Road transport bodies in mess

When the debt to GDP ratio of a country approaches 100%, it spells disaster for its citizens. When payroll of any private sector service organisation nears 40% or a manufacturing company crosses 30% of its sales, it implies doom and gloom for its employees and management. Similarly, when payroll of a public sector undertaking (PSU) crosses 45% of its revenues, it is catastrophe for taxpayers and disaster for users of that service. No organisation can function effectively and efficiently with such a payroll burden and invariably leads to bankruptcy.

The Hindustan Machine Tools (HMT), the Indian Telephone Industries (ITI) and many Central government units were long supported by the taxpayers’ money before they eventually went under or privatised. Currently, telecom giants BSNL and MTNL are in a similar situation with a humongous payroll burden that will make loss making a permanent feature of these companies.

In order to increase efficiency of these companies, managements are offering voluntary retirement schemes for employees that will cost more than Rs 17,000 crore. It is a travesty that the taxpayers’ money is being wasted and continues to be squ-andered by the Centre on these poorly managed companies.

The state road transport corporations (SRTCs) will soon be in a similar situation causing a predicament for the state governments and all stakeholders in future. In Karnataka, the wages paid by the four SRTCs crossed 50% of their revenues after the recent revisions. This situation spells trouble for the taxpayers and a tragedy for the consumers. For the record, the four STRCs earn around Rs 7,800 crore, employ a little more than 1,20,000 employees, operate 23,000 buses, serve 1.25 crore people and have incurred a loss of about Rs 400 crore.

Both the management and the unions have been irresponsible in the run up to the recent strike. The management should have highlighted the poor financial performance of STRCs to the public to garner support against the strike. The Transport Department added fuel to the fire by providing four year figures that were questionable rather than stick to additional costs for a single year.

Moreover, top officials should have devised a plan to increase revenues or achieve cost savings before engaging with the unions. They were hindered by the past transport ministers’ decision of 10% wage hike which had set the bar for the current negotiation.

Employees are blaming the financial mess on corruption in top echelons. Employee unions’ talks with the management could not beg-in as they demanded a 35% incr-ease in wages. Unions were also under the wrong notion that SRTCs need not make profit si-nce they are providing essential services to the common people.

Indeed, in order to provide excellent public transport, the SRTCs have to periodically replace older buses and hence will need to fund their capital expenditures through generated profits. The unions were also under the impression that the state government will keep the financial taps open to perennially fund a bloated payroll.

Ticket prices
And drawing comparisons with neighbouring states’ SRTCs was just a red-herring. Any meaningful evaluation had to be accompanied by contrasting ticket prices too. Wages of Andhra Pr-adesh and Telangana road tra-nsport employees are better since ticket prices are higher by more than 20% while in Tamil Nadu and Kerala, wages are lower because of the much lower ticket prices. The more appr-opriate comparison is to cont-rast SRTC employees with those of similar skill sets in Karnataka.

Going forward, there is a huge challenge facing both the management and employee un-ions to improve the financial co-ndition of SRTCs. With an outsized payroll burden, the state government will not only need to support the losses of SRTCs but will also need to periodically fund capital expenditures, a burden that will be borne by the common people in the form of higher ticket prices and taxpayers in form of higher taxes. Hence, the management, along with state government, must begin to address the issues plaguing the SRTCs at the earliest.

First, the all-important issue of corruption at STRCs must be addressed both in procurement and recruitment. Second, the state government must be prepared to impose a surcharge on private vehicle owners for the sole purpose of subsidising public transport and must transfer all collections to SRTCs without fail (a 15% surcharge will fetch Rs 750 crore).

Third, the management must draw up plans to retire old employees, replace diesel guzzling old buses with fuel-efficient newer vehicles and other cost saving measures including keeping the option of combining the three SRTC mofussil bus services into a single corporation. Finally, the unions must realise that they are doing a public service and cannot demand ridiculous payroll increases in future negotiations.

Ultimately, the onus of providing quality transport services rests neither with SRTCs’ mana-gements nor with employee un-ions. It is solely the responsibility of the state government. It must act quickly to restore the financial status of the SRTCs before the common man begins to suffer and taxpayers start to revolt.
(The writer is a Bengaluru-based money manager)