BMTC - KEY INITIATIVES TO RETURN TO PROFITABILITY

The Bengaluru Metropolitan Transport Corporation’s (BMTC’s) efforts to enhance and augment bus services in Bengaluru have historically been aided by its ability to recover its costs of operating the bus system – generating capital to further invest in newer, better buses and improved technology to make commuting for Bengalureans faster, simpler and more comfortable.  In this regard, BMTC was hampered by losses between 2012 and 2015, making scarce quick capital when it was needed the most; to swiftly increase the city’s bus fleet to incentivise commuting by public transport to tackle growing congestion in the city. 

Fortunately, however, several measures undertaken by the Corporation have enabled it to improve upon its goal of breaking even for the year 2015-16, paving the way for increased service enhancements.  Most fundamentally, BMTC’s efforts to attract commuters to bus services across 2015-16 resulted in a major improvement in average bus load factors, increasing from 68% in the preceding (2014-15) year to 74% for the current assessment year; these higher passenger volumes contributing to improved revenues and earnings per kilometre (EPKM). 

Equally important, however, are numerous measures taken by the Corporation over the year to utilise infrastructure more efficiently, finance operations more innovatively, leverage its commercial assets, and prevent revenue leakages.  Some of these initiatives are discussed below.

1. Procurement of Diesel through Tendering Process

In a first for any State Transport Undertaking in India, BMTC recently finalised its fleet-wise refuelling practices through a tendering process.  As a result, BMTC now enjoys a lower per-litre cost on diesel and a 30-day credit facility.  While the latter facility has enabled the Corporation to save INR 24 million annually, the discounted diesel cost has reduced BMTC’s expenses by around INR 123 million every year when compared to purchasing diesel at regular rates.  This aside, the supplier also provides state-of-the-art refuelling facilities.  It is thus now possible to remotely analyse the frequency and amount of fuel provided to each bus, severely curbing opportunities for fuel pilferage.

2. Restructuring of Loan Facility

BMTC’s shift from unprofitability can also be attributed in no small part to changes in its financial practices that have enabled the Corporation to minimise costs. The Corporation has greatly reduced its overall loan liability by obtaining loans from the Karnataka Urban Infrastructure Development and Finance Corporation (KUIDFC) under the Megacity Revolving Fund at a much lower rate of interest (6.5%) than through regular high-interest loans (10%). By swapping existing loans to the KUIDFC Fund, BMTC’s cash flow savings equal an impressive INR 78.9 million per month (INR 947 million per year); money that can be utilised for service improvements.

3. Increase in Rental Income

On the commercial front, BMTC has – over the past year – adopted an extremely proactive approach to generate revenue from its Traffic and Transit Management Centres (TTMCs) by renting out space to commercial establishments.  As a result, almost all TTMCs currently report close to full occupancy levels. BMTC has also been using other means to generate revenue to meets it capital and operational costs for running bus services in the city, such as using LED displays for advertising in buses and leasing out space for installation of mobile towers in its 43 depots. The Corporation has also moved away from its previous practice of allotting temporary kiosks at its TTMCs and bus stations solely to government agencies and has begun to auction spaces at these kiosks to the highest bidder.  This has resulted in an exponential increase in rents from such kiosks from the earlier baseline figure of INR 30,000 per month to over INR 150,000 per month at several kiosks; a significant jump in non-traffic revenue.

4. Online Payment to Suppliers

On the technological side, BMTC has moved to an online payments system wherein its suppliers are paid via NEFT or RTGS.  The new system – apart from permitting quick auditing and surveillance of payments – has cut red-tapism and delays, simplifying and expediting transactions with the Corporation’s vendors.  This has built greater confidence in BMTC among existing vendors and has attracted a greater number of new vendors as well, increasing the scope for better quotes from suppliers and better quality of items supplied.  The push towards technological solutions to cost management has also led the Corporation to adopt an entirely web-based inventory management system, allowing for a significantly improved centralised monitoring of its inventory.  This facilitates an optimal inventory flow and prevents a build-up of ‘dead’ inventory, ensuring that costs on inventory acquisition are limited to currently necessary items.  In both instances, the move to a web-based system has vastly reduced opportunities for pilferage of items and revenue.

5. Route Restructuring 

The Corporation has taken a scientific approach towards bus depot requirements and fleet utilisation. Prior to the current year, several depots were commissioned without taking into account actual fleet stabling requirements or proposed fleet augmentation, leading to unnecessary expenditure and resulting in unutilised capacity at several depots. More stringent norms were instituted recently, wherein depot augmentation is permitted solely when additional capacity is required. This has reduced the pressure on the financial resources of the Corporation and has also enabled optimal utilisation of depot space.

With plans to add 700 additional buses this year, six additional depots are planned over the coming annum. Improvements in the quality of buses purchased over the past decade have further enabled the Corporation to change its bus scrapping policy; buses are now scrapped after 11 years or 8.5 lakh kilometres of operation, an increase from the previous policy of 10 years or 8 lakh kilometres. This has increased BMTC’s cash flow as well as improved viable asset utilisation.

6. Procurement of New Buses and Tyres

A change in the Corporation’s approach toward the purchase of new buses and tyres is also expected to enable cost savings.  BMTC now views the previous performance of suppliers’ products to arrive at a Life Cycle Cost analysis – rather than solely the purchasing cost – which is used to determine the ideal suppliers for buses and tyres.  This switch to a long-term analysis rather than short-term cost savings is expected to economise the life-cycle expenditure on buses purchased, and has already resulted in a Rs. 2.04 crore reduction in costs on tyres, tubes and flaps for the current year when compared to the preceding (2014-15) year of analysis. 

BMTC, thus, has managed to return to profitability without having to burden passengers with increased fares; rather, by increasing non-traffic revenue and reducing costs through a series of innovations. The corporation is also implementing a robust ITS system that includes GPS in all buses, electronic ticketing, and a smartcard for cashless transactions on buses. This will drastically improve service quality, reliability and the overall commuting experience.