Small is Efficient: A Frontier Approach to Cost Inefficiencies in Indian State Road Transport Undertakings

27 Pages Posted: 22 Jun 2000

See all articles by Raghbendra Jha

Raghbendra Jha

Australian National University (ANU) - Australia South Asia Research Centre (ASARC); Crawford School of Public Policy

Sanjay Kumar Singh

Indian Institute of Management Lucknow

Date Written: March 2000

Abstract

This paper attempts to measure cost-inefficiency of nine major Indian State Road Transport Undertakings (STU) for the period 1983-84 to 1996-97 in a manner that allows this inefficiency to vary both across time as well as across STUs. We found that given the size distribution of the STUs and relevant measures of their working conditions, the potential for reduction in cost inefficiency is very high. Further, there is evidence of wide disparity among STUs' inefficiency levels, through out the sample period. On an average smaller STUs appear to be more efficient than their larger counterparts in Indian bus transport industry. By and large, there has been stability in the cost-inefficiency ranks across STUs. The average cost curve is U-shaped, i.e., economies of scale are present up to a certain level of production and the diseconomies of scale set in. A policy that aims to change the size distribution of the STUs will help in increasing the efficiency of the Indian bus transport industry.

JEL Classification: L32, L92

Suggested Citation

Jha, Raghbendra and Singh, Sanjay Kumar, Small is Efficient: A Frontier Approach to Cost Inefficiencies in Indian State Road Transport Undertakings (March 2000). Available at SSRN: https://ssrn.com/abstract=228829 or http://dx.doi.org/10.2139/ssrn.228829

Raghbendra Jha (Contact Author)

Australian National University (ANU) - Australia South Asia Research Centre (ASARC) ( email )

Canberra, Australian Capital Territory 0200
Australia
+61 2 6125 2683 (Phone)
+61 2 6125 0443 (Fax)

HOME PAGE: http://crawford.anu.edu.au/crawford_people/content/staff/acde/rjha.php

Crawford School of Public Policy

ANU College of Asia and the Pacific
J.G. Crawford Building, #132, Lennox Crossing
Canberra, Australian Capital Territory 0200
Australia

Sanjay Kumar Singh

Indian Institute of Management Lucknow ( email )

Lucknow, 226013
India
+91 522 273 6637 (Phone)
+91 522 273 4005 (Fax)

HOME PAGE: http://ganga.iiml.ac.in/~sanjay/

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