IS RAILWAYS’ TURNROUND SUSTANABLE?
In February 2009 when the Railways’ Minister presented Budget Railways were poised to create history by generating a cash surplus of Rs. 90,000 crores in last five years as against acute cash shortage in the previous few years before this period. This was the same Railway that defaulted on payment of Dividend of Rs.2800 crores and whose fund balances dipped to Rs 359 cr. in 2001. Rakesh Mohan Committee, in July 2001 has termed it terminally ill organization, which was on the verge of bankruptcy. At that time it was believed that very soon Railways would get involved in a terminal debt trap with an additional financial liability of over Rs. 61,000 crores. The operating ratio had reached low levels of performance- 98.3%-in 2000-01. The fund balance had reached a low of just Rs.149 crores in 1990-2000. In contrast to this by the year 2007-08 Indian Railway achieved the Operating Ratio of 76% - best ever for IR and one of the best in world. Railways are now having substantial amount of surplus money and it is the second largest profit making Public Sector Undertaking after ONGC. Thus the railways have been able to make total turnaround of its performance.
However, the biggest doubt prevailing in the minds of many critics is that whether this turnaround of Railways is going to last for longer and whether this turn round is sustainable? Thus the purpose of this article is to analyze these issues. To search the answer of these questions we would try to examine what were the specific actions taken to improve the working of the Railways and whether these actions are going to give continuously better result or do we need to take some more or different approach to make the Railways turnaround really sustainable.
Let us see what the steps were proposed to be taken to improve the productivity: -
Quantum jump in Freight Business
The Railways have been able to maintain outstanding freight performance for the fifth consecutive year and incremental loading is likely to be more about 14 per cent MT. Thus the incremental loading of about 170 MT achieved in the three years. This would exceed the total incremental loading of the 1990’s by 125 per cent. To maintain this rate of growth, the IR has taken several steps to improve the availability of trains. The IR has adapted its policies to the needs of the market and customers.
Cement and Steel - Mission 200 Million Tonnes
Since introduction of the New Economic Policy in the year 1991, Railways have been constantly losing share in cement and steel traffic. As a result Railways’ share in transportation of these commodities has declined from two thirds in 1991 to one third. During2006-07 Railways have increased their share in transportation of cement and steel by seven percent. While the cement and steel industry registered a growth rate of ten percent this year, IR’s cement and steel traffic have increased by twenty to thirty percent. This is the result of market and customer oriented policies. Now the Railways have focused on Mission 200 Million Tonnes. Railways are hopeful that by the year 2011-12, Railways traffic from cement and steel industry will increase to 200 MT each.
Container Traffic - Mission 100 Million Tonnes
To increase the container traffic 15 licenses have been issued for the running of container trains in the last two years. Efforts are being made to increase container traffic to 100 million tones by 2011-12, from the present 20 million tonnes. Over the next five years, it is expected that investment worth several thousand crores of rupees will flow in for the development of container wagons, terminals and other related rail infrastructure.
Triple Stack Container Train
After successful experimentation of running double stack container trains on diesel route, double stack container trains are now running between Pipavav and Jaipur. The efforts are on to run triple stack container trains with low height container on diesel routes and double stack container trains on electrified routes on pilot basis. Such containers would be useful for loading of motor vehicles. Once it becomes successful it can be implemented in other regions.
Long Term Service Level Agreements
Railways have signed a 30 yearlong term Service Level Agreement (SLA) for transportation of coal. Similar SLAs are required to be signed with several new cement, steel and mega power plants, which are being set up in the country. Railways should provide necessary support services for laying new lines up to their facilities, enhancing capacity of existing lines, making available wagons designed to suit their specific requirements, formulation of pricing policy and in developing loading and unloading terminals.
Merry Go Round (MGR) System For Coal
Several companies, including NTPC, are operating their own MGR Systems. New power plants are also planning setting up of MGR systems. Railways have domain expertise in running these systems more efficiently and economically at costs that are lower than their existing costs. Therefore, more and more companies should be encouraged to enter into SLAs with the Railways for the running of MGR.
Development of Freight Terminals
There has been a significant increase in Railways traffic with the commissioning of the warehouse complex in the Bangalore Goods shed. After this experience Railways have decided to develop all basic facilities at freight terminals handling more than 15 rakes per month, over the next three years. A new Plan sub head has been opened for expenditure on development and up gradation of freight terminals to ensure adequate provision of funds for these works.
Improvement of NTKM to GTKM Ratio
For a payload of one tonne, Railways carry a tare weight of a little less than a tonne. The Railways have realized that an improvement of one percent in this ratio would yield an additional earning per annum of Rs 1500 cr. Consequently it has been realized that a multi pronged strategy of increasing the payload and reducing the tare weight of trains, running trains loaded in both directions and minimizing empty running of trains for maintenance and examination and other such measures would have to be simultaneously adopted over the next few years to effect a 5 per cent improvement in this ratio. Since average speed of vacuum goods train is much slower than air brake stocks it has been decided that all types of vacuum brake rolling stock will be eliminated in two stages so that we get freer path to run higher speed train. As per the utilization pattern it has been decided to reorganize wagon examination and maintenance centers will be reorganized to minimize empty running of trains. Several trains have wagons that run empty in both the directions. After implementation of FOIS, the numbers and location of such wagons will be monitored to detach them for repair at the nearest depot.
Higher Axle Load Goods Trains
The Railways are already running CC+8+2 tonnes, which have helped Railways to achieve 714 million tonnes loading in 2006-07. The pilot project of introducing of 22.3 and 22.9 Tonne axle load trains has yielded good results. Recently, 25 T Axle load trains have also been run on pilot basis. Railways have extended running of 22.9 tonne axle load trains on several routes and 25 tonne axle load trains on select other routes.
Wagons with better payload to tare weight ratio
Wagons are the bread winning horses of the Railways. An increase of 10% in wagon productivity would lead to annual incremental earnings of Rs.4000 crore for the Railways. Railways have earned several thousand crores by improving the wagon turnaround time and enhancing per wagon payload. Acting further on this line RDSO has designed new covered and open wagons with a pay load to tare weight ratio of 3 and above, fit for 22.9 T axle load. The carrying capacity of freight trains comprising of such open and covered wagons will improve by 10 and 30% respectively, compared with existing trains. Railways have therefore decided to stop procurement of open and covered wagons of old design from 2007-08. Production of 25 T axle load wagons and 22.9 T axle load wagons of new design will commence in 2007-08. Similarly, 22.9 T and 25 T Axle load wagons suitable for steel and petroleum products will also be manufactured.
Manufacture of new design wagons by Wagon Manufacturers
Till now Railways have been procuring wagons based on RDSO’s designs. Now it has been decided to bring about a total change in this system. Now, wagon manufacturers will be permitted to supply wagons of their own designs, with RDSO recommended bogies, coupler, and draft and brake gear. RDSO will certify and approve the new designs of wagons from the safety angle within 9 months. However these higher payload lower tare weight wagons with new technology would be costlier compared to old wagons. To encourage the development of such new technology wagons, a suitable freight discounts policy is being evolved so that the Railways and investors share benefits of the new technology.
Arrangement of rolling stock maintenance
The Railways have improved loading with available resources through better utilization of existing rolling stock. Through rationalization of driver and loco links Indian Railway have been able to spare more than 250 engines for running other trains. Now world-class facilities are being provided at all train examination points where more than 5 goods trains are examined per day. Most air brake trains under the system of premium CC or premium end-to-end has been covered examination. Railways have decided to make unit exchange spares based maintenance arrangements for all types of rolling stock. This would bring about significant improvement in the productivity of rolling stock.
Throughput enhancement works
To meet the growing competition against the road and to meet the challenges of Railways’ own bottleneck it is imperative that speedy expansion of capacity on the 20,000 kms. long high-density network is finished earliest. The railways have decided that an integrated approach of route-wise planning and implementation would be undertaken to obtain full benefits from investment on these routes. This network would be made capable for running 23T axle load trains and mineral routes would be upgraded for running of 25T axle load trains. Need based enhancement in line capacity of such routes would be undertaken by constructing second, third or fourth lines. Installing IBS would reduce distance between two sections and automatic signaling would be provided at both ends of busy junction stations to enhance line capacity. For seamless and faster rail movement, flyovers and bypasses etc. will be constructed at busy junction stations and yard designs will be modified to avoid cross movement of the trains. High-speed turnouts with a speed of 30 km per hour would be laid on such routes. Additional diesel and electric locomotives and wagons would be produced. Adequate funds provision would be made for throughput enhancement works.
Market Surveys
Railways earn ninety per cent of its freight business from transportation of a few select commodities. With a view to broad base business and improve stability in the growth rate Railways. It is imperative to diversify and increase the mix of carried commodities. Every zonal railway should engage an independent market survey agency to identify new traffic streams.
Passenger Business
By playing the volume game by inducting additional coaches in popular trains, Railways have facilitated travel of more people and increased the earnings. Railways’ policy of licensing of parcel and catering services through open tender has also borne good results. It is for these reasons that despite reduction in fares, the losses in coaching business are likely to decrease by several hundred crores.
Increase in capacity of passenger coaches
Railways have designed coaches with new layouts, having significantly higher capacity than the previous coaches. The capacity of sleeper coaches has been increased from 72 to 84, AC Chair Car from 67 to 102, AC 3 Tier from 64 to 81, AC 2 Tier from 46 to 48 and AC 1st from 18 to 22. There has been some opposition for providing three seats in the side in sleeper or 3rd AC coaches. Hence the IR has decided to discontinue such coaches. Thus, despite in capacity these all coaches would be convenient and comfortable for the passengers.
Rakes with standard composition
Due to absence of standard composition for passenger trains, several trains reach the destination in the morning and remain standing till night. To ensure better utilization of the rake links, Railways have decided to increase the number of passenger trains having standard rake composition. Through revision in maintenance practices, Break Power Certificate (BPC) of passenger trains was given for 3500 kms. in place of 2500 kms. These two decisions will result in considerable increase in availability of coaches.
Railways’ New Profile - 11th Five-year plan
The Railways are targeting a freight loading of 1100 million tonnes and passenger traffic of 840 cr. by the terminal year of the 11th Five-year plan. In order to make this unprecedented growth a reality, it is absolutely essential that in the next few years the Railways’ transport capacity be expanded and doubled, unit cost be brought down by playing the volume game and customers be provided world-class services.
The quantum jump in Investment
During the 11th Five Year Plan, Railways are required to invest many times more as compared to earlier plans. There is no readymade investment policy for a vast network like the Indian Railways. The growing demand for transportation can only be met through a harmonious blend of short term and long-term policies. Railways short-term policy of investing in low cost high return projects has been successful in eliminating network bottlenecks and in ensuring effective utilization of rolling stock. Alongside a twin mid-term and long-term investment strategy is required to be adopted to enhance productivity through, modernization and technological up gradation on the one hand and enhancement of capacity of the network and rolling stock on the other.
Even though the Golden Quadrilateral and its diagonals constitute 16% of the rail network, more than 75% of the traffic moves on these routes. As these routes are super-saturated, IR has make up mind for construction of East-West, East-South, North-South and South-South corridors. Here dream is to construct these corridors in a manner that they develop into efficient and economical trunk routes for speedier, longer, heavy-haul trains. After completion of the freight corridors, it is expected that the problem of passenger and goods trains running on the same network at different speeds will be solved. The IR has been able to achieve such progress in the construction of East-West (in two part- West to north between Mumbai and Delhi and North East between Amritsar and Howrah) by Japanese funding. However, the speed of work is rather show. The IR needs to ensure its timely implementation for getting better result.
Construction of High Speed Passenger Corridor
The rapid growth of the economy, rising industrialization and urbanization and unprecedented growth in intercity travel, has opened infinite possibilities for developing high-speed passenger corridors. Railways have decided to conduct pre-feasibility studies for construction of high speed passenger corridors, equipped with state of the art signaling and train control systems, for running high speed trains at speeds of 300 to 350 kms per hour; one each in the Northern, Western, Southern and Eastern regions of the country. These trains would cover distances of up to 600 kms in two to three hours. All alternatives including Private Public Partnership will be considered for implementation of these corridors. Global warming and changing climatic conditions are a worldwide concern today. These energy efficient and environment friendly systems would go a long way in alleviating these concerns.
Rolling Stock Modernization and Capacity Augmentation
In view of the demands of growing traffic, along with expansion of network, availability of rolling stock will be increased through effective utilization of available rolling stock, technical up gradation and modernization and by setting up new production units. During the 11th Five Year Plan production of rolling stock will be doubled as compared with the previous Plan. The Railways have planned that capacity of existing rail coach and loco production units will be enhanced through expansion of these units. High horse power, energy efficient locomotives with new technology would also be produced. During this plan, production of MEMU, DEMU and EMU coaches would also be stepped up. One new factory each for rail coaches, diesel locomotives, electric locomotives and wheels would also be established. The locomotives to be manufactured in these units would be equipped with state of the art technology and would be capable of hauling longer, heavier high axle load trains. The new Rail Coach Factory would produce high capacity, modern and comfortable coaches. Similarly production of 32 tonne axle load, higher payload lower tare weight and track friendly wagons will start for the new Dedicated Freight Corridors.
Use of IT in the Railway services
It has been planned that in the XI five year plan, investment in IT projects would be increased to several thousand crore rupees to harness the immense possibilities offered by IT in the interest of Indian Railways. IT applications would be deployed to increase passenger and freight earnings, improve the image of the Railways in the eyes of the customer, reduce operating costs, ensure effective utilization of human and physical resources and to help the top management in arriving at long-term policy decisions by developing MIS & LRDSS. A commercial portal will be developed in the next 3 years for yield management, especially to attract traffic for returning empties and filling up vacant seats. All modules of Freight Online Information System (FOIS) including rolling stock maintenance and examination, revenue apportionment, crew management, control charting Coaching Online Information System (COIS) etc. will be integrated and implemented in a time bound manner for completion by 2010. Alongside ERP packages will be implemented in workshops, production units and selected zonal railways. A common website integrating the more than 50 different web sites of Railways will be developed with built in facilities like e-payment and e-tendering. For an integrated approach in IT, CRIS will be entrusted with coordination of all IT applications of the Railways and for development of a comprehensive vision on IT. CRIS will be developed as an autonomous and empowered organization, drawing officers from various Railways services. Indian IT companies have hoisted the national flag all over the world.
Railway Electrification
The Railways have planned that electrified network will be extended over the Golden Quadrilateral and its diagonals, and in all directions from Kashmir to Kanniya Kumari and Guwahati to Amritsar by the end of the 11th Five Year Plan. Electrification of Thiruvananthapuram-Kanniya Kumari, Thrichur-Guruvayur, Tiruchirapalli-Madurai, Barabanki-Gorakhpur-Barauni-Katihar-Guwahati and Jallandhar to Baramullah sections will be completed during the 11th Five Year Plan. In the first phase, electrification of Jalandhar -Jammu, Barabanki-Gorakhpur-Barauni and Tiruchirapalli-Madurai sections are proposed to be taken up in 2007-08. Similarly, doubling and electrification of Pune-Wadi-Guntkal and electrification of Daitari-Banspani, Haridaspur-Paradeep new lines will be undertaken by Indian Railways’ Public Enterprise RVNL in the coming years.
Public Private Partnership Schemes
Investments at a much larger scale would to be required in eleventh five year plan for different capacity and expansion network as compared with the provision made in the Tenth Five Year Plan. The funding of plan of several lakh crores would require multi-source approach based upon deployment of internal resources, market borrowing, and public private partnership and budgetary support. The improved financial performance of the Railways will enable a large share of the financing to be met from internal and external budgetary resources. The Railways have to seek partnership with the private sector on the terms that are in the interest of Railways and their customers. For example, by leasing out catering and parcel services the Railways have reduced catering and parcel losses of more than a thousand crores. The Railways have enhanced their capacity by attracting private investments in the wagon investment schemes and siding liberalization schemes etc. Even while retaining the core activity of train operations, Railways have awarded licenses to private parties for running container trains, which is likely to attract investment of thousands of crores in wagons and construction of terminals over the next few years. Public Private Partnership (PPP) options are being explored with the aim of modernization of metro and mini-metro stations with world-class passenger amenities, development of agro retail outlets and supply chains, construction of multi-modal logistic parks, warehouses and budget hotels and expansion of network and increase in production capacity. The Railways have constituted a PPP Cell which would develop the policy framework to provide non-discriminatory level playing field to investors, prepare the bankable documents and set up the procedure for awarding partnerships through open tendering system.
Thus these steps would help the Railways to meet the challenges being faced by the Railways. When we evaluate the recent past experience of the Railways we found that whole host of schemes have been put in place to attract the freight customer. These include mini rakes for the small customer, volume discounts for the large customer, lean season discount scheme, long term freight incentive scheme, loyalty discount scheme, discounts for providing traffic in the empty direction, incentives at terminals like engine on load and construction of sidings, wagon investment scheme etc.
There was substantial growth of 11.7 percent in earning in 2008-09 over 2007-08. Similar a historic increase of 17 per cent was registered in freight earnings in 2006-07 .A comparison of the loading figures between 2005-06 and 2004-05 shows that increased loadings have been achieved in coal, other goods, raw material for steel plants, and iron ore for exports. The percentage increase with respect to 2004-05 was most significant for other goods (25%) followed by raw material for steel plants (19%), cement (14%), and iron ore for exports (13%). The increase in coal was 8%. The increased axle load has facilitated 14% improvement. Due to increased rake availability as a consequence of (i) improvements in wagon turnaround, especially in iron ore circuits due to the efforts towards 24 hour loading in sidings in SER and SWR, and reduced train examination and (ii) use of covered wagon rakes which would otherwise have gone empty in SWR has also contributed in improved loading.
Most spectacular growth has been in Passenger earnings. There has been increased of 7 percent in 2008-09 over 2007-08. Similarly the passenger earnings in 2005-06 had gone up only by 7.2% over 2004-05.The main reason for the growth of passenger earning were due to initiatives in running 24 coach trains, deploying additional coaches in well patronized trains and even running of additional trains and up gradation of passengers if the seats are running empty. Thus a range of initiatives focused on (i) reducing passenger losses by increasing volumes by increasing the length and occupancy of trains (ii) modifying train length and composition based on passenger profile management (analysis of the passenger reservation system data to understand class wise and season wise occupancy of trains) (iii) increasing average speeds of trains (iv) providing affordable air-conditioned travel for the poor and (v) improved design of coaches. Running of ‘Garib – Rath’ has been one of the successful experiments which has been immensely found to be popular amongst passenger.
There has been substantial growth in other coaching earnings in last four years. These earning came through parcel, catering, advertising, and dividends from the public sector units under the ministry. The increase of 24.2% in 2005-06 over 2004-05 followed a similar growth of 24.7% in 2004-05 over 2003-04. In the earlier years, the growth in this segment had been marginal. This source of revenue had not received as much focus as in the past four years. However, a slew of initiatives on these areas had been implemented over the past some years, making it attractive for private parties to take advantage of the market opportunity that IR could offer.
International Comparison
Russia
According to Russell Pittman1 the Russian railways system is in the midst of a complete restructuring. As part of a ten-year, three-stage reform plan, the railway operating company, RZhD, has only recently been completely separated from the Ministry of Railway Transport. A small number of new train operating companies has been granted access to the infrastructure, carrying only oil and oil products at this point but with the potential to carry other commodities as well. The stated long-term goal of the plan is for RZhD to control 50 per cent of the wagon fleet and to continue to run trains in competition with private train operating companies, which would be guaranteed non-discriminatory terms of access to the track and other infrastructure. Thus – although the exact nature of the post-reform industry structure remains not completely clear – the idea is evidently to allow access by non-integrated train operators but not to force complete vertical separation, and to enforce non-discriminatory terms of access in order to create and protect competition between integrated and nonintegrated train operators
Those arguing for restructuring and reform of the rail sector, particularly in transition and developing economies, have tended to focus on three (interrelated) goals: reducing the demands of the railway sector for government funding, increasing the efficiency of operation of the railway sector, and creating competitive options for shippers. The first goal is not consistent with the policy option of marginal cost access pricing and government funding to make up the fixed costs. The second goal is not consistent either with this option, for reasons of incentives for operational efficiency, or with the option of fully allocated cost access pricing, for reasons of pricing efficiency. Both seem consistent with access pricing schemes utilizing second or third degree price discrimination, but these in turn seem as a practical matter to run counter to the goal of creating competition conditions in transport markets.
Pittman argues that the way out of this dilemma may in many cases lie in abandoning the premise that railways restructuring should be based on the concepts of vertical access and vertical separation. Many freight shippers can take advantage of intermodal competition, using the options of road and/or water haulage to keep a ceiling on rail rates, and this will be increasingly the case for manufactured goods in Russia, especially European Russia. Unfortunately intermodal competition is typically not an option for shippers of the bulk commodities – oil, coal, minerals, chemicals, timber – that make up the largest share of Russian rail haulage.
Britain
The railway network in Britain was planned, financed and built by the private sector in the 19th Century. The industry was nationalized in 1948, and then returned to private ownership during the period 1995-1997, as part of the wider programme of sell-offs carried out by four successive Conservative administrations (1979-1997).
Since nationalization, rail traffic has been in almost continual decline in the face of increased competition from road transport. In the early 1950s, passenger rail travel accounted for roughly 17% of total passenger traffic - by the mid-1990s this share had fallen to around 5%. Rail freight business saw an even sharper loss of market share, from over 40% to just 7% over the same period, driven by the loss of traffic to roads, and the decline of Britain’s heavy manufacturing and primary industries (which rail freight was particularly well placed to serve). Rail volumes also fell in absolute terms up until the mid 1990s. These trends have been reversed since privatization.
Basically the British Railways moved into a loss-making position in the mid-1950s and, in spite of the line and station closures implemented following the Beeching reports (1963; 1965) - which saw the total route mileage reduced by a third - the industry’s financial position continued to deteriorate during the 1970s and early 1980s (as productivity growth slowed whilst wages were on the increase; and as government controls prevented the development of commercial pricing). The 1968 Transport Act explicitly recognized the need for government subsidy to support loss-making (but socially-beneficial) services. However, in line with worsening performance, the level of subsidy also increased over time, reaching £1.6bn by 1985/86, compared to £600m in 1968 (1999/00 prices).
During the 1980s it was recognized that the financial position of the industry, and the requirement for government support, would complicate any attempt at privatizing the industry. Rail privatization would require route closures and/or continued government subsidy after sale. As a result, proposals for rail privatization developed slowly during the 1980s, finally culminating in the sale of the industry during the period 1995-1997. However, the government (and BR), were not idle in the meantime, and began selling off many of BR’s non-core operations. Some of these sales raised substantial sums (for example, BR Hotels raised £150m in 1999/00 prices).
The debate on privatizing the core railway operations continued throughout the 1980s and early 1990s. In 1992, immediately following the surprise Conservative election victory, a White Paper, ‘New Opportunities for the Railways’ (Department of Transport), was quickly put together under the direction of the John MacGregor (then Secretary of State for Transport). The strong likelihood that the Conservatives would lose the subsequent election (1997) injected urgency into the process, as the government sought to complete the sale of the industry in one Parliament – and thus make privatization effectively irreversible.
The 1992 White Paper outlined the government’s privatization objectives, which were similar to those for previous sell-offs: to harness the skills of private sector management, in order to achieve greater responsiveness to customer needs, higher service quality, improved efficiency and better value for money. The introduction of competition was thought to be the best way of achieving these objectives (following the example of the electricity restructuring in 1990), although it was recognized that regulation would be required to protect consumers (especially with regard to safety).
As a result, the industry was separated (vertically and horizontally) into more than one hundred companies, to allow competition to develop in the contestable elements of the business. The restructuring was carried out initially within the public sector, creating shadow companies, which were later sold.
The most significant change was the separation of control of the track infrastructure (natural monopoly) from train operation (contestable). In 1994, most of the fixed railway infrastructure assets were transferred to a new company, Railtrack, separate from BR, but still wholly owned by Government. The company was sold by public offer in 1996.
At the same time, BR’s infrastructure services were reorganized into seven-infrastructure maintenance and six track renewal companies (sold between February and July 1996). BR’s rolling stock was divided into three leasing companies (ROSCOs). The ROSCOs (sold in January/February 1996) lease locomotives and carriages to the passenger train operating companies. Six heavy maintenance depots (provide services to ROSCOs) were also sold in April and June 1995. The right to run passenger train services was franchised to 25 private sector train operating companies (TOCs) - with open-access competition to be introduced gradually under the “moderation of competition” rules laid down by the Regulator (from 1995 onwards). TOCs lease almost all of their rolling stock from the ROSCOs, and pay Railtrack for access to track and stations. Red Star Parcels was sold to a management buy-out in September 1995. Freight operations were separated into six companies (later consolidated into two) and sold between December 1995 and November 1997 (with open-access competition allowed from the outset). In addition, many other BR central services operations were sold to private sector companies or management teams.
As part of the reorganization, two regulatory bodies were also created: (1) The Office of Rail Regulator (ORR), principally to regulate the monopoly element of the business - Railtrack; and (2) The Office of Passenger Rail Franchising (OPRAF), mainly responsible for awarding franchises, paying subsidies, and regulating the TOCs. Rail Users’ Consultative Committees (RUCCs) were established to work with OPRAF in protecting the interests of rail users. Safety regulation was placed with the Health & Safety Executive.
Since privatization industry outputs have increased substantially (reversing a long-term trend of decline), whilst costs have fallen in real terms. The new structure gave the TOCs strong incentives to increase outputs and reduce costs (because of declining subsidies; fixed access charges). Whilst part of the output growth since the mid 1990s can be attributed to privatization itself - through, for example, fare regulation and better marketing
Michael g. Pollitt and Andrew S. J. Smith1 have conclude that:
1. Industry outputs have risen sharply since privatization (1992/93 to 1999/00). Passenger train miles, passenger miles and freight tonne miles have grown by 13%, 21% and 19% respectively. At the same time, the cost base has been reduced by 6% in real terms. As a result, unit costs have fallen sharply over the period, by 17% (or 2.7% per annum). After taking account of scale effects, the rail industry has achieved efficiency savings of 13% (or 2% per annum) since privatization.
2. The post-privatization performance on efficiency has been significantly better than that achieved under public ownership. During the five years prior to privatization, unit costs went up by approximately 1% per annum (after stripping out the impact of scale effects).
3. In the central scenario, privatization and restructuring has generated efficiency savings
to date of about £800m, compared to the counterfactual of continued public ownership. The savings, achieved over only four years, are more than offset by restructuring costs. However, assuming that the savings achieved to date are rolled forward into the future (though declining to zero over 15 years as the public sector catches up), the total savings rise to £2.5bn under the central scenario (pre-restructuring), or £1.1bn after restructuring costs.
4. Consumers have benefited considerably from privatization (£1.2bn) – indeed by more than the level of savings. In present situation producers and government together lose £100m, with the government losing £300m, whilst producers gain £200m.
5. Output quality has improved since privatization (pre-Hatfield). Train performance has improved significantly, whilst the evidence from the 1980s suggests that it would have deteriorated under the old BR structure. Although overcrowding has got worse, it was argue that the same would have happened under public ownership, given the level of passenger growth. The increase in the number of broken rails has also resulted from increased traffic growth; however, it is unclear whether extra money would have been forthcoming to address this issue in the public sector. Finally, despite concerns over safety, the Cullen report – written after the Hatfield disaster - found safety performance to be (statistically) the same before and after privatization.
Of course, post-Hatfield, train performance has worsened dramatically. This position has resulted partly from the lack of an adequate asset register, which led Railtrack to close down large parts of the network. However, it also reflects a reduction in risk tolerance since privatization. Whilst British Rail may not have taken the same action as Railtrack, passengers may have been subjected to higher risk as a result. The value of this reduced risk is often ignored and is difficult to quantify.
Looking forward, the Periodic Review (2000) envisaged a significant increase in investment in the network, to deliver improved safety systems, and better performance. There have also been suggestions that long-term costs may have risen in the aftermath of Hatfield. However, this cost increases largely affect capital, not operating costs. Furthermore, the Periodic Review also committed Railtrack to deliver significant efficiency savings in the coming years.
The achievement of further efficiencies in the future will be key to delivering the government’s objective to improve rail services. Thus a privatized structure, where shareholders demand a return on their investment, has led to significant improvements in operating efficiency - it remains to be seen whether the new regime, with a not-for-profit infrastructure owner, will deliver the same efficiency improvements.
The U. S. A.
In the US, private railroad companies own both tracks and the trains that run over them. A particular location may be served by one or many railroads, and it is common for a pair of major cities to have two or sometimes three “parallel” railroads operating between them, competing for customers. Furthermore, it is not always necessary for one railroad to serve a shipper “directly” to provide service, or to provide competition to a second railroad; depending on the characteristics of the commodity, shippers may send their goods many miles by truck or water to or from a second rail line. For many commodities (especially manufactured goods) over many routes (especially shorter ones), motor carriers provide intense competition to rail carriers for the entire haul, or indeed may have already taken most of the business away from the railroads. In some locations, water carriers provide strong competition to rail. Most tariffs have been deregulated, and are set in contracts between railroads and shippers. At particular locations with multiple shippers -- such as a city – the individual railroads may agree among each other to form a “switching area”, where each railroad may run its train on each other railroad’s track to reach shippers located there (or the switching area track may be jointly owned by the local government, or by the railroads that use it). However, it is an important part of the US system that most such arrangements for “trackage rights” by one railroad company over another company’s tracks are voluntary and mutually agreed upon. “Compulsory” trackage rights, that is, access mandated by a government regulatory agency, are less common. When they do occur, they do so typically either a) as a competitive condition placed upon the merger of two railroad companies, as the regulator seeks to maintain competitive options for a particular shipper, or b) if a particular shipper can satisfy the difficult regulatory requirement necessary to prove that it is economically “captive” to a single railroad -- that is, that it has no economic alternative, via either rail or other transport mode, to that railroad for the haulage of its inputs and/or outputs. Even in those rare cases where competitive access is mandated, there may be lengthy regulatory or court proceedings to arrive at the price to be paid for access.
The Canadian System.
Most rail traffic in Canada travels over one of only two major privately owned carriers, the Canadian National Railway and the Canadian Pacific Railway. As in the US, each railroad runs its own trains over its own track. A large amount of rail traffic flows between Canada and the US, and each Canadian railroad has various connections with US railroads for interlining traffic. Furthermore, both major Canadian railroads own significant amounts of track in the US, and two US carriers have track networks that extend into Canada. Perhaps the most important difference between the Canadian and the American systems regarding competition is that in Canada, shippers located on one of the railroads but within 30 km of the other are automatically eligible to receive either service by the second railroad over the tracks of the first or service by the first that interlines with the second, both at regulated rates.
Brazil
Brazil has three gauges of rail track totaling about 32,000 kilometers of which about 2,000 kilometers are electrified. The different gauges used are 1,600 mm (5,000 kilometers), 1,440 mm (200 kilometers) and 1,000 mm (26,000 kilometers). The entire railway system covers mostly the eastern part of the country serving the ports on the South Atlantic coast. The central and western part of the country does not have any railway system. The road lobby is understood to be very influential in Brazil. 82 percent of the freight traffic is carried by road leaving the rest mainly to rail-based transportation and to water-borne movement along the Amazon. Separate private companies own most of the main line routes and only metro rail in major cities are owned by the respective municipalities. The urban areas are giving way to more and more road space shrinking the available area for housing people. Thus the cities and towns are getting overcrowded with road bottlenecks, similar to trends witnessed elsewhere in 'urbanizing' cities. This has hampered the movement of freight traffic to strategic ports; augmentation of the rail network is a priority for the state governments.
China
China has a total of about 72,000 kilometers of railway lines of which standard gauge (1,435 mm) is 68,000 kilometers while the rest are of 1,000 mm gauge. The population density in the eastern part of the country is denser than the rest of the country. The rail network is correspondingly denser in the eastern part. Being about three times larger in area than India, the population of China is more distributed and thus the route kilometers of railways per million of the population is only about 55 kilometers as against about 65 kilometers in India. The Chinese government operates about 60,000 kilometers; private players operate the rest. Rail freight traffic in China was of the order of 2,100 million tons as compared to 602 million tons by Indian Railways in the financial year 2005-06. China is focusing on the implementation of the 1,300 kilometers connection between Shanghai and Beijing. A separate dedicated high-speed rail corridor is also being constructed for commuting between the cities. The present operating speed on the rail network is about 160 kilometers per hour but China intends to augment this to about 300 kilometers per hour by 2010.
Australia
Australia is twice as large as India in area and has a total of about 45,000 kilometers of railways. Most of the northern part of Australia being arid and a desert, the population is concentrated in the eastern and southern coast. The iron ore and coal reserves are in the south and southwest regions. In order to optimize the total logistics, a substantial quantity of the material moves by rail to both the east and west coast almost along the entire southern belt of the country. For operational economies, Australian Railway companies operate very long freight trains carrying a payload of more than 25,000 tons powered by three or four locos distributed along the length of the train. The locos are controlled wirelessly. High-speed trains are mainly confined to connecting the metro cities on the southeastern part of the country such as Melbourne, Sydney, Canberra and Brisbane.
According to Pittman1 many Latin American countries have reformed their railways without relying on vertical access or vertical separation to create competition. In Argentina, Brazil, Chile, and Mexico, the restructured railways systems are made up of multiple vertically integrated railway companies that compete with each other primarily at common points. Shippers to or from Mexico City, for example, can choose among three independent, vertically integrated railroad companies to carry their commodities, and this ‘geographic’ or ‘source’ competition, in addition to US-style ‘parallel’ competition in limited areas, has proved surprisingly successful in limiting the market power of individual railroad companies. Based on the experience in Latin America and North America, the creation of vertically integrated, competing railway companies in Russia, would seem likely to have two additional outcomes that are especially attractive. First, and perhaps contrary to expectations, it seems to be easier for the price discrimination that may be necessary to pay for the fixed infrastructure in the railroad sector to be done implicitly by vertically integrated companies, in the form of differentiated charges to shippers, rather than explicitly by infrastructure companies, in the form of differentiated access charges. In addition to problems with competition authorities, as discussed above, the experience in both the UK and Australia with small numbers negotiations in setting differentiated access charges suggests that the transactions costs of such an approach may be very high.
Second, one of the advantages of the Canadian and US systems of competition among vertically integrated railroad companies has been the ability of these companies to cover there fixed costs and make new investments. The same has already been observed in some of the reforming Latin American countries, where, for example, in both Brazil and Mexico the railway systems have moved in a few short years from draining the government treasuries to attracting hundreds of millions of dollars of private investment funds and paying taxes. It may be very difficult for railways in Russia and other transition and developing countries to achieve simultaneously the goals of reformers under models of vertical access and separation. This is in part a problem of regulatory capabilities and in part a problem of the huge amounts of investment required by a modern railway system. For this and other reasons, alternative models of restructuring that maintain vertical integration in the rail sector are worth serious consideration
General Overview of Indian Railways Compared with Other Railways of the World.
The above international comparison and description indicate that different countries have followed different model for reforming their railway system. However privatization of Railways has been a common theme. K P M G1 report on the Indian Railways says that taking into account the holistic picture of economic development, population distribution, raw material availability, location of industries and all other factors influencing material transport prospects, India appears to be unique in most respects. The population density in the southern part of the peninsula is high and coal, iron ore and other mineral resources are concentrated in the Bengal, Bihar and Jharkhand areas. Major industries and power plants are distributed almost throughout the country. This unique feature presents enormous opportunities for the transport of people and material across the country, in all directions. India also has an ancient history - the heritage locations and international tour promoters adding to the demand for most sophisticated passenger comfort showcase pilgrimage and other historic centers to the world. The popular Palace on Wheels is an example of the potential. Pilgrim specials are run across the country almost throughout the year at various seasons to different destinations. Many new 'tourist' trains on the lines of the Palace on Wheels are also being planned. In such situation any reform or liberalization within government control seems to be more appropriate for the railway reform rather than complete privatization.
Critical Question: Sustainability
Here comes the most important part of our study. Whether the turn around which the Indian Railways have made is going to sustain for long or was it a one-time affair, which is not going to be repeated year after year.
Indian Economy: In a Phase of Higher Growth
It may be noted that the Indian Railways have been able to achieve turn round when the Indian Economy was in a boom phase. Sometime after 2004 Indian Economy has crossed the restrictive growth rate of 5% or less. Coinciding with that the performance of the Indian Railways has also registered a phase of higher growth. Hence the growth of India Railways is somewhat dependent on the growth of Indian economy. If due to any reasons the growth of Indian economy is disturbed or stalled then the performance of the Indian Railways will also, if not totally disturbed, affected. For the Railways it will be much tougher to sustain this growth rate. This was illustrated in the growth pattern as seen during 2004-05 to 2009-10. After 2008-09 when the global economy was hit by the meltdown affect there was cascading affect on Indian economy which in turn has also affected the IR.
The Role of Present Leadership
For making turnaround happen the role of leadership is very important. Some of the critical decisions which was taken in the past have played very important role. For instance for taking decisions like increasing the loading capacity of the wagons lot of resistance was there from several departments with in Railway. Although the Railways have a very systematic bureaucratic hierarchy of three tier at divisional, zonal and Railway Board level the badly needed decision came from the top. It was good that the Railways have got proper leadership at an appropriate time. However this kind of good coincidence may not always be possible. According to Prof. Raghuram1 ‘the strategies and processes can be sustained if the political leadership is well intentioned and has consistency of direction. Political leadership does not come in through a controlled process. The need is for the professional top management (RB) to be able to respond as a commercially oriented organization with a corporate culture’.
Organizational Restructuring
G Raghuram and Niraja Shukla2 have argued that while IR is well set in terms of the human resources and a lot of systems, it does not have the structure for a corporate approach. The initiative of increasing the axle loading had to be triggered by the MR and his office, rather than emerge as an in house strategic decision. ‘Departmentalism’ is the major issue that comes in the way of the IR’s ability to take strategic decisions from within. Further, top officials generally have short tenures. Given the relationship between political leadership and Railway Board (RB), short tenures hinder the consistency of initiatives. IR needs to redesign its organizational structure to bring a corporate perspective at higher levels. This would call for redefinition of the roles and responsibilities of the top management towards a business perspective rather than a functional perspective. They have recommended that even though IR has performed well in the past two years, there is need for organizational restructuring.
Apart from a faster growing economy, consistency of leadership by the MR and a professionally responsive RB worked well in turning around IR. However, if the political leadership changes, how IR will respond is a big question. There is need for a system which focuses on continued innovation and not just on current strategic initiatives. Unfortunately, political leadership is not an outcome of a controlled process. Hence, the technocracy has to develop the capability for continuous innovation. There is also need for IR to become a commercially oriented organization with a corporate culture. Strategies and processes have to be customer centric and scientifically based.
Predominance of Supplier Driven Initiatives
All the initiatives for ensuring turnaround has been taken form the railways’ side i.e. the entire process was supplier driven and not as per the wish of customers. This makes entire process as one sided and in this the entire system becomes dependent on the mood of single party. There are several issues, which are badly affecting customers. But in those issues the views of customers have not been given much importance. It may be noted that for Railways’ goods traffic five or six commodities are very important and six top loading divisions are vary important. For increasing share further it is very important that all problems being faced by these commodities and divisions has to be solved in a mission approach.
Slow Progress in Port connectivity
The highest growth in demand of the Railways services has been in port sector. This sector is likely to give more and more demand, as India’s international trade is likely to increase many times. Despite making so much efforts the Railways have not been able to provide substantial improvement in its services. Nor there is any substantial improvement in the connectivity between four metropolitan cities i.e. Delhi, Mumbai Chennai and Kolkata. Although the Railways have many projects to improve these further, the success of Railways depends on the fact that how early these projects are logically concluded further.
According to G. Raghuram and Rachana Gangwar1 ‘India’s Port originating traffic is 68.9 (58.8) mt and port terminating traffic is 74.1 (70.7) mt, accounting for a total of 143.0 (129.5) mt, which is about 10.7 (10.8) percent of IR’s traffic. The port as a significant client needs to be recognized in this framework, since otherwise IR tends to look at clients at the originating side.
IR has opportunities to increase its traffic volumes and market share in port traffic. Apart from increasing line capacity on the rail route to the hinterland (which the IR were already considering through appropriate infrastructure investments), it would also be important to develop appropriate customer oriented systems and other infrastructure. The strategies that IR needs to adopt for this would emerge as a result of understanding the supply chain requirements of the major commodities being handled at these ports.
India’s international trade is going up. Port traffic is also going up, both due to international trade and coastal movement. IR’s market share of domestic movement is going down. IR has a market share of about 30 percent of the port traffic for hinterland movement1. Port traffic is largely bulk and containers and IR has expertise in this. There is potential for IR to focus on port-based traffic and develop a sustainable niche. The mode choice for traffic from and to the hinterland is based on lead to/from port, freight rates, volume per shipment, availability of wagons and services at the customer interface’. The Railways have to initiate specific and speedy measures to retain and further capture this market.
Increasing Axle Load Further
One of the major source or reason of the Railways turnaround has been increasing the axle load and carrying capacity to CC + 8 + 2 tonnes. This turnaround can be sustainable further only when the loading limits are relaxed further and loading capacity of different wagons, track, bridges etc. are improved further.
According to G. Raghuram and Niraja Shukla2 ‘the increased axle load had been viewed as a net revenue generator, with marginal revenues far exceeding marginal costs. Increasing loadability for a given axle load by improving the net to tare ratio from the current 2.7 (to possibly around 4) could be a possible technological solution. For a 92 ton gross weight, if the wagon weight could be brought down to 18 tons, the loadability would go up to 74 tons. Long-term possibilities were increasing the axle load to 25 tons and then 30 tons. These would require adoption of new technologies, apart from planning future rail construction and wagon procurement activity to meet the required parameters. The concept of multiaxle vehicles, which was popular on roads, could also a possibility of on rail. Thus IR faced several immediate future priorities: better instrumentation, and studies and to determine the impact of higher axle loading on bridges, track, and wagons’. However, before we increase such limits proper assessment of cost owing to increased fuel consumption, increased wagon and track maintenance, increased investments in wagons, tracks and bridges, instrumentation, monitoring and studies, and ill effects of increased breakdowns has to be done. The strength and safety of bridges is one of the critical factors, which have to be kept in mind.
‘At 22.9 tons axle load, up to 67 tons can be loaded today in a wagon (in comparison to earlier loading of 56 tons, taking an average of 25 tons of tare weight). There are plans for increasing it further to 25t and 30t per axle loading in the proposed dedicated freight corridors. This would require certain infrastructural changes and safety issues to be addressed, even though some of the experts says that IR tracks are fit for 30 tons and 32.5 tons per axle loading with certain modifications like increasing ballast, replacing sleepers, etc. Improved net to tare weight ratio, multiaxle vehicles, and utilizing maximum moving dimensions are the areas of research for increasing further loadability’2.
Early Completion of Dedicated Freight Corridor
It is high time for the Railways for the early finalization of dedicated freight corridor to meet the high congestion situation between different metropolitan cities. The high-density Eastern and Western corridors are already saturated in terms of line capacity utilization. Accelerated growth of the economy is only adding to the congestion on these routes. A quantum jump in capacity is, therefore, necessary for meeting the rising freight demand on account of robust domestic growth as well as the rapid increase in international trade. Railways have planned to construct a new Dedicated Freight Corridor (DFC), initially covering about 2700 route kms. equivalent to over 5000 of Track kms at an approximate Cost of Rs. 22,000 crores, linking the ports of western Indian and the ports and mines of Eastern India to Delhi and Punjab. The construction of this corridor is under implementation through an SPV being created for the purpose through a mix of Engineering Procurement and Construction (EPC) and PPP methods. Indian Railways was in the process of selecting a global consultant to advise on the concession agreement, principles of track access charges and other financing and bidding issues. It was envisaged that innovative ideas on design, construction and maintenance of railway to achieve optimal life – cycle costs would be forthcoming through PPP especially as the work progresses on the initial two corridors and further corridors are taken up. The concessionaire could also tap additional ancillary revenue streams through commercial exploitation of land, construction of freight terminals/logistic parks/ICDs etc. Further, after firming up a wagon design for the DFC, private investment for its manufacture would be encouraged. All possible options, including PPP route through appropriate models was being considered.
Increasing Passenger Coaches
One of the main reasons of passenger growth in recent year has been increasing the number of coaches in most popular trains to 24 coaches. To take benefit of this it is necessary that even other trains are extended this benefit. However, the pace of this conversion has been rather slow. This is required to be speeded up. The Railways also require canceling some of the less popular and unpopular trains to save totally unwarranted expenditure. However this would not be much easy.
Providing Total Logistic Support
Today the Railways are facing tough challenge from the road sector, which has taken over most of the goods traffic share from the railways. One of the good things of the road sector has been that they, most of the time, act as total logistic solution provider. They pick up the goods from the doorstep of the customers and after reaching to the destination they deliver to the customer at their doorstep. However this has not been so in the Railways. Here, the party is supposed to bring their commodities to the good shed by road and after reaching at the destination again they are supposed to empty the entire rake by 6 to 8 hours and vacate the good shed within 24 hours. This again involves road movement. Except “container services” Railways does not provide any totally logistic solution. With increased or round the clock working hour many customer find it rather difficult to adjust. To make the Railways customer oriented the Railways have to make some arrangement for providing total logistic support. This has become more important since now there is greater requirement for mechanized loading and unloading of consignment to avoid warfage and demurrage. For an individual customer it may be difficult to have all these mechanized facilities. Whereas, if the Railways make some institutional arrangement with some Private Sector players it would be much convenient for any party to take full benefit of the railways’ services. In the beginning, we may provide as a pilot project in some big and busy good shed and on the basis of experience gained over there it may be replicated at other locations. Sooner or later, the Railways have to realize that until unless they emerge as total logistic provider they will not be able to compete with the Road.
Commercial utilization of land
Indian Railways has approximately 43,000 hectares of vacant land. These are mostly situated alongside the tracks in a longitudinal strips, around railway stations and in railway colonies especially in metro and other important cities / towns with potential of being used commercially to generate revenue as well as capital for modernization and capacity addition. An authority, namely, Rail Land Development Authority (RLDA) was set up under the Railway (Amendment) Act 2005 to pursue, inter alia, the main objectives of generating revenue, up grading railway assets and providing world – class, state – of – the – art passenger facilities / services at stations.
In fact in big Metro City like Delhi, Mumbai, Kolkata, Chennai etc. Railway should modernized to provide world – class passenger amenities and services to the large multitude of passengers using these stations. The Ministry is planning to do so by attracting private investments in the area by allowing the areas around the stations and the air space above platform to be commercially developed while operational / passenger – handling areas are separated from such commercial areas as in the case of airports. The concessionaire would be expected to construct and maintain the operational and passenger areas free of cost, share the revenue earned from the real estate created and hand over the same after the concession period. The pilot project for New Delhi Station is on the anvil and on the basis of this experience it is required to be replicated for other stations. Development of new green field passenger terminals is also required to be taken up in a similar manner.
Customer Orientation
The Railways still works with suppliers’ market mentality. Different terms and condition are made as per the convenience of the Railways. Laid down rules don’t permit for molding different restrictions for the benefit of the customer. Whereas, the expectation of different customers are gradually increasing and they want personalized favor as they get it from private truck operators. Being a government department, Railway officials don’t have such liberty. However, to meet the expectation and to compete with the private road operators Railway officials are gradually required to be given some discretionary powers. G. Raghuram1 has mentioned some of the expectations. Siding owners, as key customers of the IR, often put forth the following requirements from railway operations.
• Supply of wagons: IR should supply the stock asked for with little or no delay. Open wagons should not be supplied against request for covered wagons. The supplies should be arranged with little or no bunching.
• Transit time guarantee: "Just In Time" approach is becoming important to the cement industry to eliminate inventory costs. This requires transit time guarantees and even containerization.
• No restrictions on free flow of goods: The traffic must move freely, determined by market forces and not by IR. For example, if food grain loading picks up from Firozpur division, loading of covered wagons outward Mughalsarai runs into difficulties. Similarly, frequent restrictions are imposed on movement to individual railway destinations where a quota is applicable. If it is a capacity problem, what have the IR done to remove the bottlenecks? If it is a problem of terminals, what can the IR and industry do?
• Rail connections to minor ports: Traffic will start moving in a big manner to the interiors from the ports, especially coastal traffic from and to the minor ports. Therefore, transport infrastructure planning not only for the major ports but also the minor ports is important.
• Claims settlement: IR’s record for claim settlement is poor. For example, when wagons are involved in accidents due to suspected sabotage, IR are not willing to refund the freight and also not willing to prove that the unloaded goods were taken care of as required by law. The result is that the industry is fighting cases in the claims tribunal and adding to the workload on the both sides.
Suggestion given in the above study is important and the IR may decide future policy in the above prospective. Since in the coming years the Railways have to accept customer as king so gradually they have to amend different laws to incorporate proper solution to these elements.
More Leasing of Parcel Services
Since April 2005 Railways have been following the policy of leasing of S L R as the Railways was making heavy losses. Hardly 25% S L R capacity utilization was being utilized and only about 500 crore was being earned whereas the potentialities was for 25000 crore. However, despite some progress not more than 40 % S L R space has been leased. Many less important express trains and most of the passenger trains are yet be covered under leasing. Hence, the Railways have to expedite the progress of leasing of S L R to get proper benefit. Further Railway should try to provide total logistic solution to the parcel service customer to make it truly attractive. Railways may make arrangement with some trucks operarators to provide road part of services as per the Railway fixed rate. This will increase the credibility of the Railways services tremendously.
Thus we may conclude that at this stage the Indian Railway does not need privatization as it was done in the U. K. or in the U S A or Russia. Rather, its recent attempts to improve have brought some improvements. Hence the IR should continue to reform itself further. The turn around of the Railways can be sustainable only when those listed items are achieved within given time. If any undue delay takes place or if the task is left in the mid way it may lead to very serious consequence. To save the Railway from privatization and serious hardship of the common population the IR have to achieve the transformational goal of Railway even before its due date.
Bibliography
G. Raghuram and Rachana Gangwar- Marketing Strategies for Freight Traffic on Indian Railways: A Systems Perspective W.P. No. 2007- 07-03, July 2007 Indian Institute of Management, Ahmedabad.
G. Raghuram and Niraja Shukla -‘Turnaround’ of Indian Railways: Increasing the Axle Loading W.P. No.2007-05-03 May 2007. Indian Institute Of Management, Ahmedabad.
G Raghuram -Experiences of Various Forms of Commercial Partnerships in Indian Railways Indian Institute of Management, Ahmedabad
KPMG–International Railway Conference –A Background Note New Delhi 2007I
Michael g. Pollitt and Andrew S. J. Smith - The Restructuring and Privatization of British Rail: Was it really that bad? Judge Institute of Management, University of Cambridge. DAE Working Paper 0118
MOR (2007). ‘Indian Railways Year Book 2005-06,’ Ministry of Railways, Government of India, New Delhi.
Ministry of Railways- Indian Railways –Opportunities and Challenges 2006
Planning Commission - ‘Report of the Committee of Secretaries: Road Rail Connectivity of Major Ports,’ The Secretariat for the Committee on Infrastructure, Planning Commission, Government of India, New Delhi 2006.
Russell Pittman - Russian Railways Reform and the Problem of non-discriminatory Access to Infrastructure- Annals of Public and Cooperative Economics 75:2 2004
Russell Pittman - Chinese Railway Reform and Competition: Vertical or Horizontal Restructuring. New York: Columbia University (Studies in History, Economics and Public Law LXVI:2) 2002
Saxena R N (1985). ‘Rail Transport Pricing in India,’ Meeranjani Publications, New Delhi
In February 2009 when the Railways’ Minister presented Budget Railways were poised to create history by generating a cash surplus of Rs. 90,000 crores in last five years as against acute cash shortage in the previous few years before this period. This was the same Railway that defaulted on payment of Dividend of Rs.2800 crores and whose fund balances dipped to Rs 359 cr. in 2001. Rakesh Mohan Committee, in July 2001 has termed it terminally ill organization, which was on the verge of bankruptcy. At that time it was believed that very soon Railways would get involved in a terminal debt trap with an additional financial liability of over Rs. 61,000 crores. The operating ratio had reached low levels of performance- 98.3%-in 2000-01. The fund balance had reached a low of just Rs.149 crores in 1990-2000. In contrast to this by the year 2007-08 Indian Railway achieved the Operating Ratio of 76% - best ever for IR and one of the best in world. Railways are now having substantial amount of surplus money and it is the second largest profit making Public Sector Undertaking after ONGC. Thus the railways have been able to make total turnaround of its performance.
However, the biggest doubt prevailing in the minds of many critics is that whether this turnaround of Railways is going to last for longer and whether this turn round is sustainable? Thus the purpose of this article is to analyze these issues. To search the answer of these questions we would try to examine what were the specific actions taken to improve the working of the Railways and whether these actions are going to give continuously better result or do we need to take some more or different approach to make the Railways turnaround really sustainable.
Let us see what the steps were proposed to be taken to improve the productivity: -
Quantum jump in Freight Business
The Railways have been able to maintain outstanding freight performance for the fifth consecutive year and incremental loading is likely to be more about 14 per cent MT. Thus the incremental loading of about 170 MT achieved in the three years. This would exceed the total incremental loading of the 1990’s by 125 per cent. To maintain this rate of growth, the IR has taken several steps to improve the availability of trains. The IR has adapted its policies to the needs of the market and customers.
Cement and Steel - Mission 200 Million Tonnes
Since introduction of the New Economic Policy in the year 1991, Railways have been constantly losing share in cement and steel traffic. As a result Railways’ share in transportation of these commodities has declined from two thirds in 1991 to one third. During2006-07 Railways have increased their share in transportation of cement and steel by seven percent. While the cement and steel industry registered a growth rate of ten percent this year, IR’s cement and steel traffic have increased by twenty to thirty percent. This is the result of market and customer oriented policies. Now the Railways have focused on Mission 200 Million Tonnes. Railways are hopeful that by the year 2011-12, Railways traffic from cement and steel industry will increase to 200 MT each.
Container Traffic - Mission 100 Million Tonnes
To increase the container traffic 15 licenses have been issued for the running of container trains in the last two years. Efforts are being made to increase container traffic to 100 million tones by 2011-12, from the present 20 million tonnes. Over the next five years, it is expected that investment worth several thousand crores of rupees will flow in for the development of container wagons, terminals and other related rail infrastructure.
Triple Stack Container Train
After successful experimentation of running double stack container trains on diesel route, double stack container trains are now running between Pipavav and Jaipur. The efforts are on to run triple stack container trains with low height container on diesel routes and double stack container trains on electrified routes on pilot basis. Such containers would be useful for loading of motor vehicles. Once it becomes successful it can be implemented in other regions.
Long Term Service Level Agreements
Railways have signed a 30 yearlong term Service Level Agreement (SLA) for transportation of coal. Similar SLAs are required to be signed with several new cement, steel and mega power plants, which are being set up in the country. Railways should provide necessary support services for laying new lines up to their facilities, enhancing capacity of existing lines, making available wagons designed to suit their specific requirements, formulation of pricing policy and in developing loading and unloading terminals.
Merry Go Round (MGR) System For Coal
Several companies, including NTPC, are operating their own MGR Systems. New power plants are also planning setting up of MGR systems. Railways have domain expertise in running these systems more efficiently and economically at costs that are lower than their existing costs. Therefore, more and more companies should be encouraged to enter into SLAs with the Railways for the running of MGR.
Development of Freight Terminals
There has been a significant increase in Railways traffic with the commissioning of the warehouse complex in the Bangalore Goods shed. After this experience Railways have decided to develop all basic facilities at freight terminals handling more than 15 rakes per month, over the next three years. A new Plan sub head has been opened for expenditure on development and up gradation of freight terminals to ensure adequate provision of funds for these works.
Improvement of NTKM to GTKM Ratio
For a payload of one tonne, Railways carry a tare weight of a little less than a tonne. The Railways have realized that an improvement of one percent in this ratio would yield an additional earning per annum of Rs 1500 cr. Consequently it has been realized that a multi pronged strategy of increasing the payload and reducing the tare weight of trains, running trains loaded in both directions and minimizing empty running of trains for maintenance and examination and other such measures would have to be simultaneously adopted over the next few years to effect a 5 per cent improvement in this ratio. Since average speed of vacuum goods train is much slower than air brake stocks it has been decided that all types of vacuum brake rolling stock will be eliminated in two stages so that we get freer path to run higher speed train. As per the utilization pattern it has been decided to reorganize wagon examination and maintenance centers will be reorganized to minimize empty running of trains. Several trains have wagons that run empty in both the directions. After implementation of FOIS, the numbers and location of such wagons will be monitored to detach them for repair at the nearest depot.
Higher Axle Load Goods Trains
The Railways are already running CC+8+2 tonnes, which have helped Railways to achieve 714 million tonnes loading in 2006-07. The pilot project of introducing of 22.3 and 22.9 Tonne axle load trains has yielded good results. Recently, 25 T Axle load trains have also been run on pilot basis. Railways have extended running of 22.9 tonne axle load trains on several routes and 25 tonne axle load trains on select other routes.
Wagons with better payload to tare weight ratio
Wagons are the bread winning horses of the Railways. An increase of 10% in wagon productivity would lead to annual incremental earnings of Rs.4000 crore for the Railways. Railways have earned several thousand crores by improving the wagon turnaround time and enhancing per wagon payload. Acting further on this line RDSO has designed new covered and open wagons with a pay load to tare weight ratio of 3 and above, fit for 22.9 T axle load. The carrying capacity of freight trains comprising of such open and covered wagons will improve by 10 and 30% respectively, compared with existing trains. Railways have therefore decided to stop procurement of open and covered wagons of old design from 2007-08. Production of 25 T axle load wagons and 22.9 T axle load wagons of new design will commence in 2007-08. Similarly, 22.9 T and 25 T Axle load wagons suitable for steel and petroleum products will also be manufactured.
Manufacture of new design wagons by Wagon Manufacturers
Till now Railways have been procuring wagons based on RDSO’s designs. Now it has been decided to bring about a total change in this system. Now, wagon manufacturers will be permitted to supply wagons of their own designs, with RDSO recommended bogies, coupler, and draft and brake gear. RDSO will certify and approve the new designs of wagons from the safety angle within 9 months. However these higher payload lower tare weight wagons with new technology would be costlier compared to old wagons. To encourage the development of such new technology wagons, a suitable freight discounts policy is being evolved so that the Railways and investors share benefits of the new technology.
Arrangement of rolling stock maintenance
The Railways have improved loading with available resources through better utilization of existing rolling stock. Through rationalization of driver and loco links Indian Railway have been able to spare more than 250 engines for running other trains. Now world-class facilities are being provided at all train examination points where more than 5 goods trains are examined per day. Most air brake trains under the system of premium CC or premium end-to-end has been covered examination. Railways have decided to make unit exchange spares based maintenance arrangements for all types of rolling stock. This would bring about significant improvement in the productivity of rolling stock.
Throughput enhancement works
To meet the growing competition against the road and to meet the challenges of Railways’ own bottleneck it is imperative that speedy expansion of capacity on the 20,000 kms. long high-density network is finished earliest. The railways have decided that an integrated approach of route-wise planning and implementation would be undertaken to obtain full benefits from investment on these routes. This network would be made capable for running 23T axle load trains and mineral routes would be upgraded for running of 25T axle load trains. Need based enhancement in line capacity of such routes would be undertaken by constructing second, third or fourth lines. Installing IBS would reduce distance between two sections and automatic signaling would be provided at both ends of busy junction stations to enhance line capacity. For seamless and faster rail movement, flyovers and bypasses etc. will be constructed at busy junction stations and yard designs will be modified to avoid cross movement of the trains. High-speed turnouts with a speed of 30 km per hour would be laid on such routes. Additional diesel and electric locomotives and wagons would be produced. Adequate funds provision would be made for throughput enhancement works.
Market Surveys
Railways earn ninety per cent of its freight business from transportation of a few select commodities. With a view to broad base business and improve stability in the growth rate Railways. It is imperative to diversify and increase the mix of carried commodities. Every zonal railway should engage an independent market survey agency to identify new traffic streams.
Passenger Business
By playing the volume game by inducting additional coaches in popular trains, Railways have facilitated travel of more people and increased the earnings. Railways’ policy of licensing of parcel and catering services through open tender has also borne good results. It is for these reasons that despite reduction in fares, the losses in coaching business are likely to decrease by several hundred crores.
Increase in capacity of passenger coaches
Railways have designed coaches with new layouts, having significantly higher capacity than the previous coaches. The capacity of sleeper coaches has been increased from 72 to 84, AC Chair Car from 67 to 102, AC 3 Tier from 64 to 81, AC 2 Tier from 46 to 48 and AC 1st from 18 to 22. There has been some opposition for providing three seats in the side in sleeper or 3rd AC coaches. Hence the IR has decided to discontinue such coaches. Thus, despite in capacity these all coaches would be convenient and comfortable for the passengers.
Rakes with standard composition
Due to absence of standard composition for passenger trains, several trains reach the destination in the morning and remain standing till night. To ensure better utilization of the rake links, Railways have decided to increase the number of passenger trains having standard rake composition. Through revision in maintenance practices, Break Power Certificate (BPC) of passenger trains was given for 3500 kms. in place of 2500 kms. These two decisions will result in considerable increase in availability of coaches.
Railways’ New Profile - 11th Five-year plan
The Railways are targeting a freight loading of 1100 million tonnes and passenger traffic of 840 cr. by the terminal year of the 11th Five-year plan. In order to make this unprecedented growth a reality, it is absolutely essential that in the next few years the Railways’ transport capacity be expanded and doubled, unit cost be brought down by playing the volume game and customers be provided world-class services.
The quantum jump in Investment
During the 11th Five Year Plan, Railways are required to invest many times more as compared to earlier plans. There is no readymade investment policy for a vast network like the Indian Railways. The growing demand for transportation can only be met through a harmonious blend of short term and long-term policies. Railways short-term policy of investing in low cost high return projects has been successful in eliminating network bottlenecks and in ensuring effective utilization of rolling stock. Alongside a twin mid-term and long-term investment strategy is required to be adopted to enhance productivity through, modernization and technological up gradation on the one hand and enhancement of capacity of the network and rolling stock on the other.
Even though the Golden Quadrilateral and its diagonals constitute 16% of the rail network, more than 75% of the traffic moves on these routes. As these routes are super-saturated, IR has make up mind for construction of East-West, East-South, North-South and South-South corridors. Here dream is to construct these corridors in a manner that they develop into efficient and economical trunk routes for speedier, longer, heavy-haul trains. After completion of the freight corridors, it is expected that the problem of passenger and goods trains running on the same network at different speeds will be solved. The IR has been able to achieve such progress in the construction of East-West (in two part- West to north between Mumbai and Delhi and North East between Amritsar and Howrah) by Japanese funding. However, the speed of work is rather show. The IR needs to ensure its timely implementation for getting better result.
Construction of High Speed Passenger Corridor
The rapid growth of the economy, rising industrialization and urbanization and unprecedented growth in intercity travel, has opened infinite possibilities for developing high-speed passenger corridors. Railways have decided to conduct pre-feasibility studies for construction of high speed passenger corridors, equipped with state of the art signaling and train control systems, for running high speed trains at speeds of 300 to 350 kms per hour; one each in the Northern, Western, Southern and Eastern regions of the country. These trains would cover distances of up to 600 kms in two to three hours. All alternatives including Private Public Partnership will be considered for implementation of these corridors. Global warming and changing climatic conditions are a worldwide concern today. These energy efficient and environment friendly systems would go a long way in alleviating these concerns.
Rolling Stock Modernization and Capacity Augmentation
In view of the demands of growing traffic, along with expansion of network, availability of rolling stock will be increased through effective utilization of available rolling stock, technical up gradation and modernization and by setting up new production units. During the 11th Five Year Plan production of rolling stock will be doubled as compared with the previous Plan. The Railways have planned that capacity of existing rail coach and loco production units will be enhanced through expansion of these units. High horse power, energy efficient locomotives with new technology would also be produced. During this plan, production of MEMU, DEMU and EMU coaches would also be stepped up. One new factory each for rail coaches, diesel locomotives, electric locomotives and wheels would also be established. The locomotives to be manufactured in these units would be equipped with state of the art technology and would be capable of hauling longer, heavier high axle load trains. The new Rail Coach Factory would produce high capacity, modern and comfortable coaches. Similarly production of 32 tonne axle load, higher payload lower tare weight and track friendly wagons will start for the new Dedicated Freight Corridors.
Use of IT in the Railway services
It has been planned that in the XI five year plan, investment in IT projects would be increased to several thousand crore rupees to harness the immense possibilities offered by IT in the interest of Indian Railways. IT applications would be deployed to increase passenger and freight earnings, improve the image of the Railways in the eyes of the customer, reduce operating costs, ensure effective utilization of human and physical resources and to help the top management in arriving at long-term policy decisions by developing MIS & LRDSS. A commercial portal will be developed in the next 3 years for yield management, especially to attract traffic for returning empties and filling up vacant seats. All modules of Freight Online Information System (FOIS) including rolling stock maintenance and examination, revenue apportionment, crew management, control charting Coaching Online Information System (COIS) etc. will be integrated and implemented in a time bound manner for completion by 2010. Alongside ERP packages will be implemented in workshops, production units and selected zonal railways. A common website integrating the more than 50 different web sites of Railways will be developed with built in facilities like e-payment and e-tendering. For an integrated approach in IT, CRIS will be entrusted with coordination of all IT applications of the Railways and for development of a comprehensive vision on IT. CRIS will be developed as an autonomous and empowered organization, drawing officers from various Railways services. Indian IT companies have hoisted the national flag all over the world.
Railway Electrification
The Railways have planned that electrified network will be extended over the Golden Quadrilateral and its diagonals, and in all directions from Kashmir to Kanniya Kumari and Guwahati to Amritsar by the end of the 11th Five Year Plan. Electrification of Thiruvananthapuram-Kanniya Kumari, Thrichur-Guruvayur, Tiruchirapalli-Madurai, Barabanki-Gorakhpur-Barauni-Katihar-Guwahati and Jallandhar to Baramullah sections will be completed during the 11th Five Year Plan. In the first phase, electrification of Jalandhar -Jammu, Barabanki-Gorakhpur-Barauni and Tiruchirapalli-Madurai sections are proposed to be taken up in 2007-08. Similarly, doubling and electrification of Pune-Wadi-Guntkal and electrification of Daitari-Banspani, Haridaspur-Paradeep new lines will be undertaken by Indian Railways’ Public Enterprise RVNL in the coming years.
Public Private Partnership Schemes
Investments at a much larger scale would to be required in eleventh five year plan for different capacity and expansion network as compared with the provision made in the Tenth Five Year Plan. The funding of plan of several lakh crores would require multi-source approach based upon deployment of internal resources, market borrowing, and public private partnership and budgetary support. The improved financial performance of the Railways will enable a large share of the financing to be met from internal and external budgetary resources. The Railways have to seek partnership with the private sector on the terms that are in the interest of Railways and their customers. For example, by leasing out catering and parcel services the Railways have reduced catering and parcel losses of more than a thousand crores. The Railways have enhanced their capacity by attracting private investments in the wagon investment schemes and siding liberalization schemes etc. Even while retaining the core activity of train operations, Railways have awarded licenses to private parties for running container trains, which is likely to attract investment of thousands of crores in wagons and construction of terminals over the next few years. Public Private Partnership (PPP) options are being explored with the aim of modernization of metro and mini-metro stations with world-class passenger amenities, development of agro retail outlets and supply chains, construction of multi-modal logistic parks, warehouses and budget hotels and expansion of network and increase in production capacity. The Railways have constituted a PPP Cell which would develop the policy framework to provide non-discriminatory level playing field to investors, prepare the bankable documents and set up the procedure for awarding partnerships through open tendering system.
Thus these steps would help the Railways to meet the challenges being faced by the Railways. When we evaluate the recent past experience of the Railways we found that whole host of schemes have been put in place to attract the freight customer. These include mini rakes for the small customer, volume discounts for the large customer, lean season discount scheme, long term freight incentive scheme, loyalty discount scheme, discounts for providing traffic in the empty direction, incentives at terminals like engine on load and construction of sidings, wagon investment scheme etc.
There was substantial growth of 11.7 percent in earning in 2008-09 over 2007-08. Similar a historic increase of 17 per cent was registered in freight earnings in 2006-07 .A comparison of the loading figures between 2005-06 and 2004-05 shows that increased loadings have been achieved in coal, other goods, raw material for steel plants, and iron ore for exports. The percentage increase with respect to 2004-05 was most significant for other goods (25%) followed by raw material for steel plants (19%), cement (14%), and iron ore for exports (13%). The increase in coal was 8%. The increased axle load has facilitated 14% improvement. Due to increased rake availability as a consequence of (i) improvements in wagon turnaround, especially in iron ore circuits due to the efforts towards 24 hour loading in sidings in SER and SWR, and reduced train examination and (ii) use of covered wagon rakes which would otherwise have gone empty in SWR has also contributed in improved loading.
Most spectacular growth has been in Passenger earnings. There has been increased of 7 percent in 2008-09 over 2007-08. Similarly the passenger earnings in 2005-06 had gone up only by 7.2% over 2004-05.The main reason for the growth of passenger earning were due to initiatives in running 24 coach trains, deploying additional coaches in well patronized trains and even running of additional trains and up gradation of passengers if the seats are running empty. Thus a range of initiatives focused on (i) reducing passenger losses by increasing volumes by increasing the length and occupancy of trains (ii) modifying train length and composition based on passenger profile management (analysis of the passenger reservation system data to understand class wise and season wise occupancy of trains) (iii) increasing average speeds of trains (iv) providing affordable air-conditioned travel for the poor and (v) improved design of coaches. Running of ‘Garib – Rath’ has been one of the successful experiments which has been immensely found to be popular amongst passenger.
There has been substantial growth in other coaching earnings in last four years. These earning came through parcel, catering, advertising, and dividends from the public sector units under the ministry. The increase of 24.2% in 2005-06 over 2004-05 followed a similar growth of 24.7% in 2004-05 over 2003-04. In the earlier years, the growth in this segment had been marginal. This source of revenue had not received as much focus as in the past four years. However, a slew of initiatives on these areas had been implemented over the past some years, making it attractive for private parties to take advantage of the market opportunity that IR could offer.
International Comparison
Russia
According to Russell Pittman1 the Russian railways system is in the midst of a complete restructuring. As part of a ten-year, three-stage reform plan, the railway operating company, RZhD, has only recently been completely separated from the Ministry of Railway Transport. A small number of new train operating companies has been granted access to the infrastructure, carrying only oil and oil products at this point but with the potential to carry other commodities as well. The stated long-term goal of the plan is for RZhD to control 50 per cent of the wagon fleet and to continue to run trains in competition with private train operating companies, which would be guaranteed non-discriminatory terms of access to the track and other infrastructure. Thus – although the exact nature of the post-reform industry structure remains not completely clear – the idea is evidently to allow access by non-integrated train operators but not to force complete vertical separation, and to enforce non-discriminatory terms of access in order to create and protect competition between integrated and nonintegrated train operators
Those arguing for restructuring and reform of the rail sector, particularly in transition and developing economies, have tended to focus on three (interrelated) goals: reducing the demands of the railway sector for government funding, increasing the efficiency of operation of the railway sector, and creating competitive options for shippers. The first goal is not consistent with the policy option of marginal cost access pricing and government funding to make up the fixed costs. The second goal is not consistent either with this option, for reasons of incentives for operational efficiency, or with the option of fully allocated cost access pricing, for reasons of pricing efficiency. Both seem consistent with access pricing schemes utilizing second or third degree price discrimination, but these in turn seem as a practical matter to run counter to the goal of creating competition conditions in transport markets.
Pittman argues that the way out of this dilemma may in many cases lie in abandoning the premise that railways restructuring should be based on the concepts of vertical access and vertical separation. Many freight shippers can take advantage of intermodal competition, using the options of road and/or water haulage to keep a ceiling on rail rates, and this will be increasingly the case for manufactured goods in Russia, especially European Russia. Unfortunately intermodal competition is typically not an option for shippers of the bulk commodities – oil, coal, minerals, chemicals, timber – that make up the largest share of Russian rail haulage.
Britain
The railway network in Britain was planned, financed and built by the private sector in the 19th Century. The industry was nationalized in 1948, and then returned to private ownership during the period 1995-1997, as part of the wider programme of sell-offs carried out by four successive Conservative administrations (1979-1997).
Since nationalization, rail traffic has been in almost continual decline in the face of increased competition from road transport. In the early 1950s, passenger rail travel accounted for roughly 17% of total passenger traffic - by the mid-1990s this share had fallen to around 5%. Rail freight business saw an even sharper loss of market share, from over 40% to just 7% over the same period, driven by the loss of traffic to roads, and the decline of Britain’s heavy manufacturing and primary industries (which rail freight was particularly well placed to serve). Rail volumes also fell in absolute terms up until the mid 1990s. These trends have been reversed since privatization.
Basically the British Railways moved into a loss-making position in the mid-1950s and, in spite of the line and station closures implemented following the Beeching reports (1963; 1965) - which saw the total route mileage reduced by a third - the industry’s financial position continued to deteriorate during the 1970s and early 1980s (as productivity growth slowed whilst wages were on the increase; and as government controls prevented the development of commercial pricing). The 1968 Transport Act explicitly recognized the need for government subsidy to support loss-making (but socially-beneficial) services. However, in line with worsening performance, the level of subsidy also increased over time, reaching £1.6bn by 1985/86, compared to £600m in 1968 (1999/00 prices).
During the 1980s it was recognized that the financial position of the industry, and the requirement for government support, would complicate any attempt at privatizing the industry. Rail privatization would require route closures and/or continued government subsidy after sale. As a result, proposals for rail privatization developed slowly during the 1980s, finally culminating in the sale of the industry during the period 1995-1997. However, the government (and BR), were not idle in the meantime, and began selling off many of BR’s non-core operations. Some of these sales raised substantial sums (for example, BR Hotels raised £150m in 1999/00 prices).
The debate on privatizing the core railway operations continued throughout the 1980s and early 1990s. In 1992, immediately following the surprise Conservative election victory, a White Paper, ‘New Opportunities for the Railways’ (Department of Transport), was quickly put together under the direction of the John MacGregor (then Secretary of State for Transport). The strong likelihood that the Conservatives would lose the subsequent election (1997) injected urgency into the process, as the government sought to complete the sale of the industry in one Parliament – and thus make privatization effectively irreversible.
The 1992 White Paper outlined the government’s privatization objectives, which were similar to those for previous sell-offs: to harness the skills of private sector management, in order to achieve greater responsiveness to customer needs, higher service quality, improved efficiency and better value for money. The introduction of competition was thought to be the best way of achieving these objectives (following the example of the electricity restructuring in 1990), although it was recognized that regulation would be required to protect consumers (especially with regard to safety).
As a result, the industry was separated (vertically and horizontally) into more than one hundred companies, to allow competition to develop in the contestable elements of the business. The restructuring was carried out initially within the public sector, creating shadow companies, which were later sold.
The most significant change was the separation of control of the track infrastructure (natural monopoly) from train operation (contestable). In 1994, most of the fixed railway infrastructure assets were transferred to a new company, Railtrack, separate from BR, but still wholly owned by Government. The company was sold by public offer in 1996.
At the same time, BR’s infrastructure services were reorganized into seven-infrastructure maintenance and six track renewal companies (sold between February and July 1996). BR’s rolling stock was divided into three leasing companies (ROSCOs). The ROSCOs (sold in January/February 1996) lease locomotives and carriages to the passenger train operating companies. Six heavy maintenance depots (provide services to ROSCOs) were also sold in April and June 1995. The right to run passenger train services was franchised to 25 private sector train operating companies (TOCs) - with open-access competition to be introduced gradually under the “moderation of competition” rules laid down by the Regulator (from 1995 onwards). TOCs lease almost all of their rolling stock from the ROSCOs, and pay Railtrack for access to track and stations. Red Star Parcels was sold to a management buy-out in September 1995. Freight operations were separated into six companies (later consolidated into two) and sold between December 1995 and November 1997 (with open-access competition allowed from the outset). In addition, many other BR central services operations were sold to private sector companies or management teams.
As part of the reorganization, two regulatory bodies were also created: (1) The Office of Rail Regulator (ORR), principally to regulate the monopoly element of the business - Railtrack; and (2) The Office of Passenger Rail Franchising (OPRAF), mainly responsible for awarding franchises, paying subsidies, and regulating the TOCs. Rail Users’ Consultative Committees (RUCCs) were established to work with OPRAF in protecting the interests of rail users. Safety regulation was placed with the Health & Safety Executive.
Since privatization industry outputs have increased substantially (reversing a long-term trend of decline), whilst costs have fallen in real terms. The new structure gave the TOCs strong incentives to increase outputs and reduce costs (because of declining subsidies; fixed access charges). Whilst part of the output growth since the mid 1990s can be attributed to privatization itself - through, for example, fare regulation and better marketing
Michael g. Pollitt and Andrew S. J. Smith1 have conclude that:
1. Industry outputs have risen sharply since privatization (1992/93 to 1999/00). Passenger train miles, passenger miles and freight tonne miles have grown by 13%, 21% and 19% respectively. At the same time, the cost base has been reduced by 6% in real terms. As a result, unit costs have fallen sharply over the period, by 17% (or 2.7% per annum). After taking account of scale effects, the rail industry has achieved efficiency savings of 13% (or 2% per annum) since privatization.
2. The post-privatization performance on efficiency has been significantly better than that achieved under public ownership. During the five years prior to privatization, unit costs went up by approximately 1% per annum (after stripping out the impact of scale effects).
3. In the central scenario, privatization and restructuring has generated efficiency savings
to date of about £800m, compared to the counterfactual of continued public ownership. The savings, achieved over only four years, are more than offset by restructuring costs. However, assuming that the savings achieved to date are rolled forward into the future (though declining to zero over 15 years as the public sector catches up), the total savings rise to £2.5bn under the central scenario (pre-restructuring), or £1.1bn after restructuring costs.
4. Consumers have benefited considerably from privatization (£1.2bn) – indeed by more than the level of savings. In present situation producers and government together lose £100m, with the government losing £300m, whilst producers gain £200m.
5. Output quality has improved since privatization (pre-Hatfield). Train performance has improved significantly, whilst the evidence from the 1980s suggests that it would have deteriorated under the old BR structure. Although overcrowding has got worse, it was argue that the same would have happened under public ownership, given the level of passenger growth. The increase in the number of broken rails has also resulted from increased traffic growth; however, it is unclear whether extra money would have been forthcoming to address this issue in the public sector. Finally, despite concerns over safety, the Cullen report – written after the Hatfield disaster - found safety performance to be (statistically) the same before and after privatization.
Of course, post-Hatfield, train performance has worsened dramatically. This position has resulted partly from the lack of an adequate asset register, which led Railtrack to close down large parts of the network. However, it also reflects a reduction in risk tolerance since privatization. Whilst British Rail may not have taken the same action as Railtrack, passengers may have been subjected to higher risk as a result. The value of this reduced risk is often ignored and is difficult to quantify.
Looking forward, the Periodic Review (2000) envisaged a significant increase in investment in the network, to deliver improved safety systems, and better performance. There have also been suggestions that long-term costs may have risen in the aftermath of Hatfield. However, this cost increases largely affect capital, not operating costs. Furthermore, the Periodic Review also committed Railtrack to deliver significant efficiency savings in the coming years.
The achievement of further efficiencies in the future will be key to delivering the government’s objective to improve rail services. Thus a privatized structure, where shareholders demand a return on their investment, has led to significant improvements in operating efficiency - it remains to be seen whether the new regime, with a not-for-profit infrastructure owner, will deliver the same efficiency improvements.
The U. S. A.
In the US, private railroad companies own both tracks and the trains that run over them. A particular location may be served by one or many railroads, and it is common for a pair of major cities to have two or sometimes three “parallel” railroads operating between them, competing for customers. Furthermore, it is not always necessary for one railroad to serve a shipper “directly” to provide service, or to provide competition to a second railroad; depending on the characteristics of the commodity, shippers may send their goods many miles by truck or water to or from a second rail line. For many commodities (especially manufactured goods) over many routes (especially shorter ones), motor carriers provide intense competition to rail carriers for the entire haul, or indeed may have already taken most of the business away from the railroads. In some locations, water carriers provide strong competition to rail. Most tariffs have been deregulated, and are set in contracts between railroads and shippers. At particular locations with multiple shippers -- such as a city – the individual railroads may agree among each other to form a “switching area”, where each railroad may run its train on each other railroad’s track to reach shippers located there (or the switching area track may be jointly owned by the local government, or by the railroads that use it). However, it is an important part of the US system that most such arrangements for “trackage rights” by one railroad company over another company’s tracks are voluntary and mutually agreed upon. “Compulsory” trackage rights, that is, access mandated by a government regulatory agency, are less common. When they do occur, they do so typically either a) as a competitive condition placed upon the merger of two railroad companies, as the regulator seeks to maintain competitive options for a particular shipper, or b) if a particular shipper can satisfy the difficult regulatory requirement necessary to prove that it is economically “captive” to a single railroad -- that is, that it has no economic alternative, via either rail or other transport mode, to that railroad for the haulage of its inputs and/or outputs. Even in those rare cases where competitive access is mandated, there may be lengthy regulatory or court proceedings to arrive at the price to be paid for access.
The Canadian System.
Most rail traffic in Canada travels over one of only two major privately owned carriers, the Canadian National Railway and the Canadian Pacific Railway. As in the US, each railroad runs its own trains over its own track. A large amount of rail traffic flows between Canada and the US, and each Canadian railroad has various connections with US railroads for interlining traffic. Furthermore, both major Canadian railroads own significant amounts of track in the US, and two US carriers have track networks that extend into Canada. Perhaps the most important difference between the Canadian and the American systems regarding competition is that in Canada, shippers located on one of the railroads but within 30 km of the other are automatically eligible to receive either service by the second railroad over the tracks of the first or service by the first that interlines with the second, both at regulated rates.
Brazil
Brazil has three gauges of rail track totaling about 32,000 kilometers of which about 2,000 kilometers are electrified. The different gauges used are 1,600 mm (5,000 kilometers), 1,440 mm (200 kilometers) and 1,000 mm (26,000 kilometers). The entire railway system covers mostly the eastern part of the country serving the ports on the South Atlantic coast. The central and western part of the country does not have any railway system. The road lobby is understood to be very influential in Brazil. 82 percent of the freight traffic is carried by road leaving the rest mainly to rail-based transportation and to water-borne movement along the Amazon. Separate private companies own most of the main line routes and only metro rail in major cities are owned by the respective municipalities. The urban areas are giving way to more and more road space shrinking the available area for housing people. Thus the cities and towns are getting overcrowded with road bottlenecks, similar to trends witnessed elsewhere in 'urbanizing' cities. This has hampered the movement of freight traffic to strategic ports; augmentation of the rail network is a priority for the state governments.
China
China has a total of about 72,000 kilometers of railway lines of which standard gauge (1,435 mm) is 68,000 kilometers while the rest are of 1,000 mm gauge. The population density in the eastern part of the country is denser than the rest of the country. The rail network is correspondingly denser in the eastern part. Being about three times larger in area than India, the population of China is more distributed and thus the route kilometers of railways per million of the population is only about 55 kilometers as against about 65 kilometers in India. The Chinese government operates about 60,000 kilometers; private players operate the rest. Rail freight traffic in China was of the order of 2,100 million tons as compared to 602 million tons by Indian Railways in the financial year 2005-06. China is focusing on the implementation of the 1,300 kilometers connection between Shanghai and Beijing. A separate dedicated high-speed rail corridor is also being constructed for commuting between the cities. The present operating speed on the rail network is about 160 kilometers per hour but China intends to augment this to about 300 kilometers per hour by 2010.
Australia
Australia is twice as large as India in area and has a total of about 45,000 kilometers of railways. Most of the northern part of Australia being arid and a desert, the population is concentrated in the eastern and southern coast. The iron ore and coal reserves are in the south and southwest regions. In order to optimize the total logistics, a substantial quantity of the material moves by rail to both the east and west coast almost along the entire southern belt of the country. For operational economies, Australian Railway companies operate very long freight trains carrying a payload of more than 25,000 tons powered by three or four locos distributed along the length of the train. The locos are controlled wirelessly. High-speed trains are mainly confined to connecting the metro cities on the southeastern part of the country such as Melbourne, Sydney, Canberra and Brisbane.
According to Pittman1 many Latin American countries have reformed their railways without relying on vertical access or vertical separation to create competition. In Argentina, Brazil, Chile, and Mexico, the restructured railways systems are made up of multiple vertically integrated railway companies that compete with each other primarily at common points. Shippers to or from Mexico City, for example, can choose among three independent, vertically integrated railroad companies to carry their commodities, and this ‘geographic’ or ‘source’ competition, in addition to US-style ‘parallel’ competition in limited areas, has proved surprisingly successful in limiting the market power of individual railroad companies. Based on the experience in Latin America and North America, the creation of vertically integrated, competing railway companies in Russia, would seem likely to have two additional outcomes that are especially attractive. First, and perhaps contrary to expectations, it seems to be easier for the price discrimination that may be necessary to pay for the fixed infrastructure in the railroad sector to be done implicitly by vertically integrated companies, in the form of differentiated charges to shippers, rather than explicitly by infrastructure companies, in the form of differentiated access charges. In addition to problems with competition authorities, as discussed above, the experience in both the UK and Australia with small numbers negotiations in setting differentiated access charges suggests that the transactions costs of such an approach may be very high.
Second, one of the advantages of the Canadian and US systems of competition among vertically integrated railroad companies has been the ability of these companies to cover there fixed costs and make new investments. The same has already been observed in some of the reforming Latin American countries, where, for example, in both Brazil and Mexico the railway systems have moved in a few short years from draining the government treasuries to attracting hundreds of millions of dollars of private investment funds and paying taxes. It may be very difficult for railways in Russia and other transition and developing countries to achieve simultaneously the goals of reformers under models of vertical access and separation. This is in part a problem of regulatory capabilities and in part a problem of the huge amounts of investment required by a modern railway system. For this and other reasons, alternative models of restructuring that maintain vertical integration in the rail sector are worth serious consideration
General Overview of Indian Railways Compared with Other Railways of the World.
The above international comparison and description indicate that different countries have followed different model for reforming their railway system. However privatization of Railways has been a common theme. K P M G1 report on the Indian Railways says that taking into account the holistic picture of economic development, population distribution, raw material availability, location of industries and all other factors influencing material transport prospects, India appears to be unique in most respects. The population density in the southern part of the peninsula is high and coal, iron ore and other mineral resources are concentrated in the Bengal, Bihar and Jharkhand areas. Major industries and power plants are distributed almost throughout the country. This unique feature presents enormous opportunities for the transport of people and material across the country, in all directions. India also has an ancient history - the heritage locations and international tour promoters adding to the demand for most sophisticated passenger comfort showcase pilgrimage and other historic centers to the world. The popular Palace on Wheels is an example of the potential. Pilgrim specials are run across the country almost throughout the year at various seasons to different destinations. Many new 'tourist' trains on the lines of the Palace on Wheels are also being planned. In such situation any reform or liberalization within government control seems to be more appropriate for the railway reform rather than complete privatization.
Critical Question: Sustainability
Here comes the most important part of our study. Whether the turn around which the Indian Railways have made is going to sustain for long or was it a one-time affair, which is not going to be repeated year after year.
Indian Economy: In a Phase of Higher Growth
It may be noted that the Indian Railways have been able to achieve turn round when the Indian Economy was in a boom phase. Sometime after 2004 Indian Economy has crossed the restrictive growth rate of 5% or less. Coinciding with that the performance of the Indian Railways has also registered a phase of higher growth. Hence the growth of India Railways is somewhat dependent on the growth of Indian economy. If due to any reasons the growth of Indian economy is disturbed or stalled then the performance of the Indian Railways will also, if not totally disturbed, affected. For the Railways it will be much tougher to sustain this growth rate. This was illustrated in the growth pattern as seen during 2004-05 to 2009-10. After 2008-09 when the global economy was hit by the meltdown affect there was cascading affect on Indian economy which in turn has also affected the IR.
The Role of Present Leadership
For making turnaround happen the role of leadership is very important. Some of the critical decisions which was taken in the past have played very important role. For instance for taking decisions like increasing the loading capacity of the wagons lot of resistance was there from several departments with in Railway. Although the Railways have a very systematic bureaucratic hierarchy of three tier at divisional, zonal and Railway Board level the badly needed decision came from the top. It was good that the Railways have got proper leadership at an appropriate time. However this kind of good coincidence may not always be possible. According to Prof. Raghuram1 ‘the strategies and processes can be sustained if the political leadership is well intentioned and has consistency of direction. Political leadership does not come in through a controlled process. The need is for the professional top management (RB) to be able to respond as a commercially oriented organization with a corporate culture’.
Organizational Restructuring
G Raghuram and Niraja Shukla2 have argued that while IR is well set in terms of the human resources and a lot of systems, it does not have the structure for a corporate approach. The initiative of increasing the axle loading had to be triggered by the MR and his office, rather than emerge as an in house strategic decision. ‘Departmentalism’ is the major issue that comes in the way of the IR’s ability to take strategic decisions from within. Further, top officials generally have short tenures. Given the relationship between political leadership and Railway Board (RB), short tenures hinder the consistency of initiatives. IR needs to redesign its organizational structure to bring a corporate perspective at higher levels. This would call for redefinition of the roles and responsibilities of the top management towards a business perspective rather than a functional perspective. They have recommended that even though IR has performed well in the past two years, there is need for organizational restructuring.
Apart from a faster growing economy, consistency of leadership by the MR and a professionally responsive RB worked well in turning around IR. However, if the political leadership changes, how IR will respond is a big question. There is need for a system which focuses on continued innovation and not just on current strategic initiatives. Unfortunately, political leadership is not an outcome of a controlled process. Hence, the technocracy has to develop the capability for continuous innovation. There is also need for IR to become a commercially oriented organization with a corporate culture. Strategies and processes have to be customer centric and scientifically based.
Predominance of Supplier Driven Initiatives
All the initiatives for ensuring turnaround has been taken form the railways’ side i.e. the entire process was supplier driven and not as per the wish of customers. This makes entire process as one sided and in this the entire system becomes dependent on the mood of single party. There are several issues, which are badly affecting customers. But in those issues the views of customers have not been given much importance. It may be noted that for Railways’ goods traffic five or six commodities are very important and six top loading divisions are vary important. For increasing share further it is very important that all problems being faced by these commodities and divisions has to be solved in a mission approach.
Slow Progress in Port connectivity
The highest growth in demand of the Railways services has been in port sector. This sector is likely to give more and more demand, as India’s international trade is likely to increase many times. Despite making so much efforts the Railways have not been able to provide substantial improvement in its services. Nor there is any substantial improvement in the connectivity between four metropolitan cities i.e. Delhi, Mumbai Chennai and Kolkata. Although the Railways have many projects to improve these further, the success of Railways depends on the fact that how early these projects are logically concluded further.
According to G. Raghuram and Rachana Gangwar1 ‘India’s Port originating traffic is 68.9 (58.8) mt and port terminating traffic is 74.1 (70.7) mt, accounting for a total of 143.0 (129.5) mt, which is about 10.7 (10.8) percent of IR’s traffic. The port as a significant client needs to be recognized in this framework, since otherwise IR tends to look at clients at the originating side.
IR has opportunities to increase its traffic volumes and market share in port traffic. Apart from increasing line capacity on the rail route to the hinterland (which the IR were already considering through appropriate infrastructure investments), it would also be important to develop appropriate customer oriented systems and other infrastructure. The strategies that IR needs to adopt for this would emerge as a result of understanding the supply chain requirements of the major commodities being handled at these ports.
India’s international trade is going up. Port traffic is also going up, both due to international trade and coastal movement. IR’s market share of domestic movement is going down. IR has a market share of about 30 percent of the port traffic for hinterland movement1. Port traffic is largely bulk and containers and IR has expertise in this. There is potential for IR to focus on port-based traffic and develop a sustainable niche. The mode choice for traffic from and to the hinterland is based on lead to/from port, freight rates, volume per shipment, availability of wagons and services at the customer interface’. The Railways have to initiate specific and speedy measures to retain and further capture this market.
Increasing Axle Load Further
One of the major source or reason of the Railways turnaround has been increasing the axle load and carrying capacity to CC + 8 + 2 tonnes. This turnaround can be sustainable further only when the loading limits are relaxed further and loading capacity of different wagons, track, bridges etc. are improved further.
According to G. Raghuram and Niraja Shukla2 ‘the increased axle load had been viewed as a net revenue generator, with marginal revenues far exceeding marginal costs. Increasing loadability for a given axle load by improving the net to tare ratio from the current 2.7 (to possibly around 4) could be a possible technological solution. For a 92 ton gross weight, if the wagon weight could be brought down to 18 tons, the loadability would go up to 74 tons. Long-term possibilities were increasing the axle load to 25 tons and then 30 tons. These would require adoption of new technologies, apart from planning future rail construction and wagon procurement activity to meet the required parameters. The concept of multiaxle vehicles, which was popular on roads, could also a possibility of on rail. Thus IR faced several immediate future priorities: better instrumentation, and studies and to determine the impact of higher axle loading on bridges, track, and wagons’. However, before we increase such limits proper assessment of cost owing to increased fuel consumption, increased wagon and track maintenance, increased investments in wagons, tracks and bridges, instrumentation, monitoring and studies, and ill effects of increased breakdowns has to be done. The strength and safety of bridges is one of the critical factors, which have to be kept in mind.
‘At 22.9 tons axle load, up to 67 tons can be loaded today in a wagon (in comparison to earlier loading of 56 tons, taking an average of 25 tons of tare weight). There are plans for increasing it further to 25t and 30t per axle loading in the proposed dedicated freight corridors. This would require certain infrastructural changes and safety issues to be addressed, even though some of the experts says that IR tracks are fit for 30 tons and 32.5 tons per axle loading with certain modifications like increasing ballast, replacing sleepers, etc. Improved net to tare weight ratio, multiaxle vehicles, and utilizing maximum moving dimensions are the areas of research for increasing further loadability’2.
Early Completion of Dedicated Freight Corridor
It is high time for the Railways for the early finalization of dedicated freight corridor to meet the high congestion situation between different metropolitan cities. The high-density Eastern and Western corridors are already saturated in terms of line capacity utilization. Accelerated growth of the economy is only adding to the congestion on these routes. A quantum jump in capacity is, therefore, necessary for meeting the rising freight demand on account of robust domestic growth as well as the rapid increase in international trade. Railways have planned to construct a new Dedicated Freight Corridor (DFC), initially covering about 2700 route kms. equivalent to over 5000 of Track kms at an approximate Cost of Rs. 22,000 crores, linking the ports of western Indian and the ports and mines of Eastern India to Delhi and Punjab. The construction of this corridor is under implementation through an SPV being created for the purpose through a mix of Engineering Procurement and Construction (EPC) and PPP methods. Indian Railways was in the process of selecting a global consultant to advise on the concession agreement, principles of track access charges and other financing and bidding issues. It was envisaged that innovative ideas on design, construction and maintenance of railway to achieve optimal life – cycle costs would be forthcoming through PPP especially as the work progresses on the initial two corridors and further corridors are taken up. The concessionaire could also tap additional ancillary revenue streams through commercial exploitation of land, construction of freight terminals/logistic parks/ICDs etc. Further, after firming up a wagon design for the DFC, private investment for its manufacture would be encouraged. All possible options, including PPP route through appropriate models was being considered.
Increasing Passenger Coaches
One of the main reasons of passenger growth in recent year has been increasing the number of coaches in most popular trains to 24 coaches. To take benefit of this it is necessary that even other trains are extended this benefit. However, the pace of this conversion has been rather slow. This is required to be speeded up. The Railways also require canceling some of the less popular and unpopular trains to save totally unwarranted expenditure. However this would not be much easy.
Providing Total Logistic Support
Today the Railways are facing tough challenge from the road sector, which has taken over most of the goods traffic share from the railways. One of the good things of the road sector has been that they, most of the time, act as total logistic solution provider. They pick up the goods from the doorstep of the customers and after reaching to the destination they deliver to the customer at their doorstep. However this has not been so in the Railways. Here, the party is supposed to bring their commodities to the good shed by road and after reaching at the destination again they are supposed to empty the entire rake by 6 to 8 hours and vacate the good shed within 24 hours. This again involves road movement. Except “container services” Railways does not provide any totally logistic solution. With increased or round the clock working hour many customer find it rather difficult to adjust. To make the Railways customer oriented the Railways have to make some arrangement for providing total logistic support. This has become more important since now there is greater requirement for mechanized loading and unloading of consignment to avoid warfage and demurrage. For an individual customer it may be difficult to have all these mechanized facilities. Whereas, if the Railways make some institutional arrangement with some Private Sector players it would be much convenient for any party to take full benefit of the railways’ services. In the beginning, we may provide as a pilot project in some big and busy good shed and on the basis of experience gained over there it may be replicated at other locations. Sooner or later, the Railways have to realize that until unless they emerge as total logistic provider they will not be able to compete with the Road.
Commercial utilization of land
Indian Railways has approximately 43,000 hectares of vacant land. These are mostly situated alongside the tracks in a longitudinal strips, around railway stations and in railway colonies especially in metro and other important cities / towns with potential of being used commercially to generate revenue as well as capital for modernization and capacity addition. An authority, namely, Rail Land Development Authority (RLDA) was set up under the Railway (Amendment) Act 2005 to pursue, inter alia, the main objectives of generating revenue, up grading railway assets and providing world – class, state – of – the – art passenger facilities / services at stations.
In fact in big Metro City like Delhi, Mumbai, Kolkata, Chennai etc. Railway should modernized to provide world – class passenger amenities and services to the large multitude of passengers using these stations. The Ministry is planning to do so by attracting private investments in the area by allowing the areas around the stations and the air space above platform to be commercially developed while operational / passenger – handling areas are separated from such commercial areas as in the case of airports. The concessionaire would be expected to construct and maintain the operational and passenger areas free of cost, share the revenue earned from the real estate created and hand over the same after the concession period. The pilot project for New Delhi Station is on the anvil and on the basis of this experience it is required to be replicated for other stations. Development of new green field passenger terminals is also required to be taken up in a similar manner.
Customer Orientation
The Railways still works with suppliers’ market mentality. Different terms and condition are made as per the convenience of the Railways. Laid down rules don’t permit for molding different restrictions for the benefit of the customer. Whereas, the expectation of different customers are gradually increasing and they want personalized favor as they get it from private truck operators. Being a government department, Railway officials don’t have such liberty. However, to meet the expectation and to compete with the private road operators Railway officials are gradually required to be given some discretionary powers. G. Raghuram1 has mentioned some of the expectations. Siding owners, as key customers of the IR, often put forth the following requirements from railway operations.
• Supply of wagons: IR should supply the stock asked for with little or no delay. Open wagons should not be supplied against request for covered wagons. The supplies should be arranged with little or no bunching.
• Transit time guarantee: "Just In Time" approach is becoming important to the cement industry to eliminate inventory costs. This requires transit time guarantees and even containerization.
• No restrictions on free flow of goods: The traffic must move freely, determined by market forces and not by IR. For example, if food grain loading picks up from Firozpur division, loading of covered wagons outward Mughalsarai runs into difficulties. Similarly, frequent restrictions are imposed on movement to individual railway destinations where a quota is applicable. If it is a capacity problem, what have the IR done to remove the bottlenecks? If it is a problem of terminals, what can the IR and industry do?
• Rail connections to minor ports: Traffic will start moving in a big manner to the interiors from the ports, especially coastal traffic from and to the minor ports. Therefore, transport infrastructure planning not only for the major ports but also the minor ports is important.
• Claims settlement: IR’s record for claim settlement is poor. For example, when wagons are involved in accidents due to suspected sabotage, IR are not willing to refund the freight and also not willing to prove that the unloaded goods were taken care of as required by law. The result is that the industry is fighting cases in the claims tribunal and adding to the workload on the both sides.
Suggestion given in the above study is important and the IR may decide future policy in the above prospective. Since in the coming years the Railways have to accept customer as king so gradually they have to amend different laws to incorporate proper solution to these elements.
More Leasing of Parcel Services
Since April 2005 Railways have been following the policy of leasing of S L R as the Railways was making heavy losses. Hardly 25% S L R capacity utilization was being utilized and only about 500 crore was being earned whereas the potentialities was for 25000 crore. However, despite some progress not more than 40 % S L R space has been leased. Many less important express trains and most of the passenger trains are yet be covered under leasing. Hence, the Railways have to expedite the progress of leasing of S L R to get proper benefit. Further Railway should try to provide total logistic solution to the parcel service customer to make it truly attractive. Railways may make arrangement with some trucks operarators to provide road part of services as per the Railway fixed rate. This will increase the credibility of the Railways services tremendously.
Thus we may conclude that at this stage the Indian Railway does not need privatization as it was done in the U. K. or in the U S A or Russia. Rather, its recent attempts to improve have brought some improvements. Hence the IR should continue to reform itself further. The turn around of the Railways can be sustainable only when those listed items are achieved within given time. If any undue delay takes place or if the task is left in the mid way it may lead to very serious consequence. To save the Railway from privatization and serious hardship of the common population the IR have to achieve the transformational goal of Railway even before its due date.
Bibliography
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