final report on indain railways gr 4

CASE STUDY:-“Turn Around of Indian Railways

2004-2006”

SUBMITTED TO: - Prof. Samik Shome

SUBMITTED BY: GROUP -4 Aditya Jain – 09PG303

Chawla Manisha – 09PG313

Karthik Vishwanath- 09PG323

Pooja Prasad- 09PG333

Sandeep Babaji- 09PG342

Swati Ray – 09PG352

SUBMITTED ON: - 9th NOVEMBER 2009

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CONTENTS:-

Sr No :- Topic Page no

1. Executive Summary 3

2. Issue statement 3

3. Introduction 4

4. Analysis of the case

4.1 SWOT Analysis

4.2 PESTLE Analysis

4.3 GRAPHICAL Analysis

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5. Future Scenario of Indian Railway Industry

A) Challenges

B) Prospects

C) Recommendations

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6. Conclusion 14

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EXECUTIVE SUMMARY:-

The Indian Railways Once considered as non performing and non profit

Public Sector Undertaking, today is on edge of second largest profit making Public Sector

Undertaking. In the year 1990’s Indian Railways experienced huge financial crisis due to

IR (Indian Railways) losing traffic to the roads rapidly and freight services repeatedly

subsidized passenger services. But after 2001 there was a sudden boost in the Railway

Industry .The fund balance crossed Rs.12, 000 crores in 2005-06, which had reached a

low of just Rs.149 crores in 1990-2000. The total investment planning for the eight-year

time frame (2007-2015) is tentatively in the order of Rs.350, 000 crores. This confidence

is not only due to the rising trend of performance, but also due to the significant growth

in the past two years and continues to be part of an essential part of the growth engine of

the Indian economy. This made the Indian Railways with various determinants, different

strategies and operations to be successful and this is what the Case deals with called the

Turnaround of Indian railways.

ISSUE STATEMENT:-

The case basically deals with the comparison of present day growth of

Indian Railways with the difficulties and losses faced by it earlier. The main aim is to

understand the strategies implemented to bring this significant change and to face future

challenges.

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INTRODUCTION:-

Indian Railways is one of the largest and busiest rail networks in the world,

transporting over 15.68 million passengers and more than 1.83 million tones of freights

under single management. IR (Indian railways) operates long distance and suburban rail

systems on a multi gauge network of broad, meter and narrow gauges. It also owns

locomotive and coach production facilities. IR draws up its development plans with

framework of National Five Year Plans.

This golden period of growth and development has come after long period of

struggle and apprehensions faced earlier by IR .During 1990’s, the IR suffered losses due

to snatching over of freight carriage by roadways .There were also doubts about the

performance of IR in future. According to Expert Group, Internal reasons such as

government’s attitude, diversion of freight traffic to the roads in bulk and for longer

distance and price discrimination i.e. not providing lower class consumer any subsidy

resulted in the turmoil. The situation worsened and Expert group commented that IR will

not survive for long and by 2016 it will become bankrupt.

But after 2004-05 considerable growth has been witnessed in IR, this

increase in efficiency of IR has been termed as The Turn’ around in Indian Railways.

FACTS:-

1. In the first five year plan, from 1951-56, replacement of over aged assets was the

key area of concern for IR with the total fund of Rs. 267.07 crores. If we compare

this with the tenth five year plan, from 2002-07 with the total budget of Rs. 60600

crores, the key concern areas were technological up-gradation, improving assets

efficiency, increasing share of freight and passenger traffic etc.

2. The ninth five year plan from 1997-2002 reflects the turbulent time of Indian

railways. Implementation of fifth pay commission resulted in increase in the staff

costs, freight traffic reduced by 29%, the attitude of government towards IR as

public entity forced people to use road transportation.

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3. The tenth five year plan laid the foundation of growth of IR with exceptional

performance in the year 2002-07.The growth in freight loading increased by 10%

while that of freight revenues increased by 17%. This was the turnaround point in

Indian Railways.

REASONS FOR TURNAROUND:-

The Rail budget proposed Strategic plans which were able to attract funds

from the government .The implementation of these plans led to maximum utilization of

resources and hence resulted in growth in IR.

THE FOLLOWING STEPS WERE TAKEN FOR THE TURNAROUND OF IR :

Number of Diesel and Electric engine on broad gauge tracks were increased, this

resulted in passenger traffic and hence revenues.

Reduction in fare to make the travel cost more effective

IR also introduced 178 new trains and extended 105 existing trains. It also

increased the frequency of 28 trains. During the same year i.e. in 2005-06, 119

lakhs cases of ticket less travelled were checked and amount of Rs.233.11crores

were collected.

Railway coaches were redesigned using imported technology from Germany.

Existing stations were upgraded and new stations were built to meet passenger

services.

Up gradation was introduced to optimize accommodation in trains.

Passenger Reservation System (PRS) were increased to 1315 locations

Catering services were improved by adopting the concept of food plazas.

Wagon loading capacity was increased and wagon turnaround time was reduced.

IR also set up a PPP (Public Private Partnership) cell to develop railway

infrastructure.

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Garib Rath trains for poor people were introduced with 50% concession in train

fares and also introduced Palace on Wheels which attracted tourists and also

promoted Indian culture.

Zonal railways were advertised to promote railway. IR earnings from

advertisements increased from Rs 50.2 crores in 2004-05 to Rs 78.1crore in 2005-

06. Also allowing advertisements of different companies like Kurkure, Reliance,

and Airtel etc on railway platforms led to increase in revenues. They also

generated revenues from internet café and internet facilities inside the trains like

Rajdhani and Shatabdi on some routes and also on platforms.

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ANALYSIS OF THE CASE:

SWOT Analysis:

Strengths

Financial back up from government

Biggest company in the world in terms of Employee Strength

Large Infrastructure

Large Network across the country

Luxurious and also affordable to common man

Weakness

Assets are not properly utilized

Government protocols, lot of negligence.

Lack of safety measures in all trains.

Delay in train timings.

Opportunities

Use of Latest Technology.

Better customer service.

Metro trains in cosmopolitans cities.

Threats

Heavy vehicles with two trailers may replace freights carriage

Low cost airlines

Development of roadways

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PESTLE Analysis:

Political:

The Indian Railways is owned and run by the government of India. As a result

there was lot of policy changes which resulted in increase in efficiency of the railways

during the period 2004-05.

Economic:

IR is a Public Sector Undertaking so fund flows were taken care of by the

government and Revenue generated helped in economic prosperity of the country.

Social:

As there was no further hike in the travel fare, so travel was made affordable

for common man at the same time the additional services were also provided. This led to

considerable increase in revenues and tourism.

Technological:

Introduction of Diesel engines, Electric super fast trains, redesigning of

coaches and improved safety measures were undertaken which earned more revenues to

the railways.

Legal:

The contracts undertaken by the railways for freight carriages and insurance are

major of Legal aspects

Environmental:

Introduction of electric engine helped in decreasing the pollution. Also

introduction of Kulhars (cups made of mud) and ban on use of plastic cups in train also

led to decrease in pollution and gave financial help to potters.

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Graphical Analysis:

A)

X axis: Growth Rate in % , Y axis: Year wise

Source:- http://www.iimahd.ernet.in/publications/data/2007-02-03graghuram.pdf

The Figure above shows, the Ups and Downs in the earnings and expenses of

Indian railways, over a period of time. During 2005-06, the total earnings reached Rs.

54,404 crores, the total working expenses were Rs. 45,573 crores. There was a 16 %

increase in the total earnings as compared to previous year and 7 % in total working

expenses in the same year as compared to previous year. The increase in net revenue is

significantly due to freight rolling stock and reduced operating costs with no idle time,

which made it profitable.

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http://www.iimahd.ernet.in/publications/data/2007-02-03graghuram.pdf

B) OPERATING RATIO:-

X axis: Operating Ratio in % , Y axis: Year wise


ANALYSIS OF THE CASE:-

As shown in above figure, Operating Ratio is ratio of total working expenses to

total earnings; This is an indicator of the efficiency of IR. The Operating ratio was 98% in

2000-01 and expenditure was almost equivalent. This was due to non proper utilization of

funds which relatively shows poor performance. But in 2005-06 it declined to 84%

showing efficient performance of IR, which was due to introduction of high efficient

trains and better utilization of rolling stock.

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C) Net Revenue:

X axis: Net Revenue , Y axis: Year wise


ANALYSIS OF THE GRAPH:-

From the graph it can be analyzed that the net revenue which was 1071 crores in

2000-2001 reached to 8005 crores in 2005-2006 and dividend which was approximately

Rs.250 crores in 2000-01 reached to Rs.3750 crores in 2005.The deferred dividend

liability from 1978-79 onwards aggregated to Rs 428.43 crore by end of March, 1990. The

amount was cleared by 1992-93. The dividend payable in 2000-01 and 2001-02 worked

out to be Rs 2,131 crore and 2,337 crore respectively, out of which Rs 1823 crore and Rs

1000 crore respectively have been transferred to a deferred dividend liability account.

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D) Commodity wise Freight Earning

X axis: Commodity wise Freight Earnings, Y axis: Year wise


From the above graph it can be analyzed that coal loading increased by nearly

8%, iron and iron ore by 7%, cement by nearly 2%, food grains supply reduced by 2%

from 1988 to 2005.Main revenue to IR comes from freight transport of which coal and

iron ores take the major share. Therefore freight loading capacity was increased by

increasing the Wagon loading capacity and the freight charges were reduced. So IR was

able to generate more revenues.

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FUTURE SCENERIO OF INDIAN RAILWAY INDUSTRY

A) Challenges:-

1. Increasing number of trains requires sufficient number of tracks and setting up of

tracks requires huge amount of time and expenditure.

2. Over use of old tracks can lead to accidents.

B) Prospects:-

1. High way Golden Quadrilateral Plan should be complemented.

2. Implementation of freight and high speed corridors in southern region should be

done, so as to balance Northern Rail freight corridors railway.

3. Private sector investments should be allowed so that financial and operational

burden is met.

4. Increase in financial and commercial investment to attract FDI.

5. PPT frame work should be developed for the manufacture of state-of-art rolling

stock, locomotives, track equipment and signaling infrastructure coupled with

technology transfer arrangements.

6. Development of infrastructure for Inter Modal connectivity.

7. Rationalization of freight tariffs to simplify freight tariff slabs.

8. Railways should resort to progressive suppression of railway

infrastructure and operation and maintenance.

9. Independent and transparent rail tariff authority should be created.

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C) Recommendations:

1. Special teams should be appointed to check ticket less traveling.

2. Censor monitoring system should be implemented to check extra luggage

carriage.

3. Customer services should be taken care of by improvement of resting rooms on

stations.

4. Third track should be made for better freight transport.

5. Safety measures of the railway should be checked at regular intervals and should

be updated with the latest technology.

CONCLUSION:

Indian railways should aim at performance enhancement keeping in mind

performance maintenance. Increasing customer expectations and rapid technological

advances with considering customer focus should be the main motto of the Indian

Railways, thus adding support to the economic development of the country.

Courtesy :


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final report on indain railways gr 4

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