The increasing trend in oil prices particularly of diesel is making it difficult for large-sized bus operators of Urban Transport Scheme (UTS) to run their fleet profitably. In case no corrective measures are taken immediately, the companies might run into default due to their inability to repay the loans to financial institutions and leasing companies, who have financed buses under this scheme.
The UTS operators are incurring huge financial losses which are becoming unbearable owing to unprecedented surge in diesel prices over the years, especially in last few months. The situation has become worse because fares of these companies have not been increased during this period.
The UTS, launched over two and half years back, was aimed at changing the old and obsolete transport culture of the city by replacing the same with new large-sized air-conditioned and non air-conditioned buses to provide commuters of Karachi a convenient and comfortable mode of transportation.
The scheme, which registered steady progress initially, got confronted with various hurdles. Soon after its commencement it faced the danger of default due to companies' inability to repay the loans to leasing companies and banks.
The financing ranging from 70 to 90 percent is made by leasing companies while the rest is provided by the operators company which is bound to pay back to the leasing companies and financial institutions in five years period through instalments.
A bus company operating under the UTS has to pay an instalment of around Rs 50,000 each month for every leased bus besides the operating cost, which ranges from Rs 60,000 to Rs 70,000 each month for a bus. All the 225 new large-sized buses have been financed by financial institutions.
It has now become difficult for the operators to ply their buses in a situation where there seems to be no end to price-hike in diesel prices, an operator of UTS said, adding that fares are not being increased to safeguard the interest of general public at the cost of bus companies.
He said UTS operators are not demanding any increase in fares as they also understand the sufferings of the common man who is already under pressure due to price-hike in almost all essential commodities. However, the government should also be sensitised about the problems of operators, who have invested Rs 1.5 billion to Rs 2 billion in this sector.
Another operator said if the increase in oil prices persisted unabated, companies might default billions of rupees, and large sized buses would be selling in scarp.
An official source told that 100 buses are ready in assembling units, but are awaiting financing from leasing companies to come on roads. The leasing companies are now reluctant to finance these buses due to inability of operators to pay back the loan.
He said that leasing companies are already finding it hard to get back the amount, invested in UTS buses, and they would not be in a position to extend finance further, if the situation did not show any improvement.
The target of 500 buses, set by the city administration by end of December 2004 could not be achieved due to this reason, and it would be also very hard for it to accomplish this target even by end of next month.
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