Turnaround of Indian Railways

Topics: Indian Railways, Rail gauge, Rail transport in India Pages: 16 (5231 words) Published: November 8, 2008


Indian Railways (IR), which was declared to be heading towards bankruptcy as per the Expert Group on Indian Railways in 2001, is today the second largest profit making Public Sector Undertaking after ONGC. The fund balance crossed Rs.12,000 crores in 2005-06, which had reached a low of just Rs.149 crores in 1990-2000. The total investment being planning for the eight-year time frame (2007-2015) is tentatively in the order of Rs.350,000 crores. This confidence is not only due to the rising trend of performance, but also due to the significant growth in the past two years. These two years coincided with Mr. Lalu Prasad being at the helm of affairs of the IR, having moved into his position on 23rd May, 2004. Railway officials called this as the ‘turnaround’ of IR. This paper attempts a diagnosis of the ‘turnaround,’ beginning with the question as to whether it really was a ‘turnaround’. This paper then carried out an analysis of the various determinants of the ‘turnaround’ related to goods, passenger and other operations. This is followed by a critical assessment of the strategies and key processes being the ‘turnaround’. Finally the sustainability of the ‘turnaround’ is explored.

Statement of Problem

The Indian Railways in 1990 had major financial difficulties which hampered its growth and there were apprehensions on its capability to make available a viable transport service in future. According to experts the main reason for this was the practice of considering railways as an indispensable public service and to the tariff administration .another critical reason for the decline in growth and the financial crisis was the loss of passenger traffic to roads.

IR draws up its development plans within the framework of National Five Year Plans. Investment in the transport sector, including the railways, was the main concern in the early phase of India’s planned development. The plan wise outlays for IR beginning with the first to tenth plan are given below in the table: PLAN STRATEGY OUTCOME First Year( 1951-56)Rehabilitation & replacement of the over aged assets of railways.Revenue performance fairly satisfactory. Second Year(1956-61)Capacity augmentation to meet the requirements of new steel plants & increased coal production. Third Year(1961-66)Keep the rail transport capacity ahead of demand •Modernization of traction through dieselization & electrification •Improvements in signaling, track & rolling stock were also initiated. Fourth Year(1969-74)Modernization was on further operational efficiency.Resorted to loans from general revenues Fifth Year(1974-79)Concept of rapid transit system in metropolitan towns •Improvements in efficiency, reduction in cost & better utilization of assets.For the development fund; used for un-remunerative but essential work – passenger and staff welfare. Sixth Year(1980-85)Emphasis on rehabilitation, replacement & renewals was continued.disappointing due to huge loss that occurred and highest ever operating ratio of 96.3 % Seventh Year(1985-89)Emphasized the sixth plan because of the success.Freight output increased primarily on account of the long haul movement of bulk goods in block rakes •Reasonably balanced increase of tariffs of both passenger and freight traffic •Consequentially good financial results were achieved, resulting in washing out of the outstanding dues to the general revenues for the development fund. •The railway funds balance increased and the operating ratio came down

Eight Year(1992-97)Focused on completion of process of 6th & 7th yr plan. •Imp decision to adopt unigauge policy on IR.
Planned to phase out steam locomotives on broad and narrow gauges.Strengthened the achievements of the previous year’s plans

Ninth Year(1997-2002)Generation of adequate rail transport capacity to manage...
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