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Slump in IT-BPO biz spells trouble for cab owners
Seema Sindhu & Kaustubh Kulkarni in New Delhi | March 05, 2009 16:27 IST
Following stringent cost-cutting measures by business process outsourcing units and IT firms across the country, the business of call centre cab owners has dwindled by anywhere between 5 and 40 per cent.
Tarun Jain of Legend Transport Solutions,New Delhi, says his company used to transport seven employees in a single cab. Now they are forced to take nine. And, with more employees (especially those on the bench) being placed under the scanner and later retrenched on grounds of poor performance, the number of cabs required falls every month.
"Business has seen a loss of 30-35 per cent in the last one year. Companies have increased vehicle utilisation norms, and decreased routes. Banks are not funding loans for new vehicles. Vehicle insurance has gone up. Despite knowing this, companies are undermining us," says Jain.
In Pune, too, where business has gone down by 40 per cent over two months. More than 7,000 cabs used to transport around 45,000 BPO staffers in the Pune and Pimpri-Chinchwad regions. The number has now reportedly come down to 4,000. While some BPOs have cut the number of cabs they use, other have shifted to mini-buses.
Speaking to Business Standard, Nana Kshirsagar, president, Maharashtra Call Centre Drivers' and Owners' Association said: "A large number of vehicles have turned idle in the city, due to the cost-cutting by BPOs. Our association represents more than 7,000 cabs and around 350 buses that provide pick-up and drop service to some 150 BPOs and software firms. As of now, only 4,000 cabs are operating and a further dip is expected."
MCCDOA members had gone on a day's strike last May in Pune for various demands. "Our clients are in trouble and, hence, we are finding it difficult to cope. A large number of cab drivers are sitting home," he added.
Although IT and BPO companies can't stop the cab facility completely due to safety reasons for employees in the night shift, some are replacing this with a bus/shuttle service for those in the day shift. A cab costs companies Rs 30,000-40,000 a month (within 40 km and 22 working days), while a bus costs Rs 100,000-110,000 a month. Rough estimates indicate that five buses can replace 60 cabs. Which means a company can save around Rs 18.5 lakh (Rs 1.8 million) a month by replacing cabs with buses.
"Transport comprises the most expensive component of overall cost in the BPO business. We have already restructured our employee transport system to make it more efficient, and a part of which is also to reduce the costs. However, we have made sure to abide by the law of the land and will continue to provide transportation," says Amitabh Chaudhry, CEO of Bangalore-based Infosys [Get Quote] BPO.
Infosys has already arranged for buses to transport employees to the work place during the day. Beside reducing costs, it ensures safety and security, says Chaudhry. At night, the company still provides cab facilities. And, the company has re-negotiated contracts with many vendors who provide cabbies.
BPO major, WNS, which has about 5,000 staffers at its two centres in Pune, has stopped cab services to transport them. "We are being ferried by buses instead of cabs for more than a month now. This has increased our travel time," said a staffer, who lives at Koregaon Park.
KPIT Cummins Infosystems [Get Quote] has even cut the number of buses, as well as the cabs it used to operate for the pick-up and drop service. It has introduced strict norms to regulate travel time and distance to be covered by a single vehicle. "Placing a request for a pick-up is a major headache, as the procedure involves a lot of approvals," said an executive with the Pune-based BPO firm.
A top administration official said, "We have introduced stringent measures...in difficult times, we cannot provide every employee a pick-up from his or her doorstep at his or her wish." KPIT Cummins has around 4,000 employees in Pune and is expected to further cut the number of buses it operates.
Moreover, the Metro Rail is considered as a major threat to the transport business in Delhi and the National Capital Region region. Upender Singh Anand, owner of United Services Corporation, says: "Business has seen a 5-10 per cent decline in the last one year. Once the Metro begins in Ghaziabad and Gurgaon, business is expected to go down by 40 per cent, since companies are planning to issue passes to employees rather than providing bus or cab services." BPOs like Genpact and EXL have begun a shuttle service which takes and collects staffers to and from Metro rail stations in Delhi between 8 am and 8 pm.
Cab owners complain that companies are taking advantage of the downturn. They say when diesel prices rose, companies did not implement new rates immediately, saying they will have to discuss it. But when prices decrease, they shoot a mail and implement instantly.
For instance, till December, 2008, cab owners in New Delhi and Gurgaon areas were working on a Rs 6/km compensation. Now it is Rs 5.60/km. Companies increase or decrease rates by 10 paise for every rupee increase or decrease. In December, the government cut diesel prices by Rs 2, followed by an equal cut in January.
There are two modes of payment for cab owners: Pay per km (as in Rs 6/ km) or on route basis (Rs 900-1,200 per trip in the NCR catchment). "Now companies are asking us to revise the system. They are asking us to charge Rs 5/ km (Re 1 less) or implement a per employee system wherein they will pay as per the employees ferried. Imagine if we ferry two people on a route, what will we earn?" Jain asks.