The study on “State Policies Affecting Competition: Passenger Road Transportation Sector ” was commissioned to National Council of Applied Economic Research (NCAER). The main objective of the study was to assess the state of competition in passenger transportation and to suggest measures to enhance competition and better services to the passengers. The study proposed a model for development of the sector.It recommends a major departure from the prevailing system by the introduction of competitive tendering for services on commercial routs. For non-commercial routes, it suggests a competitive subsidy bid process. Monitoring of the franchises will rest with the regulatory authority.