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)