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100th Birth Anniversary of
Eng. B D Rampala
Engineer, Entrepreneur & LegendNovember 14, 1910 – November 14, 2010
Eng. B. D. Rampala
Memorial Lecture 2010
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By
Eng. Keerthi K. HewavithanaBsc (Eng) Hons. C.Eng.,(MIE)SL
Headquarters Engineer
Sri Lanka Railways
The Institution of Engineers, Sri Lanka
Wimalasurendra Auditorium
Monday - November 15, 2010
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A case study approach
SuccessfulSuccessful
Turnaround of Turnaround of
Indian Railways &Indian Railways &Lessons RelevantLessons Relevant
for Sri Lankafor Sri Lanka
RailwaysRailways
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4Eng. B D Rampala Memorial Lecture-2010
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• The Indian Railways – A GovernmentDepartment
• Comes under the Ministry of Railways
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Total capital investment of US $ 14 billion
Contributed to 1% of the GDP
Total staff of 1.5 Million
Largest employer in the organized business sector
Track length of 63,322 km.
Carries 14 Million passengers per day.
Locomotives available 7,910
Passenger service vehicles 42,441
Other coaching vehicles 5,822
Wagons 222,379
Railway stations 7,133
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6Eng. B D Rampala Memorial Lecture-2010
Bankruptcy inevitable!
Alarm
Time was running out
for Indian railways!
The Committee concluded in 2001 that:"Today Indian Railways is on the verge of a financial crisis.To put it bluntly, the 'business as usual, low growth' willrapidly drive it to fatal bankruptcy, and in 16 years, theGovernment of India will be saddled with additional financialliability of over Rs 61,000 crores… On a pure operatinglevel, IR is in a terminal debt trap." RMC Report - 2001
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Rakesh Mohan Committee (RMC)
• Appointed by Government
• Review the Indian Railways operations
• Members: vast knowledge in railway and transport sector plus those
with futuristic thinking and knowledge/education background.
• The RMC repot submitted in year 2001
Loss of market share in the profitable freight business Lack of flexibility in pricing High cost of internally sourced products and services Investment in un-remunerative projects
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Unable to respond to changes in transport market conditions in 1990s
Symptom
Approach
Problems
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Core Problem!
Politicization of the decision making process that
emphasized taking populist actions, rather than hard
business decisions
SolutionComplete change in PhilosophyPhilosophy of the business
“Railway need to develop market oriented and customer
friendly outlook due to emerging competition within the
transport sector”
Hon. Nitish Kumar – Railway Minister
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Implementation• RMC report submitted in year 2001
• Turnaround started in around year 2003
• Hon Minister Lalu Prasad Yadiv (Minister since 2004) continued thephilosophy & strategies
• Minister adopted a common sense based approach, and showed anastute understanding of the market reality, and demonstrated thatgood economies is good politics.
Within 3 years Indian Railways showed impressive results
In year 2005 -2006 operating ratio of 83.5 % compared to 98.3% in year 2000
Targeted to achieve operational ratio of 65% in year 2010
Results
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Best Performance indicator in railway business
Operating Ratio =Total Operating Expenses
Gross Revenue Receipts
Year 2000 2005-06 2010-11
Operating Ratio 98.3% 83.5% 65%
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1999-00
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Operating ratio
Wagon Turnaround
Source : MOR India 12Eng. B D Rampala Memorial Lecture-2010
Operating Ratio =
Total Operating Expenses
Gross Revenue Receipts
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Retrenchment strategies
Repositioning strategies
Reorganization strategies
External Environmental strategies
13Eng. B D Rampala Memorial Lecture-2010
Strategies Adopted
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Cause pain,
stress and tension
amongst stakeholders!
Retrenchment (Cost Cutting Initiative)
Several retrenchment actions identified to review business units which are not value
adding.
• Withdraw from markets where firm is performing poorly
• Selling assets
• Reduce scale of operation
• Improve efficiency
• Downsizing
• Outsourcing
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Cause
Expectations,
Happiness!
Focus on growth
Product innovation
Product differentiation
Improving market shear
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Change in planning system
Decentralizing
Human resource initiative
Change in organization culture
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Indian Railway Ministry/ RailwayBoard
IRCON
IRFC
CONCOR RITES
RVNL
IRCTC
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• IRFC: 1986 ( positive effect due to facilitation of market borrowings for wagon procurement,
negative effect due to high interest rates)•
CONCOR:1989 ( positive effect due to focus oncontainerized movement of non-bulk)• Project Unigauge: Early 90’s (negative effect in
the 90’s, including due to reduction in track
renewal works, positive in the recent and futureyears)
• Fifth Pay Commission: 1997-98 (negative in the
late 90’s)
Some important steps taken by Railway Minister
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• Special Railway Safety Fund: 2001-02 onwards( positive in the recent and future years)
• Reorganization from 9 to 16 zones: 2001-02 and
2002-03 ( positive in the future years, due togreater focus)
• Focus on PPP (public private partnership) format
for investments, catalyzed through RVNL:2002-03 onwards ( positive, due to the ability to
leverage other stakeholders’ funds).• Market oriented tariffs ( positive)
Some important steps taken by Railway Minister
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• Focus on increasing asset utilization: 2004-05 and
2005-06 ( positive, provided implications on asset
wear and tear are appropriately dealt with)
• Competition in container movement: 2006(expected to be positive, though implementation
has to be seen)
(Ref G Raghuram .2007)
Some important steps taken by Railway Minister
R l f th Mi i t
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common sense based approach leverage the management and assets through empowerment and delegation.
• Non interference
• Direct approach• Caring attitude
• Right people for right job (Identify right
people)
• Image building(Ref : G Raghuram .2007)Minister set goals and expect results from the setup
Railway board functions as a cohesive entity due to theforce exerted on legitimate initiatives.
27Eng. B D Rampala Memorial Lecture-2010
Pillars of successes are the following five characteristics of the
Minister.
Role of the Minister
The operationalisation of strategies over past years depend
significantly on the leadership style of Mr Lalu prasad.
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Non interfering
Sets goals
Expects results
Ensures organization alignment
Follows up fundamental initiatives
Autonomy to Railway Board
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Non Interference
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Periodically communicate with general
managers.
Setting and reinforcing priorities.
Precisely set targets and standards for the prevailing matters.
29Eng. B D Rampala Memorial Lecture-2010
Direct Approach
C i Attit d
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Positive attitude when dealing with staff and unions.
Personally intervene to provide contributions to the staff welfare
fund when staff able to show financial performance better than
recommended. Whenever concerns were raised about downsizing of the Indian
railway, he came out with his Hindi one liner which translated to,
30Eng. B D Rampala Memorial Lecture-2010
Caring Attitude
“Downsizing may make Indian railway thinner, but not necessarily
healthier.”
He set his strategy based on “regenerate competitiveness and leverage
resources rather than restructure and downsize.”He believed in instilling hope and excitement rather than fear and
anxiety.
Id tif Ri ht P l
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Appointment of Officer on Special Duty (OSD)
All dealings with Minister and Indian Railway Board has been through a noble
person appointed as officer on special duty (OSD), Mr Sudhir Kumar.
Role:
Specially chosen by the minister for this position based on earlier experiences and
interactions with him. His role would be to provide the link between the minister and
railway board and translate the vision of minister into action in railway.
Some of the initiatives related to
1. axle load increase,
2. market oriented tariffs,
3. reducing wagon turnaround,
4. innumerable freight incentive schemes,
5. passenger profile management, up gradation of passengers,
6. leasing of parcel capacity and catering,
all this has happened through the existing systems and culture of the Indian railway.
31Eng. B D Rampala Memorial Lecture-2010
Identify Right People
I B ildi
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Achievements & Campaigns Publicized
Up lift the image of railway , its services and staff…….
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Image Building
Salient Results of Indian Railways TurnaroundSalient Results of Indian Railways Turnaround
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Eng. B D Rampala Memorial Lecture-2010 33
Salient Results of Indian Railways TurnaroundSalient Results of Indian Railways Turnaround
Following results speak volumes about the
success of the strategies adopted: Increase in income through advertising on all
Rajdhani Expresses coaches with the cost of
advertising being around US $ 1.26 million per train.
Introduction of new generation trains that would
be fuel efficient, recyclable and have lowemission to generate certified emission reduction
credits.
Salient Results of Indian Railways TurnaroundSalient Results of Indian Railways Turnaround
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Eng. B D Rampala Memorial Lecture-2010 34
Salient Results of Indian Railways TurnaroundSalient Results of Indian Railways Turnaround
Construction of dedicated freight corridor, with
an investment of US $ 81.92 million invested in2008 to 2009 and US$ 614.4 in 2009-2010.
Renewal of 44.5 million pre–stressed concrete
sleepers set for open line network. Development of PPP in new routes, railway
stations, logistics parks, cargo aggregation and
warehouses. Development of 100 budget hotels with private
partnership in the vicinity of railway stations.
Salient Results of Indian Railways TurnaroundSalient Results of Indian Railways Turnaround
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Salient Results of Indian Railways TurnaroundSalient Results of Indian Railways Turnaround
Installation of Wi-Fi to provide wireless access
at 500 stations. Development of agri-retail hubs, cold chains,
multi-purpose warehouses on surplus land with
in the Indian Railways.
Training of railway managers to meet futurechallenges, Indian railway is planning to set up
an International Management Institute in New
Delhi. Discount schemes, loyalty discount schemes and
long term fright discount schemes.(Ref: Indian railway website. www.impactlab.net)
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Lanka Railway – Current Situation Lost its market share in profitable freight
business;
Lack of flexibility in pricing and unrealisticpricing methods;
High cost of internally sourced products and
services Investment in projects that do not yield a
return;
Operating expenses much higher than gross
revenue (Grater than 100% operating ratio).
Lack of market orientation
Politicization of the decision making process40Eng. B D Rampala Memorial Lecture-2010
Same as Indian railways in 1990s!
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Sri Lanka Railway The
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Energy efficiency★ Rail is on average 2 - 5 times more energy efficient than road,shipping and aviation
climate change and cO2 emissions★ Travelling by rail is on average 3-10 times less cO2 intensivecompared to road or air transport
★ The rail sector has committed itself to cut the specific emissions of
rail transport by 30% over the period 1990-2020
Ref: UIC official web sit
Land take★ Railway infrastructure occupies 2-3 times less land perpassenger or freight unit than other modes of transport
★ Railways, having a market share of 6-10%, occupy less than 2%of the land used for transport infrastructure in Europe( Benchmark)
External costs★ The external costs of rail may be as low as 1% of those of roads
42Eng. B D Rampala Memorial Lecture-2010
Sri Lanka Railway – TheFuture
Plan to Turnaround
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Introduce
43Eng. B D Rampala Memorial Lecture-2010
Plan to Turnaround
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References;
•G Raghuram (Turnaround of Indian railway).2007. Indian institute of management report.
•Rakesh Mohan Committee .2001. Highlights of the executive summary, available at http:/www.irastimes.org/rkmreportingexesummary.htm
accessed on 30 may 2007.
•World Bank. 1994. The World Bank railway database available at http:/www.worldbank.org/transport/rail/rdb.htm.
•Desh Gupta and Milind sathye (Financial turnaround of Indian railway) 2008. Accessed from Scribed web site. On 17.6.2010.•IRFC Indian Railway Finance Corporation. 2004. Anual report of the Indian railway financial cooperation. New Delhi.
44Eng. B D Rampala Memorial Lecture-2010