An out-of-the-box managerial initiative by state-owned Karnataka State Road Transport Corporation (KSRTC) in procurement and management of fuel for its fleet of 24,000 buses has resulted in savings of Rs 300 crore.All KSRTC did was sever its 55-year-old relationship with the Indian Oil Corporation (IOC) and start purchasing fuel on the open market. KSRTC’s decision, which could well set a precedent for other states to follow, has resulted in savings of Rs 300 crore over 10 months.Procuring more than 5,00,000 kilolitres of fuel every year for its fleet of buses—the largest in any state -- KSRTC used to spend about 40 per cent of its annual funds on fuel alone. Despite spending this huge amount, there was no accountability or scientific management in place for fuel dispensation.Taking over the reins of the corporation as managing director in 2015, Rajender Kumar Kataria, a 1996 batch IAS officer, was surprised that nobody bothered to look into the pattern of spending on fuel. At the same time, the union government allowed the deregulation of diesel prices and Kataria figured the time was right for KSRTC to play the market, as it were.KSRTC GOES TO MARKET Before the KSRTC decided to look at the open market for its fuel requirements, the corporation had been buying its fuel from IOC. Though a major and longstanding customer, KSRTC never received any incentives or discounts on its purchases from the oil major. Expanding on the initiative, Kataria said that not only was it a tough decision, but an arduous struggle fraught with legal battles. Finally, the courts ruled in favour of KSRTC.“After deregulation, we reevaluated our decision to go with one player without any benefits. With other players in the market, we felt that if we negotiated, we could get a better deal and reap the benefits. Accordingly we went into the open market,” he said. BREAKING THE MONOPOLY Deciding to try its luck in the open market, KSRTC approached others. “We zeroed in on four aspects that play a major role in fuel procurement. The first was the net discount offered by companies, followed by credit facility of at least one month as it would give us enough breathing space financially. This apart, we wanted to bring in a fuel automation system as it would not only bring in accountability, but help us understand how we utilised the product on which we spend so much money.The last requirement was that the company must create infrastructure for dispensation of fuel at no cost, and hand over the property to us at a depreciated price towards the end of the agreement,” Kataria said. With several proposals trickling in, the KSRTC could not believe that the inititative – the first of its kind for any public sector transport company -- would yield such great results. “The Bharat Petroleum Corporation Limited (BPCL) quoted the lowest price and they even offered a discount of Rs1.28 per litre of diesel. Since the KSRTC MD is a member of the fuel purchase committee of all four corporations, the deal turned out be a feasible one for all four companies,” Kataria explained.SAVINGS IN CRORESWith the discount offered by BPCL, the KSRTC, along with other corporations, witnessed a saving of about Rs 120 crore on fuel. “On fuel purchases alone, we were able to save Rs 100 crore. Further, the savings on fuelassociated infrastructure, credit payment and other expenses resulted in a net saving of Rs 200 crore. In less than a year, we have already saved around 157.66 crore and will continue to increase that in the coming years. The contract that we have signed with BPCL is for three years and can be extended for another two.The infrastructure created by the company, including tanks, pumps and other facilities, will last for at least 20 to 30 years,” Kataria said.FUEL AUTOMATION SYSTEM IN PLACESaving considerably on fuel purchases, the KSRTC set its eyes on the management of fuel dispensation at all its depots, hopefully cancelling out pilferage and theft. The BPCL brought in the fuel automation software keeping in mind the KSRTC’s operations. “The automation system will give us a tool to manage the fuel supply system and if there are any loopholes we can plug them too and ensure profits to the company.All the drivers have been given Radio Frequency Identification (RFID) tags an automatic fuel gauges have been installed at depots. The fuel is filled into the tank only if the RFID of the driver matches with that of the automated dispenser. This has replaced the earlier cashand- slip method and also does away with fuel clerks who sit with log books. There is no scope for manual intervention at any point during refueling.This apart, even the tankers that ferry diesel to the depots have been fixed with GPRS and their route map is pre-decided. Even the slightest deviation will be reflected on the map,” Kataria said. The KSRTC model of open market fuel procurement is now hailed by all and adopted by Rajasthan, Uttar Pradesh, Gujarat and Maharashtra in their road transport companies.