EC 547:

Transport Economics

Dr. P. K. Mohanty
Chair Professor, School of Economics, University
of Hyderabad
&
Dr. Alok K. Mishra
Assistant Professor, School of Economics,
University of Hyderabad
 EC 547: Transport Economics

Lecture 1:
Why Study Transport Economics?
The Challenges of Transport Sector in India
 Importance of Transport for India’s
Economy
Rostow (1960):
“The introduction of railroads has historically been
the most-powerful single indicator to take-offs. It was
decisive in the United States, France, Germany,
Canada and Russia.”
Economic Survey 2014-15 (Volume I, p.91):
“Conceptually, there is a strong case for channelizing
resources to transport infrastructure in India given
the widely known spillover effects of transport
networks to link markets, reduce a variety of costs,
boost agglomeration economies, and improve the
competitiveness of the economy, especially
manufacturing, which tends to be logistic-intensive.
(Volume I, p.91)
Transport is itself an economic activity; it serves
economic activity; it also creates economic activity.
 India’s Transport Sector:
Key Sub-Sectors
Roads and Road Ports and Shipping
Transport
Railways Inland Waterways

Civil Aviation Urban Transport

• Road and Rail are the dominant modes of transport

accounting for 87% of India’s freight traffic in 2007-08.
• Railway’s share in total inter-regional freight traffic has
declined from 89% in 1951 to 65% in 1978-79, 53% in 1986-
87, and 30% in 2007-08
• Share of roads in total passenger traffic carried by road
and rail together rose from 32% in 1951 to 90% in 2011-12.
 Direct Contribution of Transport by
Mode to GDP (%)
2008-09 2011-12
Transport 6.6 6.6
Railways 1.0 1.0
Road Transport 4.7 4.8
Water Transport 0.2 0.2
Air Transport 0.2 0.3
Transport Services 0.4 0.4

Indirect/Induced Contributions are huge

 India: Total Road Length
as on 31.3.2013

Category of Length of Road Share in Total

Road (km) Road Length (1%)
National 79,116 1.5
Highways
State Highways 1,69,227 3.2
Other PWD 10,66,747 20.4
Roads
Rural Roads 31,59,639 60.4
Urban Road 4,46,238 8.5
Project Roads 3,10,955 5.9
Total 52,31,922 100.0
 Road Transport in India
Length of Roads (in Kms.)

National State Total Road

Year
Highways Highways Length
1951 19,811 399,942
1961 23,798 524,478
1971 23,838 56,765 914,979
1981 31,671 94,359 14,85,421
1991 33,650 127,311 23,27,362
2001 57,737 132,100 46,90,342
2011 70,934 163,898 46,76,838
2013 (P) 79,116 168,324 52,31,922
 Comparative Picture on Highways:
India vs. Other Countries
• India’s Road Density is high at 1.59 kms/sq. km as of
31.3.2013 as against 0.90 for Japan, 0.67 for USA, 0.44
for China, 0.19 for Brazil and 0.08 for Russia
Federation

• However, Surfaced Road Length in India was 60.61%

of Total Road Length - much lower than UK (100%),
France (100%), Korea (83%), Russian Federation (72%)
and China (66%)

• National Highways accounted for 1.51% of total road

length which is much lower than that of Brazil (6.3%),
China (1.75%), Japan (15%), Korea (13%) and UK
(11.7%)
 Road Length Vs. Registered Vehicles:
Compound Annual Growth Rate (%) 1951-2013

Period National Urban Total Registere

Highways Road Roads d Motor
Vehicles
1951-1961 1.9 - 2.7 8.1

1971-1981 2.9 5.5 5.0 11.2

1991-2001 5.5 3.0 3.8 9.9

2003-2013 3.1 4.1 4.0 10.5

1951-2013 2.2 - 4.2 10.8

 Compound Annual Growth Rate of
Registered Motor Vehicles in Select Metros

Metropolitan City CAGR (%)

Pune 12.9
Kochi 12.7
Madurai 10.6
Kanpur 10.4
Coimbatore 10.2
Jaipur 10.0
Bengaluru 10.0
 Vehicular Penetration Rates 2012
Country Gross National Passenger No. of Motor
Income Per Cars per 1000 Vehicles per
Capita (US $) persons 1000 persons
USA 52,350 355 781

UK 38,300 451 512

Japan 47,690 460 593

Mexico 9,720 196 277

Brazil 11,640 215 273

China 5,720 65 80

India 1,550 17 149

 Revenues from Road Transport
(Rs. Crores)

Year Central State Total

1950-61 34.6 12.6 47.4

1960-61 111.7 55.2 166.9
1970-71 451.8 231.4 683.2
1980-81 930.9 750.4 1681.3
1990-91 4596.0 3259.6 7855.6
2000-01 23861.0 12901.7 36762.7
2010-11 75453.2 45992.0 121445.2
2011-12 75572.6 53577.0 129149.6
2012-13 69411.5 64427.5 133839.0
 Revenue from Road Transport (State)
(Rs. Crore)
Motor Sales Tax on
Sales Tax on
Vehicles Passengers
Year Motor Spirit Total
Transport & Goods
& Lubricants
Fee Traffic
1960-61 29.9 16.9 8.4 55.2
1970-71 107.7 63.2 60.5 231.4
1980-81 356.3 154.5 239.6 750.4
1990-91 1566.3 631.5 1061.8 3259.6
2000-01 7644.0 5645.0 3671.4 16960.4
2010-11 23498.0 11198.0 11296.0 45992.0
2011-12 28897.0 13017.0 11663.0 53577.0
2012-13 34173.7 15528.8 14725.0 64427.5
 Revenue from Road Transport (Central)
(Rs. Crore)

Tax on
Motor Tyres
High Motor
Year Vehicles and Total
Speed Spirit
Accessories Tubes
Diesel
1960-61 25.3 14.3 72.1 - 111.7

1970-71 42.3 55.9 353.6 - 451.8

1980-81 303.1 289.9 329.9 8.0 930.9

1990-91 1862.7 803.4 727.6 1202.3 4596.0

 Revenue from Road Transport (Central)
(Rs. Crores)
Contd.

Tax on
Motor Tyres
High Motor
Year Vehicles and Total
Speed Spirit
Accessories Tubes
Diesel
2000-01 7034.2 1382.1 9863.7 5581.0 23861.0

2010-11 15176.3 3392.3 21278.1 35606.5 75453.2

2011-12 17457.9 4076.6 20003.1 34035.0 75572.6

2012-13 21402.2 4871.1 15673.2 27465.0 69411.5

 Road Transport: Overview
• Road length increased from 4 lakh kms in 1951 to 4.7 million
kms in 2011.
• Surfaced road length increased from 1.6 lakh kms in 1951 to
2.5 million kms in 2011.
• Surfaced road length as a ratio of total road length
increased from 39% in 1951 to 54% in 2011.
• Road density was 1.48 km per square km. in 2011-12.
• Length of National Highways with 2 lanes increased from
25,395 kms in 1996 to 41,518 kms in 2012.
• Length of National Highways with 4 lanes and above rose
from 1,170 kms in 1996 to 17,774 kms in 2012.
• State Highways and other PWD roads experienced a 7-fold
expansion during 1996-2012.
• National Highway Development Programme (NHDP) and
PMGSY (Prime Minister’s Gram Sadak Yojana) – Major
programmes funded by GoI.
 Indian Railways: An Overview (2014-15)
Running Trackage (Both ways) 115,000 Kilometres
Route Trackage 67,000 Kilometres
Passenger Trains per Day 13,000
Freight Trains per Day 8,000
Number of Stations 8,000
Passengers Carried 2014-15 840 Crore (23 Million per
Freight Carried Day)
1097 Million Tonnes
Average speed per Kms/hour
Goods 25
Passenger 50.3
Personnel Employed (2014-15) 13.26 Lakhs
Gross Revenue Earned (2014- Rs.161,017 Crore (Bulk from
15) Freight)
 Rail Transport: Overview

• Indian Railways – 3rd largest railway network in the

world – functioning under a single management.
• 8000 railway stations, 9550 locomotives, 55,000
coaches, 240,000 freight cars.
• 67000 route kms, 13000 passenger trains per day, 8000
freight trains per day.
• 2.8 million tonnes of freight traffic and 23 million
passengers per day
• Dedicated freight corridors (DFCs) envisaged to
augment rail freight transportation capacity [Eastern
(Howrah-Delhi) and Western (Mumbai- Delhi) trunk
routes operating with capacity utilisation 115% - 150%].
• Diversions of freight traffic to DFCs expected to free up
existing network for passenger movement.
 Railways Capacity Augmentation:
India vs. China
India China
Route Kilometres
62,211 57,900
1990
Route Kilometres
64,000 90,000
2010
India: Speed of average freight train – 24-25 kms/hour
over 2001-2013 (virtually constant), passenger train -
about 50 kms/hour. China: Maximum speed of freight
trains was around 80 kms/hour. Maximum train speed,
which was 80-100 kms/hour in 1991 was raised to 160-
200 kms/hour on most popular passenger corridors by
2008 and is 300 kms/hour at present.
 Freight Carried:
Case of Coal in India and China

Ratio
Sl. India China (India /
No. China
1 Average distance (km) 639 653 0.98
2 Cost ($) 0.021 0.016 1.31
3 Cost (PPP terms ($ per 0.064 0.029 2.21
ton-km)
4 Load Carried by avg. 1700 3500 0.49
Freight train (tonne)
5 Avg. Freight train 25 34 0.74
speed (km/hr)
 Freight Carried:
Case of Coal in India and China

Ratio
Sl. India China (India /
No. China
Indicators
6 Time inefficiency 25.6 19.2 1.33
(hours) (1/5)
7 Capacity (ton/hour) 67 182 0.37
(4/6)
8 Cost inefficiency 40.89 19.23 2.13
($/ton) in PPP terms
(1X3)
 Air Transport in India

Number of Airports as on 31.03.2012

Domestic 94
International 26

Passenger Traffic handled at Airports 2011-12

Domestic 122 million passengers
International 40 million passengers
Total 162 million passengers
2.28 million metric tonnes (0. 81
Freight Traffic 2011-12
Domestic + 1.47 International)
 Air Transport in India

Freight Traffic
2.28 million metric tonnes
Freight Traffic 2011-12 (0. 81 million Domestic + 1.47
million International)

Gross Revenues Earned 2012-13 (Rs. Billion)

Airlines 547

Airports 111
 Air Transport: Overview

• Ninth largest civil aviation market in the world.

• Passengers carried in 2011-12: 1.62 million; freight
carried in 2012: 2.28 million metric tonnes.
• Air traffic density: 1000 passengers per million urban
population : India – 72 as against Brazil – 231 (3 times),
China – 282 (4 times), Sri Lanka – 530 (7 times),
Malaysia – 1225 (17 times) and United States – 2896 (40
times)
• India has an aircraft for every 2.89 million people;
China – 1.14 million.
• Out of 15,750 freight carriers globally, India has just 13
scheduled and 149 non-scheduled operators.
• India’s air connectivity index is small at 3.8 as against
China (5.7), United Sates (22.7), Canada (13.4) and
United Kingdom (11.6).
 Passenger Traffic Handled by Airports
2015 (Lakh)
Atlanta (United States) 1015

Beijing 899

Dubai 780
Chicago 769

Tokyo 753

London 750

Delhi 460

Mumbai 406
 Ports and Shipping
• 12 major ports (all major ports operate under Major
Port Trusts Act 1863 excepting Ennore which operates
under Indian Companies Act 1956) and 205 notified
non-major ports.
• Private sector participation has been permitted since
1997
• Cargo handled by all ports in 2014-15: 1052.23 million
tons
• Major ports accounted for 61% of the cargo handled
• 441 shipping fleet in 1992 and 1154 in 2012
• Tariff Authority for Major Ports (TAMP) introduced for
regulating vessel-related and cargo-related tariffs and
rates of lease of port properties.
• Performance of Indian ports has generally deteriorated;
average pre-berthing detention of vessels was 2.05
days and average turn around time (TRT) was 3.89
Volume Handled by Container Ports (in TEU
– 20 Foot Equivalent Unit) 2015
Container Port Volume (TEU)
Shanghai (China) 35.29
Singapore 33.87

Shenzen (China) 24.03

Hong Kong (China) 22.23
Ningbo-Zhoushan (China) 19.45

Busan (Korea) 18.65

Mumbai (JNPT) 4.45

 Urban Transport

• 0.3 million motor vehicles in 1951; increased to 182.4

million in 2013 – grew at Compound Annual Growth
Rate (CAGR) of 10.5% between 2003 and 2013 as
against CAGR of 4.0% in Total Road Length.
• Share of Two-wheelers increased from 8.8% in 1951 to
72.7% in 2013
• Share of buses in registered motor vehicles declined
from 11.1% in 1951 to 1.0% in 2013.
• Proliferation of private vehicles: In 2013, Delhi had
registered motor vehicles of 77.9 lakhs, followed by
Bengaluru (45.9 lakhs), Chennai (40.7 lakhs), Pune (23.5
lakhs), Greater Mumbai (21.9 lakhs) and Hyderabad
(20.4 lakhs)
• Poor public transport systems in cities, especially
metropolitan cities – lack of focus on rail-based transit
in the past and on transport-land use integration.
 Composition of Transport Vehicles
(% Distribution)
Cars/
Two- Goods Other
Year Jeeps/ Buses
wheelers Vehicles Vehicles
Taxis, etc.
1951 8.8 52.0 11.1 26.8 1.3
1961 13.2 46.6 8.6 25.3 6.3
1971 30.9 36.6 5.0 18.4 9.1
1981 48.6 21.5 3.0 10.3 16.6
1991 66.4 13.8 1.5 6.3 11.9
2001 70.1 12.8 1.2 5.4 10.5
2011 71.8 13.6 1.1 5.0 8.5
2013 72.7 13.6 1.0 4.7 8.0
 Challenges of Transport
(India Transport Report 2014)
• Under-Investment in Transport Infrastructure: Public
Investment has lagged.
• Serious Capacity Bottlenecks exist: Capacity
expansion has not kept pace with current demands
and growth needs
• Modal Imbalance: Railways, though a more reliable and
energy-efficient mode is suffering from severe capacity
deficiency due to the long lack of public investment
(5.5% of Plan Outlay: Railways, 11%: Other Transport).
• Poor Quality of Transport Services: Adverse Effect on
Competitiveness of the Indian Industry
• High External Costs of Transport: Network Congestion,
Pollution, Accidents, etc.;
 Challenges of Transport
(India Transport Report 2014)
• Pricing: complex web of subsidies, tariffs and taxation
policies – resulting in inefficient signaling mechanisms
for resource allocation, leading to market distortions,
wasteful leakages, rent-seeking, etc.
• Mixing of Efficiency and Equity Objectives
• Urban Transport: Proliferation of personalised vehicles
calling for a need to manage congestion (Transport
System Management) and promote public transport,
especially mass rapid transit in large cities.
• Governance and institutional issues: Silo decision-
making pervades in the transport sector; problems of
unclear responsibilities, lack of inter-modal
coordination, politicisation of investments and weak
accountability need to be addressed.
 Directions for Reforms
(India Transport Report 2014)

• Inter-connected hierarchical transport networks with

inter-modal access, fit-for-purpose network standards
needed.
• Transport infrastructure needs to be in position in
anticipation of future demand – must be dynamic to
respond to challenges of economic growth and
changing development patterns
• Investment gap and financing challenges: commercially
unviable but economically and socially important
investments need to be taken up by Government.
• Addressing transport-land use integration to minimise
travel, promote carrying-capacity based planning for
cities and conserve the environment.
State of Transport in India
State of Transport in India
State of Transport in India
State of Transport in India
State of Transport in India
State of Transport in India
State of Transport in India
Visioning the Future
Visioning the Future
Visioning the Future
Visioning the Future
Sanghai Maglev
Thank You