The Finance Minister of Kerala, Mr. Thomas Issac has provided a special package to the perpetually Loss making KSRTC, in a bid to revive it
Will the recent package announced in the Kerala State Budget for the Kerala State Road Transport Corporation save it from financial disaster?
The KSRTC has been given a special package of about ₹3,000 crores to revamp itself and at the very least Break-even in the 2017-18 Kerala Budget. This, according to the Finance minister is on the basis of the Susheel Khanna report, whose specifics have not been released to the public as of now. The suggestions of the report (that are in the public arena) are what standard issue review of Transport PSUs might show: Increase efficiency, Reduce break down rates, better utilization of fleets etc.
In the Budget speech, Mr.Issac, mooted the “through restructuring and induction of professional experts” of the KSRTC. While this seems to be a practical and reasonable step for the survival of entity, one might doubt the practicality of such a change, considering that removing mid-level and low level employees is fraught with risk. It is a well-known fact that transfers/postings in PSUs, including the KSRTC are on the basis of political partisanship rather than merit. In such an atmosphere, one would only classify Mr.Issac’s words as rhetoric. The Induction of professional experts in the company in the top-level maybe viable, but nothing more than that. (One would ask why the professional experts are only being inducted now, but such a question loses relevance in the current context.)
Table 1, Source: Kerala Economic Review, 2016.
The other parameters that Mr.Issac moots improvement in – Utilization of fleets, average kilometres per bus, mileage are achievable in the context that the money is invested in replacing and renewing 2/5ths of the Fleet ( 2415 buses, as shown in Table 1. ) who are an operational drag on the Corporation, with increased breakdown rates and lower mileage. As noted in the Economic review 2016 by the Kerala State Planning Board, 12%of the fleet is under repair, and 25.9 % are over aged. The breakdown rates is 6 per lakh kilometres for the KSRTC, and less than one for the Karnataka State RTC. The KSRTC does not indeed, at the moment, even have a time management system. This serves to illustrate how bad the condition of the Corporation is.
The biggest problem that will be faced by the Government of Kerala will face in restructuring the Corporation will be bringing down the average employees per bus, which is currently 7.2, down to the national average of 5.2. This will entail the firing of 10,000 workers. Such a move is completely impractical in the political landscape of Kerala. The Trade Unions such as INTUC and CITU will never allow such a move. Besides, the employees themselves are bearing the direct blunt of the corporation’s failure: they are receiving only 75% of their monthly salary as of now, and there have been instances where the Corporation has been unable to pay any amount of salary due to its pending dues on some months. The KSRTC spends more than 50% of its earnings on salary dues – the dues amount roughly to ₹77 crores in a month, while the earnings by the corporation is ₹149 crores in a month. This means that the KSRTC is inherently unstable, and its continued existence is economically infeasible. The KSRTC suffers from accumulated liabilities of capital investment, dues to Oil Companies, Repair and maintenance expenses, and not to include the pension dues- which is ₹27 crores for the company, with the other half being given as “grant” by the State Government.
This has swirled the KSRTC into the massive debt trap that it currently suffers from. Mr. Issac envisions this package as a last attempt to save the company and (very hopefully) reach operational profit in 2017-18.
This seems very unlikely at the least.
There have been, however, improvements in the KSRTC’s financials. As per the Appendix provided by the Economic Review 2016, the earnings per bus has increased, and so has fleet utilisation (from 67% to 75% from 2009 to 2016), and other Indicators are also positive. But the other indicators are worrying- especially the Expenditure/Earnings columns, as well as the unsatisfactory marginal increase in Earnings per bus.
The earnings from a single bus has to support 7 employees of the corporation. This is far, far from the case. The Corporation has to exponentially increasing its earnings as well as shelve some of it concessions, operate purely on profitable routes. The marginal improvements listed above will not save KSRTC from ruin.
The KSRTC operates in almost 180 nationalised routes in the state, and earnings from these routes represent the majority of the corporations’ earnings. The LDF Government recently decided to limit the distance of private carriers within the state to 140 kms, in a bid to prop up the KSRTC – as it faced upwards of up to loss of ₹2 lakhs per day because of the private carriers. The State Government is essentially supporting an inefficient, perpetually loss making (public) corporation over private players. This move actively lobbied and supported by the Trade Unions, going on to illustrate the amount of influence they have. In this context, one wonders whether the luxury of double duty afforded to employees will change, either.
The Corporation, in a welcome move, is planning to shelve 1,819 routes that is loss-making. One wonders however, how such a huge number of services continued to remain on paper, regardless of the record loss that KSRTC has caused the exchequer. The only difference between the past two finance years of the company, as seen in Table 2, is that it reduced losses from ₹617 crores to ₹613 crores. (It seems unlikely then, that the Corporation is running only on a loss of ₹18 crores per month, as filed before the Supreme Court)
It is more than overdue to that KSRTC be restructured, and any government with any sense of fiscal responsibility would have done so, as has been argued earlier. But this is Kerala. And State Run PSUs exist to provide welfare employment, as that is its essential function. What Mr.Issac has awarded the KSRTC with seems to be foolish, brave and optimistic, but foolish. To take the KSRTC out of the woods, it is essential to not only have financial packages, but political will to stand up against Trade Unions. This, however, this Government will be unlikely to source.
To a day were “fiscal responsibility” and “Private” become acceptable words in Kerala, I await, as the state continues unbridled to financial disaster.