134

CHAPTER V

FINANCIAL PERFORMANCE OF THE KSRTC

A study of the financial performance of any

organisation reveals as to whether the organisation is run

on 'business principles', or not. The economic viability of

any organisation owes much of its crededentials to its

financial performance. The financial performance is

generally judged in terms of profits, i.e., the net margin

between revenues and costs. Normally, profitability is

considered as the measuring rod of efficiency. Higher the

profitability, higher is the efficiency of the organisation.

But, a public sector service undertaking like the KSRTC is

not meant to fulfil only economic objecives, but it is also

obliged to attain certain social objectives. Attainment of

these social objectives has a direct bearing on the financial

performance of the Corporation. Hence, an attempt is made

here to assess the financial performance of the KSRTC and to

show how far it is able to work in consonance with 'business

principles *.

As profit is the difference between total revenues

and total costs of any organisation, it is necessary to

analyse the component parts of revenues and costs. Total

 135

revenue consists of operating revenue and non-operating

revenue. In the case of the KSRTC, operating revenue refers

to the amount realised by the sale of services which is

represented by its regular operations^- Operating revenue is further

divided into 'revenue from passengers' and 'revenue from

other sources'. Other sources include items like Contract

Service, Passenger Luggages, Percel Services etc. v Non­

operating revenue consists of those revenue receipts which

do not arise out of the regular operations of the

Corporation. It includes items like receipts emerging out

of sale of scrap, advertising etc.

Similarly, operating and non-operating costs make up

for the total costs of the concern. Operating costs include

various expenses incurred on conducting the regular

operations of the Corporation. They comprise of :

1. Personnel Cost 2

2. Fuel and Oil Cost

3. Oth'er Material Cost^

4
4. . Tax Cost

5. Insurance and Depreciation Cost

Miscellaneous Cost^
6.
 136

The main item of non-operating cost of the KSRTC is

interest paid on capital contributions and other interest

payments. This is included under the non-operating category

as suggested by experts. Guthmann^, for instance, has the

following to say in this connection :

"Because the interest charges are a financial

expense, the amount and even the existence of

which depends upon the form of financing, they are

generally excluded from the operating section and

the operating ratio in analytical work."

A study of the financial history of the KSRTC reveals

that in the first two decades of its functioning, it

generally made a profit. This was the period when the rise

in prices of inputs was slow and the amount of social cost

incurred small. It was a time when the operations of the

KSRTC were not so much widespread. But from the 1980's

onwards, the Corporation has been continually experiencing

losses, except during 1990-91, thus making the financial

position stringent.

A detailed study of the financial performance of the

KSRTC in recent years (from 1980-81 to 1991-92) is made here

with a view to discover the causes of its losses.

 137

It is seen from Table :I( Cols. 2,3,4 and 5) that the

total revenue and total cost of the KSRTC have been

increasing during the study period. If total revenue has

increased by 440.2%, the total cost has gone up by 405.5%

over the figures of 1980-81. Except for the year 1990-91,

the Corporation has made a loss (Col. 6) in all the years of

the study period. Even during 1990-91, the profit made was

only marginal. The main cause of this profit was that the

Undertaking carried more number of passengers per day

(55.61 lakhs) in that year as against the number of

passengers carried per day (55.16 lakhs) in 1991-92.

Excluding the year 1990-91, the Corporation has suffered

losses during all the years of the study period, despite the

fact that the percentage increase in cost was less than the

percentage increase in revenue. This was because, during

all those years, the total cost was greater than the total

revenue. Further, the percentage increase in cost was lower

than that of the revenue, as the cost in the base year

(1980-81) was quite high.

Table 2 shows that the operating revenue (Cols. 2 and

3) accounts for a bigger share in the total revenue of the

Corporation. In ten out of the twelve years, the share of

the operating revenue was more than 96% while, for 1990-91

and 1991-92, it was 93.4% and 92.3% respectively. This

 138

TABLE - 1

Financial Performance of the KSRTC (figures in lakhs)

Year Total Percentr

revenue age in­
crease
in total
revenue
over
1980-81
1. 2 3

1980-81 10,474.09 —
1981-82 13,616.94 29.9

1982-83 15,851.67 51.3

1983-84 18,247.56 74.2

1984-85 20,527.79 95.9

1985-86 25,612.27 144.5

1986-87 30,591.55 192.0

1987-88 35,558.92 239.4

1988-89 38,790.85 270.3

1989-90 41,906.18 300.0

1990-91 53,048.42 406.4

1991-92 56,587.36 440.2

(contd.)
 139

{Table 1 continued)

Year Total Percent­ Net

cost age in­ profit/
crease in loss
total
cost over
1980-81
4 5 6

1980-81 11,570.45 - 1,096.36

1981-82 14,654.41 26.6 - 1,037.47

1982-83 17,276.72 49.3 - 1,425.05

1983-84 19,821.98 71.3 - 1,574.42

1984-85 22,576.30 95.1 - 2,048.51

1985-86 27,025.78 133.5 - 1,413.51

1986-87 31,389.26 171.2 797.71

1987-88 36,058.51 211.6 499.59

1988-89 44,190.90 281.9 - 5,400.05

1989-90 45,676.30 294.7 - 3,770.12

1990-91 52,917.98 357.3 + 130.44

1991-92 58,496.8-2 405.5 - 1,909.46

Source : Administration Reports of the KSRTC

 140

TABLE - 2
Analysis of Revnue of KSRTC
(Rs. in lakhs)

Year Operating Percent­ Non-op­ Percent­ Total

revenue age in­ erating age in­ revenue
crease in revenue crease in
operating non-op­
revenue erating
over revenue
1980-81 over
1980-91
1 2 3 4 5 6

1980-81 10,130.14 — 343.95 — 10,474.09

(96.7) (3.3)

1981-82 13,169.95 30.00 446.99 :: 28.6 13,616.94

(96.7) (3.3)

1982-83 15,400.80 54.00 450.87 30.0 15,851.67

(97.1) (2.9)

1983-84 17,775.72 77.50 471.84 34.2 18,247.56

(97.4) (2.6)

1984-85 20,094.36 101.00 433.43 25.7 20,527.79

(97.8) (2.2)

1985-86 24,860.78 148.00 751.54 114.2 25,612.27

((97.1) (2.9)

(Contd.) .
 141

(Table 2 continued)
(Rs. in lakhs)

Year Operating Percent­ Non-op­ Percent­ Total

revenue age in­ erating age in­ revenue
crease in revenue crease in
operating non-op­
revenue erating
over revenue
1980-81 over
1980-81
1 2 3 4 5 6

1986-87 29,830.65 198.00 760.90 117.1 30,591.55

(97.4) (2.6)

1987-88 34,559.54 245.00 999.38 185.7 35,558.92

(97.1) (2.9)

1988-89 37,413.23 274.00 1,377.62 292.8 38,790.85

(96.4) (3.6)

1989-90 40,452.40 304.00 1,453.78 314.2 41,906.18

(96.5) (3.5)

1990-91 49,548.47 395.00 3,499.95 900.0 53,048.42

(93.4) (6.6)

1991-92 52,267.97 422.00 4,319.39 1,134.0 56,587.36

(92.3) (7.7)

Note : Figures in brackets indicate as percentage to total revenue

Source : Administration Reports of the KSRTC

 142

reveals the significance of operating.revenue^in the total revenue

of the organisation. Even though the percentage increase in

the non-operating revenue (Col. 5) over the figures of

1980-81 is much higher (1,134%) than that of the percentage

increase in the operating revenue (422%), it fails to occupy

a place of prominence in the overall revenue of the

Undertaking. The KSRTC secures its non-operating revenue

from items like sale of scrap, sale of depreciated vehicles

etc. In view of the general inflationary trend in the

economy, the sale proceeds of scrap and depreciated vehicles

have been continuously rising, thus accounting for an

increase in the overall non-operating revenue (Col. 4) of

the Organisation.

Table 3 shows that out of the total operating

revenue, the maximum amount is collected by way of passenger

fare (Cols. 2 and 3). In the total operating revenue, its

share has been more than 96% during the period under study.

Revenue from other sources (Cols. 4 and 5) includes revenue

receipts from items like contract services, passenger

luggages, parcel services etc., whose percentage share in

the total operating revenue is less than 3%. As the basic

function of the KSRTC is to provide transport facilities to

the passengers, 'Revenue from Passengers' forms the major

source of operating revenue. It can also be seen from the

 143

TABLE - 3
Analysis of Operating Revenue of the KSRTC
(Rs. in lakhs)

Year Revenue Percent­ Revenue Percent­ Total

frcm age in­ frcm age in­ op­
pass­ crease in other crease in erating
engers revenue sources revenue revenue
frcm frcm
pass­ other
engers sources
over over
1980-81 1980-81
1 2 3 4 5 6

1980-81 9,905*31 — 224.83 — 10,130.14

(97.7) (2.3)

1981-82 12,919.90 30.5 250.05 11.5 13,169.95

(98.1) (1.9)

1982-83 15,089.04 52.5 311.76 38.2 15,400.80

(97.9) (2.1)

1983-84 17,459.15 76.3 316.57 40.4 17,775.72

(98.2) (1.8)

1984-85 19,707.05 . 98.9 387.31 72.0 20,094.36

(98.0) (2.0)

1985-86 24,526.23 147.4 334.55 48.4 24,860.78

(98.6) (1.4)

(contd.)
 144

(Table 3 continued)

(Rs. in lakhs)

Year Revenue Percent­ Revenue Percent­ Total

from age in­ frcm age in­ op­
pass­ crease in other crease in erating
engers revenue sources revenue revenue
frcm frcm
pass­ other
engers sources
over over
1980-81 1980-81
1 2 3 4 5 6

1986-87 29,003.25 192.9 827.40 267.5 29,830.65

(97.2) (2.8)

1987-88 33,734.82 240.4 824.72 266.6 34,559.54

(97.6) (2.4)

1988-89 36,408.72 267.6 1,004.51 346.2 37,413.23

(97.3) (2.7)

1989-90 39,179.16 295.9 1,273.24 465.7 40,452.40

(96.8) (3.2)

1990-91 48,285.16 387.8 1,263.31 461.3 49,548.47

(97.4) (2.6)

1991-92 50,746.08 412.6 1,521.89 576.0 52,267.97

(97.1) (2.9)

Note : Figures in brackets indicate as percentage to total operating

revenue

Source : Administration Reports of the KSRTC

 145

Table 3 that the revenue from passengers has registered an

increase of 412.6% during the study period. But, for the

same period, the revenue from other sources has recorded an

increase of 576.0%. As the share of this source in the

total operating revenue is not significant, it could not

produce any notable effect. However, it helped in

augmenting the total operating revenues of the Undertaking.

From Table 4, it is noticed that both operating and

non-operating costs have increased. During the study

period, if operating costs (Col. 3) have increased by

395.6%, the non-operating costs (Col. 5) have risen by

723.4%. Though the non-operating costs have registered a

much higher increase, its influence on total costs is not

predominant. This is because a major share of total costs

emerges out of operating costs. Its share ranges between

93.8% and 96.9% for the study period. The percentage share

of non-operating costs varies between 3.1% and 6.2%,

signifying a role of minor importance in the overall costs

of the Concern. Non-operating cost consists of interest on

capital contributions paid to the participating governments

and other interest payments on borrowings. The total

interest cost of the Corporation has gone up from Rs.349.87

lakhs at the beginning of the study period, to Rs.2,882.13

lakhs at its end, registering an eight fold increase in

 146

TABLE - 4
Analysis of Costs of the KSRTC

(R$. in lakhs)

Year Operating Percent­ Non-op­ Percent­ Total

cost age in­ erating age in­ cost
crease in cost crease in
operating non-op­
cost over erating
1980-81 cost over
1980-81
1 2 3 4 5 6

1980-81 11,220.58 — 349.87 —V 11,570.45

(96.9) (3.1)

1981-82 14,155.43 26.1 498.98 42.5 14,654.41

(96.5) (3.5)

1982-83 16,641.62 48.4 635.10 81.4 17,276.72

(96.3) (3.7)

1983-84 18,954.51 69.1 867.47 147.7 19,821.98

(95.6) (4.4)

1984-85 21,570.15 92.2 1,006.15 187.4 22,576.30

(95.5) (4.5)

1985-86 25,355.80 125.9 1,669.98 377.1 27,025.78

(93.8) (6.2)

(oontd.)
 147

(Table 4 continued)

(Rs. in lakhs)

Year Operating Percent­ Non-op­ Percent­ Total

cost age in­ erating age in­ cost
crease in cost crease in
operating non-op­
cost over erating
1980-81 cost over
1980-81
1 2 3 4 5' 6

1986-87 30,149.28 168.7 1,669.98 377.1 31,389.26

(96.1) (3.9)

1987-88 34,011.59 203.1 2,046.92 484.8 36,058.51

(94.3) (5.7)

1988-89 41,982.94 274.1 2,207.96 530.8 44,190.90

(95.0) (5.0)

1989-90 43,238.36 285.3 2,437.94 596.5 45,676.30

(94.6) (5.4)

1990-91 50,235.72 347.7 2,682.26 666.2 52,917.98

(94.9) (5.1)

1991-92 55,614.69 395.6 2,882.13 723.4 58,496.82

(95.1) (4.9)

Note : Figures in brackets denote as percentage to total cost

Source : Administration Reports of the KSRTC

 148

absolute terms. On certain loans, the Corporation was made

to pay high rates of interest and as such, non-operating

costs increased at a rapid rate.

Table 5 reveals that among the different elements of

the operating cost, personnel cost (Cols. 2 and 3) occupies

the first place of significance. Its percentage share in

the operating cost varies between 27.64 and 37.20. Over the

study period, personnel costs have shown an increase of

491.1%. Increase in personnel cost in absolute terms was

due partly to the increase in the number of employees, and

partly to the better emoluments paid to the staff to cope up

with the enhanced costs of living arising out of the

inflationary situation prevailing in the economy. As the

KSRTC has to follow the State government in the announcement

of pay revision to its employees as and when they are

revised for the government employees, the Corporation has no

control over this item of cost.

Fuel and Oil Cost (Cols. 4 and 5) as an item of

operating cost ranks second in the order of importance. Its

relative percentage ranged between 19.5% and 27.2% during

the study period. Due to an enormous increase in the prices

of petroleum products over which even the Government of

India does not have much control, the fuel and oil cost
 149

TABLE - 5

Analysis of Operating Costs of the KSRTC

(Rs. in lakhs)

Year Person­ Percent­ Fuel Percent­ Other Percent­

nel cost age in­ and oil age in­ material age in­
crease cost crease cost crease
in per­ in fuel in other
sonnel and oil material
cost cost cost
over over over
1980-81 1980-81 1980-81
1 2 3 4 5 6 7

1980-81 3,386.41 — 2,498.61 — 2,299.51 —

(31.17) (21.30) (20.49)

1981-82 3,902.64 14.7 3,781.36 51.2 2,834.30 21.7

(27.64) (26.70) (20.02)

1982-83 4,598.25 35.2 4,452.60 78.0 3,329.85 43.4

(28.00) (26.60) (20.00)

1983-84 5,399.86 58.8 5,163.75 104.0 3,523.35 52.1

(28.50) (27.20) (18.60)

1984-85 7,021.97 105.8 5,610.74 124.0 3,588.50 56.0

(32.50) (26.30) (16.60)

1985-86 7,954.84 132.3 6,490.20 160.0 4,468.41 ' 94.2

(31.30) (25.50) (17.60)

(contd.)
 150

(Table 5 continued)

(Rs. in lakhs)

Year Person­ Percent­ Fuel Percent­ Other Percent­

nel cost age in­ and oil age in­ material age in­
crease cost crease cost crease
in per­ in fuel in other
sonnel and oil material
cost cost cost
over over over
1980-81 1980-81 1980-81
1 2 3 4 5 6 7

1986-87 9,027.79 164.7 6,971.95 178.8 4,443.94 93.1

(29.9) (23.4) (14.9)

1987-88 10,972.67 220.5 7,831.79 212.0 4,030.48 75.2

(32.2) (23.3) (11.8)

1988-89 15,637.68 358.8 8,246.87 228.0 4,813.08 109.2

(37.2) (19.6) (11.4)

1989-90 15,389.95 352.9 8,466.47 238.4 5,604.91 143.4

(35.8) (19.5) (12.9)

1990-91 17,866.23 423.5 10,645.85 325.8 5,771.33 150.8

(35.5) (21.5) (11.4)

1991-92 20,103.08 491.1 12,079.43 380.0 6,843.71 197.5

(36.4) (21.7) (12.3)

(contd.)
 151

M t-» 1—* t—* H* M

(Table 5 continued)
CO CO CO CO CO CO
00 00 00 00 00 00
Ul .fe. 00 to I-1 0
11 1t 11 11 I1 11
00 00 00 00 00 00
CT. Ul CO fvj M

Co —* to to to H ***». lp>J
M ■» H ' |—i ■*» H-
H ttk h-> NJ to o CO 00 as
Ul • «0 • to • ~-J • CO • as
CO Ji. CO •O CO 4* o CO o 00 ~-J
• o • o • o • Ul • Ul •
as W O w o to w O w to
o o CO to o 00

00 00 to H* tn e 9
CO CO 00 00
• • • • • CO
CO 00 CTl 00

— to to —> h-1 0 Q gi BJ H
M - I-1 ~ VO ■» CO » O H-3 3 3
O ~J O H O CO • CTl • 00 <-* CO CO 3 tJ O CD
• CTl . CO • CO 00 >Ck to (-* 00 ft r+ CD g
00
o
to
•
H»
o
H
•
cti I-1
o •
o ~o co as • H- CD R
w on — Ul w 00 o
• CTl
00
•
to
s
"J •tk o 00 Ul •w- 00 a

I-1 H* H' O 3 *3
00
00
to
4a>
o as
CO
co
00 sfi as-*? It
•
to
1
'J
t
I-1
•
to
•
CO I ft Qi CD 3 CO O
H-g
00 H-CD CO CD
H O3 *VR 3
I
I
CO — CTl ■'-> CTl Ul 4a. *-* 00
00 I-1 00 00 00 Ul 00 4i 00 00 00 co 8CO H
• 00 • 00 • 00 • 00 • o • 4^ (-<
CTl . H1 • 4S. • to • o * Ul • M
to ft
o o O 4*. O M O CTl O CTl H* Ul §
— CTl w O CTl to W oo
CO

M H Q Q (D H- Q 3 ►3
00 -J CTl CO CO < c 1-* 3 h cQ 3
R
to 00 Ul CO I-1 00 3 CO M 3 3
• • • • • 00 o n 3 3 3 o
CO 00 00 H 1 Q 3 p» 3 H- 3
o o o o co 00 0 tD CO 3 3 3
H CO 1 0 ft
(contd.)

fso to l-> H H*
Ul H* oo\ CTl 45. I—*
00
<«
Ul
to\
CTl
«■
H4
**
to 0}
ft US
to 3
ft I-1
Ul on 4* on
Ul o M Ul o
vHH-
•00 • • • • »
H on CTl 4a. Ul
o cn H* to CO 00
 (Table 5 continued)
(Rs. in lakhs)
Year Total Percent­ Insur­ Percent­ Misce­ Percent­ Total
taxes age in­ ance and age in­ llaneous age in­ operating
crease depre­ crease cost crease cost
in total ciation in insu­ in misc­
taxes cost rance ellane­
over and depr­ ous cost
1980-81 eciation over
cost 1980-81
over
1980-81
00

VO

10 11 12 13 14
1986-87 4,661.73 180.7 3,595.50 268.7 1,018.37 158.3 30,149.28
(16.10) (12.20) (3.50)
152

1987-88 5,454.52 228.5 4,578.51 369.2 1,143.62 190.1 34,011.59

(16.00) (13.40) (3.30)
1988-89 6,581.79 296.3 4,575.26 368.0 2,128.16 440.1 41,982.94
(15.60) (11.80) (6.00)
1989-90 6,973.53 319.8 4,813.76 392.3 1,989.74 404.8 43,238.36
(16.10) (11.10) (4.60)
1990-91 8,527.13 413.6 4,787.41 390.9 2,637.77 569.2 50,235.72
(16.90) (9.50) (5.20)
1991-92 9,009.14 442.1 4,880.52 400.5 2,698.81 584.7 55,614.69
(16.10) (8.70) (4.80)
Note : Figures in brackets indicate as percentage to total operating cost
Source : Administration Reports of the KSRTC
 153

registered an increase of 380% (nearly 65% of our

petroleum consumption is met out of imports). But this cost

could be reduced by increasing the KMPL (kilometres per

litre of diesel), of the Corporation. Though this has

improved over the study period (4.50 in 1991-92), there is

still scope for improvement, looking to the 4.95 KMPL

obtained by the Andhra Pradesh State Road Transport Corpora­

tion, 4.78 KMPL obtained by the Rajasthan State Road

Transport Corporation and 5.02 KMPL obtained by the Gujarat

State Road Transport Corporation. 7

In the operating costs of the KSRTC, if fuel and oil

costs form a part of the variable cost, other material costs

(Cols. 6 and 7) which include costs incurred on tyres,

tubes, spare parts, batteries, etc., also constitute an

important part of it. This cost increases with an increase

in the kilometres travelled by the bus. In the study

period, its ranking among the items of operating cost, has

fallen from third to fourth. Its percentage share in the

operating costs varied between 11.4 and 20.49. During the

study period, this item of cost has shown an increase of

197.5%. An increase in material cost is mainly the

consequence of the rising prices. Since other material cost

depends on external factors like the condition of roads, it

is not fully an item of controllable cost of KSRTC.

 154

Motor Vehicle and Other taxes (Cols. 8 and 9) as an

item of cost ranked third in the total operating costs of

the Undertaking. Its significance in the operating cost

rose, as its ranking which was fourth till 1985-86 advanced

to third during the study period. Its share in the

operating costs ranged between 11.4% and 16.9%. During this

period, the amount of total taxes increased by 442.1%. This

increase in cost element was mainly due to the revision of

the rates of Motor Vehicle Tax three times. These rates

were revised on 1 August 1985, 1 April 1986 and 1 April

1988. This tax rate was revised despite the fact that all

other items of cost were increasing due to the increased

prices of inputs. This clearly indicates that the State

government had no hesitation in using the KSRTC as a source

of revenue for its Exchequer.

The KSRTC has no control over the cost emerging out

of the tax burden, as it is the State government which fixes

the tax rates and it is obligatory on the part of the

Corporation to make the payments. From the' available

circumstantial evidence, one can suspect the intention of

the State government in maintaining tax rates at a high level.

The reasons for this may be that the State government wants

to keep the margin of Public Utilities at a lower level, as

higher profits on the part of the KSRTC may be criticised

 155

by both the public and the opposition parties as the direct

result of the higher fares and that they may agitate for

lowering them. Or else, sizable surpluses may initiate the

labour force to bring pressure on the Corporation to effect

a hike in the bonus paid to them or to make provision for

better welfare measures and superannuation benefits.

The next item of cost is Insurance and Depreciation

(Cols. 10 and 11) which accounted for 8.7% of the total

operating costs at the end of the study period. Its

relative importance fluctuated between 8.6% and 13.4%. This

cost increased by about 400% in the study period. A steep

increase in this cost was necessitated by the increase in

the prices of vehicles. An increase in the depreciation

allowance was very much necessary to meet the increased

costs of replacement of vehicles. In the absence of such an

enhanced depreciation allowance, the programme of replace­

ment of old and worn-out buses undertaken by the KSRTC could

have been either halted or the Corporation might have been

compelled to secure adequate finances for this programme

from long-term sources. Therefore, an increase in this item

of cost is jutifiable.

The last item of cost listed in Table 5 is the group

of miscellaneous items (Cols. 12 and 13) which recorded an

 156

increase of 584.7% during the study period. Its share in

the operating costs varied between 3% and 6%. The

percentage share of miscellaneous cost was highest at 6% in

the year 1988-89. This component of cost is of least

importance in the total operating costs of the Corporation.

The most important economic characteristic of KSRTC

is its large investment in fixed capital. As such, the

capital structure of the Corporation has an effect on the

profitability of the concern. The capital structure of

KSRTC consists of capital receipts and capital expenditure.

The capital receipts of the Corporation comprise of :

1. Capital contributions from the participating

governments

2. Internal resources

3. Loans

It is seen from Table 6 that out of the capital

contributions made to the KSRTC, a larger portion comes from

the Government of Karnataka (Col. 2) and a smaller amount

from the Government of India (Col. 3). Capital contributions

 TABLE - 6
Capital Receipts of the KSRTC
(Rs. in lakhs)
H-

H-
H
ft

ft
o
£»
V

£U

O
T3
H
0
<D

Year Sources of co Total Percent-

State Union Internal Loans capi­ age in­
govern­ govern­ resour­ tal crease
ment ment ces recei­ in the
pts capital
receipts
over
1980-81
H*

N)

Co

•Ch

U1

O'!
1980-81 2,151.51 659.21 4.611.16 1,959.07 9,380.95
157

(22.90) (7.00) (49.20) (20.90)

1981-82 2.704.24 756.21 5,634.39 2,514.63 11,609.47 23.70
(23.20) (6.50) (48.40) (21.90)
1982-83 3.748.24 1,253.40 5,560.94 3.276.11 13,838.69 47.50
(27.08) (9.06) (40.18) (23.68)
1983-84 4.485.84 1,664.01 5.140.16 4,308.18 15,598.19 66.20
(28.76) (10.67) (32.95) (27.62)
1984-85 5.699.84 2.229.51 5,389.35 4.450.12 17,768.82 89.42
(32.08) (12.55) (30.33) (25.04)
1985-86 6,807.39 2.811.51 5,316.84 6,540.83 21,476.57 128.90
(31.07) (13.09) (24.75) (31.09)
(contd .
 (Table 6 continued)
(Rs. in lakhs)
Year Sources of capital receipts Total Percent-
State Union Internal Loans capi­ age in­
govern­ govern­ resour­ tal crease
ment ment ces receip- in the
pts capital
receipts
over
1980-81
to

u>

it*

Ol

<T>

-J
u>

u>
l»' M
fO U1

1986-87 8,141.39 • VO
to 6,902.57 8,783.67 27,142.92 189.3
i—.*

1—< .
to
(29.99) (25.43) (32.37)
158

1987-88 9,548.39 3,348.79 8,858.95 9,443.04 31,199.17 232.6

(30.60) (10.73) (28.40) (30.27)
1988-89 10,836.39 3,911.59 10,122.72 9,832.49 34,703.19 269.9
(31.23) (11.27) (29.17) (28.33)
1989-90 14,120.39 4,052.29 9,642.42 9,981.40 37,796.50 302.9
(37.36) (10.72) (25.51) (26.41)
1990-91 17,324.39 4,052.29 9,773.41 9,783.71 40,234.80 328.9
(43.06) (10.07) (24.29) (22.58)
1991-92 20,524.39 4,452.29 9,371.23 9,842.10 44,490.01 374.3
(46.13) (10.00) (21.07) (22.80)
Note Figures in brackets denote as percentage to total capital receipts
Source : Adminsitration Reports of the KSRTC
 159

are not made as a lump sum amount but are paid on a year -to-

year basis by the participating governments. Thus, with

fresh contributions from the participating governments, the

capital receipts of the Corporation increase. The share of

the State government in the capital receipts of the KSRTC

has gone up from 22.9% in 1980-81 to 46.13% in 1991-92.

This shows the increased dependence of the organisation on

the State government. If the contributions from the State

government have risen by ten times, the contributions from

the Central government have gone up by seven times. A

slight increase in the share of the Central government in

the capital receipts of the Undertaking during the study

period can also be noticed. Its percentage share increased

from 7 to 10.

Internal Resources (Col. 4) .form the next important

item of capital receipts. Internal funds consist of various

items generally in the nature of appropriations made out of

retained earnings to funds like KSRTC Employees Welfare

Fund, General Reserve Fund, Betterment Fund etc. The creation

and maintenance of such reserves will raise the credit

worthiness of the Organisation apart from facilitating

financing of expansionary activities through internally

generated funds. The share of internal resources in the

 160

capital receipts of KSRTC has gone on declining from 49.2%

in 1980-81 to 21% in 1991-92. This is an undesirable

development, as it raises the dependence of the Corporation

on external factors by affecting its move towards self-

sufficiency.

As borrowings are considered necessary to overcome

the problem of cash shortage situation, the capital receipts

8
of the KSRTC also constitute loans. L.A.Bernstein lays

stress on the importance of loans by stating that upto a

certain point, debt is a less expensive source of fund than

equity capital. Grunewald 9 also feels that debt capital can

be allowed upto a point, as it reduces the overall cost of

operation.

The KSRTC secures loans through the issuance of bonds

and rural debentures and by borrowing from institutions such

as Commercial Banks, the LIC, the IDBI and others. The

amount of loans raised by the KSRTC has risen by five times

under the study period. There is not much of a change in

its percentage share in the capital receipts. Its share,

which was 20.9% in the beginning of the study period, rose

to 22.8% at the end, registering only a marginal improvement

in its relative position. But regarding the extent of debt

in capital receipts, Garfield and Lovejoy^
state that the
 161

debt ratio of Public Utilities normally vary between one-

third and two-thirds of its total capital receipts - In the

. •
opinion of Guthmann and Dougall 11^a large, proportion of bonds

in Public Utility concerns are common and justifiable as

there exists with them a constant demand for their output

and they have relatively stable earnings compared to private

concerns.

It is also clear from Table 6 that the capital

receipts of the KSRTC (Cols. 6 and 7) have risen from

Rs.9,380.95 lakhs in 1980-81 to Rs.44,490.01 lakhs in 1991-92.

During this period, the capital receipts have gone up by

374.3%. It is the capital receipts which provide the base

for capital expenditure of the Corporation.

As shown in Table 7, the capital expenditure (Cols. 5

and 6) of the Corporation made a similar increase as that of

its capital receipts during the study period. With 1980-81

as the basei year, the capital expenditure recorded an

increase of 375.4% for the year 1991-92, along with an

increase in all its component parts. This shows the

expansionary capital activity of the concern. Among the

different items of capital expenditure, expenditure on

passenger buses is most important. Its (Col. 3) percentage

share ranged between 80.20% and 84.62%. This is a desirable

 162

TREUR - 7

Capital Exenditure of KSPTC

(Rs. in lakhs)

Year Items of expenditure Total Percent­

Land and Passenger Other capital age in­
Build- Buses Assets expendi­ crease
ings ture in capi­
tal ex­
pendi­
ture
over
1980-81
1 2 3 4 5 6

1980-81 1,542.65 7,493.39 312.19 9,348.23 —

(16.50) (80.20) (3.30)

1981-82 1,770.48 9,473.16 333.22 11,576.86 23.8

(15.20) (81.80) (3.00)

1982-83 2,043.81 11,337.80 424.52 13,806.13 47.6

(14.80) (82.12) (3.08)

1983-84 2,221.35 12,887.76 456.54 15,565.65 66.4

(14.27) (82.80) (2.93)

1984-85 2,341-.79 14,856.80 537.69 17,736.28 89.6

(13.20) (83.77) (3.03)

1985-86 2,627.97 18,146.36 669.69 21,444.02 129.3

(12.25) (84.62) (3.13)

(contd.)
 163

(Table 7 continued)

(Rs. in lakhs)

Year Items of expenditure Total Percent­

Land and Passenger Other Capital age in­
Build- Buses Assets expendi­ crease
ings ture in capi­
tal ex­
pendi­
ture
over
1980-81
1 2 3 4 5 6

1986-87 3,343.27 22,891.30 875.79 27,110.36 189.9

(12.33) (84.44) (3.23)

1987-88 3,940.74 26,157.19 1,068.69 31,166.62 233.3

(12.64) (83.93) (3.43)

1988-89 4,373.09 29,011.39 1,286.16 34,670.64 270.8

(12.62) (83.68) (3.70)

1989-90 4,862.31 31,604.59 1,297.06 37,763.96 303.8

(12.88) (83.68) (3.44)

1990-91 5,143.66 33,680.61 1,378.00 40,202.27 329.9

(12.79) (83.78) (3.43)

1991-92 5,598.46 37,296.81 1,562.21 44,457.48 375.4

(12.59) (83.69) (3.52)

Note : Figures in brackets indicate as percentage to total capital

expenditure

Source : Administration Reports of the KSRTC

 164

investment, as the bus is the basic input of the Corporation

to satisfy the transport needs of passengers. The second

important item of capital expenditure is the amount spent on

land and building (Col. 2). Its percentage share has

marginally fallen from 16.5% in 1980-81 to 12.59% in

1991-92. Despite this fall, its amount in absolute terms

has increased fourfold. This item of cost provides the base

for the various transport operations of the concern.

Though, spendings on other assets (Col. 4) have increased,

their significance on the total capital expenditure is not

much, as their percentage share is around 3%.

Analysis of the losses of KSRTC

A review of the Undertaking's performance over the

period 1980-92 reveals that it has been showing an improve­

ment in its physical and operational spheres. The

statistics in Table 8 bear out this fact.

As such, the losses suffered cannot be attributed to

the inefficiency of the organisation, but to causes that lie

elsewhere. The financial viability of any transport

organisation depends on its revenue and the cost of bus

operation. The revenue earned is a function of passengers

carried (or technically passenger kms) and fare charged. Thus,

 165

TABLE - 8

SI. Description 1980-81 1986-87 1991-92

NO.

1. Bus Productivity 271.40 289.70 294.00

(kins)

2. Fleet Utilisation 79.20 87.40 88.40

(%)

3. Fuel Productivity 3.93 4.30 4.50

(KMPL)

4. Tyre Peformance 24,000 27,000 32,000

(kms) (average of
new + retreaded
tyres)

5. Manpower 30 36 44
Productivity
per day (kms)

Source : Administration Reports of the KSRTC

TR = f(P, F)

Where TR Total Revenue

P = Passengers carried

F = Fare

While, cost incurred is a function of productivity of inputs

and their prices. Thus,

 166

TC = f (P.I.:, Pr.I)

Where TC = Total Cost

P.I = Productivity of inputs

Pr .1 = Prices of inputs

A closer examination of the financial performance of

the KSRTC shows that the root cause of its losses is its

improper fare structure. The prevalent fare systems for

public road transport all over the world are :

1. Straight Line Scale Method : This is a method where

the fare increases directly in proportion to the distance

travelled. For intance, if the fare rate per km is 10

paise, it will be 20 paise for 2 kms, 30 paise for 3 kms and

so on. In this method, the passenger travelling longer

distance is required to pay more for his journey, as

unvarying rates are charged for successive stages. This

method establishes a direct relationship between the bus use

and the cost of operation of the service.

2. Tapered Scale Method : This is a method where the

fare decreases as the distance travelled increases.

Generally, in this fare method, the first few kilometres

would have a straight line type of fare which would then

progressively taper off. For example, if the fare rate

 167

is 40 paise for the first 5 kms^i.e., 8 paise per km; any

journey within 5 kms would be charged at this rate. After

5 kms, the fare rate decreases as the distance travelled

increases. The fare rate for 10 kms may be fixed at 70

paise instead of 80 paise, and for 20 kms at 130 paise

instead of 160 paise, and so on.

3. Flat Fare Method ; Under this method, the entire

operational area is considered as one unit and the fare will

be the same for any distance travelled within the unit. To

illustrate, if the rate is 40 paise for 5 kms or a multiple

thereof, the commuter has to pay 40 paise whether he travels

1 km or 5 kms. This method is easy to apply and understand

and it ensures better collections.

4. Zonal Fare Method : There is not much of a difference

between flat fares and zonal fares. Under zonal fares, the

whole operational area is divided into different zones, and

the same fare is charged for any journey within the zone.

For any journey extended beyond the area of a zone, the fare

charged is double.

5. Concessional Fare Method : In this method, certain

categories of people are offered transport service at

concessional rates on compassionate or other grounds. Here,

 168

certain specified groups of people are charged less than

what others are normally charged.

6. Free Travel Method : This fare method offers travel

facility to the commuters free of cost. Free travel

facility is provided to certain sections of people either as

a privilege or as an incentive to encourage some desirable

activities. Here, the entire burden of costs of operation

is borne by the Undertaking itself.

The National Transport Policy Commitee under the

Chairmanship of B.D.Pande, 12 noticed the prevalence of wide

variations in the fare structures of public passenger road

transport concerns of different States of India and also the

lack of a uniform basis for their fixation.

The fare structure of the KSRTC is fixed in accordance

with the Tapered Scale, Concessional Fare, Free Travel and

Flat Fare Methods. Tapered Scale Method is adopted in both

mofussil and city services. For the Mofussil Services, a

stage length is 6.5 kms; for the City Services, it is 2 kms

and for Suburban Services, it is 4 kms. Concessional fare is

charged to the school going children aged 12 years and

above, college going students, Working Journalists etc.

Free passes are issued to all the school going children

 169

below the age of 12 years, all the school and college going

children of KSRTC employees, blind persons attending their

professional duty, homeguards on duty travelling in city

services etc. Flat Fare is charged in the newly started

Pushpak buses introduced in Bangalore, Mysore and Hubli-

Dharwad City Services to provide a more comfortable journey

to those who have better paying capacity.

The fare fixation policy of Karntaka falls in line

with the observation of the Transport Policy Committee

(1980) which held that fares are fixed not on the basis of

any objective criteria of cost and profitability, but in an

unscientific and arbitray manner. There is no appropriate

13
methodology adopted. The fares to be charged by the KSRTC

are fixed by the government of Karnataka. The fares fixed,

do not incorporate fully the cost. The Corporation has no

control over the fixation of fares. It has merely to

implement whatever fare structure is given to it by the

State government. Further, fare hike is determined by the

Political will. Whereas, freight hikes pass off

unnoticed, it is fare hikes that are usually met with by

public agitations, as the passengers are directly affected

by them. For this reason, politicians deliberately avoid a

decision on fare revision and for years the existing rates

continue^ unmindful of what happens to the Corporation.

 170

S.D.Kulkarni.14 holds that it is a normal feature of every

State government to keep the passenger fares of its Road

Transport Corporation at the minimum.

It can be noticed from Table 1 that the costs of the

KSRTC have been increasing continuously every year due to

inflation. But the fare hike is effected only once in a

way. Table 9 shows the number of times fare revision was

effected for KSRTC during the study period, as also the

revised fare rates.

TABLE - 9

Year Average fare/ Fare

passenger km revision
after
(years)

1980-81 10.1 paise -

1983-84 10.7 paise 3

1985-86 13.9 paise 2

1990-91 17.9 paie 5

Source : Administration Reports of the KSRTC

 171

From Table 9, it .is Seen that , the- fare revision ..'.for

KSRTC was resorted to once in a while. Even when the fare

hike measure was undertaken, it did not fully compensate the

cost hike. Therefore, generally there always existed a gap

between the economic fare and the actual fare permitted by

the State government. Due to the lack of a scientific fare

policy, it has led to cumulative losses. These losses have

been hampering the financial health of the Corporation by

corroding its capital base. In spite of these losses, the

KSRTC is made to follow an unscientific fare policy as it is

a Public Utility organisation. Its pricing policy is

formulated in such a way as to ensure at best a reasonable

rate of return and not provide for exploiting its monopoly

character.

The second factor which has hampered the profita­

bility of the Undertaking, is its obligation to run

uneconomic routes in public interest. P.A.Francis^ remarks

that the emergence of profits in private road operations is

due to largely to their non-compulsion to run uneconomic

routes.

Being a public sector service industry, the KSRTC is

expected to cater to the overall transport requirements of

the society. This compels it not to pursue a purely

 172

commercial approach of maximising profits. But it has to

shoulder a greater responsibility as contrasted to the

private operators in respect of :

i. running uneconomic routes to bring the isolated and

remote villages into the mainstream of development;

ii. conducting operation of buses even on bad roads

without regard to the fact that such roads damage the

bus and increase the cost of operation;

iii. conducting city operations even if they contribute to

the negative profits of the organistion; and

iv. operating on such routes which are profitable in the

beginning and become uneconomic subsequently.

To maintain the monopoly character of its services,

it is essential for the Corporation to Continue its

operations on those routes which do not even cover their

cost of operations. In the opinion of C.H. Sharp, ^ the

running of some unremunerative services by the Public Sector

Undertakings is obligatory, as the loss entailed here could

be compensated by the profits of the high density routes.

 173

It is reported that 25 per cent of the KSRTC's routes

17
are uneconomic. If m the mofussil services, the

Corporation is obliged to ply the route to an interior

village even if a few passengers travel by it, in the city

services, it has to run empty return journeys at peak hours.

To get over this contingency, the Concern cannot get prices

fixed at a higher level in order to utilise a part of the

surplus earned on economic routes to cross subsidise the

losses suffered on uneconomic routes. The Undertaking is

also not allowed to adopt a differential policy, whereby it

can charge higher prices on uneconomic routes. No attempt

has been made to quantify the losses suffered on account of

uneconomic routes and compensate them by giving a subsidy.

Hence, the Corporation has to silently bear the burden.

Road transport operations handled by the KSRTC are

looked upon as a source of revenue to the government. The

government burdens the KSRTC by levying taxes such as motor

vehicles tax, passenger tax etc. This heavy burden of

taxation is contributing to the poor financial performance

of the organisation. The State government is not making any

effort to control the costs of the various inputs of bus

operation. Instead, it is raising the cost of operation by

periodically revising the taxes upwards. Compared to

1980-81, the tax amounts have increased by 442 per cent

 174

in 1991-92. This is indeed very high. The Karnataka

Government could do this because, imposition of the motor

vehicles tax is within its exclusive purview. But there is

no justification for such an abnormal increase in the rates

of this tax. After a careful examination of the tax levied

on the different State Road Transport Corporations of India,

18
the Road Transport Taxation Enquiry Committee came to the

inescapable conclusion that the tax element in the cost of

operation of these Undertakings is a definite disincentive

to their healthy development.

The KSRTC has to fulful not only (a) 'economic

objective' aimed at attaining efficient allocation of

resources, but also (b) 'non-economic' or 'social

objectives' aimed at serving the commuters better at

reasonable rates. Attainment of social objectives involves

a certain amount of social cost. Social cost is that cost

which the passenger road transport undertaking has to incur

by virtue of its being a Public Utility concern providing an

19
essential - service to the community. It is a cost which

the passenger road transport undertaking has to incur in

order to meet its social obligations.

The KSRTC grants travel facility at concessional

rates to the students, the blind and the physically handicapped,

 175

journalists, freedom fighters, members of the legislature

and others. These concessions are decided upon by political

leadership to enhance the popularity of their governments.

But these concessions will raise the cost of operation of

the Corporation without a corresponding increase in revenue

and thus lead to extra costs known as social costs. It is

possible to calculate these costs. All services which are

not operated on the basis of traffic potentiality but by way

of social obligations can be separated and the total

kilometres operated for such purposes can be arrived at.

The total cost incurred for such operations can be worked

out on the basis of cost per kilometre.

Social Costs incurred by the KSRTC during the years

of the study period, are seen in Table 10. This Social Cost

without a matching subsidy by the State government, has

adversely affected the finances of the Corporation.

20
Iyer expresses the opinion that the entry of the

State in the strategic centres of economic life and national

enterprise is not only to secure social justice but also to

show how a model employer should conduct an economic

adventure.
 176

TABLE - 10

Year Revenue
lost by
KSRTC
due to
various
concess­
ions
(Rs. in
crores)

1980-81 2.0

1981-82 3.1

1982-83 5.5

1983-84 8.0

1984-85 9.0

1985-86 10.0

1986-87 26.0

1987-88 26.6

1988-89 29.2

•1989-90 47.8

1990-91 63.2

1991-92 72.7

Source : Administration Reports of the

KSRTC
 177

Since the KSRTC is the creation of the State

government, it wants to assume the role of an ideal employer. In

order to do that, it is obliged to provide its employees

with better working conditions, and proper housing, medical,

canteen and entertainment facilities, in addition to good

pay and bonus. Pay revisions should also be effected to its

employees as and when the State government revises pay

scales of its employees to compensate the increased costs of

living. The Corporation is also responsible for paying

superannuation benefits to its retired employees. All these

measures would raise the welfare of the KSRTC employees.

But this implies financial ccumitment, whether recurring or

non-recurring. But transport, being a labour intensive

industry, its personnel cost is more rapidly rising in

comparison to all other costs of operation. This is so, on

account of the payment of better wages and welfare

amenities.

From Table 11, it can be seen that the welfare and

superannuation expenditure has increased by more than five

times in a period of 12 years. Thus, the employees of the

Corporation are better off when compared to their counter­

parts in the private sector. This has resulted in increased

costs, leading to lower margins.

 178

TABLE - 11

year Welfare and Total Welfare and

super­ staff super­
annuation strength annuation
expenditure expenditure
per employee
per annum

1980-81 Rs.136 lakhs 31,901 Rs. 426.31

1986-87 Rs.171 lakhs 45,420 Rs. 376.48
1991-92 Rs.748 lakhs 55,757 Rs.1,341.53

Source : Administration Reports of the KSRTC

The total revenue of the KSRTC depends to a greater

extent on the traffic revenue collected by its multitude of

conductors. Since revenue collection is handled by many

people, there is the possibility of its leakage in the

process of collection, issuing of tickets etc. Even though

the top ranks of the KSRTC admit that there is pilferage in

the daily bus operations of the Corporation, no scientific

method has been made available to quantify the leakage of

revenue and to estimate the financial harm caused to the

organisation in this connection. This does not mean that

there is no supervisory machinery to inspect the working of

the Undertaking's operations.

 179

The work of supervision has got its own limitations.

It is almost an impossible task to check all the buses on

all routes at all times. Having fully understood this fact,

the conductors pilfer revenue by not issuing tickets at all

to those who travel for shorter distances. The concerned

travellers do not object to this, as the conductor charges

them less than the prescribed fare. Another practice

followed by the conductors, is to issue lower denomination

’tickets by collecting the prescribed fare amount specified

for the distance upto which the passenger wishes to travel.

This is resorted to in the case of uneducated passengers.

Thus, in the former case, the conductor pilfers the revenue

with the concurrence of passengers, in the latter^ he

(conductor) is able to do so without the knowledge of the

passengers. In both the cases, the conductor takes away by

an unfair practice, a part of the revenue which in the normal

course should have gone to the accounts of the organisation.

A rough estimate of the amount pilfered can be made

21
on the basis of human behavioural outcomes. Presuming,

that the approximate amount that is pilfered by a person

handling cash is equivalent to the amount required by him to

meet the daily expenditure of necessities like refreshment,

lunch etc., for himself and in many cases, for the driver as

well.
 180

Assumption : The conductor will pilfer an amount sufficient

to meet at least his and the driver's daily

requirements, while performing his duty.

This assumption gains validity on the following observations :

i. Conductor or driver on duty, carrying his own lunch

or breakfast is usually not observed;

ii. Since it is not possible for the conductor to pilfer

revenue without the co-operation of the driver,

generally the driver's expenditure is also borne by

the conductor.

Based on these observations, it is presumed that a

Conductor on duty will pilfer a minimum of Rs.20 in a day to

meet the expenses of both. It is not correct to assume that

all conductors do this mischief. Hence, it can be presumed

that 50% of the conductors involve themselves in such a

practice. On the basis of this, it is possible -to estimate

the extent of pilferage caused during a year, for instance,

1991-92.

In 1991-92, the KSRTC engaged about 17,000 conductors.

The average revenue leakage could approximately be estimated

at :
 181

8,500 X Rs.20 = Rs.1,70,000 daily

Rs.1,70,000 x 365 days = Rs. 6,20,50,000

i.e., Rs.6.20 crores

During 1991-92, as the Corporation realised a traffic

revenue of Rs.523 crores, the approximate leakage is of the

tune of 1.2%, which indeed is substantial.

The extent of pilferage calculated through this

method is the barest minimum, as the common experience

reveals that its extent is far greater. The pilfered amount

which cannot be quantified accurately, is one of the

internal factors responsible for the low realisation of

traffic revenue, despite the fact that at least 50% of the

buses run overcrowded by accommodating passengers double

their (buses) full capacity. If the leakage amount

calculated by the above method for the year 1991-92 is added

to the revenue of the KSRTC, the extent of loss incurred by

the Corporation could have been diminished by 33 per cent.

City operations in Karnataka are considered as a

facility and not a business. Therefore, the fares fixed for

these operations cover only a part of their operating costs,

resulting in big losses for the Corporation. It is

well-known that city transport anywhere in the world is not

 182

able to support itself. For this reason, K. V. S.

Suryanarayana 22 laments that in India, men in authority have

not yet realised the fact that the City Services cannot be

run satisfactorily without a subsidy from public revenue.

Thus, in the absence of any subsidy from the

Karnataka government to the KSRTC to ply the losing city

routes, there would be a lopsided cross subsidisation. The

rural passenger with a lower per capita income is made to

subsidise the urban passenger having a higher per capita

income. . The main reasons for the city routes of KSRTC to be

losing ones are :

i. A larger proportion of the city traffic is uni­

directional i.e., empty return ratio is high here.

The buses which are run in the peak hours i.e., a few

hours in the morning and a few hours in the evening,

return almost empty, dropping the passengers at the

places of their work, educational institutions or

their residence.

ii. Extra fleet maintained to cope up with peak hour

traffic cannot be gainfully employed during the rest

of the day. This will lead to extra capital cost.

 183

iii. The total number of kilometres per bus per day is

lower in view of the fact that the speed of the bus

is checked due to many pick up stops. The number of

kms per litre of diesel (KMPL) is also less due to

frequent stopping and frequent slowing down of a bus.

iv. The proportion of pass holders (i.e., the commuters

getting travel facility at concessional rates) is

large in city routes.

v. The practice of providing specialised services on a

point to point basis will increase the non-revenue

kilometres of the Corporation, as the commuters

availing of such a facility are usually pass holders.

Here, a bus from a particular service at a particular

time has to be withdrawn and will have to be made

avialable at the scheduled hour at a pre-determined

place.

The usual accusation 23 made against the working of

the public road transport is that under identical

circumstances, private operators thrive^ whereas Public

Undertakings suffer losses.

 184

Supporters of privatisation argue that private

transport companies are better managed and hence they earn

profits. But the real reasons behind their profitability

are entirely different. The private operators pay

comparatively lesser wages to their employees. There is no

question of paying them Dearness Allowance, Provident Fund

and such other labour amenities. They are made to work for

longer hours in a day and are denied of enjoying holidays.

Many a time, the private owners make use of child labour by

paying meagre wages.

The private operators do not pay Motor Vehicles Tax

promptly. Through various ways of manipulation, they manage

to pay lesser amounts by way of this tax. They try to esta­

blish an easy rapport with the officials in such a way that

it will be possible for them to influence the administrative

machinery to co-operate with them in violating the various

provisions of the Motor Vehicles Act. Or else, they run

their vehicles as contract carriages for which the rate of

Motor Vehicles Tax is lower.

The private operators run only profitable routes.

But public transport is compelled to provide bus services to

the isolated villages connected by low traffic routes. In

 185

rural areas, as far as possible, the private operators will

not allow the bus to start its journey till it is full, even

if it means running the bus much behind the time schedule.

Thus, the private operators are prospering by exploiting

their employees and cheating the government. Hence, it is

not proper to compare the financial performance of the KSRTC

with its counterparts in private sector, as they operate

with diametrically opposite objectives.

Judging the performance of the KSRTC merely on the

basis of the amount of profit made by the organisation, is

not correct. As it is differently motivated, an altogether

different criteria is necessary to assess its operations.

If its revenue is calculated before the payment of taxes to

the government and after adding the revenue lost to the

Corporation due to the government's social obligations, the

KSRTC is able to show profit for all the years during the

study period. Therefore, gross profit instead of net profit

would be the better measuring rod in the case of public

utilities like the KSRTC.

 186

REFERENCES

1. H.G.Guthmann and H.R.Dougall, Corporate Financial

Policy, New Delhi, 1966 p. 197

2. Personnel cost consists of expenditure incurred on

wages and salaries of staff and also on their
welfare and superannuation.

3. Other material cost includes expenses made on Auto

Spare parts, Tyres and Tubes, Batteries, Other
Consumables etc.

4. Tax cost is made up of items like Motor Vehicles Tax,

Passenger Tax and other taxes on vehicles.

5. Miscellaneous cost consists of items like ticket and

traffic stationery, uniforms, electric power and
various other general administrative charges.

6. Guthmann, op. cit., p. 227

7. Central Institute of Road Transport, Report on the

Performance of Nationalised Road Transport
Undertakings 1990-91 and 1991-92, Pune, 1993,
pp. 161-163

8. Leopold A. Bernstein, Financial Statement Analysis -

Theory, Application and Interpretation, Homewood,
Illinois, 1974, p. 434

9. Adloph E. Grunewald and Erwin Esser Nummers, Basic

Managerial Finance, New York, 1970, p. 361
 187

10. P.J.Garfield and W.F.Lovejoy, Public Utility Economics,

New Jersey, 1964, p. 25

11. Harry G.Guthmann and Herbert R. Dougall, op.cit., p.292

12. Quoted by N.Ramasaamy, "Bus Transport Fare Structure

at a Glance", Journal of Transport Management,
Vol. 17, No. 11, November 1993, p. 655

13. Quoted by P.G.Patankar, Road Passenger Transport in

India, Pune, 1982, p. 78

14. S.D.Kulkarni, "Economic Fare for Public Transport",

Journal of Transport Management, February 1982,
p. 24

15. P.A.Francis, "Road Transport : Need for Co-ordinated

Approach", The Economic Times, Vol. XVII, No. 38,
(13 April 1977), p. 7

16. C.H.Sharp, Transport Economics, London, 1973, p. 71

17. KSRTC, Administration Report 1991-92, Bangalore, p. 19

18. Report of the Road Transport Taxation Enquiry Committee,

1967, pp. 22, 63

19. S.D.Kulkarni, "The Concept of Social Cost in Transport

Undertakings", Journal of Transport Management,
October 1980, p. 9

20. V.R.Krishna Iyer, "Corporate Responsibility and Social

Justice", talk delivered at the Administrative
Staff College of India, Hyderabad, on December 21,
1979
 188

21. Ch. Hanumantha Rao and B. Anand Swaroop, "Quantifying

the Leakage of Revenue in State Transport Under­
takings" , Journal of Transport Management, Vol.17,
No. 2, February 1993, p. 85

22. K.V.S.Suryanarayana, "Financing State Transport Under­

takings", State Transport News, Vol. VI, No. 7,
January 1972, p. 21

23. Lokesh Dhar, "Public Transportation, Problems and

Prospects", Journal of Transport Management,
Vol. I, No. 8, March 1978, p. 10