MANAGERIAL ECONOMICS

GROWTH OF INDIAN RAILWAYS

MANAGERIAL ECONOMICS

PROJECT

ONGROWTH OF INDIAN RAILWAYS

Ms. Meghnaa Sharma

Anurag Mishra[FTDurgesh Tiwari [FT

Jagat Singh NagarKarnica Ghildiyal[ FT

Shwetank Kumar [FT Sourav Mukherjee[FT

MANAGERIAL ECONOMICS

GROWTH OF INDIAN RAILWAYS

Submitted to-Meghnaa Sharma

Submitted by-Anurag Mishra[FT- 09-729]

Durgesh Tiwari [FT -09-748]Jagat Singh Nagar [FT -09-754]

Ghildiyal[ FT- 09-762] Shwetank Kumar [FT -09-856]

Sourav Mukherjee[FT -09-862]

ACKNOWLEDGEMENT

We take this opportunity to convey ourdirectly or indirectly helped and contributed towards the completion of this project.

First and foremost, we would like to thank and support throughout this relevance of the learning being imparted in the class is very high. The learning enabled us to get a better understanding of the nitty

We would also like to thank our batch mates for the discussions that we had with them. All these have resulted in the enrichment of our knowledge and their inputs have helped us to incorporate relevant issues into our project.

Last but not the least we would like to thank Gohelp.

ACKNOWLEDGEMENT

We take this opportunity to convey our sincere thanks and gratitude to all those who have directly or indirectly helped and contributed towards the completion of this project.

First and foremost, we would like to thank Ms. Meghna Sharma for her constant guidance and support throughout this project. During the project, we realized that the degree of relevance of the learning being imparted in the class is very high. The learning enabled us to get a better understanding of the nitty-gritty of the subject which we studied.

o thank our batch mates for the discussions that we had with them. All these have resulted in the enrichment of our knowledge and their inputs have helped us to incorporate relevant issues into our project.

Last but not the least we would like to thank God and our parents for their cooperation and

Durgesh Tiwari Jagat Singh Nagar Karnica

Shwetank Kumar Sourav Mukherjee

sincere thanks and gratitude to all those who have directly or indirectly helped and contributed towards the completion of this project.

for her constant guidance project. During the project, we realized that the degree of

relevance of the learning being imparted in the class is very high. The learning enabled us to gritty of the subject which we studied.

o thank our batch mates for the discussions that we had with them. All these have resulted in the enrichment of our knowledge and their inputs have helped us to

d and our parents for their cooperation and

Anurag MishraDurgesh Tiwari

Jagat Singh Nagar Karnica Ghildiyal

Shwetank Kumar Sourav Mukherjee

Executive SummaryIn the year 1832 the first Railway running on steam engine, was launched in England. Thereafter in May 1843 a young Engineer Graham Clark got down from a ship harbored at Mumbai (then Bombay). He was sent to India to find out how and in which part of India a railway can be built which would be useful to transport cheap cotton from Indian hinterland first to Bombay Harbor and then from there to England by ship. Thereafter on 1st of August, 1849 the Great Indian Peninsular Railways Company was established in India. On 17th of August 1849, a contract was signed between the Great Indian Peninsular Railways Company and East India Company. As a result of the contract an experimenwas made by laying a railway track between Bombay and Thane (56 Kms.). On 16th April, 1853, the first train service was started from Bombay to Thane.On 15th August, 1854, the 2nd train service commenced between Howrah and Hubli.

Indian Railways is one of the busiest rail networks in the whole world. In a single day it runs around 14,500 trains across various terrains covering 63,140 kilometers that transports millions of passengers. It is also participating in a Trans-Asian railway link project.

Choosing a project was not an easy task considering the fact that there are presently many socioeconomic factors whose impact is immense in the Indian Economic and Financial Growth. After visualizing the various aspects, we decided to move forward with Indian Railways(IR), the world’s largest employer, not only because

In the year 1832 the first Railway running on steam engine, was launched in England. Thereafter in May 1843 a young Engineer Graham Clark got down from

Mumbai (then Bombay). He was sent to India to find out how and in which part of India a railway can be built which would be useful to transport cheap cotton from Indian hinterland first to Bombay Harbor and then from there to England

n 1st of August, 1849 the Great Indian Peninsular Railways Company was established in India. On 17th of August 1849, a contract was signed between the Great Indian Peninsular Railways Company and East India Company. As a result of the contract an experiment was made by laying a railway track between Bombay and Thane (56 Kms.). On 16th April, 1853,

started from Bombay to Thane.On 15th August, 1854, the 2nd train service commenced between Howrah and Hubli.

f the busiest rail networks in the whole world. In a single day it runs around 14,500 trains across various terrains covering 63,140 kilometers that transports millions of passengers. It

Asian railway link

Choosing a project was not an easy task there are presently

many socioeconomic factors whose impact is immense in the Indian Economic and Financial Growth. After visualizing the various aspects, we decided to move

ian Railways(IR), the world’s largest employer, not only because

it provides a mode of transportation but also as a uniting factorsuch great diversities. growth rate at which it is growing provides lots of hope towarEconomy.

The paper starts with an introduction on Indian Railways. It reveals certain startling facts about IR and, proceeds with its objectivity and methodology adopted for preparing the project. The project than entering into the arena of the modes of operation of Indian Railways, tries to finds various data and facts regarding its growth. The data’s are supported by various graphs, which help to get a clear view about IR’s performance and also how it is performing with comparatigiving an elaborate detail on the fundamental knowledge project further tries to provide some conclusion based on the secondary data been collected. It further analyzes the retarding force which is hindering its growth. It also tries to provide certain recommendation which can enhance the pace of IR, and help it to grow more.

The project, thus tries to broaden the arena of visualizing the various modes and growth factor of Indian Railways, and its impact on National Economy.

a mode of transportation but also as a uniting factor in our country of

at diversities. Also, currently, the growth rate at which it is growing provides lots of hope towards boosting Indian

The paper starts with an introduction on Indian Railways. It reveals certain

facts about IR and, then, proceeds with its objectivity and methodology adopted for preparing the project. The project than entering into

e arena of the modes of operation of Indian Railways, tries to finds various data and facts regarding its growth. The data’s are supported by various graphs, which help to get a clear view about IR’s performance and also how it is performing with comparative study. After giving an elaborate detail on the fundamental knowledge on IR, the project further tries to provide some conclusion based on the secondary data been collected. It further analyzes the retarding force which is hindering its

tries to provide certain recommendation which can enhance the pace of IR, and help it to grow more.

The project, thus tries to broaden the arena of visualizing the various modes and growth factor of Indian Railways, and its impact on National Economy.

Literature review

The role played by the Indian Railways in our country’s socio-political development is indisputable. Apart from its stated duty of transporting men and goods across the length and breadth of the country, it has played a stellar role in times of natural andman-made disasters. Thus, the paper on Turnaround of Indian Railways has shown how role of the railways becomes even more crucial to the development of the country as we enter the 21st century and the pace of the growth of the economy accelerates. As the country integrated with the global economy all prices in the economy had to align themselves to those prevailing in the international markets. Thus as prices of transport services fell internationally the natural protection that the domestic sector, including the railways, enjoyed became a thing of the past. Simultaneously Indian railways started facing newer challenges. This paper broadly describes about the looming financial crisis that IR has faced and the issues railways needs to address with extreme urgency. It also emphasized on the investment decisions of IR, the lessons for IR, various recommendations, reforming remuneration pattern of IR.

According to Dr. Rakesh Mohan (head of expert group IR) in July 2001 that in the next sixteen years IR’s will face additional financial liability of Rs 61000 crores , but, under the ministry of Mr.Lalu Prasad Yadav it has achieved a lot of success as the

RAILWAY BUDGET presented by Mr. Lalu Prasad Yadav cash surplus of the Railways rose steadily from Rs 9000 crores in 2005 to Rs 14000 crores in 2006 to Rs 20000 cr in 2007 & operating ratio has also improved to 76%.According to Parveen Parmar(professor at C.M.) gives the charges of Indian railways vs aviation sector along with the swot analysis. According to Mr.Sudhir Kumar(Officer on Special Duty /Minister for Railways) talk about the leading change and transformation in Indian railways & gives more emphasis on public private partnerships in some areas like to run container trains , modernization of metros & computerized train enquiry centre’s. He also talks about railway mission 2012. Sanjoy Majumder talks about Indian railways chug into the future. How travelling by rail in India has always been relatively inexpensive - a trip from Mumbai to the capital, Delhi, costs between 425 and 3,000 rupees ($10-$73) depending on the class of travel. But the deregulation of the Indian aviation market has led to a huge increase in budget airlines offering cheaper fares. The Garib Rath is just one of many initiatives taken by Indian Railways in its effort to attract more passengers. At the other end of the scale is the Shatabdi Express for the rich & business class people

Mr. G. Raghuram states, Indian Railways (IR), which was declared to be heading towards bankruptcy as per the Expert Group on Indian Railways in 2001, is today the second largest profit making Public Sector

Undertaking after ONGC. The fund balance crossed Rs.12,000 crores in 2005-06, which had reached a low of just Rs.149 crores in 1990-2000. The total investment being planning for the eight-year time frame (2007-2015) is tentatively in the order of Rs.350,000 crores. This confidence is not only due to the rising trend of performance, but also due to the significant growth in the past two years. These two years coincided with Mr. Lalu Prasad being at the helm of affairs of the IR, having moved into his

position on 23rd

May, 2004. Railway officials called this as the ‘turnaround’ of IR.

Mr. P. C. Sharma explicates in his article ‘Safety as Key Business Theme! - Indian Railways Perspective `Human error' is a handy phrase and often covers a multitude of sins. According to the Indian Railways, it is responsible for 83 per cent of the train accidents. Most safety committees have called for strengthening infrastructure and mechanizing the systems for signaling and switching of tracks. However, the bulk of the rail network still relies on outdated, dilapidated safety assets. This is further compounded by the fact that the past years have seen a massive surge in railway traffic. Probes into accidents reveal that most of them result from signal failures - both mechanical and human - as well as derailments, collapsing bridges and shoddy safety procedures at level crossings. Yet, there is far too little attention paid to these factors. For example, the repair and maintenance of bridges is allocated a mere 0.5 per cent of the Railway Budget and even

this amount is not fully utilized. Many of these bridges are over a hundred years old and are relics from British times. Dr Desh Gupta & Dr Milind Sathye analyzed the factors that led to the turnaround of the Indian railways from a low performing organization to a high performing one. There is a growing interest worldwide strategy for turnaround of public services because of the growing awareness that public services need to be efficiently deployed. Financial turnaround of the IR is a function of factors (a) retrenchment (b) repositioning (c) reorganization (d) environmental conditions. Retrenchment strategy helps in reducing operating cost. They focused on dynamic pricing and customer centric sub strategy within the overall repositioning strategy. In reorganization strategy, achievement of efficient outcomes is through decentralization of authority and responsibility. But a substantial turnaround the IR can be attributed by the favorable environmental factors. Both ‘good management’ and ‘good luck’ helped the Indian Railways turnaround from a low performing organization to a high performing one in about five years.

Railway customers are primarily of two types —those availing freight services and those availing passenger services. The two major sources of revenue for the railways are then goods (freight) revenue and passenger revenue which respectively form about two-third and one-third of total railway revenue. Railways have initiated

many policy changes to meet the requirements of its customers, be it freight or passenger services. While continuing the process of reforms…..other priority areas will be…improvement in passenger amenities…control over expenditure and stepping up of measures to prevent leakages of revenue.

According to Dr. Rakesh Mohan (head of expert group IR) in July 2001, said that in the next sixteen years, IR’s will face additional financial liability of Rs 61000 crores, but, under the ministry of Mr. Lalu Prasad Yadav it has achieved a lot of success as the RAILWAY BUDGET presented by Mr. Lalu Prasad Yadav cash surplus of the Railways rose steadily from Rs 9000 crores in 2005 to

Rs 14000 crores in 2006 to Rs 20000 cr in 2007 & operating ratio has also improved to 76%.According to Parveen Parmar(professor at C.M.) gives the charges of Indian railways vs aviation sector along with the swot analysis. According to P. C. Sharma (/Minister for Railways) Investment in safety is a good business proposition. No service industry canhope to grain and sustain customers if it is not concerned, rather particular, about thesafety of its customers.

TABLE OF

TOPICS

Introduction

Objectives Of Study and Methodology

Observation and Analysis

Conclusion and Recommendation

Bibliography and References

TABLE OF CONTENTS

TOPICS

Objectives Of Study and Methodology

nd Analysis

Recommendation

References

PAGE

01

03

04

24

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Introduction

“Indian Railways is one of the most studied institutions on the planet. For almost every conceivable question that can be asked, there already exists a comprehensive and rigorous report that lays out the facts and indicates the answers. What is striking, however, is that there has been little action on the many reports IR has commissioned,both internal and external. The overwhelming sentiment of the Expert Group is that time has run out. Action is overdue. The imperative is to get started fast on a programme ofrestructuring and reform.”

-Expert Group on Indian Railways

The economy is in an auto-pilot mode (showing no signs of slowing down). We have been witnessing a consistent growth of nearly 7% in our GDP over the last few years and hence the need for infrastructure to sustain the same has been felt all across the board as thecurrent level of infrastructure is insufficient to sustain such an increase in GDP growth rate.

The Indian Railways is considered the lifeblood of the nation and, hence, the onus of carrying the economy on its shoulder lies with the railways. The boom in the economy has resulted in a dire need of improvement and enhancement of rail infrastructure in the country. As part of the overall strategy of restructuring the railway infrastructure, a major thrust has been given to Public-Private Partnership.

Introduction

“Indian Railways is one of the most studied institutions on the planet. For

conceivable question that can be asked, there already exists a

report that lays out the facts and indicates the

however, is that there has been little action on the many reports IR has commissioned,both internal and external. The overwhelming sentiment of the Expert

has run out. Action is overdue. The imperative is to get started fast on a programme of

Expert Group on Indian Railways-2001

pilot mode slowing down). We

been witnessing a consistent in our GDP over the

the need for infrastructure to sustain the same has been felt all across the board as the

ent level of infrastructure is insufficient to sustain such an increase

The Indian Railways is considered the lifeblood of the nation and, hence, the

carrying the economy on its shoulder lies with the railways. The

has resulted in a dire need of improvement and enhancement of rail infrastructure in

country. As part of the overall strategy of restructuring the railway

jor thrust has been .

Indian Railways, the Department of the Government of India, under the Ministry of Railways,operating the rail network in India. The Ministry is headed by a cabinet rank Railways Minister, while the Department is managed by the Railway BoardRailways (IR), the largest rail network in Asia and the world’s second largest under one management, spanning over 6,909 stations, over a total route length of more than 63,327 kilometers (39,350three gauges – broad, metre and namillion passengers every day and more than 2 million tons of freight daily. It is the world's largest commercial or utility employer, with more than 1.4employees. As to rolling stock, IR owns over 200,000 (freight) wagons, 50,000 coaches and 8,000 locomotives and ran more than 18,000 trains daily, including about 8,984 passenger trains and 9,387 goods trains.

IR is not a private corporate body; however, as of recently, Indian Railways has adopted a corporate management style. The Indian Railways are prima facie encouraging Public-Private Partnership in the capacity enhancing and modernizing exercise. Projects through the PPP model have been started in a few sectors and envisaged in few other areas. Indian Railways has a total state monopoly on India's rail transport.

Over the last few years Indian Railways has been regaining market share in transport sector through improved services, better utilizationaugmentation and customer friendly approach and the revenues have steadily increased to the level ofcrore in 2008-09. The thrust of improved performance in 2008-09 has hinged upon significant improvement in asset utilization apart from capacity augmentation. There has also been a positive response of the market to Dynamic Pricing Policy and other innovative measures introduced by Railways to gain market share. Indian

Department of the Government of er the Ministry of Railways, is tasked with

operating the rail network in India. The Ministry is headed by a cabinet rank Railways Minister, while the Department is managed by the Railway Board. Indian Railways (IR), the largest rail network in Asia and the world’s second largest under one management,

over a total route length (39,350 mi) divided into

broad, metre and narrow, carries 18 and more than 2 million

daily. It is the world's largest commercial or utility employer, with more than 1.4 million

, IR owns over 200,000 agons, 50,000 coaches and 8,000 locomotives

and ran more than 18,000 trains daily, including about ods trains.

is not a private corporate body; however, as of has adopted a corporate

The Indian Railways are prima facie Private Partnership in the capacity

e. Projects through the PPP model have been started in a few sectors and

Indian Railways has a total state monopoly on India's rail transport.

Over the last few years Indian Railways has been regaining market share in transport sector through

of assets, capacity augmentation and customer friendly approach and the revenues have steadily increased to the level of Rs84,233

The thrust of improved performance in 09 has hinged upon significant improvement in

apart from capacity augmentation. There has also been a positive response of the market to Dynamic Pricing Policy and other innovative measures introduced by Railways to gain market share. Indian

2 | P a g e

Railways have been following a systematic Five Year Planning process to achieve strategic objectives and allocate resources optimally. The Five Year Plan is further implemented, monitored and reviewed on yearly basis throPlans to ensure that priorities are met.

To give a broad picture of IR’s structure and size, the vast network is predominantly Broad Gauge- 1676 mm (81%) with 18274 kms of electrified route kms (29%). Administratively IR under Ministry of Railways is divided into 16 Zones which are further sub divided into 68 divisions. There are 13 Public Sector Units/Corporations, 7 major production units (maelectric and diesel locomotives,EMU/ MEMU/ DEMU) other major organizations under IR are Research, and Standards Organization (RDSO), CentrOrganization for Railway Electrification (CORE), Metro Railway Kolkata and 6 major training institutes. The freight and business strategies, capacity augmentation and asset replacement plan, technological programme and other initiatives are planned systematically across this vast and along the complete value chain of Rail transportation business through the Five Year Planning process.

Despite the global economic downturn in 2008-09 which drastically affected demand, Indian Economy has shown resilience and witnessed a GDP growth of over 6% in 200809. The GDP forecast for next few years although moderated from the 8

been following a systematic ng process to prioritize &

achieve strategic objectives and allocate resources optimally. The Five Year Plan is further implemented, monitored and reviewed on yearly basis through Annual

priorities are met.

IR’s organizationalstructure and size, the vast network is

1676 mm (81%) with 18274 kms of electrified route kms (29%). Administratively IR under Ministry of

is divided into 16 Zones which are 68 divisions. There

are 13 Public Sector Units/Corporations, 7 (manufacturing

locomotives, coaches, DEMU) other major

organizations under IR are Research, Design (RDSO), Central

for Railway Electrification (CORE), Metro Railway Kolkata and 6 major training institutes. The freight and business strategies, capacity augmentation and asset replacement plan, technological up gradation

and other initiatives are planned systematically across this vast organizationand along the complete value chain of Rail transportation business through the Five Year Planning process.

Despite the global economic downturn in ffected demand,

Indian Economy has shown resilience and witnessed a GDP growth of over 6% in 2008-09. The GDP forecast for next few years although moderated from the 8-9% growth

levels in last few years are still relatively significant and range of 5% to 7and propel this high projected GDP growth, India needs rapid augmentation of capacity in infrastructure be it Power Generation, Road Network, Rail Network, Port capacity or Telecom connectivity. Indian Railways being the main transporter of bcontainers and passenger traffic are a key driver for supporting the GDP growth of the country. Besides, Railways is also an engine of inclusive growth. The XIth Plan (2007lays ambitious targets for freight and passenger business transporassociated capacity augmentation and technological up gradation

The main objectives in the XIth Five Year Plan are creation of adequate transport capacity to handle the projected growth of both passenger and freight traffic during the Plan period and provide improved services to both the segments. Increase in market share in freight traffic, both bulk and nonan important focus area.

levels in last few years are still relatively % to 7%. To support

and propel this high projected GDP growth, India needs rapid augmentation of capacity in infrastructure be it Power Generation, Road Network, Rail Network, Port capacity or Telecom connectivity. Indian Railways being the main transporter of bulk freight, containers and passenger traffic are a key driver for supporting the GDP growth of the country. Besides, Railways is also an engine of inclusive growth. The XIth Plan (2007-12) lays ambitious targets for freight and passenger business transportation and

augmentation and technological up gradation.

The main objectives in the XIth Five Year Plan are creation of adequate transport capacity to handle the projected growth of both passenger and freight traffic during the Plan

riod and provide improved services to both the segments. Increase in market share in freight traffic, both bulk and non-bulk, is also

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Objectives of Study and MethodologyThe objectives of the study in a nutshell are as follows-

To analyze the social and economic growth of Indian Railways

To analyze the impact of Indian Railways on Indian Economy.

To examine the strategies taken by Indian Railways for its development.

To find-out the problems, which were hindering the growth of Indian Railways since years.

To study and analyze the drastic Turnaround of Indian Railways.

To determine various issues concerned with the present rail industry, to explore and recommend some solutions towards these issues.

We have used the secondary data for conducting the study and analysis of our project work.

Secondary data analysis is commonly known as second-hand analysis. It is simply the analysis of preexisting data in a different way or to answer a different question than originally intended. Secondary data analysis utilizes the data that was collected by someone else in order to further a study that you are interested in completing.

Railway Employees and renowned persons

Text-Books, etc

For the purpose of study we consulted various: Websites

Search - Engines

Encyclopedia

E - Libraries

Articles (published and non-published) written by some of the great research scholars.

Journals

News-Papers/E-news-papers

Magazines

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Observation AnalysisIn economics a company is said to have monopoly power if it faces a downward sloping demand curve (see supply and demand). This is in contrast to a price taker that faces a horizontal demand curve. A price taker cannot choose the price that they sell at, since if they above the equilibrium price, they will sell none, and if they set it below the equilibrium price, they will have an infinite number of buyers (and be making less money than they could if they sold at the equilibrium price). In contrast, a business with monopoly power can choose the price they want to sell at. If they set it higher, they sell less. If they set it lower, they sell more.

As long as the price elasticity of demand (in absolute value) for most customers is less than one, it is very advantageous to increase the price: the seller gets more money for fewer goods. With an increase of the price, the price elasticity tends to rise, and in the optimum mentioned above it will be above one for most customers. A formula gives the relation betweenmarginal cost of production and demand elasticity which maximizes a monopoly profit: (known as Lerner index). The monopolist’s monopoly power is given by the vertical distance between the point where the marginal cost curve (MC) intersects with threvenue curve (MR) and the demand curve. the vertical distance, (the more inelastic the demand curve) the bigger the monopoly power, and thus larger profits…Indian Railways too runs under monopoly market

Observation and

a company is said to have monopoly power if it faces a downward sloping demand curve (see supply and demand). This is in contrast to a price taker that faces a horizontal demand curve. A price taker cannot choose the price that they sell at, since if they set it above the equilibrium price, they will sell none, and if they set it below the equilibrium price, they will have an infinite number of buyers (and be making less money than they could if they sold at the equilibrium price). In

ith monopoly power can choose the price they want to sell at. If they set it higher, they sell less. If they set it lower, they sell more.

As long as the price elasticity of demand (in absolute value) for most customers is less than one, it is very

antageous to increase the price: the seller gets more goods. With an increase of the price,

the price elasticity tends to rise, and in the optimum mentioned above it will be above one for most customers. A formula gives the relation between price, marginal cost of production and demand elasticity which maximizes a monopoly profit: (known as Lerner index). The monopolist’s monopoly power is given by the vertical distance between the point where the

intersects with the marginal revenue curve (MR) and the demand curve. The longer the vertical distance, (the more inelastic the demand curve) the bigger the monopoly power, and thus larger

Indian Railways too runs under monopoly

On 15 April 2006, the Washingtcarried a lead story on the turnaround of the Indian Railways (IR) —organization runs by the Government of India (GOI). It stated ‘…few now doubt that Mr Yadav (Minister for Railways) has presided over an impressive business turnaround … more importantly, he’s taken the world’s largest employer — a government giant of 1.5 million employees — and boosted revenues by 15.5 percent without raising fares’ (Nelson, 2006:1). Pai Panandiker states has turned around and made an estimated profit of $2.5 billion in 2005important, however, is that, unlike previous ministers, Mr. Yadav has looked upon Railways as a commercial enterprise and not a social welfare institution. [He] is a hard taskmaster and will ensure his subordinates carry out the projects’ (Pai Panandikar, 2006:1). The former Railway Minister (Mr Nitish Kumar), however, claimed that the foundation forturnaround was laid down by him, the results of which are being realized now. In the media interviews, he charged that Mr Yadav (who became the Railway Minister in May 2004) is usurping the credit for the IR success. It is important to note at this st2004 the growth rate of the Indian economy has nearly doubled as compared to the three years prior to that. Did the favorable economic environment help the IR turnaround or was it only due to the managerial leadership provided by Mr Yadav — the current Railway Minister? What caused the IR turnaround — good management, good luck or both — this is the question that

On 15 April 2006, the Washington Times carried a lead story on the turnaround of the

—a departmental runs by the Government of India

‘…few now doubt that Mr Yadav (Minister for Railways) has presided over an impressive business turnaround … more importantly, he’s taken the world’s

a government giant of 1.5 and boosted revenues by

ut raising fares’ (Nelson, Pai Panandiker states ‘Indian Railways

has turned around and made an estimated profit of $2.5 billion in 2005–2006. What is important, however, is that, unlike previous ministers, Mr. Yadav has looked upon Railways

commercial enterprise and not a social welfare institution. [He] is a hard taskmaster and will ensure his subordinates carry out the

(Pai Panandikar, 2006:1). The former Railway Minister (Mr Nitish Kumar), however, claimed that the foundation for the turnaround was laid down by him, the results of which are being realized now. In the media interviews, he charged that Mr Yadav (who became the Railway Minister in May 2004) is usurping the credit for the IR success. It is important to note at this stage, that since 2004 the growth rate of the Indian economy has nearly doubled as compared to the three years prior to that. Did the favorable economic environment help the IR turnaround or was it only due to the managerial leadership provided by Mr Yadav

the current Railway Minister? What caused good management,

this is the question that

5 | P a g e

we explore in this paper within the framework of public sector turnaround.

The study is important for several reasons. First, there is a growing interest worldwide in strategies for turnaround of public services because of the growing awareness that public resources need to be efficiently deployed. The case of the IR is particularly important given the large investment of the GOI in the IR and the need to get adequate return on investment. Second, the research on turnaround has largely focused on the impact of managerial strategies. We examine the IR turnaround from both these perspectives — good luck and good management. Publicly available data about the IR has been analyzed. We found that both managerial leadership and good luck contributed to the success of the IR. We suggest that turnaround successes need to be put in a wider context. Besides managerial actions, favorable environment also contributes to the success — an aspect that has hardly received attention in organizational turnaround studies.

According to the World Bank, the IR is one of the top five national railway systems in the world; others being the United States, former Soviet Union, Canada and China.

The basic plank of the IR turnaround is its shift towards market orientation and customer focus. As the then Railway Minister Mr Nitish Kumar said while presenting his 2001–02-budget speech ‘Railways need to develop market oriented and customer friendly outlook due to emerging

competition within the transport sector’. Mr Yadav also underscored this policy in his first railway budget speech on 6 July 2004. The Minister stated ‘with a commercial orientation, aggressive marketing and economy measures, the Railways would be continuously working towards further improving their financial performance’

Performance of Indian Railways-

We have tried our best to find out the all problems faced by Indian Railways so as to analyze it’s past scenario and to find out the reasons for it as well as to predict the future scenario of the Indian railways on the basis of various graphs, statistical analysis as well as accounting analysis.

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These graphs clearly show that the profit of the Indian railways is not that much higher 5-7 years ago as which is in present. Its profit has increased about three times in 2006 than 2005 because of the strategy adopted by Mr. Lalu Prasad Ylike Retrenchment, Reorganization,

0

10000

20000

30000

40000

50000

60000

2001-02

200203

Goods 24845 26505

Passengers 11196 12575

Rs.(i

n cr

ore)

These graphs clearly show that the profit of the Indian railways is not that much

7 years ago as which is in present. Its profit has increased about three times in 2006 than 2005 because of the various

Prasad Yadav like Retrenchment, Reorganization,

customer-centric & dynamic pricing strategy. Also its operating ratio has become better as the time surpasses as in 2008 its op. ratio has improved to76% in2008 from 98.3% in2001.Further while classifying the dataable to reveal the following details

2002- 2003-04

2004-05

2005-06

2006-07

2007-08

2008

26505 27618 30778 36287 41717 47743 52700

12575 13298 14113 15126 17225 20075 22330

Revenue

centric & dynamic pricing strategy. Also its operating ratio has become better as the time surpasses as in 2008 its op. ratio has improved to76%

in2001.Further while classifying the data, we are able to reveal the following details-

2008-09

2009-10(estimates)

52700 58525

22330 24309

7 | P a g e

As shown in the above graphof staff of Indian railways had decrease from 1470000 to 1392000.Retrenchment strategy means trim off excess staff so to decline overall expenditure. The approach adopted by IR was not to fill vacancies

00.20.40.60.8

11.21.41.61.8

2

2003-04 2004-05 2005

2005

AMOUNT (in Rs Crore) 1990.98

0

500

1000

1500

2000

2500

3000

3500

As shown in the above graph, the number of staff of Indian railways had decrease

2000.Retrenchment strategy means trim off excess staff so to decline overall expenditure. The approach adopted by IR was not to fill vacancies

created due to retirement or other reasons. The average wage as a result increased a lot.Now, on investment, the Indian Railway has invested at various sectors. The below data depicts the real picture.

2005-06 2006-07 2007-08

Employees

NO. OF STAFF (in mn)

AVG.WAGE PER STAFF PER ANUM (in lakh)

2005-06 2006-07 2007-08 2008-09

1990.98 2501.04 2681.21 2963

New Lines

created due to retirement or other The average wage as a result

Now, on investment, the Indian Railway has invested at various sectors. The below data depicts the real picture.

NO. OF STAFF (in mn)

AVG.WAGE PER STAFF PER ANUM

2009-10(est.)

2921

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01000200030004000

1241.74 2317.36

AM

OU

NT

(in R

s Cr

ore)

Guage Conversion

0 70

200

400

600

800

1000

1200

1400

1600

1800

2000

2005-06 2006-

Am

ount

(inRs

)

Frieght Corridor

The investment on Freight Corridor is estimated to increase by 134% in 2009-10, from what has been in 2008-09. Railways are able to generate huge amount of revenue, so investing more on that area can place them in a more profitable zone.

2317.36 3011.85 30132054.1

Guage Conversion

73241

455.41

0100200300400500600700800900

Am

ount

(inR

s)

Electrification

86

780

1880

-07 2007-08 2008-09 2009-10(est.)

Frieght Corridor

780.38 744

1880

10(est.)

9 | P a g e

Passenger Earnings

Sundry other Earnings

4%

Where the rupee came from(2007

Miscellaneous8%

Dividend7%

Depreciation reserve fund

7%

Lease charges

Where the rupee went(2007

The chart depicts the percentage distribution of income and expenditure from various of Indian Railways for the year 2008

Goods Traffic Earnings

65%

Passenger Earnings27%

Sundry other Earnings

4%

Miscellanous Receipts

2%

Other Coaching Earnings

2%

Where the rupee came from(2007-08)

Staff wages & other allowances

25%

Fuel17%

Capital fund15%

Pension fund11%

Stores4%

Lease charges3% Development fund

3%

Where the rupee went(2007-08)

The chart depicts the percentage distribution of income and expenditure from various of Indian Railways for the year 2008-09The chart depicts the percentage distribution of income and expenditure from various areas

10 | P a g e

4.74.8

8.58.5

0

2

4

6

8

10

12

14

16

2001-02 2002-03

GROWTH PERCENT

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

1996199719981999

Am

ount

(in

Rs. c

rore

)

The growth percentage of earnings has falconsistently increased as the period surpasses.

4.8

3.8

8.3

6.6

8.5

4.5

10.4

15

03 2003-04 2004-05 2005-06

GROWTH PERCENTAGE OF EARNING AND EXPENSES

19992000200120022003200420052006200720082009

of earnings has fallen in 2003-04 from 2002-03, afterwards consistently increased as the period surpasses.

growth %age of expenses

growth %age of earnings

AGE OF EARNING AND EXPENSES

Total Revenue

Total Expenses

03, afterwards and it has

11 | P a g e

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

19961997 1998199920002001

Revenue of IR (in Rs. crore)

The revenue generated by Indian Railwayshown a sharp increase since 2005, and the main reason being the increase in the freight revenue. The total revenue touched the

2001 200220032004 2005200620072008 2009

Revenue of IR (in Rs. crore)

The revenue generated by Indian Railway has shown a sharp increase since 2005, and the main reason being the increase in the freight revenue. The total revenue touched the

Rs.80,ooo crore mark in the year 2008with the annual revenue being Rs.80,338 crore. Passenger revenue increased fro19837 crore to Rs.22071 crore.

Figure- Indian Railways running crossing the hills.

Freight Revenue

Passenger revenue

Misc Revenue

Total Revenue

Rs.80,ooo crore mark in the year 2008-2009, with the annual revenue being Rs.80,338 crore. Passenger revenue increased from Rs. 19837 crore to Rs.22071 crore.

crossing the hills.

12 | P a g e

Better resource management through increased wagon load, faster turnaround time and a more rational pricing policy has led to a perceptible improvement in the performance of the Railways. Out of the freight and passenger traffic, the freight segment accounts for about 70 per cent of revenues. Within the freight segment, bulk traffic accounts for nearly 84 per cent of revenue earning freight traffic (in physical terms), of which about 43 per cent is coal.

Source: Ministry of Railwaysa) Up to March in terms of 4-wheelers, b) April-February (estimated),c) Calculated in terms of 8-wheelers, d) Excludes Metro Kolkata.

*Excludes 1.21 MT for 2007-08 and 1.12 MT for 2008-09 for Konkan Railway Loading Figures of 2007-08 reflect the revised commodity group as modified from October 2007. As such, except for Coal, Pig Iron and finished steel from S.P., Cement, Food grains, Fertilizers and Mineral oil (POL), these are not comparable with the figures of previous years.

Particulars 2007-08* 2008-09* 2007-08Change %

2008-09 dChange %

1. Revenue earning freight traffic (mn tonnes) 793.9 832.1 9.0 4.9

Coal 336.9 369.4 7.5 9.7

Raw materials for S.P. (excl. Iron Ore) 11.1 10.9 - (-) 2.6

Pig iron & finished steel 25.8 27.1 - 5.3

Iron ore for export 136.7 130.5 - (-)4.6

Cement 79.0 86.0 8.0 8.8

Food Grains 38.2 34.1 (-) 8.7 (-)10.7

Fertilizers 35.9 38.8 1.9 8.0

POL 35.9 38.8 1.9 8.0

Container Service 21.1 28.9 - 36.4

Balance (other goods) 73.3 65.2 - (-)11.0

2. Net tonne kms (billion) 521.3 538.2 8.4 3.2

3. Net tonne kms/ wagon /day 3539 a 8472 c 9.3 -

4. Passenger traffic orig. (million) (d) 6524 b 6971 b 5.0 6.9

5. Passenger Kilometres(billion) 770 b 778 b 10.8 -

13 | P a g e

Indian Railways at Current Context

Freight chargesRailways have rationalized the freightstructure extensively to make it simple andtransparent. Pursuing market responsive freight policies, the value-based freight rates have been changed to fixed ones. Under the new pricing strategy, surcharge is levied during peak season and discounts offered during lean season, but, peak and non-peak seasons have been fixed uniformly for all the commodities while many commodities havedifferent peak and non-peak seasons. Therefore in 2008-09, Railways have decided to modify this policy as per the prevailing market conditions. In order that the difference between highest and lowest rates is not more than two times, freight rates for petrol and diesel were reduced by more than 17 per cent during the last three years.

Passenger faresThere is no change in Second Class fares on Suburban sections. Second Class Fares up toRs.50.00 per passenger on Non-suburban Mail/ Express including Superfast trains and Ordinary passengers have been reduced by Re.1. Second Class Fares beyond Rs.50.00 per passenger on Non-Suburban section of M/E & Passenger including Superfast trains have been reduced by 2%. Sleeper class fares beyond Rs.50.00 per passenger for Mail/First Class, AC 2-tier, AC- 3-tier and AC Chair Car has been reduced by 2% for all distances. There isno change in the existing fares of First Class Mail/ Express and Ordinary trains.

Up gradation of Passenger Amenities

Station amenities-Out of the 594 stations identified for upgradation of passenger amenities through Model Station scheme, 325 stations have already been developed, while the rest are at various stages of progress. Under the plan to identify five stations in each Division to give a facelift on priority basis under the Touch & Feel Scheme, 637 stations have beenidentified and 395 stations have been completed. The works for up gradation of passenger amenities at B and D category stations are planned to be completed by March 2010. In order to accommodate longer trains carrying 24/26 coaches, platforms atmore than 502 (out of 596) stations have also been completed during last three years.

Computerization of passenger and freightServices-The computerized passenger reservationsystem of Indian Railways is the largest passenger reservation network in the world, with 1,721 locations and more than 6,800 terminals (end-2008-09). On an average, 3.82 crore passengers per month are being booked in PRS with average passengerearning of Rs.1,300 crore per month. Further,Railways has tied up with the India Post for operation of PRSs through Post Offices.

Freight operations information systemFOIS gives an account of all demands,number of loads/rakes/trains and their pipeline, freight locos, stock at aggregate level etc. FOIS Phase I (Rake Management System–RMS) module implemented at 243 locations covers all major yards/ lobbies and

14 | P a g e

control offices at divisions and zones. FOIS Phase II (Terminal Management System–TMS) has been commissioned at 523 locations.

Rail safetyWith steps taken to ensure safety, theaccidents per million train km, and animportant index of rail safety, came down from 0.55 in 2001-02 to 0.20 in 2008-2009. The

number of consequential train accidents decreased from 194 in 2007-08 to 177 in 2008-09. Special Railway Safety Fund (SRSF),created in 2001-02 to wipe out the arrears in renewal and replacement of over-aged assets and for safety enhancement within six years, expended was Rs. 16,318 crore till 2007-08. Most of the intended works were completed by 2007-08. Adequate contribution is being made to the Depreciation Reserve Fund (DRF) for future asset renewals.

Technology upgradationRailTel was set up for creating OFC-basedcommunication infrastructure for train operations and to generate revenue through commercial exploitation of surplus capacity. RailTel has set up an OFC network of 34,932 RKMs, of which 25,130 RKMs is of high bandwidth capacity. A PAN India MPLSnetwork for providing connectivity to data and voice circuits have also been set up. Till date, 220 important and about 3,150 other stations have been put on OFC network. With this, the Indian Railways is now in a position to lease the surplus capacity on commercial terms.

Achievements and new initiatives in signaling

To increase efficiency and safety, modern signaling system with route elay /panel/ electronic Interlocking along with multi aspect colour light signaling in replacement of over-aged mechanical/multi-cabin signaling system has been provided at 416 stations.

Automatic block signaling (ABS) has been provided on 349 RKms to increase line capacity.

Intermediate block signaling (IBS) has been provided on 87 block sections to increase line capacity, by splitting thelonger block sections.

Anti collision device (ACD) isoperational as a pilot project on Katihar-Guwahati-Dibrugarh- Ledo section of the North Frontier Railway.

Train protection and warning system (TPWS) has been provided on 50 RKMs in Chennai-Gummiddipundi Section on the Southern Railway as an aid to drivers. This will prevent cases of “signal passing at danger” and overspeeding.

910 stations have been provided with highly durable LED signals to improve reliability and visibility of signals.

Automatic clearance of block section has been provided at 492 sections

15 | P a g e

through use of axle counter. This will reduce dependence on human element and enhance safety.

Figure – Passenger at CST Mumbai

Indian Railway under LALU

There are few political leaders in the country who have been more sharply criticised than Railways Minister Lalu Prasad Yadav.now, there is a genuine sensewhat Lalu has been able to achieve for Indian railways, which is looking healthier than it has in years. When he wrestled the Railways Ministry from Ram Vilas Paswan, many had written the obituary of the Indian railways, saying Lalu would drive it into the ground. But he’s proved the skeptics wrong.

Effective feat

The Indian railways, an organization heading towards bankruptcy seven years ago when he took over, now has surplus revenue of Rs. 11,000 crore(2006), a feat that has won grudging respect for Lalu.

Lalu achieved the feat by taking simple steps like competitive passenger fares and reducing the wagons’ turnaround time from seven to five days.

“…This is just the start. We will soon have surplus of Rs 20,000 crore. We will do more, you see our profit will climb even further…” added confident Lalu Yadav

through use of axle counter. This will dependence on human

enhance safety.

Passenger at CST Mumbai

LALU regime-

There are few political leaders in the country who have been more sharply criticised than Railways Minister Lalu Prasad Yadav. But

of respect for what Lalu has been able to achieve for Indian railways, which is looking healthier than it has

When he wrestled the Railways Ministry from Ram Vilas Paswan, many had written the obituary of the Indian railways,

rive it into the ground. But he’s proved the skeptics wrong.

The Indian railways, an organization heading towards bankruptcy seven years ago when he took over, now has surplus revenue of Rs. 11,000 crore(2006), a feat that has won

espect for Lalu.Lalu achieved the feat by taking simple steps like competitive

and reducing the wagons’ turnaround time from seven

He also raised the carrying capacity of goods trains from 3,200 tonnes to 4,000 tonnes, which led to higher freight earnings.

Turning to the Aam Aadmi slogan, the minister said the railways will soon create economic opportunities for the farmers. plan to create a public-private partnership model, wherein retail stores would be set up at around 7,500 stations across the country. It will facilitate procurement, distribution and marketing. We plan to involve corporates in this project. Global tenders will be invited,”said...While the minister termed the bullet train project unviable for the country, hemedia persons that the ministry plans to take measures to tighten securi“We plan to introduce close circuit TVs and metal detectors at all the major stations. We also plan to restrict entry at the platforms. Only passengers will be allowed to enter the platforms,” he said.

The minister also stated that he hadto enable travelers to get a worldexperience. Starting with stations at major cities like Ahmedabad, Delhi, Chennai, Mumbai and Patna the new station will have underground cross-over system to reach different platforms instead of an over

“…This is just the start. We will soon have surplus of Rs 20,000 crore. We will

you see our profit will climb even further…” added confident Lalu

He also raised the carrying capacity of goods trains from 3,200 tonnes to 4,000 tonnes, which led to higher

Turning to the Aam Aadmi slogan, the railways will soon create

economic opportunities for the farmers. “We private partnership

model, wherein retail stores would be set up at around 7,500 stations across the country. It will facilitate procurement, distribution and

keting. We plan to involve corporates in this project. Global tenders will be invited,” he

While the minister termed the bullet train project unviable for the country, he told media persons that the ministry plans to take measures to tighten security in the system.“We plan to introduce close circuit TVs and metal detectors at all the major stations. We also plan to restrict entry at the platforms. Only passengers will be allowed to enter the

The minister also stated that he had big plans to get a world class

experience. Starting with stations at major cities like Ahmedabad, Delhi, Chennai, Mumbai and Patna the new station will have

over system to reach different platforms instead of an over bridge.

16 | P a g e

Analysis of the various strategies of Indian RailwayAnalysis of the various strategies of Indian Railway-

17 | P a g e

Fig. - Mr.Lalu Yadav

18 | P a g e

The organizational Structure of Indian Railways has been shown by the The organizational Structure of Indian Railways has been shown by the following diagramfollowing diagram-

19 | P a g e

Railway Mission 2012

I. Double passenger traffic from 6000 to 9000 million passengers

II. Increase the speed ofa. Passenger train to 100 kmph from

55kmphb. Goods train to 60kmph from 24 kmph

III. Reduce unit cost IV. Deliver world class services and

amenities

RAILWAY VISION 2025

The Railway Vision 2025 document which will provide the long-term strategy of IR with a focus on "customermodern passenger servicefreight schemes to sharpen the competitive edge of Railways". and convenience for passengers while commitment and connectivity

The financial turnaround of the Railways has been achieved by thinking beyond the beaten path, taking innovative decisions in commercial, operational and pricing policies and through cross functional cooperation and coordination. For making this magical turnaround durable.working on to prepare a2025 Document which willideas and initiatives in a novel manner. This shall outline preparedness and strategies for the future.

This document will set forth thefor the coming 17 years in the field of operational performance and quality of service. It will also detail an action plan

Double passenger traffic from 6000 to 9000 million passengers

Passenger train to 100 kmph from

Goods train to 60kmph from 24 kmph

Deliver world class services and

RAILWAY VISION 2025

The Railway Vision 2025 document which term strategy of IR

with a focus on "customer-centric modern passenger services and various freight schemes to sharpen the competitive edge of Railways". Comfort

for passengers while commitment and connectivity for freight.The financial turnaround of the Railways

has been achieved by thinking beyond the , taking innovative decisions

operational and pricing policies and through cross functional

coordination. For making his magical turnaround durable.They are

Railway Vision 2025 Document which will present new ideas and initiatives in a novel manner. This shall outline preparedness and

This document will set forth the target for the coming 17 years in the field of operational performance and quality of

so detail an action plan

for achieving the stipulated targets and necessary investment plans thereof. This document will also contain details of customer-centric modern passenger services and various freight schemes to sharpen the competitive edge of Railways.

This will have a blue print of an organization that encourages transdepartmental decision making to take the Railways to unprecedented heights. Route wise planning would be done to reduce traffic bottlenecks, expand the network and modernize the Rai

The passenger services will be governed by two words-convenience’. The buzz word in freight business will be ‘commitment and connectivity’.

This document will inspire the Railway management and its employees to do new experiments, and guiding light for the future generation.

stipulated targets and necessary investment plans thereof. This

will also contain details of centric modern passenger

various freight schemes to sharpen the competitive edge of

will have a blue print of an organization that encourages trans-

decision making to take the Railways to unprecedented heights. Route wise planning would be done to reduce traffic bottlenecks, expand the

and modernize the Railways.The passenger services will be governed

‘comfort and convenience’. The buzz word in freight

‘commitment and

This document will inspire the Railway management and its employees to do new experiments, and will be like a guiding light for the future generation.

20 | P a g e

Highlights of Indian Railway Budget 2009-2010

Introduction• “Inclusive growth” and expansion of rail network to reach development to everycorner of the country is core to developmental approach.• Economically unviable projects need to be viewed with social perspective beingeconomic necessity for backward areas and under privileged.• Expert committee to advice on innovative financing and implementation of suchprojects.

Service to the Passengers• Priority will be given to effect perceptible improvement in Passenger Amenities Cleanliness Quality of Railway catering Safety and Security and Punctuality

With focus on strict monitoring

• Extensive availability of Janata Khana, national and regional cuisines.• 50 stations to be developed as world class stations.• 375 stations to be upgraded as ‘Adarsh Stations’ with basic facilities including drinking water, adequate toilets, ladies dormitories etc.• Multi-functional complexes to be constructed at 50 railway stations serving centres of pilgrimage, tourist and industry. To have shopping facilities, food stalls, budget hotels etc.

• ‘Onboard housekeeping scheme’ to cover 200 additional pairs of trains; ‘improved linen management’ with modern mechanized automated laundries.• Expanding facilities like ramps, special signage, lifts, escalators, special coaches forphysically challenged and aged persons.• Onboard availability of doctors in long-distance trains being considered; ambulanceservices to be provided in seven cities to start with.• On-board infotainment services to beprovided on important long-distance intercitytrains.• Toilet facilities to be introduced in DEMU/MEMU trains with journey time more than2 hours.• 1000 new PRS locations to be opened; UTS services to be expanded from 5000 to 8000locations.• Automated ticket vending machines to be installed at 200 large and medium sizedstations. Taking ticketing to ‘Maa Mati Manush’

grassroot, through issue of computerizedtickets at Post offices and ‘Mushkil Aasaan’ mobile ticketing service vans.• Air-conditioned double decker coaches for inter-city travel to be introduced.

Safety and Security• Timely track renewal, modernization of signals, use of digital ultrasonic flaw detectors etc.• Integrated Security Scheme to be introduced at 140 vulnerable and sensitive railway stations.• Women RPF squads for security of women passengers

21 | P a g e

Staff Welfare• 6,560 staff quarters to be constructed in 2009-10.• Indoor stadia to be developed in major railway divisions and zones.• Increased contribution of Rs 350 per employee to Staff Benefit Fund to continue for a year, with Rs 100 per employee for women empowerment, vocational training ofphysically and mentally challenged wardsespecially girl child, and higher education forgirls.• Scholarships for higher education of girl child of group D staff.• Proposal to open 7 nursing colleges on railway land at Delhi, Kolkata, Mumbai(Kalyan), Chennai, Secunderabad, Lucknow and Jabalpur on PPP model to facilitate thewards of railway employees in finding vocational avenues.• Burn Units at major Railway hospitals.• Metro Railway Hospital to be upgraded to 75 beds.• Medical colleges planned to be attached to existing railway hospitals at 18 locationsthrough PPP mode.• Dormitories for railway families accompanying patients to be provided at 16 hospitals having 150 beds and above.• Policy on Railway Recruitment Boards to be reviewed.• Special recruitment drive for filling vacancies of Scheduled Castes and Scheduled Tribes and Physically Handicapped quota.

Freight and Parcel Business• Premium service for container movement with assured transit time being considered.

• Private ownership of special purpose rolling stock for commodities and privateoperation of freight terminals will be encouraged.• Mega logistic hubs being planned alongside Eastern and Western Dedicated FreightCorridors.• Kisan-Vision project – Running special trains from production clusters to consumercenters for perishable products like fruits and vegetables to reduce wastage and also forvillage handicraft, cottage industry & textile products to increase outreach and access tonew markets for rural produce. Temperature controlled cargo centres to be encouraged. Premium Parcel Services named Faster

Parcel Services on pilot basis on three routes to run with guaranteed transit time from dedicated terminals.

Landmark initiatives• Dedicated Freight corridors declared ‘Diamond Rail Corridors’.• Foundation being laid for development of Eastern Industrial Corridor alongside theEastern Freight Corridor. Railways’ land banks to be

productively utilized to catalyze development in this corridor.

Investment in rolling stock production and assembly facilities proposed fordevelopment of rail based industrial cluster drawing upon advantage of proximity to mines, labour force and metal works market.

• Setting up of a new factory at Kanchrapara-Halisahar Railway Complex with annual

22 | P a g e

capacity of 500 EMU/MEMU and Metro coaches in Joint Venture/Public-PrivatePartnership mode.• Proposal to initiate action for setting up 1000 MW power plant with Ministry of Power, at Adra, in under developed tribal area.• State of the art training facilities proposed at Dankuni for young artisans andsupervisors, thereby contributing to national talent pool.

Financial Performance in 2008-09

• Freight loading at 833 million tonnes (MT) grew @ 5% on previous year.• Traffic receipts also increased by 11.4% to reach Rs 79,862 cr.• Cash surplus before dividend Rs 17,400 cr after disbursing Rs 13,600 cr towardsimplementation of 6th Central PayCommission.• Railways paid full dividend liability of Rs 4,717 cr to Government.• Investible surplus of Rs 12,681 cr generated.• Annual Plan expenditure was Rs 36,336 cr.Budget Estimates 2009-10.• Freight loading targeted at 882 MT – an increment of 49 MT; number of passengerslikely to grow by around 6%.• Gross Traffic Receipts (GTR) estimated at Rs 88,419 cr i.e. Rs 8,557 cr more than 2008-09.• Ordinary Working Expenses budgeted at Rs 62,900 cr to cover the full year impact of VICPC and the payment of 60% arrears due in 2009-10.

• The dividend payable to General Revenues kept at Rs 5,479 cr. Budgeted Operating Ratio 92.5%.

Concessions• ‘Izzat’- A new scheme for travel with dignity. Issue of concessional MST of Rs 25 for people, with monthly income upto Rs 1,500, in unorganized sector, for travel upto 100 km.• Press correspondents to get ‘photo identification cum credit cards’ on certification of PIB and other competent authorities instead of existing system of coupons. concession of 30% to increase to 50%

for Press Correspondents 50% concession for travel with spouse

also to be given once a year.• The existing student concession to be extended to students of Madrasas, higherMadrasas and senior Madrasas.• Concessional MST available to students in Kolkata will be applicable for travel in MetroRail Kolkata also.

Special Trains• ‘Only ladies’ EMU trains to start in Delhi, Chennai and Kolkata sub-urban during office rush hour.• ‘Yuva Trains’ - New low-cost, air-conditioned, seated accommodation trains, dedicated specially for young generation and low-income groups. To run from rural hinterland to major

metros/cities; fare to range from Rs 299 upto 1500 km to Rs 399 upto 2500 km.

23 | P a g e

Weekly service on pilot basis to be introduced within 3 months between Mumbai to Delhi and Delhi to Kolkata.

• ‘Duronto trains’ - for the first time new Non-stop, point to point train services. Starting with 12 trains.

Other New Train Services• 57 new train services to be introduced.• Extension of 27 trains also envisaged.• Frequency of 13 trains to be increased.

Annual Plan 2009-10• Plan outlay is Rs 40,745 cr. Increase of Rs 2,840 cr on Interim Budget. New lines outlay - Rs. 2,921 cr ;

increase of 166% on interim budget Gauge conversion - Rs 1,750 cr. –

increase of 24% on interim budget Passenger amenities - Rs 1,102 cr - 119%

increase on interim budget excludingPPP provision, which is unlikely to materialize.

Staff Quarters - Rs 335 cr - increase of 49% on interim budget.

Staff Amenities - Rs 424 cr- increase of 79% on interim budget.

Acquisition of 18,000 wagons in 2009-10 against 11,000 in 2008-09.

• Additional budgetary support of Rs. 1,949 cr. sought for 11 national projects.• Feasibility study for energy efficient rail based system to provide connectivity tosuburban system in Kolkata, Mumbai and Chennai.• Proposals for better integration of passengers’ movement in Kolkata suburban area.

• Quazigund-Anantnag New Line to be completed by August, ’09.• Creation of Northeast Rail Development Fund under consideration for timelycompletion of national projects in N.E.Region.• New proposals for better rail connectivity proposed to be processed which include 53 for new lines, 3 for gauge conversion works and 12 for doubling.

Other important announcements• Setting up of an expert committee headed by Shri Sam Pitroda to suggest innovationsto utilize optic fibre cable network of Railways and take information technology to door steps in remote areas.• Project Monitoring Committee for developing mechanism to avoid slippage in project delivery. Special monitoring for National Projects.• Railways to come out with white paper on organizational, operational and financialstatus based on last five years performance and develop Vision-2020 with long and shortterm strategy and plan of action.• Modernization of select railway printing presses. Offer for takeover of heritageinstitution Basumati Sahitya Mandir, for revival.• Takeover of Units of Burn Standard and also Braithwaite under consideration.• Revision in Tatkal Scheme to make it more user friendly. Advance booking periodreduced. Minimum charge reduced to Rs.100.• No increase in passenger fares and freight tariffs.

24 | P a g e

Conclusion and Recommendation

Both ‘good management’ and ‘good luck’ helped the Indian Railways turnaround from a low performing organization to a high performing one in about five years. The foundation for the turnaround was laid during the tenure of Mr Nitish Kumar, which the former Railway Minister, Mr Yadav, implicitly accepted in his first budget speech. It goes to the credit of Mr Yadav that he not only continued those policies (though initiated by a rival political party member) but importantly ensured that they produced results. This demonstrates that the organization moved away from past malaise of politicization of decision making processes and policies, to a more corporate minded commercial focus. It adopted three major strategies for a turnaround. Through the retrenchment strategy it was successful in reducing the operating cost. It focused on dynamic pricing and customer centric sub-strategy within the overall repositioning strategy to significantly increase revenue —in particular the freight revenue. Reorganization strategies like human resource development initiatives and achievement of efficient outcomes through decentralization of authority and responsibility aided the IR turnaround. Importantly, the IR benefited from favorable macro-economic environment like increase in the growth rate of the economy and the growth of exports. The implication of our study is that an organization’s turnaround

success needs to be put in a much wider context. It could be due to ‘good luck’ and not due to ‘good management’ alone as most of the extant literature tends to suggest.

Turnaround: a myth or reality!!!

Former Railways Minister Lalu Prasad Yadav has been trumpeting from atop the Red Fort that he has got the railways to perform and earn a profit of Rs 21,578 crores during 2006-7, surpassing the ONGC. As it later turned out, the turnaround story was one third true, one third media hype and one third jugglery of figures. A close scrutiny of railways accounts reveals a net profit of Rs 11,000 crores. Even this amount was earned at the expense of unsuspecting passengers and at risk to their safety. A large amount of money reflected as profit is not available to be ploughed back. Part of it is suspense account, money promised to the railways but not yet in its kitty.

Disturbing FactsLalu Prasad claimed the railways made a profit of Rs 21,578 crores. Actual profits work out to Rs 11,000 crores.

Rs 9000 crores pension fund shown as profits.

Miscellaneous funds – Rs 2,500 crores included in profits.

Rs 1,700 crores meant for lease of wagons reflected as profits.

25 | P a g e

Profit figures inflated by advance earnings for 2007-8 in last year’s balance sheet.

Funds promised by Finance Ministry, but not yet received, included as profits.

Excess tonnage carried ignoring safety concerns fetched Rs 5000 crores.

Hidden costs to passengers earned Rs 325 crores.

The railway under Lalu has altered the way the balance sheet is presented. It has shown a remarkable creativity to artificially inflate revenues while at the same time degrading the quality of service. Consider the following:

Diluting Tatkal. - 10 % seats meant for those traveling in emergency earned Rs 100 per ticket. This has now been changed to 30 % seats with a surcharged of Rs 250 per ticket.

Declaring Trains Superfast- Over 100 trains have been declared Superfast without any change in running time or facilities. The Superfast tag fetches Rs 75 crores.

Doubling Cancellation Charge- Added profits Rs100crores.

Onward Journey More Expensive- One can no longer buy a single ticket if one has to change trains for an onward destination.

The Actual Profits

The railways primarily did two things:

substantially increased the load carried by freight trains and put in place a slew of ticketing rules which extracted money from passengers even as Lalu Prasad claimed he had not raised fares.The chunk of the profits, Rs 5000 crores, came by increasing the carrying capacity of container wagons by ten tones each. In private, however, experts have questioned on grounds of safety. The rail infrastructure –tracks, wagons, engines can only be stretched to a limit. While the loads carried increased there was no corresponding enhancement of maintenance standards/schedules. Earlier, train examination was done every time a train returned to its base station, irrespective of the distance traveled. This was changed to every 7,500 Km. As a result; various zonal divisions reported increased rail fractures, stress on old bridges and wagon coupler failures due to increased axel loads and less frequent maintenance. The axel loads were increased without any trials, checks, tests or technical analysis. It is ironic that Lalu Prasad could increase the axel loads because of infrastructure upgradation executed by his predecessor, Nitish Kumar.

On the brighter aspect-

Inspite of having a dark phase earlier and various challenges with respect to growth the turnaround of the Indian Railways was really a great surprise for India as well as for the world. Without Lalu Prasad Yadav’s strategy it would not have been possible to make such a huge public sector unit into a profit making industry that too within 30

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months. The strategies which minister have followed are very economic realities and pretty different from those which are generally folcorporate giants for revenue generation. From time immemorial the road transports had been a great competitor for Indian railways but with the improvement in the overall infrastructure in the railways it seems that the cut throat competition hto a great extent. As the freight charges havenot been increased much but still the services have been improved by several folds.

Still there are few more problems which IR is facing presently like the threat from the low cost airlines. People of higher classes prefer travelling by flight than by superfast trains to save on their time. So here we can say that may be Indian railways need to introduce some more advanced technology to meet the needs of the customers as well as to attract more number of customers.

Even after this huge success of Indian railways in terms of revenue generation there are still rooms for improvements in the areas like investments, policy making, maximizing its market share, institutional separation of roles; clear differentiation between social obligations and performance imperatives; and the need to create a leadership team committed to and capable of redefining the status quo.

months. The strategies which former rail minister have followed are very hardnosedeconomic realities and pretty different from those which are generally followed by the corporate giants for revenue generation. From time immemorial the road transports had been a great competitor for Indian railways but with the improvement in the overall infrastructure in the railways it seems that the cut throat competition has subsided to a great extent. As the freight charges have

increased much but still the services have been improved by several folds.

Still there are few more problems which IR is facing presently like the threat from the low

e of higher classes prefer by superfast trains to

save on their time. So here we can say that may be Indian railways need to introduce some more advanced technology to meet the needs of the customers as well as to attract

Even after this huge success of Indian railways in terms of revenue generation there are still rooms for improvements in the areas like investments, policy making, maximizing

institutional separation of differentiation between social

obligations and performance imperatives; and the need to create a leadership team committed to and capable of redefining the

Current Issues and problems

Higher demand for Freight and Passenger transport, witeconomic growth

Need for capacity enhancement in the Railway network over the next 10years

Technological uprgadation for better maintenance of railway assets

Greater competition from Roadways, with major investments in Highway network upgradation

Increase freight market share through higher availability of services at competitive prices

Greater attention to passenger services and safety

Heavily subsidised passenger fares, distorted passenger pricing

Upgradation of the Railway Production units for improved efficiency and productivity

Recommendation

Recommendations on Infrastructure Ageing Infrastructure(operational and

administrative)1) Maximize the operational capability and efficiency of every

(i) using 3 phase a.c. drive engines for all the engines byreplacing all the low capacity d.c. series and disel engines(ii)replacing the heavy weight bogies and creating low bogies, making the best

and problems-

Higher demand for Freight and Passenger transport, with planned

Need for capacity enhancement in the Railway network over the next 10-15

Technological uprgadation for better maintenance of railway assets Greater competition from Roadways, with major investments in Highway

ationIncrease freight market share through higher availability of services at

Greater attention to passenger

Heavily subsidised passenger fares, distorted passenger pricingUpgradation of the Railway

s for improved efficiency and productivity.

Recommendation-

Recommendations on InfrastructureAgeing Infrastructure(operational and

1) Maximize the operational capability and efficiency of every train

(i) using 3 phase a.c. drive for all the engines by

replacing all the low capacity d.c. series and disel engines(ii)replacing the heavy weight bogies and creating low weight

, making the best

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possible design for the bogies for passengers and for goods and for material separately(iii)using the best signaling and interlocking system so as to reduce the manual operation and preventing the human errors responsible for accidents

2)Ensure maximum utilization of railways for transport of goodsmaterial also ensure maximum utilization of railways by commuters and passenger also expand the railway network where trahigh , cut-off or dismantle the railway network where traffic is very low,this step will help the to generate maximum income.

Recommendations on Security Poor safety record(accidents

security) a dismal record of optimally

assets like land, freight andunresponsive staff)

Recommendation on Public Services Passengers Security

Security is one more care takable issue. To avoid any train robberies etc trains needmore security ppl. Actually we can think of automatic

possible design for the passengers and

for goods and for material

(iii)using the best signaling and interlocking system so as to reduce the manual operation and preventing the human errors

for accidentsnsure maximum utilization of

ort of goods and material also ensure maximum

n of railways by commuters passenger also expand the

railway network where traffic is very dismantle the

railway network where traffic is very this step will help the railways

to generate maximum income.

Recommendations on Securityoor safety record(accidents

a dismal record of optimally utilizingand

Recommendation on Public Services

Security is one more care takable issue. To avoid any train robberies etc trains

more security ppl. Actually we can think of automatic

doors which open only atstops that can avoid robbery to some extent

Hygienic, cleaniness First things that come tmind are cleanliness (both in rails and in those bathrooms) and security. For the railways to be clean obviously need more staff that cleanThe bathrooms and put them clean after every travel and if possible between toowhen the rail stops for longer time.Avoid sales of unclean and untidy food supplies in the trains. Allow licenced leanfood providers to supply food. If needed privitization can be done and improve theneccessary.

Good Quality of FoodThis not only gives u a loss but also messcomnpartments as they have huge utensils and improper dining facity makes it dirty all over. Instead good food packed compact and easy to use disposable packets would help a long wayis hardly tasty and more over never hygienic.stale at times worth for money

doors which open only atstops that can avoid robbery to some extent.

Hygienic, cleaniness First things that come to mind are cleanliness (both in rails and in those bathrooms) and security. For the railways to be clean obviously usneed more staff that clean.

he bathrooms and put them clean after every travel and if possible between too maybe when the rail stops for a longer time.Avoid sales of unclean and untidy food supplies in the trains. Allow licenced leanfood providers to supply food. If needed privitization can be done and improve theneccessary.

Good Quality of Foodhis not only gives u a loss

but also messes the comnpartments as they have huge utensils and improper dining facity makes it dirty all

Instead good food packed compact and easy to use disposable packets would help a long way food is hardly tasty and more over never hygienic. They are

at times and never worth for money.

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Recommendations on Technology Advancement Using IT for greater efficiency

A large complex Infrastructure System such as the Indian Railways can benefit greatly from the intelligent use of IT

Applications should transcend boundaries of railway organisation and go into the domain of the customer.

Implement decision support systems

ERP for Integration with communication systems and other technologies.Internet, mobile phones, hand held terminals, universal product code readers etc

Manage efficiently continuous improvement in technology.

E-enabledFreight Management System

Customer care centersIntelligentInfrastructure

Self service kiosks at Stations

Recommendations on Technology

Using IT for greater efficiencyA large complex Infrastructure System such

Railways can benefit greatly from the intelligent use of IT.

Applications should transcend boundaries of railway organisation and go into the domain of the

Implement decision support

ERP for Integration with communication systems and other technologies.-use of Internet, mobile phones, hand held terminals,

product code

Manage efficiently continuous improvement in

Freight Management System .

Customer care centersStations

Self service kiosks at Stations

Smart and Stored Value Cards for MST / RFID based Smart card & Biometric technology for passenger screening vamped Revenue Management System

The below diagram shows the service provided by the Indian Railways to the various segment of people according to the income group.

Smart and Stored Value Cards for MST / Passes .RFID based Smart card & Biometric technology for passenger screening and Re-vamped Revenue Management System.

The below diagram shows the service provided by the Indian Railways to the various segment of people according to the

29 | P a g e

Bibliography and References

Text Books: Managerial Economics, Fourth

Edition-Craig H. Petersen-W. Cris Lewis

-Sudhir K. Jain

Managerial Economics-Samuelson

Search Engines: www.google.com

www.yahoo.com

www.yagoohoogle.com

www.altavista.com

Web Links: www.indianrailways.gov.in/Accesse

d on 20 May 2007. Indian Railways 2001. The Indian

Railways Report -2001.Expert Group on Indian Railways Vol. 2 Part I & II.

Yadav, L.P Rail 2006Speech on www.indianrailways.gov.in

Accessed on 25 May 2007Financial Support to PPP infrastructure 2007 Secretariat of the Committee on Infrastructure at www.infrastructure.gov.inAccessed on 15 June 2007.

Bibliography and

Managerial Economics, Fourth

Craig H. Petersen

www.yagoohoogle.com

www.altavista.com

www.indianrailways.gov.in/Accesse

Indian Railways 2001. The Indian 2001.Expert Group

on Indian Railways Vol. 2 Part I & II.Yadav, L.P Rail 2006-07 Budget Speech on www.indianrailways.gov.in

Accessed on 25 May 2007 Guidelines Financial Support to PPP infrastructure 2007 Secretariat of

Committee on Infrastructure at www.infrastructure.gov.in.Accessed on 15 June 2007.

Indian Railways-opportunities and challenges (pdf document) athttp://infrastructure.gov.in/pdf/brochure_railway.pdf.Accessed on 12 June 2007.

‘Economic Growth derives Indian Railways spending’ at http://www.railwaygazette.com/features_view/article/2007/07/7580/economic_growth_drives_indiays_spending.html Accessed on 10 July 2007.

U.S General Accounting Office Public-Private Partnerships Terms Related to Building and Facility Partnershipshttp://www.gao.gov/archive/1999/gg99071.pdf Accessed on 24 June 2007 Government of India. 2Report of the Task Force. The Delhi – Mumbai & DelhiCorridors.

opportunities and challenges (pdf document) athttp://infrastructure.gov.in/pdf/brochure_railway.pdf.Accessed on 12

‘Economic Growth derives Indian Railways spending’ at http://www.railwaygazette.com/features_view/article/2007/07/7580/economic_growth_drives_indian_railways_spending.html Accessed on 10

U.S General Accounting Office Private Partnerships Terms

Related to Building and Facility at

http://www.gao.gov/archive/1999/gg99071.pdf Accessed on 24 June 2007 Government of India. 2006. Report of the Task Force. The Delhi

Mumbai & Delhi–Howrah Freight