| Just three years back it was supposed to be heading for bankruptcy. An expert group report in 2001 had even predicted that it would impart the government a liability of over Rs 61,000 crore in 16 years. There has been a major turnaround since then. For the past two years, it has been earning cash profits, while just two days ago, it announced a cash surplus of Rs 20,000 crore. |
The Indian Railways, the organisation in question, has managed to prove its detractors wrong. Not only is the turnaround on track, it is also a case study at the prestigious Indian Institute of Management (IIM), Ahmedabad and its driver, Railways Minister Lalu Prasad Yadav has been addressing students of universities like Wharton and Harvard Business School in the US, telling them how he scripted the success story of the country's loss-making Railways.
A surplus (before dividends) of Rs 20,000 crore makes the Indian Railways the country's largest profit making entity-it has left behind ONGC by 25 per cent and Reliance Industries by almost double the amount, which registered profits worth Rs 16,000 crore and Rs 10,557 crore, respectively. It is now looking at modernisation by investing in it projects and the plans include setting up automatic ticket vending machines across major cities, train-inquiry call centres and hand-held computers for travelling ticket examiners. There is also an initiative to introduce e-ticketing through post offices, petrol pumps and ATMs. But here arises a question-how will they be achieved? "With better utilisation of economies of scale, these innovative measures can easily be incorporated," says Sudhir Kumar, officer on special duty to the railway minister, "This in turn will improve efficiency, tariff management and volume growth," says Kumar.
The freight-driven growth in traffic receipts and a 9.6 per cent drop in working expenses can be seen in 78.7 per cent (target) operating ratio, which is best for the Railways ever. The return on capital is set to reach a historic level of 20 per cent. Also, despite reduction in passenger fares, the losses in passenger business are expected to come down. "We have justified our commercial existence," says Kumar. Of course, this has to be seen in the context of a buoyant economy growing at over 9 per cent, with exports growing at over 20 per cent.
The turnaround has been apparent for the last three years, as Lalu's policies of lowering unit costs have worked in removing productivity gaps in this once waning organisation. On the passenger front, earnings have grown from Rs 15,126 crore in 2005 to Rs 17,400 crore in 2006. As far as freight is concerned, the productivity jump has come from increased loading. The Ministry is targeting a load of 785 million tonne, an increase of 8 per cent over the previous year. However, the "dynamic freight pricing" is a reclassification of existing categories. Also, it is looking at raising income from other sources that include parcel leasing, issuing tenders in catering and scouting innovative areas for advertising at railway stations.
| FIRST CLASS! |
Cushioned seats in unreserved second class coaches
Lower berths for senior citizens and women above 45 years
6,000 automatic ticket vending machines in metros
Single number (139) for train enquiry
32 new trains, 8 Garib Raths
In an interview to india today in March 2005, Lalu had highlighted his priorities, the first one being restoring the Indian Railways' financial loss, then modernising it. It seems he has maintained consistency in his objectives, although he hasn't specified how the dream run will be sustained. While he has presented a please-all budget this time, it remains to be seen if the earnings will maintain momentum in the future.