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Niti Aayog wants govt to buy 60,000 buses under a larger JNNURM

Prasanta Sahu

While one criticism of the recent sharp reduction in corporate tax rates is that it might not boost consumption demand which is in the doldrums, the Niti Aayog has recommended that a scheme for large-scale public procurement of buses be launched soon, on the lines of the Jawaharlal Nehru National Urban Renewal Mission (JNURM), which was a component of the post-Lehman fiscal stimulus in 2009.

The think-tank, according to a senior official, said as many as 60,000 buses be procured over a year or so, using predominantly funds from the Central Budget, but also with part-financing of the scheme by state governments through their road transport corporations. "The procurement of a large number of buses by the government would give a boost to the (crisis-ridden) automobile sector as well as the public transport system, with beneficial implications for the economy," the official said.

While private consumption and gross fixed capital formation (investment) have seen sharp declines in recent quarters, government consumption spending, though a relatively smaller constituent of the GDP, largely remained steady.

However, even this demand component has lately faltered as the economic slowdown became sharper and more broad-based. Growth in government consumption expenditure had declined from 13.1% in Q4FY19 to 8.8% in Q1FY20.

Sales of heavy commercial vehicles, including buses, have fallen around 14% year on year over the past eight months, impacted by fall in demand from state transport corporations and costlier options of financing.

According to a Niti Aayog report, India has only 1.2 buses per 1,000 people, much below developing-nations benchmark, with a vast disparity among states - 3.9 in Karnataka vs 0.02 in Bihar. Only 63 of 458 Indian cities of more than 100,000 population have formal city-bus systems. Within this, only 15 cities have either a bus or a rail-based mass rapid transit system. Hosting about 30% of India’s population, cities contribute 50-55% of the country’s GDP.

Under the second economic stimulus package announced by the then UPA-government in January 2009, the states were provided financial assistance for purchase of buses for their urban transport systems under the JNURM (rechristened as the Atal Mission for Rejuvenation and Urban Transformation or AMRUT by the ruling NDA in 2015). Under this project, which has other components like affordable housing and assorted local government schemes, a total of 15,441 modern buses were sanctioned to 61 mission cities with the estimated central assistance of Rs 2,089 crore. Another 7,059 more buses were sanctioned under JnNURM in 2013-14.

Under the JNURM scheme, central assistance was up to 50% and state governments' share was up to 30%, depending on the population of the cities for which buses were procured. Some portion of the finance was arranged by the municipal bodies or transport corporations or via loans. The Centre's share was as high as 90% for the hill and North Eastern states.

Notwithstanding its acute budget constraints, the government, on September 20, unveiled a massive fiscal stimulus of Rs 1.45 lakh crore or 0.7% of the gross domestic product (GDP), mostly in the form of surprise tax cuts for the whole of corporate India to push GDP growth with a supply-side impetus.