Part III Bus Fare Hike: An unjust burden on the working Class

In a move that has caused serious heart burn among the working people of Tamilnadu, the newly elected government of Tamilnadu led by Dr.J.Jayalalithaa, increased the prices of public utilities and services like bus tickets, milk and electricity rates. The Government claims that the public utilities are making enormous and unsustainable losses. The only option that they have presented is to raise the rates at which the people can access these public utilities. In effect this government has passed the whole burden upon the working people. While the government’s arguments sound valid on the surface, its true logic and intent can be understood when we dig a little deeper and deconstruct their arguments.

Final part of three part series on analysis of the the recent bus fare hike from Working class perspective.

Bus Fare revision: An unjust burden on the working Class

In November of last year, the government of Tamilnadu, doubled the rate of bus tickets. Overnight the economies of wage work had altered significantly. Many low paying jobs, handled by an army of informal workers had become non remunerative. Many left work, others had to cut down on other essential expenses or extend their already stretched working hours to pay for bus tickets. Ostensibly the reason for the massive increase in bus fares across categories was the huge losses being made by the Transport department on a daily basis. The government claimed MTC was making a daily loss of over 60Lakh Rupees which was crippling the corporation. It maintained that the loss was primarily due to the need for increased working capital and input cost arising out of a spiralling diesel price and increase in salaries. It alleged that the previous regime had maintained the fares too low -forcing MTC into this mess. And finally its actions meant that the burden of saving public transport in Chennai would fall squarely on the working class that was the largest users for this mode of travel. What the government refused to recognise (while being fully aware) was that the working classes, realing under double digit inflation and vanishing jobs could ill afford to carry this burden.

Half Truths and Plain lies

While a government’s arguments about loss seems genuine on the surface, a closer perusal of the financials of MTC reveals how the government sold the idea of ‘loss’ to the people by mixing half-truths and plain lies. Firstly the government maintained that the State governments had not increased the bus fare for over a decade, the last general fare revision was under the AIADMK regime in 2001-2002. But this was only a part of the truth. While there was no general fare revision, the previous DMK led government had effectively increased fares by over 25% by creating a staggered fare structure for different class of busses. They also increased the frequency of the higher fare buses in order to gain more revenues. Therefore, effectively the bus fare had been increased indirectly in the last 4 years. People had protested against this indirect raise in fares and the decline of ordinary services.

The government claims that the rise in operational cost has increased the daily loss to over Rs 60 Lakhs. But if we look at the 2010-2011 annual report of MTC, we find that MTC has made an operational income of Rs 863.60 crores and incurred an operational cost of Rs 885.54 crores. That is a loss of Rs 21.94 Cr (Rs 6 lakhs a day).




Amount Rs. lakhs)


Amount (Rs lakhs)

Operational Income


Fuel (including Tax)


Non Operation Income


Spares and repairs


Profit on Sale of Assets


Tyres, tubes & flaps


Reimbursement for free passes




M.V Tax & Permit Fees


Interest & finance Charges


Other Expense




from 39th Annual Report (2010-2011) GIVE PROPER REFERENCE

For the financial year of 2010-2011, MTC paid an average of Rs 39/- per litre of diesel. The cost of diesel has increased in between March 2011 to Novermber 2011, increasing the operational cost. This includes the hefty state and central taxes on petroleum products (upto 35% in Tamilnadu of which the state government gets 21%). This accounts for almost Rs 110.85 Cr annually. Thus, a major burden of expenditure is because of the high rates of tax that MTC pays to the state and central exchequer.

The other major increase as claimed by the government is the increase in establishment cost due to increase in wages. The wage increase is long overdue and needs an upward revision given the falling real wages due to inflation. But this has accounted only for Rs 103 Cr. This has been already accounted for in the 2010-11 annual report. This cannot account for the over Rs 60 lakh daily loss that the government claims.

The accounts reveal that the other major component that has gone upwards, is the cost of debt servicing. It has increased by Rs 182 cr year on year. The primary purpose of raising loans was to increase fleet strength and to improve infrastructure. From the accounts we gather that MTC pays around 8.7% on debt servicing. Here again the State government is the major lender and receives a major share of the interest paid. Thus while the government claims to increase MTC buses, the actual financial burden is borne by the public transport users and is not acquired from the revenues of the state government or the central government. Infact the interest payments go towards augmenting state revenues.

Another important part of the increase in book cost is the depreciation of assets (mainly buses). But there is no mention about the increase in value of land assets held by MTC, which infact has been used as collateral for raising loans from national banks. This skews the financials of MTC towards loss as Rs60 lakh per day loss reported in papers include the depreciation cost- This needs to be understood within the context of the improvements made in bus infrastructure that was implemented by MTC in the last year. While 50% of the infrastructure improvements cost came from Central(JNNURM) and the State, the rest of the 50% has come in terms of loans for which the consumers are paying interest and towards the capital.

This apart, MTC also pays about Rs 9.0 Cr as Motor vehicle tax and permit charges. This is the only component in the report that is mentioned as a contribution to the exchequer but again reveals that the flow of revenue is from MTC to State government rather than the other way around. Around Rs 200 Cr, has been contributed by MTC to state and central government revenues (Rs 110 cr as fuel tax, Rs 90 cr approx. as interest to state government, and Rs 9 Cr as M.V tax). The book loss of MTC is merely Rs 231 Cr (Rs 63 lakhs a day) which is being cited as the reason for a two fold increase in bus fare rates. Rather than the State investing in public transport in order to improve civic infrastructure and support the working class in commuting to work at reasonable rates, this government has not only made the workers’ pay fully for the commute cost but also pay to the exchequer for them to spend on huge tax concessions to the rich and minor freebies to the people to make theM silent.

Insensitive Governance

In a welfare state the government is mandated to promote equal opportunities to people by redistribution of income. Progressive taxation and social investment are two sides of this process. One of the key sectors for investment in cities is mass public transport systems at an affordable cost for the poor and informal workers. By improving public transport and subsidizing the cost, the government augment the poor wages that informal workers make in a day. The inability of the state to obtain to all its people a minimum living wage is partially offset by progressive transfers through cross subsidization.

Public transport also has important implication for environment. No modern city can reduce its carbon footprint and ecological footprint without investing In public transport and promoting the same. Private vehicles have come to populate cities, throwing its infrastructure out of gear. They have also enormously contributed to contaminated environment in which we live. By taxing them, public transport needs to be subsidised so that people will move from private modes to shared public transport mode. But our government, while sloganeering for public transport in its policies, have systematically subsidised the cost of private travel by investing in roads/flyover etc without restricting vehicle use or prioritizing public busses on these roads. This has resulted in massive pollution to the environment, significant congestion on the road, adding to the time and cost of travel for the working class that predominantly depends on public transport. This has resulted in a rich class approrpriating a common resource such as public road from the working class. While developed nations have gone ahead to levying high parking charges, congestion charge and non monetary methods of restriction private vehicle use, our government has refused to curb their use in order to promote fuel based auto motive industry and its profits.

The governments has also refrained from using the vast resources at its disposal to stabilize the cost of fuel. This commodity has a cascading effect on all essential items pushing inflation into double digits. The governments are not reducing our dependence on imported oil, by reducing consumption and promoting alternative energy sources. Nor are they relaxing the high rates of taxation that goes into fuel cost. Public transport a sector that should enjoy fuel tax waiver as not only that this sector is primarily used by the working class but also there are added benefits in terms of environment.

The irony is that while the working people are forced to shell out more so that MTC pays up its tax to the state, the state and central governments have offered a string of tax concessions and other subsidies like land, electricity etc to private enterprises in the burgeoning Special Economic Zones. While the state government has waived excise and duties for many units established in SEZs, the union government also provides large write-offs to corporates under the garb of promoting industry and employment. Over 5 lakh crores have been written off in the last budget alone as tax concession to corporates.

The Working Class bears the burden

While the inflation has increased the price of essential commodities for the working class, there has been no increase in real wages for the working class to mitigate the increase in the cost of social reproduction of labour. Nor has the state implemented any real measures to curb the inflation for the working class. At the same time, there has been a sustained attack from the media and the corporates which continues to blame the subsidies to the poor as a cause for inflation.

The State has bowed to this pressure by allowing public utilities to move into debt and by refusing to subsidise their cost. On the other hand it delivers large tax concessions to the rich. The state forces public utilities that serve primarily the poorer sections to go broke or recover the cost from them. Either way, the cost of using these utilities increases, phenomenally increasing the inflationary pressures on the working people. This process shifts the burden of propping up the government and maintaining the economy to fall squarely on the working class. It is important that the working class unite against this injustice and struggle to lower the increase in cost of public utilities and services like electricity, milk, and transport.

Venkat, Chandrika

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