Sydney's private bus contractors are earning bonuses by cancelling thousands of services to meet "on time" targets, the New South Wales government says.
The revelation comes as the state's new Transport Minister Jo Haylen said she would struggle to end bus privatisation, given contracts had been locked in for up to 10 years.
The Labor government said more than a dozen bus companies, including Transdev John Holland which operates in Sydney's east, were being paid incentives to keep the city's bus services on time.
But services that were cancelled did not count as "late", except if they surpassed a certain number.
"Many passengers have been left on the side of the road waiting for a bus that never turns up and yet the private operator is not penalised for cancelling that bus," Ms Haylen said.
"If you look at the chart of bus performance over the last couple of years, on-time running has broadly stayed fairly consistent but there has been a dramatic increase in the cancellation of buses."
Ms Haylen said in August last year alone, 28,000 services were cancelled.
"Assuming each cancelled bus would have been only half full, that is more than a million people abandoned at bus stops in a single month," she said.
'Limited' options for renegotiating the contracts
Labor opposed the former Coalition government's privatisation of bus services, but Ms Haylen said it cannot be easily undone.
"Many of these contracts are many years way, in fact many of them up to 10 years in their length," she said.
"So the options available to us are limited."
A NSW Legislative Council committee last year released the results of an inquiry which recommended rolling back the privatisation of bus services, but the then-government called it a "political document".
A spokeswoman from Transport for NSW said details of the contracts between private bus operators and government were commercial in-confidence.
"Operators are subject to key performance indicators, including cancelled trips, on-time running, and customer satisfaction, which incur financial penalties," she said.
"Since late last year, several operators launched adjusted timetables to deal with the unprecedented Australia-wide bus driver shortage.
"NSW in particular is severely affected with hundreds of vacancies in the industry."
Last month, there were more than 500 bus driver vacancies across Sydney for a workforce of about 7,000.
In January, Transport for NSW announced a reduced bus timetable due to a driver shortage, with no date set for when services would return to normal levels.
Transdev John Holland and Keolis Downer, which operates on the Northern Beaches and Lower North Shore, have declined to comment.
