End of the road for APSRTC ?

The Andhra Pradesh Road Transport Corporation (APSTRC) is perennially in losses, its employees seem to go on strike at the drop of a hat and overall the corporation can’t seem to put a foot right at all as its actions (and including the state government’s in its regard) have come for widespread ridicule in recent times.

Recently, the state government spent millions of rupees of taxpayer’s money to hire external consultants (Professors at the Indian Institute of Management, Bangalore) to help them understand what is wrong with the corporation & what needs to be done to set it right. The answers that professors at IIM Bangalore came up with were so obvious that it left the general public & the opposition wondering if they were needed in the first place. Indeed, the answers were fundamental to the core of the problem –

o Too high costs (rocketing cost of fuel, massive overstaffing, high taxes)
o Too less revenues (under-priced tickets, and further subsidization for sections of society such as students etc.)

which meant the revenues of the corporation could never catch up with spiraling costs.

The suggestion was to decrease costs by

o Reduction in fuel surcharges (In India, state governments make a lot of revenue on fuel surcharges). This was becoming an unbearable cost on the corporation with increasing global oil prices
o Improve bus mileage (something that APSRTC has been quite successful at, but more on that later). This would reduce the impact of increasing cost of fuel
o Decrease no. of employees per bus ratio (BSR) to get a higher productivity from its assets (buses) by reducing expenses in utilizing them (cost of employees such as drivers, conductors, mechanics & cleaners)

And increase revenues by

o Raising ticket prices for travelers to reasonable levels
o Reducing the burden of subsidies given in the form of concessional bus passes for students etc. This could be done by either removing subsidies or state government bearing full cost of subsidies

Indeed, the answers are not acceptable to the populist state government which is just not ready to accept any of these recommendations, as this would be at a heavy cost to its image of being pro-poor, and if it does make such a move, it would be quickly taken advantage of by the opposition. The employees union is not ready to play its part in reducing employee costs and in fact wants a raise for a large majority of its workforce.

Privatization of the state-owned road transport corporation would take much of the burden off the chest of the state government and push the issue of long-term viability of the corporation into private hands. This could be a good idea especially as providing cheap road transport to the public is really debatable as to whether it is one of the priorities of a welfare state. The state government could indeed focus its attention on the needs of the really poor within its state & focus on other developmental & socio-economic issues rather than worrying about the financial health of one of the many companies owned by it. The experience of Mumbai & Delhi (large private-owned & run road transport corporations here) as also its own experience of separating APSEB into APGENCO & APTRANSCO (State Electricity Board of Andhra Pradesh was split into two separate companies focusing on power generation & power transmission exclusively. However, these two companies have not been privatized yet, which would have been the logical extension of the reforms process.) should have given it confidence to go ahead with the privatization but it is not really an option as employee unions are vehemently against any such plans and even the current dispensation is not really pro-reform. (The splitting of APSEB was carried out during the previous government led by TDP, which is now in the opposition, but given the nature of Indian politics, will oppose tooth-and-nail any Congress plans of privatizing APSRTC.)

APSTRC thus continues to run up huge losses and remains a lag on the state exchequer. The employee unions allege the state government does not have the best interests of APSRTC in mind as some people in the government own private road transport companies & APSRTC directly competes with them. In such trying circumstances with multiple political, social, economic & employee relations ramifications staring the state government, its continued inaction is only likely to make the problem worse.

It is high time that the state government takes tough corrective measures to rescue & resurrect APSRTC, starting by increasing bus fares, reducing BSR & restructuring loans as suggested by professors from IIM Bangalore. Privatization would be the next logical step, but that might be too tough to digest for the current government.