Bonds, bus-stand malls to pull Kerala State Transport Corp out of the red

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SummaryAlthough growing profit-after-tax has never been a driver for any state transport utility in the country, this one has been splashing in the red, with about Rs 1,500-crore accumulated losses. Creditors like Indian Oil and Hindustan Petroleum have started breathing down KSRTC’s neck for outstandings of Rs 145 crore.

The Left Democratic Front (LDF) has prescribed bonds and build-operate-transfer (BOT) bus-stand malls for Kerala State Road Transport Corporation (KSRTC).

Although growing profit-after-tax has never been a driver for any state transport utility in the country, this one has been splashing in the red, with about Rs 1,500-crore accumulated losses. Creditors like Indian Oil and Hindustan Petroleum have started breathing down KSRTC’s neck for outstandings of Rs 145 crore. Every now and then, there is the threat of diesel supply choke, as the corporation reels under Rs 195 crore losses per annum.

The proposed bond is just a first-aid of sorts. And the state's public finance managers are hardly excited about shouldering the burden. ‘‘There is no option but to go for the bond, given the growing credit on fuel,’’ says TP Sen Kumar, managing director, KSRTC.

While oil marketing firms offer discounts of about Rs 1.10 per litre to state transport undertakings with low outstandings, KSRTC has been missing the bus. Bonds could ensure a clean chit, entitling it discounts worth Rs 13 crore of savings per year.

The question is: what happens when the loan cycle catches up? KSRTC is out to stretch its non-ticket revenue by building commercially viable malls in its prime location bus-stands.

When in Opposition, the LDF had been up in arms against Reliance’s proposal to partner a chain of malls in some key bus-stands. ‘‘Here is where KTDFC (Kerala's transport financing PSU) with deep pockets comes in. It is KTDFC, which is to be the BoT partner in setting up bus-stand malls,’’ says transport minister Mathew P Thomas, ruling out a private partner.

By bringing in a profit-making in-house partner like KTDFC, the government is counting on making the BoT contract a win-win deal. LDF's political panel has insisted that when building the malls, the annuity should start flowing in from the very first year, to be shared on 50:50 basis. This is estimated to fetch about Rs 80 crore per year.

A report by State Planning Board, prepared five years ago, had blamed ‘sub-optimal revenue’ from operating routes as the prime reason for KSRTC's crisis. Its earnings per km is merely Rs 26 and the fleet-utilisation as low as 30%.

Although dropping unviable routes is a decision that calls for bold political conviction, some of these flaws are being. In a single month (August), Thiruvananthapuram district alone yielded Rs 1.61 crore extra revenue, when KSRTC stopped sharing the most profitable routes with private operators. To boost the fleet, it now plans to buy 1,000 buses per year. It would take about two months for the KSRTC package to get finalised, i.e, bonds, malls and fleet of Volvos.

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