Submission from Group 5: Mahak Wadhwa (I063), S Shyam (G060), Shashank Reddy (G047), Deepti Mhatre (I034),

Prasad Sawant (E054) and Titiksha Daga (E017)

Indian Railways: Building a permanent legacy?

Indian Railways has been a key national infrastructure, carrying over 17 million passengers and 2 million tons of freight every single day. It
was the World’s largest public utility employer with 1.4 million people on it’s payroll and indirectly affecting the employment of millions of
people in India

The foundation of the Indian Railways were laid on 16th April, 1853, with the first train line between Mumbai and Thane. The Indian railway
infrastructure grew in the colonial era and post independence a total of 42 separate railway system were amalgamated to create the Indian
Railways.

The hierarchical structure of the Indian Railways consisted of the Union Railway Minister at the top, assisted by two state ministers and a
special officer in charge for implementing policies. A railway board overlooking the administration of Railways consisting of highly
specialized and experienced members of their respective fields from the Indian Railway Services. The technical staff under them consisted of
highly qualified engineers from prestigious institutes like IITs.

Problems

Indian railways was marred with a series of problems. The investments made in railways were not yielding great results due to narrow
departmentalism, lack of cross functional coordination and risk aversion due to increasing axle load. Over the years, the passenger and
freight traffic declined significantly to other means of transportation. Social service obligations of their such as transportation of goods and
passengers below cost and continuing to operate non profitable railway lines contributed to the losses at IR. Also not closing already
unprofitable lines, and over that investing further to set up new unprofitable railway lines due to political pressure, led to losses and more
importantly diversion of railway resources away from important projects. IRs financial problems culminated in 2001, when it was compelled
to defer the dividend payable to the government as it barely had enough revenue to pay for the operating costs.

When Lalu Prasad Yadav took charge as the Railway minister, the main challenge in front of him was to deliver inclusive reforms, cater to
unremunerative social obligations and yet transform IR to make it a commercially viable organization of a global repute.

Freight trains

To improve the freight operations of IR, Prasad and team focused on reducing the unit cost of transportation by using Faster and heavier
trains. Electrification of some tracks junctions, reduced detention time for some rakes, alteration of rules related to demurrage and wharfage ,
and maintenance practices were altered to reduce the turnaround time of the freight trains. The loading capacity of the trains was increased ,
ensuring that the safety norms aren’t compromised. Also changes were made to the pricing structure, by changing tariff schedule to wagon
capacity incorporating seasonality of demand, providing lean period discounts , incorporating surge pricing and giving loyalty discounts.
Also an upgradation of technology was undertaken in information and management systems as well as the payment systems for freight train
operations.

Passenger Trains

In the passenger train segment, the key challenge was to maintain the lower cost services, while at the same time increasing it’s capacity and
utilization for the upper class services. Under Prasad, IR intended to increase volumes to lower the cost. IR wanted to extend the services to
the poor and also solve the issue of underutilization of the air conditioned first class. Garib Rath, a low cost air conditioned passenger train
solved both the problems, and with enhanced seating capacity , it was commercially viable. The number of coaches of the trains were
increased resulting in reduction of unit cost per passenger and increase in revenue per train on popular long distance routes. Measures like
introduction of Tatkal services, increase in the speeds of the trains through investments and altering the current operating procedures and
adoption of new technology to improve customer service, all resulted in improving the passenger train performance for the IR.

Human resource

Since downsizing was not an option due to political reasons, IR focused on focusing on labor productivity, cross-functional work, speedy
execution and a renewed focus on training. Employees in un efficient roles were shifted to more efficient jobs where they could be utilized
better. Monetary benefits, proper gears were provided to boost employee morale.

Capital Expenditure

To fund capital expenditure, Prasad encouraged public-private partnerships in noncore areas such as hospitality and catering, or cargo
handling at terminals. He gave 15 operators licenses to run trains and invited customers to own their wagons. IR also issued debts for capital
expenditure. Through these measures IR generated a cash surlplus which were used to finance investments and infrastructure improvements.

Legacy

The turnaround of the Indian railways can be among other reasons, attributed to a motivated Lalu Prasad Yadav, who used the opportunity of
becoming the Railway minister to showcase his administrative capabilities and further his political cause and civil servant Sudhir Kumar,
who was the link between Prasad and the board, and was instrumental in implementation of the policies for improvements.

It was the prerogative of the successors of Prasad and Kumar to ensure that the gains made by IR through the turnaround were sustained and
there were further improvements in the performance as well.