Improve physical and operational efficiencies

Metropolitan Road Transport Undertakings (MRTUs) are the dominant players in the people movement and in some cities, they are the lifeline.

There are altogether eight MRTUs and about 55 city road transport units. The institutional set-up of these vary but the primary objective is to serve residents in a cost-effective and safe manner.

Barring a handful, all are making losses, or just about managing to avoid the red lines. Nearly 9 out of 10 of them – 87% to be exact – were bleeding in fiscal 2016. Some losses are so significant that they are biting the state exchequer.

Data and statistics for this segment are very hard to come by and generally not available in the public domain. 

A survey was recently conducted jointly by the Shakthi Foundation and the Delhi Integrated Multi-Modal Transit System. The key issues at the ground level for these road units ranged from outdated/inadequate depot infrastructure for maintenance of bus fleet and practices followed thereof. Other issues were lack of scientific methodology to create/modify routes, revenue collection and reconciliation did manually with an element of leakage on the part of conductors as well as passengers, an ageing fleet and the corresponding impact on maintenance cost. Low adoption of technology in bus operations management need for capacity building and adoption of best practices etc.

The profitability of the RTUs is determined by physical (and operational) efficiency parameters such as fleet vintage, fleet utilisation, vehicle productivity, occupancy ratio, staff productivity, and pricing power.

Here’s how the RTUs fared on each of these parameters: 

1) Age of vehicles/ fleet vintage: Ensuring an optimal balance between new and old buses in the fleet – and between capital and operational expenditure – is important. The better-performing RTUs have an average fleet vintage of four-six years compared with 8-10 years for the loss-making ones. The fleet age also has an impact on fuel and lubricant cost, which is over 40% of the operational expenditure. It is observed that the profitable entities have 20-25% lower fuel bill.

2) Vehicle productivity or number of km run: On an average, a public bus travels 305 km a day, at 70% occupancy. By comparison, buses of private companies log 460 km a day. Also, in metropolitan STU buses, this figure is far lower because of ongoing infrastructure projects and heavy traffic, especially during peak hours. 

3) Staff-to-bus ratio: For the profit-making undertakings, the ratio is three-four people per bus, around half that of the loss-making ones. 

4) Occupancy ratio: Although a high occupancy ratio does not necessarily translate to better performance, the ones with significant losses have poor occupancy ratios, at less than 50%.

5) Appropriate pricing: It is imperative that the units are given a free hand to price the tickets and if needed follow a dynamic pricing system. The three main operational costs pertain to staff, fuel and lubricants. In the recent past, there has been a significant increase in the fuel cost, with little pass through. 

The writer is director and practice lead, Transport and Logistics at Crisil Infrastructure Advisory