5. Fare Policy and Pricing of Public Transport Services– Study on Stage Carriages in Kerala

August 2004 to December 2005
National Transportation Planning and Research Centre (NATPAC),
Thiruvananthapuram (R)


Scope and Objectives

(i) To find out the operational characteristics, the passenger load, passenger lead, daily collection, and expenditures (fixed and variable cost) of stage carriage operations in Kerala.

(ii) To prepare a Price Index for Stage Carriage Operations (PISCO) for understanding the periodical movement of prices of vehicle operating cost, and other inputs for different types of stage carriage operations.

(iii) To determine the fare structure of various category of services of stage carriages and establish unit operating Cost of various types of services.

In order to obtain operational characteristics and revenue collection, a sample survey of Stage Carriage Operators was conducted in selected five districts viz. Kollam, Ernakulam, Thrissur, Kannur and Idukki in Kerala State. Two percent of the buses were selected on systematic sample basis. These bus operators were contacted for detailed inventory of their records.

Details such as type of services offered, route length, fleet utilization, mileage or life of different components etc., were collected in the structured questionnaire. In-board bus survey was conducted and the information on tickets sold in different fare stages, passenger load for each fare stage, daily collections etc., were collected from the bus crew / operators.

Cost of operation of stage carriages were worked out based on both sample survey and also based on standard cost modeling. The data for costing has been taken independently from the detailed study of vehicle parts and its behavior during the economic life of the asset. The cost arrived from the cost model by taking the product life cycle costs is further simplified to get a cost table. It is further linked to standard price list obtained from dealers. Cost table acts as a desktop reference to arrive at standard operating costs. Its strength is the system wise cost visibility. This cost table can be adapted as a standard base for periodical updation of various vehicle-operating costs.
The major conclusions, arrived at from the study, are

• The fixation of stage carriage fare so far has been on ad-hoc basis without any scientific basis. PISCO provided a scientific base for revision of fare based on variation in operation cost.

• The fuel mileage of stage carriages showed an improvement in the longer distance operation. Long routes are covered by better roads and less number of stops.

• As per the cost modeling, the total cost of operation for ordinary stage carriages works out as Rs.18.78/ km consisting of 12.155/km as variable cost and Rs.6.63/km as fixed cost. The cost calculations for fast passenger bus services works out to Rs 20.39 / km. consisting of Rs. 12.15 variable cost and 8.23 fixed cost.

• The fare structure after arriving normal return on investment (average 11 percent returns on equity) works out as Rs. 0.54 per passenger km for ordinary buses and Rs 0.59 per passenger km for fast buses for a capacity utlisation of 75 percent. The respective fare for ordinary buses will be Rs. 0.33 per passenger km and Rs 0.36 for fast services for a capacity utilization of 125 percent.

• It is observed that the average number of passengers traveling per bus per trip in the state is around 40. This amounts to almost 85 percent seating capacity of these buses. The fare rates applicable at 85 percent capacity utilization including profit works out to Rs 0.48 per passenger km for ordinary buses to Rs. 0.52 per passenger km for fast services. This is the recommended fare structure for the state.

• The cost modeling approach has clearly revealed that variable costs of operation almost remains constant irrespective of the age of the vehicle if standard planned maintenance policy is adhered to.

• Quality of service which is depending upon the capacity utilization and supply gives ample scope for research for planning of induction and withdrawal of services thus providing room for healthy competition.
Significance/Utilisation Potential
The cost model and the price index for stage carriage operations (PISCO) presented a clear scientific methodology that would be helpful for taking decisions on revision of fare for stage carriages.
(i) Variations in load factor and daily fare collection due to uncontrolled issue of permits in a particular route were not considered;

(ii) Frequent fluctuations in fuel and other cost inputs and also the load and lead parameters could not be realistically modeled;

(iii) The competition from parallel services and their impact not studied;
Final Report on Fare Policy and Principle of Public Transport Services, NATPAC (being finalized)