Why big companies shy away from road transportation business
Low profit margin, extortion, control of route permit issuance by shady groups, unruly roads, etc discourages big businesses from investing in the transport sector
In January 1997, Bangladesh Metro Bus Company Limited, a newly formed bus operator, brought the first fleet of air-conditioned bus on the streets of Dhaka city called Premium Bus Service. The bus service operated on the Motijheel-Uttara route.
Within weeks the service got so popular that people used to stand in queue to take a ride on the bus. Each bus, of Indian origin, was fitted with Czech-made air-coolers, and offered relaxing journeys for officegoers. But the service did not last long. After one year of business, the company began to experience falling profits.
Nonetheless, in three years, the company expanded to four destinations: Motijheel to Uttara, Motijheel to Mirpur, Motijheel to Savar and Motijheel to Narayanganj.
"We started the practice of standing in a queue to getting on a bus," said Abdul Matlub Ahmad, chairmand of Nitol-Niloy Group and one of the investors of the company.
After running the business for three years, finally, the company had to sell off all the buses to different individuals.
"It was supposed to be a franchising route, a limited number of companies were supposed to operate bus on the route. There had already been many buses on the route from before. On the top of that, BRTA began to issue route permits to whoever applied for the same route. As a result, this company found it hard to survive," said Abdul Matlub Ahmad. Eventually, the company went out of business.
Though Bangladesh has many big entities, they do not dare to venture to the road transport business because of the unruly business environment and risks. As a result, passengers have no alternative but to get low quality service that individual bus owners provide.
"If you provide people with substandard service on the cheap, people are ready to take that," said Matlub.
Matlub believes that city bus services as a business prospect is not very attractive.
"Managing transport business is very tough because the capital is always at risk due to road accidents. Our drivers are illiterate and the people on the street are careless. The passengers are not that conscious too. Some of them cut seats on a bus," said Matlub.
"It is very risky and cumbersome business. You will find it hard to make profit. Very tough," said Matlub, adding that sometimes passengers transport contrabands on buses.
Transport experts say many small businessmen are in the transport business and they provide poor quality of services to passengers. Most of them do not follow rules and regulations to run the bus services. They operate by 'managing' a range of people - law enforcers, workers' leaders, and local political party men.
"But it is not possible for big companies. They always have to follow rules and regulations to do business," said Matlub.
Matlub observed that the bus fares are very low in Bangladesh compared to other countries in the world. It is hard to cover the costs of operating a bus in Bangladesh.
In the beginning, when people bring new buses on the street, it does not need much maintenance cost; As a result, they can make some profit. But in the long run, profit plummets.
Transport experts said politics has an influence on every business. Certain groups control different sectors. But in the case of transport sector in Bangladesh, the influence is too much.
It is tough for some people to get route permits. On the other hand, some people who have influence in the sector can get that easily.
Professor Shamsul Hoque, Department of Civil Engineering, BUET said that there is huge demand for quality bus services. People are compelled to ride unfit buses.
This transport expert said that there is not good atmosphere for big corporate investment in transport sector. He blamed the government for not creating conditions conducive to corporate investment.
"The BRTA issues route permits to those who have political influence. As a result, many companies' buses run on the same route and compete with one another for the same number of passengers," said transport expert Shamsul Hoque.
He believes that bus workers' and owners' leaders never want big companies to come to the business. When there are lots of individuals in the sector, they can remain influential leaders. They become important to the government too.
"In the Strategic Transport Plan-2005, there is clear recommendation that bus routes will be franchised and all the buses will be brought under five companies. But the initiative did not come to reality," said Shamsul Hoque.
He believes that it is very important to bring corporate investment in the transport sector. Big investors provide quality services to passengers. If the government can create a conducive environment, then big companies will come to the business.
According to Bangladesh Road Transport Owners' Association, nearly one lakh buses ply the streets across the country. Of them, 4,500 buses ply on Dhaka city roads.
Khandaker Enayet Ullah, secretary general of Bangladesh Road Transport Owners' Association, who has nearly 300 bus in his fleet said big companies do not want to come to the bus business as they have already become big companies.
"The transport business is a risky business. For this reason, big companies are not interested in it. There is always a chance of accidents and there is an issue of the handling of the workers," said Khandaker Enayet Ullah.
Enayet Ullah said there is a shortage of skilled drivers. This is a major problem. Whatever the driver does, the owners have to bear all responsibility.
The government could not free the highways from three-wheelers like Nasimon, Karimon; as a result, there is a higher risk of accidents. If there is an accident, the bus owners are fined.
Those who have long been in the business, they are here. Very few people who have no alternative to invest in, come to transport sector. Nobody else wants to come to the business.
Bus route franchising initiatives
The Strategic Transport Plan-2005 recommended to "restructure the bus operations from a large number of small operators into a smaller number of large operators."
The Urban Transport Policy said that in order to make significant improvements in the operations of the system it will be necessary to merge owners into cooperatives. This can be done effectively by introducing route franchising arrangements.
The Revised Strategic Transport Plan-2015 (RSTP) also put emphasis on the implementation of bus route franchising. According to the RSTP, "There are too many private operators and they are not fully managed by government. And they are operating buses without timetable, fixed route and bus stops, agreeable environment and others."
In 2016, Annisul Huq, late mayor of Dhaka North City took initiatives to reform Dhaka's outdated transport system by proposing to launch colour-coded buses in different routes.
According to his plan, all private bus operators would be merged to six conglomerates that would operate their buses on the 22 major routes, instead of the existing hundred plus bus routes around the city.
Anisul wanted to present the city dwellers with high quality bus service.
After the death of Mayor Annisul Huq, Dhaka South City Corporation Mayor Sayeed Hossain Khokon was tasked with the initiative. The progress slowed down following the outbreak of Dengue in the city. After the Dengue, the city corporation elections began. Now we are in the midst of the Covid-19 pandemic.
"The initiative is not gathering momentum, we are facing problems one after another," said bus owners' leader Khandaker Enayet Ullah.
However, he hopes that the Dhaka city dwellers will get high quality service once bus rationalization and route franchising happens.
Dhaka Transport Coordination Authority (DTCA) said they are working to implement the bus route rationalization.
Khandakar Rakibur Rahman, executive director of DTCA said that they have sent a feasibility study proposal to the planning commission for approval of the design of the bus terminals.
"We will form a development project proforma on the basis of the result of the feasibility study. The work has also slowed down due to the pandemic. The work will get momentum once the covid-19 situation improves," said Rakibur Rahman.
Bus owners said that profit-making in this business is very tough at present. There is no single bus which is not being fined at least four times every month. The fine is between Tk3,000 to 5,000.
"On the one hand, the traffic congestion is increasing day by day; On the other hand, there is high competition among buses on the same route. Again, most of the money goes to pay fines," said Khandaker Enayet Ullah.
The average speed of motor vehicles in the city has come down to 4.5 kilometres per hour – almost equal to walking speed, according to a recent study conducted by BUET.
Seeking anonymity, one bus owner said they have to pay influential people as well as law enforcement agency members on a regular basis.
Now the bus fare in the city service is Tk1.65 per kilometre. He claimed that per kilometre bus fare is no less than Tk5 in other countries.
But transport experts believe the government has failed to implement the bus route franchising only because individual bus owners and leaders do not want it to happen. Bus owners and workers leaders get money from the sector in the name of different associations.
"These associations are important for any government. When opposition political party calls for hartal (transport strike), theses associations bring buses onto the road to make the hartal a failure. As a result, the government usually do not take action or formulate policy that goes against theses associations," said a transport expert seeking anonymity.
