Path forward for prolonged employee disengagement

MANAGEMENT & GOVERNANCE

S. Ainavolu

12/8/2021 10 min read

Path forward for prolonged employee disengagement – Reflecting on why RTC employees instead of buses are “on the road”?

It is already over forty days that employees of India’s largest Road Transport Corporation (RTC or corporation) headquartered in financial capital of the country begun their agitation. There are devotional practices where forty days is the duration required for completing the offering called mandala puja. Even if the strike ends soon, the demands may remain ever-green.

The employees’ dominant demand is to be treated at par with state government employees. Two years ago, it was another RTC of a south-central state that witnessed prolonged strike. Most unfortunate of these disengagements are reported suicides by a few employees who see no light at the end of the tunnel, bleak future and possibly crushed by the financial woes (mostly salaries are not paid to the striking employees). Day to day sustenance becomes the issue for many employees who depend on monthly wages that get paid by atleast middle of the month. Most of these families, given their socio-economic profile, do have single earning member. No salary for a month or more disturbs the balance. Often the suffering of employees and their families during prolonged strikes goes unreported in the mainstream media. Sadly, most visible information is the press statements issued by the government appointed management. These monotonous statements focus initially on the illogicality of the employee demands, then on fissures among the unions on continuation of the strike, and finally how many buses/depots have returned to normalcy. Issues give way and get reduced to statistics.

Recent and oft-repeated demand

Recent demand that appears as single point agenda but it covers most of the wage related woes of the employees. It is “amalgamation of the RTC with the state government”. Here, though the ownership of the corporation is with state government, the current demand is for total amalgamation. The demand for merger has to be understood from the sensitivity of lower wages (compared to state government employees), perceived Damocles sword of threat of closure and/or privatization and tough working conditions. Instead of pontificating to agitating employees who often seethe for two to three years before taking recourse to agitation as the last resort, one should examine the genuine nature of the demands and approach the main issues with positivity. This way of dealing in general helps if applied without pre-judice and can be applied to all cases of similar conflicts.

First let us focus on the dominant demand. Request or urging for merger of the corporation with state government is viewed with scepticism by a few stakeholders including advising consultants and “owner” governments. To quote a recent development, such an amalgamation happened in the state of Andhra Pradesh. Management experts often parrot the argument that ‘government has no business to be in business’ and hence the corporation form is the possible arms’ length way out. Lack of clarity exists when the corporation is fully owned by the very state. Assumedly knowledgeable too aver that as the employees of transport corporation receive “bonuses” and other “incentives”, they can’t and shouldn’t be asking for pay parity with state government employees. Hence is the argument that the demand of merger of the corporation with the state government in terms of absorption as one of the departments of the government doesn’t stand the test of logical scrutiny. It is often said that emotions are inversely proportional to the information. Thus, subtle examination of the facts on the ground shall clarify the scenario better. The imperative is to examine recent 4 to 5-year trends, look at current facts and gain a clear perspective before proposing any solution.

Mandate confusion between developmental needs and demands of commercial operations

RTCs have their origin in similar named act of 1950. Different state RTCs came into existence progressively at different points of timeline. In the beginning, the ownership of buses and their operations were vested with RTCs and these buses were to ply on then recently “nationalized” routes. In other words, on such specified routes no private vehicles can move with a commercial intent of transportation of people. Over the years good number of “attractive” routes, especially routes with traffic and profitability became “open” and are beyond the control of RTCs. Many private operators who flourish in these routes do so at the cost of RTCs. Now this may be offered as an instance of “opening up” to market forces. However, the ground reality and demands on RTCs are different. There is an inherent disadvantage vested with RTCs that these need to operate minimum services in unprofitable, low traffic routes. This is to fulfil the social and developmental agenda of the “owner” viz. the state government. Thus, RTCs often end up with less revenue giving/profitable routes, and attractive routes are declared “open” and shared with private operators, who often over-exploit.

The pay scales and work rules for corporation employees were originally distinguished from state government employees as the working conditions are different. Fair, it might sound then. Over years, the conflict of interest and governance deficiency started affecting the RTC’s performance. As discussed above, these entities are in the forefront of fulfilment of developmental agenda and also are expected to meet people’s demand for safe, economical and efficient transport. To deliver all these, it costs huge quantum of resources. RTC being a separate profit and loss (P&L) bearing entity, if entrusted with the fulfilment of above expectations, commercially weakened performance is often the outcome. The load which is of developmental and administrative nature is expected to be borne by RTC, then it is not a perfect model. Governments often neither offer relief nor compensate in any manner against the fulfilment of mandate expected of these corporations. Thus, RTCs are made to foot the bill for the fulfilment of developmental agenda of their “owner”. Subsequently, RTCs get assessed poorly as above commitment eats into their finances. Classic conflict of interest, one may say but it is more of lack of clarity. Guess is probably this case slips out of governance lens due to the absence of monetary minority shareholders in this case.

Flexibilization of the cost structure

Of late, the efforts towards flexibilization of the cost structure is happening in RTCs by higher loading on opex, which is often disproportionate to the reduction in capex and this is affecting the entity’s commercial viability adversely. Over the years, number of buses of RTCs on roads increased multi-fold. Currently thousands are deployed by each of the larger RTCs and these get housed in base depots which serve as anchoring points of decentralized operations. Tens of thousands of employees work with each of these RTCs, larger of these RTCs have half a lakh to a lakh in employees on rolls. This model is capital intensive and high on employee cost as well, as experts comment.

With thoughts on flexibilization of cost structure, different “leasing” options are explored by various RTCs. Simplest of these is along the lines of “converting the capex into opex” which in simple terms is leasing buses instead of buying these that involves high upfront costs. This we know for sure is the standard practice in airline industry. However, the sanity of the airline industry model wherein the lease is directly with the aircraft manufacturing company, is missing in leases executed by RTCs. The leases are often entered with small time individuals (distorted representation of some of interested primary stakeholders?). Ideally leases should have been carried out with large bus manufacturers. Worst is, there is reported grapevine in employee circle about how buses declared unfit by RTCs and disposed as scrap are “recycled”. In other words, the discarded and often in unsafe condition buses sold by RTC are bought by some of the leaders of various hues, and brought in to deploy again as lease buses. RTC interests suffer hugely as it is using its own old buses for which it did not receive much compensation (as these got offloaded as scrap), but now using the very buses by paying high lease amounts. Private interests are taken well care of one may easily observe but interests of RTC are compromised, and badly.

Quality of governance

Much before the famous bank nationalization happened in India the “route nationalization” happened. Road routes were reserved for local/state RTCs. As academicians who study the sector observe, regarding permitting the private operators on these “nationalized” roads, hardly any transparency exists. Often it is said that the dummy individuals representing the ruling sections of the state are shown as the owners of these route buses offering services. Often it gets reported that against one bus permit in a select prime route, more than one operates. Huge leakage of the potential revenue of the corporation, one may wonder. Lack of transparency in granting the permits exists and also there is more opaqueness in administering these permits.

Similar lack of transparency is visible regarding the hiring/leasing of the buses by RTCs. If the long-term leases with healthy commercials are entered with competing OEMs (bus manufacturers), probably no scope for any insinuation exists. On the other hand, RTCs indulging in leasing from “recycling” individuals or even if new buses are provided, leasing from entities without manufacturing capabilities is seen as a “?”.

Additionally, it is of common knowledge that if one pools the requirements and goes for a larger order, one stands to get better unit rates. In other words, instead of hiring buses in small numbers through multiple contracts, one larger contract with a bus manufacturer company like Tata or Ashok Leyland shall result in better economics. Fairly publicized large deals made available for public scrutiny shall help promote transparency and instil confidence in their managerial practices. Whether it is a “dry” or “wet” lease arrangement, if it is entered with OEMs directly shall have greater credibility is the understanding of any sectoral student.

Employees’ demand for amalgamation of RTC with state government

Over the years, the original corporation form of RTCs has come to represent poorer ethical standards, witness governance deficit and got led by non-specialized leadership with shorter tenures. Private interests often assumed greater importance than the interests of the corporation. Employees complain in private about malpractices reported in various procurements, auctions of scrap won by “related elements”, leases getting granted to select individuals who are aligning with the ruling class and route permits of private operators freely getting violated. Higher cost of fuel, higher “life cycle costing” of hired/leased vehicles, higher maintenance costs of RTC owned vehicles due to leakages, all contribute to higher operational costs that eat into the margins. This often colours the bottom-line with red. Accumulated losses of larger RTCs often run into thousands of crores of rupees. Sadly, a significant portion has to do with reimbursement of costs borne towards fulfilment of the government’s social agenda and also high taxes on the fuel consumed by vehicles.

Originally assumed bonuses for the employees and other possible incentives hardly become operational if the corporations are under cost pressure and registering regular losses. This is the case with most RTCs. When timely monthly wage payment itself becomes the big news, the question of incentives or bonuses is absolutely remote. Thus, when no additional benefit is a possibility, the RTC employees’ expectation is around getting atleast the minimum that is extended to government employees, relatively better wages and perceived job security. RTCs are large organizations per se. Largest of these has close to a lakh employees and operates close to eighteen thousand buses of different hues, including deluxe ones. It caters daily to close to two thirds of a crore people. Significant and large observers may say, and it is true.

Entry level and experienced employee salaries in governments are implemented based on the recommendations of pay commissions that get appointed from time to time. Often these follow similar announcements by central government. On the other hand, the wages in the corporations often stagnate for many years due to the pressures on the budget. Even the “release” of agreed amounts takes months towards waiting. This puts employees in adverse situation and they often look at the differential with state government employees who have better working conditions. Compare the typical routine of 10 am to 5 pm office workers and predictability associated with daily routines. On the contrast, difficult is the routine of a driver or a conductor of a bus that has to leave the base depot at say 4 am, as part of the first shift.

Harsher demands and working conditions and lower level of pay are the grievances often aired by RTC employees. It is not uncommon to find decade experienced RTC employee drawing a salary lower than the entry-minimum salary of a state government employee. Here, the grievance assumes solid form when the skills and education levels are comparable. Additional Damocles sword of any possibility of privatization or closure hangs on the heads of corporations’ employees. With government employment no such possibility exists is the perception. Thus, comparatively poorer wages, perceived lack of job security, bleak future in the light of the losses recorded by the corporations make employees raise single point demand of “amalgamation” with the state government. They feel their minimum interests shall be taken care by being a part of state government, and for the same work quantum and duty demands. In the absence of social security in the country, perceived security offered by government job can’t be negated in value terms.

On an optimistic note

Transport sector is prime mover of the economy. India records comparatively higher logistics to GDP ratio percentages and this is a definite comparative disadvantage. As a nation we need to optimize on that front. Both goods and human travel are important components of national efforts using logistics. In any field, we can’t afford to have business discontinuities for long. Better continue to walk and even against the odds. Thus, immediate goal is to commence the operations again and at the earliest. This needs to happen without winner/loser identification and obvious loss of face associated with such efforts.

Truce has to happen in a dignified manner which is acceptable to all the stakeholders. Economical profit won’t define the entirety of the value that is getting generated by the organization, given its contribution in reducing the per capita emissions and reducing the requirement of per capita road space. These become even more value adding in urban spaces that are already choking under the heavy clouds of pollution and witnessing bumper-to-bumper traffic. These are big ticket achievement metrics from sustainability perspective too.

Professionalizing the management of RTCs including having a full-time sectoral experienced CEO/MD, having necessary leadership guidance through highly qualified & ethically sensitive boards, vesting operational autonomy with the corporation, and most importantly immunizing the corporation against the political interference of any sort shall address the problems of the corporations in the medium term. Last point of lack of political interference is a mandatory condition for such enterprises to survive and succeed. AMUL is one such shining example where it was allowed to flourish in non-political eco-system. Late Shri Tribhuvandas Patel ensured such a neutral and safe ground for the startup of 1940s. This needs to be replicated in case of RTCs too.

Leveraging the power of information systems, promoting transparency, and ensuring better governance shall align the interests of all right-thinking stakeholders. Then, winning over the employees shall be a step away. The hand that promises the professional operations to these institutions needs to be extended and subsequent walking-the-talk has to be ensured. Trust develops then and trust ensures subsequent execution with ease. Statesmanship and vision are required qualities for handling the current and similar situations. In many a case, getting qualified and well-intending advisors may be just a call away. To begin the earnest transformational journey and succeed over years, this may be the first important step to be taken. And the rest shall follow.