Business model for bus operation in Dhaka city under proposed brt system scenario

Abstract

This study explores the current situation of bus service in Dhaka city in the purview of service, operational and business point of view. Based on the information collected from the stakeholders it is investigated and analyzed the underlying causes of the problems facing by private operators in Dhaka’s bus industry, dig out the nature of present business model including the critical analyses of present profit/loss of the bus operation. It is also analyze the overseas experience in bus operation contracting system. Lesson learned from international experiences and taking the due considering of the local circumstances, it has been developed the business model for the private bus operators suitable for Dhaka BRT system trading off the risks sharing between public and private operators.

The research study reveals that present bus business model negatively affects the bus operations. It has unearthed that against benchmark costs for proper bus operations, present operators operating their buses with average 30% losses. They are surviving because most of the operators are paying low wages to the labors (driver, conductors, helpers), and poorly maintain the buses. They are reducing the quality of the bus service to minimize their cost. Some of the operators who have taken loan form bank are not able to paying to the bank in due time and some of the operators have very old fleet which they already recover their capital investment and some do not survive at all and are bound to leave the business. As a result, very little new investment is happening in city bus service from private sector and number of bus is not increasing as desired rather bus owners or operators are not reinvesting their money in city transport service. Due to overlapping routes, the driver compete each other to get more passengers, create obstruction near to junction so that bus cannot overtake, driver does not care about safety of the passenger during boarding and alighting. Thus, due to absence of adequate, reliable and quality public transport, numbers of private cars are increasing day by day and congestion is increasing due to inadequate road space as well as poor traffic management. The main problem lies with business model. Present business plan, operators carry all kinds of risks on the other hand government is not taking any risk of bus operation in Dhaka.

The research study has investigated existing route permit system, bus contracting system and existing business model of bus operator. The research also made critical analysis of business model in eleven cities of the world where BRT has been introduced or reforms took place in Bus contracting system. By introducing new business model in each case the government is exercising greater control by a contract system. The research has developed a Business model suitable for Dhaka BRT and questionnaire survey was made for consultation with Bus operator and other stakeholders.

The major findings of the research study is that Gross Cost model should be used for Dhaka BRT i.e. The Dhaka BRT will take the revenue risk and the operator will take the Bus operation and maintenance risk. The operators will be selected through Negotiation from existing Operators. The Reward and Penalty will be linked with operator performance. Fare revenue will be collected by DTCA. The payment will be made by Clearing House of DTCA to Dhaka BRT Company and Dhaka BRT will make payment to the Bus operator on the basis of per km contract. Thus the risk of bus operation will be allocated between both government and operator. The operators need not to be worried with passenger demand as they will be paid per km. The same business model i.e. contracting system also recommended in general Bus operation to avoid on street fearless completion between the operators.