Standing Room Only
Answer: According to both common sense and bus company rules that passenger has no right to inconvenience you or any of the other standing passengers by using a sitting place for his package. You may be tempted to make some cynical remark like asking him if he paid for two seats (which may still not justify using one for a package) but restrain yourself from doing so.
The passenger in question most likely took that extra seat for his package when the bus still had many empty seats and may not be aware that he is now the cause of your discomfort. A polite request that he make way for you by placing his package on his lap or on the floor will almost always elicit an apology and effect a quick solution to your problem.