Is MSRTC on the path recovery?1

Manisha Karne*

ABSTRACT

Though it is unfashionable to talk about state intervention now a day, this paper wishes to

review the role of passenger state road transportation in India with special reference to

Maharashtra State Road Transport Corporation (henceforth MSRTC). State Road

Transport corporations (henceforth SRTCs) in our country have played crucial role of

providing the most economical and reliable access to mobility to the people of India .But

currently many of these SRTCs find themselves plagued by several problems, partly

external but largely self-inflicted. The problems faced by the SRTCs were accentuated

after passing of the Motor Vehicles act, 1989, which liberalized private bus operations.

With declining financial support from both Central and State Governments after

liberalization and in the wake of intense competition from clandestine operations, these

organizations have had to largely fend for themselves.

Maharashtra State Road Transport Corporation(henceforth MSRTC) has played

crucial role in the provision of public transportation services in Maharashtra. But over the

last few years, due to a variety of factors, particularly falling load factors and competition

from the private sector; MSRTC’s financial performance has shown a marked

deterioration. Whereas in the neighboring state of Karnataka, there was dramatic

financial turnaround after KnSRTC had been split into smaller organizations2.This paper

examines whether the organizational set up needs to be reorganized and what has been

the impact of reorganization that was introduced in the recent past on the basis of the

recommendations of the Upasani Committee.

1 The author is thankful to Prof. S. Sriraman of University of Mumbai and Dr. Vijay Mudgal of MSRTC for their suggestions and valuable help.2 After 1996-97, KnSRTC was divided into four smaller organisations viz. North West KnSRTC, North East KnSRTC, Banglore Metropolitan Transport Corporation and Karnataka State Road Transport Corporation , which remained the apex body.* Reader, Department of Economics, SNDT University Mumbai

1

1. Introduction:

Passenger road transport in India has always been predominantly under the domain of the

public sector. The Road Transport Corporation Act (henceforth known as ‘RTC Act’)

was passed by the Parliament in India in 1950. This Act advocated the nationalization of

passenger road transport services in States of the Union. Under the provisions of the

above Act, many States nationalized their passenger road transport services and thus

State Road Transport Corporations (SRTCs) came into being. Section 18 of the RTC Act

States that “it shall be general duty of the Corporation to exercise its power as

progressively to provide or secure or promote an efficient, adequate, economical and

properly co-coordinated system of road transport services”. Further Section 22 of the

same Act States that the Corporation shall act on “business principles”. Following on the

heels of the RTC Act was the Industrial Policy Resolution of 1956, which included the

passenger road transport industry in Schedule ‘B’. The industry was included in such a

category that was marked for being progressively brought under Government control

with the expectation that the States would take the initiative in establishing new

undertakings.

The process of nationalization of passenger road transport services in the State of

Maharashtra began in July 1948 when, initially, a departmental undertaking of the

Provincial Government with a fleet of 36 buses started operating on the Poona-

Ahmednagar and allied routes, which were later handed over to a Statutory Corporation

viz., Bombay State Road Transport Corporation (BSRTC).

Consequent to the bifurcation of the erstwhile Bombay State with effect from May

1, 1960, the Bombay Reorganization Act, 1960 made provision for the corresponding

bifurcation of the erstwhile Bombay State Road Transport Corporation into the

Maharashtra State Road Transport Corporation (MSRTC) and the Gujarat State Road

Transport Corporation (GSRTC). After bifurcation and with the approval of the Central

Government, a notification was issued in June 1961 merging the Maharashtra State Road

Transport Corporation, State Transport, Marathwada and Provincial Transport Services,

1The Section 3 of the RTC Act provides that the State Govt. can establish Road Transport Corporation.2

Nagpur formally with effect from July 1, 1961. Simultaneously, the jurisdiction of the

Maharashtra State Transport Corporation (MSRTC) was extended to cover the entire

State of Maharashtra.The current Status of MSRTC is provided in the Appendix I

2. PROBLEMS FACED BY MSRTC

MSRTC is facing several problems like other SRTCs in the country. Due to this its

financial profitability has been adversely affected. The problems facing MSRTC are

briefly discussed below:

Falling load factor: Even though MSRTC operates along 100% nationalized

routes in Maharashtra state; it faces competition from private bus and maxi-

cab operators who operate stage carriage services in a clandestine manner

posing as contract carriage operators. Since these operators compete with

MSRTC only along its high density routes, MSRTC’s load factors have fallen

along these routes thereby affecting its financial performance. As can be seen

from Table 1, there has been a steep decline in load factor for MSRTC, from

around 70% in 1994-95 to nearly 56 percent in 2005-06.

Table 1: Decline in load factors in MSRTC

YearLF in

MSRTCYear

LF in

MSRTC

1994-95 70.35 2000-01 59.76

1995-95 73.09 2001-02 60.05

1996-97 72.77 2002-03 58.99

1997-98 67.55 2003-04 55.98

1998-99 65.63 2004-05 56.20

1999-2000 63.55 2005-06 56.69

Source: MSRTC

As per Profit and Loss Statement

3

Excessive Governmental Control: In the RTC Act (1950), guidelines were laid

for the control mechanism between the Road Transport Corporations (RTCs) and

the Government. While RTCs were allowed to tap various avenues of finance to

fulfill their investment requirements, the same required approval from the

respective State Governments. A major problem with this clause was that State

Governments were keen to use RTCs as a tool to further their political interests

rather than facilitate their financial autonomy. Moreover, the Act stipulated that

even in matters related to recruitment, State Governments would have a major

say. Most significantly RTCs did not even possess pricing autonomy. Failure to

comply with Government orders meant heavy penalties to the RTCs. Thus, this

flawed control mechanism between State Governments and RTCs was, to a large

extent, responsible for the deteriorating financial health of these RTCs.

Uneconomic and regulated fare structure: Pricing or fare fixation is a method

of resource allocation. There is no such thing as the right price but rather there are

optimal pricing strategies with specific goals to be achieved (Button, 1993). The

problem with the SRTCs is that there is no economic rationale for determination

of the fare structure. In practice, the organizations have attempted to determine

tariffs based on so-called fully distributed (allocated) costs. However, since fully

distributed costs bear no relationship to marginal costs, there is no basis for

efficiency considerations in this method of pricing. Further, another defect of this

method is its complete neglect of any demand data. In MSRTC, the level and

structure of fares are also determined this way- at least, in theory. In practice,

State Government approval is necessary before tariffs can be implemented. The

Government has the power to modify the recommended tariffs and even if no

modifications are made, their approval, it is normally observed, is accorded after a

long delay. Further, there is also a delay in implementation due to cumbersome

procedures for revision of fares. The delays in approval and implementation have

often meant that the relationship between costs and tariffs on which the

recommendations were made are no longer valid. Thus, the absence of an

economic rationale for the fare structure and the excessive regulation of fares by

the Government have been one of the important causes for the rapid deterioration

4

in the financial condition of MSRTC during the last few decades which has

adversely affected the capacity of the organization to deliver efficient services.

Other implications have been inadequate fleet augmentation, inability to induct

new technology etc., which have also resulted in increasing the costs of service

provision by MSRTC.

Heavy Tax burden: Since RTCs were corporations; they were required to pay

tax to the state in form of passenger tax, motor vehicle tax and so forth. The

MSRTC pays Passenger Tax for Mofussil services is 17.5@ and for City services

@ 3.5%. The rate of passenger taxation in Maharashtra is highest as indicated in

the Table no. 2 which gives the comparative picture for passenger taxation in

some other states. The rate of passenger taxation in Maharashtra is highest and

this has impacted MSRTC’s supply, both quantitatively as well as qualitatively.

The burden of Passenger taxation is indicated in Table 3 below.

Table No.2: Rates of Passenger Tax in Some SRTCs

Name of

the STU

MSRTC KSRTC APSRTC Kerala

SRTC

RSRTC UPSRTC

Rate of

Passenger

Tax

17.50% 7.70% 7.00% Rs. 46

lacs

per

year

Above

10%

17.5%(5%

concession)

Source: MSRTC

Table 3: Passenger tax paid by MSRTC in the past 6 years

Source: MSRTC

Year2000-01 2001-

2002

2002-03 2003-

04

2004-

05

2005-

06

Rs.

Crores

359.06 377.89 392.07 393.17 429.31 455.63

5

The burden of Toll tax which MSRTC pays at various entry points in the city area has

also increased substantially in past four years as shown in the table no 4 below.

Table no. 4: Toll Tax paid by MSRTC

Year2002-03 2003-

04

2004-

05

2005-

06

Rs.

Crores

17.05 21.50 26.46 34.91

Even the Motor Vehicle Tax paid by the corporation is higher than the private

operators. The tax disparity is not only burdensome but it is unjust from the point of

view of the services given by MSRTC. This tax disparity is indicated in the Table no. 5

below.

Table 5: Motor vehicle tax paid by the MSRTC and Private Operators

Type of Bus Tax paid by MSRTC per

bus per Year (in Rs.

Lakhs)

Tax paid by Private

operatorsper bus per Year

(in Rs. Lakhs)

Ordinary Bus 2.51 1.40

Deluxe Bus 8.66 1.40

Air- conditioned bus 16.89 2.25

Burden of social obligations. We have already pointed out in the context of fare

fixation that there are optimal pricing strategies. The optimal price to achieve profit

maximization will differ from that needed to maximize social welfare or sales

revenue. Whenever there is more than one objective to attain, some of these are

treated as goals while the others are treated as constraints. Section 22 of the RTC Act

stipulates that RTCs shall act on ‘business principles’. At the same time, it stipulates

that they function in public interest as well. Thus, the problem of SRTCs is one of

constrained maximization where the objective function is the revenue maximization

function based on fares while the constraints spell out the social obligations. This

6

inherent dichotomy in the act has led to a lot of ambiguity and confusion in

interpreting the roles and functions of RTCs.

Social obligations as far as MSRTC is concerned have basically been in terms

of provision of routes that are un-remunerative as well as concessions in fares to be

offered to certain Sections of the society. In the case of un-remunerative routes (which

are categorized as ‘B’ and ’C’ routes) in regard to MSRTC, it has normally been

observed that these constitute more than 60% of the total number of routes. For instance

the yearly loss of “C” type operation is to the tune of Rs.224.39 crores (approx) during

2005-06. As MSRTC is guided by the service motive these routes are operated with a

view to provide minimum transport facilities to remote rural and backward areas often on

social and political grounds. Though this approach has earned MSRTC the credit of being

the ‘Lifeline’ of rural Maharashtra, there are significant implications. For example, ‘B’

routes are defined as ones where the variable costs are covered and only a part of the

fixed costs are recovered. This situation is just the reverse of that which occurs in

economic theory literature to explain the idea of a firm continuing to be in operation

when a part of the variable costs are covered in addition to fixed costs. In reality, an

organization cannot afford not to take care of variable costs only – a situation that occurs

at the expense of fixed costs, the consequence being running down of fixed assets. The

result is that there is little provision for replacement of the fleet let alone its expansion.

Further, there is no mechanism to find out the social cost that is incurred and to provide

clear guidelines as to who would bear the costs when such new routes are suggested.

As pointed out earlier, MSRTC too has to offer concessions in fares to various

Sections of the society. Generally it is observed that in MSRTC almost 72% of the

concessions are given to the students in different categories whereas 25% are given to

senior citizens. This provision by way of cross subsidization has imposed a heavy burden

on MSRTC over a period of time. Till very recently, the non-plan support (i.e.

compensation for subsidies) was arbitrary and minimal. However, an encouraging trend

has been that since 2000-01, MSRTC have quantified the costs of providing these social

obligatory services and the State Government is reimbursing the amount that MSRTC

incurs as a cost of fare concessions. The State Government has started giving explicit

7

subsidy for these social obligations. But it must be noted that the assistance does not

seem to be conditional upon the achievement of any measures of efficiency or

productivity earlier or even in the recent past. The fare concessions given in 2001-02 was

218.58 and in 2005-06 it amounted to 372.99 crore causing additional burden.

Inadequate Replacement of Fleet: Due to the inability of MSRTC to raise

timely finances, its replacement of fleet has been woefully inadequate. This has

further worsened its position in an intense competitive environment. MSRTC is

thus forced to operate with a fleet whose age is sub-optimally high thereby

resulting in frequent breakdowns. As pointed out in the Upasani committee report

the average age of MSRTC fleet is 6.7 laks kms as against stipulated life of

5.5lakh kms. The non-replacement of overage buses is a cause of concern as it

increases repairs and maintenance costs and reduces productivity

Vertically Integrated Organization: Like most of the other RTCs, MSRTC chose

to operate as a vertically integrated enterprise by owning and managing all allied

activities apart from its core activity of providing public passenger bus transportation.

Over a period of time it owned and operated a large number of depots, workshops,

terminals, bus body building units, tyre retreading plants and so forth. The weak

financial situation of MSRTC made the maintenance of these assets all the more

difficult. Owning and operating these allied activities, which had been justified on the

grounds of lack of specialisation in the country, no longer has any economic rationale

in the post liberalisation era of specialisation. However, the strong labour unions of

MSRTC, apart from a general reluctance to outsourcing has resulted in MSRTC

concentrating its attention needlessly on activities it could have outsourced at a lower

cost and hence reduced its operating cost, particularly personnel cost which

constitutes a relatively large share of 42% in total costs. This would have also

reduced the Staff Bus ratio, which currently stands at a relatively high level of 6.28 in

2002-03 and 6.67 in 2006 for MSRTC.

Thus the end result of all these problems was the MSRTC’s financial health

deteriorated year after year. The MSRTC has often pointed out to the burden of social

8

obligations, the existing organizational structure and the fare structure (controlled) as

being important reasons for their poor physical and financial performance. Further, the

growth in parallel operations of private vehicles in an unregulated environment that was

encouraged by a policy of liberalization appearing as amendments to the Motor Vehicles

Act, 1989 aggravated the problem as the MSRTC was not able to compete effectively

with these parallel operations. This was due to the absence of a level playing field

considering the fare flexibility of the private operators and higher taxes paid by the

MSRTC which resulted in the poor financial situation that they are placed in today. The

financial performance of MSRTC for the period of 93-94 to 2005-06 is shown in the

Appendix No II

3. Organizational Structure of MSRTC

Road transport activities have been found to need more complex organizational

arrangements to deal with complex non-routine events/ operations. Accordingly, the

institutional arrangement for organizing public road transport in Maharashtra is broadly

based on the RTC Act of 1950. In this Act, guidelines were laid out for the control

mechanism between the Road Transport Corporations (RTCs) and State the

Governments. Most SRTCs opted for a hierarchical organizational structure of

operations. The tiers of operations have varied from two to four in different SRTCs.

GSRTC, APSRTC and KnSRTC opted for a three-tier structure of operation. Some have

been organized with only two tiers- a branch / a depot and the head office headed by the

Managing Director (as in Tamilnadu). We now examine the organizational set up in

regard to MSRTC.

The MSRTC is the only organization that adopted a four-tier organization structure

since 1976, where the first tier was the Corporation’s head office consisting of the

Chairman, the Managing Director and departmental chiefs (Executive Directors and

General Managers). The second tier consisted of the Regions, which are now six in

number, namely, Aurangabad, Mumbai, Pune, Nashik, Nagpur and Amravati that vary

quite a bit in terms of the fleet size. The third tier consists of the Divisions, which are

thirty in number, headed by a Divisional Controller titled as Deputy General Manager

and each controlling, on an average of seven to eight depots, At the fourth tier are the

9

Depots which are currently 247 in number and are supposedly the real operating units

levels headed by Assistant Divisional Managers / Depot Managers who implement

management decisions made at higher levels.

The general feeling in the 70s was that the linkage between the head office and the

division was not strong and delegation of authority at the divisional level was found to be

inadequate. Therefore, MSRTC in February 1973 constituted the Administrative Set-up

committee under the Chairmanship of Mr. N.S. Pardasani mainly to examine whether

decentralization of day- to- day functions to appropriate regional set up would be

desirable and, if so, to indicate duties of such authorities to achieve optimum efficiency.

This Pardasani Committee pointed out certain weaknesses of the organizational

structure of MSRTC. To tackle these problems, the Committee made the following

recommendations:

Decentralization of functions and powers at the level of Depot manager should be

progressively undertaken.

Since the Depot is a vital profit centre, it should become the “unit of accounting”

and should function as autonomously as possible. The Pardasani Committee

strongly opposed the introduction of a regional set-up in the structure since they

believed that this would lead to problems. But despite this view, the regional set –

up was introduced in the MSRTC thereby making it a four-tier organization.

Thus, an important recommendation of the Pardasani Committee i.e. of

decentralization of functions and powers to lower levels was not adopted by

MSRTC and it continued to be a highly centralized organization.

In September 1985, the Government of Maharashtra constituted another

Committee of experts under the chairmanship of Dr. P.G. Patankar to study, in depth, the

present organization structure of MSRTC with a view to streamlining it so as to ensure

effective decision-making and also monitoring of organization of operational efficiency.

In the view of the committee, the centralized and tall organization structure with four

hierarchical tiers in management without adequate and uniform decentralization of

powers could be ineffective and costly.

10

After taking a comprehensive overview and making a comparative analysis of

productivity levels in different SRTCs vis-à-vis relative positions of the four regions of

MSRTC, the Patankar Committee recommended that MSRTC should resort to

decentralization of authority- delegating more and more powers for operational activity at

the divisional and depot levels. But such decentralization, it was suggested, should be

within the framework of the centralized policy making body, and a centralized

administrative set-up with minimum number of operational tiers for effective line of

control. The Committee based its recommendations on the basis of its conclusion that

breaking a single Corporation for the entire State between two or more Corporations on a

regional basis will not necessarily give desired improvement in the quality of

management.

Both Paradasani Committee and Dr Patankar Committee did not recommend division

of the Corporation in to smaller corporations. Their emphasis was mainly on up-gradation

of skills, decentralization of administrative work, delegation of powers and authority to 

strengthen depots and divisions, improving quality of recruitment, proper planning, 

and appointments of Professionals on board including that of Chairman and Managing

Director and non-interference by the Government etc. It should be noted that like

Paradasani Committee Dr. Patankar Committee had felt that once Depots and Divisions

were strengthened, the regional set up should be redundant and can be done away without

any disadvantage whatsoever. It was felt that the posts of 

Regional Managers who are not accountable to Corporate Office for profit or loss should

be abolished as their duties being only supervisory and advisory.

4. Review of MSRTC by Upasani Committee (2002-03)

The Upasani Committee was set up in 2002 to review restructuring in MSRTC. It made

exhaustive review of MSRTC’s financial performance and organizational structure of

MSRTC. In view of the above, the Upasani committee made certain recommendations

which could be divided in the following two categories.

11

Recommendations on Financial Restructuring:

The committee noted that financial position of the MSRTC is precarious and there have

been accumulated losses in the past few years. The reasons for financial losses are mainly

clandestine operations, cost of uneconomic trips, social obligations, heavy tax burden city

service operations and overage buses. For improving this condition the MSRTC and the

State has to take immediate action. The main highlights of the recommendations made by

the committee on this issue are as under.

Control on clandestine operations

Creating awareness among people regarding the dangers of using clandestine

operations.

Regulatory framework to control illegal operations of contract carriage buses

which operate as stage carriage buses should be made stricter by enhancing

penalties and setting up of an independent machinery to implement this policy

In the competitive environment any fare revision to absorb rise input prices results

in to decline in the load factor, MSRTC should try to absorb some part of increase

in input price by increasing productivity.

Due to the growing urbanization and the competition from other modes of

transport, there is an urgent need for MSRTC to revamp its operations.

To reduce the burden of social obligations MSRTC should be entitled to

automatic reimbursement of losses and a mechanism could be worked out as its

reimbursement out of passenger tax payable by the MSRTC.

Need for stricter definition of Parallel operations and measures to control such

operations.

The function of line checking and traffic management could be separated to make

it more effective.

A shorter business plan for replacing overage buses and considering the option of

hiring of new buses from private operators.

State government should consider special funding for overage buses.

Review of losses made by some depots and to avoid further losses operations with

the help of hire –purchase agreement for operation can be considered.

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Recommendations on organizational Restructuring

As said earlier, MSRTC is the only Public Sector Transport Undertaking in India

having a 4-tier organisation. Most of the other organisations have either 2-tier or 3-

tier organisational structure. Karnataka has four Corporations, while in Tamilnadu,

there is a separate company for each district to manage transport services.

The experience of MSRTC of working of a 4-tier organisational set up shows

that in initial stages the Regional set up having considerable delegated powers of the

Central Office functioned very well. Later on number of restrictions was placed on

the exercise of these powers either by the Central Office or by the Board or because

of the general policy instructions given by the State Government. One of the main

reasons why the decentralized set up could not achieve expected results was because

of the existence of the Central Office manned by officers of higher rank who

continued to call for information and issue directions on matters which were

delegated exclusively to the Regional offices. Even the matters, which are within the

scope of day to day management like framing timetables, appointment of personnel,

transfers of unit cadre staff etc. were interfered with. All this resulted in reduced

responsibility of the Regional office and diluted the authority given to the Divisional

Office and resulted in lack of control and indiscipline. It was strongly felt that 

the Regional set up has failed to serve the purpose for which it was created. For

instance in the year 2001-02 the MSRTC has spent a sum of Rs 8.37 crores on six

regional offices. Reduction of one tier could be achieved either by eliminating

regional offices and retaining one single large corporation or by eliminating Central

office and its associate offices and creating three separate Corporations by suitably

combining the operations of contiguous geographical areas. There was also a feeling

that the advantages of a large single corporation far outweigh the likely advantages in

splitting the operations in three corporations. It was also felt that establishment of

independent regional corporations or district wise companies or corporations or

subsidiary corporations would not only result in increase in overheads and

administrative costs without any commensurate operational benefits but also the

financial viability of such companies or corporations was doubtful.

13

The Karnataka‘s experience needs to be noted here. After splitting of the

KnSRTC, there has been a spectacular improvement in its performance. However the

improvement was also due to other factors like the full support extended by the

government in handling the labour relations, 14% reduction in passenger tax,

charging a concessional sales tax at the rate of 5% on all purchases except oil, cement

and steel, made by Karnataka Corporation. This experience brings out clearly that

organizational restructuring if supported by other relevant steps can lead to positive

changes in the organization’s performance. So after taking into considerations

different aspects related to organizational structure, Upasani committee made certain

recommendations for organizational restructuring of MSRTC.

The Committee recommended that as a first step MSRTC should eliminate the

Regional se up and Central Units like Kurla Stores, Central Stores Purchase

Organisation and to empower all Divisions and Central Workshops and make

them accountable for financial results also. Such an exercise would result

reduction in staff and staff cost as well as down sizing of administrative and

workshop organization structures. 

The committee strongly recommended decentralization of power by way of

empowering 30 divisions and 3 central workshops and holding them fully

accountable and responsible for physical performance and financial results. In

organisation like MSRTC where operations ought to be conducted on business

principles, it was believed that authority also ought to be 

accompanied with financial accountability and responsibility. It also recommends

that all operating managers are held fully responsible and accountable for the

financial results as well as physical performance. Along with eliminating and

trimming administrative tiers, management at all levels from Corporation Board

to Depot should be held accountable for financial performance. At the Head

office, Monitoring Committees should be constituted to 

supervise financial performance of the divisions. Along with the abolition of

Regional Office, MSRTC should also introduce a system of Transfer of funds

from head office to thirty divisions and three central workshops on the basis of

approved budget of the division/ workshops and shortfall in performance, if any,

14

will have to explained to the Monitoring committee and its sanction will have to

be obtained before any extra funds are released by Head Office. Such a system

will make Divisional Management cost conscious and drive them 

to perform better. The Divisions should function as if they are independent units

without separate corporate legal status and bound by the guidelines of the Central

Office. The empowered divisions should prepare their own budgets and get them

approved from Central Office. Similar modifications should be made in the set up

of three Central workshops, and the Divisions as well as Central 

Workshops should also prepare their own profit and loss account and balance

sheet.

The role of Central Office would under go a change because of empowerment of

Divisions and Central Workshops and should also result in reduction of staff.

Thus without the splitting of MSRTC in to different legally constituted corporate

units as done in case of KnSRTC, it is possible for the Head Office to 

treat each of the 33 Units of MSRTC (30 divisions and 3 Central Workshops) as

an independent unit with full powers for all practical purposes preparing it's own

budget, profit and loss account, balance sheet, managing it's finances and taking

full financial responsibility, subject to certain conditions. 

It is important for MSRTC to evolve a system of evaluation of performance of

each of these 33 units and a scientifically evolved scoring system can be

implemented to assess the physical and financial performance of these units. This

will motivate the staff and incentives could be given to better performance.

A long term plan has to be made for establishing new system and procedures and

modification of some of the existing systems and procedures in view of the

decentralization and organizational restructuring.

Is MSRTC on the path of recovery?

The recommendations of Upasani Committee mainly aimed at improving the financial

performance by way cost minimization and revenue maximization by reducing the

clandestine operations. The major focus was on organizational restructuring which has

been partially implemented in MSRTC. The powers at the Regional set up were diluted

15

and currently though the regional set up still exists with Regional managers and Regional

Engineers there has been substantial staff reduction at the regional offices. The divisions

are strengthened and empowered by way transfer of funds and decision making autonomy

as indicated by Upasani committee. This organizational restructuring though only

partially has been accompanied by number of measures to raise revenue were also taken

by MSRTC. Some of the new services started were introduction of Air-conditioned

Deluxe Buses on high density routes, introduction of Mini buses and Midi Buses to curb

the clandestine operations, Annual concession travel card system, Janata Bus service,

improved passenger amenities, Travel as you like scheme etc. Along with this certain

supplementary measures such as computerisation in Reservations, Accounting and

computer training for employees were introduce to improve the operational

administrative efficiency of MSRTC. The Corporation has taken measures to improve

fuel efficiency and there is encouraging outcome as the KPTL and KPL shows

improvement as shown in the table 6 below.

The Corporation has decided to computerise working of the depots in phased

manner. The wireless communication has been upgraded so that in case of emergencies

the remedial and rescue operations could be carried out immediately. The corporation has

introduced VHF Communication system at important places of three National Highways.

Special wireless wing headed by Wireless planning and co-ordinated officer in the

organization has been created. Wireless system at 13 divisions made operational and will

be extended to others in near future. The proposal of hiring buses is also under

consideration which may further help in cost cutting.

The combined effect of all these measure has been positive. Though no financial

turn around is seen in MSRTC like that of KnSRTC, there are certain positive signs of

improvement in performance of MSRTC as indicated in the table 6 below3.

3 The Upasani committee(2003) was of the view that the results of reorganization will begin to appear only in the third year.

16

Table No. 6: Physical and financial performance of MSRTC (2001 to 2005-06)

Sr.

No

Particulars 2005-06 2004-05 2003-04 2002-03 2001-02

1 % Fleet Utilization 93.16 95.47 94.16 93.96 94.11

2 % load Factor 56.59 56.20 55.98 58.99 60.05

3 Vehicle Utilization 321.30 323.45 317.73 311.85 308.20

4 Effective Kms (In

Crores)

172.14 179.76 176.52 176.56 178.27

5 KPTL (HSD) 48.93 48.54 48.07 47.63 47.02

6 KPL(Engine oil) 928 874 788 724 660

7 Gross Revenue (Rs. In

Crores)

3295.30 3263.45 2747.07 2727.51 2641.49

Paise per km(EPKM) 1914.43 1315.45 1556.23 1544.77 1481.76

7 Total Expenditure

in(Rs. Crores)

3329.93 3396.63 2927.11 2808.81 2711.02

8 CPKM (in paise) 1914.54 1889.54 1658.23 1590.86 1520.77

9 Profit/Loss Excl. prior

period adjustment(Rs

crores)

-34.63 -133.18 -180.04 -81.30 -69.53

10 Profit/Loss Incl. prior

period adjustment(Rs

crores)

-37.29 -129.37 -205.07 -71.91 -55.38

One has to take note of the fact that there have been only partial efforts of

reorganization and the regional set up though now have become non-operational, the

regional offices still exists. The control of clandestine operations requires stringent policy

interventions and involvement of various authorities like the Road Transport Authority,

MSRTC and the State government. Hence controlling the clandestine operations is the

issue which remains unresolved. But despite of theses constraints, the efforts of cost

cutting through organizational restructuring, improving operational efficiency and

17

modernization has certainly helped in improving the EPKM, controlling falling load

factor and reducing losses over the last 2-3 years i.e. the period after Upasani

Committee’s recommendations have been partially implemented. In RSRTC, which too

had a highly centralized organizational structure like MSRTC earlier, there was

progressive improvement in physical parameters when re-organization was introduced in

1990. There was devolution of power to depot level and due to this novel scheme of

designating each depot as a ‘profit centre’, which were given incentives for successful

achievements of the physical and financial targets set for the depots, the performance of

RSRTC improved substantially thereafter.

There is research finding which supports the need for implementing organizational

restructuring. This finding about the measurement of Technical Efficiency score by

using Malmquist Data Envelopment Analysis technique indicated that all the regions of

MSRTC are operating either on or very close to the production frontier.(Karne,

2004).Our findings indicate that though technical efficiency scores for the regions are

high, under a centralized framework for decision making, the imposition of targets,

financial constraints and the burden of social obligations have created distortions in the

functioning of these regions. Thus, a centralized framework is recognized as the major

cause of poor performance of this organization, which further implies this organization

requires restructuring.

The efforts of reorganisation will fail to bring desired results unless there is an

environment in which professional and competent managers are able to exercise

delegated authority and could be held responsible for the physical as well as financial

performance. Such structure can be created only if there is no state government

interference in day today operations. Hence, MSRTC needs to be given full autonomy

within the framework of RTC Act. If Memorandum of Understanding can be prepared

between MSRTC and State government it will give clarity to the mission and objectives

of MSRTC and targets to be achieved in performance and at the same time it will also

regulate the relationship between the government and the Corporation. To conclude ,If

MSRTC wishes the to maintain its status of life line of Maharashtra then there is an

urgent need to implement reforms in the near future and this would also set an example

for other SRTCs facing similar problems.

18

Appendix I

MSRTC at a glance

Established on 1st June 1948.

Owns 1379 hectares of land

No. of regions 6

No. of divisions 30

No. of depots 247

No/ of buses held 15445

Average No. of routes 16640

Average no. of schedules operated 13930

No. of villages served (directly) 41418

Total population served 1009.78 Lakhs (99.77% of total population) as on 31-03-2005

Daily Effective kms operated 48.36 Lakhs

Average daily passengers traveled 62.10 Lakhs

No. of central workshops 3

No. of divisional workshops 32

No of employees (including staff at central units) 102818 as on 31-3-06

Appendix No. II: Profit /Loss during 1993-94 to 2001-2002.

MSRTC 2002-03 2003-04 2004-05 2005-06

Profit/loss

(Rr.

crores)

-81. 30 -180.04 -133.18 -34.63

Source: Annual Administrative Report of MSRTC, several years

As per profit and loss statement.

References:

MSRTC 1993-94 1994-95 1995-96 1996-97 1997-

98

1998-99 1999-

2000

2000-

2001

2001-

2002

Profit/loss

(Rr. crores)

43.92 3.51 -3.17 -136.24 -88.37 -142.93 -156.31 -22.97 -69.53

19

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