POLICY PAPER: POLICY FOR INTRODUCING NEW SCHEMES THROUGH PUBLIC PRIVATE PARTNERSHIP TO MAKE THE KERALA STATE ROAD TRANSPORT CORPORATION (KSRTC)  EFFICIENT AND PROFITABLE.

                                                                      

 Biju Prabhakar IAS

                                                                                        

Policy Recommendation:

KSRTC – The Kerala State Road Transport Corporation, is making losses every day and it cannot be allowed to be closed down, crushed under the ever increasing losses, as it provides vital service and also act as price-control mechanism in the public transport sector. It is necessary to turn it around and this is proposed through a major change in  policy of the government, which now requires KSRTC to undertake every activity on its own and instead, ushering in public-private partnership in some key areas, where the management lacks  resources and expertise.

 

Back ground:

The KSRTC, the biggest public sector Unit of Kerala, is constantly in the red, with accumulated losses of Rs.1529 Cr as on 31^st March 2012. Every month, it incurs a loss of Rs.58 Cr on an average, and this is showing an upward trend. The support from Government is minimal. At the same time, the Government, as part of appeasing various sections of the society, decided in the past to give concessions to students, freedom fighters and even to journalists, who command handsome perks and allowances. On an average, a student spends Rs.55/month and travels 500 km per month.  In addition to this, the political pressure from MLAs, MPs and Local Self Government functionaries force the Corporation to ply buses to uneconomical routes, often to remote places. The middle management consists of promotees from the lower cadres and not aware of the modern management techniques and often not capable of handling higher responsibilities. The e-governance programme started some years ago has not created any impact. The biggest blow to the corporation occurred when, in the year 1984, the Government without grasping the long term implications, introduced Pension scheme at par with Government employees. KSRTC has 26705 permanent staff, 13275 casual staff and about 200 officers. The number of pensioners as on date is 35354, and soon will surpass the number of serving employees.  The pension amount comes to around Rs 409 Cr, the salary bills around Rs.644 Cr and it requires, Rs.1053 Cr every year to pay the salary and pension. The monthly income is around Rs.139 Cr and Rs.149 Cr is needed as operational expenses, which include salary of the staff. If the pension amount is taken out, the KSRTC can make a profit of Rs.23 Cr every month. It is time for a major policy change, in the operation of the Corporation and this is proposed to be achieved through introduction of Public Private Partnerships in key areas.

Rationale for Policy Change:

The salary bills, the pension benefits, the operational expenses – cost of fuel, spare parts, tyres, etc are going up every year and therefore the accumulated losses will also shoot up. The losses have to arrested, the Corporation needs to be made efficient and profit generating, so that it need not depend on the government for its funding every year. The surplus funds generated from its operation could be invested in better infrastructure and facilities, thereby, providing better service to the passengers. It could also pay back the investments made by the government once it is on a self footing, contributing to the public exchequer. If some drastic steps are not taken at this stage, the cash starved coffers of the government will be drained further, as the government cannot close down this essential public service.

Alternatives & Comparative Analysis:

Alternative 1: Government taking over the pension expenses of all the present and future KSRTC pensioners as in the case of the other government employees. This will take away the liability of paying Rs.409 Cr every year or more from the KSRTC revenues and also permit the Corporation to come out of the red, to use the operational profits not only for meeting the operational expenses including salary of its existing staff, but also to provide some cash reserves for making meaningful investments in priority areas such as capacity addition of buses, modernising bus stations and other facilities, etc..

Alternative 2: Government to provide soft loans to the Corporation as working capital or arrange for interest free loans from funding agencies. This will not wipe out the losses in one step, but will provide for making  investments in improving the infrastructure and buses.

Alternative 3: Government to issue orders for voluntary pension scheme or even stop the pension scheme for those retiring from the service during this year onwards.

Alternative 4: Invite PPP, which will bring in resources, expertise and efficiency in the following areas.

a.  Construction of Bus stations as Shopping Mall cum Multiplexes. This is an idea which was mooted in the year 2001 and some steps were taken towards its fulfilment. But later, a new entity, Kerala  Transport Development Financing Corporation (KTDFC) was constituted and construction of multiplexes was entrusted to it. The KTDFC borrowed money from outside and had taken up the job, but ultimately, it is public money. Another defect in the scheme, was that the built up area was limited to a portion of the large acreage of land . The KSRTC bus stations are   prime locations of any city or town and every inch matters. The buses can be parked in the ground floor or basement floors of multi-storied building built above it, occupying the entire area of the prime land, in strict compliance with the provisions of the Kerala Municipal Building Rules. After completion, the operation and maintenance of the built up space is planned to be taken up again in a governmental way, leading to customer dissatisfaction.  The operation and maintenance of the entire facility could be entrusted to some reliable Facility Management Agency, on the basis of a performance based revenue sharing system. The customer satisfaction level in this arrangement will be at maximum.

b.  CNG Pumps in KSRTC bus stations: The diesel prices are going up and soon will be decontrolled. This will further increase the operational costs. Pilferage is common and KSRTC has not estimated the losses on account of this. The environmental pollution from the diesel engines and the hazardous wastes generated by the buses, the high maintenance and replacement costs of engines are issues to be addressed. Delhi Transport Corporation had switched from diesel to CNG. CNG is not so popular in Kerala, due to small number of filling stations. The proposal is to convert all the buses into CNG and set up CNG filling stations by the side of the road, so that KSRTC as well as other vehicle owners can avail the facility. This can be done as a revenue sharing model and also put an end to pilferage, as CNG cannot be transported in cans and sold elsewhere.

c. Wet lease of Buses: It is a practice in any State, every new government/Minister announces to introduce 1000 more buses, as and when they assume power. It is not necessary to purchase buses. The buses, especially the long distance buses can be hired on long term contract for 5 to 7 years, with driver, and by ensuring 95% uptime. There is no requirement of paying pension to the driver, no need for maintenance and spares, no tyre replacement, and the rates of this arrangement will be lesser than  the running cost (including staff cost and pension) of the KSRTC owned buses.The vehicle manufacturers can also ‘dry lease’ the buses or on an annuity model, so that the initial investment is reduced.

d.  Courier Services: KSRTC has a net work spanning the entire State, covering the nooks and corners. The buses are not designed to carry parcels and the luggage on the top of buses, has its own problems of loading and unloading. First requirement of this strategy is to acquire buses that can hold parcels in its belly and ply them in long distance routes. The logistics of sorting the parcels, loading/unloading and delivery, has to be entrusted to a courier company, which will manage through a software driven parcel tracking system. The KSRTC bus stands will also act as collection points.

e. On-line reservation and Booking agents: All the seat arrangements of long distance buses are to be mapped and displayed on line, so that public can book tickets on line. KSRTC is presently doing this and hardly 500 passengers avail this facility. The season tickets could be introduced as smart cards, with readers on every bus, the students’ concession and other ticketing arrangements could be outsourced to private agents. This will ensure more sales and also relieve the public of the hard ships of coming to the Bus stations for getting them, as they are either delivered by post or obtained from the agents at their shops.

f. Advertisements in Buses and Bus stations: KSRTC has not yet tapped the potential revenue from advertisements, except leasing out space for a few hoardings here and there and also on some of the buses. It is possible to completely turn towards digital bill boards, installed on vantage points on the buildings, inside buses as on LED/LCD displays (updated through a Wi-Fi, when the buses enters a station). This could be effectively undertaken through private agencies.

g. Shared purchase of Buses:The long distance buses, especially inter-state buses have to be treated as a profit centre and the investment on the buses shall be done through floating of equity shares. The revenues and expenses of the buses shall be separately accounted and profit shall be shared between the share holders at the end of every month/quarter. The investment can first come from the employees and later from general public, after  demonstrating the proof of concept. This model will ensure the participation of employees and create a sense of belonging among them.

On evaluating the four alternatives listed above, it could be seen that, the first two alternatives, will require additional funds from the government, which will be near impossible under the precarious financial position of the State.The third alternatives is a hard political decision, jeopardising the income and benefits of over 34,000 families, they enjoyed till the other day. Borrowing from the funding agencies/banks will be costly option. The pros and cons of the fourth alternative are discussed as follows;

                    i.            The private sector will bring in resources, expertise and efficiency and the result will be increased customer satisfaction.

                  ii.            The much needed capital is also brought in by the Private sector so that expansion programmes and other capital investments could be undertaken in a phased manner.

                iii.     The conversion of buses into CNG driven and also hiring out space for setting up CNG filling stations to private sector will popularise the use of CNG in heavy vehicles and this will reduce pollution and subsequent health issues, through out the State.

                iv.   The passengers will be offered every facility from good toilets to good hotels, shops in the multiplexes and the performance based management system ensures that such facilities are maintained well.

Coming to the problems that may be confronted, is the strong opposition from trade unions against involvement of private agencies in the above sectors. There will be opposition against leasing out space for setting up CNG stations, outsourcing the booking operations etc. But all these oppositions could be over come when better pay and perks are offered to the employees, when the income start coming from the schemes mentioned.

Other requirements:

a.  Instead of undertaking the above activities by the mammoth Corporation directly, it will be ideal to create a SPV as a subsidiary company, with 74% equity from the KSRTC, with professionals at the top to manage the private partners and for better accountability. The involvement of employees can be ensured through issuing one share each to every employee for the remaining 26% so that their representative is also included in the Board of new SPV.

b.  Negotiations with the employees is a pre-requisite, as a confidence building measure and also part of transparency of the arrangements with private sector.

Monitoring & Evaluation:

a. Monitoring and evaluation shall be done on the basis of Key Performance Indicators, which shall be part of the concessionaire agreement, for the respective services offered.

b. This shall be done at two levels, one at the Bus depot level (treated as a profit centre) and another at the State level by Committee headed by the Hon.Transport Minister.

Conclusion:

            The financial problems of KSRTC cannot be solved over night. The ever increasing accumulated losses donot allow the Corporation to grow and provide efficient services to its customers, but always depending on the government for any capital investment. The resource crunch prevents the government from taking up the huge recurring commitment in terms of the pensionary benefits of over 34000 persons. The customer services are hit because of all these issues and the major policy change to bring in private sector will provide with resources and efficiency. This will generate substantial income and in 10 years, the accumulated losses could be wiped off, provide better pay and perks to the existing employees and to a certain extent to the pensioners through contributory pension scheme.The substantial cash inflow expected will help the Corporation to come out of the present financial situation, provide adequate fund for new investments and ultimately benefit the customers through better service. The decision to be taken by the Ministry at this stage is to permit the corporation to go in for PPP model of operations in the above mentioned areas for which discussions with the Unions have to be started immediately.

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FOOD SAFETY & CONSUMPTION OF ALCOHOLIC BEVERAGES IN KERALA

Kerala has made a progressive stride in its steps towards preventing the manufacture and trade of uncontrolled illicit liquor by bringing in the entire foreign liquor trade in the State under the Beverages Corporation. The taxation system prevalent in the State is that the liquor on the basis of its alcoholic content are taxed very heavily. On a comparison with other States, it can be found that the tax rates are so high in the state that most of the smugglers use, Mahe, (a part of Pondicherry State, where taxes are lowest)  and also use border check-posts  as conduits for smuggling of illegal liquor in to this State. This should have been at par with the tax rates of other states and it is unlikely that we can lower the tax rates at this stage, due to the huge loss in revenue anticipated. But it may be noted that the after the banning, the clear arrack is coming in a coloured form in the guise of foreign liquor.   The high tax regime has raised concerns in food safety of almost all sections of the male population of the State. Let me share some thoughts on this issue. (In the Gods own land of controversies, please understand that the views  expressed here are purely professional from the food safety point of view, and all the Governments, for the last few decades are following the same policy, more or less in the same lines, thinking that  High tax regime and holiday on the first day of a month will reduce consumption of liquor(sic))

1.     Preventing working class from consuming hard liquor: Though cheap liquor is purchased by the Beverage Corporation, a high tax regime prohibits the common man/working class to consume the foreign liquor sold by govt run outlets.  The result is that, he has to depend on illicit liquor, brewed with prohibited materials and in unhygienic condition,  and this often leads the government to embarrassing situations in the form of hooch tragedies. And governments, in the past, announced Rs.5 lakh per victim to tide over public anger. It may be kindly understood that even in gulf countries, where punishments like beheading or flogging in public has failed to prevent the manufacture and trade of illegal liquor. Any wise government will have to acknowledge that the consumption of liquor cannot be prevented by just raising the taxes and making the commodity prohibitively costly. That will help only illegal market to grow. It is necessary in the interest of the working class that the govt should provide them with an opportunity to take good quality liquor at a lesser cost, but with government’s control need to be there on the alcohol content and without the private manufacturers taking benefit undue advantage. The solution proposed is to manufacture good quality cheap liquor, with low alcohol percentage, at the government run Chittor sugars or Pandalam sugars and make them available through the beverages corporation/consumerfed outlets. Unless this is done, we are encouraging the mixing on illegal spirit in toddy and the health of our working class is being affected badly. In the olden days, the working class preferred country toddy, after a day’s hard labour, but the available material also has become an unsafe commodity. (see point 5 below). This high alcohol content liquor is UNSAFE, as it is spoiling the health of the our working class.

2.     Preventing younger generation from consuming hard liquor: The second class of citizens whose health is adversely affected because of the inadvertent promotion of hard liquor by the government is the youth of the State. We cannot prevent the youth from the consumption of alcohol especially when they are in parties/get-together, which are part of the vibrancy of their age.  In every such get-together, the youth generation is forced to consume the hard liquor because the cost of low alcohol beverages like beer and wine are prohibitively high in the State. So it is natural for anyone to buy and consume a half-a-pint of hard liquor rather than going for a bottle of wine or few bottles of beer. In several western countries, beer is considered in equivalent to any other beverages like Coke and Pepsi. In a recent article in the 'Times of India' exploring on why the consumption of alcohol is not affecting the health of Europeans, even they consume on a daily basis, the main reason is stated therein to be the consumption of beverages with low alcohol percentage, where Indians consume more hard liquor in short span of time.  In almost all the metros in India, ‘Beer pubs’ are common. It may also be acknowledged that the high cost of beer and wine has led to the failure of KTDC's Beer/Wine Parlours.  It may be also be noted that even in the Technopark, where about 30,000 employees are working, of which over 95% are in their prime youth, do not have Beer/Wine Parlours. They are forced to take hard liquor from the nearby Bar. Therefore, there is an urgent requirement to bring down the taxes on beer and wine. There is also a major policy shift to establish large number of Beer Parlours along with 2 Star/3 Star Hotels or even in common hotels to make available this low alcoholic beverage to the younger generation.  If this is not done, the Government may unknowingly make all the younger generation, habitual drinkers of hard liquors and not only the future generations become alcoholic but also the Government has to spend most of its revenue generated from foreign liquor on their health care. The increase in consumption of low alcohol drinks will ensure that there will not be any drop in tax revenue. But, at the same time,  the health expenditure will also come down.

3.     Prevention of illegal trade of foreign made foreign liquor: Thirdly, the Government expect that any decent person in the State has to stand in the queue of the shabby Beverages Corporation's outlets along with thugs and crooks.  This is the reason for the high surge in the sale of scotch and other foreign brand in the 'smugglers market'.  Unconfirmed studies estimate that, the market for sale of scotch and other imported brands in Kerala is around Rs.750/- Crores per year.  The Government is not getting a single paisa as tax except from the sale of liquor in the Duty Free Shops. There is also a high prevalence of spurious liquor in the imported liquor market (which affects the health of its good citizens). The Government can immediately raise around Rs.100/- Crores, as tax, if  super market type of shops for imported brands and premium Indian brands are opened in all the district headquarters, where the high/upper class and the rich can walk-in, select their own brand rather than standing in the queue before the Beverage Corporation outlet officials. Delhi and other metros have already started these kind of shops.  This will not only ensure the availability of, again the quality liquor which will not affect the health of the people, but also the Government can immediately get a sizeable income from the sale. But the present taxing system on liquor may not be made applicable in this case, since the prices will become substantially high, when compared with the prices in the "smuggler's market" and there will be few takers. Therefore, a 50 to 100 percent increase in tax may be ideal, where customers are even willing to give extra amount to the tune of Rs.300/- to Rs.500/- per bottle, since the liquor supplied is a genuine brand. This policy will  take care of the health of the upper and upper middle class and Government spend will be less.

4.     License fees for the Clubs and Wayside restaurants  When the Government started giving licenses for Bar in clubs, the fee was fixed at Rs.50,000 per year. Now, I am told that this almost equal to that of bar licenses.  Government has to issue licenses for beer and wine parlours in clubs, and in all types of small hotels in the level of ‘Aramam’ of the KTDC. The ‘Vazhiyoram’ project of the tourism department would have created a network of safe hotels, a boon to the travelling population, since they are controlled by the department. It is understood that one of the reasons it did not take off since, the beer/wine permit was not issued. There is a need for giving beer and wine permits to all the clubs and those wayside hotels under the department control. This measure will encourage the consumption of low alcohol beverages. This policy will again promote the low alcohol content beverages.

5.     The adulteration of Toddy:  Its is a secret known to all. Kerala taps 4 lakh litres of toddy from coconut and palm and consumes 20 lakh liters annually. Where does this ‘16 lakh litres’ come from? Synthetic toddy. Is it restricted to permitted chemicals and vegetables? No. It contains all known and unknown chemicals and high degree of spirit smuggled in, not to mention Diazepam and chloral – harmful drugs added to increase the ‘kick’. Where is this leading to? We are again ruining the health of our working class knowingly. The wayside toddy shops are frequented by the lorry drivers day and night, and the mixed alcohol is one of the causes of high accident rates of Kerala.  Toddy is to be treated as a luxury good. Permit rooms have to be attached to the hotels with Bar licenses. The rates at these hotels for pure toddy have to be high. The benefit will go to the toddy tappers. Upper and middle class will consume and that will also yield more tax to the Government. The public has to be offered choice-- between low alcohol toddy or hard liquor at a Bar. Time has come to stop the auctioning of toddy shops – it has to move to a permit system.

          In all the instances suggested above, it can be seen that the Government has to spend on the health care an equal amount of whatsoever amount generated out of the sale of foreign liquor.  If the Government policy continues like this, it is likely that the Health Care spend will become multi-fold in the years to come, as the whole generation would become addicted to hard liquor, affecting their vital organs. We are spoiling a whole new generation because of flawed liquor policy aimed, at least in paper, for discouraging people from consumption of alcohol, but levying exorbitant taxes. Therefore, a major paradigm shift in the policy of sale of foreign liquor in the State of Kerala is the need of the hour.

Concept paper on introducing a Grading system for the Hotels and other Food Business Operators

Self regulation means that the rules which govern the behavior in the market are enforced by the people whose behavior is to be governed.  It is a collective activity, involving all or the majority of participants and done mostly on a voluntary basis.  This would ultimately benefit the participants.

In the aftermath of the death due to food poisoning at a small wayside outlet at Thiruvananthapuram, the Commissionerate of Food Safety was forced to enforce the newly enacted law, the Food Safety and Standards Act, 2006 with the Rules, Regulations and standards made there under.  The department has taken a pragmatic approach in the implementation which is evident from the figures of the hotels closed down.  When, on 04.08.2012, about 1200 hotels and premises of other FBOs were inspected, only 73 were closed.  It may be pertinent to note that improvement notices were issued to over 696 establishments.  The public is scared to venture out for eating out in the evening.  This is a stage of transformation for our people who relished every kind of food – Chinese, Arabic, North Indian, Punjabi and what not.  The sales of hotels dropped.  Most of the industry association have taken this as an incident as a time for  introspection and has offered their willingness to associate with the Government to enforce self-regulation.  It is necessary to provide an opportunity to the public to differentiate between the good and the bad.  It is proposed to introduce a grading system for the different class of FBOs who are in the field.  This concept paper is prepared for discussion with the industry leaders and to evolve out a strategy for joint certification of FBOs.

1.           Class/Sub class of FBOs (in the first instance) :

a)           Hotels & Restaurants

i.                    Wayside eateries (Thattukada)

ii.                  Medium sale hotels (Janatha)

iii.                Classified hotels

b)           Bakeries

c)           Caterers

2.           The Grades :

A Grade: The ultimate in the food safety.

B Grade: Those who comply with all the stipulation of Grade-C. But additional conditions like purchase of raw materials from suppliers with Registration/License, testing of water every 3 months and use of RO plan, proper self waste disposal shall be complied.

C Grade: The lowest grade awarded to any FBOs under the above class. They shall strictly comply with the basic requirements of Food Safety and Standards Act, Rules and Regulations (the 30 point guidelines of CFS may be taken up as the starting point).

3.           The procedure for grading :

a)                 Any FBO who wish to apply for grade shall submit the following documents.

i.                    License under Food Safety and Standards Act.

ii.                  Checklist showing the compliance of guidelines.

iii.                Application form duly filled.

iv.                Photos/videos.

b)                 A district level committee headed by the Collector as the Chairman with following members shall inspect the eating establishment.

i.                    District Food Safety Officer (Designated Officer)

ii.                  District Medical Officer of Health

iii.                Representative of the respective association

iv.                Secretary, Tourism Promotion Council.

v.                  Health officer of the concerned Corporation/ Municipality

c)                 The District Grading Committee shall make suitable recommendation to the Commissioner of Food Safety.  If recommended for grading the Commissioner of Food Safety shall publish the same in local news papers and on the website, with the intention to give grading to the establishment and invite public remarks complaints from the general public with in a period of 15/30 days.  The public, who so demand, shall be given an opportunity to visit the kitchen and other facilities during this period and shall be explained how strict adherence of the standards are maintained.

d)                 The complaints can be sent in writing, by e-mail or posted in the website (to be designed in the form of www.tripadvisor.com).

e)                  An independent evaluation agency like ……………………….. shall evaluate the complaints/remarks of the public.  The complaints are disposed off by the agency and the information is passed on to the District Grading Committee.

f)                   If the committee, after evaluation, is satisfied with the grades awarded by the independent agency, then it shall hold a public hearing, during which the complaints are heard.  If satisfied, the committee shall recommend the grade and the same is notified by the Commissioner of Food Safety.

4.           Approval and Award :

The grade given will be announced and awarded in a public function once or twice every year.  The graded establishment will be permitted to display a logo and certificate for a period of one year at the establishment and all the advertisements.

5.           District and State Level Award :

a)                 The District Level Committee will select one establishment from each district for district level Food Safety Award (usually from A Grade establishments). The winner will get certification and award prize of Rs. …………..

b)                 A State Level Committee headed by the Commissioner of Food Safety with Senior Officer of Tourism, Health, Municipal Administration, State level representatives of the 4 associations shall conduct a joint inspection and select the winner for State Level Food Safety Award.  The winner shall be given the award by the Hon’ble Chief Minister or Health Minister according to convenience along with a public function organized jointly by the Commissionerate of Food Safety and the Associations.  

PLEASE OFFER YOUR COMMENTS ON THIS SYSTEM PROPOSED 

General Observer for UP Elections in Ballia

I am in Ballia District (Phephna Constituency) as General observer for the UP elections. This is one rare opportunity to see the different parts of India in detail. Ballia is the eastern district of UP, bordering Bihar. I have to go to a booth in a place called "Kulrhia Khas' (in the picture) through the town of Buxar in Bihar. Buxar is known for the Battle of Buxar, where the British under Major Hecter Munro on 23dr October 1764 defeated Shuja-ud-Dawla, Nawab of Wazir of Audh and won the Diwani of Bengal (Including Bangladesh), Bihar and Orissa. This was one of the three battles which laid foundation for British Rule in India.

Most of the people here are living in abject poverty. There is no major industry nor opportunities for employment. A driver gets around Rs.3000/-, my driver say. The great socialist leader Jayaprakash Narayan was born in this district. There is a memorial for him in Bariya. The late Prime Minister of India, Shri.Chandrasekhar was also born here and represented this constituency.

I was always amused by this Indian village innovation -Jugad, which is a make shift transport vehicle. A Diesel engine (water pump) on a disused chassis of the Jeep, with its gear box and steering taken from the scrap yard, makes this vehicle . No registeration, no road tax. It plies in villages and it is said that they dismantle the engine and use for irrigation, if their stay in the agricultural field exceeds weeks. It is as good as any bullock cart.

The polling percentage is very less when compared with the southern states. My Constituency phephana is fortunate - it registered 51 % poll in last elections. Neighbouring Rasra had the lowest with 28 %. This time every one hopes that poll percentage will be higher.