Replacing 2,500 old buses within a year at a cost of Rs 250 crore (Rs 2.5 billion), separation of city services from the rest, tax and octroi concessions and curbing of clandestine services by private operators have been suggested as part of the financial and operational recast plan put forward for the Maharashtra State Road Transport Corporation.
The Maharashtra Board for Restructuring State Enterprises also recommends converting the state government's interest-bearing capital in MSRTC into equity capital.
Replicating the success of Karnataka and Tamil Nadu, which divided their transport corporations into smaller entities, has also been mooted.
The MBRSE said, "Taking into consideration that the MSRTC is not in a position to pay to the state government interest on capital and that the MSRTC will also take a long time to return to profitability, we recommend that the interest-bearing capital, which the MSRTC has been authorised to keep out of its passenger tax collections, may be converted into equity capital.
"This step is also necessary in view of the fact that the present equity capital has been wiped out because of losses. Thus during the period of financial recovery, interest cost of MSRTC would go down."
MBRSE's final order on the revival plan states that: "While MSRTC is required to pay 40 per cent sales tax on high speed diesel, in other states, they are paying a concessional sales tax on diesel.
"In 2001-2002, MSRTC purchased diesel costing Rs 765 crore (Rs 7.65 billion), inclusive of sales tax of Rs 218 crore (Rs 2.18 billion). It is recommended that the payment of this cess be waived for one full year and the funds so saved be made available to MSRTC as equity capital for replacement of old vehicles.
"Alternatively, the state government should bring tax on HSD for MSRTC to 22.5 per cent as in Karnataka from the present level of 40 per cent and direct the MSRTC to use the savings exclusively for replacement of old buses."
Taking a serious note of the precarious financial situation of MSRTC, the board said the corporation's net worth as on March 31, 2002, showed that reserves and equity contributed by owners in all forms had been wiped out along with a part of the insurance fund as well in order to meet the accumulated losses.
The board recommended that the government curb clandestine services by private operators. The government should enhance penalties, strictly implement contract carriage regulations and put in place an independent machinery to implement the policy, the MBRSE order said.
"During January 9 to May 20, 2002, when the motor vehicles department and police undertook a special drive to check clandestine operations, MSRTC operated 62.88 lakh (^.28 million) additional kilometers and its revenue increased by Rs 62.41 crore (Rs 6.24 million). The earnings per km also improved by 80.50 paise."
The board recommended separation of MSRTC city services from the rest of the services.
"If such city service operations, which constitute only four to five per cent of the total effective kilometers operated by the MSRTC, are loss making and if the state government and local municipal authorities still want MSRTC to run these services, then they must change their policy in regard to taxes, both state and local on motor vehicles and HSD used for city services, and on city service fares.
"We recommend that the local authorities exempt MSRTC from payment of octroi and municipal taxes for the material brought for maintaining these city service operations," the board said.
In 2001-02, MSRTC incurred a loss of Rs 16.93 crore (Rs 1.69 million) on account of city service operations and paid Rs 6.71 crore (Rs 67.1 million) as passenger tax.
Commenting on the steps taken by the Karnataka government in reorganising its transport corporation in 1997-2000, MBRSE said, "The Karnataka government took a decision to form four separate transport corporations -- three on the basis of geographical areas and one for Bangalore city operations -- after reserving certain functions with the residual KSRTC."
The order said Karnataka and Tamil Nadu had been able to successfully restructure their transport corporations through the creation of smaller entities and concessions in state and local taxes.
In 1974-75, the corporation had 18 divisions, a central workshop, 141 depots, 6,357 buses and 49, 000 employees. Currently, it has 30 divisions, six regions, three central workshops, 243 depots, 16,900 buses and 1.12 lakh (11.2 million) employees.
"Thus, between 1974-75 and now, the size of the MSRTC has more than doubled. Though MSRTC is not in favour of any change in the organisational structure, the increase in the size of MSRTC no doubt calls for a major structural and organisational change for better management," it said.
The road ahead
- Replacement of 2,500 old buses within a year at a cost of Rs 250 crore (Rs 2.5 billion) suggested
- Separation of city services from the rest and tax and octroi concessions also sought
- Curbing of clandestine services by private operators needs to be strengthened
- Recast panel has suggested converting state government's interest-bearing capital in the road transport corporation into equity capital
