If Indian urban transport models were considered, the BrihanMumbai Electric Supply & Transport (BEST), Mumbai's bus operator, used to be the best. But today, BEST incurs an operating loss and after-tax loss. The revenues are not enough to cover the operating costs - on every single route. The loss has been widening over the years primarily due to salary increases, fuel cost fluctuations and erratic fare strategy.
Expert solutions aim to imitate strategies from apparent successes like Singapore's Mass Rapid Transit (MRT), Hong Kong's Mass Transit Railway (MTR), London or European cities. Another strategy explored is dedicated lanes or BRTS. Ideas such as congestion pricing, overhead metros, underground metros are floated around as transportation solutions. However, this will not fix Mumbai's transportation woes nor will it make BEST profitable for various reasons. For one, there is no coordination between different modes of transport in Mumbai. Second, the star performing cities are well-planned cities, their transportation systems are coherently designed and translating these learnings to Mumbai may not be easy. Third, despite a lot of innovation none of the public bus systems generate net profits. But a profitable urban bus transport is possible and necessary. So, we need to fix BEST. And as a first step we must understand the realities facing BEST.
What ails BEST?
Firstly, BEST is burdened with diverse and conflicting expectations. We need BEST to be low-cost carrier of masses. At the same time, BEST must help reduce the automobile congestion in Mumbai. It translates into a choice between cheap robustness for former v/s higher priced luxury for later.
Similarly, BEST is burdened with the responsibility to correct the mistakes of planning and policy. Thus, BEST buses need to be higher off the road to survive the Mumbai water logging but also must have low-floor disabled access. The shortcomings of urban planning in Mumbai result in inadequate roads, dispersed populations, and lack of supporting infrastructure such as bus stops. Similarly, BEST acts as feeder to Mumbai suburban rail network (locals), which form the arterial connections. But at railway stations, the frequency of feeder service and frequency of arterial service is seriously mismatched. This is because of encroachments near the railway stations. Then, BEST also has to overcome the challenges created by lack of law and order. Burning, pelting BEST buses is a regular occurrence at every riot, demonstration or protest. The enormity of the challenge facing BEST is quite unique and requires strategic ingenuity to overcome and BEST's response, to put it kindly, has been lackadaisical.
BEST's attempt to solve the problems
BEST has experimented with fare hikes and fare cuts and in both cases incurred losses. At policy levels, BEST is beset with glaring mistakes and half-hearted attempts at improvement. Both have hurt BEST. For example, BEST has a smart-card ticket system, which very few use. There are TV screens - two per bus in most of the buses. If you examine the response from BEST, it has been poorly thought out in some cases, and poorly executed in others. The result, not surprisingly, is that BEST continues to operate at a loss.
In short, the woes of BEST arise from fundamental factors (e.g. Improper route planning), strategic mistakes, (e.g. Fleet composition, erratic deployment of ideas like smart-card solution), operational inefficiencies (e.g. Maintenance problems, revenue management, fuel cost management etc.), environmental challenges (e.g. road conditions, geography of Mumbai), policy inadequacies (e.g. Lack of coordination between railways, traffic police and BEST), legacy issues (e.g. Manpower costs and deployment), and importantly, the bane of Indian public services - corruption.
Why can't BEST fix itself?
To put it simply, BEST does not know what is going wrong. BEST does not even have a proper reporting framework in place. The standards of reporting of government and government bodies is suspect. As a principle, any entity that uses public fund and is a monopoly must disclose its performance in greater detail than public companies. When you want to hold tax-payers liable for costs, you better serve them with information. BEST must publish detailed performance parameters. Thus, BEST is ailing but there is no consistent data for diagnosis.
Can it turn around?
These factors individually are challenging by themselves, but taken together are a case study in complexity. Fixing it is impossible. Well, ALMOST impossible. There are strategies to fix BEST. We will detail these strategies through a RECoRFS examining Revenues, Expenditures, Coordination issues, Route Planning, Fleet composition and Strategy. The first milestone for any public transportation system is operational profitability. The state and city can finance the capital and interest expenditure initially. If these strategies are implemented, BEST can return to operating profitability in 2-3 years. In 2-3 years thereafter, fully profitability can be achieved. It needs energy and political will, but it can be done. In the next few articles we examine the issues facing BEST and the strategies how to fix BEST.
Note: We only focus on transportation side of BEST. BEST also has electricity distribution business which is not within the scope of this article. The analysis of BEST is based on financial and operational data from BEST website.
(Rahul Prakash Deodhar is a lawyer, investor and author with experience spanning manufacturing, consulting, investment banking firms. He has advised a wide range of clients including Fortune 500 companies, public and private sector banks, hedge funds and private equity funds among others. He has developed econometric models for demand forecasting in real estate, metals, airlines, and shipping. He designed MIS and planning and budgeting systems, sales networks, and operations for large corporates. He has worked with Aditya Birla Group, CRISIL and Morgan Stanley. He is author of two books – Subverting Capitalism and Democracy and Understanding Firms. He can be reached at [email protected] or at his website www.rahuldeodhar.com.)