Cash crunch — BEST may fall back on reserves

MUMBAI, MARCH 5: The delay in the proposed bus fare hike has forced the BEST administration, reeling under a severe cash crunch, to think ...

MUMBAI, MARCH 5: The delay in the proposed bus fare hike has forced the BEST administration, reeling under a severe cash crunch, to think of digging into its reserves and investments.

Coins are proving to be major problem for the BEST. While they are one of the major causes of fights breaking out between conductors and commuters, the coins and Rs 10 notes find it difficult to make their way to banks for want of storage space.

The BEST has to deposit a certain amount of money with the banks as an incentive to lift notes and cins of small denomination. As on February 21, the BEST had Rs 18.14 crore in short-term deposits with banks.

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Now with the BEST’s coffers getting increasingly empty, it might be forced to withdraw the deposits prematurely at the cost of the organisation’s credibility, BEST officials say, adding that the only way out of this predicament is to hike fares as soon as possible. Apart from charging 1 per cent as penalty, the current rate of interest is calculated by the banks unnecessarily adding to the undertaking’s losses.

The BEST needs to place Rs 5.29 crore more with various banks for lifting small denomination notes and coins which cannot be placed due to the critical cash flow position. It also has investments of about Rs 30.16 crore in government securities which it may have to sell under the present circumstances. Here too it faces a problem since many of its investments in these categories are of relatively high coupon rate compared to present interest rates available in the market.

The other reason for the critical cash flow is the mismatch of recovery of fuel from the BEST’s consumers compared to its payment of fuel adjustment charges to Tata Electric Companies (TEC). Due to the nature of its billing system, there is delay in recovery of fuel adjustment charges from its consumers at the same time when the fuel adjustment charges are continously rising.

The situation is such that the BEST ends up paying more to the TEC in a particular month as fuel adjustment charges as against the recovery of the same from its consumers in that particular month. Though over a period of time, it gets adjusted, it has a short term impact on the BEST’s liquidity.

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With the Central Government increasing the prices of diesel from October 5, ’99 and the State Government too levying additional tax on diesel, it has resulted in an additional burden of Rs 4 to 4.5 crore per month for BEST.

The BEST also had to pay Rs 4.97 crore and Rs 4.50 crore as passenger tax on concessional fares and acquisition of land for the Malad depot respectively. In the year ’99-2000, an amount of approximately Rs 125 crore was paid for acquisition of various assets under capital works programme.