Monopoly - Indian

Railways
 Monopoly - Introduction

What is a monopoly?


A firm is considered a monopoly if . . .



¼ it is the sole seller of its product.

¼ its product does not have close
substitutes.
 Monopoly - Introduction

 Primary characteristics of a monopoly

– Single Sellers
– No Close substitutes
– Price Maker
– Blocked Entry
 Why do Monopolies Arise?


 Barriers to entry
– Legal/Government Restrictions
– High cost of entry
– Advertising and product
differentiation
 Profit Maximization for
Monopoly
2. ...and then the demand curve shows the price consistent with this quantity.
1. The intersection of the marginal-revenue curve and the marginal-cost curve
Costs and
Revenue

Monopoly B
price

Average total cost

A

Demand
Marginal
cost

Marginal revenue
0 Q MAX Quantity
 INDIAN RAILWAYS - Evolution

 State owned company

 Monopoly of country’s rail transport
 In 1832, a proposal was made to build a railroad
between Madras & Bangalore, but it never
materialized.
 In 1845, two companies formed
– East Indian Railway Company operating from
Calcutta
– Great Indian Peninsula Railway operating from
Bombay
 On December 22, 1851, first train is operational
in India
 April 16, 1853, first passenger train introduced
between Bombay & Thana.
 Railways grows in India with encouragement of
 Background Information -
Evolution

 Due to Partition, India lost 40% of its existing rail

network.
 At independence, 42 rail systems were existing
 In 1951, all systems were nationalized as one unit.
 Total of 6 zones came into existence in 1952, later
extended to 16 zones.
 In 1985, steam locomotives are phased out.
 In 1987, computerisation of reservation first was
carried out in Bombay
 In 1989, train numbers were standardized to 4 digits.
 In 1995, entire reservation system was computerized.
 In 1998, Konkan Railway was opened spanning difficult
terrain through the Western Ghats.
Background Information -
Evolution
 Background Information -
Evolution

 Railways Zones –
Sr . No . Name Abbr . Headquarters Date Divisions
 Established
1 Central CR November 5, 1951 Mumbai Mumbai, Bhusawal, Pune, Solapur, Nagpur
2 East Central ECR October 1, 2002 Hajipur Danapur, Dhanbad, Mughalsarai, Samastipur, Sonpur
3 East Coast ECoR April 1, 2003 Bhubaneswar Khurda Road, Sambalpur, Visakhapatnam
4 Eastern ER April, 1952 Kolkata Howrah, Sealdah, Asansol, Malda
5 North Central NCR April 1, 2003 Allahabad Allahabad, Agra, Jhansi
6 North Eastern NER 1952 Gorakhpur Izzatnagar, Lucknow, Varanasi
7 North Western NWR October 1, 2002 Jaipur Jaipur, Ajmer, Bikaner, Jodhpur
8 Northeast Frontier NFR 1958 Guwahati Alipurduar, Katihar, Lumding, Rangia, Tinsukia
9 Northern NR April 14, 1952 Delhi Delhi, Ambala, Firozpur, Lucknow, Moradabad
10 South Central SCR October 2, 1966 Secunderabad Secunderabad, Hyderabad, Guntakal, Guntur, Nanded,
Vijayawada
11 South East Central SECR April 1, 2003 Bilaspur, CG Bilaspur, Raipur, Nagpur
12 South Eastern SER 1955 Kolkata Adra, Chakradharpur, Kharagpur, Ranchi
13 South Western SWR April 1, 2003 Hubli Hubli, Bangalore, Mysore
14 Southern SR April 14, 1951 Chennai Chennai, Madurai, Palakkad, Salem, Tiruchchirapalli,
Thiruvanathapuram
15 West Central WCR April 1, 2003 Jabalpur Jabalpur, Bhopal, Kota
16 Western WR November 5, 1951 Mumbai Mumbai Central, Vadodara, Ratlam, Ahmedabad, Rajkot,
Bhavnagar
 Background Information -
Services

 Passenger Services
– Operates over 9000 trains and
transports over 5 billion annually
across India.
– Preferred mode of transport in most
of the country.
– Overcrowding is a widely faced
problem
– Ticket-less travel is also an additional
problem faced.
 Background Information -
Services

 Production Services
– Manufactures most of its rolling stock
and heavy engineering component
– Production units are managed directly
by ministry
– Each unit is headed by GM
 Background Information -
Services

 Production Services
Name Headquarte Purpose

Diesel Locomotive Works
rs
Varanasi Manufacture mainline diesel-electric for passenger and freight
traffic

Chittaranjan Locomotive
Works
Chittaranja Manufacture electric locomotives using DC traction as well as AC-AC
n transmission


Diesel-Loco Modernisation
Works
Patiala Manufactures key sub-assemblies for Diesel Locomotives

Integral Coach Factory Chennai Make coaches for the Indian Railways

Rail Coach Factory Kapurthala Modern plant and has a much more flexible automation


Wheel & Axle Plant Bengaluru Makes cast wheels for wagons





 Background Information -
Services

 Freight
– Carries variety of goods
– Contributes to 70% of revenues
– Last 2 decades, shifted to large
container movement.
– Majority of earnings comes from
carrying bulk goods like iron ore,
coal.
– Introduced CONRAJ for high priority
freight
 Background Information -
Services

 Suburban Rail
– Many cities have dedicated suburban
networks.
– Cities include Mumbai, Chennai, Delhi,
Hyderabad, Kolkata, Lucknow & Pune.
– Only Mumbai, Pune & Hyderabad share
tracks with long distance trains.
– Trains are mostly electric multiple units.
– Only in Mumbai trains run on Direct Current,
rest run on Alternating Current.
Background Information –
Organizational Services
 Background Information –
Organizational Structure

 Other PSU’s under the control of Ministry of

Railways
– Indian Railways Catering and Tourism
Corporation
– Konkan Railway Corporation
– Indian Railway Finance Corporation
– Mumbai Rail Vikas Corporation
– Railtel Corporation of India – Telecommunication
Networks
– RITES Ltd. – Consulting Division of Indian
Railways
– IRCON International Ltd. – Construction Division
– Rail Vikas Nigam Limited
 Centre for Railway Information Systems is an
autonomous society under Railway Board,
which is responsible for developing the major
 Indian Railways -
Present
 World’s third largest railway network
 Prime movers to the nation
 Approximately 65,000 km of rail tracks and over
7,151 railway stations.
 IR owns a fleet of
– 2,22,379 wagons
– 42,441 coaches
– 7,910 locomotives
 Operates 1,60,251 trains including 9,550
passenger trains, carrying about 1.6 million
tonnes of freight and about 18 million
passengers daily
 Indian Railways - Present


 Prime infrastructural sector
 World's largest commercial or utility employer,
with more than 1.5 million employees on its
payrolls
 Perform the dual role
– Commercial Organization
– Vehicle for fulfillment of social obligations
 Part and parcel of the total receipts and
expenditure of the Government of India.
 Contributes to 1% of GDP of INDIA.
Indian Railways – The
Mayhem
 Indian Railways – The Mayhem

 In 2002-03, 'social service obligation' of

Indian Railways worked out Rs 37.87 billion.
 A 2001-02 review of all "branch lines"
disclosed that 115 trains had become
uneconomical, accounting for an annual
loss of Rs 434 crore.
 In 2001, the ratio of net revenue to capital
declined to 2.5
 In 1999-2000, fund balances had touched a
low of Rs. 1.49 billion.
 Operating ratio reached 98.8 percent in the
year ending March 2001.
 Indian Railways – Problems
faced

 Surplus manpower…1.6 million in FY

2001.
 Poor staff productivity.
 Loss of market share in the profitable
freight business.
 Lack of flexibility in pricing.
 Lack of accountability.
 Politicization of the decision-making
processes
Indian Railways – Cost Structure
 Indian Railways – Corrective
Measures

 modernization
 safety and security of passengers
 replacement and renewal of assets
 track renewal & improvement in passenger
amenities
 increase in productivity and reduction in
operating ratio.
 computerization of railway systems.
 induction of new technologies for signalling
and telecom.
 prevention of leakages of revenue.
 Indian Railways – Strategic
Performance Enhancement
Initiatives
 Capacity Enhancement


 increasing wagon loading

capacity
 reducing wagon turnaround time
 increasing length of wagon
sidings(platforms)
 reducing loading/unloading time
 avoiding frequent train
examination
 Indian Railways – Strategic
Performance Enhancement
Initiatives
 Capacity Utilization


 Dynamic pricing policy

 Tariff Rationalization
 Non-peak Season Incremental
Freight Discount
 Loyalty Discount Scheme
 Long-term Freight Discount
Scheme
 Multiple Unloading
 Indian Railways – Strategic
Performance Enhancement
Initiatives
 Revenue Enhancement


 Focusing on low-cost high-

volume operations
 Revision in freight rates
 Increasing number of coaches in
popular trains
 Reducing AC class fares
 Introducing Garib Raths to
attract volumes
 Indian Railways – Favourable
Factors


 Change in the macro-economic
conditions
 Rise in demand
 Change in the legal position
 Changes in organisational culture
 Human resources initiatives
 Downsizing
 Decentralising
 Indian Railways – The Recovery

 In FY 2006-2007, IR registered profits of Rs. 200 billion.

 As of 2007, IR was India's second largest profit making PSU
after ONGC.
 Revenue per staff witnessed a rise by 68 percent (2001–
2006).
 Operating Ratio was brought down to 78.7 percent by 2007.
 Enhanced axle load and reduction in turnaround time of
wagons increased by 14%
 IR increased wagon capacity available per day by 36 %
 The number of employees reduced to 1.412 million by 2006
.
 The number of accidents have been more than halved from
473 (2001) to 200 (2007)
 Increase in the volume of passengers by approx 29 percent
over the period 2001 to 2007
Way Forward
 Way Forward for Indian
Railways..

 The XIth Plan (2007-12) lays

ambitious targets for
1. Freight and passenger business transportation

2. Capacity augmentation

3. Technological up gradation.

4. Sustained improvement of services .

5.
 Way Forward for Indian
Railways..

 The Head Start : Right sizing in the

system.
 Significant change was the Investment
Strategy.


Freight was
the
.
 Way Forward for Indian
Railways..
 Increase in market share in freight traffic, both bulk and

non-bulk, was the important focus area.

 Plan priorities for IR - building capacity for handling traffic

growth

 Up-gradation for heavy axle load movement

 Modernization of freight and passenger terminals

 Developing world class stations

 Information Technology initiatives and technological up-

 Way Forward for Indian
Railways..

 Quantum increase in traffic through

incremental capacity augmentation :
 Capacity creation targets in XIth Plan have been kept at

twice/thrice.

 2000 kms of new lines, convert 10000 kms of Meter/Narrow gauge

lines to Broad gauge, double 6000 kms of single track and

electrify 3500 kms of network length

 Manufacture/ procure 1,55,000 wagons (equivalent 4 wheeler

units), 17,500 coaches, 2800 EMUs.

 2200 MEMU/DEMU and 3600 Locomotives (1800 Electric and 1800

 Way Forward for Indian
Railways..

 How to attain the Rolling Stock ??

 The INITIATIVES :
1. Electric Locomotive Manufacturing Unit
2. Diesel Locomotive Manufacturing Unit
3. main line EMU Manufacturing Unit,
4. two new Rail Coach Factories besides augmenting the
capacity of existing production units.
5. These new Manufacturing Units are to be setup as
departmental production units or through the Joint
Venture route.


 “ Indian Railways is also moving ahead with the Dedicated

Freight Corridor Projects on Western Route from Jawaharlal
Nehru Port Trust near Bombay to Rewari and Eastern Route from
Ludhiana to Dankuni. These corridors would add significant
capacity in freight transportation and would be operational in
2016-17. “
 Way Forward for Indian
Railways..

 Status Quo : Passenger Services -

Trains

 10 new Garib Raths introduced.

 53 pairs of new trains.

 Extension of trains : 16 pairs.

 Increase in frequency : 11 pairs.


 Way Forward for Indian
Railways..

 Status Quo : Passenger Services –

Trains
 300 additional services in Mumbai suburban.

 Special train from Anandpur Sahib and Patna Sahib to

Gurudwara Sachkhand Sahib during tercentenary function of

Shri Guru Granth Sahib of Gurta Gaddi.

 Special train between Pune and Delhi for Commonwealth Youth

Games being held in Pune from 12th -18th October this year.
 Way Forward for Indian
Railways..

 Amenities
 Provision of on-line coach indication display board; on-line train arrival

departure information board; on-line reservation availability

information board.

 Provision of discharge-free green toilets in all 36,000 coaches in XI

Plan period at a cost of about Rs.4,000 cr.

 LHB design coaches for all Rajdhani and Shatabdi trains over next few

years.
 Way Forward for Indian
Railways..

 Concessions
 Senior citizen concession for women enhanced to 50% from
existing 30%.
 Free Monthly Seasonal Ticket to girl students up to graduation
level in place of 12th standard and for boys up to 12th
standard in place of 10th standard.
 Improvements in ticketing 
 Termination of queues at ticket counters targeted in two years.
 Ticket booking on mobile phones;  E-ticket for waitlisted
passengers.
 Increase in Unreserved Ticketing Systems counters to 15,000
 Way Forward for Indian
Railways..

 Reduction in passenger fares

 One rupee discount per passenger for fares up to Rs.50 in non

suburban Second Class (ordinary and mail/express)

 5% discount across the board for passenger fares beyond

Rs.50 for all non suburban Second Class (ordinary and

mail/express).

 Increase in discount for travel in new design high capacity

reserved coaches.

 Reduction in fare – AC-I : 7%; and AC-II : 4% (the reduction will

be half for popular trains and during peak period).

 Way Forward for Indian
Railways..

 Freight Business
 Reductions & Concessions
 5%  reduction in freight rates for Petrol and
Diesel.
 14% reduction in freight rate of Fly-ash.
 Liberalisation of Traditional Empty Flow
direction incentive scheme

 Way Forward for Indian
Railways..

 Freight Business
 Reductions & Concessions
 30% discount on entire traffic in place of
incremental traffic booked from goods shed.
 Increase in discount on incremental traffic
booked from private sidings from 30% to
40%.
 6% freight concession for traffic booked from
other States for stations in North Eastern
States.

 Way Forward for Indian
Railways..

 Initiatives
 Target for loading fixed at 850 MT in 2008-
09.
 Blue - Print prepared for High Density
Network.
 Top priority being given to port rail
connectivity projects.
 New and dedicated iron ore routes to be
upgraded/constructed.
 Work on Eastern freight corridor from
Ludhiana to Dankuni (Kolkata) and
Western freight corridor from Delhi to JNPT
 Way Forward for Indian
Railways..

 Initiatives
 Procurement of Rolling Stock: All time
high of 20,000 wagons, 250 diesel
and 220 electric locomotives to be
manufactured.
 New Wagon Leasing Policy and Wagon
Investment Scheme formulated to
increase availability of wagons in the
system.
 Discounts for development of bulk and
 Way Forward for Indian
Railways..

 Safety & Security

 Multi-pronged scheme to strengthen railway safety through
various automatic devices like anti-collision device etc.
 Rail accidents have reduced remarkably despite substantial
increase in gross traffic volumes.
 Fire resistant material to be used in coaches.
 Unmanned level crossings at busy sections to be manned on a
fast track basis.
 Integrated security plan drawn up through installation of
CCTVs, metal detectors etc.

 Way Forward for Indian
Railways..

 Welfare Measures
 Social Welfare

 99%  backlog vacancies for SCs/STs filled up in special

campaign launched since 2004.

 Appointment of candidates from SCs/STs/OBCs exceeded their

respective quotas in Group D appointments.

 Minorities welfare cells to be opened at Railway Board and

Zonal Railways.
 Way Forward for Indian
Railways..

 Welfare Measures
 Social Welfare

 One time exercise of appointing Railway Porters as gangmen

and to other Group D posts.

 Mother-Child Health Express to be run on a pilot basis at

concessional fares in collaboration with Rajiv Gandhi

Foundation for providing medical facilities to mother and

child.
 Way Forward for Indian
Railways..

 Staff Welfare 

 Per-capita contribution to Staff Benefit Fund to be increased

by ten times from Rs.35 to Rs.350 for 2008-09.

 Northern Railway Central Hospital at Delhi to be made

centrally air-conditioned.

 Two divisional hospitals at Jaipur and Hubli to be upgraded

to central hospitals.
 Way Forward for Indian
Railways..

 Staff Welfare 
 A new divisional hospital at Ranchi and an OPD block

at Integral Coach Factory to be constructed.

 Employees who joined Railways from other

agencies/PSUs etc and are eligible for pensionary

benefits, would now be eligible for post retirement

complimentary passes as per the norms being set.


 Way Forward for Indian
Railways..

 Vision 2025
 Aims at setting the roadmap for coming 17 years –
customer centric and market responsive strategic
initiatives.

 Information Technology Vision 2012 aims at radical

changes in IT applications ,improvement in
operational efficiency, transparency in working ad
better services to the customers.

 Multi-Departmental Innovation Promotion Group at

 Way Forward for Indian
Railways..

 Vision 2025

 Public-Private Partnership schemes to be launched

for attracting an investment of Rs.1,00,000 cr

over the next five years for developing world

class stations, rolling stock ad other logistics.

 Commercial use of Railway land by Rail Land

Development Authority to give a boost to Railway

Revenues.

THANK YOU !!