In 1873, the Bombay Tramway Company Limited was given the licence to operate trams in the city. The Bombay Municipal Corporation (BMC) was given the right to purchase the company after first twenty years or after every seven years thereafter. On 9 May 1874, the company started with horse-drawn tram of two kinds on road — those drawn by one horse and those drawn by two. In 1905, the Bombay Electric Supply & Tramways Company Limited (B.E.S. & T Co. Ltd.) bought the Bombay Tramway Company Limited. The first electrically operated tram-car appeared on Mumbai’s roads in 1907. Unlike the horse-drawn tram, the electric tram drew praise from public for its comfort and low fare. To handle rush-hour traffic double-decker trams were introduced on Mumbai’s roads in September 1920.
In 1913 there was debate in the Mumbai municipality whether to introduce motor buses to supplement the tramway service in the city. The main factor against its introduction was the high accident rate for a similar service in London. On 15 July 1926, 24 single-deck buses started operating on three routes. Despite stiff opposition and protests by taxi-drivers, the service ran without a hitch, transporting six lakh (600,000) passengers by the end of that year.
One of the terms of the agreement of 7 August 1905 between the Bombay Municipal Corporation and the Bombay Electric Supply & Tramways Company Limited (B.E.S.&T. Company) gave the Bombay Municipality the right to buy the company at the end of forty-two years. It was also laid down that if the right was exercised on 7 August 1947, the municipality would have to pay forty lakh rupees as goodwill, in addition to the agreed price of the company’s assets. On 7 August 1947, the Municipal Corporation took over the B.E.S.&T. Company Ltd and it was municipalised to form the Bombay Electric Supply and Transport Undertaking which was again renamed to Brihanmumbai Electric Supply and Transport Undertaking (B.E.S.&T Undertaking) in 1995. BEST celebrates 7 August annually as “BEST Day”.