Beruflich Dokumente
Kultur Dokumente
Introduction
Indian Railways have also been the prime movers and have the distinction of being
one of the largest railway systems in the world under a single management.
As for rolling stock, IR holds over 239,281 Freight Wagons, 59,713 Passenger
Coaches and 9,549 Locomotives (43 steam, 5,197 diesel and 4,309 electric
locomotives). The trains have a 5 digit numbering system as the Indian Railways runs
about 14,450 trains daily. As of 31 March 2013, 23,541 km (36%) of the total 65,000
km route length was electrified.
Indian Railways also successfully completed 160 years of its services to the people of
India on the 16th of April, 2013. Indian Railways, which had a modest beginning in
1853, has since then been an integral part of the nation -- a network that has held
together a population of one billion.
Several long trains are composed of two to three classes of travel, such as a 1st and
2nd classes which have different pricing systems for various amenities. The 1st Class
refers to coaches with separate cabins, coaches can or cannot be air-conditioned. 3-tier
non-AC coaches and 2nd class seating coaches, which are highly popular among
passengers going on shorter journeys. In air-conditioned sleeper classes, passengers
are provided with sheets, pillows and blankets. Meals and refreshments are provided,
to all the passengers of reserved classes, either through the on-board pantry service or
through special catering arrangements in trains without pantry car. Unreserved coach
passengers have options of purchasing from licensed vendors either on board or on the
platform of intermediate tops. The amenities depend on the popularity and length
of the route. Lavatories are communal and feature both the Indian style as well as
the Western style.
The recent growth in freight loading due to more intensive asset utilization and
adoption of market responsive strategies has brought into focus its long term
sustainability. The average annual growth of 8.1 per cent in freight loading
There was an increase in the net revenue including revenue from passenger as well as
freight from 2003-04 to 2007-08. From the low of 4000 cr of net revenue in FY 2004
to as high as 18000 cr in FY 2008.But, after 2008, in the FY 2009 and FY 2010 there
was a dip in the revenue collection to a low of Rs 4500 Crores in the FY 2010. The net
revenue of the Indian Railways had been decreasing with little improvement in 2010-
11.
3. Railway History
3 Turnaround of Indian Railways
In the year 1846, there was a major failure of cotton crop in America. Following this,
textile merchants of Great Britain had to seek alternative markets. It was then that
traders in the UK turned their attention on the cotton crop in India, one of British
colonies then, rich in cotton crop.
However, cotton was produced in various parts of the Indian sub-continent and it took
days to bring it to the nearest port to transport it to England through ships, the only
major means of international communication then. The British then had to build a link
from the hinterland to Indias major ports for quicker transport of cotton and other
goods as demand soared. This expedited matters for the British to introduce a railway
in India.
As early as 1843, Lord Dalhousie had proposed to link the three ports of Bombay,
Calcutta and Madras by a railway. In the same year he sent George T. Clarke, an
engineer, to Bombay to assess the possibility. A Couple of years later, a strong lobby
in Bombay, supporting railway communication formed a body called the Bombay
Great Eastern Railway. The Bombay Great Eastern Railway locally prepared plans for
constructing a railway line from Bombay to the Deccan. As the British already had a
concrete plan in their minds, things soon started taking a good shape.
The bill to incorporate Indias first railway company, the Great Indian Peninsular
Railway Company [G.I.P.R], came up before the British Parliament twice-First in
March 1847 and then in 1849.
In March 1847, the East Indian Company, which then ruled India, opposed the bill on
certain clauses forcing it to be withdrawn. Matters dragged on till 1849 when Lord
Dalhousie, who had some experience in railway matters of England, took over as the
Governor-General of India. On August 1, 1849, the Act to incorporate the Great Indian
Peninsula Railway came into being.
The line in Bombay was ready by November 1852. However officially, the first train
in India (and in Asia) was flagged off on April 16, 1853, a Saturday, at 3:35 pm
between Boree Bunder (Mumbai) and Thane, a distance of 34 kilometers. The train,
hauled by three engines -- Sindh, Sahib and Sultan -- carried as many as 400
passengers in its 14 coaches on its debut run. The importance of this day can be
gauged from the fact the Bombay government declared the day as a public holiday.
For the very first time in its history, the Railways instigated to draw a neat profit. In
1907, most of the rail companies were came under the government control.
Subsequently, the first electric locomotive emerged in the next year. During the First
World War, the railways were exclusively used by the British. In view of the War, the
condition of railways became miserable. In 1920, the Government captured the
administration of the Railways and the linkage between the funding of the Railways
and other governmental revenues was detached.
With the Second World War, the railways got incapacitated since the trains were
diverted to the Middle East. On the occasion of India's Independence in 1947, the
maximum share of the railways went under the terrain of Pakistan. On the whole, 42
independent railway systems with thirty-two lines were merged in a single unit and
were acknowledged as Indian Railways.
The Partition of India changed everything the subcontinent forever including the
Railways. As per the line and map drawn up by Sir Cyril Radcliffe dividing India,
8070 km of line from the erstwhile Northern Frontier Railway went to the newly
created state of Pakistan and almost all of the Assam-Bengal Railway went to
Bangladesh. The partition cut through many railway lines and as a result the entire
North-Eastern part of India was cut off from the rest of the country as all lines
leading there passed through the new state of East Pakistan (Present day Bangladesh).
Personnel, equipment, assets, rolling stock and such had to be divided between the
two dominions, along with transportation of documents, files, personnel and other
railway related stuff. Despite the acute shortage of everything, the Railways
transported 4.7 million refugees in 1947-1948, something that was never heard of
before in history.
Once the dust settled after the partition, the Railways lay in tatters along with the rest
of India. Most of the lines, locomotives and rolling stock were damaged or unusable,
much went missing and on the wrong side of the border. There was a severe shortage
of fuel and a lot many of the staff had either fled or were missing after the rioting. IR
had to start from scratch. They needed new locomotives, new lines, Assam and
As the economy of India improved, almost all railway production units were
'indigenised' (produced in India). By 1985, steam locomotives were phased out in
favour of diesel and electric locomotives. The entire railway reservation system was
streamlined with computerization between 1987 and 1995. The existing rail networks
were forfeited for zones in 1951 and 6 zones were formed in 1952. With 1985, the
diesel and electric locomotives took the place of steam locomotives. In 1995, the
whole railway reservation system was rationalized with computerization.
Statistical Summary of Select Variables IR (1950-51 through 2000-01)
They 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.61000 crores. On a pure operating level, IR is in a term in terminal
debt trap.
World Bank said Railways have no future in India unless they downsize, increase
passenger fares, divest and introduce a tariff regulator.
Indian railways had a market share of nearly 100% in 1947 which declined to 90% in
the by the year 1990 further by 2004 the market share of IR dwindled to less than 15%
in passenger business and to less than 35% in freight business.
2. IR will have to compete even harder with other modes in order to sustain its traffic
volumes, let alone accelerate growth. Thus a significant change is needed in IRs
strategy towards its freight services.
3. IR should take steps to recover its market share through a combination of tariff re-
balancing and quality enhancement measures, and to increase its share of the
transportation of other commodities.
4. The Committee has constructed three possible investment strategies for IR over
the next fifteen years. The first two scenarios, Low Growth and Medium Growth
are constructed in a Business as Usual framework, whereas the third scenario,
Strategic High Growth will require substantial focused remunerative investment
and corresponding organizational restructuring of IR internally and in its relationship
with government, including corporatization.
5. For IR to survive over the next 20 years and beyond, it has to adopt a strategic
perspective where it rekindles high growth in both the passenger and freight
segments.
7. From the point of view of investment strategy, the most undesirable feature of the
annual budget exercise is the very short-term focus it imparts to all investment
initiatives. The priority for IR is to invest in debottlenecking points of congestion in
the network.
8. The Expert Groups focus on root causes has highlighted three priority areas:
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.
9. The current system has two flaws that the Expert Group believes must be
corrected: tenure and skills. A system which effectively rewards those on the basis of
seniority and age with a position on the Board for a few months prior to retirement is
not the mechanism to breed leaders. Skills in the leadership team need to be
broadened and deepened. IR urgently requires an injection of fresh ideas and fresh
skills to accelerate its development into a commercially savvy market oriented set of
businesses.
10. The Expert Group has carefully examined the experience of European and other
railways in their restructuring efforts. The focus should be on commercialization
rather than privatization. This involves re organizing the rail system into its
component parts, spinning off non-core activities, restructuring what remains along
business lines and adopting commercial accounting performance management
systems. IRs management needs to be allowed a degree of autonomy that is
comparable to any other commercial organization.
11. IR must eventually be corporatized into the Indian Railways Corporation. The
Government of India should be in charge of setting policy direction. It would also
need to set up an Indian Rail Regulatory Authority (IRRA), which would be necessary
to regulate IRCs activities as a monopoly supplier of rail services, particularly related
to tariff setting. The Indian Railways Corporation would be governed by a
reconstituted Indian Railways Executive Board (IREB).
[NCAER, 2001]
On the 23rd of May, 2004 Mr. Lalu Prasad Yadav was made the Railway Minister
(MR) of Indian Railways.
Indian Railways is a function of the general buoyancy in the Indian economy and most
of the reforms were initiated by the former Railway Minister Mr. Nitish Kumar.
In Indian politics its a rarity that the successor carries forward the initiatives of the
predecessor. But, Lalu Prasad Yadav carried on with the foundations laid by Nitish
Kumar. In fact, in his first railway budget, Lalu Prasad Yadav implicitly accepts that
the foundation for a turnaround has already been laid by Nitish Kumar. 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.
Mr. Lalus employees are very with his approach towards work and his way of
working. The OSD and various others who were working with him, are thankful to
him because he gave them opportunity to come ahead and solve problems in their
Department.
Whenever concerns were raised about downsizing of the IR, he came out with his
Hindi one liner which translated to, Downsizing may make IR thinner, but not
necessarily healthier. On presenting the future, his pitch was, regenerate
competitiveness and leverage resources rather than restructure and downsize. He
believed in instilling hope and excitement rather than fear and anxiety.
The first task that the OSD took upon himself was to understand the functioning of the
IR and what has been said about the IR in a studied manner. In his own words, I read
whatever reports on IR that I could lay my hands on, and there were plenty. I read
various correspondence to understand the decision making processes. I soon realized
that the IR had tremendous strengths in its systems that ensured robust decision
making. This understanding that he developed gained him acceptance in the RB.
The OSD understood that the IR officers themselves were a source of ideas for
innovation that would be in line with the MRs thinking. He made it a point to be open
to ideas from within the IR, so that they could be examined by the concerned
functional departments and appropriate action finalized and implemented quickly.
Given his unique position, he could cut across the hierarchy of the IR.
The Railway Minister had that passion to bring the Indian railways out of the debt
trap. He broke the shackles of the restrictive thinking that nothing can possibly change
the ill conditioned Indian Railways. With the new flow of thinking he led the
Railways, always from the front and he emerged as a great leader for the Railway
Board. He initiated the thinking that Indian Railways is in the business of
Transportation rather than the General monopolist thinking that IR was in the business
of Railways. By bringing in this change he brought himself and IR into a scenario of
Perfect competition from a Monopolist scenario.
With bringing in such changes he also changed certain policies of Indian Railways and
also choose to continue the policies adopted by the Mr Nitish Kumar and brought
glory, in the way of profits to the Indian Railways.
7. Policy Changes
I - Strategic Changes
Exhibit 15.The Number of employees which peaked at 1.65 million in the year 1990-
91 was brought down to 1.47 million by the year 2003 and further these numbers fell
to 1.41 million by the end of 2006.
One of the elements of the Retrenchment strategy is to trim off excess staff. The
approach that Indian Railways adopted was of not filling vacancies created due to
retirement or any other reasons.
B) Outsourcing
Besides the catering and parcel service activity, the Indian Railways also outsourced
advertising activity. In this area of parcel, catering and advertisements the strategy of
outsourcing through Public-Private Partnership and wholesaling rather than retailing
was adopted.
C) Product Innovation
The Indian railways introduced Double stack container trains on some diesel routes.
These increased their carrying capacity of each trains to 2500 tonnes against 1500
tonnes and they also reduced line capacity constraint by nearly half.
This led to savings of about 7% on Capital cost and about 25% in the operating
expenses.
In the same way, newly designed wagons were of higher pay load but lower tare
weight which improved the safety feature of the wagons. The effect of these measured
can be seen in the higher freight revenue.(As Shown in Exhibit-18)
D) Rise in Demand
In the year 2004, Mr. Lalu Prasad decided to reduce Passenger fares by 45%. Indian
railway earns about 70% of the revenue from freight traffic (i.e. 686.2 billion against
304.6 billion from passenger). Hence it deliberately keeps passenger fares low and
cross subsidises the loss making passenger traffic with profit making freight traffic.
The rise in freight revenue -the main plank of the Indian Railway turnaround -was
facilitated by the increased domestic demand for coal (for electricity generation), for
cement (for construction) and pig iron (for steel plants) due to economic growth.
(Rise in freight revenue was as much as 500%)
There was also an increase in the iron ore for exports (mainly to the Chinese market).
In 2006, China bought more than 74 million tonnes, accounting for about 84 percent
of Indias total iron ore exports. The IR used the favorable international demand
E) Asset Utilization
The Indian railways introduced Double stack container trains where they increased
their carrying capacity from 1500 tonnes to 2500 tonnes. By doing this, they carried
double the quantities they used to carry earlier. This also reduced the per unit cost,
ultimately increasing profits for the Indian Railways.
Faster here means Faster Recycling time or Faster Turnaround time of trains. IR
currently holds 4000 goods trains, if they turnaround these trains every 7 days they
have 570 trains/day. While, if they turnaround the same 4000 trains in every 5 days
they will have 800 trains/day.
For Faster Turnaround of trains the following things were very essential:
Full rake placements ,Round the clock working, Electrification of diesel sidings on
electrified routes, Amendment in Preferential Tariff Schedule (PTS),Faster train
examination. This faster turnaround time of trains accounts to 3 billion USD profit per
annum to IR.
IR was thinking to reduce per unit cost of its products so that the people at large could
gain benefits from the services that they offer. Earlier the Unit Cost of a Rajdhani
Express was about Rs.1200 and the carrying capacity of these trains was about 800
People. Later, in the same trains they accommodated about 2000 people which by
itself reduced the unit cost to around Rs.500
As more people could more people could afford the services offered by IR, more
people started demanding to travel through Indian Railways.
F) Dynamic Pricing
Earlier IR had a uniform pricing strategy for all Lean season/Peak season,
Congested route/Light route. There was only one Price.
G) Length Expansion
IR introduced many new products like Garibrath express in which they made the
Trains longer. While other trains used to have 17 coaches, the new trains now have 24
coaches.
Other trains have a pantry car, a Luggage van, a Power van but these new trains had
no frills in them. These new products were Commercial Products designed to make
profits.
Thus about 27.33% of the total route kms. on IR is electrified. Of the total 17,280
electrified route kms., 1,379 route kms. are on the suburban sections and the balance
15,901 on heavy density freight routes. During 2004-05, 47.5% of passenger train
kms. and 62.9% of the BG freight gross tonne kms, were operated on electric
traction.In the following 2 year of the X five year plan after 2004-05, total route
kilometeres electrified were 170 kms. and 361 kms. Respectivelyand it was also seen
in the Xth Plan period that 1,810 route kms had been electrified against the Plan target
of 1,800 route kms.
Capacity improvement through doubling has been steady ( Figure B), in the range of
about 5 percent with the initial priority being on the Golden Quadrilateral and the
Diagonals. The Golden Quadrilateral is a route Connecting the four metro cities of
New Delhi, Mumbai, Chennai, and Kolkata . These routes generating most revenue
for Indian Railway have dedicated tracks to passenger & freight trains. In terms of
total route length which is 15% of network, they carry 65% of the Goods traffic and
55% of the passenger traffic.
During 2006-07, following two accounting changes have been carried out in
consultation with Ministry of Finance, in accordance with the generally accepted
accounting practices and to reflect correct picture of financial status in the financial
statements of railways with due disclosure in the budget documents:
However, the accounting changes would increase the cash surplus by Rs. 2,183.47
crore in 2006-07, whereas these had no effect on the cash surplus of 2005-06. The
fund balances of Indian Railways available for investment remains unaffected.
1) Cluster ticket
Earlier, if you wanted to travel from Mumbai to Guwahati, you could buy a reserved
ticket on the Gitanjali Express that terminates at Howrah and a second ticket from
Howrah to Guwahati all at a cost of Rs.557. This was called a cluster ticket. Such
cluster tickets have now been discontinued. For the same journey, you now have to
buy a reserved ticket for Howrah at Rs.517 and then buy another ticket to travel
between Howrah and Guwahati at Rs.369. The total charges now add up to Rs.886 - a
full Rs.329 extra.
2) Cancellation charges
People purchase reservation tickets much in advance but for various reasons they fail
to turn up and decide to cancel such ticket. Sometimes people terminate their journey
midway for some unforeseen reasons. Obviously, they ask for refund on such unused
or partially used tickets. Railway has got a set of rules regarding refund.Railway
deducts either clerkage charge or cancellation charges on such tickets. The amount of
refund also is determined according to the time of cancellation.
Unused unreserved ticket when presented at the booking office within three hours of
purchase is refunded deducting a cancellation charge of Rs 10 per passenger not per
ticket. In reserved a different set of rules are applied.
If someone approaches the booking office more than 24 hours before the scheduled
departure of the train on which reservation is made refund is granted after granting a
specified amount as cancellation charge that varies according to the class of
reservation. The Cancellation charge happens to be in the following way. Rs. 70 for
Ac First class/ Executive class, Rs. 60 for ticket of 2nd Ac/ 3rd Ac/ First class/ Ac
Chair Car, Rs 40 for sleeper class and Rs 20 for Second class sitting tickets.
If a ticket is presented within 24 hours and upto four hours before the scheduled
departure of the train, a flat 25 per cent is deducted. When a train leaves a station and
a reserved ticket is presented for refund a flat 50 per cent is deducted and rest is
refunded.
Ticket issued on Credit Card or Electronic Ticket is refunded by the issuing authority
that is the IRCTC. IRCTC takes the ticket and verifies with the original ticket and
grants refund accordingly. Unused confirmed Tatkal ticket is not refunded when the
same is presented when it is not presented 24 hours before the scheduled departure of
a train. Unused wait listed Tatkal ticket is refunded usually
About 27% of all tickets sold are cancelled. So what Lalu Prasad did was simply
double the charges on all tickets cancelled. While the older charges for cancellation were
Rs 20 for second class and Rs.30 for AC class, the new charges are Rs.40 and Rs.60
respectively.
3) The superfast
Several trains have been upgraded to super-fast status by Mr.Lalu Prasad. For every
ticket you purchase for these trains you pay Rs.20 extra under the super-fast train
charge. Several of these trains have only 20 minutes to one hour shaved off their old
the running time. So these trains may have minor delays and end up reaching their
destination on the original arrival time anyway. Among the trains that have been given
super-fast status in Mumbai are Kurla - Bhubaneshwar, Kurla-Howrah Samratan
Express, CST-Manmad Panchvati Express, Bandra-Surat, Surat Flying Ranee, Bandra-
Bhavnagar and Mumbai Central-Bhuj. All these trains are heavily patronised by the
people of Mumbai.
Say you buy a second class ticket from Mumbai to New Delhi on the Paschim
Express. You will pay Rs.421 for it. However, if you also book a return ticket (New
Delhi-Mumbai) you will pay Rs.431 for this ticket- Rs.10 extra. This is because an
enhanced reservation fee has been introduced as Passenger Reservation System
charges. Earlier, you paid the same amount for tickets booked from anywhere in
India. Now if you buy a ticket at a Mumbai counter for a journey originating from
New Delhi, you have to pay Rs.10 extra for second class tickets and Rs.15 extra for
18 Turnaround of Indian Railways
AC tickets. This is unfair to the vast majority that buys return tickets to avoid standing
in a crowded queue a second time.
5) Chargeable distance
IR's fares are generally computed on the basis of the official distance between the end
points for a particular route. The fares for some routes, however, are different than the
fare expected based on looking up the fares for the actual route-km in a fare table.
These are lines with very sparse traffic, tourist lines or lines with other special
conditions. In such cases, there is a chargeable distance associated with the route,
which is the distance to be used when looking up fares in a fare table, regardless of the
actual route length.
For instance, the Neral-Matheran NG route is only about 21km long, however the
ticket fare for the journey is based on a chargeable distance of 126km (and in fact, the
distance markers along the way show the chargeable distances, not the physical
distance!). Other routes for which chargeable distances differ from the actual distance
are Kalka-Shimla, Pathankot - Joginder Nagar, Purna-Khandwa (MG, in the 1980s),
etc.
Konkan Railway also charges fares based on a chargeable distance being 40% higher
than the actual distance, a measure intended to recover some of the construction costs
for the lines. In some rare cases the chargeable distance is lower than the route length
-- for instance, at one time trains on the Grand Chord and the Main Line between
Howrah and Mughalsarai had tickets with the same chargeable distance (660km), even
though the Main Line route came to 757km.
Continuing and building on the strategies adopted, the focus for the future is on
capacity enhancement, reduction in unit cost , reducing transit times and having world
class terminals.
The MR, with inputs from the RB, has proposed various initiatives towards (i)
improving the wagon productivity (ii) improving the mobility of wagons (iii) running
of higher axle load trains (iv) improvements in asset liability and (v) infrastructure
development for reducing transit times.
Exhibit 9 provides a perspective on the freight traffic trends in IR. Over a thirty year
horizon, coal has become the most important commodity for IR. Other commodities
had reduced in significance, but have the potential for the future, especially due to
growth in container traffic and other customer oriented schemes. The wagon turn
around has been reducing consistently from a peak of 15.2 days in 1980-81 to just
over 6 days in 2005-06.
Passenger
A recent initiative has been providing automatic upgrades to passengers in case of
vacancy in a higher class, while there is a waiting list in a lower class and increasing
the number of superfast trains. The MR has suggested a range of initiatives focused on
(i) reducing passenger losses by increasing volumes by increasing the length and
occupancy of trains (ii) modifying train length and composition based on passenger
profile management (analysis of the passenger reservation system data to understand
class wise and season wise occupancy of trains) (iii) increasing average speeds of
trains (iv) providing affordable air-conditioned travel for the poor and (v) improved
design of coaches.
Related touch and feel initiatives at stations and on board trains focused on the
passenger would be stepped up, driven by the zonal GMs and executed through
IRCTC. Exhibit 10 provides a perspective on the passenger traffic trends in IR. In
terms of passenger earnings, the long term trend in earnings shows a growth in second
class mail/express and upper class and a reduction in second class ordinary. The trends
in number of passengers are similar. This reflects an increasing focus on the long
distance reserved passenger rather than the short distance unreserved passengers.
Between suburban and non-suburban, the originating passengers are more for
suburban, while it is the reverse in earnings.
Others
Parcel, catering and advertising are expected to witness more aggressive efforts. In his
budget speech in February 2006, he described the outcomes and process as, Present
capacity utilization in parcel is less than 25% which is causing a loss in the parcel
business. Certain measures were employed in parcel business in the current year
which has registered a growth of 30% in parcel earnings. Open tenders were invited
Investment
To support the above, appropriate investments are being considered. The focus has
been on low cost, short gestation and high return projects. Route based throughput
enhancement works are being aggressively pursued by relaxing any cap on resource
availability. The other thrust areas are gauge conversions to improve the BG network
flexibility, sidings and the dedicated freight corridor. Exhibit 3 provides a perspective
on the investment trends in IR.
These changes all together helped IR to come out of the debt trap and register itself
as an profit making asset to the Government of India.
____________________________________________________________________
8. Achievements
The total investment being planned for the eight year time frame (2007-2015) was
tentatively in the order of Rs 350,000 crores. This was a significant increase from the
planned Rs 60,000 crores (actual expected to cross Rs 80,000 crores) in the X Plan
period of 2002-07. This confidence was a result of what the Indian Railways (IR)
achieved, not only due to the rising trend of performance, but also due to the
The fund balance at the end of 1999-00 had reached a low of Rs 149 crores,
improving to Rs 5228 crores by the end of 2003-04 and over Rs 12,000 crores by the
end of 2005-06. A 20 year perspective since 1987-88 gives a birds eye view of the
performance of IR, in terms of total earnings, total working expenses, operating ratio
and net revenues (Exhibit 2). The operating ratio (ratio of total working expenses
(including depreciation and pension, but exclude dividend to GOI) to total earnings)
and net revenues (total earnings less total working expenses, adjusted with
miscellaneous transactions) had reached low levels of performance in 2000-01
(98.3%) and then had consistently improved till 2005-06 (83.7%).The figures were
however not strictly comparable. There had been a decrease in allocations to the
depreciation reserve fund during the late 1990s from over Rs 2000 crores to a low of
Rs 1155 crores in 1998-99. This was followed by a gradual increase until 2004-05 to
Rs 2700 crores. In 2005-06, the allocation jumped to Rs 3600 crores (Exhibit 3).
Further, there was a change in accounting practice in 2005-06 when Rs 1615 crores of
lease charges to IRFC towards the principal amount for wagon procurement had been
shifted from working expenses to miscellaneous expenditure. The operating ratio, for
the sake of comparability with earlier years, would be 86.6%. Exhibit 4 gives the key
statistics of IR as on 31st March, 2005.
As recognition to this turnaround, some of the worlds biggest asset managers,
investment bankers and consultants including Goldman Sachs, Deutsche Bank, HSBC,
etc had shown interest in working with IR.
09.Turnaround Diagnosis
A) To diagnose the turnaround, the first question would be whether it really was
a turnaround.?
The total earnings in 2005-06 increased by Rs 7121 crores, a 15.0% growth with
This justified the principles that freight business is a play on volumes, and that
passenger business is a play on volumes and quality which were behind various
focused initiatives undertaken by the MR, and driven by the RB. Further, the
initiatives were pursued in a manner that results could be obtained as quickly as
possible, yet laying the foundation for continued performance improvements.
An interesting aspect was that the total earnings in 2005-06 had gone up by a record
Rs 3523 crores with respect to the budget estimates (BE) for the year. While this could
raise questions about the budgeting process, for the year 2005-06 it is more of a
consequence of initiatives that were put in place during the year, with results coming
in the same year.
B) The next question would be The Determinants of the ' Turnaround ' .
Goods Earnings:
The increase in goods earnings for 2005-06 over 2004-05 was Rs 5509 crores,
including miscellaneous earnings due to wharfage and demurrage. Excluding the
miscellaneous, the increase was Rs 5482 crores. Exhibit 5 provides an analysis of the
commodities through which the increased goods earnings were obtained.
Coal (Rs 1365 crores), other goods including raw material (iron ore, limestone and
dolomite) for other than major steel plants, and other stones, sugar, salt, non-bulk
goods and containers (Rs 1121 crores), iron ore for exports (Rs 733 crores), cement
(Rs 550crores), raw material for steel plants (Rs 475 crores), fertilizers (Rs. 449
crores) and pig iron and finished steel (Rs 373 crores) accounted for 92% of the
increase in earnings, in that order.
The increase in earnings from coal and other goods were largely due to the increased
loadings. The increase in earnings from iron ore for exports was both due to increase
in loading and increase in rates by change of classification. The increase in earnings
from cement was due to increase in loading. The increase in earnings from raw
material for steel plants was due to the increased loading and increase in rates by
change of classification. The increase in earnings from fertilizers was due to the
increased loading and higher lead. The increase in earnings from pig iron and finished
steel was primarily due to higher lead. Exhibit 6gives the change in freight
classification and rates since 2000-01.
A comparison of the loading figures between FY 2005 and FY 2006 shows that
increased loadings have been achieved in coal, other goods, raw material for steel
plants, and iron ore for exports. The percentage increase with respect to 2004-05 was
most significant for other goods (25%) followed by raw material for steel plants
(19%), cement (14%), and iron ore for exports (13%). The increase in coal was 8%.
The increased axle load would account for a maximum of 14%. The rest would be due
to increased rake availability as a consequence of improvements in wagon turnaround,
and reduced train examination.
A whole host of schemes have been put in place to attract the freight customer, since
Passenger Earnings:
The passenger earnings in 2005-06 had gone up by Rs 1013 crores (7.2%) over 2004-
05.
The possible reasons for the earnings in 2005- 06 being higher were due to initiatives
in running 24 coach trains , deploying additional coaches in well patronized trains
and even running of additional trains. These initiatives were made possible by
ensuring analysis of demand based on the passenger reservation system data and
requiring the field level officers to respond to it by additional supply where possible.
In the passenger segment, a reduction of one rupee was offered in the second class
ordinary fare, 10% in ACII and 18% in ACI. The Tatkal scheme, targeted at the last
minute passenger was extended first from one day to three days and then to five days.
This offered a window of opportunity to increase earnings through differential pricing,
based on the time of booking.
Emphasis has been laid on what has been called touch and feel initiatives to improve
the service quality for the passenger.
Consequent to the above initiatives, the growth in number of passengers has been
7.5% in 2005-06 over 2004-05 and 7.1% in 2004-05 over 2003-04. The growth in the
earlier three years had ranged between -2.4% to 5.4% (Exhibit 1).
Other Earnings:
The increase in other earnings of Rs 599 crores (24.2% over 2004-05) came through
parcel, catering, advertising, dividends from the public sector units under the ministry
etc (Exhibit 7).
The increase of 24.2% in 2005-06 over 2004-05 followed a similar growth of 24.7%
in 2004-05 over 2003-04.
In the earlier years, the growth in this segment had been marginal this source of
revenue had not received as much focus as in the past two years A slew of initiatives
on these areas had been implemented over the past two years, m a king it attractive for
private parties to take advantage of the market opportunity that IR could offer.
Parcel
Catering
Catering was an essential service to IR passengers, both on the trains (mobile) and at
the stations (static). Outsourcing in catering through the IRCTC was a major initiative,
which received increased attention during the previous few years. Like parcel, in the
MRs correspondence to GMs, a sense of urgency was communicated focusing on the
need to quickly finalize the catering contracts within three months of issuing the
tender. Open competitive bidding, many times having to deal with pressures
(including court litigation) brought by incumbents, had been a strategy to unlock the
potential of this business activity. The political stature of Mr Lalu Prasad and his
ability to deal with such pressures had enabled the GMs and IRCTC to move forward.
Even then, at the end of the year, there were pending cases in courts.
Advertising
As stated by CCM, NR, easy processing of innovative ideas for advertising was put
in place. This enabled zonal railways to be more proactive on this front. As an
example, the NR doubled its advertising income from the three major terminal
stations: Delhi, New Delhi and Hazrat Nizamuddin in two years. The increase in
earnings from advertising had been even more significant in the CR and WR,
leveraging the Mumbai area. The overall IR earnings had gone up from Rs 50.2 crores
in 2004-05 to Rs 78.1 crores in 2005-06.
The countrys economy was growing faster than before, moving from the 4% to 6%
GDP growth rates (from 1996-97 until 2002-03 ) to the 8.5%, 7.5% and 8.4%
achieved in 2003-04, 2004-05 and 2005-06 respectively. This growth environment
offered an opportunity for IR and had a significant impact on the turnaround.
The strategy of higher volumes was also carried through in the passenger business.
The concept of revenue management, wherein differential prices could be charged for
differential services like tatkal and superfast were leveraged.
In the other business areas of parcel, catering and advertising, the strategy of
outsourcing through public private partnership (PPP) and wholesaling rather than
retailing was adopted.
Underlying all this was mainly the strategy of Asset utilization which goes to the
credit of Lalu Prasad Yadav.
The trend of IRs total earnings and total working expenses are shown in Figure A and
Figure B. The good years were between 1993-94 to 1995- 96, after which the
expenses caught up with the revenues until 2000-01, when the net revenue shrunk to a
little over Rs 1000 crores. The situation started improving steadily to reach an actual
net revenue of just over Rs 8000 crores in 2005-06, for a total earnings of Rs 54,404
crores. Th is figure, collated after the financial year ended 2005-06, has been a
significant increased achievement over and above the budgeted and revised estimates
for the same year. The increase in net revenue is attributed significantly due to better
utilization of freight rolling stock. The budgeted estimate for the year 2006- 07, before
the actuals for 2005-06 were collated, is total earnings of nearly Rs 60,000 crores
with a surplus of about Rs 7500 crores. The actuals are expected to be at least 10%
higher on earnings and 50% higher on the net revenue.
The operating ratio had reached a peak of 98.3 in 2000- 01, reflecting a relatively
poor performance. After that, it had reduced year on year till 91.0 in 2004-05. It
dropped sharply to 83.8 in 2005-06. (As stated above, this was both due to better
utilization of rolling stock and changes in accounting practice.)
The IR was targeting an improvement in the operating ratio of 77% for 2006- 07. This
means that it aims to earn Re 1 by spending 77 paise in 2006-07, against 83.8 paise in
the last financial year [Business Line, May 6, 2006]. Which in the Same year was
achieved, and in the next year i.e,2007-08 they managed to further reduce it to 74.9%
which was appreciable .
The net revenue receipts are then appropriated for dividends payable to the
government of India and into various capital funds. Figure D gives the dividends p aid
out of the net revenues including when the pay ment was due to deferred dividends.
As can be seen, the deferred dividend payments have happened in the good years,
which have followed the bad years when the IR would have sought deferment of the
dividend.
The deferred dividend liability from 1978-79 onwards aggregated to Rs 428.43 crore
by end of March, 1990. The amount was cleared by 1992-93. The dividend payable
in 2000-01 and 2001-02 worked out to be Rs 2,131 crore and 2,337 crore respectively,
out of which Rs 1823 crore and Rs 1000 crore respectively have been transferred to a
deferred dividend liability account.
A review of the investment record of the past would be in order, not only to assess the
shortcomings in the existing planning process but also to identify the changes that are
required. There has been an effort on continuity of investment on three items, namely
on gauge conversion/doubling, asset replacements, new lines and rolling stock . The
focus no wis more on through put enhancement works, terminal infrastructure works,
user amenities, and information technology.
Gauge Conversion
While earlier, the policy of gauge conversion had been one of selectivity on high
density bridging routes, in the early 90s, the IR launched the project unigauge, in
an attempt to standardize in most of the networks. The gauge conversion project,
which peaked between 1992- 93 to 1998 -99 ( F igure A ), had a severe impact on
track renewals and to an extent on safety. Both these had a consequent impact on the
finances of IR, with the operating ratio peaking to 98.3 in 2000-01. With the safety
related investments on IR and a better balance on gauge conversion, the IR
recovered fr om 2002-03 onwards.
Doubling
Capacity improvement through doubling has been steady ( Figure B), in the range of
about 5 percent with the initial priority being on the Golden Quadrilateral and the
Diagonals.
Rolling Stock
The emphasis has been on both replacements and additions. Investments have
averaged about 40 percent of the Plan Outlay, over the period of past 20 years. In fact,
the expenditure has had a steady relationship with earnings, the average coming to
around 15 percent. This has been made possible by the IR adopting a combination of
measures, such as using DRF and Budgetary Support, leasing via IRFC and
deploying various schemes such as Own Your Wagon. Yet another reason to ensure
this investment stability has been to ensure work load to manufacturing units.
Despite this emphasis, IR was hampered by shor tage of rolling stock , contributing to
a decline in the share of the transport output.
In the recent past, IR has taken several initiatives to improve the performance of the
parcel segment. Following is a study done by CRI SIL [CRISIL, 2005 ]:
Catering:
IR has formulated a new catering policy in order to improve the standards of food
being served in the trains and in the stationary units to generate more revenue. Under
this policy, the catering contracts will now be given through an annual open tendering
system, under the ownership of IRCTC. Previously, catering contracts were based on
an application-based system. Often, an administrative extension would be granted to
the incumbent. The rates used were not commercially contested.
With the new policy, as an example, an annual catering contract for an important train
like Howrah-Kalka mail was awarded for Rs 83.6 lakhs, when earlier it fetched Rs 5
lakhs. After open competitive bidding, earnings have increased from Rs 13 crore to
over Rs 100 crore due to mobile catering. On stationary catering, due to the open
competitive bidding, as an example, the license fee at Bandra and Nagpur went up
from Rs 78,000 and Rs 32,000 to Rs 16 lakhs and Rs 34 lakhs respectively. The pace
of open bidding for stationary units has been slowed down since some of the
incumbents have gone to courts to contest IRs move
Advertising
The various strategies on advertising currently being leveraged are: (i) wholesale
leasing rather than retail leasing (ii) leasing for a division as a whole (iii) open
competitive bidding and (iv) trains and wagons. This earning option is expected to
yield significantly higher returns in the future.
Exhibit 15 : Downsizing
The table below shows, the strength of railway employees under various groups,
together with total expenditure on them, for some selected years:
Management personnel (Groups A&B) constitute up 1.3% of the total strength, while
Group C and D account for 81.1% and 17.6% respectively. Of the employees in Group
C and D, 3.85 lakhs (29.3%) are workshop employees and artisans and 9.27 lakhs
(70.66%) from other categories including running staff.
Weights
Containers have weight limits designed to fit road trucks, which have clearly smaller
weight limits than trains. A common limit for railways is 8 tonnes (7.9 long tons;
8.8 short tons) per meter train length and 22.5 tonnes (22.1 long tons; 24.8 short tons)
per axle. A four axle container car can take 90 tonnes (99.2 short tons; 88.6 long tons).
Since a container is limited to 30.5 tonnes (33.6 short tons; 30.0 long tons) (plus a rail
car), single stacking clearly does not use the load capacity of the railway. A 20-foot
(6.1 m) container is limited to 24 tonnes (26.5 short tons; 23.6 long tons) and two such
can fit into a car for a 40-foot (12.2 m) container, or even three if double-stacking, but
not four unless very high axle load is permitted. The North American railways permit
two 53-foot (16.15 m) or four 20-foot (6.1 m) containers as shown in the images on
this page.
Another consideration is the maximum weight of a train. A maximum length train in
Europe, 750 m (2,461 ft) long can have 50 container cars with a total weight of 2,250
tonnes (2,480 short tons; 2,210 long tons), and more if 20 ft containers are included.
This is not so far from the limit using standard European couplers. Double-stacking
requires allowing higher train weight to be meaningful, since it is higher train weights
that saves costs. In the US, the AAR coupler used allows much higher train weight.
Sizes and Clearances
Double-stack cars come in a number of sizes, related to the standard sizes of the
containers they are designed to carry. Well lengths of 40 ft (12.19 m), 48 ft (14.63 m)
and 53 ft (16.15 m) are most common.[1] Heights range from 8 ft (2.44 m) to 9 ft 6 in
(2.9 m) ("high cube").
CSX lists three clearance heights above top of rail for double stack service: [2]
Doublestack 1 18 ft 2 in (5.54 m)
Doublestack 2 19 ft 2 in (5.84 m)
Doublestack 3 20 ft 2 in (6.15 m)
The last clearance offers the most flexibility, allowing two high cube containers to be
stacked
The growth in India railway revenues has also been declining since its peak during the
fiscal year ending March 2007. Although India Railway revenues grew at 7.5% and
improved to INR 864.8 billion in 2010-2011 from INR 804.3 billion the previous year,
this growth rate was barely half of its peak growth of 15.1% in 2006-2007. The
sluggish growth rate in total railway revenues is attributable to slower growth in
revenues from goods transportation, accounting for about 70% of total railway
revenues. Although growth in passenger revenue constituting 30% of total railway
revenues increased by 9.8% in 2010-2011, compared to 7.1% in the previous year,
these growth rates were insufficient to compensate for the sharper decline in revenues
from goods transportation.
Source:CEIC
Steps for booking Railway Reserved Ticket on IRCTC website from a browser enabled
mobile Phone
(i) Login to URL https://www.irctc.co.in/mobile with your existing IRCTC user id and
password.
(ii) Click on Book Ticket and fill in details for plan my travel.
(iv) Confirm booking details and pay through Credit/debit card to get successful booking.
(v) To save paper they have come with SMS services, and all Railway centers approve
Mobile Tickets instead of Print outs.
One can just log on to the Webpage and book the tickets personally, without any help from
an agent. This enables IRCTC to reach the customers directly.
You can also check the fares, alternate journey plans and various other things available on
the website.
In these mobile application you can check the availability of the tickets and also you can
Check the PNR status , the Railway Map, Ticket Fares, Times of Various trains etc.
It was observed for a long time that towns and cities on the meter gauge (MG) and
narrow gauge (NG) lines had a poorer service than equivalent towns on the broad
gauge system, the speed of trains was slower and the freight traffic (ton per kilometer)
on metre gauge tracks was only a small fraction of the freight traffic on broad gauge
tracks. It was decided that conversion of meter and narrow gauge railway lines to
broad gauge would make Indian Railways more efficient.
As of 2012, 107,500 km of track length (93% of entire track length of all the gauges)
and 58,300 km of route-kilometer (90% of entire route-kilometer of all the gauges)
was broad gauge; 6,000 km of track length (5% of entire track length of all the gauges)
and 5,210 km of route-kilometer (8% of entire route-kilometer of all the gauges) was
meter gauge and 1,500 route-kilometer (2% of entire route-kilometer of all the gauges)
was of the narrow gauges.
As a result of Project Uni-gauge, the share of broad gauge in the total route-kilometer
has been steadily rising, increasing from 47% (25,258 route-km) in 1951 to 89%
(58,300 route-km) in 2012 whereas the share of meter gauge has declined from 45%
(24,185 route-km) to 8% (5,210 route-km) in the same period. The share of narrow
gauges has decreased from 8% in 1951 to 2% (1,500 route-km) in 2012.
India has converted its meter gauge lines into broad gauge up to its border with Nepal.
Narrow gauge railway lines that extend for a short length from India into Nepal
(Raxaul-Amlekhagunj and Jayanagar-Janakpuur-Bijalpura) need conversion by Nepal
Railways to avoid trans-shipment.
Conclusion
Weakness
Opportunity
1.It can capture large chunk of container traffic by introducing block container trains
operating at passenger speeds
2.Its 70% of revenue and most of its profits comes from freight sector and there is a
tremendous growth in emerging companies, hence has a great future for freight sector
3.Operating ratio has been decreasing drastically in last 10 years
Threats
13. Bibliography
(A) Videos:
Youtube:
OSD-Sudhir Mishras and MRs (Lalu) Lecture at Lee Kuan yew School
of Public Policy.
https://www.youtube.com/watch?v=4wvoO5phs-8
(B) Websites:
IR Website:
http://www.indianrailways.gov.in
Counterview of Turnaround:
http://www.creative.sulekha.com/turnaround-of-indian-railways-under-
mr-lalu-prasad-yadav-a-counterview_325027.blog
Indian Railways-Wikipedia:
http://www.en.wikipedia.org/wiki/indian_railways
Electrification:
http://www.indianrailways.gov.in/railwayboard/uploads/directorate/stat_
econ/annual-rep-0607/electrification.pdf
Electric Locomotives:
Http://en.wikipedia.org/wiki/Electric_locomotive
Cancellation Charges :
http://ekikrat.in/Ticket-Cancellation-and-Refund-Rules-Indian-Railways
http://www.irfca.org/faq/faq-jargon.html
(C) Reports:
Status of Electrification:
Rail business report, 1999
(D) Images:
m-indicator:
Screenshot from iOS application
IRCTC-Homepage
www.irctc.com
Sample Advertisements:
https://www.google.cm/search?
q=advertisement+in+indian+railways&tbm=isch&tbo=u&source=univ&
sa=X&ei=rN1gUqe_M8nriAf7hoGQDA&sqi=2&ved=0CDwQsAQ&bi
w=1024&bih=67
--THE END--