CHAPTER -IV FINANCIAL PERFORMANCE OF THE MAX! CAB OPERATIONS IN K4NYI4KUM4RI DISTRICT

CHAPTER -IV FINANCIAL PERFORMANCE OF THE MAX! CAB OPERATIONS IN K4NYI4KUM4RI DISTRICT

118 CHAPTER IV FINANCIAL PERFORMANCE OF THE MAXI CAB OPERATIONS IN KANYAKUMARI DISTRICT The profitability of maxi cab operations, as in any other industry, depends on the performance of the operations, development of techniques and the methodology needed for attaining higher productivity. An analysis of factors, which contribute to the economics, and diseconomies of maxi cab operations becomes vital, if one hopes to indicate the essentials of maxi cab operations in Kanyakuman district. Hence, an attempt is made in this chapter to analyse the financial performance of maxi cabs in the district. It is self-evident that to analyse the financial performance of maxi cabs is greatly needed for finding out the overall operational position of the maxi cabs. This discussion may be done by analyzing various indicators like cost, revenue structure, profit or loss per vehicle, return on investment ratio and operating ratio of finance.' 4.1 Cost Analysis An analysis of the cost structure of transport industry is important to assess its financial performance. Further, as profitability is the guiding factor in all economic activities, the factors, which influence profit margin, call for proper scrutiny. 1. A.V. Raman, "Financial Problems of Nationalized Transport Undertakings", Journal of Transport Management, Association of State Transport Undertakings, Vol. 5, No.10, May 1982, p.10.

119 Cost analysis is significant because it plays a crucial role in running any business. The influence of cost on profit is much greater than revenue because cost fluctuates more frequently than revenue. In maxi cab operations, the major revenue comes from passenger traffic, and it also depends upon fare structure. Further, the importance of cost analysis in achieving cost effectiveness is crucial because certain types of cabs can be controlled through economic and efficient operations. 4.2 Classification of Cost Components The total cost may be classified into six components namely 1) fuel cost, 2) labour cost, 3) maintenance cost, 4) interest on capital, 5) the various taxes paid by the owners of the vehicle and 6) miscellaneous cost. 4.2.1 Fuel Cost Fuel cost includes expenditure on diesel and oil incurred by the owners of maxi cabs. It is the major component in the cost structure because its percentage (42.09%) to the total cost is more. The fuel cost of maxi cab operations depends upon the fuel prices, the kilometres per litre, the proper road conditions, the smoothness of driving, the life of the vehicle and the number of passengers carried. Table 4.1 gives the details of the total fuel cost for different types of maxi cabs.

120 Table 4.1 Fuel cost for maxi cabs Type of Make Total fuel cost per month (Rs.) Total fuel cost per cab per month (Rs.) Total fuel cost per cab per km. (Rs.) Mah md ía 10,10,193 8,203 2.17 Tata 407 3,73,249 7,169 2.06 Matador 1,52,067 4,899 1.81 Tempo Traveller 1,37,253 6,854 2.24 Total 16,72,762 27,125 8.28 Source: Primary data The table above shows that the Matador cab is the most fuel-efficient, and its monthly cost on fuel per cab is Rs. 4,899, and the cost per cab per kilometer is Rs. 1.81. The Tata 407 cab comes next with the cost of Rs. 7,167 as monthly fuel cost per cab and Rs. 2.06 as total fuel cost per cab kilometer. The Tempo Traveller cab has a fuel cost of Rs. 6,854 per month, and the fuel cost of Rs. 2.24 per cab kilometer. The Mahindra cab has a fuel cost of Rs. 8,203 per cab, and Rs. 2.17 per cab kilometer. The fuel cost per kilometer for Tempo Traveller is high because this maxi cab is normally used for long journeys. For the purpose of reaching the destination at a minimum time, these cabs usually travel at around 80 to 100 kilometres per hour. Sometimes, Mahindra and Tata 407 cabs are used for local trips, and they frequently apply breaks when they travel through populated areas in the district. Further, their maximum speed is only up to 50 to 70 kilometres per hour. So, the fuel cost of Mahindra and Tata 407 cab is lower, when it is compared to that of Tempo Traveller. But, the Matador cabs operated in the

121 district are old, and passengers hire them only for attending functions, which are held within the district. 4.2.2 Labour Cost Labour cost includes the salaries and daily allowances of drivers and cleaners. Table 4.2 shows the monthly labour cost per cab and per cab kilometer. Table 4.2 Labour cost for maxi cabs Type of cabs Total labour cost per month (Rs.) Total labour cost per cab month (Rs.) Total labour cost per cab km. (Rs.) Ma hind ra 3,67,767 2,986.79 Tata 407 1,52,198 2,923.84 Matador 41,512 1,382.49 Tempo Traveller 52,086 2,601.85 Total Source: Primary data 6,13,563 9,892 2.97 The monthly labour cost per cab is found to be Rs. 2,986 for Mahindra, Rs. 2,923 for Tata 407, Rs. 1,382 for Matador and Rs. 2,601 for Tempo Traveller. Even though the monthly labour cost is high for Mahindra cabs, compared to the other three cabs, the labour cost per cab per kilometer for Mahindra cab is lower than that of other three cabs, because the bata for labour is fixed only on the basis of kilometres covered by the cabs. Mahindra has covered maximum kilometres compared to the other cabs, because long distance run for Mahindra is comparatively less. So, the expenditure on bata for drivers and cleaners is lower than that of Tata 407 and Tempo Travellers.

122 The labour cost per cab per kilometres is more or less the same for Tempo Traveller and Tata 407, because mostly it is the people who plan long distance travels hire them. So, the drivers and cleaners get more bata. The labour cost for Matador cab is the lowest because most of the days this cab does not have long trips. 4.2.3 Maintenance Cost The cost of maintenance also constitutes one of the major items of expenditure in the maxi cab operations. The life of the tyres, the life of rethreaded tyres, the materials, and the prices of spare parts of the vehicles determine the cost of maintenance. The life and performance of tyres, materials and rethreaded tyres are influenced by the type and quality of manufacture, maintenance of tyres, road factor, load factor, rethreadability factor, habit of drivers and weight of the body of cabs. Besides, manufacturing defects mechanical irregularities like wrong wheel alignment affect the life and performance tyres and tubes. Frequent rise in prices of tyres and tubes, materials, spare parts increases the cost of maintenance. Table 4.3 gives the details of the total maintenance cost per month. The total maintenance cost per cab per month and total maintenance cost per cab per kilometer.

123 Table 4.3 Maintenance cost for maxi cabs Total maint. cost Total maint. cost per Total maint. cost Type of cabs per month cab per month per cab per km. (Rs.) (Rs.) (Rs.) Mahindra 3,63,111 2,948 0.78 Tata 407 195,664 3,758 1.08 Matador 82,319 2,845 1.05 Tempo Traveller 68,630 3,427 1.12 Total 7,09,744 12,978-4.03 Source: Primary data The table above shows maintenance cost per cab per kilometer. The maintenance cost of Mahindra cab is comparatively less, because the prices of its spare parts are less, and most of the operations of the cab are limited within the district. The maintenance cost of Tempo Traveller is the highest due to the high cost of its spare parts and also because of the fact that the cab is usually used for long distance travel. Tata 407's maintenance cost is slightly less than that of Tempo Traveller and more than that of Mahindra and Matador, because it carries more passengers than the other cabs. Even though Matador cab's maintenance cost is less than that of Tata 407, and Tempo Traveller, it is greater than that of Mahindra. The outdated machine used in this cab is the main reason for it. 4.2.4 Interest on Capital Interest is a payment paid for the use of capital, which has been taken as market borrowing rate. The interest cost depends upon the rates attached to various sources of capital received on interest basis. The interest on the capital is arrived at on the basis of rate of interest charged by money lenders and financial

124 institutions (market rate of interest). Moneylenders, usually charge 24 percent of annual interest, financial institutions charge in between 15 and 18 percent and the relatives, who help do not usually charge any interest. Hence, interest rate varies from moneylenders and financial institutions. Hence, the interest used in this is explicit. Table 4.4, shows the cost of interest on capital per cab and per cab kilometer. Table 4.4 Interest on capital for maxi cab operations Total interest on Total interest on Total interest on Type of Cabs capital month capital per cab month capital per cab km (Rs.) (Rs.) (Rs.) Mahindra 2,42,074 1,966 0.52 Tata 407 1,17,773 2,266 0.65 Matador 45,033 1,451 0.53 Tempo Traveller 42,894 2,142 0.70 Total 4,47,774 7825 2.40 Source: Primary data As per table 4.4, the monthly cost on interest per cab is Rs. 1,966 for Mahindra, Rs. 2,266 for Tata 407, Rs. 1,451 for Matador and Rs. 2,142 for Tempo Traveller cabs. The interest cost per cab kilometer is Rs. 0.52 for Mahindra, Rs. 0.65 for Tata 407, Rs. 0.53 for Matador and Rs. 0.70 for Tempo Traveller. It Is observed from the above analysis that the interest amount for Matador was lower, compared to the cabs of other types. It is also inferred that the Matador cab requires less investment than other types of cabs, because the number of cabs and kilometres run by it per day are comparatively less. On the

125 other hand, the price of Mahindra cab is less and the investment in this cab compared to other types is also less. Further, Mahindra's coverage of kilometer is higher, compared to the other three cabs. The owners of the Tempo Traveller and Tata 407 pay more interest per kilometer because the cost of purchasing these cabs is very high, and for arranging margin money, they borrow from moneylenders at a high rate of interest. 4.2.5 Expenditure Incurred on the Payment of Taxes Taxes constitute 6.86 per cent of the total cost. Table 4.5 shows the cost incurred by taxes per cab and per cab kilometer for all the four types of makes. Table 4.5 Expenditure incurred for the payment of taxes Total taxes paid Total taxes paid per Total taxes per Type of Makes per month cab per month cab per km. (Rs.) (Rs.) (Rs.) Mahindra 1,58,207 1,285.34 Tata 407 72,475 1,392.40 Matador 24,551 791.29 Tempo Traveller 19,609 979.32 Total 2,74,842 4447 35.01 Source: Primary data The tax levied by the Government of Tamil Nadu is uniform to all types of cabs. But, table 4.5 reveals that there is a variation in the expenditure incurred by the cab for the payment of taxes. It is due to differences in the trips outside the state Matador's contribution towards the tax is less because its average coverage of kilometres is less. Other states' trips for the cab are almost nil. The taxes paid for a kilometer by the Tempo Traveller is less because the owners of the Tempo

126 Travellers charge Rs. 5.75 per kilometer from the passengers. Even though it is more convenient to travel, the passengers do not prefer it due to high cost. On the other hand, Mahindra and Tata 407 are very popular among the passengers for trips outside the state. Since the owners of the Mahindra cabs charge only Rs. 5.27 for a kilometer, these cabs are used for both inside and outside state trips frequently. Compared to Mahindra cab, Tata 407 is more convenient to travel, and its rate per kilometer is less than that of Tempo Traveller. As a result, people hire this cab for long as well as inter-state trips. Hence, the contribution to taxes by Tata 407 and Mahindra is more than that of Tempo Traveller and Matador. 4.2.6 Miscellaneous Cost Miscellaneous cost includes cost on insurance, expenditure on telephone, rent for shed, electricity charges and advertising costs. These costs constitute 3.39 per cent of the total cost. Table 4.6 shows miscellaneous cost per cab per cab kilometer for all the four types of vehicles. Table 4.6 Miscellaneous cost for maxi cab operations Total mis. cost per Total mis. cost per Total mis. cost per cab per Type of Makes month cab per month km. (Rs.) (Rs.) (Rs.) Mahindra 79,139 643 0.17 Tata 407 30,602 591 0.17 Matador 11,694 377 0.14 Tempo Traveller 11,643 581 0.19 Total 1,33,278 2192 0.67 Source: Primary data

127 Miscellaneous cost per cab and per cab kilometer is least for Matador cab followed by Tata 407, Tempo Traveller, and Mahindra cabs. While the monthly miscellaneous cost of Mahindra cab is Rs. 643, it is Rs. 591 for Tata 407, Rs. 377 for Matador and Rs. 581 for Tempo Traveller cabs. The miscellaneous cost per cab per kilometer is Rs. 0.14 for Matador, Rs. 0.17 for Mahindra and Rs. 0.17 for Tata 407 and Rs. 0.19 for Tempo Traveller cabs 4.3 Total Cost taxes The total cost includes all the costs of operations including interests and The calculation of total cost is essential for the calculation of profit as well as the total expenditure incurred by the maxi cabs. Only after knowing the total cost, the financial performance evaluation of the different makes can be analysed. Table 4.7 gives the details of the total cost incurred by different types of maxi cabs in Kanyakuman district per month and per cab kilometer. Table 4.7 Total cost of maxi cab operations 0 Type of o cabs I- (50 Monthly cost per cab (in Rs.).0 I 0 In C,.e C, (5 0. In. 0 0 0 0. d 0.0 WO. n o 00 0c(5 '(5 (5 I-u I-(5Q - I- Mahindra 8203 2986 2948 1966 1285 643 18031 4.77 Tata 407 7169 2923 3758 2266 1392 591 18099 5.20 Matador 4899 1382 2845 1451 791 377 11745 4.33 Tempo 6854 2601 3427 2142 979 581 16584 5.40 Traveller Total 27125 9892 12978 7825 4447 2192 64459 19.70 Source: I-'rimay clara I--

128 As per the figures in table 4.7, the total cost incurred in a month by the Tata 407 cab is the highest and Mahindra follows closely. Even though the total monthly cost for the Tempo Traveller is less than that of Tata 407 and Mahindra, the total cost per cab per kilometer is high because the average kilometer run per day is comparatively less than that of Tata 407 and Mahindra. The total cost per cab per kilometer for the Mahindra is less because the capital invested on the cab is less than that of the other two cabs and the maintenance cost is also comparatively low. The total cost for the Matador cab is very low because the average kilometer run by it is the least. Overall, all the components of the total cost for the Matador cab is less than the other cabs. The above analysis is presented in the form of pie diagram 4.1.

129 Figure 4.1 TOTAL COST OF MAXI CAB OPERATIONS 16584 18031 /F I F 11745 18099 [ámahindra DTata 407 DMatador DTempo Travellefj

130 4.4 Revenue Analysis Total revenue is one of the important concepts that enables us to find out the overall operating performance of maxi cabs. It depends upon maxi cabs utilisation, effective kilometres run and operating ratio. It is important to derive the total revenue of the maxi cab operations as total cost together with total revenue determines the financial performance. The total revenue of the maxi cab is depending upon the fare charged by the maxi cab. But, in practice, there are three types of charges. I) Flat rate for short distance. (Below 100 kilo meters) ii) iii) Fixed rate for one-day travel. Kilo metre rate for long distances. By consolidating all these rates the total revenue is calculated. Table 4.8 Revenue structure of maxi cab operations Monthly total Monthly total Total revenue per cab Type of cabs revenue revenue per cab per km. (Rs.) (Rs.) (Rs.) Mahindra 24,52,251 19,937 5.27 Tata 407 10,30,848 19,824 5.60 Matador 3,76,650 12,150 4.50 Tempo Traveller 3,51900 17,595 5.75 Total 42,11,649 69,506 21.12 source: Primary data Table 4.8 shows the operating monthly revenue of different maxi cabs. It is the average monthly collection made by the vehicles. The operating monthly income per cab is Rs. 19,937 for Mahindra, Rs. 19,824 for Tata 407, Rs. 12,150 for Matador and Rs. 17,595 for Tempo Traveller. It is clear from the analysis that

13 the Mahindra cab has higher operational monthly income per cab and per cab kilometer compared to the other makes. But the performance in terms of operating income per kilometer per cab is Rs. 5.27 for Mahindra, Rs. 5.60 for Tata 407, Rs. 4.50 for Matador and Rs. 5.75 for Tempo Traveller. The total revenue per cab per kilometer for the maxi cabs is varied because they charge the passengers for different rates for a kilometer. The above analysis is presented in the form of pie diagram 4.2.

132 Figure 4.2 REVENUE STRUCTURE OF MAXI CABS 19937 19824 LDMa hnd ra!ltata 407 DMatador OTempo Traveller

133 4.5 Operating Ratio Operating ratio is a financial indicator of operating efficiency and it measures the relationship between the cost of operations and the revenue arising from operations. 2 It is the ratio of total cost of operations to the total operating income. The operating ratio is arrived at as follows, Operating ratio = Total operatin g cost x 100 Total operating revenue Table 4.9 shows the operating ratio for the different types of cabs. Table 4.9 Operating ratio for different types of cabs Type of cabs Mahi nd ra Tata 407 Matador Tempo Traveller Source: Primer,' data Operating ratio (in percentage) 90.44 91.28 96.30 93.90 From table 4.9, it can be observed that the operating ratio per cab is found to be the highest for Matador and the least for Mahindra cab. The operating ratio is 90.72 per cent for Mahindra, 91.28 per cent for Tata 407, 96.30 per cent for Matador and 93.90 per cent for Tempo Traveller cab. The operating ratio shows that Mahindra cab is more efficient than the other makes of cabs under study. 2. A Planning Commission Exercise, "A Comparative Analysis of the Performance of SRTUS", Journal of Transport Management, Association of State Road Transport Undertakings, Pune, Vol. 9, No.7, July, 1985, p.27.

134 4.6 Profit Structure An attempt is made to analyse the financial performance of the maxi cabs on the basis of profit structure. The operating profit margin is the excess of total operating revenue over total cost of operation. It indicates the profitability and efficiency of maxi cab operations. The profit structure per cab and per cab kilometer is given in table 4.10. Table 4.10 Profit structure of maxi cab operations Type of cab >4 z a. 4" Z.c'. ȧ. O>' -. nj.o c,w CL CL ooo oww -Et i-e--- 0 Q_u. Mahindra 24,52,251 22,17,764 2,34,487 1,906 5.27 4.77 0.50 Tata407 10,30,848 9,40,992 89,856 1,728 5.60 5.20 0.40 Matador 3,76,650 3,62,729 13,921 449 4,50 1 4.33 0.17 Tempo 3,51,900 3,30,480 21,420 1,071 5.75 5.40 0.35 Traveller 4211649j 38,51,965 3,59,684 5,154 21.12 19.70 1.42 Source: Primary Cata From table 4.10, it can be observed that the monthly profit per cab and profit per cab kilometer is the highest for Mahindra followed by Tata 407, Tempo Traveller and Matador cabs. The monthly profit per cab shown in the table indicates that it is Rs. 1906 for Mahindra, Rs. 1728 for Tata 407, Rs. 1071 for Tempo Traveller and Rs. 449 for Matador cab. The monthly profit per cab per kilometer is Rs. 0.50 for Mahindra, Rs. 0.40 for Tata 407, Rs. 0.35 for Tempo Traveller and Rs. 0.17 for Matador cabs. The above analysis is presented in the form of bar diagram 4.3.

135 Figure 4.3 PROFIT STRUCTURE OF MAXI CABS 2500 2000 196 1728 a 1500 1071 500 Mahindra Tata4U7 Matador TempoTraveller Type of Maxi Cabs rahindra Ilata 407 I Matador ltempotraveller

136 4.7 Return on Investment ratio Return on investment indicates the percentage of return on the total capital employed. 3 It is calculated on the basis of the following formula. Operating Profit Capital employed x 100 Operating profit means, Profit before interest and tax. Profit, the key indicator is related to the capital invested, which is known as the return on investment ratio. The return on investment indicates the extent and scope of the final reward to the owners of the business for investing capital. An attempt is made to calculate return on investment ratio to evaluate the financial performance of maxi cabs. The return on investment is the percentage return on total capital employed in the business. Operating Profit x 100 Return on Investment = Capital employed The overall return or profitability is provided in table 4.11. Table 4.11 Return on investment ratio of maxi cab operations Type of cab Mah in d ra Capital Employed per cab 2,73,691.05 Operating profit per cab /per year 46464 Return on investment ratio (%) 16.98 Tata 407 3,11,884.62 47928 15.37 Matador 2,33,612.90 22800 9.76 Tempo Traveller 4,45,250.00 38556 8.75 3. Maheswan S.N., 'Financial Management Principles and Practice', Sultan Chand & Sons, New Delhi, 1993, p.b.27.

137 Table 4.11 shows that the operating profit per cab is the highest for Mahindra, followed by Tata 407, Tempo Traveller and Matador cab. The average capital invested per cab is Rs. 273,691.05 for Mahindra, Rs. 3,11,884 for Tata 407, Rs. 2,33,612 for Matador and Rs. 4,45,250 for Tempo Traveller. For calculating the average capital, the researcher while conducting the survey observed that some have purchased new vehicles, a few have purchased used and usable vehicles, and another set have purchased condemned and reconditioned vehicles. Hence, in this situation the simple average was used for arriving at the average capital. 4.8 FINANCIAL PERFORMANCE OF MAXI CAB OPERATIONS IN KANYAKUMARI DISTRICT - A STATISTICAL ANALYSIS The details regarding the financial performance of the four types of vehicles chosen for the study in this study area are presented in table 4.12.

138 Table 4.12 Minimum, Maximum, Mean, Standard Deviation, Skewness and Kurtosis for all the financial performances of maxi cabs Minimum Maximum Mean Std. Error Standard Skewness Kurtosis deviation Fuel Cost 2389 13671 8802.60 211.09 2341.06 0.116 -.066 (per month) 4326 10382 7168.81 192.22 1386.14 -.330 -.017 3252 6605 4899.19 133.77 744.81 -.099.218 1680 13171 6854.00 658.56 2945.17.398.826 Labour Cost 782 4977 2986.20 69.00 765.28.045.371 (per month) 1764 4233 2923.19 78.91 569.01 -.386 -.103 882 1764 1337.42 33.01 183.78 -.005.318 637 4998 2601.00 249.91 1117.64.379.827 Maintenance Cost 787 4914 2948.40 78.75 873.42.071-254 2268 5420 3758.40 97.86 705.64 -.439.100 1120 3780 2652.10 111.18 619.02-1.034 1.506 840 6585 3427.20 329.22 1472.33.397.828 Expenditure on 306 3142 1284.89 3441 381.65.052 -.222 Taxes 840 2016 1392 38.01 274.08 -.255 -.274 483 1044 790.97 21.68 120.71 -.255.313 244 1881 979.65 93.98 420.29.404.827 Expenditure for 153 1071 642.60 16.84 186.76.083 -.145 PavmentofInterest 357 856 591.60 16.04 115.66 -.387 -.133 213 570 376.77 23.60 131.42.032-1.584 119 1117 581.40 58.06 259.66.231.617 Miscellaneous cost 0 3500 1965.60 69.88 775.04-1.036 1.175 per month 0 3800 2262.00 127.46 919.13 -.311 -.147 1246 1650 1450.84 24.08 134.05 -.048-1320 1250 3750 2142.00 130.05 581.62 1.351 2.107 Revenue per month 4853 33201 19937.00 535.81 5942.46.035 -.173 12264 28224 19824.00 504.06 3634.80 -.172 -.461 8100 16200 12150.00 311.91 1736.67 -.005.267 4312 33810 17595.00 1688.96 7553.26.400.841 Profit Per month -1642 5515 1940.00 126.50 1402.91.296 -.14 62 5240 1741.98 153.20 1104.71 1.022 1.350-270 1070 44358 60.99 339.56 -.001.411-1373 4464 1133.45 336.76 1506.03.506.451 Capital Employed 166360 467940 273715.28 5352.39 59360.87.392.388 130000 155000 312846.15 16618.36 119836.72.374 -.687 125200 350000 233628.35 11271.77 62758.56.437 -.881 325000 600000 4452500) 18930.19 84658.37.177 -.862 Return on -1 2.66 4.26E-02.47 -.232 1.572 Investment Ratio 0 3.61 7.37E-02 53 3.198 14.390 0 1.20 2.96E-02.16.178.953-1 1 7.55E-02 9.91E-02.44 -.392.218

139 The fuel cost is a multiple of the kilometer run and it is the highest for Mahindra. The labour cost is the maximum for Mahindra and the minimum for Matador. This may be due to the overloading and higher mileage travelled per day by Mahindra vehicles. The maintenance cost is the highest for Tata 407 and the lowest for Matador. Monthly total revenue is the maximum for Mahindra (19,937) and the minimum for Matador (12,150). The behaviour is symmetric and platykurtic for Mahindra, that is, the revenue is almost uniform, whereas it is not so for others. Same is the case with profit also. 4.8.1 Correlation Analysis The zero order correlation matrix for all the variables included in the financial performance viz: Fuel cost per month (F 1 ), labour cost per month (F2), Monthly Maintenance cost (F 3), Miscellaneous cost (F 4), Expenditure for payment of interest (F 5), Revenue or income per month (F 6), Profit per month (F 7), Capital Employed (F 8), Return on investment ratio (F 9) is presented in Table 4.13.

140 Table 4.13 The zero order correlation matrix on the financial performance variables of all the four types of cabs F 1 F2 F3 F4 F5 F6 F7 I F8 F9 1-0.099 0.064-0.240 0.046 0. 908** 0. 897** 0.082 0.934** -0.50-0.180-0.022 0.030 0. 438** 0. 598** 0.109 0.277** F1 0.103 0.098-0.126-0.089 0. 772** 0.741** 0.236 0.718** -0.152 0.203 0.195 0.161 0. 814** 0. 762* 0.272 0.814** - I 0.379' -0.064 0.416.240** 0. 283** 0. 211* -0.288 0.432** 0.178 0.113 0.362* 0. 309* 0. 782** 0.309* F2 0.540** 0.235 0.259 0. 365* 0. 410* 0.359* 0.778** 0.670** 0.204 0.188 0.867** 0.866** 0.848** 0.670** - - 1 0.263** 0.118 0.288** 0. 367** 0.151 0.314** -0.118 0.032 0.418** 0. 583** 0.058 0.407** F3 0.229 0.288 0. 540** 0.476* -0.481 0.813** 0.187 0.213 0.723** 0.689** 0.223 0.813** - - - 1-0.025-0.143-0.032-0.020-0.082 0.018 0.087-0.017-0.064 0.015 F4 0.193 0.216 0.115-0.173-0.056 0.147 0.142 0.168 0.128 0.361 - - - - 1-0.082-0.020-0.058-0.014 0.062 0.053 0.143 0.118 F5-0.089-0.131 0.088 0.201 0.350 0.356 0.312 0.018 - - - - - I 0.995 0.697** 0.855** 0.589** 0.693** 0.658** F60.407* 0.476** 0.33** 0.814** 0.848** 0.536* - - - - - - I 0.641 0.943** 0.486** 0.593** F 7 0.5 12* 0.786** 0.713** 0.751** - - - - - - - 1 0.472** 0.333* F 80.633** 0.695* F9- - - - I - - - 1 The table shows that in the case of the financial performance of Mahindra the cost of fuel per month has positive association with revenue, profit and return on investment ratio, whereas the labour cost is directly related to the maintenance cost and negatively associated with revenue, profit, capital employed and return on investment ratio. The variable maintenance cost has positive association with miscellaneous cost and negative association with revenue, profit, and return on

14] investment ratio. The two variables, namely, additional expenditure and expenditure on interest have no association with any other variables. Revenue is positively associated with profit; capital employed and returns on investment ratio. Profit is directly associated with capital employed and return on investment ratio. Capital employed is directly associated with return on investment ratio. Regarding the performance of Tata 407, it is seen that the fuel cost has direct relation with revenue, profit and return on investment ratio. The labour cost is positively associated with monthly maintenance cost, and negatively associated with revenue, profit, capital employed and return on investment ratio. The monthly maintenance cost is negatively associated with revenue, profit and return on investment ratio. As in the case of Mahindra, in Tata 407 also miscellaneous cost and expenditure for payment of interest have no association with any of the variables. Revenue has positive association with profit; capital employed and returns on investment ratio. Profit has positive association with capital employed and returns on investment ratio. Capital employed is positively associated with return on investment ratio. In the case of Matador, the fuel cost has positive association with revenue, profit and return on investment ratio. Labour cost has positive association with maintenance cost and negative association with revenue, profit, capital and return on invesfment ratio. Monthly maintenance cost is negatively associated with revenue, profit, capital employed and returns on investment ratio. Revenue, profit, capital employed and return on investment ratio have all positive interrelations.

142 In the case of Tempo Traveller, the fuel cost is positively associated with revenue, profit and return on investment ratio. Labour cost has positive association with maintenance cost and negative association with revenue, profit, capital and return on investment ratio. Monthly maintenance has negative association with revenue, profit and return on investment ratio. The four variables, namely, revenue, profit, capital employed and return on investment ratio are all positively inter-related. On the whole, as for as the financial performance is concerned, the performance of all the four types of vehicles is almost in the same pattern. 4.8.2 Regression Analysis In the case of financial performance, the researcher collected information on fuel cost per month, labour cost per month, maintenance cost per month, miscellaneous cost per month, expenditure for the payment of interest, revenue per month, profit per month, capital employed, and return on investment ratio. Since the object of owning a vehicle is to make profit, and since the variable profit ratio, revenue and return on investment ratio are the proxies for the variable profit, they are removed from the functional analysis to avoid multi-colineanty. The variables, namely maintenance cost, miscellaneous cost and interest rate have no association with the profit as per the zero order correlation and hence, removed. Thus, the profit is considered as a function of fuel cost, labour cost and capital employed. The scatter diagram suggested linear relationship of all the choice variables on their logarithmic values with the logarithm of the dependent variable viz profit in each case. Hence, the researcher resorted to the log linear multiple

143 regression analysis, otherwise called the Cobb-Douglas analysis, and the results are presented below in the log linear forms. The estimated equation for the profit (y) of the Mahindra vehicle with fuel cost (xi ), labour cost (X2) and capital employed (x 3) is log y = 0.7285 + 0. 2102** log xi + 02018NS log x 2 + 0. 1872**log x3 (t=1.2132) (t=2.6172) (t=1.3100) (t=2.7513) R2 =O.58** The significance of R-square indicates the goodness of fit of the equation. That is 58 per cent of the variation in the profit is being accounted for the three independent variables. The 't' values are the elasticities, and it is significant for the fuel used and the capital employed. That is, the fuel and the capital used have positive effects on the profit for Mahindra vehicle. The Cobb-Douglas type of equation fitted for the Tata 407 vehicles in the log linear form is logy = 0.6817 + 0. 1206** log x1 + 0.0682 NS log X2+ 0. 1183* log x3 (t=1.3030) (t=2.7542) (t=1.2963) (t=2.0613) R 2 O.62** R - square is significant at one per cent level of probability indicating the fact that 62 per cent of the variations in the profit is being accounted for the three independent variables included in the equation. As in the case of Mahindra the two variables, the fuel cost and the capital invested, are significant for Tata 407 cabs. It shows that these two variables contribute more for the profit. In the case of the Matador, the fitted regression equation is log y = 0.4652 + 0.4031** log x 1-0.1026 NS 109x2 + 0.1100** log x3 (t=1.3152) (t=2.7794) (t=1.3112) (t2.8456)

144 R2 = 0.71** This shows that 71 per cent of the variations in the profit is being explained by the three independent variables included in the study. The elasticities coefficient are positively significant for the fuel cost and the capital invested. This shows that irrespective of the brands, the profit is added by the fuel cost and the capital invested. The estimated equations in the case of the Tempo Traveller is log y=o.5123+ (t=1.1156) (t=2.9934) (t=0.8162) (t=3.6841) R2 = 0.87** The significance of the R-square implies that 87 per cent of the variations in the profit is being accounted for by the three choice variables used. The elasticity co-efficient is positively significant for fuel cost and capital investment. The statistical analysis reveals that, in the case of maxi cabs run in Kanyakumari district, the profit is determined by the fuel cost and the capital invested. Since the fuel cost is the cost of the total diesel used, its significance implies the higher mileage run by the vehicles. Thus, more the distance covered, the higher the profit. Similarly, the capital investment is higher for the first-hand vehicles, and the study also reveals that the variations in the investment used are due to the purchase of used-vehicles by these owner-cum-drivers at different rates based on the model at the time of purchase. The lesser profit for the lower investment implies that vehicles purchased at lower prices swallow the major part

145 of the income for maintenance as it is evidenced by the data on the maintenance cost of these vehicles. 4.9 Returns to Scale - A Comprehensive Statistical Analysis of Physical and Financial Performances of Maxi Cab Operations in Kanyakumari District The physical and financial performances of all the four types of vehicles viz., Mahindra, Tata 407, Matador and Tempo Traveller have been analysed separately and presented earlier, to arrive at a conclusion. The independent variables, which are mostly related to the Total Revenue, are the number of persons carried (for Mahindra Vehicle only), the variable cost (which is the sum of labour cost and miscellaneous costs) is the capital employed, and kilometres run per day. The symbols used are, Total Revenue Kilometer run per day Capital Employed Variable Cost Number of persons carried y xl X2 X3 x4 (for Mahindra only) The estimated equation for Mahindra is 0. 6123* 0.4216** -0.2114 NS 0.3752** y = 0.5672 x1 x2 x3 x4 [or] logy = log 0.5672 +0-6123* log x1 + 0.4216** log x 2-0.2114* log x + 0.3752** log x 4 (t=0.1 156) (t--2.0152) (t--2.5162) (t--2.0163) (t=2.6371) R2 = 0.82**

146 R-square is 0.82, which is significant at one per cent level of significance. This shows that the four choice variables included together account for eighty two per cent of the variations in the total revenue as for as the Mahindra vehicles are concerned. The significance of the coefficients suggests that the effect of the variables, namely the number of kilometres run/day, the capital employed and the number of persons carried have positive effects on the total revenue. Whereas, the negative non-significant coefficient of the variable cost is an indication of its non-behaviour towards the total revenue, to be precise the expenditure on these items has not yet crossed the border level to affect the total revenue. Further, the total revenue from Mahindra is subject to the increasing returns to scale. The total revenue equation fitted for Tata 407 vehicles is 0. 5857** 0.5392* y = 0.4952 x i x2 X3 [or] -0.0187 NS log y = log 0.4952 + 0.5857** log x 1 + 0.5392* x2-0.0187 N3 (t=0.9852) (t=2.6173) (t=2.1357) (t=1.1134) R 2 = 0.78" The R-square is significant at one percent level of probability indicating the fact that 78 per cent of the variations in the total revenue of the Tata 407 vehicle is decided by the three explanatory variables viz., kilometre run per day, the capital employed and the variable cost. The significance of the coefficients suggests that the kilometres run per day and the capital employed have positive effects on the total revenue whereas the variable cost has no effect. Moreover, the return to scale is increasing.

147 The equation fitted for the Tempo Traveller is 0. 5691** 0.5437** -0.0066 NS y=0.5137 x 1x2 x3 [or] log y = log 0.5137 + 0. 5691** log x 1 + 0. 5437** log x 2-0.066 log x3 (t=1.1531) (t=2.7153) (t=2.8651) (t=0.8512) R2 0.77** This shows that seventy seven per cent of the variations in the Total Revenue for the Tempo Traveller is being accounted for by the three independent variables used in the study. Again, the variables-- number of kilometres run per day and the capital employed are the contributing variables to the total revenue. Hence, the returns to scale is increasing. The total revenue equation fitted for the Matador vehicle is 0.6893** 0.5591** 0.1871* y=0.3756 xix2 x3 [or] logy = log 0.3756 + 0.6892** log x 1 + 0. 5591** log x2-0. 1871* log x3 (t=2.7138) (t=2.5931) (t=2.1893) R2 =0.63** The R-square in the regression analysis indicates that sixty three per cent of the variations in the total revenue of the Matador vehicle is being explained by the three regressors-- the number of kilometres run per day, the capital employed and the variable cost. Contrary to the other three types of vehicles, here alone the variable cost co-efficient is negatively significant. This may be due to the fact that, as it is observed in the survey, these vehicles are very old and their maintenance

148 takes a lot of revenue for workshops. The behaviour of the other two variables is similar in all the four cases. It is inferable that the returns to scale are increasing. Thus, on the whole, the study reveals that the physical and the financial performances of all the four leading maxi cabs in Kanyakuman District are subject to increasing returns to scale.