Tamil Nadu’s Move Towards Private Bus and Minibus Sparks Privatisation Fears Among TNSTC Employees

When the Tamil Nadu government announced it would operate private buses on a contract basis alongside State-run buses during Deepavali 2024, the public cheered the move, welcoming the effort to manage the holiday rush and ensure smoother travel. But for people like Jagadish*, a bus conductor with the Tamil Nadu State Transport Corporation (TNSTC) with 18 years of service to boot, it was a taste of things to come—and he was right.

“Government officials did not value State buses. They made sure private buses were full while some State buses ran with empty seats,” Jagadish told Frontline. During Deepavali 2024, 430 private buses operated on contract—327 from Chennai and 103 from other parts of the State.

Jagadish pointed out that workers on these buses lacked fixed employment and social security benefits, warning that the temporary arrangement could eventually create an employment crisis for government workers. However, calling the Deepavali experiment “successful,” the government used the same approach for this year’s Pongal festival: it increased contracted buses to 953—498 from Chennai and 455 from elsewhere.

Although fares remain the same for both private and State-run buses, transport workers remain wary of the long-term implications of the shift. Opposition parties—including the Pattali Makkal Katchi—have also criticised the high operational cost of Rs.51.25 a km for contracted private buses. Unions, on their part, have opposed running private buses on nationalised routes.

Talking to Frontline, K. Phanindra Reddy, Additional Chief Secretary to the Government, said: “When a State Transport Corporation runs a bus, it costs at least Rs.60 per km. With spare buses, the cost rises to Rs.80 per km. Previously, people waited until 4 am for buses. Last Deepavali and this Pongal [2025], we cleared the crowd by 1 am.”

State Transport Minister S.S. Sivasankar told Frontline that until last year, when unexpected crowds arrived, the government used Metropolitan Transport Corporation (MTC) buses and buses from the Viluppuram and Tiruchirapalli corporations for special services—a practice that hurt the smooth operation of those corporations. Hiring private buses on contract, he said, is an “alternative solution to the issue”.

Transport workers argued there is another reason behind the move. An anonymous MTC union leader told Frontline: “When Koyambedu was the Bus Terminus in Chennai, many depots from the city could quickly divert MTC buses in emergencies. With the terminus moving to Kilambakkam [outside the city], it takes much longer for them to arrive.” He added that with public dissatisfaction over the new terminus already evident, the government used Deepavali as an opportunity to introduce private buses on contract.

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A State Transport Undertaking (STU) driver from Tiruchendur explained that during festivals like “Thai Poosam” or in crowded areas like Palani, corporation buses from surrounding districts will be redirected to meet special needs. “The transport corporation has nearly 52 years of experience managing festival crowds,” he said.

Government officials told Frontline that plans are in place to hire private buses on contract for special occasions in the future.

New mini bus and premium bus schemes

The New Comprehensive Mini Bus Scheme, 2024, has further fuelled privatisation concerns by permitting private operators to run minibuses across the State. Minibuses were first introduced in Tamil Nadu in 1997 by the then DMK government.

Tamil Nadu currently has 20,260 STU buses, 7,764 private buses, and 2,857 minibuses—a total of 30,881 State carriage buses.

Under the new scheme, minibuses must cover at least 65 per cent of their total route as unserved areas. The maximum route length has been revised to 25 km—8 km served and 17 km unserved—up from 20 km (with 4 km served). A served route is one where a stage carrier or minibus operates continuously along the permitted route with enough trips to meet public needs. Eight areas in Chennai, including Tiruvottriyur, Madhavaram, Alandur, Perungudi, and Sholinganallur, are designated as unserved for private minibus operations.

When the proposal emerged in 2024, the MTC objected. Its then Chairman, Alby John Varghese, argued that these areas were not truly unserved, given MTC’s operation of 1,700 buses daily covering these areas. He also questioned setting the maximum distance at 25 km for a city like Chennai, which already has adequate public transport.

Dhanraj*, an MTC worker with over 25 years of service, warned: “If private minibuses operate on MTC routes, people might prefer them when waiting times are longer, leading to greater losses for the corporation.” He noted that while Branch Managers already question workers about declining fare collections—attributed partly to the free bus scheme for women—the introduction of private minibuses will lead to discontinuation of unprofitable MTC routes.

Currently, MTC buses serve an average of 3.189 million passengers daily (data as of December 31, 2024) in Chennai city.

Minister Sivasankar added: “Some Chennai routes are too narrow for normal buses. We will identify these and operate minibuses there. Private minibuses will run only on unserved routes.” Transport unions are also against letting regional transport authorities to issue permits for mini bus operators.

Arumugam Ramalingam, general secretary of the Tamil Nadu State Transport Corporations Employees Federation – All India Trade Union Congress (or AITUC, affiliated to the National Federation of Indian Road Transport Workers), remarked: “Private operators will not run buses if expenditure exceeds revenue. Staff will lack job security, and passengers cannot complain if buses do not run on essential routes.”

Despite these concerns, the State government pressed ahead. Soon after the minibus scheme, the government announced premium bus services in Chennai to reduce reliance on personal vehicles. These premium buses—equipped with AC, Wi-Fi, GPS, CCTV, panic buttons, and a 2×2 seating arrangement—will offer an app-based service with guaranteed seating. A government order (GO) dated September 25, 2024, endorsed a “hiring of service provider” model, noting that the provider would operate under STU oversight and that MTC would earn revenue through a revenue-sharing model.

Union leaders decried the move. “Hiring private service providers for mini and premium buses weakens our transport corporations and their control,” they said. Kishorekumar Suryaprakash, who has tracked the public transport system in the State closely and who is currently pursuing his doctorate in economics at the University of Massachusetts Amherst, observed: “This should not be seen in isolation but as part of efforts by both DMK and AIADMK governments over the last two decades to privatise public services.” He cited the privatisation of solid waste management in Chennai as the latest example, adding: “The Tamil Nadu government is not an exception. This is the order of the neoliberal regime across the country.”

Parties change, plans continue

In 2002, one of the earliest privatisation efforts took place when the AIADMK government, led by Chief Minister J. Jayalalithaa, proposed downsizing 21 State-run transport corporations, endangering thousands of jobs. In the 2002–03 budget, Finance Minister C. Ponnaiyan talked about the “poor financial position of the State Transport Undertakings (STUs) in Tamil Nadu” and declared: “This Government has decided to phase in the privatisation of select routes, services, and operations under STU control.” But the plan did not materialise.

In its June 18, 2004, article “Shock and Somersault,” Frontline reported that the ultimate aim was to denationalise a public transport system once hailed as among the best in the country.

Assessing these efforts, K. Arumuga Nainar, general secretary of the All India Road Transport Workers’ Federation (AIRTWF-Centre of Indian Trade Unions), told Frontline: “The AIADMK again made efforts to privatise the sector in 2018 when it was in power.” Through a GO in October 2018, the AIADMK government set norms for the number of workers and buses in transport corporations. Claiming that 71 per cent of revenue went towards expenditure on manpower, the directive said that regular bus drivers should not perform non-essential services; outsourced drivers could handle them instead. Yet, the AIADMK government did not implement the directive till its term ended.

The DMK won the 2021 Assembly election and assumed power after a 10-year hiatus. “In 2022, the DMK government took the first step to outsource work based on the GO. It was the starting point,” Nainar said.

Later, in the Transport Department’s Policy Note 2023–2024, the DMK government introduced the Gross Cost Contract (GCC) model, stating: “Public Private Partnerships (PPP) have emerged as a way for State Road Transport Corporations that lack financial resources to introduce or scale bus services.” The note cited reduced capital expenditure for STUs in procuring buses as the “main advantage” of GCC. Under this model, the STU manages the transport network and revenue collection, while a private operator procures, operates, and maintains the buses. The corporation compensates the operator with fixed fares throughout the contract.

Reddy explained: “More than 500 e-buses will arrive in April–May, including 100–200 AC buses. This is the first rollout under the GCC. GCC is preferred since e-bus technology is not yet mature, and our staff—trained only on IC engine buses—may struggle with maintenance.” Private operators supplying e-bus drivers will not need to comply with the State’s reservation policies.

Nainar added: “The GCC model must be read along with Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME-India).” The Union government launched the flagship electric mobility scheme in 2015 in two phases—FAME 1 and FAME 2—to promote electric vehicle adoption through buyer and manufacturer incentives.

“According to the scheme, the Centre directed State governments not to buy e-buses directly but to rent them from private operators,” he said.

To support FAME, the AIADMK government amended the Tamil Nadu Motor Vehicle Rules, 1989, in August 2020 by issuing a GO introducing Rule 288(A), which allows private buses on nationalised routes. It stated: “If a State Transport Undertaking cannot procure its own vehicle in an emergency to run service on a nationalised route, it may hire a private vehicle upon payment of fixed charges and with a permit.”

Issue of vacancies

According to union leaders, when the DMK came to power in 2021, transport corporations faced excess manpower—a situation they attributed to former AIADMK Transport Minister Senthil Balaji’s tenure between 2011 and 2016. In June 2023, Balaji, then a DMK Minister, was arrested by the Enforcement Directorate in a “cash-for-jobs racket” case allegedly involving the Transport Department during his AIADMK days. The ED said he had carried out illegal recruitments for posts like drivers, conductors, and junior assistants, taking kickbacks paid by candidates. “There were no appointments after 2013,” claimed one union leader.

In May 2020, the Tamil Nadu government raised the retirement age from 58 to 59 after the COVID-19 outbreak and increased it again to 60 a year later. The first retirements under the new age occurred in May 2022. Nainar said these bulk retirements created vacancies for over 17,700 posts, with an additional 11,200 vacancies arising as reserve crew moved into regular posts. AIRTWF claims that the total vacancies now stand at 30,000.

Reddy noted: “There is a gap between vacancies and recruitment. We are not disputing the numbers. A total of 1,25,000 employees work now, and between 1,08,000 and 1,10,000 are on hand.”

Unions added that staff shortages prevent buses from operating at full capacity, leaving many parked in workshops. Ramalingam stated: “About 1,000 candidates graduate in driver training every year from the Institute of Road Transport. Their futures will be secure if placed in permanent jobs. Recruiting on a contract basis will only allow middlemen to profit.”

Fall in ridership

Presenting the Revised Budget for 2021–22, the then Finance Minister P.T.R. Palanivel Thiaga Rajan noted, “Daily ridership on government buses declined from 20.836 million in 2010–11 to 13.142 million in 2019–20, even before the COVID-19 pandemic, despite fares on both town and mofussil services being the lowest among neighbouring States.” Today, ridership stands at 17.6 million (per the 2024–25 Policy Note). In the same speech, he added, “Clearly, much ails the State Transport Undertakings, including an overaged fleet and very high overhead costs.”

Despite recognising these issues, unions say the DMK government has done little to address them in the past four years.

According to a 1991 GO, Express buses were replaced after 3 years or 7,00,000 km—whichever came first—while buses of other STUs were replaced after 6 years or 7,00,000 km. In 2021, new norms were announced: Express buses should be replaced after 7 years or 1.2 million km, and other STU buses after 9 years or 1.2 million km, whichever comes first.

Nainar lamented: “We have an approximate 21,000 STU buses now. Under the new norms, 3,000 buses should be replaced each year. Four years into the DMK term, 12,000 new buses should have been introduced, but fewer than 3,000 have been purchased. Aged buses form the majority, and spare buses are mostly old. The government cannot run special services with these buses.” An MTC driver said this directly contributed to declining ridership.

Dismal allocation

The Comptroller and Auditor General (CAG) of India, in its December 2024 report based on the compliance audit of eight STUs, reported continuous losses from 2017-18 to 2021-22, with an accumulated loss of Rs.48,478 crore. The fleet size had also reduced from 22,517 buses to 20,304. According to Reddy, the losses now stood at Rs.70,000 crore.

Ramalingam said that in 2022, the government formed a committee to study the viability gap between expenditure and revenue, but it failed to implement its findings. The viability gap calculation includes parameters such as earnings per kilometre, kilometres per litre, and variable costs (including wear and tear). Nainar noted, “All corporations have reached the maximum limits on these parameters. The daily revenue–expenditure gap stands at Rs.16 crore (2023 calculations). The corporations demanded roughly Rs.500 crore per month.” Reddy acknowledged that the study is complete and under government review. “It is highly necessary,” he added.

DA and the old pension promise

On February 13, a Statewide protest organised by the CITU and AITUC unions pressed for an increase in dearness allowance, filling up 30,000 vacancies, and implementing the Old Pension Scheme, among other demands. Protesters also opposed the government’s move to operate private minibuses and contract-hire private buses during festivals.

In its 2021 manifesto, the DMK had promised to implement the Old Pension Scheme.

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The AIRTWF alleged that due to loans taken by the transport department, Rs.12 of every Rs.100 earned goes toward interest payments. “The government does not compensate for the losses incurred by the transport corporations, leaving them in a financial crunch,” they said. Pension liabilities are discharged from the interest on the corpus in the pension trust—a corpus funded by worker contributions. At the protest, unions charged that instead of depositing workers’ money (over Rs.15,000 crore) into the trust, the government diverted it to operational costs.

Nainar added: “Since March 2023, Rs.3,500 crore earmarked for workers’ retirement benefits has not been paid. The dearness allowance has not been revised in nine years.” The Madurai Bench of the Madras High Court, in its September 10, 2024 judgment—citing Rule 20A of the Tamil Nadu State Transport Corporation Employees Pension Fund Trust Rules—stated, “In addition to the basic pension, pensioners are eligible for a nominal dearness allowance at rates determined by the Government of Tamil Nadu.” Minister Sivasankar told Frontline: “The AIADMK government stopped DA enhancements for pensioners in 2015. It’s difficult to pay all arrears at once. We will do so when our finances stabilise.”

Retired workers and unions continue to intensify their protests and hold discussions with the government. They argue that privatisation efforts and non-payment of retirement benefits expose deep issues in transport corporation management—issues that could erode the public transport system’s robustness.