118

CHAPTER 5

GROWTH STORY OF INDIAN RAILWAYS

The present chapter attempts to review the growth story of Indian Railways (IR)

since 1981, especially after the reorganization of zones in 2003-04 in its various aspects

like physical infrastructure, output (passenger and freight), staff employed and finances.

For this, the chapter has been divided into two sections. Section I examines growth of

railways in India in the period from 1981-82 to 2010-11 while Section II attempts to

outline the inter-zonal growth in IR in the period from 1991-92 to 2010-11.

SECTION I

5.1 Growth of Indian Railways

For examining the growth performance of IR throughout the aforementioned

study period, this section is further divided into four parts. These different parts deal

with the growth of IR on four front‟s viz. physical infrastructure, output, staff employed

and finances. The growth of IR has been calculated for the period 1981-82 to 2010-11

(denoted as P1) which has been further divided into four sub-periods – P2 (from 1981-82

to 1991-92) known as the pre-reform period, P3 (from 1992-93 to 2002-03) the post-

reform period but before the further break up of zones, P4 (from 2003-04 to 2010-11)

indicating the post-reorganization phase and P5 (1992-93 to 2010-11) the post-reform

period which evaluates the complete impact of liberalization policy of 1991.

5.1.1 Growth of Physical Infrastructure

Since the commencement of reforms after 1990‟s, IR has tried to improve its

transport capacity through execution of modernization program and acquisition of

sophisticated plans, machinery and equipment, as well as laying special emphasis on

optimum utilization of railways assets. But Table 5.1 clearly shows that there is very

slow expansion in the route network of IR during the period under study. IR inherited

61230 of route km of rail network in 1981-82 and in 2010-11 railway network stood at

64460 km – an increase of only 3230 km over 30 years indicating stagnation in the

119

Table 5.1: Growth of Physical Infrastructure of Indian Railways.

Year

Total

Route

Kilometer

(RKM)

Running

Track

Kilometer

(RTKM)

Electrified

Track

Kilometer

(ETKM)

Number

of

Stations

(ST)

Total

Locomotives

(LOC)

Number

of

Passenger

Carriages

(PC)

Number

of

Wagons

(WG)

1981-82 61230 75964 5473 7072 10869 27192 392062

1982-83 61385 76197 5815 7068 10087 26894 383431

1983-84 61460 76407 5971 7065 10211 27311 374757

1984-85 61850 76963 6325 7093 10127 27793 365392

1985-86 61836 77153 6517 7092 9919 27735 359614

1986-87 61813 77254 7275 7105 9498 27629 354041

1987-88 61976 77671 8157 7084 9158 27463 346844

1988-89 61985 77845 8880 7083 8813 27715 345821

1989-90 62211 78320 9100 7076 8590 27969 349661

1990-91 62367 78607 9968 7100 8417 28677 346102

1991-92 62458 78969 10653 7116 8268 29469 346394

1992-93 62486 79200 11064 7043 7806 30298 337562

1993-94 62462 79188 11260 7050 7220 30537 312405

1994-95 62660 79495 11772 7056 6919 30036 291360

1995-96 62915 80441 12306 7068 6909 29472 280791

1996-97 62725 80754 13018 6984 6975 29978 272144

1997-98 62495 80908 13490 6995 7206 30739 263981

1998-99 62809 81511 13765 6896 7429 31554 252944

1999-00 62759 81252 14261 6867 7517 32208 234397

2000-01 63028 81865 14856 6853 7566 33238 222193

2001-02 63140 82354 15994 6931 7739 34338 216717

2002-03 63122 82492 16271 6906 7681 34871 214760

2003-04 63221 83859 17503 7031 7818 35654 227752

2004-05 63465 84260 17495 7133 7916 37087 222409

2005-06 63332 84370 17907 6974 8025 38156 207983

2006-07 63327 85389 17786 6909 8153 38855 207719

2007-08 63273 85158 18273 7025 8330 40696 204034

2008-09 64015 86937 18559 7030 8592 42058 211763

2009-10 63974 87087 18927 7083 8889 43556 220549

2010-11 64460 87040 19596 7133 9213 45123 229381

Source: Key Statistics of Indian Railways, Ministry of Railways, Government of India, 2010-11.

120

Table 5.1A: Growth Rates of Physical Infrastructure of IR.

Period RKM RTKM ETKM ST LOC PC WG

P1

(1981-82 to 2010-11)

0.139*

(21.340)

0.475*

(36.068)

4.595*

(25.869)

-0.049*

(-2.122)

-0.704*

(-2.993)

1.704*

(16.509)

-2.483*

(-17.704)

P2

(1981-82 to 1991-92)

0.187*

(13.014)

0.385*

(31.308)

7.205*

(21.862)

0.045*

(2.627)

-2.662*

(15.579)

0.652*

(4.742)

-1.250*

(-7.394)

P3

(1992-93 to 2002-03)

0.098*

(4.356)

0.436*

(14.951)

4.063*

(32.328)

-0.294*

(-4.742)

0.636

(1.566)

1.562*

(5.847)

-4.419*

(-21.994)

P4

(2003-04 to 2010-11)

0.247

(0.247)

0.612*

(7.834)

1.582*

(8.388)

0.127

(0.727)

2.355*

(11.801)

3.376*

(34.296)

0.052

(0.070)

P5

(1992-93 to 2010-11)

0.141*

(9.353)

0.562*

(25.866)

3.348*

(22.868)

0.032

(0.608)

1.287*

(7.725)

2.418*

(16.939)

-2.288*

(-7.193)

Source: Calculated by authors from Table 5.1.

Note: i) The figures in brackets ( ) are t-values.

ii) * indicates that the value is significant at 5 percent level of significance.

growth of route kilometers. The route kilometer of IR (RKM) has experienced a meager

growth of only 0.139 percent in the same period (see Table 5.1A). Comparing the

growth in distinct sub-periods, it was examined that growth of route kilometer

remained more or less stagnant indicating no significant expansion in the route network

of railways. There was, however, observed a slight higher growth in period P4 (after

reorganization) which was 0.247 percent but non-significant. It might be due to the

capacity constraints found on most of the high-density routes resulting in inadequate

services provided by IR. It may also be due to the fact that “the trunk routes which are

only 16 percent of IR network are carrying more than 50 percent of the traffic and as

such have already reached saturation levels of capacity utilization” (Ministry of

Railways, 2009a). The situation was no better when the growth of running track

kilometer (RTKM) was taken into account. The average annual growth rate of RTKM

was only 0.475 percent during the period under study (denoted by P1). Again marginal

improvements were seen in different sub-periods and a comparatively greater

improvement was seen in period P4 (0.612 percent) i.e. post-reorganization period

which was significant. It implied that reorganization of IR into new zones resulted in

some improvement in RKM and RTKM. The process of electrification of railway

network took place at a rapid pace in late eighties when it was almost doubled from

121

5473 km in 1981-82 to 10653 km in 1991-92 (see Table 5.1), growing at an average

rate of 7.205 percent per annum and then slowed down in post reform period when it

was only 3.348 percent in period P5. Through a comparative analysis of growth in

electrified track kilometer (ETKM) during pre- and post-reorganization, it is observed

that the electrification process showed least growth in the latter period i.e. only 1.582

percent in P4. Till 2010-11, only 19596 km of total route length (64460 km) was

electrified which was only 30.4 percent of the total railway network and even

reorganization had not made any significant positive impact in this area. This clearly

indicated that the capacity creation of IR had not kept pace with the transport output

over the study period. It was quite clear from the results that RKM had increased by

just 5 percent and RTKM by 12 percent during the study period even though in the

same period, freight and passenger outputs have gone up by 72 percent and 77 percent

respectively. Thus adding new lines to the railway network, doubling of lines and their

electrification are still the major areas of concern for IR.

The average annual growth rate of number of stations (ST) remained negative

(-0.049 percent) during the selected study period P1. The growth was also negative in P3

(-0.294 percent) but showed marginal increase in period P4 when it was 0.127 percent.

Looking at overall growth in post-reform period, the number of stations has grown at an

average rate of 0.032 percent per annum indicating virtual stagnation in development of

stations of railways. Ironically the existing stations were also ill maintained and ill

equipped to handle the needs of growing passengers. While looking at the growth of

rolling stock of railways, it was observed that the total number of locomotives (LOC)

had shown a negative growth in pre-reform period (-0.704 percent in P1 and -2.662

percent in P2). In the post-reform period, their growth showed an upward trend which

might be due to the replacement of steam and diesel locomotives with the electric ones

as a part of modernization exercise of IR. Even more significant growth was seen in P4

(2.355 percent) indicating a positive impact of reorganization on this area of

infrastructure. There had been a rapid increase in number of passenger carriages (PC)

whose average annual growth rate stood at 1.704 percent in P1. It was 0.652 percent in

P2, 1.562 percent in P3 and then increased to the maximum of 3.376 percent in P4 again

reflecting positive impact of restructuring on the improvement of number of

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passenger carriages. As regards number of wagons (WG), it was seen that there had

been significant decline during the period under study reflected by negative growth rate

(-2.483 percent). This decline was sharpened during period immediately following the

reforms i.e. P3 when the growth rate was -4.419 percent though marginal improvements

had been observed in the period following post-reorganization (at 0.052 percent growth

rate). This decline can be attributed to the fact that railways were facing stiff

competition from other modes of transport like better roads and low-cost airlines

requiring railways to provide an adequate number of faster services.

Thus the above analysis shows that IR are lagging behind in development of

physical infrastructure with its growth not being commensurate with rising investment

allocations and growing demand resulting in railways falling short of the targets set so

far. The major bottlenecks in completion of railway projects as considered by the

railway experts in their reports are “problems in land acquisition, funding tie-ups, scope

of or changes in design, re-tendering of construction contracts, and also delay in

clearance or approvals from State Governments and other concerned agencies” (FICCI,

2012). Hence capacity addition appears to be the key challenge for IR in coming years.

5.1.2 Growth of Output

Multi product character in terms of output is a distinctive feature of railway

industry. There are various types of passenger railway output i.e. long distance, urban,

high speed etc. as well as freight output like general, intermodal, parcels etc. Due to

shortage of data, the present study restricts the output to two important dimensions i.e.

passenger and freight. The commonly used parameters in these dimensions are the

number of passenger-kilometers (PKM) and net ton-kilometers (NTKM) (Caves et al.,

1980, 1982, and 1985; Mcgeehan, 1993; and Cantos et al., 1999).

Table 5.2 depicts the compound growth rates of passenger kilometers (PKM),

passenger average lead (PAL), net ton kilometers (NTKM), and freight average lead

(FAL). IR‟s passenger traffic had been growing at a fast pace in the entire study period

as seen in Table 5.2. It was of the order of 220787 million km in 1981-82, increased to

314564 million km in 1991-92 at a growth rate of 3.644 percent per annum (Table

5.2A), and then sharply to 541208 million km in 2003-04 at an average rate of 5.972

123

Table 5.2: Growth of Output of Indian Railways.

Year

Passenger

Kilometers

(PKM)

(in millions)

Passenger

Average lead

(PAL)

Net Ton

Kilometers

(NTKM)

(in millions)

Freight

Average lead

(FAL)

1981-82 220787.00 59.60 174202.00 709.00

1982-83 226930.00 62.10 177767.00 694.00

1983-84 222935.00 67.00 178446.00 692.00

1984-85 226582.00 68.00 182161.00 688.00

1985-86 240614.00 70.10 205904.00 719.00

1986-87 256535.00 71.40 223097.00 726.00

1987-88 269389.00 71.00 231241.00 726.00

1988-89 263731.00 75.30 230131.00 698.00

1989-90 280848.00 76.90 236917.00 709.00

1990-91 295644.00 76.60 242699.00 711.00

1991-92 314564.00 77.70 256895.00 714.00

1992-93 300103.00 80.00 258131.00 696.00

1993-94 296245.00 79.90 257130.00 681.00

1994-95 319365.00 81.60 252967.00 663.00

1995-96 341999.00 85.10 273516.00 675.00

1996-97 357013.00 86.00 279992.00 661.00

1997-98 379897.00 87.40 286771.00 644.00

1998-99 403884.00 91.60 284270.00 644.00

1999-00 430666.00 93.90 308039.00 644.00

2000-01 457022.00 94.60 315516.00 626.00

2001-02 490912.00 96.40 336445.00 644.00

2002-03 515044.00 103.60 356027.00 656.00

2003-04 541208.00 105.90 384074.00 661.00

2004-05 575702.00 107.00 411280.00 657.00

2005-06 615614.00 107.50 441762.00 647.00

2006-07 694764.00 111.70 483422.00 649.00

2007-08 769956.00 118.00 523196.00 651.00

2008-09 838032.00 121.10 552002.00 660.00

2009-10 903465.00 124.70 600548.00 676.00

2010-11 978508.00 127.90 625723.00 679.00

Source: Annual Statistical Statements of Indian Railways, Ministry of Railways, Government of India,

Various Issues.

124

Table 5.2A: Growth Rates of Output of Indian Railways.

Period PKM PAL NTKM FAL

P1

(1981-82 to 2010-11)

5.151*

(24.687)

2.438*

(45.625)

4.171*

(22.626)

-0.344*

(-5.480)

P2

(1981-82 to 1991-92)

3.644*

(12.431)

2.574*

(10.763)

4.291*

(11.609)

0.221

(1.271)

P3

(1992-93 to 2002-03)

5.972*

(31.614)

2.529*

(16.441)

3.326*

(10.836)

-0.735*

(-3.979)

P4

(2003-04 to 2010-11)

9.244*

(32.739)

3.020*

(12.657)

7.477*

(35.306)

0.469*

(2.025)

P5

(1992-93 to 2010-11)

6.909*

(36.031)

2.746*

(39.744)

5.448*

(18.975)

-0.078

(-0.720)

Source: Calculated by authors from Table 5.2.

Note: i) The figures in brackets ( ) are t-values.

ii) * indicates that the value is significant at 5 percent level of significance.

percent per annum. Thereafter the passenger traffic reached at a high of 978508 million

km in 2010-11, an increase of 9.244 percent per annum indicating a boost in passenger

traffic after reorganization. Again the positive impact of reforms could be seen on PKM

through a significant growth rate of 6.909 percent per annum in P5. “The growth in

passenger traffic was found more in suburban second class passengers, second class

mail/express passengers and in second class ordinary” (Ministry of Railways, 2009b).

This growth can be attributed to various factors like higher mobility of passengers,

running higher number of special trains, introducing new trains, increase in tourism and

alike. The average lead of passenger traffic (PAL) increased progressively during the

study period from 59.60 km in 1981-82 to 127.90 km in 2010-11 at a growth rate of

2.438 percent per annum (denoted by P1 in Table 5.2A). The compound growth rate of

PAL was highest at 3.020 percent in P4 again showing increasing mobility of Indian

population after reorganization of railways into smaller zones. As pointed by Rao and

Sriraman (1985a), “the major source of higher passenger movements might be an

increase in agricultural and industrial incomes. Further, the length of the haul of

passenger services on IR had also increased due to the movement of people from

agricultural to industrial areas (i.e. due to urbanization)”.

125

Freight is the key profit earner for Indian Railways. The Railways carry a huge

variety of goods ranging from mineral ores, fertilizers and petrochemicals, agricultural

produce, iron and steel, multimodal traffic and others and make 70 percent of its

revenues from freight. To meet the rapidly growing requirements of the industries and

the trade, the freight traffic moved by the railways had also grown rapidly over the

study period. The freight traffic in terms of net ton-kilometers (NTKM) had moved

from a level of 174202 million tons in 1981-82 to a level of 625723 million tons in

2010-11, an increase of 451521 million tons (at 4.171 percent rate of growth as shown

in Table 5.2A). It grew at a rate of 4.29 percent in P2 and then declined to 3.326 percent

in P3 representing a fall in freight traffic after reforms till 2002-03 which might be due

to the general recession in the industrial sector during nineties as well as caused by the

crowding-out effect of new passenger trains. During this period, the movement of

important bulk commodities like coal, food grains, iron ore etc. grew at a very slow

pace. But in P4, the growth of NTKM registered a sharp increase of 7.477 percent per

annum. This rise in freight traffic after reorganization process may be attributed to the

improvement in the movement of coal, iron ore and cement traffic for meeting their

increased demand. The growth of freight traffic in terms of lead showed a decline of -

0.344 percent per annum during the entire study period. It was, however, positive (0.469

percent) in P4 mainly due to the major strategies followed by IR in goods sector like

FOIS (Freight Operations Information System) for better monitoring, improving the

infrastructure at the goods sheds, reducing terminal detentions by increasing goods

sheds working hours, increasing length of trains, increasing the carrying capacity of

wagons, and running of double-stack container trains.

Thus from the above analysis, it has been noticed that the growth estimates of

passenger and freight traffic of IR have shown better performance during P4

highlighting positive impact of reorganization on output growth of IR. Better output

growth in post-reorganization period can be attributed to the “efforts made by the

railways to reduce unit costs in core activities, to carry large volumes by increasing the

capacities, optimization of existing infrastructure, and increasing the time interval

between two successive wagon examinations” (Alivelu, 2010). However, the growth in

PKM has been observed to be more significant than that in NTKM.

126

5.1.3 Growth in Staff Employed

IR is the largest employer in the public sector in the country with its employees

constituting a key pillar of its strength. The staff employed in IR has been divided into

three categories- skilled management personnel (Group A & B), semi-skilled labor

(Group C), and unskilled labor (Group D). The manpower in IR is mainly distributed in

open line and construction wings having engineering, signal and communications,

electrical, administration accounts and stores department. Open line, in addition, has

staff working in the transportation, mechanical, commercial, medical and security

department. The manpower personnel in Group A & B constitute about 1.3 percent of

total strength, while Groups C & D account for 81.1 percent and 17.6 percent of total

staff respectively clearly indicating more burden of semi-skilled and unskilled workers

on IR. “The railways spend around 42 percent of their earnings on wages and

allowances and 17 percent on pensions in 2009-10 which emphasizes the importance of

efficient management of manpower in railways” (Ministry of Railways, 2009a). Table

5.3 depicts the compound growth rates of staff employed in these categories as well as

expenditure incurred by railways on staff. The total staff employed in IR had dropped

from 1574980 in 1981-82 to 1328200 in 2010-11, a decline at the rate of -0.637 percent

per annum. Their number, however, increased in eighties at a rate of 0.496 percent per

annum in P1 but came down gradually thereafter (see Table 5.3A). The decline was

more pronounced in the post-reform period P5 (-1.176 percent) which might be due to

the cost cutting strategy adopted by IR in late nineties to overcome the financial crisis.

Analyzing the different categories of railway staff, it is observed that the most rigorous

decline was in Group C staff whose number had declined from a high of 835013 in

1981-82 to 752603 in 1991-92 (at a rate of -1.202 percent per annum) and then more

sharply to 234500 in 2010-11 (at a rate of -3.968 percent per annum). While in case of

Group A & B staff, a marginal increase was seen during the period under study. Their

number increased at an average rate of 1.020 percent per annum in P1. In post-reform

period P4, this category of railway staff showed a growth of 1.161 percent per annum

which aggravated further in P4 with a growth of 2.289 percent per annum. This huge

staff strength led to the formation of Rail India Technical and Economic Services

Limited (RITES) in 1991 which observed that manpower deployment in various

activities of railways was very high and recommended effective monitoring of

127

Table 5.3: Growth and Expenditure of Staff Employed in Indian Railways.

Year Group

A & B Group C Group D Total staff

Expenditure on

staff

(in millions)

1981-82 11613 728354 835013 1574980 7284.159

1982-83 11807 740485 831802 1584094 6885.594

1983-84 12074 777146 803122 1592342 7154.994

1984-85 12440 796701 794039 1603180 7998.715

1985-86 12554 821679 779047 1613280 8400.898

1986-87 12802 827611 771073 1611486 9508.366

1987-88 13233 851772 752608 1617613 10352.960

1988-89 13646 871831 740682 1626159 10337.090

1989-90 13957 882078 750669 1646704 10024.960

1990-91 14292 891388 746109 1651789 9928.690

1991-92 14308 887155 752603 1654066 10945.520

1992-93 13842 891515 740164 1645521 10610.160

1993-94 13778 894528 717189 1625495 10162.500

1994-95 13479 895541 693031 1602051 10077.270

1995-96 13696 891903 681055 1586654 11277.960

1996-97 13914 902355 667345 1583614 12323.600

1997-98 14141 893854 670807 1578802 15006.800

1998-99 14555 900052 663827 1578434 16722.640

1999-00 14585 908603 654004 1577192 17088.430

2000-01 14832 900318 630158 1545308 20274.820

2001-02 14241 890004 606514 1510759 21172.560

2002-03 13621 869965 588264 1471850 21051.540

2003-04 14291 860067 567155 1441513 21480.450

2004-05 14960 873716 535713 1424389 22552.710

2005-06 15401 883880 513154 1412435 24361.510

2006-07 15775 898492 483343 1397610 22482.170

2007-08 16131 907510 470879 1394520 22702.710

2008-09 16441 913343 456227 1386011 34626.670

2009-10 16700 904720 440000 1361520 38726.780

2010-11 16800 1076900 234500 1328200 36662.500

Source: Key Statistics of Indian Railways, Ministry of Railways, Government of India, 2010-11

128

Table 5.3A: Growth Rates of Staff Employed in Indian Railways.

Period Group A &B Group C Group D Total staff Expenditure

on staff

P1

(1981-82 to 2010-11)

1.020*

(12.614)

0.608*

(5.968)

-2.551*

(-8.973)

-0.637*

(-8.415)

5.726*

(20.725)

P2

(1981-82 to 1991-92)

2.280*

(21.075)

2.135*

(12.871)

-1.202*

(-7.580)

0.496*

(18.079)

4.873*

(7.702)

P3

(1992-93 to 2002-03)

0.464

(1.686)

-0.084

(-0.779)

-1.972*

(-12.451)

-0.882*

(-7.622)

9.115*

(12.034)

P4

(2003-04 to 2010-11)

2.289*

(11.054)

2.235*

(3.001)

-8.591*

(-3.229)

-1.016*

(-9.192)

9.353*

(4.311)

P5

(1992-93 to 2010-11)

1.161*

(8.211)

0.305

(1.672)

-3.968*

(-6.771)

-1.176*

(-20.904)

11.064*

(17.711)

Source: Calculated by authors from Table 5.3.

Note: i) The figures in brackets ( ) are t-values.

ii) * indicates that the value is significant at 5 percent level of significance.

manpower strength, reduction in staff by freezing of existing vacancies putting in

recruitment ban, ad hoc cut in staff strength, introduction of voluntary retirement

scheme, timely identification of surplus staff etc. Perusal of the Table 5.3 shows that

their recommendations have been followed to some extent. During P3 the overall

decline was -0.882 percent per annum with maximum being in case of unskilled

workers (-1.972 percent) while in case of management cadre there was a marginal

increase. During the period following reorganization the decline was significant i.e.

-1.016 percent per annum for overall staff and -8.591 percent per annum for Group D

workers. However there was an increase in staff strength of Group A & B (2.289

percent) and Group C (2.23 percent). A relatively greater increase had been seen in the

latter category as the employees were of the order of 46 percent in 1981-82 and grew

sharply to 81 percent in 2010-11 with more rigorous increase in P4 (i.e. post

reorganization period). This increase could be attributed to the expansion of railway

activities as a part of modernization exercise which involves more construction of as

well as repair and maintenance of railway assets. The increasing burden of staff on

railways was also supported by the rising expenditure of railways on its staff. A huge

amount was spent on wages, salaries, pensions and liabilities and other allowances of

railway staff due to which staff expenditure increased at a rate of 5.726 percent per

129

annum during the study period. Again in post-reform period, a healthy upward trend

was seen in staff expenditure when it grew at a rate of 11.064 percent per annum.

Comparing distinct sub-periods, greater increase was observed in P4 (9.353 percent)

indicating the failure of reorganization process of IR in cutting down its expenses.

Thus, though “Indian Railways has set itself a goal of 1 percent reduction in the

sanctioned strength per annum, assuming a 3 percent annual retention to reach

equilibrium level of right-sized staff-strength” (Ministry of Railways, 2009a), the

overstaffing remains a major problem for IR.

5.1.4 Growth of Financial Resources

The financial position of the railways assumes greater importance in the light of

the amount of investment made on this largest public sector undertaking of Indian

Government. The financial resources of IR have been through several vicissitudes over

the decades. There have been phases of relative buoyancy as well as of insufficiencies.

The financial health of IR is governed by several factors whose principal revenue

earners are freight and passenger business. “While freight and passenger traffic generate

the major portion of earnings, they are supplemented by parcels, luggage and non-

traditional sources of earnings such as lease of land, advertisement revenues and other

sundries” (Verma, 1998).

Table 5.4 attempts to study the various aspects related to the financial

performance of the railways like passenger earnings (PE), freight earnings (FE), gross

receipts (GR), total investments (TI), capital at charge (CC), total working expenses

(WE), net revenue (NR), surplus/deficit (SD), operating ratio (OR) and ratio of net

revenue to capital at charge (NRTCC) in order to find out the impact of reorganization

on it. It can be clearly seen from the Table 5.4A that gross receipts of railways had

grown at a rate of 4.962 percent per annum during the entire study period P1. Freight

earnings with a share of about 66 percent in gross receipts contributed maximum

relative of passenger earnings whose share was just 28 percent in 2010-11. However

taking into account the rates of growth of passenger and freight earnings, it was

observed that growth in passenger earnings was comparatively more (5.334 percent)

than that of freight earnings (4.864 percent) during the entire study period. In pre-

130

reform period P2, the growth in freight earnings was more than that of passenger

earnings but the situation was reversed in P3 when passenger earnings started growing

faster than freight earnings. The low fare passenger traffic has grown at a faster rate in

past few years which might have been resulted from an increase in passenger capacity

in the form of new and longer trains, running of special trains to capture seasonal

requirements, longer lead, better passenger services and customer friendly initiatives.

On the contrary, in post reorganization period, freight earnings started improving to

grow at a rate of 7.082 percent per annum which also caused increase in the growth of

gross receipts.

The total investments grew progressively in the period under review. These

grew at a rate of 6.806 percent per annum in P1 and more rapidly in P4 at a rate of

12.354 percent per annum. It may be due to more emphasis on modernization of

railways resulting in expansion in the activities of railways in terms of physical

infrastructure and financial matters. The compound growth rate of capital at charge

grew from a low of 0.548 percent per annum in P2 to 6.984 percent per annum in P3 and

then to a high of 7.829 percent per annum in P4. This showed an increase in the amount

of loan capital advanced by the government to railways in post-reform period clearly

indicating dismal performance of railways on financial front making it difficult to

survive on its own. Due to the increase in traffic, higher workload and the maintenance

of larger assets, and higher cost of staff, the total cost of railway operations had

increased. The compound growth rate of total working expenses was quite high in P4

(7.427 percent per annum) might be due to modernization of railways and higher staff

wages. However the highest percentage increase in working expenses was found during

post reform period in 1997-98 (15.56 percent per annum). During this year, the

percentage increase in revenue gross receipts was 10.173 percent only. In 2000-01, the

yearly increase in gross revenue receipts (3.09 percent) was less than half of the total

working expenses (8.93 percent) indicating loss to railways. It was the period when the

financial performance of IR was dithering and Rakesh Mohan Committee (2001) termed

it as „White Elephant‟. Though total investments increased at a faster rate during this

period yet most of them proved to be less productive. This was also supported by the

negative growth of net

131

Table 5.4: Growth of Financial Resources of Indian Railways. (Rs. Crores)

Year

Passenger

Earnings

(PE)

Freight

Earnings

(FE)

Gross

Receipts

(GR)

Total

Investment

(TI)

Capital at

Charge

(CC)

Total

Working

Expenses

(WE)

Net

Revenue

(NR)

Surplus/

Deficit

(SD)

Operating

Ratio

(OR)

Ratio of Net

Revenue to Capital

at Charge

(NRTCC)

1981-82 4963.365 11834.056 18213.733 40989.685 33628.481 15975.549 2023.804 233.960 96.07 2.09

1982-83 4677.529 11968.047 18053.345 35766.828 29198.717 15637.266 2232.054 476.370 89.40 6.02

1983-84 4744.166 11754.386 17837.855 32952.941 26525.971 16339.070 1328.437 -156.678 88.34 7.64

1984-85 4958.196 12243.903 18588.477 35270.557 29170.698 17477.404 1257.903 -324.927 93.52 5.01

1985-86 5337.113 13582.220 20456.504 35665.585 28176.185 18072.074 2128.700 554.908 96.25 3.26

1986-87 5542.803 14658.587 21940.191 37999.756 29621.871 19705.650 1944.122 291.276 90.58 7.56

1987-88 5349.063 15532.303 22536.380 39408.481 30177.120 20260.282 1877.534 218.886 92.20 6.56

1988-89 5779.350 14929.342 22426.845 40575.253 30567.833 20318.930 1735.335 50.839 92.47 6.22

1989-90 5596.450 15987.910 23152.432 41373.345 30676.783 18867.391 2059.378 363.395 95.05 5.67

1990-91 6048.946 16158.518 23929.805 42565.364 30990.977 21436.044 2140.529 360.727 91.52 6.71

1991-92 6674.152 17139.774 25563.933 44720.172 32084.659 22441.962 2791.388 787.965 91.97 6.91

1992-93 6649.485 16801.465 24832.439 43838.123 31009.460 21543.062 3013.233 679.572 89.48 8.70

1993-94 6507.619 16693.654 24411.946 42685.444 27749.108 20119.619 4123.894 2401.007 87.36 9.72

1994-95 6497.563 16256.335 24413.697 42142.291 25880.962 19729.344 4528.684 2909.317 82.93 13.71

1995-96 7031.486 17554.777 26192.443 45461.664 25542.623 21268.279 4747.473 3295.826 82.64 15.28

1996-97 7410.451 18621.310 27707.413 49856.541 34533.916 23461.586 4049.204 2365.061 82.45 14.92

1997-98 7660.636 20095.765 29470.566 49624.191 34237.069 26174.748 3059.419 1553.026 86.22 11.73

1998-99 8730.627 20382.084 30872.724 54791.171 37607.356 28422.634 2186.435 407.531 90.92 10.94

1999-00 9581.100 22061.000 23855.700 58353.400 39772.000 30844.000 2735.700 845.900 93.34 7.84

2000-01 10786.277 23906.122 36939.699 64974.520 44162.076 35561.345 1098.826 783.293 93.31 8.45

2001-02 11759.518 26094.988 41337.282 73644.027 49518.552 38118.550 2455.063 1050.610 98.34 2.49

2002-03 12670.182 26704.569 43063.646 78503.057 51484.238 38312.403 3859.069 1123.807 96.02 4.96

2003-04 13010.291 27019.861 43937.946 85580.015 54847.638 38627.112 4381.507 1067.763 92.34 7.50

2004-05 14112.500 30778.400 49046.600 98490.000 59346.900 42758.900 5273.500 2074.200 92.19 7.99

2005-06 15405.210 36956.820 57799.582 114251.131 67094.445 46127.635 8153.680 4418.075 90.98 8.89

2006-07 16028.923 38820.899 60288.926 121133.506 70753.301 45642.113 13449.890 9497.866 83.72 12.15

2007-08 17399.598 41591.470 64249.772 1386288.144 64660.471 47753.088 16075.464 11776.544 78.68 24.10

2008-09 18957.138 46324.027 70794.094 152831.821 72208.521 62281.002 7953.736 38638.005 75.94 24.86

2009-10 17587.619 43805.253 65222.764 152239.753 92101.225 62085.874 4151.338 0.562 90.46 9.63

2010-11 17607.093 42900.348 64526.903 158109.939 97173.780 61078.722 4332.132 959.035 95.28 4.51

Source: Annual Statistical Statements of Indian Railways, Ministry of Railways, Government of India, Various Issues.

132

Table 5.4A: Growth Rates of Financial Resources of Indian Railways.

Period PE FE GR TI CC WE NR SD OR NRTCC

P1

(1981-82 to 2010-11)

5.334*

(23.317)

4.864*

(21.545)

4.962*

(16.848)

6.806*

(6.358)

4.073*

(9.850)

4.911*

(18.895)

5.383*

(5.391)

21.682*

(2.571)

-0.197

(-1.546)

2.843*

(2.579)

P2

(1981-82 to 1991-92)

3.058*

(7.376)

4.182*

(10.991)

3.776*

(11.270)

2.015*

(2.986)

0.548

(0.895)

3.523*

(8.385)

3.021

(1.444)

79.110

(1.214)

0.027

(0.097)

6.232

(1.757)

P3

(1992-93 to 2002-03)

7.440*

(11.511)

5.422*

(12.804)

5.628*

(4.538)

6.558*

(10.559)

6.984*

(6.687)

7.678*

(10.573)

-6.000

(-1.663)

-8.028

(-1.354)

1.393*

(3.309)

-9.807*

(-2.503)

P4

(2003-04 to 2010-11)

4.781*

(5.048)

7.082*

(4.977)

5.865*

(4.314)

12.354

(0.835)

7.829*

(6.090)

7.427*

(6.848)

-1.385

(-0.159)

-34.157

(-0.768)

-0.569

(-0.416)

1.370

(0.140)

P5

(1992-93 to 2010-11)

6.991*

(23.418)

6.617*

(22.038)

7.014*

(14.220)

11.438*

(4.670)

7.472*

(18.788)

7.013*

(23.217)

5.283*

(2.167)

-3.651

(-0.395)

0.048

(0.158)

-0.488

(-0.208)

Source: Calculated by authors from Table 5.4.

Note: i) The figures in brackets ( ) are t-values.

ii) * indicates that the value is significant at 5 percent level of significance.

iii) PE - Passenger Earnings, FE – Freight Earnings, GR – Gross Receipts, TI – Total Investment, CC – Capital at Charge, WE – Working Expenses, NR – Net

Revenue, SD – Surplus/Deficit, OR – Operating Ratio, NRTCC – Net Revenue to Capital at Charge.

133

revenue along with a fall in surplus earned by railways in post-reform period. In pre-

reform era, there were found dynamic fluctuations in the surplus earned by IR while

railways gained a momentum after reforms as the surplus increased to 3295.826 million

in 1995-96 but again started declining in late nineties. However, the situation revived

thereafter when restructuring of zones took place in 2003. It was also observed that

there was more than a two-fold increase in the surplus earned by the railways in the

years 2004-05, 2005-06 and 2006-07 than the preceding years and in 2008-09 it more

than tripled the surplus earned in 2007-08. The operating ratio, which shows the

relationship between the working expenses and gross revenue receipts, is a good index

of profitability of IR. It was quite high in pre-reform period, declined in post-reform

period till 1996-97 to 82.45 after which it again started rising and reached to the

maximum of 98.34 in 2001-02. In post-reorganization period, it followed a declining

trend till 2008-09 when it fell to the lowest of 75.94 but started rising again thereafter.

Similar trend was followed by the ratio of net revenue to capital at charge (NRTCC).

This ratio was lowest (3.26) in 1985-86 and highest (24.86) in 2008-09.

5.1.5 Asset Utilization of Indian Railways

Operational efficiency is the bedrock on which the financial health of an

undertaking like IR rests. The dramatic increase in the asset base of railway industry

reflected in terms of increased investments under conditions of capital scarcity makes

efficient utilization of these assets necessary. “The operational efficiency of railways is

mainly reflected in the indicators of utilization of major assets in producing the traffic

outputs” (Verma, 1998). These include the track, the rolling stock consisting

locomotives, freight wagons and passenger carriages, the staff and other fixed assets.

An attempt has been made to analyze the relationship between the operational

efficiency and financial performance of IR over the selected study period as depicted in

Table 5.5 and Table 5.5A.

Track Utilization

The effective use of railway network is reflected in the density of traffic i.e.

passenger kilometer per route kilometer (PKM/RKM) and net ton kilometer per route

134

Table 5.5: Asset Utilization of Indian Railways.

Year

Passenger

Kilometer per

Route

Kilometer

(PKM/RKM)

(millions)

Net Ton

Kilometer per

Route Kilometer

(NTKM/RKM)

(millions)

Earnings

per

Carriage

(EPC)

(in ‘000)

Earnings

per Wagon

(EPW)

(in ‘000)

Wagon

Turn

Round

(WTR)

(days)

Traffic Units

per Employee

(TPE)

1981-82 7211 5580 0.916 0.152 27.5 250.79

1982-83 7360 5648 0.700 0.126 26.6 255.48

1983-84 7182 5662 0.609 0.110 27.2 252.07

1984-85 7194 5651 0.606 0.114 27.6 254.96

1985-86 7611 6377 0.597 0.117 26.3 276.78

1986-87 8102 6890 0.573 0.118 24.3 297.63

1987-88 8480 7097 0.506 0.116 23.9 309.49

1988-89 8266 7019 0.491 0.102 23.7 303.70

1989-90 8715 7153 0.420 0.096 24.2 314.43

1990-91 9087 7272 0.405 0.090 24.8 325.92

1991-92 9605 7659 0.430 0.094 24.2 345.49

1992-93 8928 7472 0.355 0.080 23.5 339.24

1993-94 8613 7202 0.297 0.075 25.4 340.43

1994-95 8974 6729 0.270 0.070 24.4 357.25

1995-96 9417 7062 0.287 0.075 24.2 387.93

1996-97 9597 6983 0.290 0.080 23.2 402.25

1997-98 10090 6881 0.264 0.081 25.5 422.26

1998-99 10469 6626 0.296 0.086 27.2 435.97

1999-00 11073 7104 0.312 0.099 21.2 468.37

2000-01 11576 7206 0.349 0.116 20.4 499.92

2001-02 12450 7620 0.377 0.133 18.3 547.64

2002-03 12915 7934 0.384 0.131 17.8 591.82

2003-04 13517 8365 0.375 0.122 16.7 641.88

2004-05 13511 8736 0.381 0.138 15.9 692.92

2005-06 14206 9215 0.411 0.181 6.08 748.62

2006-07 15626 9813 0.384 0.174 5.49 843.00

2007-08 16920 10333 0.375 0.179 5.23 927.31

2008-09 17533 10523 0.391 0.190 5.19 1002.90

2009-10 18460 11160 0.302 0.149 4.98 1104.66

2010-11 20270 11430 0.266 0.128 4.97 1207.82

Source: Author‟s Calculations

135

Table 5.5A: Growth Rates of Asset Utilization of IR.

Period PKM/RKM NTKM/RKM EPC EPW WTR TPE

P1

(1981-82 to 2010-11)

3.416*

(20.489)

2.020*

(10.513)

-2.416*

(-5.046)

1.312*

(2.355)

-5.517*

(-7.277)

5.402*

(21.034)

P2

(1981-82 to 1991-92)

2.992*

(9.814)

3.549*

(9.291)

-6.736*

(-9.101)

-3.911*

(-5.676)

-1.507*

(-4.442)

3.421*

(11.547)

P3

(1992-93 to 2002-03)

4.171*

(14.878)

0.630

(1.267)

2.117

(1.858)

6.474*

(6.135)

-2.994*

(-3.191)

5.750*

(20.558)

P4

(2003-04 to 2010-11)

6.269*

(15.113)

4.702*

(21.622)

-4.354*

(-2.601)

1.069

(0.374)

-16.166*

(-3.585)

9.639*

(55.447)

P5

(1992-93 to 2010-11)

4.807*

(30.016)

3.003*

(8.994)

1.081

(1.807)

5.587*

(8.492)

-10.339*

(-8.357)

7.548*

(29.876)

Source: Calculated by authors from Table 5.5.

Note: i) The figures in brackets ( ) are t-values.

ii) * indicates that the value is significant at 5 percent level of significance.

kilometer (NTKM/RKM) which reflects the average number of PKMs and NTKMs

carried over a kilometer of route length. An increase in these indicators signifies greater

utilization of railway route network. From Table 5.5, it is observed that passenger traffic

density had increased from 7211 million in 1981-82 to 20270 million in 2010-11 at a

rate of growth of 3.416 percent per annum, though the maximum increase was seen

during the period P4 when it grew at the rate of 6.269 percent per annum. In case of

freight density also there had been growth from 5580 million to 11430 million, but the

growth was relatively slow at an average of 2.021 percent. Again the growth in

NTKM/RKM was observed to be maximum during the period P4 (4.702 percent), though

it was relatively quite lesser than that of PKM/RKM. Thus, nevertheless there was more

effective use of railway network in post-reorganization period but passenger density

posted greater advantage.

Utilization of Rolling Stock

“Efficiency indicators relating to rolling stock constitute significant efficiency

measures in all the railway systems in the world, as the rolling stock are at the cutting

edge of converting railway assets into the eventual transport products” (Verma, 1998).

The selected indicators considered under this are utilization of passenger carriages and

136

wagons in terms of earnings derived per unit of assets. Table 5.5 depicts that the

earnings per carriage (EPC) dropped from 0.916 in 1981-82 to 0.266 in 2010-11 at a

negative growth rate of 2.416 percent per annum. It implied that despite the increase in

PKMs (as observed in table 5.2); passenger traffic had not played a significant role in

revenue generation. This may be due to lower fares charged especially from middle and

lower class passengers by IR. On the contrary, the earnings per wagon (EPW) increased

at a rate of 1.312 percent per annum during period P1, with more rapid increase in pre-

reform period (i.e. during P5 when it was 5.587 percent) which might be the result of

conducive industrial climate.

Wagon Utilization

Wagon turn round (WTR) is used to measure the time interval between two

successive loadings of a wagon. Analyzing the data on this indicator, it has been

observed in the Table 5.5 that the wagon turn round time fell heavily during the period

under study from about 28 days in 1981-82 to only about 5 days in 2010-11. This

decline was carried out at a rate of -5.517 percent per annum indicating comparatively

lesser time taken during subsequent loadings and thus higher speeds of wagons which is

a good sign for freight segment of railways. The decline was observed to be most

pronounced in post-reorganization era, when WTR declined at a highly significant rate

of -16.166 percent per annum.

Staff Productivity

IR employs a massive workforce of about 1.4 million which is considered to be

a major bottleneck in the way of success of IR. To measure staff productivity, total

traffic units (NTKMs plus PKMs) per employee, denoted by TPE, is considered which

had improved from 250.79 in 1981-82 to 1207.82 in 2010-11 experiencing a growth of

5.402 percent per annum. However, a sharp increase was found in post-reorganization

period P4 when this indicator grew at a highly significant rate of 9.639 percent per

annum. It may be due to the improved traffic of railways in this period (as was seen in

Table 5.2) or due to the fact that the contribution to output made by the management

personnel (Group A & B) was more as compared to the semi-skilled labor (Group C).

Also the effectiveness, with which the higher level decision jobs are transmitted, has a

137

greater impact on the entire productivity vis-à-vis the efficiency with which semi-

skilled jobs are accomplished. More generally, the increase in the growth rates of staff

productivity was probably because of the reorientation of human resource development

strategies in accordance with the internal and external changes taking place over time

(Alivelu, 2010). Despite of a significant growth in output per employee, it must be

realized that IR had made substantial investments during this period to upgrade the

track, signaling and rolling stock. Thus it will be somewhat naive to equate

mechanistically the growth in TPE with a corresponding growth in staff efficiency as

such. As a matter of fact, IR employs much more labor force than any other railways in

the world and can be considered as highly overmanned indicating the urgent need for

the railways to retrench the enormous manpower.

SECTION II

5.2 Inter-Zonal Growth of Indian Railways

This section tries to analyze the growth performance of 16 zones of Indian

Railways (IR) in terms of physical and financial performance as well as asset utilization

in railways. The compound growth rates have been calculated for three different

periods- Entire period (from 1991-92 to 2010-11) denoted as P1, Pre-reorganization

period (from 1991-92 to 2002-03) denoted as P2 and Post-reorganization period (from

2003-04 to 2010-11) denoted as P3.

5.2.1 Physical Growth of Zones of IR

The performance of physical infrastructure among the 16 zones of IR has been

mixed and uneven during the study period as can be seen in Table 5.6 and Table 5.7. It

is observed that there had been stagnation in rail network expansion in terms of route

kilometer (RKM) and running track kilometer (RTKM). There was seen a marginal

increase in RKM of Central, Eastern, Northern, North Eastern, South Central and South

Eastern zones during post-reorganization period while Southern and Western zones

experienced a decline in the same period. This was due to the reason that two new zones

namely South East Central and South Western were carved out of Southern zone while

three zones, North Western, South Western and West Central were carved out of

Western zone causing fall in the route network of the parent zones. The new zones

138

made after restructuring of previous zones showed a significant growth during post-

reorganization period with the highest growth attained by East Coast zone (0.791

percent) followed by East Central zone (0.760 percent). Similarly the growth in RTKM

was also observed to be very low with a little improvement after reorganization.

However, Southern, South Eastern and Western zones showed a fall in the growth of

RTKM after reorganization than what was observed during pre-reorganization period.

Among newly made zones West Central showed an insignificant decline in the growth

of RTKM while other zones experienced marginal improvements. The significant

growth was shown by North Western and North Central zones to the tune of 1.272

percent and 0.824 percent per annum respectively. The electrification process slowed

down after reorganization as evident from falling growth rates of electrified track

kilometer (ETKM) for all the previous zones barring Southern and Western zones for

which the growth of ETKM increased at a rate of 5.609 percent and 1.929 percent per

annum from the levels of 4.868 percent and 0.240 percent per annum (during pre-

reorganization period) respectively. Even some zones were identified as having

negligible electrification of the network like North Eastern, Northeast Frontier and

North Western zones. Furthermore, it was noticed that less than 50 percent of the

network had been electrified in all railway zones (see Appendix 5.1 for detailed results)

which is a matter of serious concern. All new zones, however, were observed to

experience a positive significant growth in ETKM except East Central zone (in which

there was a non-significant decline of -2.732 percent).

The growth in rolling stock of railway zones was disappointing over the study

period. Analyzing the performance of rolling stock after restructuring of railways, it is

observed that Central, Eastern, Northern and South Eastern zones showed

comparatively significant growth in number of stations (ST) during post-reorganization

period than what was observed during pre-reorganization period, with maximum growth

seen in Central zone (4.202 percent). Among the new zones, East Central and East

Coast also showed significant but marginal improvements in number of stations (i.e.

0.804 percent and 0.669 percent respectively). In case of number of locomotives (LOC),

the maximum growth was observed in South Western zone (11.429 percent) followed

by North Central zone (4.175 percent). Most of the previous zones, however, followed a

139

Table 5.6: Growth Rates of Physical Growth of Nine Old Zones of Indian Railways.

Zones Period RKM RTKM ELC ST LOC PC WG STF PKM PAL NTKM FAL

Central

P1

-4.235*

(-6.536)

-4.132*

(-6.289)

-3.169*

(-5.030)

-2.849*

(-4.125)

-3.618*

(-3.922)

0.649*

(2.523)

-9.350*

(-8.562)

-4.380*

(-8.269)

2.621*

(4.711)

0.019

(0.041)

-0.625

(-1.028)

-4.055*

(-4.503)

P2

0.128

(1.804)

0.290*

(4.601)

1.354*

(4.757)

0.987*

(5.089)

3.082*

(9.021)

2.260*

(6.086)

-2.354*

(-6.216)

-0.622*

(-3.985)

5.996*

(16.752)

2.758*

(6.530)

3.343*

(4.600)

1.113

(0.646)

P3

0.415*

(7.107)

0.608*

(8.905)

0.194*

(2.653)

4.202*

(5.981)

1.368*

(6.010)

-1.148*

(-2.643)

-15.352*

(-3.991)

-1.431*

(-12.043)

7.663*

(15.664)

3.068*

(2.939)

2.671*

(5.058)

-6.358*

(-3.574)

Eastern

P1

-4.061*

(-6.897)

-3.666*

(-5.981)

-0.347

(-0.390)

-3.110*

(-6.727)

-2.932*

(-4.479)

-1.010*

(-2.762)

-9.449*

(-9.100)

-3.987*

(-9.736)

2.562*

(9.517)

-0.884*

(-4.677)

-4.407*

(-3.903)

-3.978*

(-6.895)

P2

-0.129*

(-2.153)

0.418*

(14.197)

6.795*

(14.105)

-0.144

(-1.534)

1.834*

(6.092)

1.326*

(4.168)

-2.706*

(-5.479)

-1.202*

(-9.173)

4.014*

(10.509)

0.540*

(2.771)

2.569*

(14.784)

0.158*

(2.316)

P3

0.250*

(4.594)

0.905*

(8.081)

0.831*

(7.713)

0.618*

(4.885)

0.045

(0.067)

1.524*

(4.692)

-17.309*

(-6.468)

-1.321*

(-6.603)

4.537*

(10.421)

-1.150*

(-7.541)

5.915*

(9.090)

-0.853*

(-2.270)

Northern

P1

-3.297*

(-6.632)

-2.872*

(-6.050)

1.485*

(2.025)

-2.718*

(-7.961)

-0.093

(-0.323)

-0.756*

(-3.035)

-7.082*

(-6.917)

-3.170*

(-7.945)

4.818*

(12.093)

-1.527*

(-2.665)

0.238

(0.479)

-6.571*

(-11.175)

P2

0.044*

(4.653)

0.125*

(6.970)

6.828*

(7.344)

-0.733*

(-5.041)

1.526*

(4.849)

0.431*

(2.151)

-1.077*

(-1.453)

-0.457*

(-3.222)

6.818*

(8.173)

2.805*

(5.723)

2.818*

(5.833)

-3.153*

(-10.592)

P3

0.291*

(4.337)

1.153*

(18.216)

2.739*

(4.813)

0.478*

(3.230)

2.225*

(5.005)

0.126

(0.104)

-11.397*

(-2.680)

-0.533*

(-3.319)

3.021*

(3.701)

-4.136*

(-5.020)

5.159*

(9.910)

-1.659

(-1.710)

North

Eastern

P1

-2.592*

(-6.392)

-2.369*

(-5.811) _

-3.196*

(-6.882)

4.144*

(3.685)

0.436

(1.451)

-7.440*

(-8.474)

-3.636*

(-9.178)

3.772*

(6.350)

-2.034*

(-6.009)

2.330*

(4.413)

-4.053*

(-18.652)

P2

-0.279*

(-6.430)

-0.074

(-0.232) _

-0.024

(-0.307)

7.024*

(2.292)

1.032

(1.355)

-3.265*

(-3.493)

-0.874*

(-5.017)

6.268*

(20.024)

0.501*

(2.766)

2.102

(1.609)

-4.558*

(-10.466)

P3

1.412*

(5.191)

1.274*

(2.491) _

-0.044

(-0.936)

-0.326

(-0.988)

1.731*

(2.792)

-13.084*

(-3.544)

-1.349*

(-8.891)

11.504*

(16.931)

-1.074*

(-2.845)

3.149

(1.702)

-1.801*

(-4.685)

Northeast

Frontier

P1

0.528

(1.677)

0.940*

(2.513) _

-0.727*

(-5.533)

2.134*

(10.442)

2.432*

(6.331)

-4.933*

(-3.868)

-1.308*

(-23.819)

2.584*

(4.416)

-3.398*

(-5.097)

5.672*

(11.239)

-1.012*

(-2.069)

P2

0.268

(1.682)

0.471*

(3.152) _

-0.791*

(-8.466)

2.688*

(8.260)

0.048

(0.083)

-0.397

(-0.401)

-1.157*

(-8.587)

0.917

(0.851)

0.471*

(0.821)

3.899*

(3.090)

-1.817

(-1.926)

P3

1.174

(0.555)

1.910

(0.761) _

-1.949*

(-2.821)

2.301*

(2.143)

5.297*

(14.013)

-17.206*

(-3.368)

-1.252*

(-8.443)

6.856*

(2.964)

-10.537*

(-11.384)

4.872*

(7.456)

-4.461*

(-2.518)

140

Table 5.6 Contd.

Zones Period RKM RTKM ELC ST LOC PC WG STF PKM PAL NTKM FAL

Southern

P1

-2.202*

(-6.353)

-1.395*

(-4.767)

4.071*

(20.420)

-2.477*

(-9.295)

1.357*

(3.461)

2.546*

(13.588)

-6.467*

(-6.054)

-2.508*

(-14.637)

5.769*

(15.431)

-1.076*

(-2.535)

0.808*

(3.251)

-3.213*

(-11.490)

P2

0.313*

(7.694)

0.695*

(11.377)

4.868*

(16.041)

-0.945*

(-12.492)

4.452*

(14.412)

3.825*

(14.364)

-1.472

(-1.871)

-1.387*

(-17.359)

6.790*

(12.456)

-2.077*

(-2.865)

2.110*

(6.085)

-3.307*

(-9.811)

P3

-0.390*

(-

10.428)

0.275*

(5.680)

5.609*

(8.791)

-0.620

(-0.744)

1.150*

(4.316)

2.730*

(9.651)

-13.384*

(-2.730)

-1.394*

(-5.354)

10.292*

(14.802)

-2.013

(-0.949)

2.631*

(5.590)

-6.267*

(-5.744)

South

Central

P1

-1.590*

(-7.137)

-0.967*

(-5.731)

3.450*

(9.936)

-1.557*

(-4.924)

2.253*

(8.308)

1.464*

(4.346)

-5.440*

(-5.343)

-2.369*

(-9.912)

6.691*

(12.838)

0.424

(1.649)

6.465*

(5.674)

-3.297*

(-10.169)

P2

-0.141*

(-3.167)

0.081*

(2.268)

5.055*

(6.342)

-0.591*

(-5.742)

3.999*

(10.149)

3.582*

(5.906)

-1.190*

(-2.479)

-0.657*

(-4.627)

5.208*

(5.095)

-1.032*

(-2.162)

7.965*

(2.439)

-2.875*

(-5.919)

P3

0.143*

(2.329)

0.489*

(7.182)

3.808*

(7.032)

2.145

(1.910)

3.343*

(11.812)

1.438*

(3.587)

-11.333*

(-2.133)

-1.259*

(-11.664)

12.530*

(15.165)

1.175*

(2.311)

6.716*

(10.276)

-6.991*

(-7.023)

South

Eastern

P1

-7.076*

(-6.435)

-4.947*

(-5.205)

-1.129

(-1.376)

-6.159*

(-5.795)

-3.209*

(-4.097)

-2.304*

(-2.513)

-10.767*

(-7.889)

-5.706*

(-7.783)

2.018*

(2.424)

-1.523*

(-2.817)

-2.622*

(-2.249)

-4.736*

(-8.753)

P2

0.286*

(3.502)

1.588*

(9.478)

5.446*

(17.525)

0.625*

(2.740)

1.069

(0.938)

4.145*

(12.855)

-0.823

(-1.551)

-0.384*

(-6.615)

6.283*

(11.364)

-0.052

(-0.070)

3.890*

(12.321)

-1.163*

(-7.124)

P3

0.984*

(3.048)

1.439*

(2.119)

0.272

(1.660)

2.632*

(5.338)

2.725*

(11.068)

3.314*

(3.262)

-15.419*

(-4.235)

-1.978*

(-20.168)

11.468*

(15.798)

-1.128

(-0.373)

9.914*

(13.222)

-1.861

(-1.413)

Western

P1

-3.044*

(-6.628)

-2.926*

(-6.594)

-1.450*

(-4.068)

-3.067*

(-8.534)

-1.378*

(-3.090)

1.138*

(4.865)

-8.572*

(-10.325)

-4.168*

(-9.376)

3.688*

(11.589)

1.482*

(6.215)

1.424*

(2.409)

-4.504*

(-9.242)

P2

0.229*

(3.084)

0.156*

(4.124)

0.240*

(2.420)

-1.051*

(-4.661)

1.061*

(2.103)

2.971*

(33.296)

-4.251*

(-9.868)

-1.473*

(-17.329)

3.205*

(8.509)

0.201

(0.431)

1.912*

(5.799)

-0.962

(-2.598)*

P3

-0.461

(-1.821)

-0.091

(-0.467)

1.929

(1.669)

0.358*

(2.366)

-0.320

(-0.177)

1.005*

(2.434)

-13.977*

(-3.882)

-0.265

(-0.843)

8.458*

(16.643)

1.650*

(3.209)

11.070*

(22.916)

-2.913*

(-7.308)

Source: Author‟s Calculations

Note: i) P1 (1991-92 to 2010-11), P2 (1991-92 to 2002-03), P3 (2003-04 to 2010-11).

ii) * indicates that the value is significant at 5 percent level of significance.

iii) The values in brackets ( ) are t-values.

iv) RKM- Route Kilometer, RTKM- Running Track Kilometer, ELC- Electrified Network, ST- Number of Stations, LOC- Number of Locomotives, PC- Number

of Passenger Carriages, WG- Number of Wagons, STF- Staff Employed, PKM- Passenger Kilometers, PAL- Passenger Average Lead, NTKM- Net Ton

Kilometers, FAL- Freight Average Lead.

141

Table 5.7: Growth Rates of Physical Growth of Seven New Zones of Indian Railways in Post-Reorganization Period.

Zones RKM RTKM ELC ST LOC PC WG STF PKM PAL NTKM FAL

East Central 0.760*

(3.203)

0.528

(1.219)

-2.732

(-1.924)

0.804*

(2.091)

3.535*

(6.893)

3.493*

(9.955)

-19.994*

(-4.888)

-2.081*

(-4.979)

7.520*

(11.975)

19.273

(1.501)

4.312*

(3.046)

2.157

(0.884)

East Coast 0.791*

(2.904)

0.228

(0.524)

4.220*

(9.615)

0.669*

(2.541)

4.361*

(7.927)

7.279*

(19.688)

-4.832

(-0.306)

-0.541

(-0.939)

5.133*

(4.048)

-6.630*

(-2.903)

7.254*

(15.757)

-1.733*

(-4.614)

North Central 0.408*

(3.781)

0.824*

(5.315)

0.443*

(6.005)

0.268

(0.789)

4.715*

(11.919)

9.011*

(5.778)

1.177

(0.059)

-1.438*

(-2.491)

16.249*

(12.165)

4.302

(0.411)

10.846*

(12.020)

0.971

(1.409)

North Western 0.051

(0.208)

1.272*

(2.098) _

0.134

(0.403)

-0.504

(-0.462)

1.635

(1.037)

-4.718

(-0.477)

-0.514*

(-2.329)

29.882*

(2.332)

-3.223*

(-5.529)

10.550*

(7.589)

-4.582

(-1.639)

South East

Central

0.343*

(5.725)

0.567

(0.878)

0.531*

(5.270)

0.440

(0.411)

2.256*

(7.016)

16.991*

(7.698)

-4.019

(-0.289)

0.185

(0.457)

14.297*

(25.577)

-2.189

(-1.895)

27.164

(1.472)

-4.262*

(-4.985)

South Western 0.477*

(4.957)

0.565

(1.197)

1.177*

(2.540)

-0.979

(-0.638)

11.429*

(11.685)

23.709*

(2.303)

-3.924

(-0.312)

0.216

(1.235)

12.218*

(11.176)

-7.968*

(-2.773)

11.902*

(5.429)

2.637

(1.229)

West Central 0.110

(1.710)

-0.482

(-1.730)

2.107*

(2.404)

-0.646

(-0.465)

2.162*

(14.499)

5.946*

(11.612)

-2.434

(-0.169)

-0.868*

(-6.697)

21.779*

(27.959)

3.246*

(3.817)

6.629*

(8.428)

-3.413

(-0.715)

Source: Author‟s Calculations

Note: i) * indicates that the value is significant at 5 percent level of significance.

ii) The values in brackets ( ) are t-values.

iii) RKM- Route Kilometer, RTKM- Running Track Kilometer, ELC- Electrified Network, ST- Number of Stations, LOC- Number of Locomotives, PC- Number

of Passenger Carriages, WG- Number of Wagons, STF- Staff Employed, PKM- Passenger Kilometers, PAL- Passenger Average Lead, NTKM- Net Ton

Kilometers, FAL- Freight Average Lead.

142

relative decline in number of locomotives during period after restructuring of zones.

There had been a dramatic fall in the growth of number of wagons (WG) for almost all

the zones (except North Central) which was multiple times the decrease in number of

passenger carriages (PC). This increase in number of passenger carriages was

contributed more by introduction of new trains in many zones along with increase in the

length of trains. At the same time, it also indicated that lesser attention was paid by the

railways towards efforts to increase the freight traffic. Also the decline in the number of

passenger carriages as well as of wagons was more aggravated during post-

reorganization period. South Western zone showed the highest significant growth in

number of passenger carriages (23.709 percent) followed by South East Central zone

(16.991 percent). These zones attracted large volume of passenger traffic from their

parent zones and also got the advantage of better passenger facilities provided by

railway authorities. South East Central zone is headquartered at Bilasur which is

considered as a regional hub for the railway system. Barring South East Central and

South Western, all other zones reflected a negative growth in staff employed (STF)

during post-reorganization era. This was induced by the strategy of staff reduction in

railways for reducing their costs. For the previous zones, the decline was relatively at a

rapid rate after reorganization than during pre-reorganization period. The most

significant decline in staff employed was shown by East Central zone (-2.081 percent)

followed by North Central zone (-1.438 percent). Regardless of the strategy of reduction

in workforce through various schemes adopted by railway zones (as reflected by the

negative growth rates during the entire study period), the number was still very high.

The greatest significant decline in staff employed is observed in Central zone (-4.380

percent) during entire study period.

While analyzing the output growth of railway zones, it is observed that South

Central zone had experienced robust growth in passenger- kilometers (PKM) (6.691

percent) well as in net ton kilometers (NTKM) which was 6.465 percent per annum

during the study period signifying increase in freight loading along with passengers

carried. It may be due to the factors like highest priority to the safety and security of

passengers, introduction of new trains, carrying capacity augmentation, up gradation of

passenger amenities, computerized PRS facility, incremental loading capacity etc.

143

Comparing the output growth in two sub-periods, a higher growth in PKM was seen for

almost all the zones except Northern zone which experienced a decline from 6.818

percent during pre-reorganization to 3.021 percent in the latter sub-period. It is

remarkable to note that Northern zone was the second highest in terms of growth in

PKM during the entire study period (4.818 percent). This zone has been the largest

route kilometers of track under its jurisdiction even after reorganization also operating

the busiest railway routes covering Punjab, Haryana, Himachal Pradesh, Jammu

Kashmir, Uttaranchal, Uttar Pradesh, Delhi and the union Territory of Chandigarh.

However the decline in PKM for this zone was supported by comparatively higher

growth observed in newly carved zones out of this zone, which were North Western and

North Central experiencing maximum growth in PKM to the tune of 29.882 percent and

16.249 percent per annum respectively. On the other hand, a positive significant growth

in passenger average lead (PAL) was shown only by Central zone (3.068 percent) and

West Central zone (3.246 percent). This again confirmed a relative higher growth in

newly carved zones than the parent zones. All other zones either showed a negative or

an non-significant increase in PAL during post-reorganization. On freight front, the

maximum growth in net ton-kilometers (NTKM) was observed in South Western zone

(11.902 percent) followed by Western zone (11.070 percent) and North Central zone

(10.846 percent). Again the growth in NTKM was observed to be higher during post-

reorganization period than what was observed during pre-reorganization period. The

greatest comparative increase was seen for Western zone for which rate of growth in

NTKM increased from 1.912 percent per annum during pre-reorganization to 11.070

percent per annum during post-reorganization (about 10 times increase in NTKM). This

zone has become the most densely loaded and intensively utilized system due to

provision of efficient and reliable services. In addition a large number of ports are

handled by this zone resulting into high revenue generation. It may be due to the highest

incremental loading of this zone surpassing the loading figure of South East Central

zone at 60.98 million tons and South Eastern Railway at 55.47 million tons of freight

till August 2013 (Ministry of Railways, 2013). A fall in the growth rate of NTKM was

seen for South Eastern, Eastern and Northern zones post reorganization while some

modest increase was observed in North Eastern, Northeast Frontier and Southern zones.

144

However Central and South Central zones had shown a marginal decline in post-

reorganization period which might be due to the diversion of freight traffic to newly

made zones after reorganization. A non-significant growth was observed in freight

average lead (FAL) during entire study period with a further decline in post-

reorganization period. The greatest fall in FAL was shown by Central zone (-6.358

percent) followed by South East Central zone (-4.262 percent).

Thus, despite an increase in output(s) of railway zones in terms of PKM and

NTKM, they are still lagging behind in infrastructure development. The route network

of railway zones has expanded very slowly during the period under study. The process

of electrification has been unacceptably slow and the growth and development in rolling

stock has not kept pace with increase in traffic of railways. It may be due to lower

investment in technological tools and managerial systems that ensure reliability of

assets. The poor attention of railway authorities towards up gradation of track structure,

better maintenance practice and improvement in locomotives, segregation of passenger

and freight services had also contributed for the poor performance of zones. Though the

newly made zones are performing well but no significant improvement has been seen in

the performance of old zones.

5.2.2 Financial Growth of Zones of IR

Table 5.8 reports the compound growth rates of financial growth of previous

nine zones of IR while Table 5.9 provides the corresponding growth rates for the seven

new zones made after restructuring of railways (see Appendix 5.2 for detailed results).

It is observed from Table 5.8 that out of nine old zones, all reflected a steep decline in

passenger earnings (PE) during post-reorganization as compared to the period of pre-

reorganization. Even for Eastern zone, passenger earnings declined heavily from 4.592

percent to a negative growth of -0.228 percent over the two sub-periods. On the

contrary, the newly constructed zones had experienced a positive significant growth in

passenger earnings with maximum growth seen in West Central zone (13.533 percent)

followed by North Central zone (10.690 percent). This implied that new zones had been

able to capture a large part of revenue-generating passenger traffic from their parent

145

Table 5.8: Growth Rates of Financial Growth of Nine Old Zones of Indian Railways.

Zones Period PE FE GR TI CC WE CSTF OR

Central

P1

2.926*

(5.220)

-0.051

(-0.741)

1.119

(1.841)

2.552*

(5.110)

1.234

(1.751)

2.249*

(3.140)

4.766*

(6.782)

1.096*

(3.214)

P2

6.906*

(9.165)

4.738*

(5.283)

5.327*

(6.290)

5.598*

(7.353)

1.435

(1.244)

6.900*

(9.649)

8.574*

(9.011)

1.511*

(3.295)

P3

3.770*

(5.441)

1.177

(0.997)

2.205*

(2.799)

5.024*

(7.718)

10.792*

(10.985)

6.788*

(6.014)

8.241*

(3.477)

4.485*

(3.059)

Eastern

P1

1.096*

(2.189)

-3.261*

(-2.840)

-1.419

(-1.730)

3.522*

(9.134)

-1.817

(-1.445)

2.300*

(3.248)

4.930*

(8.029)

3.781*

(11.537)

P2

4.592*

(6.657)

4.333*

(13.599)

4.168*

(12.280)

5.860*

(9.337)

4.502*

(3.949)

6.622*

(7.585)

7.824*

(7.225)

2.384*

(4.426)

P3

-0.228

(-0.254)

5.728*

(5.194)

4.191*

(4.495)

2.077*

(2.065)

11.987*

(10.094)

6.990*

(6.368)

7.504*

(3.751)

2.630*

(2.066)

Northern

P1

3.876*

(8.717)

0.423

(0.589)

2.957*

(5.979)

8.026*

(16.291)

2.706

(0.750)

3.783*

(6.918)

5.760*

(7.901)

1.295*

(4.438)

P2

7.047*

(11.827)

5.590*

(8.001)

6.640*

(12.434)

5.550*

(5.921)

3.994*

(2.483)

6.621*

(8.367)

9.089*

(7.898)

0.414

(1.198)

P3

2.003*

(2.979)

3.348*

(6.061)

3.075*

(3.840)

10.343*

(7.646)

-13.168

(-0.609)

7.856*

(6.703)

8.329*

(2.808)

4.151*

(3.220)

North

Eastern

P1

2.916*

(4.432)

4.423*

(5.219)

3.521*

(5.035)

6.401*

(22.078)

2.195*

(2.619)

3. 646*

(5.854)

3.571*

(4.480)

0.096

(0.186)

P2

7.600*

(8.362)

7.992*

(4.353)

7.816*

(6.151)

6.425*

(11.084)

0.931

(0.659)

6.299*

(5.442)

8.173*

(9.175)

-1.403*

(-3.682)

P3

3.232*

(3.403)

0.813

(0.343)

2.415

(1.691)

9.297*

(11.056)

13.164*

(7.533)

7.903*

(5.421)

4.071

(1.214)

5.362*

(2.114)

Northeast

Frontier

P1

7.338*

(15.230)

7.504*

(9.051)

8.863*

(12.456)

11.099*

(21.215)

10.807*

(21.629)

6.483*

(13.044)

6.050*

(9.437)

-2.106*

(-3.761)

P2

6.186*

(5.462)

6.391*

(3.354)

6.249*

(4.059)

7.791*

(8.178)

8.028*

(7.566)

6.287*

(5.422)

5.971*

(7.113)

0.068

(0.102)

P3

4.211*

(5.084)

2.029

(0.925)

7.979*

(3.520)

12.409*

(21.807)

11.965*

(36.442)

9.391*

(5.622)

12.909*

(4.418)

1.148

(0.449)

Southern

P1

6.121*

(16.527)

2.826*

(6.515)

4.364*

(12.485)

6.061*

(2.780)

3.681*

(6.356)

5.003*

(10.846)

6.628*

(11.695)

0.612*

(2.272)

P2

8.113*

(12.228)

5.183*

(9.287)

6.267*

(11.683)

11.554

(1.879)

4.700*

(2.919)

6.887*

(7.516)

6.794*

(10.198)

0.609

(1.489)

P3

5.229*

(4.454)

3.685*

(2.120)

4.848*

(3.868)

7.780*

(11.382)

2.765*

(3.663)

7.197*

(5.338)

12.590*

(4.659)

2.248

(1.562)

South

Central

P1

6.228*

(15.092)

5.775*

(16.252)

5.854*

(17.567)

6.936*

(13.047)

2.741*

(4.246)

5.390*

(14.982)

6.222*

(10.374)

-0.430

(-1.703)

P2

7.020*

(6.512)

5.537*

(11.355)

5.773*

(9.145)

9.447*

(7.763)

0.139

(0.089)

6.206*

(7.304)

9.213*

(7.839)

0.428

(1.634)

P3

6.189*

(5.865)

7.594*

(3.723)

7.460*

(4.605)

5.807*

(5.795)

2.781*

(4.405)

7.020*

(6.804)

5.918*

(3.169)

-0.405

(-0.280)

South

Eastern

P1

1.113

(1.404)

-0.806

(-0.686)

-0.440

(-0.403)

-1.108

(-1.005)

-4.745*

(-4.270)

-0.706

(-0.611)

2.391*

(2.568)

-0.316

(-0.725)

P2

6.844*

(9.480)

5.508*

(10.667)

5.554*

(10.432)

5.688*

(8.242)

1.412

(1.245)

6.843*

(7.986)

8.158*

(12.015)

1.250*

(2.337)

P3

4.293*

(4.367)

11.930*

(6.807)

10.917*

(6.141)

8.859*

(19.024)

5.357*

(5.843)

7.758*

(4.857)

9.650*

(4.964)

-3.069

(-1.440)

Western

P1

2.504*

(5.728)

0.908

(1.872)

1.619*

(4.004)

4.186*

(11.796)

2.419*

(3.906)

3.462*

(6.706)

3.846*

(5.563)

1.789*

(5.630)

P2

5.530*

(9.540)

2.562*

(8.219)

3.541*

(9.001)

5.669*

(7.212)

1.575

(0.906)

5.909*

(6.648)

7.803*

(9.954)

2.331*

(3.600)

P3

2.066*

(2.146)

6.765*

(4.727)

5.497*

(5.447)

2.923*

(3.115)

1.726*

(3.323)

6.622*

(5.012)

6.331*

(2.420)

1.128

(0.767)

Source: Author‟s Calculations

Note: i) * indicates that the value is significant at 5 percent level of significance.

ii) The values in brackets ( ) are t-values.

146

Table 5.9: Growth Rates of Financial Growth of Seven New Zones of Indian

Railways in Post- Reorganization Period.

Zones PE FE GR TI CC WE CSTF OR

East Central 3.315*

(2.351)

2.753*

(3.067)

3.828*

(3.331)

21.014*

(8.816)

6.790*

(15.447)

6.348*

(6.675)

11.605*

(6.344)

2.530

(1.734)

East Coast 6.586*

(6.928)

10.588*

(10.337)

10.327*

(9.898)

4.709*

(4.888)

1.750*

(3.742)

4.380*

(4.427)

8.611*

(3.650)

-5.440*

(-7.920)

North Central 10.690*

(6.292)

6.154*

(4.292)

7.737*

(5.337)

14.940*

(3.060)

10.388*

(3.175)

5.364*

(5.642)

12.555*

(2.625)

-2.169

(-1.479)

North

Western

3.311*

(4.043)

8.947*

(8.049)

7.270*

(7.259)

28.304*

(3.007)

21.441*

(4.028)

8.862*

(6.127)

12.425*

(5.714)

0.122

(0.074)

South East

Central

7.851*

(6.389)

4.565*

(3.052)

5.053*

(3.474)

7.740*

(6.832)

2.028*

(3.318)

4.992*

(5.175)

15.587*

(7.356)

-0.030

(-0.016)

South

Western

3.148*

(3.274)

10.472*

(2.640)

9.277*

(3.219)

11.663*

(4.023)

7.920*

(3.314)

9.874*

(7.445)

9.755*

(3.835)

0.547

(0.280)

West Central 13.533*

(6.485)

5.233*

(3.844)

7.844*

(6.717)

10.975*

(4.189)

0.295

(0.379)

5.799*

(6.000)

13.262*

(7.786)

-1.809

(-1.451)

Source: Author‟s Calculations.

Note: i) * indicates that the value is significant at 5 percent level of significance.

ii) The values in brackets ( ) are t-values.

iii) PE- Passenger Earnings, FE- Freight Earnings, GR-Gross Receipts, TI- Total Investment, CC-Capital

at-Charge, WE-Working Expenses, CSTF- Cost of Staff Employed, OR-Operating Ratio.

zones. For example, North Central zone got the advantage of having much passenger

revenue generating areas of Northern and Central zones. While looking at the growth of

freight earnings (FE), it is observed that out of nine old zones, five showed a

comparative decline during post-reorganization with the highest fall seen in North

Eastern zone (from 7.992 percent to 0.813 percent over the two sub-periods). For this

zone, Sonpur and Samastipur divisions had been shifted to East Central railway and

some part of Andhra Pradesh to East Coast railway which are now the leading zones in

freight traffic. East Central zone was also performing well on passenger and freight

segments as both sectors assumed great importance in view of the huge coal loading in

the coal bearing of Dhanbad division of Jharkhand state and densely populated area of

Bihar. Due to this, the zone has been able to maintain a consistent and balanced growth

in passenger and freight earnings. For other zones, there was seen a relative rise in

freight earnings. The increase was most prominent for South Eastern in which FE

147

almost doubled after reorganization. Among the new zones, East Coast showed the

maximum growth in freight earnings which was 10.588 percent (highly significant)

followed by South Western (10.472 percent). Following the decline in passenger and

freight earnings, the gross receipts (GR) of railway zones also declined for four zones

i.e. Central, Northern, North Eastern and Southern. The only exception was Northeast

Frontier for which GR increased from 6.249 percent during pre-reorganization to 7.979

percent during post-reorganization which can be attributed to increase in other

miscellaneous earnings of railways. Also it was noticed that South Central and South

Eastern zones had experienced an increase in gross receipts which was more driven by

increase in freight earnings than that of passenger earnings. Thus freight earnings

showed an edge over passenger earnings in Indian Railways. Also East Coast zone

showed a high growth in gross receipts to the tune of 10.327 percent per annum.

The total investments (TI) made by railway zones increased for Northern, North

Eastern, Northeast Frontier and South Eastern zones during post-reorganization relative

to those incurred during pre-reorganization period. Also maximum growth in this

variable was seen in the case of North Western zone (28.304 percent) after

reorganization. Huge investments in terms of modernization, renewal of assets,

introduction of new trains, signaling and equipment etc. were made in these zones after

reorganization. Thus it is clear that in spite of an increase in total investments during

post-reorganization period, most of them proved to be not very productive as these had

not turned into surpluses. The capital-at-charge (CC) also showed a positive growth

after reorganization which was relatively higher than what was observed during pre-

reorganization for all zones except Northern and Southern zones. Higher growth in

capital at charge indicated greater dependence of these zones on government support

rather than generating surpluses on their own. This clearly implied a fall in the

profitability of railways. However, the new zones had also shown significant growth in

this indicator barring West Central zone. The high cost of railways had a direct bearing

on the performance of zones and has been a major area of concern for the authorities.

Higher the cost lesser will be the money left for further development of the zone. The

cost of staff constitutes major share of working expenses thereby reducing the profits to

railways. It was observed that there has been a rapid increase in the cost of staff (CSTF)

148

in all the zones during the entire study period highest being in Southern zone (6.628

percent) followed by South Central (6.222 percent) zone. Almost all zones followed a

declining trend in this indicator after reorganization as driven by the policy of curtailing

costs of railways. However, Northeast Frontier, Southern and South Eastern zones

showed an increase in Cost of Staff. In case of Northeast Frontier zone, the staff cost

was observed to be more than doubled during post-reorganization period leading to a

high operating ratio and hence poor performance of this zone. The corresponding

increase in working expenses had also been significant, causing fall in the performance

of these zones. The working expenses of all the zones increased significantly during

entire study period. In case of Northeast Frontier zone, these were the highest, grown at

a significant rate of 6.483 percent per annum. These expenses had increased

significantly for all the zones in post-reorganization period except Central zone which

experienced a marginal decline indicating that the target of reorganization to reduce

expenses of zones has not been achieved at all. The operating ratio also showed a

significant growth in post-reorganization period in all zones except South Central,

South Eastern and Western zones for which it deteriorated.

5.2.3 Asset Utilization Growth in Zones of IR

Table 5.10 displays the growth of some major indicators for asset utilization

considered in this study (see Appendix 5.3 for detailed results).

Track Utilization

It is observed that during the selected study period, there had been only a modest

growth in the network of IR in terms of route kilometers or running track kilometer (as

also seen in Table 5.6 and Table 5.7). The effective use of track is reflected in the

density of traffic which is measured by the average number of passenger kilometers

(PKMs) and net ton-kilometers (NTKMs) carried over a kilometer of route length. The

increase in density of traffic of zones of IR has been outlined in Appendix 5.3 while

their growth rates are depicted in Table 5.10 and Table 5.11. A highly significant

growth in both passenger kilometer per route kilometer (PKM/RKM) and net ton-

kilometer per route kilometer (NTKM/RKM) was observed in Central zone followed by

South Central and South Eastern zones during the entire study period. Again all zones

149

Table 5.10: Growth Rates of Asset Utilization of Nine Old Zones of Indian Railways.

Zones Period PKM/RKM NTKM/RKM WTR EPC EPWG TPE

Central

P1 6.655*

(27.677)

3.517*

(11.087)

-18.266*

(-6.377)

2.263*

(4.607)

10.257*

(11.945)

6.270*

(37.648)

P2 5.102*

(13.973)

2.809*

(3.963)

-14.357

(-1.790)

4.543*

(4.581)

7.263*

(9.535)

5.713*

(18.238)

P3 6.039*

(16.671)

1.070

(1.954)

-9.545*

(-3.130)

4.976*

(7.050)

19.528*

(4.857)

7.871*

(17.759)

Eastern

P1 6.984*

(16.211)

-0.163

(-0.299)

-7.463*

(-10.262)

2.127*

(4.689)

6.834*

(5.483)

4.314*

(24.969)

P2 4.050*

(12.373)

2.723*

(14.570)

-3.171*

(-4.332)

3.223*

(3.322)

7.235*

(14.537)

4.642*

(18.672)

P3

4.367*

(10.695)

5.736*

(8.813)

-13.733*

(-8.402)

-1.725

(-1.534)

27.859*

(8.448)

6.268*

(11.713)

Northern

P1 4.992*

(10.137)

1.549*

(5.416)

-18.361*

(-10.936)

4.668*

(10.819)

8.077*

(9.106)

6.377*

(19.913)

P2 6.889*

(6.275)

0.860

(1.348)

-15.533*

(-4.233)

6.587*

(9.811)

6.739*

(13.116)

5.568*

(7.661)

P3 1.553

(1.732)

4.056*

(7.558)

-8.383

(-1.732)

1.875

(1.113)

16.642*

(3.252)

4.265*

(6.378)

North Eastern

P1 4.094*

(12.782)

2.689*

(3.229)

-11.751*

(-4.690)

2.469*

(4.293)

12.817*

(15.948)

7.400*

(24.081)

P2 3.820*

(9.548)

0.348

(0.269)

1.069

(0.480)

6.501*

(7.646)

11.637*

(6.983)

6.344*

(17.862)

P3 7.489*

(5.142)

-4.070

(-1.407)

-36.181*

(-8.567)

1.476

(1.728)

15.990*

(4.444)

11.477*

(13.654)

Northeast

Frontier

P1 -1.204

(-1.767)

1.552*

(3.205)

-14.585*

(-5.937)

4.789*

(10.740)

13.083*

(9.657)

5.557*

(13.450)

P2 -3.631*

(-2.653)

-0.201

(-0.169)

-1.747

(-1.011)

6.135*

(9.235)

6.815*

(4.130)

3.624*

(4.217)

P3

3.444

(1.682)

1.576

(1.872)

-36.314*

(-5.934)

-1.030*

(-2.026)

23.232*

(3.809)

7.156*

(6.965)

Southern

P1 5.513*

(11.694)

-0.082

(-0.188)

-11.591*

(-4.071)

3.487*

(11.681)

9.935*

(9.399)

7.128*

(29.924)

P2 3.912*

(3.291)

-2.713*

(-4.570)

7.257*

(4.713)

4.130*

(6.437)

6.754*

(10.476)

6.839*

(16.217)

P3 5.0028

(7.273)

-2.093*

(-3.621)

-32.326*

(-4.692)

2.432

(2.005)

19.707*

(3.339)

10.129*

(21.166)

South Central

P1 4.956*

(8.673)

3.127*

(6.029)

-12.536*

(-4.331)

4.695*

(13.645)

11.860*

(9.995)

8.905*

(17.995)

P2 2.066

(1.934)

0.235

(0.222)

8.212*

(2.515)

3.319*

(5.212)

6.808*

(10.071)

6.574*

(5.836)

P3 9.401*

(10.589) 4.301* (9.414)

-28.135* (-5.483)

4.683* (3.362)

21.346* (3.353)

11.201* (29.174)

South Eastern

P1 7.484*

(17.122) 3.442*

(10.403) -14.819* (-6.572)

3.498* (7.618)

11.164* (8.098)

4.709* (9.651)

P2 4.647* (7.956)

2.830* (7.595)

-9.590* (-8.989)

2.591* (2.763)

6.383* (20.977)

4.873* (16.005)

P3

9.320*

(7.969)

8.223*

(10.507)

-30.947*

(-2.743)

0.947

(0.555)

32.335*

(6.438)

12.715*

(21.107)

Western

P1 4.176* (8.426)

1.680* (3.556)

-17.717* (-4.968)

1.351* (5.054)

10.368* (9.934)

7.374* (18.365)

P2 0.631

(1.050) -0.632

(-1.631) -5.167

(-1.488) 2.485* (4.630)

7.115* (13.848)

4.261* (14.404)

P3 5.820* (8.648)

7.576* (6.646)

-49.503* (-5.614)

1.050 (1.127)

24.112* (5.183)

9.533* (24.395)

Source: Author‟s Calculations

Note: i) * indicates that the value is significant at 5 percent level of significance.

ii) The values in brackets ( ) are t-values.

150

Table 5.11: Growth Rates of Asset Utilization of Seven New Zones of Indian

Railways in Post-Reorganization Period.

Zones PKM/RKM NTKM/RKM WTR EPC EPWG TPE

East Central 10.479

(1.913)

11.187*

(3.163)

-13.401*

(-2.734)

-0.173

(-0.117)

28.432*

(4.872)

8.440*

(14.115)

East Coast 3.744*

(2.890)

5.961*

(11.774)

-11.860*

(-9.326)

-0.646

(-0.927)

16.203

(0.903)

7.401*

(8.630)

North Central 10.482

(0.706)

20.455*

(3.568)

-6.204

(-0.418)

1.540

(0.695)

4.920

(0.234)

15.152*

(10.523)

North Western 1.900*

(2.318)

3.401*

(3.593)

-20.164*

(-6.707)

1.649

(1.066)

14.342

(1.251)

16.012*

(4.257)

South East Central 5.134*

(2.939)

-21.014*

(-3.530)

-7.880*

(-3.371)

-7.813*

(-3.610)

8.943

(0.588)

18.903*

(2.149)

South Western 12.403*

(4.702)

45.386*

(4.772)

-18.277*

(-2.774)

-16.620

(-1.925)

14.984

(1.023)

11.800*

(13.073)

West Central 21.032*

(17.922)

4.096*

(4.017)

-11.062

(-1.387)

7.161*

(4.110)

7.857

(0.521)

14.692*

(24.683)

Source: Author‟s Calculations.

Note: i) * indicates that the value is significant at 5 percent level of significance.

ii) The values in brackets ( ) are t-values.

iii) PKM/RKM- Passenger Kilometer per Route Kilometer, NTKM/RKM- Net Ton Kilometer per Route

Kilometer, WTR- Wagon Turn Round, EPC- Earnings Per Carriage, EPWG- Earnings Per Wagon, TPE-

Traffic Units Per Employee.

showed an increase in PKM/RKM after reorganization except Northern which

experienced a heavy fall (from 6.889 percent during pre-reorganization to 1.553 percent

during post-reorganization) reflecting decline in the passenger traffic density of this

zone. West Central zone showed maximum growth in PKM/RKM which was 21.032

percent followed by South Western zone (12.403 percent). The NTKM/RKM declined

only for Central and North Eastern zones over the two sub-periods, while for other

zones it showed an improvement, maximum being in Western zone (from non-

significant negative growth of -0.632 percent to a highly significant growth of 7.576

percent). Similarly, South Western zone showed the maximum growth in this indicator

which was 45.386 percent per annum while South East Central was the only zone,

among new zones, which showed a negative growth of -21.014 percent per annum.

Moreover, Northern, North Eastern and Western zones had recorded a significant

151

growth in PKM/RKM but a comparatively lower growth in NTKM/RKM may be due to

passenger dominant nature of these zones as explained in earlier sections.

Utilization of Rolling Stock

The highest significant growth in earnings per carriage (EPC) was observed in

Northeast Frontier zone (4.789 percent) followed by Northern zone (4.668 percent)

during the entire study period. However the growth in EPC showed a sharp downward

trend after reorganization as compared to what was observed in pre-reorganization

barring Central and South Central zones. This indicates that though passenger traffic of

railways had increased, it did not generate much revenue for railways may be due to

their low fare policy. Among the new zones, significant growth was seen only for West

Central zone (7.161 percent). The earnings per wagon (EPW), on the other hand,

yielded relatively more revenues to railways as reflected by their increasing growth

rates after reorganization which was multiple times the growth in earnings per carriage.

The most pronounced growth was observed in South Eastern zone (32.335 percent)

followed by East Central (28.432 percent) and Eastern (27.859 percent) zones. In case

of Western zone, the growth in earnings per wagon was about 10 times the growth in

earnings per carriage while for Central zone the difference stood at about 5 times.

Wagon Utilization

An efficient railway system required the wheels of wagons moving as full as

possible better still if the wagons carry higher rated commodities. All the zones had

showed a declining tendency in Wagon Turn Round (WTR) during the study period

indicating higher speed of wagons in order to enhance freight loading. This decline was

even more pronounced in post-reorganization period. The maximum decline was

observed for Western zone (-49.503 percent) followed by Northeast Frontier zone

(-36.314 percent).

Staff Productivity

The most significant growth in total traffic units (PKMs plus NTKMs) per

employee (TPE) was seen in South Eastern zone (12.715 percent) followed by North

Eastern zone (11.477 percent). However, South East Central had grown at a faster rate

152

of 18.903 percent per annum. It may be observed that TPE had registered significant

growth for all the zones during entire study period. The most significant growth in TPE

is observed in South Central zone (with 8.905 percent growth rate) followed by North

Eastern and Western zones. While TPE had shown significant growth during the study

period, it should be realized that railway zones had also made substantial investments to

upgrade the track, signaling and rolling stock in the same period. Thus the growth in

TPE cannot be directly related with the growth in staff efficiency.

Thus from the above analysis, it may be concluded that IR has witnessed a rising

trend of performance especially in post-reform period. However, inadequate and

obsolete infrastructure, continuous loss of freight traffic to roadways, overstaffing and

poor financial condition are still the major obstacles in the way of development of IR.

Even more, the process of reorganization has not added much to the railway‟s

performance in these areas rather has decelerated it on many fronts. Along with, the

growth performance of most of the zones in IR has been found to be unsatisfactory with

no significant rail network expansion, slow process of electrification, insufficient

development of rolling stock and higher costs. Central and Western zones have

maintained a consistent performance both before and after reorganization and among

the new zones East Coast, North Central, and South East Central have appeared to be

good performers. Among the previously existing zones, Southern, South Central,

Eastern, Northeast Frontier and Northern zones have shown no significant improvement

in post-reorganization period rather reorganization process has caused a further drop in

their performance. On the other hand, East Central, South Western and West Central

zones are found to perform well but have much scope for improvement.