supra note 15 Supra note 16

Competitive assessment of road transport sector

Competitive assessment of road transport sector

Assessment of Freight Transport and Its Importance (Land)

Major/ Key Players in the Road Transportation Business

Competitive assessment of road transport sector

Competitive assessment of road transport sector

Truck Operator and Their bargaining power

Intermediaries:Booking agents/Transport companies/transport contractors:

Competitive assessment of road transport sector

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

Competitive assessment of road transport sector

Road freight transportation and evidence of Cartelisation26

Competitive assessment of road transport sector CHAPTER-IV

Competition issues in Road Construction Sector

Bidding Procedure and Design of tender

Section 4. The Competition Act, 2002

Competitive assessment of road transport sector

Entry Barriers must be made easy

Requirement of Outsourcing of the maintenance work

Contracts should be Performance Based Contracts

Competitive assessment of road transport sector

Need of Capacity Building

Need for a Regulator

Competitive assessment of road transport sector CHAPTER-V

THE THIRST OF PUBLIC PROCUREMENT

Competitive assessment of road transport sector

THE FIASCO OF GOLDEN QUADRILATERAL