LIST OF ABBREVIATIONS
NEKRTC : North East Karnataka Road Transport
Corporation
CPKM : Cost per Kilometer
EPKM : Earnings per Kilometer
MPKM : Margin per kilometer
CIRT : Central Institute of Road Transport
STU : State Transport Undertaking
BEP : Break Even Point
AC : Air Conditioner
AWATAR : Any Where Any Time Advance Reservation
ETMs : Electronic Ticketing Machines
MIS : Management Information System
DCS : Depot Computerization Software
IT : Information Technology
KMs : Kilometers
HSD : High Speed Diesel.
FINANCIAL PERFORMANCE EVALUATION OF STATE ROAD
TRANSPORT CORPORATIONS – A STUDY WITH A FOCUS ON
NEKRTC
Synopsis:
I. Introduction
II. Review of Literature
III. Statement of the problem
IV. Objectives of the studies
V. Prole of NEKRTC
VI. Financial indicators OF NEKRTC
Ÿ CPKM
Ÿ EPKM
Ÿ MPKM
Ÿ Gross Revenue
VII. Summary of Findings, Suggestions and Conclusions
I .INTRODUCTION:
It is usual to judge the performance of private sector units by the
yardstick of net prot or loss; hence in their case maximization of
the prot is the sole aim. This yardstick fails in the case of public
sector undertakings, since they give more preference to attain
other priorities which in the public interest. Due to this the
performance of the public sector should not be judged by what
they earn in the form of prots but by the total additions they
make to the ow of goods and services in the economy. Thus
instead of prots, the yardstick should be the total sales value of
the enterprises.
Though there is no dispute regarding the role of the public sector
undertaking in country's economic development, yet the feeling is
widely prevalent that, the rate of prot in these undertakings is
either too low or is negative. Accordingly their performance is not
up to the expected standard.
However it is not so easy to decide about the efciency of the
public sector undertakings. As noted earlier the rate of prot might
be a good criterion to judge the efciency of a private sector
enterprise but cannot be deemed so for public sector enterprise. It
Original Research Paper Commerce
FINANCIAL PERFORMANCE EVALUATION OF STATE
ROAD TRANSPORT CORPORATIONS – A STUDY
WITH A FOCUS ON NEKRTC
SUNITA RAMESH
KATKE
DEPARTMENT OF POST GRADUATE STUDIES & RESEARCH IN COMMERCE,
GULBARGA UNIVERSITY KALABURAGI, KARNATAKA
Dr. RAJNALKAR
LAXMAN
DEPARTMENT OF POST GRADUATE STUDIES & RESEARCH IN COMMERCE,
GULBARGA UNIVERSITY KALABURAGI, KARNATAKA
ISSN - 2250-1991 | IF : 5.761 | IC Value : 79.96
Volume : 6 | Issue : 3 | - 2017
March
KEYWORDS
ABSTRACT
North East Road Transort Corporation. NEKRTC was established on 1.10.2000 having been separated from KSRTC for providing
“adequate, efcient, economic and properly coordinated road transport services” in the North eastern part of the state of
Karnataka. As on 31.03.2015 NEKRTC is operating 3970 schedules covering 12.46 lakhs kms carrying 12.00 lakhs passengers
every day. NEKRTC is serving 92% of the villages in its area (3859 out of 4203) with transport facility. NEKRTC owns a wide
Infrastructure consisting one corporate ofce, 09-Divisional ofces, 48 Depots, 134 bus stands and 4369 buses. NEKRTC
provides the wide range of services to the commuters like AC sleeper , AC Semi Sleeper, AC Jumbo, AC Mofussil, Rajahansa and
Suhas (Executive services) Karnatak Sarige ( Branded and Regular services), Mofussil (Express and ordinary city /sub urban services).
The corporation is nancially not depended on the state government as state road transport should operate the schedules and
generate the revenue to meet its expenditures. Likewise NEKRTC is managing its expenditure by generating the revenue. Major
components of the expenditure is fuel and staff salary, here fuel contributes around 40% of the total cost and staff salary around
15% -20 % of total cost. Being major cost components these two are playing a vital role in the nance management. Public
transport corporation is directly linked to the common man hence can't avoid any cost due to losses and lower earnings. Paper
prepared on “Financial Performance Evaluation of State Road Transport Corporation-A case study with Focus on
NEKRTC, nancial parameters like CPKM, EPKM, Marginal revenue and Gross revenue are discussed in detail. A public transport
organization like NEKRTC is giving equal importance to both nancial and physical parameters for performance evaluation.
Financial parameters are given importance here because all the expenditures incurred by the corporation are borne by the revenue
earned by the corporation. The revenue may be trafc revenue or commercial revenue here. Any organization can survive if it is
nancially sound. Meanwhile the public transportation like NEKRTC has to provide services to commuters without expecting the
prots. Due to various reasons NEKRTC operates vehicles in those routes which are loss making in most of the time and some time
breakeven point. Very less routes generate prot for the schedule. CPKM of the corporation is increasing every year, EPKM is also
increasing every year, but the ratio between these two parameters is not similar. Growth rate Cost of production is higher than the
growth rate of earnings. Gross revenue of the corporation is showing a favorable growth rate. Margin per kilometer is always
shown a negative gure which affects the nancial strength of the corporation in long run if the same continues for a longer
period.
PARIPEX - INDIAN JOURNAL OF RESEARCH | 515
is preferred that to judge the efciency of the public sector
undertaking it is recommended the criterion of social marginal
productivity and the utility of investment in any project should be
judged by its impact on national income, balance of payments and
distribution of income. Further the evolution of investment in the
public sector should be done on the basis of marginal per capita
investment quotient. According to this criterion, we must examine
whether investment of capital in any project will lead to
maximization of national income at any point in the future or not.
Without entering into the controversy regarding determination of
investment in the public sector at this juncture, we would like
emphasize that evaluation of any state enterprise should be done
on the basis of social benet and social cost and not on the basis of
rate of prot.
The elds of engineering and management associate efciency
with how well a relevant action is performed, i.e. ''doing things
right'', and effectiveness with selecting the best action, i.e. ''doing
the right thing''. Thus, a rm is effective if identies appropriate
strategic goals, and efcient if it achieves them with minimal
resources. Operational efciency or the ability to deliver products
and services cost effectively without sacricing quality. Efciency
with both queuing models and productivity, and efciency analysis
methods that identify maximum productivity and measure
efciency as a ratio of observed productivity to maximum
productivity. The maximum productivity levels serves as a
benchmark for desired perform.
II .REVIEW OF LITERATURE:
Performance analysis on any organization facilitates to know its
functioning in key performance areas to suggest suitable steps,
where ever necessary for its improvement in efciency and
successful performance. Lau, (1997) suggests that evaluation of
public transport services can be divided into two aspects. The rst
one is to evaluate the public transport based on its efciency. The
second one is to evaluate the systems on its ability to meet the
basic objective like service to the public.
Shambhag (1972) examined the peculiar desires of the commuters
like “he (wants to) should get a bus within a reasonable period. He
should be able to reach his destination by a direct bus; he should be
able to travel to his destination by the shortest route”. He also
observed the losses on transport due to city transport, because its
very nature of operations is uneconomic, as a large number of eet
is required to be maintained and to take off peak hour trafc, etc.
He also discussed the facts of shortage of capital, absenteeism of
staff. (Efcient network with adequate frequency)
Venkaji Rao (1974) analyzed the managerial problem of state
transport undertaking with special reference to Mysore State. He
identied some administrative problem to improve the
performance of a state transport undertaking. They are: (i)
Balancing the transport requirements of the community as against
other facilities, requirements of the community as against other
facilities served, based on costs and income and nance, (ii) Peak-
load problems, (iii) the most efcient utilization of vehicles and
staff on the basis of moving of given loads of passengers. (iv)
Forecasting the picture of transport.(Optimal utilization of
resources)
Jakaria (1975) explained the need for the establishment of
adequate criteria for evaluating the performance of urban
transport systems.
Pereira, W.(1975) suggested that overcrowding, foot board travel
and indiscipline in the bus should be reduced. Special standee
buses should be introduced during peak hours, and checking
should be strengthened. Dishonesty and cheating should be
severely punished.(Comfort and Safety approach)
Purushotham, P.W., (1992) examined the organization and
management of the road transport corporation administered
under public sector in Andhra Pradesh with a view to promote
performance standards and organizational efciency.
Prasad, Srinivas, and Khan (1996) conducted a case study on
APSRTC and identied the operations of city services, with
negative margin and operation of obligatory services, concessional
passes to various categories of commuters, provision for passenger
amenities and operation of buses on bad roads with additional
cost of operation are for the social benet and hence cannot be
taken as wastage or ill utilization of funds.(Shouldering of Social
obligations)
Gundam Rajeswari (1998) examined the performance of Andhra
Pradesh Road Transport Corporation at the state and regional
levels. Both nancial and social performance were examined using
indicators like cost per kilometer, earnings, load factor etc. and
arrived at gross margins for the survey period.
Pradeep Singh Karola (2004) in his study explained the economy of
public transport system, factors affecting the cost of operation of
bus system, the manpower related parameters, the mechanized
parameters and the trafc related parameters relating to public
transport system.
Bhaskar, G. and N.V. Ramana Murthy (2004) analyzed the difcult
role played by Transport Undertakings in meeting the duel
objectives i.e. social objectives on one side and the commercial
objectives on the other side. (Social service with business
principles)
III. STATEMENT OF THE PROBLEM
Appraisal of operational performance of public transport service
can be divided in two aspects. The rst one is to evaluate the public
transport based on its efciency. The second one is to evaluate the
systems on its ability to meet the basic objective like service to the
public. The performance of the public transport can't be
determined on the nancial performance. performance of public
transportation is assessed more on nancial parameters rather
than physical parameters. A public transport corporation like
NEKRTC is giving equal importance to both nancial and physical
parameters for performance evaluation. The reason for giving
importance to nancial aspects here that all the expenditures are
borne by the corporation, it has to manage with the revenue
earned by the corporation (Self sustaining organization). Therefore
the survival of the organization is depended on the revenue
accumulated by way of trafc revenue as well as other commercial
revenue. It is a known fact that any organization may be private or
public can survive only if it is nancially sound in its business. In
case of public sector it may generate revenue on its own business
or government may give nancial assistance. On the other hand
performance of the public sector like NEKRTC is measured with
operational parameters which also play an important role for the
organization. People (public) and State Transport Undertakings
both are very much depended on each other for their survival. The
concept of the public sector is emerged only to facilitate people to
travel from one place to other. In earlier days the performance of
the public transport Undertakings is assessed depending on the
extent of reach of its vehicles to the commuters. Later on the
performance is assessed on the load factor, frequency, number of
schedules etc., though these are the physical parameters for
performance evaluation but considered as a major techniques to
assess the quality of the services delivered and for performance
improvements.
State Transport Undertaking constitutes an important part of
Indian public sector. CIRT, Pune regularly monitors the
performance of these undertakings. The parameters used by this
institute to evaluate the performance of these undertakings are i)
Vehicle productivity ii) Manpower productivity iii) Fuel productivity
iv) Protability. Thus to evaluate the performance of State
Transport Undertakings the CIRT uses both nancial and physical
performance indicators. Government of India, Planning
commission also conducts performance evaluation of these
undertakings from time to time. The Planning Commission also
uses both nancial and physical indicators for performance
analysis.
ISSN - 2250-1991 | IF : 5.761 | IC Value : 79.96
Volume : 6 | Issue : 3 | - 2017
March
516 | PARIPEX - INDIAN JOURNAL OF RESEARCH
IV. OBJECTIVES OF THE STUDY:
Ÿ To Study and analyze the Performance of NEKRTC, with
reference to the Financial Parameters
Ÿ To study and analyze total cost and cost per kilometer behavior
for a period of 10 years.
Ÿ To study and analyze total earnings and earnings per kilometer
for a period of 10 years
Ÿ To Analyze the Gross revenue
Ÿ To offer suggestions, alternative ways and means to improve
the operations of the organization in particular, Sector in
general.
V. PROFILE OF NEKRTC
NEKRTC was established on 1.10.2000 having been separated
from KSRTC for providing “adequate, efcient, economic and
properly coordinated road transport services” in the North eastern
part of the state of Karnataka. As on 31.03.2015 NEKRTC is
operating 3970 schedules covering 12.46 lakhs kms carrying
12.00 lakhs passengers every day. NEKRTC is serving 92% of the
villages in its area (3859 out of 4203) with transport facility.
NEKRTC owns a wide Infrastructure consisting one corporate
ofce, 09-Divisional ofces, 48 Depots, 134 bus stands and 4369
buses. NEKRTC provides the wide range of services to the
commuters like AC sleeper , AC Semi Sleeper, AC Jumbo, AC
Mofussil, Rajahansa and Suhas ( Executive services) Karnatak
Sarige ( Branded and Regular services) , Mofussil ( Express and
ordinary city /sub urban services).
The corporation isnancially not depended on the state
government as state road transport should operate the schedules
and generate the revenue to meet its expenditures. Likewise
NEKRTC is managing its expenditure by generating the revenue.
Major components of the expenditure is fuel and staff salary, here
fuel contributes around 40% of the total cost and staff salary
around 15 % of total cost. Being major cost components these
two are playing a vital role in the nance management. Public
transport corporation is directly linked to the common man hence
can't avoid any cost due to losses and lower earnings.
FACILITIES PROVIDED BY THE NEKRTC ITS TO COMMUTERS:
Ÿ Reservation of seats for lady passengers: Two seats have been
reserved in Rajahamsa and higher classes of services for lady
passengers travelling single. In Mofussil buses, nine seats and
fourteen seats in City/Suburban services are reserved for lady
passengers.
Ÿ Reservation of seats for physically handicapped persons: Two
seats (24 & 25) have been reserved in Mofussil and City/
Suburban services.
Ÿ Free / Concessional Passes: NEKRTC is extending free /
concessional travel facility to students, physically Challenged
persons, Visually Challenged persons, Freedom Fighters,
SHOURYA' Awardees, National Award Winners (Kannada &
Sanskrit Dept.), Freedom Fighters Wives/Widows, Free travel
facility to the Dependents of Soldiers who died for Country
and Journalists.
Ÿ Concession for senior citizens: NEKRTC provides Concession in
passengers fare for senior citizens about 25% of the Bus fare,
having the age 60 and above.
Ÿ Discount on Return Journey Tickets: A discount of 10% is
offered on return journey tickets, if both onward and return
journey tickets are booked simultaneously.
Ÿ Discount on Group bookings: A discount of 5% on the fare, if
four or more passengers book a single ticket. Further, discount
of 8% is given for a group of 10 or more passengers.
Ÿ Special services: Additional services to pilgrimage / tourist
places are operated during festivals, summer vacation, other
fairs/festivals, weekends and holidays.
Ÿ Casual Contract services: For special occasions like weddings,
excursions, pilgrimage or study tour etc, NEKRTC is providing
dedicated buses on hire basis at competitive rates.
Ÿ Monthly Season Tickets are available to the passengers
travelling between two selected destinations daily. These
passes are most suited for ofce / industry employees,
teachers, businessmen etc.
Ÿ Pass Issue counters are working at all bus stands for the
convenience of the travelling public in obtaining student
passes, Monthly Season Tickets and One Day Passes.
Ÿ Advance reservation booking network (AWATAR): NEKRTC
has implemented on-line advance reservation network called
AWATAR (Any Where Any Time Advance Reservation),
wherein tickets can be booked through Internet. Presently, 16
NEKRTC counters and 46 Franchisees are working on this
system. There are 03 on-line booking counters in Gulbarga,
13 Counters in Hospet, 4 Counters in Raichur,7 Counters in
Koppal, 3 Counters in Bijapur, 13 counters in Bellary, 1 Counter
at in Bidar and 2 Counters in Yadagiri, . Tickets can be booked
30 days in advance including return journey tickets from
selected destinations.
Ÿ Electronic Ticketing Machines: To enhance the usage of IT in
day-to-day operations ETMs have been deployed in all 48
Depots. ETMs are convenient, user-friendly, light in weight
apart from other benets like speedy issue of tickets, reduction
in manual entry of waybills, generation of MIS reports on the
no. of passengers travelled, distance of travel, integration with
DCS etc.
Ÿ Passenger Amenities at bus stands: Refreshment rooms,
drinking water facility, sitting arrangements, display of Time-
Tables, Enquiry counters, Pass issue counters, Advance
booking counters, Luggage booking counters, separate toilets
/ urinals for Gents/Ladies, cycle/ scooter/ car parking stands,
CCTV, book stall, fruit stall. STD/local telephone booths etc are
provided at bus stands. All the bus stands in NEKRTC
jurisdiction are taken up for up gradation.
Ÿ Advertisement media: NEKRTC has an extensive media for
advertisement like bus panels, hoardings, on the backside of
bus tickets, advance reservation tickets, various types of passes
wh ich can be utiliz ed for d isplay of commercia l
advertisements.
Ÿ Environment friendly initiatives: NEKRTC has undertaken
massive a forestation programmers in its premises in Depots,
Divisions, and Workshop etc. Modern vehicle testing
equipments are procured to adhere to vehicular emission
norms. Diesel particulate lters have been tted to reduce
particulate emission on trial basis. A forestation is taken up in
large scale.
VI FINANCIAL PERFORMANCE INDICATORS
Financial management to rather like maintenance is to a vehicle. If
we don't put in good quality fuel and oil and give it a regular
service, the functioning of the vehicle suffers and it will not run
efciently. If neglected, the vehicle will eventually break down and
fail to reach its intended destination. In practice, nancial
management is about taking action to look after the nancial
health of an organization, and not leaving things to chance. The
concept purely applicable to those organizations which do not run
to achieve prot, like public transport sector run by the state
corporations like NEKRTC.
Financial performance is a subjective measure of how well a rm
can use assets from its primary mode of business and generate
revenues. There are many different ways to measure nancial
performance, but all measures should be taken in aggregation.
Line items such as revenue from operations, operating income or
cash ow from operations can be used, as well as total unit sales.
ISSN - 2250-1991 | IF : 5.761 | IC Value : 79.96
Volume : 6 | Issue : 3 | - 2017
March
PARIPEX - INDIAN JOURNAL OF RESEARCH | 517
Therefore nancial performance refers to the act of performing
nancial activity. In broader sense, nancial performance refers to
the degree to which nancial objectives being or has been
accomplished. It is the process of measuring the results of a rm's
policies and operations in monetary terms. It is used to measure
rm's overall nancial health over a given period of time and can
also be used to compare similar rms across the same industry or to
compare industries or sectors in aggregation. However, nancial
indicators do not reveal all the information related to the nancial
operations of a rm, but they furnish some extremely useful
information, which highlights two important factors protability
and nancial soundness. Thus analysis of nancial indicators is an
important aid to nancial performance analysis. Financial
performance analysis includes analysis and interpretation of
nancial statements in such a way that it undertakes full diagnosis
of the protability and nancial soundness of the business.
An attempt is made in this paper to analyze the performance of
NEKRTC based on the major nancial indicators such as CPKM,
EPKM, MPKM and Gross revenue.
(I) COST PER KILOMETERS (CPKM)
For any Road Transport Corporation the main and utmost
important nancial performance indicator is cost per kilometer.
Because it, together with EPKM, sets the base for xing the fare.
The protability of an organization is a function of both costs and
prices, which are equally valid in case of the State Transport
Undertakings too. An organization incurs losses when the cost
goes up and the price remains constant or a cost remaining the
same the price/fare falls. The second phenomenon of fare coming
down does not ordinarily arise in the case of passenger road
transport industry for reasons of relative inelasticity of demand for
the service, monopoly rights conferred on the service and state
regulation of fares. The cost of operation in absolute terms does
not by itself indicate measure of cost. Cost has to be worked out to
compare the cost of providing the service with the rate of earnings.
Cost per kilometer is one of such relative measure which is
computed by selecting effective kilometer as a unit of
measurement. In other words it is the Cost per Unit of the product
which in this case is passenger kms.
The cost per kilometer or CPKM is computed by dividing the total
cost of operation by the total effective kilometer. The CPKM is
expressed in terms of paisa/Rupees. The CPKM can be worked out
either in respect of the total cost of operation or in respect of each
components of the cost separately. The direct or operational or
variable cost reacts proportionately with the change in value of
operations and the cost per unit, i.e., CPKM is constituted with
value of operation. As indirect or total xed cost does not change
with volume of operation, the cost per unit, i.e., CPKM declines as
value rises or increases as volume falls.
In NEKRTC two types of cost are considered for assessing the
performance analysis, they are xed and variable cost. Here xed
cost consists of staff salary, general administrative expenditures,
interest and debt charges, welfare expenses, depreciation on other
assets, etc. whereas variable cost is consists of depreciation on
vehicle, HSD, lubricants, Tyres, Tubes, Flaps, spares and assembly,
batteries and electrical items, motor vehicle tax, Reconditioning
cost, Thus total cost comprises of xed costs which is independent
on vehicle utilization, but on its calculation on the basis of per
kilometer operated, it continuously declines as the vehicle
utilization increases, secondly , variable costs are dependent on
vehicle utilization but are constant on per kilometer basis. The sum
of these two costs per kilometers makes up the CPKM. Viewed
from the different angle, Total cost divided by seats kilometer gives
cost per kilometer. CPKM and cost per seat kilometer depends on
vehicle utilization which is depended on the seasons.
Data on CPKM for the reference period is given in Table.1. It could
be seen that in absolute terms CPKM increased continuously every
year. Further Table 1 reveals that, increasing trend in CPKM which
is purely due to increase in total cost, as the CPKM depends on the
total cost and effective KMs, both the gures are in increasing
trend from 2005-06 to 2014-15. Over a period of 10 years Cost of
operation is increased by 249% and effective Kms increased by
68%. Due to abnormal increase in the Cost of operation over and
above to effective Kms, the CPKM is increased by 106%. For any
other organization Cost per unit serves as a base to x the selling
price of the products with certain margin of prot. On the other
hand an organization can cut the costs according to its prot
making policy. In case of State Transport Undertakings like
NEKRTC, there are least options to cut down the costs or to avoid
the loss making schedules to reduce the increasing cost.
Table No. 1 : COST PER KILOMETER ( CPKM )
Source : Annual Administrative Reports
COST PER KILOMETER ( CPKM )
The table 1 reveals the growth rates of cost of operation in 2006-
07 is 16%, CPKM is raised by 7.08% and the Growth rate of
effective Kms is approximately 10% . In 2007-08 growth rate of
cost of operation is 7% where as effective kms hiked by 3% and
CPKM is increased by 2.03%. In 2008-09 nancial year growth
rate of cost of operation is 13%, on the other hand the rate of
effective KMs is increased by 8% and CPKM is increased by 4.4%
on its previous year gure. In 2009-10 cost of operation raised by
18% and effective kms by 16% and the growth rate CPKM
1.62%. But in 2010-11cost of operation is increased by 26%
,effective KMS and the growth rate of CPKM is same which shows
both 12% growth on its previous year gures. During 2011-12
cost of operation increased by 14%, effective Kms by 4% and
CPKM increased by 9.56%. In 2012-13 nancial year the cost of
operation increased by 16%, effective Kms increased by 1% and
CPKM is increased by 15.03%. During 2013-14 nancial year
Cost of oeration increased by 17%, Effective KMs by 2% and
CPKM increased by 14.74%. In 2014-15 nancial year Cost of
Operation increased by 9%, effective KMs showing a negative
gure with -1% growth and CPKM for the same period is 9.8%.
From the analysis of the above table it can be concluded the Cost
of Operation over a period of 10 years is increased by 249%,
CPKM is increased by 106% over a period of 10 years i.e. 2005-06
YEAR
200
6-07
2007
-08
2008
-09
2009-
10
201
0-11
201
1-12
201
2-13
2013
-14
201
4-15
Cost of
operatio
n (Rs.in
crores)
489.
06
523.
34
589.
71
697.2
0
876.
43
998.
42
115
4.33
1350
.41
147
3.54
Changes
in %
16
7
13
18
26
14
16
17
9
Effective
KMs
( in
crores)
29.6
6
30.5
6
32.9
7
38.36
42.9
5
44.6
6
44.8
8
45.7
6
45.4
8
Changes
in %
10
3
8
16
12
4
1
2
-1
CPKM
( in Rs)
16.4
9
17.1
2
17.8
9
18.17
20.4
1
22.3
6
25.7
2
29.5
1
32.4
0
Changes
in %
7.08
2.03
4.44
1.62
12.2
7
9.56
15.0
3
14.7
4
9.80
ISSN - 2250-1991 | IF : 5.761 | IC Value : 79.96
Volume : 6 | Issue : 3 | - 2017
March
518 | PARIPEX - INDIAN JOURNAL OF RESEARCH
to 2014-15, and the effective kilometers increased only by 68%
over the same period.
I) EARNINGS PER KILOMETER (EPKM)
Revenue in absolute term without reference to kilometer, hence it
does not correctly reect the Protability of the operation. EPKM is
one of the useful parameter to indicate the earning potential of a
route/depot/division/organization. The EPKM is related to the
carrying capacity of the buses, fare structure and the earning
potential of routes. The EPKM is calculated by dividing total
earnings by total effective kilometers. For any public transport
sector it is desirable to earn higher the EPKM for better nance
management. Making to increasing the revenue is not the easy
task for the corporation like NEKRTC, where revenue generation is
not done on protability factor. The organization has to operate
the schedules in spite of lower earnings and losses some times. But
the management can implement techniques to improve the
earnings per kilometers by rationalizing the schedules and routes.
The Earnings per kilometer is expressed in paisa per kilometer. The
Table No.2 exhibits the earnings per kilometer in Rs.
From the table.2it is observed that from 2005-06 to 2014-15 over
a period of 10 year EPKM increased from Rs.13.62 to Rs.28.49
which represents 109% increase. Trafc revenue over a period of
10 years increased from Rs.424.80 crores to Rs.1296.22 crores
which represents total growth rate of 205%, and effective kms
increased by 68% during the same period of 10 years. In this stage
of analysis it is difcult to analyze whether the % increase in EPKM
is due to operational efciency or due to fare hikes affected during
this period to offset the increase in the cost of operation.
Table No. 2: EARNINGS PER KILOMETERS (EPKM)
Source : Annual Administrative Reports.
EARNINGS PER KILOMETERS (EPKM)
Table 2 reveals that EPKM of the corporation has increased every
year. During the year 2006-2007 Total trafc revenue increased by
15.64%, effective Kms increased by 10% and EPKM increased by
5.07% to its previous year EPKM. During 2007-08 trafc revenue
increased by 9.65%, effective kms by 3% and EPKM increased by
6.41% compares to its previous year EPKM. During 2008-09 and
2009-10 nancial years growth rate trafc revenue is 9.97% and
17.23% respectively, effective kms increased by 8% and 16%
respectively and of EPKM is 1.94% and 0.75% which are the least
growth rate during the tenure of 10 years of study period of 2004-
05 to 2014-15. In 2010-11 trafc revenue increased by 27.89%,
effective kms by 12 % and EPKM hiked by 14.23%. In 2011-12 the
growth rate of trafc revenue increased by 18.67%, effective km
increased by 4 % and EPKM remains same almost 14%. During the
nancial year 2012-13 trafc revenue increased by 11.90%,
effective kms increased only by 1% and EPKM growth rate is
11.33%. In 2013-14 trafc revenue is increased by 16.11%,
effective kms are increased by 2% and EPKM is raised by 5.07% on
its previous year gure. During the nancial year 2014-15 trafc
revenue increased by 9.47% and effective kms showing a negative
gure of 1% on its previous gure and the highest growth rate of
EPKM in 10 years is observed in this year is 19%. By seeing the
above table it can be concluded that from 2005-06 to 2014-15
over a period of 10 year EPKM increased from Rs.13.62 to Rs.28.49
which represents 109% increase. Trace revenue over a period of
10 years increased from 424.80 crores to 1296.22 crores which
represents total growth rate of 205%, and effective kms increased
by 68% during the same period of 10 years. In this stage it is
difcult to analyze whether the % increase in EPKM is due to
operational efciency or due to fare hikes affected during this
period to offset the increase in the cost of operation.
(I) Margin per kilometer (MPKM)
Margin per kilometer refers to the difference between the EPKM
and CPKM for a particular period. In simple words it the prot or
loss margin after operating the shedues by the public transport
corporation. It is also stated as the difference between the total
earnings and total cost distributed by the total kilometers. It is one
of the most powerful technique for analyzing the nancial
performance in public sector like NEKRTC, which easily exhibits the
status of nancial condition. It is desirable to have higher EPKM
over to CPKM for better nancial conditions of the organization.
But being a state run public transportation it is difcult for NEKRTC
to have higher EPKM over to CPKM. Hence various routes and
schedules are operated in the interest of public to facilitate to
travel one place to other place. NEKRTC is public transport
corporation and it can't expect prot on every route/schedule. It is
difcult but also possible to earn the prot in each route provided
the routes are scientically established. In few cases it may not be
totally possible to get prot margin but lot of scope is there for
improvisation in the trafc management to get higher margin in
EPKM over to CPKM.
Table No. 3: MARGIN PER KILOMETR (MPKM)
Source : Annual Administrative Reports.
MARGIN PER KILOMETER. (MPKM)
In Table No. 1 and Table No.2 detailed analysis is done on most
important nancial parameters of NEKRTC, CPKM and EPKM. It is
necessary to understand the margin between these two factors
which is important to analyze the nancial sustainability in longer
YEAR
200
5-06
200
6-07
200
7-08
200
8-09
200
9-10
201
0-11
201
1-12
201
2-13
201
3-14
201
4-15
Trafc
Revenue (Rs.
In crores)
367.
35
424.
80
465.
80
512.
25
600.
49
767.
95
911.
33
101
9.75
118
4.04
129
6.22
Changes in
%
-
15.6
4
9.65
9.97
17.2
3
27.8
9
18.6
7
11.9
0
16.1
1
9.47
Effective Kms
(in crores)
26.9
5
29.6
6
30.5
6
32.9
7
38.3
6
42.9
5
44.6
6
44.8
8
45.7
6
45.4
8
Changes in
%
-
10
3
8
16
12
4
1
2
-1
EPKM ( in Rs.)
13.6
2
14.3
2
15.2
4
15.5
3
15.6
5
17.8
8
20.4
0
22.7
2
23.8
7
28.4
9
Changes in
%
-
5.07
6.41
1.94
0.75
14.2
3
14.1
2
11.3
3
5.07
19.3
6
YEAR
2005
-06
200
6-07
200
7-08
200
8-09
200
9-10
201
0-11
201
1-12
201
2-13
201
3-14
201
4-15
EPKM
(in Rs.)
13.6
2
14.3
2
15.2
4
15.5
3
15.6
5
17.8
8
20.0
4
22.7
2
23.8
7
28.4
9
CPKM
( in Rs.)
15.6
8
16.4
9
17.1
2
17.8
9
18.1
7
20.4
1
22.3
6
25.7
2
29.5
1
32.4
0
MPKM
( in Rs.)
-2.06
-2.1
7
-1.8
8
-2.3
6
-2.5
2
-2.5
3
-1.9
6
-3
-5.6
4
-3.9
1
ISSN - 2250-1991 | IF : 5.761 | IC Value : 79.96
Volume : 6 | Issue : 3 | - 2017
March
PARIPEX - INDIAN JOURNAL OF RESEARCH | 519
period. In 2005-06 and 2006-07 margin per kilometer is -2.06 and
-2.17 respectively. During the nancial year 2007-08 MPKM is -
1.88, which shows improved gure compared to 2005-06 and
2006-07. In the nancial year 2008-09 the gap between EPKM
and CPKM is further increased which represents -2.36. During the
nancial year 2009-10 and 2010-11 MPKM represents -2.52 and
-2.53 respectively. In the nancial year 2011-12 and 2012-13
MPKM represents -1.96 and -3 respectively. Again in 2013-14 and
2014-15 also MPKM is showing negative gures representing -
5.64 and -3.91. During a period of 10 years margin per kilometer
is showing negative gures, from the table it can be analyzed that
always cost per kilometer is higher than the earnings per kilometer,
which indirectly leads to accumulate the loss every year.
(I) GROSS REVENUE:-
Gross revenue of the corporation is the total revenue generated by
the corporation which includes total trafc revenue and total non
trafc revenue. Trafc revenue is the revenue generated by the
corporation from the commuters by operating its schedules/buses
. Non trafc revenue is the revenue generated by the corporation
other than operating the vehicles/buses, such as scrap revenue,
Bus stand shops rent, nes and penalties, advertisements etc.
Further the Gross revenue is the revenue where the various costs
incurred by the corporation are not yet deducted. In other words it
can be said that the Gross revenue is the total revenue receipt
excluding the expenditures.
Gross revenue in NEKRTC is the composition of trafc revenue and
other revenue, which are showing a increasing trend in all the 10
years, excluding 2011-12 where the other revenue represents with
negative growth %. Table 4 shows the increasing trend of trafc
revenue, other revenue and gross revenue put together of trafc
and other revenue. In 2005-06 trafc revenue is Rs 367.35 crores
and in 2014-15 trafc revenue is Rs 1296.22 crores , over a period
of 10 years trafc revenue increased by 252%. Other revenue for
the year 2005-06 and 2014-15 is Rs.27.35 Crores and Rs162.21
crores respectively. The growth rate for the same period is 493%.
The gross revenue in 2005-06 is Rs.394.71 crores and in 2014-15
Rs.1458.43 crores which shows a growth rate of 270% in 10
years. It is seen that growth rate of other revenue is considerably
higher than trafc revenue but, quantum of revenue in terms Rs in
crores is higher in trafc revenue compared to other revenue. It is
good to have increasing growth rate of other revenue but the main
business of the organization is revenue generation trafc which is
very important in NEKRTC for longer survival and nancial stability.
Table No. 4 : GROSS REVENUE
Source : Annual Administrative Reports.
Table 4 exhibits the Gross revenue earned by NEKRTC during the
period from 2005-06 to 2014-15. During the nancial year 2006-
07 trafc revenue increased by 15.64%, other revenue by 26.98%
and Gross revenue by 16.43%. In 2007-08 trafc revenue
increased by 9.65%, other revenue increased by 19.72% and
gross revenue increased by 10.41%. During the nancial year
2008-09 trafc revenue increased by 9.97%, other revenue
increased by 17.39% and Gross revenue increased by 10.58%. In
2009-10 trafc revenue increased by 17.23%, other revenue
increased by 28.76% and gross revenue increased by 18.23%. In
2010-11 trafc revenue increased by 27.89% ,other revenue
increased by 53.41% and Gross revenue increased by 30.31%.
During the nancial year 2011-12 trafc revenue increased by
18.67% but the other revenue showing a negative growth rate of -
28.43%. and growth rate of gross revenue increased by 13.42%.
in the nancial year 2012-13 the trafc revenue increased by
11.90%, other revenue increased by 64.69% and growth rate of
gross revenue is 15.61%. During the nancial year 2013-14 trafc
revenue increased by 16.11%, other revenue increased by
11.45% and Gross revenue increased by 15.64%. In 2014-15
trafc revenue increased by 9.47%, other revenue increased by
28.07% and 11.27 growth rate observed in gross revenue.
Among the 4 nancial factors discussed in this paper the gross
revenue is the factor which is showing a highest growth rate in
tenure of 10 years i.e. from 2005-06 to 2014-15. Gross revenue in
2005-2006 is Rs.394.71 (crores) and 2014-15 it is 1458.43
(crores), it shows total growth rate of 270% of Gross revenue.
Gross revenue is the total income of the corporation before
distributing the expenditures; hence the cost increased every year
as shown in the Table-1, it is necessary for the corporation to make
efforts to increase the Gross revenue. Otherwise gap between the
income and expenditures leads to create a nancial crisis, which is
difcult for the public sector corporation like the NEKRTC.
VII. SUMMARY OF FINDINGS, SUGGESTIONS AND
CONCLUSIONS:
FINDINGS
The present study executed wholly on the secondary data; the
following inferences were drawn on the basis of above data
Ÿ There is considerable gap between the two vital parameters
CPKM and EPKM on which the health of STUs is assessed.
Ÿ The corporation even not operating its schedules in BEP, i.e.,
Break Even Point, therefore if it operates in BEP, the
corporation can manage its cost and revenue with no prot
and no loss business.
Ÿ For the period of the study, the corporation has incurred losses
in every nancial year, due to higher CPKM over to EPKM.
Ÿ CPKM can be controlled by the effective cost control
techniques and EPKM can be increased by effective trafc
management.
Ÿ The corporation is operating its schedule in all the areas
demanded by the passengers without expecting to earn prot
on every schedule.
Ÿ There is no funding from the State Government to any of the
state road transportation corporation for its expenditures;
YEAR
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
2011
-12
2012
-13
2013
-14
2014
-15
Trafc
Reven
ue
367.
35
424.
81
465.
8
512.
25
600.
49
767.
96
911.
34
1019
.80
1184
.04
1296
.22
Chang
es in
%
-
15.6
4
9.65
9.97
17.2
3
27.8
9
18.6
7
11.9
0
16.1
1
9.47
Other
Reven
ue
27.3
5
34.7
3
41.5
8
48.8
1
62.8
5
96.4
2
69.0
1
113.
65
126.
66
162.
21
Chang
es in
%
-
26.9
8
19.7
2
17.3
9
28.7
6
53.4
1
-28.4
3
64.6
9
11.4
5
28.0
7
Gross
Reven
ue (Rs.
In
cores)
394.
71
459.
57
507.
38
561.
06
663.
35
864.
38
980.
36
1133
.41
1310
.70
1458
.43
Chang
es in
%
-
16.4
3
10.4
1
10.5
8
18.2
3
30.3
1
13.4
2
15.6
1
15.6
4
11.2
7
ISSN - 2250-1991 | IF : 5.761 | IC Value : 79.96
Volume : 6 | Issue : 3 | - 2017
March
520 | PARIPEX - INDIAN JOURNAL OF RESEARCH
therefore, the survival of the corporation is completely
depended on the trafc revenue and other miscellaneous
revenue from its operations.
Ÿ Gross revenue of the corporation is showing an increasing
trend, which has grown up by 5 times of its value in between
2005-06 to 2015-16.
SUGGETIONS
As already discussed above the North East Karnataka Road
Transportation corporation is independent unit among the various
Karnataka state public sectors. Public Transport Undertakings in
Karnataka are nancially independent and have to manage all its
expenditures by way of trafc revenue. Therefore for the longer
survival and continuity of the corporation is completely depended
on its management decision to increase the revenue to meet
breakeven point. From the above analysis andndings the
following are some of the major suggestions offered for
betterment of the corporation.
Ÿ Cost cut down policy has to be implemented strictly , for those
factors which contributes major part of CPKM, such as staff
cost controlling by avoiding unnecessary overtime schedules,
operating complete schedule without cancellation,
rationalization of schedules, cost control technique in HSD
management, Fuel Management and Tyres management etc
to be implemented by the management.
Ÿ Identifying the potential market of the passengers and
operating the schedules in a single goal to carry each needy
passenger from one place to another place, avoiding
overlapping of timings from bus stands,.
Ÿ The corporation need to convert the loss making schedules to
break even schedules to avoid nancial crises.
Ÿ Optimum utilization of vehicles makes the corporation to
accumulate trafc revenue.
CONCLUSION:
From the above data the study, it can be concluded with the
remarks that NEKRTC is making its efforts to generating trafc
revenue, further it has to emphasize more on route cancellation
and cost control. It is seen in the history of the corporation that
identication of new routes is always protable if the same is done
on the proper analysis and justication. Political interference in
recommending of implementation of routes/schedule is
unavoidable in the state road public sector, but it is always better to
be done with proper analysis of routes and passenger strength.
Though the revenue generation is not the primary objective of the
state transport unit, but the corporation like NEKRTC, it cannot be
run only with the social objectives of service providing to the
commuters, especially when the corporation has to meet its
expenditures on its own business.
References:
01. Prasad, Srinivas, T, and Khan, M.A.A., (1966), “Impact of Social Obligations on the
Financial Performance of SRTUS: A case study of APSRTC”, Indian Journal of
Transport Management, 20(6), pp. 406-418
02. Shambhag, A.R., (1972), “Problems of B.E.S.T. Bus Service”, Transport, vol.22,
pp.17-18.
03. Venkaji Rao, L.C., (1974), “Management of State Transport Undertakings” in D.M.
Nanjundappa (Ed), Transport Planning and Finance, pp. 379-392.
04. Jakaria, (1975), “Analysis of Urban Transportation Criteria”, Transportation
Engineering, Journal (17), pp.114-96
05. Pereira, W., (1975), “Leakage of Revenue in Metropolitan Transport Organization”,
Mobile, pp. 7-9.
06. Sankaraiah, V.V., Subramanya Sarma, (1985), “Urban Transportation by Andhra
Pradesh State Road Transport Corporation – A Depot level performance”. D.
Panduranga Rao (Ed) Problems of Transport in India, Inter India Publications, New
Delhi
07. . Govinda Rajan, (1988), “A study of Development and Performance of SLPES in
Andhra Pradesh”, Institute Public Enterprise Journal, p.78.
08. Lau, Joseph Cho-yam, (1997), “The performance of Public Transport Operations,
Land use and Urban Transport Plans in Hong Kong, Cities, Vol.14, No.3, pp.145-
153
09. Gore, M.L., (1997), “Strategy for Minimizing Vehicle Breakdowns in Transport
Undertakings” Indian Journal of Transport Management, volume 29, Number 9,
p.545
10. Gunadam Rajeswari : “ Public Sector Performance of State Road Transport
Corporation, A case study of Andrapradesh,1998
Cleaner Air and Better Transport in Cities - Making Informed Choices
11. by Tata Energy Research Institute (TERI) (2000)
12. Public Sector Bus Transport in India in the New Millennium A Historical Perspective
by M K Thomas, (2000)
Design and Appraisal of Rural Transport Infrastructure - Ensuring Basic Access for
Rural Communities
13. by Jerry Lebo & Dieter Schelling, for the WORLD BANK (2001)
14. Kharola, P.S. : Reducing the cost of Revenue Collection: an option available to the
STUs.Indian Journal of Transport Management. 2001
15. Transport Concepts in European Cities by Tim Pharoah, Dieter Ape (2002)
16. Kharola, P.S. : “Reforms in the public transport – a systems approach”, Proceedings
of CODATU X Conference, Lomé (Togo), 12-15 November 2002,
17. . Pradeep Singh Kharola, (2004), “The High Capacity Urban Bus: Pre-requisites and
Advantages”, Indian Journal of Transport Management, Vol.28, p.206.Bhasker, G.
& N. V Ramana Murthy, (2004), “Articial Neural Net work: An Efcient to simulate
the protability of State Transport Undertakings. Indian Journal of Transport
Management
18. The Best Transport System in the World by M.H Rose , B.E. Seely, P.F Barrett – The
Ohio State University Press(2006)
19. Transit Villages in the 21st Century by Michael Bernick, Robert Cervero (2007)
20. Kharola, P.S. : "Financing Urban Public Transport". Urban Transport Journal 2008
21. The Geography of Urban Transportation by Susan Hanson (2010)
22. Towards Coordinated Urban Transport Planning In India By Om Praksh Agarwal and
Ishita Chauhan (2010)
23. Prashant Kakade, (2010), “Impact Assessment of the withdrawal of the Daily Pass
System: A Case Study of Bangalore Metropolitan Corporation”, Indian Journal of
Transport Management,
24. Transport Policy and the Environment by David Banister (2010)
25. Prabhu D.B. & Satish Hegde, (2011), “Management Control System in Public
Transport: An Objective Study of Karnataka State Road Transport Corporation”,
Indian Journal of Transport Management
26. Singh, S.K.(2012) Urbanization and Urban Transport in India: The sketch for a
policy.
27. K.Kockelman, D.Chen, K Larsen, B Nichols – The University of Texas (2013)The
Economics of Transportation System : A reference for practitioners .
28. Annual Financial Reports and Annual Administrative Reports of NEKRTC, for the
period of 2004-05 to 2015-2016
ISSN - 2250-1991 | IF : 5.761 | IC Value : 79.96
Volume : 6 | Issue : 3 | - 2017
March
PARIPEX - INDIAN JOURNAL OF RESEARCH | 521