Nepal | July 08, 2020

Driving syndicate off: More needs to be done

Ramesh Ghimire
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The government action against the syndicate system is a good move, but it must come up with a proper and improved mechanism to ensure that general public gets convenient transport services

Illustration: Ratna Sagar Shrestha/THT

The government has finally launched a crackdown on the syndicate system in the public transport sector. The government has said route permits are open for eligible transport operators. This is a departure from the earlier provision in which route permits were granted on the basis of the recommendation of the transport committees and associations. The government’s decision to take stern action against the syndicate system is a good start. The syndicate system for long had taken the country’s public transport sector hostage, thereby not allowing a level playing field for those who wanted to enter the business.

This article will try to explore the root causes of syndicate system, its specific nature and ways to address the problem.

In the system that had been in practice, a group of bus entrepreneurs would not let new entrepreneurs operate their vehicles without their permission. Such groups are/ were so strong that even the government had to bow down to their pressure. As a result, the public transportation system in Nepal had been in its worst form. Since the syndicate system closes the door for competition, the general public was at the receiving end, as they were forced to travel on old, dilapidated and uncomfortable public buses.

So, the recent government action is aimed at breaking the syndicate system and improving the public transportation. However, it is too early to say that this will solve all the problems in Nepal’s public transport sector. What after the syndicate system is abolished? The government does not seem to have adequate planning for future.  Though it was illegal, transport federations, associations and committees were making their own rules and regulations. And accordingly, they used to allocate routes to public vehicles. Now who will take the responsibility so far borne by these associations and committees? We have to a have new system or model in place for smooth operation of public transportation after breaking the syndicate system.

Under the syndicate system, departure timings, number of vehicles for operations and routes were set by transport committees and associations. They used to punish or penalise – or cancel route permits of – those who failed to comply with the rules. Not to forget the system itself was illegal, but it had worked in such a way that there was some semblance of things being in order. Now once we break this illegal system, we have to have a new legal system in place to monitor and take required action against those who fail to comply with rules and regulations.  For this, the government must come up with a working procedure. It will need trained personnel. Offices need to be set up. But the existing government mechanism does not seem sufficient to handle the public transport sector in an efficient way.

Bias, unequal, unfair and unaccountable behaviours from officials would mean the general public would again be deprived of better services. Like in any other sector, good governance is crucial to improve the public transportation system.

Syndicate means producers of services or goods of same nature coming together under an umbrella aiming to control the price and restrict new producers in market. In Nepal, public transport fare is not opened for market. It is defined by the government. Therefore, it can be said that we just have a partial syndicate system in public transportation. However, occasionally associations do not follow government’s fare list.

There is also a possibility of creation of new syndicate after the abolition of the existing syndicate system. For example, a few years ago, new comfortable tourist buses were introduced along the Pokhara-Kathmandu route against the syndicate of Prithvi Highway Bus Entrepreneurs Committee. Those buses nowadays are not running under open competition. They are under a new association of tourism entrepreneurs. The association has fixed the fare which is much more expensive than what the government has fixed. The government has fixed Rs 389 as fare and allowed to add 20 per cent for deluxe and 40 per cent for super deluxe buses. However, this new association has fixed the fare at Rs 700.

Syndicate itself is a term of economics, but it is practised not only for financial benefit, but also for political benefits. Theoretically, syndicate is for profit maximisation among producers. But in Nepal, it is practised to gain social and political power and to “become superior”. A group of people has the penchant for showing off their clout, and they like to see many entrepreneurs hanging around them. Hence, they discourage entrepreneurs from having direct contact with government agencies. They make new entrepreneurs dependent on them.

Even under syndicate, many entrepreneurs are not getting the profit. One who runs the most uncomfortable vehicle is only in profit because his investment and operation expenditure are too low. Someone who operates comfortable vehicles may not be able to make profit because the operation cost would shoot up.

Revenue is almost the same for all vehicles because the committees give equal time to all vehicles and at the same time passengers are not given choice. Every new entrepreneur has to pay money in lakhs to those who run syndicate. This increases the probability of loss because payback period is relatively long.

Ghimire is planning officer at Kathmandu Metropolitan City


A version of this article appears in print on April 10, 2018 of The Himalayan Times.


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