“From a black sheep to a blue eyed boy”

“The Indian Railways, which was declared to be heading towards bankruptcy, is today’s second largest profit making Public

Sector Undertaking.”

TURNAROUND

“Process that takes a company from a situation of poor performance to a situation of good sustained performance.”

(Brandes and Brege.)

JOURNEY OF THE PRESENTATION

1. WHY WE SELECTED INDIAN RAILWAYS2. INDIAN RAILWAYS AN OVERVIEW3. WHERE WAS INDIAN RAILWAYS IN 2000-014. FINANCIAL TURNAROUND OF INDIAN RAILWAYS5. MAGIC FORMULA6. STRATEGIES:- A) FREIGHT B) PASSENGERS C) OTHERS6. ENVIRONMENTAL FACTORS7. INDIAN RAILWAYS - WHEELS ON CHANGES8. INDIAN RAILWAYS – SHORTCOMINGS9. LIMITATIONS

1. Indian Railway is the world’s largest employer and it had turned around, without any layoff in its workforce.

2. Strong forward and backward linkages with core sectors.

3. Public sector symbolizes inefficiency (!!!).

BACK

WHY TO STUDY INDIAN RAILWAY?

INDIAN RAILWAY AN OVERVIEW

OWNERSHIP :- MINISTRY OF RAILWAY, GOVT. OF INDIA Founded :- 26 April 1853

First railway track:- Bombay to Thane, distance 34 kms. Now Indian railways has 66000 kms network coverage

INDIAN RAILWAYS AN OVERVIEW

Industry :- Railways and LocomotivesSERVICES :- Rail transport, freight transport, servicesRevenue :- Rs. 107.66 billionEmployees :- 1,406,430 (2007)Divisions :- 16 Railway ZonesWebsite :- www.indianrailways.gov.in

Key peopleUnion Railway MinisterLaloo Prasad Yadav

Minister of State for Railways (V)R. Velu

Minister of State for Railways (R):Naranbhai J. Rathwa

Chairman, Railway BoardK C Jena

Officer on special dutySudhir Kumar

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“Today Indian Railway is on the verge of a financial crisis... To put it bluntly, the ‘business as usual low growth’ will rapidly drive IR to fatal bankruptcy, and in sixteen years Government of India will be saddled with an additional financial liability of over Rs 61,000 crores… On a pure operating level, IR is in a terminal debt trap.”

“It is very likely that Indian Railways would be a heavily-loss-making entity—in fact on the path toward bankruptcy, if it were not state owned.”

The Expert-Group committee govt. of India July 2001

Where the Indian Railway was in 2000-2001?

REASONS OF DECLINE OPERATION INEFFICIENCY

RIGID PRICING

INVESTMENT IN UN-REMUNERATION PROJECTS

POLITICAL PROFLIGACY

LACK OF ACCOUNTABILITY BACK

FROM LOSS TO PROFIT

-2000

0

2000

4000

6000

8000

10000

12000

14000

1981 1991 2002 2003 2004 2005 2006 2007 2008

-198 1751000

1115 10912074

6193

10206

11449

Operating profit

(Rs in crores)

02468

101214161820

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

4.9

7.58.0

8.7

15.4

19.018.0

Return on Investment

0

2000

4000

6000

8000

10000

12000

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

1000 1115 10912074

6193

10206

11449

Surplus

(Rs. In crores)

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

2337

31304478

5273

10143

14453

16022

Net Revenue

(Rs. In cr.)

0

10

20

30

40

50

60

70

80

90

100

2001 2002 2003 2004 2005 2006 2007 2008

98.396 92.3 92.1 91

83.278.7

75.9

Operating Ratio

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MAGIC FORMULA - PROFFESIONALISM

EMPO

WERM

ENT EN

RIC

HM

ENT

ENTITLEMENT

FASTERHEAVIERLONGER

LEVERAGINGSYNERGY

OPTIMIZATION

INNOVATIONCOMPASSIONPARTNERSHIP

CONCEPTUAL LEVEL

OPERATIONAL LEVEL

EMOTIONAL LEVEL

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FREIGHT (GOODS) 69%

PASSENGER27%

OTHERS 4%

SOURCES OF REVENUE

FREIGHT BUSINESS OF INDIAN RAILWAYS CORE INFRASTRUCTURE INDUSTRY IN INDIA

COMPRISES : CRUDE, REFINED PETROLEUM PRODUCTS, COAL, STEEL, CEMENT, FERTILIZERS.

IN INDIAN RAILWAY ABOUT 75% OF FREIGHT COMPRISES COAL, STEEL, CEMENT AND PETROLEUM PRODUCTS

GROWTH 05-06 06-07 5.8% 8.4%

FREIGHT REVENUE AND LOAD PERFORMANCE

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

2001 2002 2003 2004 2005 2006 20070

100

200

300

400

500

600

700

800

2000 2001 2002 2003 2004 2005 2006 2007

YEAR YEAR

Rs

IN C

RO

RES

LOA

D IN

TO

NN

ES

TRACK UTILISATIONIncrease in Traffic Density

15

15.5

16

16.5

17

17.5

18

18.5

19

19.5

1999-00 200-01 2001-02 2002-03 2003-04 2004-05 2005-06

15.3515.55

16.34

16.85

17.46

18.34

18.83

FREIGHT RATIONALIZATION THE STRATEGIES INCREASE VOLUMES- PILOT PROJECTS ON HIGHER AXLE LOADS

PRODUCT INNOVATION-IMPROVED DESIGN OF WAGONS

CUSTOM DESIGN - THE WAGONS BY END USERS

PRIORATIZATION - TIMELY DELIVERY OF THE GOODS

FREIGHT CHARGES STRATEGIES

MODERNIZATION - TRACK AND STRUCTURES.

REDUCED WAGON TURNAROUND

MARKET ORIENTED TARIFF AND SCHEME

INCREASE VOLUMES

ALLOW TO INCREASE IN CARRYING CAPACITY (20.32T TO 22.82T)

OUTPUT INCREASE IN REVENUE BY Rs. 6000 Cr.

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PRODUCT INNOVATION1. INTRODUCE DOUBLE STACK CONTAINER ON

DIESEL ROUTE

2. INTRODUCE NEW DESIGNED WAGONS WITH HIGHER CARRYING CAPACITY

3. LOWER TARE WEIGHT

4. NEW REFRIGERATED PARCEL VANS WERE INTRODUCED

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PRIROTIZATION

1. SEPARATE TRACKS FOR THE FREIGHT TRAINS

2. LINE CLEARANCE ON THE STATIONS

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FREIGHT CHARGES STRATEGIES

MAJOR STRATEGY

DUAL PRICING POLICY

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MODERNIZATION

CONVENTIONAL MODERN RAILS 90R/52KG 72UTS 52/60KG 90UTS HH

FITTINGS RIGID ELASTIC

BALLAST 150/200mm 250/300mm

JOINTS FISH PLATED WELDED WITH SEJs

SWITCHES STRAIGHT CURVED/TWS

MAINTENANCE MANUAL MECHANISED

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REDUCED WAGON TURNAROUND

CASH INCENTIVES TO FREIGHT CUSTOMERS

FREIGHT OPERATION INFORMATION SYSTEM

ROUND THE CLOCK LOADING AND UNLOADING AT TERMINALS

CONNECTIVITY TO PORTS WAS INCREASED

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PASSENGER REVENUE AND VOLUME PERFORMANCE

0

5000

10000

15000

20000

25000

2001 2002 2003 2004 2005 2006 20070

1000

2000

3000

4000

5000

6000

7000

2001 2002 2003 2004 2005 2006 2007

YEAR YEAR

Rs

IN C

RO

RE

PA

SSE

NG

ER

S IN

MIL

LIO

NS

REVENUE VOLUME

PASSENGER STRATEGIES PRODUCT DIFFERENTIATION

COMPETITIVE PRICING

OUTSOURCING

DOWNSIZING

SAFETY MEASURES

HUMAN RESOURCES INITIATIVES

IMPROVE IN EFFICIENCY

PRODUCT DIFFERENTIATION

INTRODUCE NEW TRAINS

INTRODUCE NEW PASSENGER COACHES

INTRODUCE E-TICKTING

NEW SIGNALLING TECHNOLOGY

SUBSTANTIAL INCREASE IN PASSENGER COMFORT AND AMMENITIES

UPGRADATION back

COMPETITIVE PRICING

AVERAGE RATE PER PASSENGER PER KM REMAIN UNCHANGED ( Rs. 0.24 / Km)

REDUCE FARE FOR AC COACHES TO COMPETE WITH AVIATION

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OUTSOURCING

LEASE OUT PARCEL AND CATERING SERVICES

ADVERTISING SERVICES

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DOWNSIZING

NUMBER OF EMPLOYEES WERE BROUGHT DOWN

[1.652 mn(1991) TO 1.41mn(2006)]

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SAFETY MEASURES SPECIAL RAILWAY SAFETY FUND OF Rs 170 bn.

REPLACE OVERAGED ASSETS

USE OF HIGH TECHNOLOGY IN SAFETY

STRENGTHEN RAILWAY PROTECTION FORCE

DECENTRALIZATION back

HUMAN RESOURCES INITIATIVES CHANGES IN ORGANIZATIONAL CULTURE

CREW FRIENDLY DRIVER’S CABINS AND BRAKE VANS WERE DESIGNED.

ESTABLISHMENT OF INTERNATIONAL RAILWAY STRATEGIC MANAGEMENT INSTITUTE.

PARTICIPATION OF RAILWAY EMPLOYEES IN MANAGEMENT (PREM)

SPORTS FACILITIES back

IMPROVE IN EFFICIENCY INTRODUCE IMPROVED ACCOUNTING

TECHNIQUE IMPROVED MANAGEMENT INFORMATION

SYSTEM(MIS)

LONG-RANGE DECISION SUPPORT SYSTEM (LRDSS)

ENTERPRISE RESOURCE PLANNING(ERP) back

OTHER STRATEGIES

ADVERTISEMENT INITIATIVE (with vinyl wrapping)

PALACE ON WHEELS

TAMPLE TRAIN

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ENVIRONMENTAL FACTORS CHANGE IN THE MACRO-ECONOMIC CONDITIONS

RISE IN DEMAND

CHANGE IN THE LEGAL POSITION

CHANGES IN THE ACCOUNTING PRACTICE

DECLINE IN THE FINANCIAL COST

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WHEELS OF CHANGES MoU WITH CHINESE COUNTERPART

RAIL FLEET WITH ECO-FRIENDLY TECHNOLOGY

TRAIN TRAFFIC CONTROL WILL BE COMPUTERISED SOON

WI-FI WILL BE INTRODUCED SOON IN BUSINESS CLASS

RAILWAY WILL UTILIZE SOLAR ENERGY

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SHORTCOMINGS

OVER UTILIZATION MAY BECOME A PROBLEM

COMMERCIALIZATION MAY BECOME A PROBLEM

TRAVELLING TIME IS STILL NOT IMPROVED

IMPROVEMENT IS STILL NEEDED BACK

LIMITATIONS SPHERE NEED TO BE INVESTIGATE FURTHER

COMPARISON WITH WORLD CLASS RAILWAY

FINANCIAL PROFIT ANALYSIS AND ACCOUNTING SHOULD BE SEE IN DETAIL FURTHER.

BACK

MILES TO GO

PALACE ON WHEELSINDIAN RAILWAY

Thank You……….

Who will be the beneficiaries?

You & Me

BIBLIOGRAPHY www.indianraiways.gov.in www.indianrail.gov.in Milind.Sathye@canberra.edu.au www.rbi.org.in www.reservebank.com www.irfca.org en.wikipedia.org Rakesh Mohan Committee. 2001. Highlights of the Executive

Summary Raghuram, G. 2007. ‘Turnaround’ of Indian Railways: A critical

appraisal of strategies and processes’, Indian Institute of Management Working Paper no. 2007–02–03, Indian Institute of Management, Ahmedabad.

A Case Study Desh Gupta and Milind Sathye* Faculty of Business & Government University of Canberra, Canberra, Australia.

Vinyl wrapped train by Airtel80 crores contract with airtel and kurkure for ad

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PALACE ON WHEELS

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