The Hindu Business Line : ‘Buses should wait for people’

We believe that each city must have 1,000 buses for every one million people. However, no bus transportation will be successful unless the builders plan the city properly.

MR UPENDRA TRIPATHY, MD, BANGALORE METROPOLITAN TRANSPORT CORPORATION.

Mamuni Das

Bangalore Metropolitan Transport Corporation (BMTC), which was spun off in 1997 from Karnataka State Road Transport Corporation, is the only profitable city transport corporation in the country. Unlike its counterparts in Delhi, Mumbai, Chennai, Kolkata and Ahmedabad, which are in red, BMTC had accumulated profits of Rs 460 crore (2006-07).

The corporation now plans to hit the market with a public issue to raise Rs 750 crore for funding its transit hub projects. BMTC’s Managing Director, Mr Upendra Tripathy spoke to Business Line on their operations strategy.

Excerpts from the interview:

How have the revenues and profit margins moved during the past few years?

Our surplus revenue has registered a multi-fold growth (Rs 224 crore in 2006-07 from Rs 26.7 crore in 2001-02) at a time, when the world over, urban transportation is highly subsidised for a variety of reasons and there is a conscious effort to privatise public transportation in cities.

Our revenues have also increased from about Rs 300 crore (1997) to Rs 900 crore. Increase in rolling stock quality and supply (buses) — from 1924 a decade back to 4741 at the end of 07-08 — has made this possible.

Is your entire revenue driven by ticket sales? Or, are you tapping other sources such as advertising on assets for revenues? What is your future model?

We are unique in the country in this regard. Almost 50 per cent of our revenue comes from daily and monthly passes. These passes remove language and other barriers for travel.

You can take any bus and travel any where. Income from advertisement is not much — we do not encourage ads on buses because it spoils the beauty of the city and the bus. Our future vision is to make a profit of Rs 500 crore from our real estate operations — we have plans to own 2,000 acres of land in a year — and subsidise city travel from those profits. This works well in Hong Kong, although they do not cross-subsidise.

What are the key parameters that you have focused on for achieving improvements in overall operations? Please share the best practices.

We have two key parameters — earnings per kilometre (EPKM) and cost per kilometre (CPKM). These are the two joysticks every transport operator logs on to.

We go by the classical economics — reduce cost and maximise revenue. EPKM was higher than CPKM by Rs 6.73 (2006-07), Rs 3.64 (2005-06), Rs 1.3 (2001-02) and 27 paise (1998-99).

We supply bus-kilometres. We try to reduce price though a variety of means to maximise sales. We have to attract difficult customers — the ones who use two wheelers, private cars and autos.

The positive externalities of our operations are a reduction in congestion in the city, improvement in environmental quality and reduction in accidents on the road.

Our best practices include examples such as fleet expansion, modernisation, and branding of services (peak hour and grid route services; specials for hospitals, malls, pass holders, women; air-conditioned Vajara and Vayu Vajra-airport shuttle), large-scale usage of IT (GPS, e-tendering, smart cards, etc).

Most of our innovations have been freely shared with other transport corporations. World Bank, EU and ADB have shown interest in studying our model.

What are the areas where you have brought in private firms to achieve efficiencies?

We hire buses from private operators on kilometre basis. Private participation also exists in bus body-building in our plant, washing and cleaning of vehicles, issuance of student concession smart cards, annual maintenance of Vajra (Volvo) buses and IT hardware, insurance coverage for all vehicles, project preparation and infrastructure development. We also plan public private partnership in projects for 35 transit hubs.

What is the current fleet size? How is it expected to go up over next few years?

The current size of fleet in BMTC is around 5,000. We aim to double this by 2012. Our philosophy is that instead of people waiting for buses, buses should wait for people in the city. We believe that each city must have 1,000 buses for every one million people.

However, no bus transportation will be successful unless the builders plan the city properly and introduce demand management measures.

What are key components of your cost?

Our largest cost components are fuel and personnel — almost one-third each. We pay over 25 per cent tax on fuel. Compliance with environmental norms on emissions also jacks up costs.

Unlike in China, there is no government policy to supply fuel at lower price for public transport or subsidies capital cost of rolling stock to improve environmental quality in the city.

What are the unique projects you are handling now?

We have three unique projects at hand. We are establishing a network of 45 traffic and transit hubs, with the alliance of two-wheelers, autos, cars and taxis, to increase bus-ridership to 75 per cent share of modal split.

Completing our IPO to disinvest 20 per cent and raise Rs 750 crore is important.

We also plan to run an airport service from the city to connect the new city airport so that any person can reach the airport seamlessly with minimum cost.