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By: Yogin Vora on May 13, 2009 17 Comments
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In economics, a monopoly (from the Latin word monopolium Greek language monos, one +
polein, to sell) is defined as a persistent market situation where there is only one provider of a
product or service. Monopolies are characterized by a lack of economic competition for the good
or service that they provide and a lack of viable substitute goods.
Monopoly should be distinguished from monopsony, in which there is only one buyer of the
product or service; it should also, strictly, be distinguished from the (similar) phenomenon of a
cartel. In a monopoly a single firm is the sole provider of a product or service; in a cartel a
centralized institution is set up to partially coordinate the actions of several independent
providers (which is a form of oligopoly).
Primary characteristics of a monopoly
Single Sellers
A pure monopoly is an industry in which a single firm is the sole producer of a good or the sole
provider of a service. This is usually caused by barriers to entry.
No Close Substitutes
The product or service is unique in ways which go beyond brand identity, and cannot be easily
replaced (a monopoly on water from a certain spring, sold under a certain brand name, is not a
true monopoly; neither is Coca-Cola, even though it is differentiated from its competition in
flavor).
Price Maker
In a pure monopoly a single firm controls the total supply of the whole industry and is able to
exert a significant degree of control over the price, by changing the quantity supplied (an
example of this would be the situation of Viagra before competing drugs emerged). In subtotal
monopolies (for example diamonds or petroleum at present) a single organization controls
enough of the supply that even if it limits the quantity, or raises prices, the other suppliers will be
unable to make up the difference and take significant amounts of market share.
Blocked Entry
The reason a pure monopolist has no competitors is that certain barriers keep would-be
competitors from entering the market. Depending upon the form of the monopoly these barriers
can be economic, technological, legal (e.g. copyrights, patents), violent (competing businesses
are shut down by force), or of some other type of barrier that completely prevents other firms
from entering the market.
Price setting for unregulated monopolies
In 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 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 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.
In most real markets with claims, falling demand associated with a price increase is due partly to
losing customers to other sellers and partly to customers who are no longer willing or able to buy
the product. In a pure monopoly market, only the latter effect is at work, and so, particularly for
inflexible commodities such as medical care, the drop in units sold as prices rise may be much
less dramatic than one might expect.
If a monopoly can only set one price it will set it where marginal cost (MC) equals marginal
revenue (MR) as seen on the diagram on the right. This can be seen on a big supply and demand
diagram for many criticism of monopoly. This will be at the quantity Qm; and at the price Pm.
This is above the competitive price of Pc and with a smaller quantity than the competitive
quantity of Qc. The offensive monopoly gains is the shaded in area labeled profit (note that this
diagram looks only at the case where there is no fixed cost. If there were a fixed cost, the average
cost curve should be used instead).
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 less 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 monopolists monopoly power is given by the vertical distance between the point
where the marginal cost curve (MC) 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 profits.
The economy as a whole loses out when monopoly power is used in this way, since the extra
profit earned by the firm will be smaller than the loss in consumer surplus. This difference is
known as a deadweight loss.
Introduction to Indian Railways
Indian Railways (IR) is the state-owned railway company of India. Indian Railways had, until
very recently, a monopoly on the countrys rail transport. It is one of the largest and busiest rail
networks in the world, transporting just over six billion passengers and almost 750 million
tonnes of freight annually. IR is the worlds largest commercial or utility employer, with more
than 1.6 million employees.
The railways traverse through the length and width of the country; the routes cover a total length
of 63,940 km (39,230 miles). As of 2005 IR owns a total of 216,717 wagons, 39,936 coaches and
7,339 locomotives and runs a total of 14,244 trains daily, including about 8,002 passenger trains.
Railways were first introduced to India in 1853. By 1947, the year of Indias independence, there
were forty-two rail systems. In 1951 the systems were nationalised as one unit, becoming one of
the largest networks in the world. Indian Railways operates both long distance and suburban rail
systems.
Background
The development of IR had its roots in the 1800s, when India was a British colony. The British
East India Company and later, the British colonial governments were credited with starting a
railway system in India.
The British found it difficult to traverse great distances between different places in India. They
felt the need to connect those places with trains to speed up the journey as well as to make it
more comfortable than travel by road in the great heat. They also sought a more efficient means
to transfer raw materials like cotton and wheat from the hinterlands of the country to the ports
located in Bombay, Madras and Calcutta, from where they would be transported to factories in
England. Besides, the mid-1800s were a period of mutiny and struggle for independence in India,
with uprisings in several parts of the country.
The British leaders wanted to be able to transfer soldiers quickly to places of unrest. Railways
seemed to be the ideal solution to all these problems.
Work began on the development of railway systems in India in the early 1850s. Initially, trains
were used to transport material between different places. The first commercial passenger train in
India ran between Bombay and Thane (places in western India) on April 16, 1853.
The distance of 34 kilometers was covered in about 75 minutes. Indians were initially
apprehensive of accepting railways as a means of travel, but soon overcame that fear and
railways gained popularity. Soon, railway lines began to be laid in other parts of the country,
mostly by private British companies, and the major regions in India were connected by rail. To
promote the construction of railway lines in India, the British Parliament introduced the
guarantee system.
Under this system, any company that constructed railway lines in India was given a guarantee of
a five percent return per annum on the capital invested. The company also had the right to pull
out from the venture and receive compensation from the government at any time if it was not
satisfied with the returns. This helped accelerate the development of railways in the country.
A number of railway companies were incorporated between 1855 and 1870. Most of them
operated at a regional level. By the beginning of the 1870s, the total track coverage in India was
4000 miles. In addition to commercial objectives, railways also began to play a social role in
India. When there were famines in several parts of the country between 1870 and 1880, railways
played a very important role in providing relief to the affected areas.
By the end of 1880, the total track coverage increased to 9000 miles. In 1880, the Darjeeling
Steam Tramway started operating (the name was changed to Darjeeling Himalayan Railway in
1881). This railway track was considered one of the greatest engineering feats in the history of
IR, crossing as it did, rough and dangerous mountain terrain at a steep gradient.
In 1890, the British Government passed the Railways Act, to govern the construction and
operation of railways in India. By the beginning of the 20th century, there were nearly 25,000
miles of railway track in the country.
Railway zones
The Map of India above shows the different railway zones in India. The zones are numbered in
the map. The red dots are the zonal headquarters. For administrative purposes, Indian
Railways is divided into sixteen zones.
Given below is the table showing these 16 zones. Konkan Railway* (KR) is constituted as a
separately incorporated railway, with its headquarters at Belapur CBD (Navi Mumbai). It comes
under the control of the Railway Ministry and the Railway Board.
The Calcutta Metro is owned and operated by Indian Railways, but is not a part of any of the
zones. It is administratively considered to have the status of a zonal railway.
Delhi
Gorakhpur
1952
Maligaon(Guwahati)
1958
Kolkata
April, 1952
Kolkata
1955
7.
Northern Railway
NR
North
Eastern
NER
Railway
Northeast
Frontier
NFR
Railway
Eastern Railway
ER
South
Eastern
SER
Railway
South
Central
SCR
Railway
Southern Railway
SR
Date
Established
April 14, 1952
8.
Central Railway
CR
Mumbai
9.
Western Railway
WR
Mumbai
10.
South
Railway
SWR
Hubli
Abbr.
Western
Headquarters
Secunderabad
Chennai
October
2,
1966
April 14, 1951
November 5,
1951
November 5,
1951
April 1, 2003
11.
12.
13.
14.
15.
16.
17.
North
Western
NWR
Railway
West Central Railway WCR
North Central Railway NCR
South East Central
SECR
Railway
East Coast Railway
ECoR
East Central Railway ECR
Konkan Railway*
KR
Jaipur
Oct 1, 2002
Jabalpur
April 1, 2003
Allahabad
April 1, 2003
Bilaspur, CG
April 1, 2003
Bhubaneswar
Hajipur
Navi Mumbai
April 1, 2003
Oct 1, 2002
Jan 26, 1998
Passenger services
Indian Railways operates 8,702 passenger trains and transports around five billion annually
across twenty-seven states and three union territories (Delhi, Pondicherry and Chandigarh).
Sikkim is the only state not connected.
The passenger division is the most preferred form of long distance transport in most of the
country. In South India and North-East India however, buses are the preferred mode of transport
for medium to long distance transport.
A standard passenger train consists of eighteen coaches, but some popular trains can have up to
24 coaches. Coaches are designed to accommodate anywhere from 18 to 72 passengers, but may
actually accommodate many more during the holiday seasons and on busy routes. The coaches in
use are vestibules, but some of these may be dummied on some trains for operational reasons.
Freight trains use a large variety of wagons.
Each coach has different accommodation class; the most popular being the sleeper class. Up to
nine of these type coaches are usually coupled. Air conditioned coaches are also attached, and a
standard train may have between three and five air-conditioned coaches.
Overcrowding is the most widely faced problem with Indian Railways. In the holiday seasons or
on long weekends, trains are usually packed more than their prescribed limit. Ticket-less travel,
which results in large losses for the IR, is also an additional problem faced.
Production Services
The interior of an Express Train in India. Food is being served by an Indian Railways employee.
The Indian Railways manufactures a lot of its rolling stock and heavy engineering components.
This is largely due to historical reasons. As with most developing economies, the main reason is
import substitution of expensive technology related products. This was relevant when the general
state of the national engineering industry was immature.
Production Units, the manufacturing plants of the Indian Railways, are managed directly by the
ministry. The General Managers of the PUs report to the Railway Board. The Production Units
are,
Responsible for manufacturing all the mainline diesel-electrics used for passenger and freight
traffic. The plant also produces diesel-electric shunters. Currently the factory is also producing
locomotives in collaboration with General Motors, USA.
Earlier called Diesel Component Works, DMW makes key sub-assemblies for Diesel
Locomotives. It also does heavy repair and overhaul of engines and locomotives.
The first factory to make coaches for the Indian Railways. The coaches were monocoque
structures.
The second coach factory is a more modern plant and has a much more flexible automation.
Makes the cast wheels for wagons and other rolling stock. Axles are forged and machined in the
same plant. Most output is sent out as finished and pressed wheel & axle sets.
Performance
The performance of Production Units during 2004-05, was as under,
Integral Coach Factory, Chennai manufactured 1,119 coaches including 112 Electric
Multiple Units (EMUs).
Rail Coach Factory, Kapurthala manufactured 1,201 coaches including 77 light weight
LHB coaches with higher passenger comfort and amenities.
Rail Wheel Factory, Bangalore produced 32,732 wheel-sets. It also manufactured 95,125
wheels and 49,502 axles. It sold products to the tune of Rs.18.39 crore to NCRs thus
earning a profit of approx. Rs.173.69 lakh.
Suburban rail
The Darjeeling Himalayan Railway is a World Heritage Site, and one of the few steam engines in
operation in India.
The Lifeline Express is a special train popularly known as the Hospital-on-Wheels which
provides healthcare to the rural areas. This train has a compartment that serves as an operating
room, a second one which serves as a storeroom and an additional two that serve as a patient
ward. The train travels around the country, staying at a location for about two months before
moving elsewhere.
Among the famous locomotives, the Fairy Queen is the oldest running locomotive in the world
today, though the distinction of the oldest surviving locomotive belongs to John Bull. Kharagpur
railway station also has the distinction of being the worlds longest railway platform at 1072 m
(3,517 ft). The Ghum station along the Toy Train route is the second highest railway station in
the world to be reached by a steam locomotive.[5] Indian Railways operates 7,566 locomotives;
37,840 Coaching vehicles and 222,147 freight wagons. There are a total of 6,853 stations; 300
yards; 2,300 goods-sheds; 700 repair shops and a total workforce of 1.54 million.
Apart from these zones and production units, a number of Public Sector Undertakings (PSU) are
under the administrative control of the ministry of railways. These PSUs are:
1. Indian Railways Catering and Tourism Corporation
2. Konkan Railway Corporation
3. Indian Railway Finance Corporation
4. Mumbai Rail Vikas Corporation
5. Railtel Corporation of India Telecommunication Networks
6. RITES Ltd. Consulting Division of Indian Railways
7. IRCON International Ltd. Construction Division
8. Rail Vikas Nigam Limited
Centre for Railway Information Systems is an autonomous society under Railway Board, which
is responsible for developing the major software required by Indian Railways for its operations.
Rail budget and finances
The Railway Budget deals with the induction and improvement of existing trains and routes, the
modernisation and most importantly the tariff for freight and passenger travel. The Parliament
discusses the policies and allocations proposed in the budget. The budget needs to be passed by a
simple majority in the Lok Sabha (Indias Lower House). The comments of the Rajya Sabha
(Upper House) are non binding. Indian Railways are subject to the same audit control as other
government revenue and expenditures. Based on the anticipated traffic and the projected tariff,
the level of resources required for railways capital and revenue expenditure is worked out.
While the revenue expenditure is met entirely by railways itself, the shortfall in the capital (plan)
expenditure is met partly from borrowings (raised by Indian Railway Finance Corporation) and
the rest from Budgetory support from the Central Government. Indian Railways pays dividend to
the Central Government for the capital invested by the Central Government.
As per the Separation Convention, 1924, the Railway Budget is presented to the Parliament by
the Union Railway Minister, two days prior to the General Budget, usually around 26 February.
Though the Railway Budget is separately presented to the Parliament, the figures relating to the
receipt and expenditure of the Railways are also shown in the General Budget, since they are a
part and parcel of the total receipts and expenditure of the Government of India. This document
serves as a balance sheet of operations of the Railways during the previous year and lists out
plans for expansion for the current year.
The formation of policy and overall control of the railways is vested in Railway Board
comprising the Chairman, Financial Commissioner and other functional Members for Traffic,
Engineering, Mechanical, Electrical and Staff matters. As per the 2006 budget, Indian Railways
earned Rs. 54,600 crores (Rs. 546,000 million or US$12,300 million). Freight earnings increased
by 10% from Rs. 30,450 cr (US$7,000 million) in the previous year. Passenger earnings, other
coaching earnings and sundry other earnings increased by 7%, 19% and 56% respectively over
previous year. Its year end fund balance is expected to stand at Rs. 11,280 cr (US $2.54 billion).
Around 20% of the passenger revenue is earned from the upper class segments of the passenger
segment (the air-conditioned classes). The overall passenger traffic grew 7.5% in the previous
year. In the first two months of Indias fiscal year 2005-06 (April and May), the Railways
registered a 10% growth in passenger traffic, and a 12% in passenger earnings.
A new concern faced by Indian Railways is competition from low cost airlines that has recently
made its dbut in India. In a cost cutting move, the Railways plans to minimise unwanted
cessations, and scrap unpopular routes.
Current problems
Contributing to the Railways problems are the antiquated communication, safety and signalling
equipment. One area of upgrading badly required is an automated signalling system to prevent
crashes. A number of train accidents happened due to a manual system of signals between
stations. However, the changeover to a new system would require a substantial investment. It is
felt that this would be required given the gradual increase in train speeds and lengths, that would
make accidents more dangerous. In the latest instances of signalling control by means of
interlinked stations (e.g., Chennai Washermanpet), failure-detection circuits are provided for
each track circuit and signal circuit with notification to the signal control centres in case of
problems [12]. However, this is available in a very small subset of the total Railways. Aging
colonial-era bridges and century-old tracks also require regular maintenance and upgrading.
In many places, pedestrians, vehicles or cyclists may cut across the tracks to save time, causing a
safety hazard to the railways. Most railway land in India is not fenced or restricted in any way,
allowing free trespass. In rural areas, cattle and other animals may stray onto the tracks, posing a
much more serious safety hazard to fast-moving trains.
AN OVERVIEW OF MUMBAI RAILWAYS
Two zonal Railways, the Western Railway (WR) and the Central Railway (CR), operate the
Mumbai Suburban Railway system running in form of 9-car and 12-car rakes of Electric
Multiple unit (EMU) trains. Two corridors (one local and other through) on Western Railway run
northwards from Churchgate terminus parallel to the west coast up to Virar (60 Kms). Two
corridors (one local and other through) on Central Railway run from Chhatrapati Shivaji
Terminus (CST) to Kalyan (54 Kms), from where it bifurcates into Kalyan-Kasara (67 Kms) in
the north-east and Kalyan-Karjat-Khapoli (61 Kms) in south-east. The 5th corridor on Central
Railway runs as the Harbour line starting from CST to Raoli Junction (11 Kms) from where the
line splits. One line goes north-west to join WR at Bandra and goes up to Andheri (11 Kms) and
the other goes eastward to terminate at Panvel (39 Kms) via New-Mumbai.
The pressure on the Mumbai Suburban Railway system has reached alarming proportions.
Overcrowding has grown to such an extent that 5,000 passengers are travelling per 9-car train
during peak hours, as against the rated carrying capacity of 1,710. Also, there is an acute problem
of encroachment by slum dwellers on the property of Indian Railways which has created the
problem of safety of commuters. The rail network is the principal mode of mass transport in
Mumbai. To enable the Mumbai Suburban Railway System to meet the demands of the evergrowing passenger traffic, the Ministry of Railways and the State Government of Maharashtra
joined hands to face the challenge and formed MRVC. However, the organisation has not been
able fulfil the aims and objectives for which it was set up. The researcher shall try to find out
whether transfer of this organisation into private hands can improve its performance and can lead
to a better future for commuters travel in the city.
The Corporation is not only executing the projects identified so far, but also involved in the
further planning and development of Mumbai Suburban Rail system for improved rail services in
close coordination with Indian Railways and Government of Maharashtra. The geographical
jurisdiction of MRVC is from Churchgate to Dahanu Road on Western Railway and from CSTM
to Kasara, Karjat/ Khopoli and Panvel on Central Railway.
Apart from execution of Railway projects in Mumbai, the main functions of MRVC are:
Integrate urban development plan for Mumbai with rail capacity and propose
investments.
Undertake commercial development of Railway land and air space in Mumbai area.
Coordinate with organizations operating the train services and responsible for protection
of Railways right of way and urban development for purposeful resolution of allied
issues and problems.
RECENT PLANS
Indian Railways plans 3 trillion rupees ($65.8 billion) of investment by 2012 to develop private
container trains, freight corridors and upgrade stations.
More private companies will be allowed to run freight trains and they will also be allowed to
improve facilities at railway stations, J.P. Batra, chairman of the Indian Railway Board, said at an
infrastructure conference in New Delhi today.
India wants to get rid of infrastructure bottlenecks so that the pace of economic growth can be
accelerated to as much as 10 percent in the next decade from an average 6 percent since 1980.
Construction of dedicated freight corridors will allow companies such as refiner Indian Oil Corp.
to move gasoline and diesel faster to consumers across the worlds seventh-biggest landmass.
Indian Railways last month began constructing 220 billion rupees of freight-only lines aimed at
improving infrastructure in the worlds second-fastest growing major economy.
Prime Minister Manmohan Singh opened the construction work in northern Indias Punjab state,
according to an e-mailed statement from his office. The project, the railways biggest since
Indias independence in 1947, will lay almost 10,000 kilometers (6,215 miles) of tracks
connecting the financial hub of Mumbai on the west coast and Kolkata in the east to the capital
New Delhi.
The freight corridor will eventually be 11,500 kilometers, Batra said.
The government in February said it granted licenses to 14 companies to run private trains, ending
the monopoly of the government in the business.
Indian Railways expects to carry 750 million tons of freight this year, more than the 726 million
tons that had been targeted, Batra said.
The utility expects to carry 6.5 billion people in the year ending March 31, 2007, compared with
6 billion people in the previous year, the official said.
Indian Railways may have a surplus of 200 billion rupees ($4.4 billion) this year, from a surplus
of 136 billion rupees last year, he said.
Financial Results
The financial performance of the Indian Railways for the period from 1998-99 to 2002-03 is
shown below:
(Rupees in crore)
1
.
2
.
3
.
4
.
Total Receipts
Total Expenditure
Net Revenue (1 2)
1998-99
29975.7
6
27834.6
0
1999-00
33579.6
6
30843.9
9
2000-01
35738.5
7
34667.3
4
2001-02 2002-03
38630.7
41855.98
4
36293.2
38025.75
1
5
Net Dividend paid
1742.08 1889.78 307.64
.
6 Net Surplus available for appropriation (3
399.08 845.89 763.59
. 5)
1337.18 2714.83
1000.35 1115.40
The trend of growth in receipts and expenditure on Indian Railways is depicted in the following
chart:
The net revenue, which was Rs.2141.16 crore in 1998-99 and Rs.2735.67 crore in 1999-2000,
declined sharply to Rs.1071.23 crore in 2000-01. Due to shortfall in net revenue, the Railways
had to defer payment of dividend of Rs.1823.30 crore in 2000-01. Net revenue registered a
growth in 2001-02, but was not adequate to meet the requirements of other funds and the
dividend liability for the year. Railways, therefore, decided to defer dividend of Rs.1000 crore in
2001-02. Though the financial results of 2002-03, showed a marked improvement over previous
years, the net revenue was not sufficient to entirely set off the deferred dividend of the previous
years.
Traffic Earnings
(1)
Passenger
Goods
Other Coaching
Actuals
2001-02
(2)
11196.45
24845.40
872.24
Actuals
2002-03
(5)
12575.44
26504.82
987.95
923.50
1050.00
37837.59 41538.00
529.00
40867.00
1000.01
41068.22
Passenger Earnings
The passenger earnings target was fixed at Rs.13450 crore in the BE. The target was, however,
scaled down by Rs.720 crore in the RE to Rs.12730 crore. The actual passenger earnings were
Rs.12575.44 crore. Passenger earnings, thus fell short of both the BE and RE projections. The
earnings, however, registered a growth of about 12.32 per cent as compared to 2001-02.
Goods Earnings
Earnings from goods traffic were estimated to yield Rs.26118 crore in the BE and
Rs.26658 crore in the RE. The actual earnings of Rs.26504.82 crore were more than BE
by Rs.386.82 crore but fell short of the RE by Rs.153.18 crore.
The originating revenue earning goods traffic was projected at 510 million tonnes for
2002-03. This was increased to 515 million tonnes in RE. Railways actually lifted 518.74
million tonnes of revenue earning goods thereby exceeding the targets.
The target for volume of revenue earning goods traffic was projected at 334213 million
net tonne kilometres (NTKMs) which was increased to 357163 million NTKMs in RE.
The actuals during 2002-03 was 353194 million NTKMs, which was more than BE by
18981 million NTKMs but less than the RE by 3969 million NTKMs.
The increase / decrease in originating tonnage of various commodities in 2002-03 over 2001-02
is shown in the following chart:
The offering of POL and Fertilizer declined by 1.57 million tonnes and
0.74 million tonnes respectively, as compared to the actuals of 2001-02.
The average lead for coal traffic, which was 614 kms in 2001-02, had decreased to 601
kms in 2002-03. Thus, while the Railways have been able to bring in additional coal
traffic, they have actually suffered loss of long lead traffic at the cost of short lead traffic.
There was a shortfall in goods earnings from Other Goods (Rs.409.63 crore),
Iron Ore for Export (Rs.155.07 crore), POL (Rs.148.81 crore),
Cement (Rs.147.77 crore), Fertilizers (Rs.59.91 crore), Miscellaneous
Goods (Rs.26.63 crore) and Raw Material for Steel Plants (Rs.3.63 crore).
Unrealised Earnings
The total amount outstanding against the State Electricity Boards/ Power Houses which stood at
Rs.1616.45 crore at the end of 2001-02, increased by Rs.137.42 crore (8.5 per cent) bringing the
balance to Rs.1753.87 crore at the end of 2002-03.
The outstanding dues against the main defaulting Power Houses/ State Electricity Boards was as
under:
(Rupees in crore)
Sr.
No.
1.
2.
3.
4.
5.
6.
7.
8.
Outstanding
Name
of
State
Electricity as
Board/ Power House
on
March 2002
Badarpur Thermal Power Station
957.61
Punjab State Electricity Board
325.31
Delhi Vidyut Board
160.86
Rajasthan State Electricity Board
105.75
Uttar Pradesh State Electricity Board 8.27
Damodar Valley Corporation
4.75
West Bengal State Electricity Board 4.21
Madhya Pradesh State Electricity
2.99
Board
dues Outstanding
Increase in
dues
dues
31 as
on
31 during
March 2003
the year
966.63
9.02
424.05
98.74
179.88
19.02
109.92
4.17
27.36
19.09
7.94
3.19
8.11
3.90
6.29
3.30
Operating Ratio
The Operating Ratio represents the percentage of working expenses (including the expenses not
yet paid) to traffic earnings (including the earnings not yet realised). The operating ratio, which
was 96.02 per cent in 2001-02, improved to 92.34 per cent (by 3.68 per cent) in 2002-03 for the
Railways as a whole.
The operating ratio of Indian Railways during the last five years is shown in the following chart:
Plan Expenditure
Details of the plan expenditure met from Central Government support and internal resources
during 2002-03 were as follows:
(Rupees in crore)
Sr.
No
1.
Budget
Estimate
Actual
Sources of Finance Expenditure
2001-02
2002-03
Central
Government
Support
(i)
Budgetary
Support
(a)
Borrowed
Capital
from 4376.89
General Revenues
(b)
Transfer
to
Special
Railway 1000.00
Safety Fund
(ii)
Contribution
from Central Road
140.28
Fund to Railway
Safety Fund
Revised
Estimate
2002-03
Actual
Expenditure
2002-03
4040.00
4390.00
4263.74
1350.00
1350.00
1350.00
450.00
264.00
164.08
5840.00
6004.00
5777.82
2045.00
1886.00
1464.75
550.00
550.00
483.86
860.00
960.00
1136.31
35.00
35.00
28.32
3490.00
3431.00
3113.24
9330.00
9435.00
8891.06
# Expenditure borne out of the SRSF financed by levy of safety surcharge and from
Railways allocation to the fund from its own resources.
Undischarged liabilities
The Railways are required to pay dividend at a fixed rate on the Capital advanced by the
Government of India. The Railway Convention Committee (RCC) of Parliament determines the
rate of dividend payable by the Railways to the General Revenues periodically. In accordance
with the recommendation of the RCC:
Any shortfall in the payment of current dividend, when the net revenue is not adequate to
meet current dividend, is treated as deferred dividend liability.
Railway Funds
Pension Fund: Railway-wise analysis of the Pension Fund balances on 31 March 2003 has
revealed that the following Railways had adverse (debit) balances in the fund:
(Rupees in crore)
Sr. No.
Name of Railway
Amount
1.
2.
3.
4.
5.
6.
Eastern
Southern
Central
North Eastern
South Central
Northern
2933.78
1375.12
839.55
737.91
709.76
81.79
It implies that these Railways have not appropriated to the fund, the amount needed to meet their
pensionary charges. These Railways have, thus, been able to depict a better/ improved operating
ratio over the years.
On the other hand, Northeast Frontier, South Eastern, Western Railways, Metro Railway Kolkata
and all the Railway Production Units have appropriated more to the fund than the amount
required for meeting the pensionary charges of 2002-03.
Depreciation Reserve Fund: For replacement and renewal of assets, the Railways maintain
Depreciation Reserve Fund (DRF) financed by transfers from Revenue.
The balances in DRF for the last five years is shown in the following table:
(Rupees in crore)
Year
Opening Balance
1998-99
1999-2000
2000-01
2001-02
2002-03
1434.27
676.72
50.81
78.10
632.90
Withdrawals
Accretion during
during
the year
the year
1276.39
2033.94
1795.23
2421.14
2429.25
2402.02
2124.49
1569.61
2585.30
1464.75
Closing Balance
676.72
50.81
78.04
632.98
1753.45
Notes:
1. Difference between closing balance of 2000-01 & 2001-02 and opening balance of 2001-02 &
2002-03 amounting to Rs.0.06 crore and Rs.0.02 crore respectively is due to transfers made
between
DRF
and
Capital
Fund.
2. Accretion includes interest on the balance in the fund.
Development Fund: This fund is financed by appropriation from surplus and/ or loans from
General Revenues to the extent required to meet expenditure on works relating to amenities for
users of Railway transport, labour welfare works, safety works and unremunerative operating
improvement works.
Appropriation from surplus to Development Fund (DF) was projected at Rs.550 crore in the BE
and RE. Ministry actually appropriated Rs.550 crore as planned to this fund.
The balances in DF for the last five years is shown in the following table:
(Rupees in crore)
Year
1998-99
1999-2000
2000-01
2001-02
2002-03
Opening
Balance
0.39
0.42
0.45
0.52
0.62
Accretion
during the year
395.89
497.02
744.98
449.51
553.85
Withdrawals
during the year
395.87
496.99
518.11
449.47
483.86
Closing
Balance
0.41
0.45
227.32
0.56
70.61
Note:
Difference between closing balance of 1998-99 and opening balance of 1999-2000 is due to
rounding off while difference between closing balance of 2000-01 and opening balance of 200102 is due to transfer of Rs.226.84 crore to Railway Safety Fund and transfer of Rs.0.04 crore
from Capital to DF. Difference between closing balance of 2001-02 and opening balance of
2002-03 is due to transfer of Rs.0.06 crore from Capital and DRF.
Capital Fund: This fund was created with effect from 1 April 1993 to finance the Capital works
of the Railways. The balance amount of surplus left after appropriation to Development Fund is
credited to this fund. Since the Railways have not been able to generate adequate surplus for
appropriation to Capital Fund, the operation of Capital Fund has ceased for the time being.
Appropriation from surplus to Capital Fund (CF) was projected at Rs.17.43 crore at the BE stage.
In the RE there was no proposal to appropriate any surplus into the fund. An amount of Rs.0.94
crore was credited to the fund as interest at 7 per cent per annum on the fund balance during the
year 2002-03.
The balances in CF for the last five years is shown in the following table:
(Rupees in crore)
Year
1998-99
1999-2000
2000-01
2001-02
Opening
Balance
1200.63
262.88
21.55
21.56
Accretion
during the year
52.71
358.50
282.23
249.62
Withdrawals
during the year
990.46
600.25
282.38
257.71
Closing
Balance
262.88
21.13
21.40
13.47
2002-03
13.47
0.94
14.41
Note:
Difference between closing balance of 1999-2000 & 2000-01 and opening balance of 2000-01 &
2001-02 amounting to Rs.0.42 crore and Rs.0.16 crore respectively is due to transfer between
Capital and Capital Fund.
Railway Safety Fund: This fund was created with effect from 1 April 2001 to finance works
relating to Road Safety works viz. (i) manning of un-manned level crossings and (ii) conversion
of level crossings into road over/ under bridges. The fund is to be funded from three sources viz.
(i) contribution from Central Road Fund, (ii) Railway surplus left after payment of dividend and
(iii) contribution which is made by the Ministry of Railways to the Railway Safety Works Fund
(maintained by the Ministry of Finance) out of the Dividend payable to General Revenues.
During the year 2002-03, the Ministry received an amount of Rs.264 crore from the Central
Road Fund and Rs.2.74 crore being contribution payable to Railway Safety Works Fund. The BE
provided Rs.452.73 crore to be appropriated from the surplus during 2002-03. However no
amounts were appropriated from the surplus to the fund.
The balance in Railway Safety Fund (RSF) is shown in the following table:
(Rupees in crore)
Year
200102
200203
Opening
Balance
226.84
305.47
140.28
392.03
392.03
266.74
164.08
494.69
Note:
The opening balance of Rs.226.84 crore represents the transfer from DF on 1April 2001.
Special Railway Safety Fund: A new fund, namely Special Railway Safety Fund (SRSF) was
set up in 2001-02, to wipe out the arrears of replacements/ renewals of vital safety equipment on
Railways in fixed time schedule of 5 to 7 years. This fund was to be financed partly through
Railway Revenues by levy of safety surcharge (Rs.5000 crore) and balance (Rs.12000 crore)
through additional financial assistance (dividend free Capital) from General Revenues. During
the year 2002-03 this fund received Rs.1350 crore by transfer from Capital and appropriation of
Rs.1167.91 crore (inclusive of Rs.602.51 crore of safety surcharge receipts) from Revenue. The
outgo on account of plan expenditure chargeable to this fund amounted to Rs.2486.31 crore
leaving a balance of Rs.52.42 crore in the fund on 31 March 2003.
The balance in SRSF is shown in the following table:
(Rupees in crore)
Year
200102
200203
Opening
Balance
1455.10
1434.28
20.82
20.82
2517.91
2486.31
52.42
1994-95
3,808.11
There are few political leaders in the country who have been more
sharply criticised than Railways Minister Lalu Prasad Yadav. But now, there is a genuine sense
of respect for what Lalu has been able to achieve for Indian railways, which is looking healthier
than it has in years.
In fact, Lalu and his Railways Ministry have been so impressive that they are now a case study
for the Indian Institute of Management (IIM).
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 hes proved the skeptics
wrong.
Amazing feat
The Indian railways, an organisation heading towards bankruptcy three years ago when he took
over, now has a surplus revenue of Rs. 11,000 crore, a feat that has won grudging respect for
Lalu.
And with success has come recognition. IIM-A is taking the railways success as a case study.
Effective steps
Lalu achieved the feat by taking simple steps like competitive passenger fares
and reducing the wagons turnaround time from seven to five days.
He also raised the carrying capacity of goods trains from 3,200 tonnes to 4,000 tonnes, which led
to higher freight earnings.
This is just the start. We will soon have a surplus of Rs 20,000 crore. We will do more, you see
our profits will climb even further, added a confident Lalu.
Railways officials are in a celebratory mood, as they know their organisation has turned the
corner and the architect of this success is the railways minister.
Turning to the Aam Aadmi slogan, the minister said the railways will soon create economic
opportunities for the farmers. We 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,
he
said.
He also talked about providing rail connectivity to all the ports in the country. We intend to
ease the congestion on the road. This would mainly facilitate the car exports from India, he
said.
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 platforms,
he
said.
The minister also stated that he had big plans to enable travellers to get a worldclass experience.
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
overbridge.
Taking a dig at his predecessor Nitish Kumar, Lalu Prasad said, I am aware what he has been
saying about our turnaround story and the situation in Bihar. Let us see if he is able to deliver. I
dont
think
he
can.
However, he steered clear of making any controversial statements. When asked about his views
on reservation, he said, Today is not the day to discuss it.