TITLE:
Efficiency and Effectiveness of State Transport Undertakings in India: A DEA Approach
AUTHORS:
Sanjay K. Singh, Amit P. Jha
KEYWORDS:
DEA, Efficiency, Effectiveness, Scale Elasticity, Indian STUs
JOURNAL NAME:
Theoretical Economics Letters,
Vol.7 No.6,
September
21,
2017
ABSTRACT: The Indian bus transport industry is dominated by
the publicly owned State Transport Undertakings (STUs). Most of the STUs have,
over the years, accumulated financial losses. However, since STUs offer their
services with a social aim, financial losses faced by them may not be bad per se. For publicly owned
organizations, efficiency and effectiveness are more important than mere
profitability. This paper attempts to measure the efficiency and effectiveness
of fifteen major STUs in India for the period 2003-04 to 2013-14 using Data
Envelopment Analysis (DEA). The paper also examines STUs’ scale elasticity and
its relationship with firm size. It is found that the STUs operating in the
state of West Bengal are not only the least efficient but also the least
effective whereas Andhra Pradesh state road transport corporation, which is the
largest bus transport operator in the world, is the most efficient and
effective operator. In general, there is a strong positive correlation between
STUs’ efficiency and their effectiveness. On the other hand, there is a
negative relationship between size of the STUs and returns to scale; large size
firms are showing decreasing returns to scale whereas small size ones are
operating on increasing returns to scale. Therefore, a size correction through
mergers, demergers or altering scale of operation, as the case may be, will be
economically prudent.