Proposal for the
Re-establishment of SLCTB
Amal Kumarage
Colombo 2005
Present Service Contributions
The private sector has over 18,000 buses. The Clusters
have around 8,000 buses only half can be operated at
present.
Clusters operates around 3,500 to 4,000 buses per day,
compared to around 16,000 of the private sector.
Cluster buses carry around 23% of the passengers. In
cities and main routes this is less and somewhat higher
in rural areas.
Special Service Contributions by
Clusters
Offers Seasons Tickets at 10% cost to students. The Govt pays Rs 225 mn per year. Even though over 300,000 season tickets are sold monthly, only around half of these children appear to come to school using buses travel by cluster buses. There are only 37 school buses operating even occasionally out of a scheduled 102 buses.
Operates rural services for which govt pays Rs 100 mn per year. There are around 200 routes where the Clusters only provide services. The total number of routes is around 4,000. This is around 2% of the services provided.
Can only Private Sector Provide
Services? Capacity is available. Based on past trends, if allowed the private sector will provide 4,000 new buses within a year.
However, the regulation of the private sector is weak. Rules are not adhered to. Overloading, strikes, crew behaviour, speeding etc are problems that regulators cannot overcome as crews are more powerful than most owners.
The industry representation is weak and a few politically motivated individuals can yield a strong influence and hold the industry to ransom by organizing strikes.
Should State Owned bus services be
loss making ? A service if it is not allowed to charge the full cost from the user and does not have a mechanism of receiving subsidies for loss making services, would have to be given general subsides. Examples Health Services, Educational Services etc as at present.
The Fares Policy is based on full cost recovery including the cost of depreciation and overheads. The private sectors operates at the same fare and remains profitable.
Subsidies are paid for selected loss making operations (Rural Services, School Children) etc. This amounts to Rs. 421 million per annum (2004).
The cluster companies can and should recover operating costs. If the services qualifying for subsidy increases, the subsidy payment should be increased. At present these services have reduced drastically.
Revenue
Rs. Million
Way bill collection 3,901
Special Hires 144
Other 147
Season Ticket 201
Sub Total 4,393
Season Ticket Subsidies 225
Un-Economic Route Subsidies 196
Salary Incrase 1,080
Short fall 1,833
EPF 600
SLCTB Expenses 375
Workshop 89
Tyres & Battetries given by the Ministry127
Spare parts and buildings 12
Liabilities 840
Sub Total 5,377
Total 9,770
2004 jraIfhA jshou Rs. Million
Salaries 3,416
EPF & ETF 201
Other Fixed Cost 692
Fuel 4,313
Other Material 1,709
Overtime 575
Other variable cost 1,390
SLCTB Expenses 375
Workshop 70
Tires & Batteries by the Ministry 127
Spare parts and buildings 12
Liabilities 840
Total (before depreciation) 13,720 52.207
Un Covered Depreciation 8,200
Unpaid permission & terminal fees 50
Total with hidden cost 21,970 83.600
Total Bus Km. (Operated) 263
Total Passenger Km 13,234 23%
Standard Difference
2004
OPERATIONAL COST (Rs per km)
C1. Fuel Cost (Diesel) 9.85
C2. Crew Cost 8.33
C3. Service & Lubricants 1.43
C4. Tires & Tubes 2.48
C6. Repairs 5.16
C8.Overheads 2.73
Cost w/o Depreciation 30.16 40.0 9.8
C10. Depreciation of Bus 6.05
Total Cost 36.21
Total Revenue 36.21 minimum 21.0 -15.2
Loss per km 25.1
Cluster
Problems facing Cluster Buses:
Unions Dominate Management: It has now been proved that the tradition of domination by the trade unions will not permit a favourable change and recovery in the management of the cluster companies.
Staffing Irregularities: Promotions given by trade unions have resulted in incompetent management at all levels. Furthermore, critical technical staff such as drivers, conductors, mechanics have in large numbers been promote to supervisory grades, thus severely constraining operational capacity of the clusters.
Operating Capacity: The operational capacity of the combined state sector is limited. Even during CTB days even though there was a large fleet of buses, daily operational fleet remained between 3,500-4,000. In 2001 also the maximum operations did not exceed 5,800 buses. This was after the government injecting over 7,000 new buses during the period 1995 to 2001.
Loss of Revenue: In addition to the losses arising from abuses in procurements, over staffing, a key problem is the revenue collection. The cluster companies are collecting less than Rs 20 per operational bus km. The cost without depreciation is around Rs 40 per km. The shortfall arises due to poor scheduling of buses and losses in revenue collection, which are symptoms of the inability to perform as a transport operator- a key qualification for remaining in the transport business.
Strategy for Re-establishment:
Bus Strength: It should be decided that the State sector
operates 4,000 buses as an immediate target. This is an
achievable target and is sufficient to provide at least 25%
share to maintain balance with private sector operations
and to respond to strikes etc. Increases to be allowed only
after achieving set performance targets.
Operations: The timetables for 4,000 buses should be
determined and entrusted to the relevant cluster company
as the basis for service. Loss making routes/services/trips
identified and payment made through regulators.
Corporate Structure Options
There are two options for the corporate structure for the proposed operation.
Option 1: A Statutory Board such as on the lines of the earlier CTB.
Option 2: A fully govt. owned company registered with RoC.
Option 1: Statutory Board
Advantages:
Political Support
Public Support
Disadvantages
Delay to Incorporate through New Act
All appointments, salary structures, procurement of buses, spares etc will have to go through Govt. FR & AR.
Will be bureaucratic and constrained to compete effectively with the private sector.
Option 2: Govt. Company
Advantages:
Can implement quickly
Can be more commercially oriented
Can raise capital from outside of Treasury
Disadvantages
Political/Trade Union Resistance
Staffing:
The present cluster staff is around 42,000. This works out to around 11 employees per operated bus.
However under better management with out sourcing of peripheral activities and computerisation of many clerical functions, this can be reduced to a core staffing of around 4.5 per operated bus.
Thus, the total staffing requirement would be around 18,000 employees made up of around 14,000 drivers and conductors (@ 3.5/bus) and around 4,000 other staff ( @ 1/bus) for work identified later.
New Staffing
Except for top management all other grades
including technical experts to be engaged on
contract basis.
This will eliminate problems of ‘promotions’
Problems of unwieldy unions can also be
reduced.
Activities to be outsourced
Maintenance of Buses
Maintenance of Depots & Buildings
Fuel Filling & Lubrication
Bus Terminal Management (CBS, Kandy etc)
Workshops
Service Development & Marketing
Training & HR Development
Cleaning Services
Security Services
Activities to be retained Depot Level – Bus Crews (Drivers & Conductors- 3.5 per bus -14,000)
– Scheduling & Operations Management (5 per depot – 500)
– Bus Terminal Supervisors (10 per depot- 1,000)
– Management (all other) (15 per depot – 1,500)
– Support Staff (5 per depot – 500)
HO Level – Management Staff (financial, legal, operations, technical)– 150
– Field Staff (investigations, monitoring) - 100
Total Staff – Depot Level – 17,500
– HO Level - 250
Staffing Issues
VRS offered to all employees (approx 42,000).
– VRS calculated on length of service and salary.
– New scheme to be set up. Those with over 3 years
service will get minimum of Rs 250,000/= (?)
– Others will take monthly salary but will not report for
work. No increments (?)
– If 50% take VRS then the cost may be around Rs 4
to 5 bn, with monthly salary bill of around Rs 90 mn
for others.
Compensation Package for employees of Sri Lanka
Transport Board, Cluster Bus Companies, Regional
Transport Boards, Vauniya Peopelized Bus
Company, Northern Regional Transport Boards, and
All Workshops belongs to SLCTB, who opt for
Voluntary Retirement
This compensation package will apply all
employees. This compensation package
provided for a 3 tier scheme for the following
categories of employees.
– Employees who count 10 or more than 10 years of
service
– Employees who count less than 10 years of service
– Casual/ Contract/ Substitute employees
1. Employees who count 10 or
more than 10 years of service
Service completed 2.0 months salary
for every 12 months of service
Service foregone 2.5 months salary
for every .12 months of service
2 Employees who count less than 10 years of service
0.5 months salary for every 12 months of past service
No payment will be made for the service foregone
Minimum compensation will be 18 months salary or Rs 250,000/= whichever is high
3 Casual/ Contract/ Substitute employees
2 months salary for every 12 months of past
service
Minimum compensation will be 12 months
salary
Method of calculation of compensation – (22
x daily wage x number of months)
Those who avail of the benefits of this
scheme and retire from service will not
be entitled to rejoin the proposed
institution under any circumstance.
Maximum Limit of Compensation a) Executive Grades Rs. 800,000
b) Middle Grades Rs. 600,000
c) Minor Grades Rs. 500,000
After VRS
Liquidation of Cluster Companies
To make settlement under Termination of Employment Scheme for employees who do not take up VRS.
Setting up of Interim Arrangement to continue operations after VRS/Liquidation.
Settle Shareholders after liquidation and determining residual share value (probably negative)
Setting up of New Organisation to (a) operate buses (b) to hold ownership of all assets
Management Structure
Board of Directors
– Chairman,
– 3 professionals (Transport, Business, Legal)
– Treasury & Ministry Representatives
– 3 Executive Directors (technical, operational & administration)
– Rostered appointments.
Depot Managers
– Graduates with transport related qualifications.
Bus Fleet: Immediate Requirement
1500 Buses p.a.
Option 1: Purchase of New Buses:
– High Outlay of Capital around Rs. 4 bn p.a. for three years.
Option 2: Lease Purchase of New Buses:
– Heavy Payback for Company, Govt Guarantee may be required.
Option 3: Provide and Maintain on per km basis.
– No capital outlay, can increase/decrease operations in short run- less risk on investment, higher political risk..
Capital Requirement
VRS- Estimated Cost: Rs 4.5 bn (payable 2005)
Repairs to Depots Rs 1.5 bn (payable 2005)
Purchase of Buses Rs 4bn p.a. (payable 2005/6/7)