Should Indian Railways Be Privatized
-
Upload
sailesh-nallapothu -
Category
Documents
-
view
296 -
download
1
Transcript of Should Indian Railways Be Privatized
Should the Indian Railways be privatized?
Presented by : Group I2
The answer is “NO”, Because :
• Indian Railways (IR) is a socio-economic organization.
• It has shown impressive growth and its turnaround story is case study at leading B-schools.
• Its too complex to be given in one hand.• Lessons from privatization of British Railways
are not very encouraging.• IR needs modernization and not privatization.
Introduction
• Indian Railways - the sinews of the Indian economy
• Reached out to bring together the great Indian family.
• World’s largest single employer –over 16 lakh
Is privatization “THE ANSWER”
• Distinction of being the largest railway system in the world under a single management
• Profit maximization not the only motive
Contd…
• British railway privatization- the most unpopular government policy in a generation
• Private players will not think from social perspective.
What are we talking about?• Ever imagined the entire population
of Netherlands — 16.41 million — transported in trains on a single day?
• The combined population of Switzerland, Denmark and Sweden similarly transported on a single day in trains.
• Undoubtedly, it is a massive operation. But that is exactly what the Indian Railways (IR) does every day — without a fuss!
Grim PhaseThe Expert-Group reportsubmitted in July 2001 stated:
“Today Indian Railway is on the verge of a financial crisis... To put it bluntly, the ‘business as usual low growth’ will rapidly drive IR to fatal bankruptcy, and in sixteen years Government of India will be saddled with an additional financial liability of over Rs 61,000 crores… On a pure operating level, IR is in a terminal debt trap.”
Turnaround
• Today’s second largest profit making Public Sector Undertaking after ONGC.
• Total earnings in 2005-06 increased by Rs 7121 crores
• Railway budget 07-08 – A surplus of Rs 215 billion
• Railway’s growth has exceeded the GDP of India
92.0
89.5
87.4
82.5
86.2
90.9
93.3
98.3
96.0
83.8
92.193.1
84.3
91.0
92.393.3
82.682.9
91.592.5
80
82
84
86
88
90
92
94
96
98
100
1987
-88
1888
-89
1989
-90
1990
-91
1991
-92
1992
-93
1993
-94
1994
-95
1995
-96
1996
-97
1997
-98
1998
-99
1999
-00
2000
-01
2001
-02
2002
-03
2003
-04
2004
-05
2005
-06
2006
-07 (
BE)
Perce
ntOperating Ratio
Proposed Services
• Railway stations into Malls • Internet• Movies on demand• Music downloads
The franchising system
Criticisms • Too complex• Leads to confusion in responsibilities• Rail/Wheel interface is an integral part
“The whole idea of separating track from train operations in this way is fundamentally misconceived, being based on the model of air transport, where the infrastructure, engineering and operational considerations are entirely different.”
– Opinion from some heads of Swiss Federal Railways
British Rail Privatisation• Most unpopular Govt. Policy in a
generation• Opinion polls show that 3/4th of UK wants
public ownership back– Crashes at Ladbroke, Hatfield and Potters Bar– Price rise– Rail company directors paid huge bonuses
themselves• Massive Skills shortage• Boundaries and responsibility• Huge variations in pay led to high staff
turnover
Steps post Disasters• Placed RailTrack under the control of Govt-appointed administrators by
obtaining an order from British High Court.• Considered as the first step towards renationalization
“ It was due to the inherent contradiction between the goal of a company that was to maximise profit and the nature of the business from which public interest cannot be separated. The functioning of privatized RailTrack was termed as 'monumental incompetence'. The fact that the privatized company had to go to Government with begging bowl for subsidy to pay dividend to its Shareholders clearly and abundantly proved that it made no commercial sense to privatize British Rail.”
– British Prime minister at Labour Party Conference
Organizational Structure of Indian Railways MINISTER OF RAILWAYS
MINISTER OF STATE FOR RAILWAYS-MSR (A)
MINISTER OF STATE FOR RAILWAYS – MSR (B)
RAILWAY BOARD
MEMBER ELECTRICAL
MEMBER STAFF
MEMBER ENGINEERING
MEMBER MECHANICAL
MEMBER TRAFFIC
FINANCIAL COMMISSIONER
DIRECTOR GENERAL RLY. HEALTH SERVICE
DIRECTOR-GENERAL RPF
ESTT MATTERS
ADMIN MATTERS
SECRETARY
CHAIRMAN RAILWAY BOARD
ZONAL RAILWAYSGENERAL MANAGERSCRERNRNERNFRWRSERSCRSR
NEW ZONAL RAILWAYSOSD**ECentralRECoastRNCRNWRSECRSWRWCR
PRODUCTION UNITSGENERAL MANAGERS
CLW ChittaranjanDLW VaranasiRCF KapurthalaICF VillivakkamWAP YelahankaCAO(R)*DCW Patiala
OTHER UNITSGENERAL MANAGERS
NF Railway (Construction)Metro Railway Kolkata
Central Organization for Railway Electrification Allahabad
DIRECTORS-GENERALRDSO Lucknow
Railway Staff College VadodraCAO(R)*
Central Organization For Modernization Of Workshops
PSUsIRCONRITESCRISCONCORIRFCKRCIRCTCRCILMRVC
*CHIEF ADMINISTRATIVE OFFICER (RAILWAYS)
** OFFICER ON SPECIAL DUTY
Indian Railways – A Complex Organization
"Indian Railways is a large and extremely complex organization. It is not easy for outside experts to grasp the many complexities that govern the operations of this massive enterprise"
- Mr. Rakesh Mohan - Chairman of Expert Group
Contd…
• Large and complex organization.• Requires flawless coordination among different
departments.• Bureaucratic structure becomes a necessity.• A single private entity cannot ensure such a level of
coordination.• So different activities have to be given to different private
players.• These private players would need coordination. • Ensuring this coordination can become a serious challenge
and make privatization a complete failure.
Modernization and not Privatization
Core activities:Transportation of freight and passengers.
Non-core activities : Catering etc.
Modernization and not privatization PPP way
Public Private partnership
• Private sector risks
• Public sector risks
• Example : Ending Monopoly of CCI
Railway stations modernizationby PPP
22 Railway Stations
• Huge potential for non-ticket-based revenues like non-aeronautical revenues
• Restaurants, shopping malls
• Different terminals
Mumbai Airport
Vision 2020•Target 3% of GDP.•Organizational Reform•Customer centric
Marketing Hyperopia (anti-Myopia) : Road Transport - biggest competitor
Vision 2020High Speed Corridors: 4 corridors of 2000 kms.: Rs 2, 00,000 crore for the modernization
Modernization of signaling set up : 3569.52 Crore Rs
References
• http://en.wikipedia.org/wiki/Indian_Railways• http://www.hindu.com/2001/07/03/stories/0
203000j.htm• http://www.medianama.com/2009/01/223-w
ifi-in-trains-piloted-on-shatabdi-express-music-downloads-movies-on-demand/
• http://pib.nic.in/release/release.asp?relid=9225
• http://vijaycn.sulekha.com/blog/post/2008/01/turnaround-of-indian-railways-under-mr-lalu-prasad.htm
• http://indiainteracts.in/columnist/2007/07/21/Tracking-the-Indian-Railways-turnaround-saga/
• http://www.qcin.org/nbqp/qualityindia/Vol-2-No4/16_20.php
Thank you