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INDIAN INSTITUTE OF MANAGEMENTAHMEDABAD



INDIA

Research and Publications

Indian Railways in the Past Twenty YearsIssues, Performance and Challenges

G. RaghuramRachna Gangwar

W.P. No. 2008-07-05

July 2008The main objective of the working paper series of the IIMA is to help faculty members,research staff and doctoral students to speedily share their research findings with professionalcolleagues and test their research findings at the pre-publication stage. IIMA is committed tomaintain academic freedom. The opinion(s), view(s) and conclusion(s) expressed in theworking paper are those of the authors and not that of IIMA.

INDIAN INSTITUTE OF MANAGEMENTAHMEDABAD-380 015INDIA

IIMA



INDIA

Research and Publications

Abstract

Indian Railways (IR) is Asia’s largest and world’s second largest network under onemanagement, with a separate Ministry and its own annual budget. The network carriedabout 17 million Passengers and 2 mt freight every day on the route of 63,327 km(2006-07). Although key business operations are freight and passenger, IR is alsoengaged in several allied services including parcel, catering and production units.Nearly 70 percent of IR’s revenues come from the freight operations, which can besegmented into bulk and other cargo. Over the years, IR has predominantly become abulk freight carrier, accounting for about 94 percent of the freight revenue. Coal aloneaccounts for nearly half of the bulk traffic carried. Passenger business accounts fornearly 60 percent of IR’s total transport effort, in terms of train kilometers, but yieldless than 30 percent of the total revenues. Suburban services account for 57 percent of the originating passengers, while contribute to only 8 percent of the passenger revenue.To understand the development process of IR’s over the past twenty years, the studycovers issues and strategies related to financial and physical aspects of revenuegenerating freight and passenger traffic from 1987-2007. Study also covers thedevelopments in the parcel, catering and advertising sector.

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W.P. No. 2008-07-05

IIMA



INDIA

Research and Publications

Indian Railways in the Past Twenty Years

Issues, Performance and Challenges

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Introduction

The Indian Railways (IR), more than 150 years old, is among one of the largest and oldestrailway systems in the world. It has an extensive network, and played an integrating role in thesocial and economic development of the country. IR is a principal mode of transportation forlong haul freight movement in bulk, long distance passenger traffic, and mass rapid transit insuburban areas. It occupies a unique position in the socio-economic map of the country and isconsidered as a vehicle and a barometer of growth. It is also the biggest state owned enterprisein India, and contributes about 1% of India’s GNP.

Objectives

The objectives of this paper are

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strategic assessment of rail sub-sector from 1987 to the present

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focus on the trends in sub-sector performance and key issues for the period, includingconsideration of changing public and private roles.

The IR System

IR is state owned and operated under Ministry of Railways (MOR), Government of India(GOI). IR’s finances were separated from the general exchequer in 1924 based on AckworthCommittee report and its annual requirement for funds is voted through a separate budgetpresented to the Indian parliament.The MOR functions under the guidelines of Minister for Railways assisted by Minister of Statefor Railways. The policy formation and management of Indian Railway Board comprises of Chairman and six functional members (Exhibit 1). Wide powers are vested in the Board toeffectively supervise the running of 16 zonal railways, metro railway (Calcutta), productionunits, construction organization and other rail establishments. These are generally headed byGeneral Managers. 12 subsidiary organizations under the MOR namely CONCOR, CRIS,DFCCIL, IRCON, IRCTC, IRFC, KRC, MRVC, RCIL, RITES, RLDA, and RVNL undertakespecialized jobs contributing to IR’s growth and progress. IRCON and RITES have theirbusiness abroad also.IR is a vertically integrated organization controlling its own facilities, performing all operatingand administrative functions and unilaterally determining what services to provide. In additionto carrying out the core business of rail transport, IR also owns and manages activities such asdesign and manufacture of rolling stock, overhaul and remanufacture of rolling stock,construction projects, schools, technical institutes, housing, hospitals, hotels etc. IR supports awork force of about 1.4 million constituting 5% of the 27 million people employed in theorganized sector. They are governed by central government rules for salary and otherconditions of service. Another 0.7 million employees are supported indirectly throughestablishments servicing IR.

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This paper was prepared as inputs for the ADB study titled “Selected Evaluation Studies for 2005:SAPE for the Transport Sector in India.” We thank ADB for the support provided.

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W.P. No. 2008-07-05

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