PRICES OF BUS SERVICES IN

DELHI TRANSPORT
CORPORATION (DTC)

Presented By: Section: Q1163

Basit
Rubiya
Ayusi
Jagdish Singh

Contents:Introduction
Summary
Problems in case
Solutions
Conclusion
Questions

Introduction
Background of transportation: The transport sector plays a crucial role in the development process

of a country.
It has a direct impact on living standards both in terms of economic

as well as social well-being.

Increases the economical activities around globe in general and

across the developing world in particular.

Modern mechanization of transportation systems further fueled this

phenomenon and heavy motorization is evident in metro cities.

Thus, motorized transport is fulfilling these insatiable transport

needs around the world.

Present
situation
Transport
in

of

Bus
Delhi:

Delhi has an extensive road network, where roads make up for

20% of the land, the highest for any city in the world.
More than two thirds of the population depends on public

transport mainly buses as mode of transit i.e., 79% of the

population uses bus as the means of transport.
DTC serves as an extremely critical mode of transport for the

working population among the lower and lower middle class.

Urban

transport
government.

is

mainly

the

responsibility

of

state

The bus services in Delhi is a mixture of private stage carriage

buses, buses owned and run by Delhi Transport Corporation

and metro feeder buses provided by Delhi Metro Rail
Corporation.

Summary
In this case were going to discuss about the prices of bus

services in DTC(Delhi Transportation Corporation) and its affects.

Demand of DTC is increasing day by day due to increase in

population and transportation is also a basic need for everyone.

The main issue with this essential service, are high its demand,

sometimes high prices, yet inefficient and over burdened supply.

The government over the years has tried to improve services by

introducing new buses and new routes, but demand always

seems to outstrip the supply.
DTC as a final attempt also allowed the private operators to ply

their buses to keep up the demand, but as a result Supreme

Court judgement which prohibited all non CNG buses plying on
Delhi roads, because of this transportation system has been
facing huge problems.

About DTC:
DTC(DELHI TRANSPORT CORPORATION) is the main public

transport operator of Delhi, it operates buses on many bus

routes, it is one of largest CNG bus operator in Delhi.
SERVICES:- Tata AC, Tata Non AC buses, Local non sight seeing,

Inter state buses, With an employee strength on about 18,000.

DTC operates around 46 depots and 18 depots operates old

DTC buses and rest of them are low floor buses.

DTC has a fleet of 11000 buses in which 1000 are air-

conditioned and 3106 buses are CNG buses for the city and
theyre plying about 773 routes in Delhi roads.

Analysis of the case:

Increase in population.
Increase in demand for the public transport.
SUPREME COURT judgment prohibited all non CNG (Compressed

Natural Gas) buses from plying on the Delhi roads.

For maximization of profits private operators has to increase the no. of

trips, which increasing accidents and air pollution.

Increase in maintenance and operating of buses and converting non-

CNG to CNG buses.

Increase in the basis wages of the drivers and salaries paid to the

employees.
Decision to increase the price of the tickets.

Problems in the case:

The uncontrollable population growth

Cost and affordability.

Increasing cost of fuel

 Environmental issues of increasing Air pollution

Ever growing demands of Public Transportation services.

Solutions
For Environment safety, only the CNG equipped buses were allowed to ply

over the roads of Delhi.

To minimize the losses, work on reducing the cost of operations, rather

than increasing the price.

Government can introduce new fleet of buses which already has CNG kits

to reduce its upgrade costs.

Increase in the number of routes which eases the round trips made by the

buses now.
Increase in the frequency of the buses which attracts most of the

commuters.

Now some questions:

Question #1: Under which market condition

does Delhi Transportation Corporation operates?

Answer:
I.

II.

III.

Although DTC operates under a favorable and supportive

market condition; because of high demand and no other
strong competitor in ground, but still they are into losses.
Looking from this perspective, case shows that Delhi
Transportation Corporation operates under monopoly
market condition in CNG-powered bus segment in Delhi.
Inspite of the huge competition from auto Rickshaws, taxi
operators and metro; but in bus transportation, it is the only
major player who operates from last 6 decades in industry

 Question #2: Do you agree with the argument

of DTC officials that there is a severe shortage

of buses in Delhi?
Answer:
I.
II.

YES!
As per the SUPREME COURT decision only CNG bus
will run on the Delhi roads ,which effect in shortage of
buses only 11000 bus are their .

 Question #3: Do you agree with the argument that in

given situation, DTC is earning losses? What is the total

value of losses?
Answer:
YES! Because the revenue that they generate is far less than the cost
that
they incur.
OR
Because they are not able meet the breakeven point.
In breakeven point, Total Revenue is equal to Total Cost.
TR=TC, and as per the case, P*Q=480+3Q
In Rs. 6, we have the demand of 5.6 million.
Q=8-0.4P
Q=8-0.4*6=5.6 million
Putting these values in formula:
TR= 6*5600000= Rs. 33600000
And Total cost:
TC= 48000000 + 3*5600000 = Rs. 64800000
Total value of Losses = TC TR = 31200000

 Question #4: If the DTC decides to increase the

average bus fare to Rs. 10, what will the percentage

fall in excess demand be? Will there still be excess
demand for buses?
Answer:
As per the calculations, if the price is Rs. 6, demand will be:
Q=8-0.4P
Q=8-0.4*6= 5.6 million
And now, if prices increase to Rs. 10; then:
Q=8-0.4P
Q=8-0.4*10= 4 million
Decrease in demand = 5600000-4000000=16000000
Percentage decrease = 1600000/5600000*100=28.57%
And yes, there will be still excess demand of buses, since even with
the Rs. 10, the demand functions is neither hugely affected, nor
changed to negative.

Question #5: If the bus fare increase to Rs. 10, will the DTC stop

earning losses, if not, what will percentage fall in losses be?

Answer: No!

Losses will be reduced but breakeven point cant be reached, so losses will
still be there.
With Rs. 6, the total revenue(TR=P*Q) is 6*5600000= 33600000
With Rs. 10, it is: TR= 10*4000000= 40000000
thus,losses reduced by Rs. 6400000.
Percentage fall in loss:
Breakeven point = Rs. 64800000
Revenue at Rs. 6 = 33600000
Revnue at Rs. 10 = 40000000
Losses = Breakeven Point Revenue
Losses for Rs. 6 = 64800000 33600000 = 31200000
=>31200000/64800000*100 = 48.14 %
Losses for Rs. 10 = 64800000 40000000 = 24800000
=>24800000/64800000*100 = 38.27 %
So there will be 9.87% (48.14 %-38.27 %) fall in losses.

Question #6: Given the above situation,

what is the optimal price at which DTC will

break even?
Answer:
As per the situation in case, where the demand is
shown as 4.8 million, they have to charge Rs. 13.
TR=TC
P*Q=48+3Q
P*4800000 = 48000000 + 3* 4800000
P*4800000 = 62400000
P= 62400000/4800000 = Rs. 13

 Question #7: With a hike in the bus fare, if

there is actually a substantial fall in the

demand for buses, how will it affect the market
condition under which the DTC operates?
Answer:
It shows higher elasticity of demand, and in this

condition, DTC doesnt have any option to play with

prices.
The only option they have is to work on reducing the
cost of operations, rather than increasing the price.