Tuesday, March 23, 2010

The most popular form of public transport all over India except Mumbai is buses. And these buses are owned by private individuals. This results in buses racing with each other to grab passengers and make money resulting in lots death in the accidents that ensue. Number of deaths due to bus accidents average about two per day – this is the figure only for the small state of Kerala which accounts for just about 3% of India’s population.
If ownership is transferred from private owners to collective ownership, most of the problems can be eliminated. Thus all new buses may be owned by a company formed as detailed below. And existing bus owners may be given the option to sell it to the corporation at a shade above the current realizable value.
Kerala is having a population of about 3.5 Crores. If everyone contributes Rs. 500 each, it will be 5250 Cr. This will buy about 35000 buses assuming a cost of Rs. 15 lakh per bus. On a debt equity ratio of 1:1, total funds can go up to 10500 Crores. With 70000 buses, travel needs will be more than covered.

Min contribution Rs. 100
Max contribution No limit but amount greater than Rs. 500 will be treated as perpetual bond earning FD interest
Dividend Will not be paid. All surpluses will be pooled back to the operations of the company.
Transferability Not transferable
Bus charges 10% discount to shareholders
Voting by shareholders One man One vote

So what is the benefit for shareholders? One is safer travel on the road with a minimum contribution. Second shareholders will have a 10% discount on tickets.
Additional share issue will be only to those who do not hold any shares as far as possible. Any one not owning shares have the option to get shares allotted without addition to share capital- such applicants will be allotted shares by compulsory conversion of perpetual bond portion of others . Thus additional shares will mean lesser interest cost for the company.
Government may be made a shareholder in this set up
Someone more than willing to be a stakeholder will be general insurers: with adverse claims ratio, they will happily contribute a lot of funds.
Who can be the shareholders? For the state of Kerala it shall be all Keralites anywhere in the world and any non Keralites who are resident in Kerala. Share held by these non residents may be bought back by the company when they leave Kerala permanently.