Indian railways case

Indian railways, the largest bureaucratic organization in the world, made surplus of INR 130 billion in
2005-2006 and about INR 200 in 2006-2007. It has emerged as the single largest money spinner in
India, challenging the entire private sector-the only sector that has ever made this kind of money. It
has over taken public-sector giants like ONGC and Reliance in spite of social obligations. Indian
railways now have the best operating ratio in the world. With this, it has convincingly and
conclusively dispelled the cynicism that nothing can change in government departments.

Have these changes been possible because of leadership? How can the Indian Railways, which was
running into losses or marginal surplus for year together. Show such results? Surplus was as low as
INR 1.49 billion in 1999-2000. Lalu Prasad Yadav , the former minister of railways of government of
India, has been able to bring in positive results. He responses faith in the million employees of Indian
railways. How can a leader manage 1.4 million employees spread all over the country? How much
time must he be devoting to this? He does not have a technical background.

All along, it has been a game of volume; it was Dhirubhai Ambani’s directive, when Reliance
Infocomm was at the blueprint stage, that a mobile phone call should be made cheaper than a
postcard. In early 2000, the average cost of a mobile phone call was around INR 0.50.Economics of
scale aside, he knew exactly what the common man wanted. Dhirubhai’s lack of education in
economic theory was more than compensated by his tremendous capacity to learn. Has Lalu Prasad
Yadav done something similar?

In mid 2001, the Rakesh Mohan Committee remarked, “today Indian Railways is on verge of financial
crisis. To put it bluntly, “business, as usual low growth” will rapidly drive Indian Railway to fatal
bankruptcy, and in 16 years, Government of India will saddled with an additional financial liability of
over Rs. 61,000 crore. On a pure operational level, IR is in a terminal debt trap. “There is cheap
politics, and infrastructure utilities are not able to recover user charges and yet shoulder the social
obligation.

From 1991 to 2000-2001, Indian railways added 155 million tons of additional freight traffic, in the
last 4 years, it has added 234 million tons-an amount that used to take more than 15 years to
achieve. Today the earnings have multiplied. There are 4000 goods trains; if they turn around every
eight days, one can load 500 trains per day. If they turn around every five days, 800 trains can be
loaded per day. Thus, 60 percent capacity is increased, and what is the cost? Zero , Indian railways
has been able to achieve the magic of INR 200 billion with the same people and same resources.

With the increased capacity running more trains, faster trains and heavier trains-is Indian Railways
facing safety problems? No Indian Railways has increased the provision of funds for replacement,
that is, depreciation from INR 1.8 billion five years ago to INR 5.4 billion in 2006-2007.

The freight business is a play on volume; passenger business is a play on volume and quality. The
increase to (1) good earnings (2) passage earnings; and (3) parcel, catering, advertising and other
earnings. In freight business, the objective was achieved by lowering the unit cost of transportation,
rationalizing the commodity classification, and introducing various freight incentive schemes, in
passenger business, the revenue management was done by changing for differential services like
“superfast” and “Tatkal”. Parcel, catering and adverting were outsourced through public-private
partnership and wholesaling rather than retailing.

The game under the leadership was cost cutting and efficiency improvement-in freight and
passenger operations-through better synergy between commercial interest and social obligation.
Manmohan Singh, Prime Mister of India, referred to Lalu Prasad Yadav as the “role model for
economic reforms with a human face”. No government department has ever shown such results.

The definitional clarity, the conceptual clarity, is the foundation of this turnaround. A leader has to
set the vision, direction, and tone-this is the sum and substance of leadership. These qualities are
essential for a transformation. What are we? What are we here for? What are our goals and
objectives? Clarity on these essential qualities is utmost importance. In this case, the objective is to
be a business in rail transport. The competition is with other means of transportation such as
airlines, roadways, and waterways. In a business, with the social obligation also, one had to offer the
customer value for money that is supervisor to the value provided by competitors. What value can
be added to attract customers to India Railways? Value can be added by enhancing the experience of
the customer through improved passenger and freight transport.

Lalu Prasad Yadav has believed in delegation. The experts in the Railway Board work as a cohesive
team to achieve the objectives through the fundamental initiatives given by the minister. He has
identified the right people for the right job. “Think big, set the objective, and leave the rest to the
professionals” is the mantra he follows. He is known for his charismatic leadership and mass appeal.
Touch and feel factors and a caring attitude have made Indian Railways reach where it is today. Peter
Ducker once said, “Great leaders do not do great things, they identify and select right kind of people
for the right kind of job and execute simple and obvious things quite brilliantly but swiftly”.

Questions:

1. It is the leadership that has turned around the India Railways. Do you agree with the
statement? Discuss.
2. Government organizations cannot make the country grow. Privatization is the only way to
grow. How far it is true in this case?
3. What is real leadership? Dhirubhai Ambani took Years to create his empire, but Lalu Prasad
Yadav took 2 ½ years to surplus equivalent to Reliance’s . Discuss.
4. What are the driving factors for the management of change in Indian Railways?
5. What is the leadership style of Lalu Prasad Yadav? What attributes have made him an
achiever?