turnaround of railway business strategy

INDIAN RAILWAYS

SALIENT FEATURES OF INDIAN RAILWAYS

• World’s third largest railway network• Prime movers to the nation.• Approximately 65,000 km of rail tracks and over 7,151

railway stations. • IR owns a fleet of 2,22,379 wagons, 42,441 coaches and

7,910 locomotives. • It runs 16,0251 trains, including 9,550 passenger trains,

carrying about 1.6 million tonnes of freight and about 15 million passengers daily.

• Prime infrastructural sector.• Perform the dual role

1. Commercial Organization2. Vehicle for fulfillment of social obligations

• Part and parcel of the total receipts and expenditure of the Government of India.

• The site which serves online ticketing for Indian Railways is the largest e-commerce website(www.irctc.com)

MemberStaff

Members Civil

Engineering

MemberSignaling

& Telecom

Railway Board

Financial Commissioner

MemberTraffic

Ministry of Railways

Research,Design,

and Stds. Org.

ProductionUnits

General Manager

MemberStores

Minister of Railways

The Govt. of India

SWOT ANALYSIS

Strengths• the ‘Biggest Company’ in the

world in terms of employee strength.

• Palace on Wheels’ is a major part of income.

• connects different cities and countries.

• luxurious and affordable to common man.

• Technological advancement

SWOT ANALYSIS (Contd..)

Weaknesses

• Corruption within the department.

• Lack of accident proof magnetic wheels in all trains.

• Lack of safety

• Poor infrastructure

• Delayed trains

• Non pro-active employees


Opportunities• METRO’ in a commercial city like Mumbai• Development in small cities• Profit through privatization


Threats• Low cost airlines• Improvement of other infrastructure like roadways• Could be taken over by airlines

THE LOSS MAKING ERA OF INDIAN RAILWAYS

The Indian Railways is hurtling towards financial and organizational bankruptcy.”

-Rakesh Mohan Committee.

Sectors due to which Railways incurred Losses•Passenger Business.•Reduction in the share of Transport Market.•Freight Segment.•Scrap Disposal.•Unremunerative Projects.•Increase in wages and salaries.•Social Service Obligations.

INDIAN RAILWAYS MARCHING

TOWARDS HUGE PROFIT

RAIL BUDGET 2006-2007

Railways reap the benefits of volume growth and better management

BROAD STRATEGY ADOPTED

• play on volumes• reduce the unit cost• pass on the benefits to the consumer.• improvisation or reinventing instead of restructuring

FREIGHT SECTOR• Indian Railway carries a huge variety of goods ranging

from mineral ores, agricultural produce, petroleum, milk and vehicles.

• Indian Railways makes 70%of its profits from the freight sector

DECISION MADE IN BUDGET

• No change in rates• Enhancing the quality of freight trains• Double stack container freight trains• Increase in wagon production & locomotive production• Meeting global demand

SCHEMES INTRODUCED• Engine-on-Load• Terminal Incentive Scheme• Electronic Payment Gateway• Wagon Investment Scheme• Non-peak season incremental freight discount scheme• Loyalty Discount Scheme

• Commodities have been moved to higher brackets — iron ore, fertilisers and petroleum products being some examples.

• A congestion charge has been put on specific commodities

• In addition, the Railways have raised the maximum permissible carrying capacity of its wagons by two to eight tonnes.

PASSENGER SECTOR

• Indian Railways operates approx. 8,702 passenger trains and transports around 5 billion annually across twenty-seven states and three union territories

Decisions Taken in Budget

• Safety Initiatives: IR created a Special Railway Safety Fund of Rs. 170 billion to improve safety environment, through replacement of over aged railway assets, that is, tracks, bridges, rolling stock, signaling gears etc.

– The number of accidents have been more than halved from 473 (2001) to 200 (2007).

– Use of high technology for passenger safety (train safety devices like Train Protection and Warning System and Anti-Collision Devices).

• Security: Railway Protection Force was strengthened to escort passenger trains in security sensitive areas.

• Cleaner Trains

• Book stalls

• Reducing journey times

• Increasing bogies

• Special Measures for Women commuters

Catering

Fully Air-conditioned Garib Rath

• A view of the Garib Rath, train for the poor, that provides comfortable, air-conditioned travel at affordable cost to India's poor.

CHANGES INTRODUCEDTatkal (instant)-reserved tickets • In the last three years, the number of tatkal seats more

than doubled.• In 2005-06, the daily average number of berths in tatkal

quota was 43,000. The next year, it increased to 57,000 and in 2007-08 raised further to 98,000.

• Tatkal revenue for the Railways almost doubled from Rs 200 crore in 2006-07 to Rs 396 crore in 2007-08.

• No slack season (February-March and August) for trains that see high purchase of such tickets — 80 per cent and above of the quota .The tatkal quota in such trains has been kept higher than others.

• In the last four years, the Railways have upgraded 210 mail and express trains to the super-fast category, taking the total number of such trains to 350.

• These trains run at an average speed of 55 km per hour and, after the conversion, their journey time has been cut by three to six hours.

• However, this reclassification has also resulted in more money (over Rs 114 crore in 2007-08) for the Railways as each passenger needs to fork out Rs 15 for super-fast charges. Today, over a fifth of all passenger trains operated by the Railways are super-fast trains.

MOTIVATION OF RAILWAY EMPLOYEES

• Changes in organizational culture from politicized decision making to commercial, business oriented decision making.

• Facilities for licensed porters

• Crew friendly driver’s cabins and brake vans were designed.• • Establishment of International Railway Strategic Management

Institute in 2005

• ‘Participation of Railway Employees in Management (PREM)

• Corporate Welfare Plan, Staff Welfare, sports club

• Evolved a system of ensuring managerial accountability, Performance based rewards

RESULTS OF THE STRATEGY

• Internal revenue generation increased from Rs 6,902 cr in 2003-04 to Rs 13,612 cr in 2005-2006.

• The operating ratio improved from 92% in 2003-2004 to 83.7% in 2005-2006.

• The railways transported freight weighing 667 tonnes in 2005-06, a 20% increase over the last year.

• IR generated a Rs 13,612 cr with 1.422 million employees on its rolls, ignoring the recommendations of the Rakesh Mohan committee which emphasized on having a thinner organization.

• More effective use of manpower led to improvement in staff productivity. Revenue per staff witnessed a rise by 68 percent (2001-2006) as against 49 percent (1996-2001).

LALU AND INDIAN RAILWAYS

• He disallowed plastic cups used for serving tea at railway stations and announced that they will be replaced by kulhads(earthen cups).– generate rural employment.– reduce garbage as the kulhads are bio- degradable.

• He made personal inspections in the railways. He undertook a surprise check at Rail Bhavan in New Delhi. He deducted the salaries of about 500 latecomer employees and sent them back.

• Lalu carried out a surprise check on a goods train coming from Mumbai at Danapur station. He found that weights of consignments were under-assessed, leading to loss of revenue for Railways. He claimed that railway officials, transporters and consignees were part of a racket. A few top BJP leaders, associated with a company called Samrudha Overseas Pvt Ltd, were allegedly involved in the racket.

• He said that he would revoke the contract of A H Wheeler & Co, which runs newspaper stands on most Indian railway stations, because they were enjoying monopoly ever since English (British) left India and would invite open tender.

• He maintained passenger profile so that compartments could be taken off or added to trains according to seasonal demand.

• As part of his drive to modernize the railways Lalu Prasad Yadav has decided to send nearly 100 top officials abroad for training in latest techniques and sharpen their managerial skills in Management Schools of USA and France.

Lalu Prasad Yadav is now credited with engineering the financial turnaround of Indian Railways, which was on the verge of bankruptcy. Under him, the Railways booked an unprecedented surplus of 110 billion rupees (2.47 billion dollars).