Improving BEST: Revenue Generation of Mumbai’s public transporter –Part2
Raising revenues and operating a profitable service is the biggest challenge before BrihanMumbai Electric Supply & Transport (BEST), Mumbai's bus operator, today. The public transporter needs to do this by deploying multiple strategies to improve revenue through ticketing and non-ticketing options. Let us examine some possibilities in this article; but before we do that let us analyse the current revenues of BEST.
 
Short analysis
BEST counts revenues from four different sources - Passenger receipts, bus hires, grants from the municipal corporation and other receipts. BEST generates additional revenue from advertising, real estate rentals and other activities. Grants account for little more than 10% of passenger receipts. Other receipts are two-thirds of the grants in 2014-15. 
 
BEST administrative report, available for FY2012-13, states that BEST earns about Rs3.5 crore per day through passenger receipts. The annual per passenger revenue is Rs9, which seems to be too low. As per ticketing spread in 2012-13, tickets sold, up to Rs5 (up to 2kms) are 25% of total, up to Rs7 (up to 3kms) is 46%, up to 10 (up to 5kms) is 72% and up to Rs12 (up to 7kms) is 83%. The comparable Auto rickshaw fares would amount to Rs24 (up to 2kms), Rs36 (up to 3kms), Rs60 (up to 5kms) and Rs85 (up to 7kms). And Taxi fares will be Rs29, Rs44, Rs74 and Rs103, respectively. Clearly, the bus fares are under-priced. 
 
To understand the revenue side better, BEST needs to focus on profits or yields at various level - e.g. Per-bus yield, per-passenger yield, and per-route yield. These numbers should be monitored daily and reported with every financial year statements. 
 
Improving passenger receipts
Passenger receipts are a function of how convenient BEST is as transport alternative. With proper route planning, easier payment system, passenger receipts should improve. Inefficient ticketing is one of the reason for low annual per passenger revenue. It causes ticketless travel and revenue leakage. One option to improve this is to make print-ticket prices in multiples of Rs10. However, if you use electronic card, then it can be in denominations of Rs5. Ticketing can be improved by contact less smart cards at entry and exit. If someone forgets to tap at the exit, fixed fee will get deducted say Rs200 - for trunk routes and Rs30 for feeder routes. We can also have a Rs30 per day pass on all feeder routes.  
 
Advertising
BEST advertising comes from bus hoardings, in bus TV adverts, bus-stop advertising and advertising on other real estate owned by BEST. Unfortunately, BEST does not give further details. It is pertinent to note that substantial amount of advertising for both transportation and electric supply division goes through Rakesh Advertising. This entity controls advertising on streetlights, bus shelter adverts, and bus side panels. In & Out agency controls the hoardings, while Special advertising rights on air-conditioned Volvo buses are with Asian Concierge. This entire setup needs to be investigated for poor performance. A fleet of 3,500 buses (three outside panels, and two TVs inside), 35 hoarding sites, 25 bus depots, 47 Bus stations, 116 bus chowkies, 3,236 sheltered bus stops and 3,172 pole-bus stops cannot provide decent amount of advertising revenues? A case in point is that most of the large advertisers do not seem to advertise on BEST buses. BEST awarded the contract for bus advertising to Rakesh Advertising for Rs72 crore for three years. In contrast, a classified advertisement in local newspaper costs Rs1,000 (minimum) per day and it reaches less number of people than any BEST bus. 
 
Real Estate rentals
Apart from advertising, BEST also owns and leases commercial complexes in various places. The proper accounting of these commercial ventures between transportation and electric supply department is necessary. At least 27 bus-depots can serve as tremendous source of revenue generation. Currently, BEST plans to develop some of these locations. BEST needs to develop proper commuter amenities (including convenience stores, grocery stores, and food courts in these premises). Intelligent development of these spaces can ensure the rents from these buildings can contribute substantially while commuters get additional benefit. BEST can also develop office complexes on the higher floors.
 
Summary
The annual passenger receipts are Rs30 lakh per bus at BEST level. This is grossly inadequate. There is lot of potential for BEST to improve both its passenger receipts as well as other income. Serious efforts in this regard may add substantial gains quickly to the income side.
 
Note: Data for this article comes from BEST Administrative Report for FY2012-13.
 
(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.)
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