Case

Presentation
CORPORATE RESTRUCTURING
OF GUJARAT STATE ROAD
TRANSPORT CORPORATION
 GSRTC : A SOCIAL SERVICE
CORPORATION
 Came into existence on May 1st
1960.
 Had a very rapid growth.
 16 divisions, 126 depots, 226 bus
stations, 1554 pick up stands and
7550 buses in 2011/12.
 Has a three tired administrative
structure and three tier
maintenance and repair facility in
line with that.
 Directly employed 42600
people in 2011.
 Operated 6850 schedules
and 42016 trips in 14666
routes that covered 99% of
the population of the state –
May 2011.
 Average vehicle utilization –
416km/day, Mileage
efficiency – 5.53km/litre of
diesel, Load factor – 68.98%.
 Acted as a channel for
societal subsidies.
 Dedicated services to less privileged an
financially weaker sections.
 Opportunity cost for the corporation
due to subsidies given to students, socio
- economically under developed ST and
other categories was around Rs 6.37
billion annually.
 Remitted significant amounts to state’s
exchequer through passenger tax.
 Govt of Gujarat (GoG) imposed a tax of
17.5 percent on ticket income.
 2010/11 fiscal year – Corporation
remitted Rs2.34 billion as taxes.
ISSUES FACED BY GSRTC
 Liberalization in 1991 - GoG began
permitting private players to operate as
stage carriers in few selected routes.
 This introduced competition to GSRTC –
competition limited to lucrative routes
served by the corporation.
 This disrupted the mechanism of cross
subsidy. Illegal carriers started operating
making use of the inadequate policy making.
 GSRTC with salaried staff and public accountability
couldn’t delegate the decision to use dynamic
pricing to staff at the operating level and they also
needed Govt. approval for everything.
 Evolving transportation scenario – Increased
number of personal vehicles, low priced cars and
low cost of air travel.
 17.5 % P – Tax posed another disadvantage
compared to private players.
 GSRTC – Rs 499000 per bus in express
routes per year, Private players – Rs184000
per bus per year.
 Illegal private operators as well as legal
stage carriers resorted to dynamic ticket
pricing to maximize their revenues.
 Liability of association – Adhere to
procurement norms such as accepting the
lowest bid for spare parts and other items
as they were under GoG.
 Lead to poor quality spare parts and
additional costs per bus.
 Ambiguous transportation policy by the
Government also posed challenges to
GSRTC.
 STRATEGIC INTIATIVES – UNDER RAJGOPAL
IASAimed at reducing costs and enhancing productivity.
 Plans to improve upon mainly 8 operating parameters:
 Aggregate effective km run by buses, % increase in passenger load factor,
daily vehicle utilization, daily crew utilization, fuel efficiency, mechanical
breakdown rate per 10,000km run, fleet utilization and non-tariff
income.
 Setting up of e- Governance system in 2009/10 with a road map to fully
implement it by 2011/12 – To enhance efficiency and administrative
control through seamless information flow and real time data transfer –
Estimated cost Rs201 million.
 Improving the bus terminals – built 22 new bus terminals along with 39
pick-up stands – Costed around Rs211.7 million.
 Revenue enhancing initiatives – Selling scraps by reverse auctioning,
advertising on buses and terminals, premium services at higher costs,
increasing bus cargo capacity etc.
 Cost controlling initiatives – Outsourcing buses and drivers, hiring
additional employees on contractual basis, setting up electronic ticketing
machines etc.
 THE GAME CHANGER
 On 9th August 2010, all TU’s staged a
deputation to the MD.
 TU’s demanded to abandon various
initiatives taken by management to
reduce employee relevance.
 Strike was called o force their
demands.
 Chief minister intervened and
resolved the issue of strike.
 This resulted in increased burden of
employee salaries and arrear wages
for current and retired employees –
adding up to the costs.
NEW OPTIONS CONSIDERED
 Reduction of passenger tax – Reduction of P -Tax from 17.5% to
7.5%
 Government debt – equity swap – Given that the corporation
had significant debt portfolio, GSRTC could propose that GoG
consider converting the debt to promoter equity.
 GoG grant towards arrear payment and five-year moratorium
therefrom.
 Prior permission for tariff revision – Move to a system of in
principle approval for fare revision as it would avoid procedural
delay and revenue loss due to that.
 Enhance capacity utilization – Improve the load factor by 2
percent on a year over year basis and achieve 74% by 2016.
 Charging of depot facilities – GSRTC can extend their bus station
facilities to private carriers and charge from them.
 Outsourcing operations in the tribal areas.
Constraints
• Entry of private players will always result in revenue bleeds
• Inadequate policy making, enabling loopholes for illegal entrants
too
• Change in socio-economics also a major constraint as state owned
establishments fail to adapt quickly
• Liability of association binds establishments with recurring costs
• The traditional structure is difficult to revamp, owing to greater
resistance

Opportunities
• Revenue streams should be diversified
• Bus terminals can be effectively used as a marketplace
• Ad placement on buses/bus terminals can be considered for revenue
generation
• PPP can be thought of for new ventures
POSSIBILITIES OF CHANGE
Communicate objectives clearly to
the entire organization. Set
detailed goals at par with the
industry leaders.
Leadership of the organizations
should get freedom as well as
the public support from the
government.
Decision making should me
made easy cutting the
unnecessary hierarchy
Focus only on select areas of
business and divest from
loss making areas
SOEs should be ready to hire
outside the traditional
sources to get the talented
employees
Implement proper systems to
measure and reward the
employee performance.
 THANKS
! Submitted by:
OCD Group 2

Anveshi Sharma MBA/06/009

Nithin Babu K MBA/06/151

Mohamed Anas Ravoof K MBA/06/142

CREDITS: ThisFayez A Musaliar

presentation MBA/06/075
template was created by Slidesgo, including
icons by Flaticon, and infographics & images by Freepik