3 big changes to revive Intercity Coach segment

Kallada Mercedes Benz Multi axle

3 Big Change to revive intercity bus market
Indian Bus market has various segments and sub segments. Intercity segment is one the tough segment for product as well as operator. The tentative volume of the segment is around 6000 to 8000 nos per annum. New and ultra long routes are explored by operators now and then and operators are very much excited to launch new routes and enter new territories from their comfort zone. There was a time when Bangalore to Mumbai was looked as a long distance route. Now the route got extended to Ahmedabad and now a single bus is operated between Bangalore and Jodhpur for a distance close to 2000 Kms and the trip time is around 36 hrs. This is by far the longest operated intercity bus in India and is a testimony to bus and operator. This route is served by four operators and they are consistently operating this route for more than 2 years. In no time we may see connectivity between New Delhi and Bangalore by bus

Current issues:
With so much happening in this segment, this segment is shrinking or stagnant in volume over a period of years. Volvo which actually triggered the growth without cannibalising others was doing very good till 2011-12. Though the segment what Volvo brought was minuscule, that was a segment which wasn’t existing before. Volvo also should have clocked their best figure during that time. But for various issues including certain measured take by transport authorities, this segment never took off in a larger manner. We go one step deeper to understand the criticality of the issue and this is an outcome of various interviews with leading fleet owners and manufactures.

1. Tax:
a. For an operator to get into this business, apart from running expenses like diesel and tyres, the single biggest fixed expense next to EMI will be taxes. By and large Omni Buses or intercity buses are looked as cash cows by every state Govt. and huge taxes are levied. This multiplies when the buses are operated to multiple states.

b. Around 1.5 lks is the tax levied for a bus operating within a state and this gets multiplied with the no of times, the bus enters each state. Say for a bus operating between Bangalore – Trivadrum, the operator shall effectively pay for three states namely Tamilnadu, Kerela and Karnataka for an amount nearing to 4+ lks, if its running in the Bangalore – Madurai – Trivandrum route.

c. There is also a war between the states and if one state increases the other state also increases.

d. Suggested solution could be a rationalisation in tax structure and a nominal taxes shall be levied instead of exorbitant way

2. National Bus Permit:
a. In black and white there isn’t a permit to operate a bus in intercity / interstate routes in many states excepting few states. Even a state which gives permits may not have permit for sleeper. Tourist permits are predominantly used normally and to operate legally, home tax and entry taxes are paid for the respective states where the buses are plying.

b. The implementation of National Permits for buses shall ensure the permits are available at ease and make way for new entrants.

c. The permits shall have provision for sleepers and seaters as well.

3. Bus Product Portfolio:
a. Currently there exists a huge gap in the Intercity product portfolio. We have traditional front engine buses costing between 40 lks to 50 lks, which are in lower end of product spectrum or premium rear engine multi axle fully built coaches upwards of 1 crs, in the upper end. There isn’t a mid segment, say at around 75lks to 80lks which will give have better operating economics.

b. This gap in the product portfolio, makes the operators to go for premium buses only in the tier I routes and the sub premium buses are operated in Tier II and Ti III routes.

c. The potential of the Intercity segment will be unleashed only if there are enough options in the products to choose from. Manufacturers like Ashok Leyland and Tata are the demanded players here. Though Ashok Leyland demonstrated its capability with 12M RE chassis, we need a fully built coach in this segment. Understand Ashok Leyland and Tata are working in a multi axle products, success rate of these products will have a positive impact on this segment as they may trigger additional volume over and above the current market scenario.