Changing fortunes of the Indian Railways Amey N Kantak

The Indian Railways (IR) is the world's second largest rail network after Russia under a single management and the chief logistics agency of the government .About 14 million people use its 63,000-km network on a daily basis. It departs on an average 8,520 passenger trains and 550 loaded freight trains. [FOIS, 2004].

History is something which just cannot be changed. The railway annual budget has for decades been dictated more by its social obligations of providing connectivity and affordable travel for poor people, then by economic common sense. Populist measures leading to an irrational fare structure with a heavy cross subsidy of the passenger sector by freight had corroded its viability as a profit making entity. In a monopolized framework, there is no one to pull the rug from under this imbalanced scheme except for the response from the goods transport users. IR has been steadily losing its share in goods transport to road. The Railway share has fallen from 89% in 1950-1 to 40% in 1997-8 [Status Paper,1999].

Elections promises like more passenger trains on unviable and loss making routes, subsidies on travel, red tapism in railway procedures, a large workforce, and the way the railways is funded, partly by public funding from GOI and via debt from Indian Railways Financial Corporation (IRFC), has ensured that the railways have always been in the red with accumulated losses of about Rs 5,000 crore. Amazing feat "I feared the worst when he took over, but he has proved every one wrong. This turnaround is because of the political leadership being in sync with the professionals of the railways. We think this model could be replicated in other PSUs"

Professor G Raghukumar, IIM-A. When he wrestled the Railways Ministry from Ram Vilas Paswan, many had written the obituary of the Indian railways, saying Lalu would drive it into the ground. But he's proved the skeptics wrong. The turnaround has been achieved by changing the old dictum - hiking goods and passenger fares to minimize cost, and because of the political leadership being in sync with the

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professionals of the railways. The railway Bhavan has finally understood the basics of rail transport or for that matter any business that is optimum use of the available assets. Effective steps When it comes to freight the railways rediscovered the Gujral formula1.The formula follows a three-pronged strategy: •

Increase the freight load of each wagon.

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Have longer and extended run by freight trains without changing the locomotive engines, hence reducing the time a rake took to reach its destination.

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Reduce the frequency of checking wagons and tracks during a journey and bring down the average time between successive loadings for wagons thereby reducing wagons turnaround time from seven to five days.

Introducing double stack container trains, Inland Container Depots and permitting private players, like CONCOR, to run container services also allowed the railways to tap the fast growing container market. Schemes like CC+6/8, permitting loading in excess of the carrying capacity (CC) of the wagons, increased rake load despite any significant augmentation in numbers resulting in a quantum jump in carrying capacity of goods trains from 3,200 tons to 4,000 tons. Pioneering schemes like Preferential Tariff Schedule, Engine-on-Load2 ,Own Your Wagon, rationalized commodity classification ,etc further ensured that freight carriage grew by 10% and revenues vaulted by over 18%.

On the passenger side the minister has endeavored to keep most of his 2005-06 budget promises introduction of a high-speed trains, frequent traveler scheme, automatic upgradation to higher classes to fill up empty berths with waiting list passengers, SMS and internet booking of tickets, Tatkal scheme, extended Internet booking timings, etc. The genius of railway officials has been to increase coaches and frequency of trains on routes with high patronage and actually reducing the frequency of trains on sections with lower demand. Also reduction in AC tier 1& 2 fares, in direct competition to low cost air carriers, has actually ment a 6% rise in passengers carried.

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devised by M S Gujral, the chairman of the Railway Board during the 1980s train engine waits during loading and unloading operations to ensure faster release of wagons.

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The results have been quick. The railways have generated Rs 13,000 crore worth internal resources as also surplus revenue of Rs 11,000 crore. Another important aspect of this year’s budget is that the balance in various railway funds (development fund, pension fund etc.) has grown to about Rs 11,000 crore from a mere Rs 350 crore in 2000-01. Moreover, out of a total plan outlay of Rs 23,475 crores for 2006-07, Railways plans to manage 46% of resources from internal accruals, indicating the building confidence level. The future Whether this turnaround can be sustained once the RJD chief moves out of Rail Bhavan is yet another ball game.With the disinvestment of many leading Public Sector Enterprises, professional ethics are becoming the norm. The changing face of the Indian economy is also leading to less transportation of bulk goods and a greater value accorded to consumer items. Providing a Customer Oriented outlook to its business operations rather than a supply side oriented bureaucratic mentality would enable IR to maintain customer loyalty. This includes ready availability of wagons and the attraction of piecemeal loads rather than the insistence of rake loads.

An unwieldy workforce means that a greater part of IR’s finances are being diverted towards staff costs and pensions which is seriously compromising it’s ability to invest in capital goods like tracks and rolling stock leading to an alarming safety issue and the inability to keep abreast with global technology standards. A probable solution may be to Leverage IT enabled services like eticketing, Freight Operations Information System (FOIS), Claims Management System, etc to reduce manpower via retirement and reduced recruitment. Innovative marketing schemes like the Roll on Roll off (RORO) can be used to capture road based markets

Greater stress should be laid on rolling stock and track regeneration like using durable stainless steel coaches, 30-tonne axle load Wagons and continuously welded tracks, as well as a Dedicated Freight Corridor on Western and Eastern routes which would increase efficiency and enhance safety. Revenue can also be raided by utilizing Vacant Railway Land for revenue generation via publicprivate partnerships ,using Build Operate Lease Transfer (BOLT)3 methods for expansion

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Surendranagar-Pipavav (Gujarat) and Hasan-mangalore (Karnataka) Gauge Conversion project

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,reducing vote bank oriented subsidies like Garib raths and by having a separate estimate of the concessions provided by IR, with a straightforward reimbursement being made by the government . A novel way for IR to boost its revenues through the passenger segment is to exploit the potential of the value of its infrastructure. Trains and Railway stations are a ready Marketing Platform. For IR to move ahead as a premier logistics solution provider and passenger transporter it is necessary to focus on its core competencies and spin off whatever is not essential. Steps like the formation of an autonomous CONCOR, RITES for consultancy and IRCON for construction are a positive sign of the change from unified ownership to discrete focused entities. All sectors that do not require direct involvement can be contracted away. This would ensure that the attitude of the side units of IR will also gear up to professionalism.

Our suggestion would be to increase suburban train fares as they are used to commute to the workplace. According to the basic urban theory, land and transport are the major expenses of city life. So these fare hikes will not affect demand.

In any case, the time has come for the IR to be business-like, with a focus on Core Competencies, in its running so that areas in which it does not possess competence or expertise is carved out or outsourced for ensuring efficiency in services and satisfaction to end-users over the long haul. The Railways' new initiatives have but scratched the surface. The Railways needs to seriously introspect and change track, looking at its own products to provide for comprehensive integrated logistics solutions in partnership with major industrial sectors. They need to shed the baggage of the past and expeditiously bring about an effective change in its siding regime: Its cost-structure, staffing, and maintenance obligations.

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References

• ‘Rlys to enhance line capacity’, Financial Express, 25 February 2006 •

‘Railways go all out to reward its customers’, Financial Express, 25 February 2006

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CMIE, 2004. Center for Monitoring Indian Economy (CMIE) Database. www.cmie.com

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‘IR, different years. Year Book’, Ministry of Railways, 2003-04

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‘Nitish back on old borrowing track’, Business Line, 27 February 2002

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SEBASTIAN MORRIS , ‘Making Reform a Positive Sum Game:Uncovering the Hidden Potential’, Financial Express, 25 February 2006

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PIB, ‘Railway Budget speech’, http://rediff.com/Business/Budget 2005-06/, 25 February 2006

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MANDVI SHARMA, ‘Lalu goes to Harvard’;The Times Of India; 8 July 2006

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‘Largest annual plan outlay for Railways’; sify.com/finance/budget2006 ;24 February 2006

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'Thanks, but no thanks': Laloo to IIM delegates ;Press Trust of India, 04 may 2006

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A K Bhattacharya, ‘Lalu turns around Railways' fortunes’; HindustanTimes.com ; 23 November 2005

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‘Lalu refuses to be CEO, Railways India’; THE TIMES OF INDIA; 5 May 2006

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