From the comments:
Perakath exposed my ignorance and made some points worth digging out of the comment pages --
Every [Blueline] bus has the owner's name and address painted in small letters near the rear "door", or lack thereof.
I believe the police routinely impound 'killer' bluelines and cancel their licences. But the problem with the individual ownership system is that it's very easy for another relative to step in and take over the licence. The government's plan to introduce corporate fleet ownership and consequent accountability is an attempt to overcome this. And it's a plan that might work. If a Tata group company were running the buses, say, I'm sure they'd train their drivers well and remove incentives to speed.
You're right about how it should be easy to phase out Bluelines, though. They could do it in one swoop, if they wanted to. Further, if the DTC could sort out its issues and actually operate with a view to making a profit, it's losing crores of rupees in opportunity costs every month. Why have Bluelines at all? A monopolistic DTC would generate far more revenue for itself, if they introduced enough buses to satisfy the demand. Chennai is an example of how it can work-- there are no private stage carriage operators in Madras.