Abstract
The main aim of this paper is to measure the technical efficiency of publicly owned urban bus companies (UBCs) in India for the period 2000-01 to 2012-13. To examine the efficiency as well as determinants of the same, we estimated a stochastic production frontier based on a translog production function using the maximum likelihood methods. The empirical results reveal that profit and fleet utilization have a significant influence on technical efficiency of UBCs. We find that substantial inefficiencies, averaging between 12 to 41 percent, exist; in general, small and large size UBCs are more efficient than their medium size counterparts. Therefore, there exists no linear relationship between technical efficiency and firm size. We also examined the temporal relationship of the cross-sectional rankings of individual UBCs’ technical efficiency estimates. To address this issue, we calculated Kendall’s index of rank concordance and coefficient of variation of technical efficiency for sample period. It is found that, by and large, there has been stability in ranks across UBCs in regard to their technical efficiency.
Highlights
Public transport system in urban India heavily relies on its bus transport system
The log likelihood ratio test shows that Model 1 is the best model; virtually all the coefficients of Model 1 are statistically significant
To examine the technical efficiency of urban bus companies (UBCs) and determinants of the same, we estimated a stochastic production frontier based on a translog production function using maximum likelihood methods
Summary
Public transport system in urban India heavily relies on its bus transport system. Services are mostly run by publicly owned Urban Bus Companies (UBCs), which are usually called either State Transport Undertakings (STUs) or Municipal Transport Undertakings (MTUs). From the very beginning, UBCs in India faced huge financial losses from their operation. UBCs’ total revenue during the year 2012-13 was just Rs. 66,025 million in comparison to total cost of Rs. 109,345 million. Due to this, they faced a net loss of more than Rs. 43 billion during the year 2012-13. Every bus-km operated by these companies resulted in a loss of more than Rs. 25 during the same year
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