Monopoly of Indian Railways : IIM Case Study

In economics, a monopoly (from the Latin word monopolium ± Greek language monos, one + polein, to sell) is defined as a persistent market situation where there is only one provider of a product or service. Monopolies are characterized by a lack of economic competition for the good or service that they provide and a lack of viable substitute goods. Monopoly should be distinguished from monopsony, in which there is only one buyer of the product or service; it should also, strictly, be distinguished from the (similar) phenomenon of a cartel. In a monopoly a single firm is the sole provider of a product or service; in a cartel a centralized institution is set up to partially coordinate the actions of several independent providers (which is a form of oligopoly). Primary characteristics of a monopoly  Single Sellers A pure monopoly is an industry in which a single firm is the sole producer of a good or the sole provider of a service. This is usually caused by barriers to entry.  No Close Substitutes

The product or service is unique in ways which go beyond brand identity, and cannot be easily replaced (a monopoly on water from a certain spring, sold under a certain brand name, is not a true monopoly; neither is Coca-Cola, even though it is differentiated from its competition in flavor).  Price Maker

In a pure monopoly a single firm controls the total supply of the whole industry and is able to exert a significant degree of control over the price, by changing the quantity supplied (an example of this would be the situation of Viagra before competing drugs emerged). In subtotal monopolies (for example diamonds or petroleum at present) a single organization controls enough of the supply that even if it limits the quantity, or raises prices, the other suppliers will be unable to make up the difference and take significant amounts of market share.  Blocked Entry

The reason a pure monopolist has no competitors is that certain barriers keep would-be competitors from entering the market. Depending upon the form of the monopoly these barriers can be economic, technological, legal (e.g. copyrights, patents), violent (competing businesses are shut down by force), or of some other type of barrier that completely prevents other firms from entering the market. Price setting for unregulated monopolies

In economics a company is said to have monopoly power if it faces a downward sloping demand curve (see supply and demand). This is in contrast to a price taker that faces a horizontal demand curve. A price taker cannot choose the price that they sell at, since if they set it above the equilibrium price, they will sell none, and if they set it below the equilibrium price, they will have an infinite number of buyers (and be making less money than they could if they sold at the equilibrium price). In contrast, a business with monopoly power can choose the price they want to sell at. If they set it higher, they sell less. If they set it lower, they sell more. In most real markets with claims, falling demand associated with a price increase is due partly to losing customers to other sellers and partly to customers who are no longer willing or able to buy the product. In a pure monopoly market, only the latter effect is at work, and so, particularly for inflexible commodities such as medical care, the drop in units sold as prices rise may be much less dramatic than one might expect. If a monopoly can only set one price it will set it where marginal cost (MC) equals marginal revenue (MR) as seen on the diagram on the right. This can be seen on a big supply and demand diagram for many criticism of monopoly. This will be at the quantity Qm; and at the price Pm. This is above the competitive price of Pc and with a smaller quantity than the competitive quantity of Qc. The offensive monopoly gains is the shaded in area labeled profit (note that this diagram looks only at the case where there is no fixed cost. If there were a fixed cost, the average cost curve should be used instead). As long as the price elasticity of demand (in absolute value) for most customers is less than one, it is very advantageous to increase the price: the seller gets more money for less goods. With an increase of the price, the price elasticity tends to rise, and in the optimum mentioned above it will be above one for most customers. A formula gives the relation between price, marginal cost of production and demand elasticity which maximizes a monopoly profit: (known as Lerner index). The monopolist¶s monopoly power is given by the vertical distance between the point where the marginal cost curve (MC) intersects with the marginal revenue curve (MR) and the demand curve. The longer the vertical distance, (the more inelastic the demand curve) the bigger the monopoly power, and thus larger profits.

the routes cover a total length of 63. 1853. a monopoly on the country¶s rail transport.244 trains daily. Background The development of IR had its roots in the 1800s.230 miles).339 locomotives and runs a total of 14. with more than 1. the British Parliament introduced the guarantee system. As of 2005 IR owns a total of 216. They also sought a more efficient means to transfer raw materials like cotton and wheat from the hinterlands of the country to the ports located in Bombay. The distance of 34 kilometers was covered in about 75 minutes. the mid-1800s were a period of mutiny and struggle for independence in India.717 wagons. IR is the world¶s largest commercial or utility employer. Initially. Madras and Calcutta. railway lines began to be laid in other parts of the country. The first commercial passenger train in India ran between Bombay and Thane (places in western India) on April 16. and the major regions in India were connected by rail. Introduction to Indian Railways Indian Railways (IR) is the state-owned railway company of India.The economy as a whole loses out when monopoly power is used in this way. The railways traverse through the length and width of the country. In 1951 the systems were nationalised as one unit.936 coaches and 7. Indian Railways operates both long distance and suburban rail systems. By 1947. the British colonial governments were credited with starting a railway system in India. Besides. including about 8.6 million employees. Under this system. trains were used to transport material between different places. with uprisings in several parts of the country. Indian Railways had. The company also had the right to pull out from the . Work began on the development of railway systems in India in the early 1850s. It is one of the largest and busiest rail networks in the world. The British East India Company and later. mostly by private British companies. Soon. there were forty-two rail systems. until very recently. To promote the construction of railway lines in India. The British leaders wanted to be able to transfer soldiers quickly to places of unrest. but soon overcame that fear and railways gained popularity.940 km (39. from where they would be transported to factories in England. Railways were first introduced to India in 1853. the year of India¶s independence. 39. Indians were initially apprehensive of accepting railways as a means of travel. The British found it difficult to traverse great distances between different places in India. They felt the need to connect those places with trains to speed up the journey as well as to make it more comfortable than travel by road in the great heat.002 passenger trains. since the extra profit earned by the firm will be smaller than the loss in consumer surplus. This difference is known as a deadweight loss. when India was a British colony. becoming one of the largest networks in the world. any company that constructed railway lines in India was given a guarantee of a five percent return per annum on the capital invested. Railways seemed to be the ideal solution to all these problems. transporting just over six billion passengers and almost 750 million tonnes of freight annually.

This helped accelerate the development of railways in the country.000 miles of railway track in the country. Konkan Railway* (KR) is constituted as a separately incorporated railway. It comes under the control of the Railway Ministry and the Railway Board. Most of them operated at a regional level. crossing as it did. to govern the construction and operation of railways in India. railways also began to play a social role in India. By the beginning of the 20th century. the total track coverage in India was 4000 miles. By the beginning of the 1870s. Indian Railways is divided into sixteen zones. railways played a very important role in providing relief to the affected areas. In 1890. Sr. It is administratively considered to have the status of a zonal railway. 1952 1952 . For administrative purposes. the Darjeeling Steam Tramway started operating (the name was changed to Darjeeling Himalayan Railway in 1881). The red dots are the zonal headquarters. Headquarters Delhi Gorakhpur NR Northern Railway North Eastern NER Date Established April 14. Railway zones The Map of India above shows the different railway zones in India. but is not a part of any of the zones. In addition to commercial objectives. 2. In 1880. When there were famines in several parts of the country between 1870 and 1880. Name 1. Given below is the table showing these 16 zones.venture and receive compensation from the government at any time if it was not satisfied with the returns. rough and dangerous mountain terrain at a steep gradient. The zones are numbered in the map. This railway track was considered one of the greatest engineering feats in the history of IR. the British Government passed the Railways Act. the total track coverage increased to 9000 miles. A number of railway companies were incorporated between 1855 and 1870. By the end of 1880. No. there were nearly 25. with its headquarters at Belapur CBD (Navi Mumbai). Abbr. The Calcutta Metro is owned and operated by Indian Railways.

buses are the preferred mode of transport for medium to long distance transport. 14. Pondicherry and Chandigarh). 1998 South Western SWR Railway North Western NWR Railway West Central Railway WCR North Central Railway NCR South East Central SECR Railway ECoR East Coast Railway East Central Railway ECR Konkan Railway* KR Passenger services Indian Railways operates 8. Railway Northeast Frontier NFR Railway ER Eastern Railway South Eastern SER Railway South Central SCR Railway SR Southern Railway Central Railway Western Railway CR WR Maligaon(Guwahati) Kolkata Kolkata Secunderabad Chennai Mumbai Mumbai Hubli Jaipur Jabalpur Allahabad Bilaspur. 1951 November 5. 2002 Jan 26. 16. 17. 2003 Oct 1. 2003 Oct 1. 5. In South India and North-East India however. 2002 April 1. 1951 November 5.702 passenger trains and transports around five billion annually across twenty-seven states and three union territories (Delhi. 1966 April 14. 10. 4. .Sikkim is the only state not connected. 6. 13. 1952 1955 October 2. 8. 11. 2003 April 1. 9. 7. CG Bhubaneswar Hajipur Navi Mumbai 1958 April. The passenger division is the most preferred form of long distance transport in most of the country. 2003 April 1. 12. 2003 April 1. 1951 April 1. 15.3.

trains are usually packed more than their prescribed limit. the most popular being the sleeper class. The Production Units are. Coaches are designed to accommodate anywhere from 18 to 72 passengers.A standard passenger train consists of eighteen coaches. Production Units. The coaches in use are vestibules. Food is being served by an Indian Railways employee. As with most developing economies. but some of these may be dummied on some trains for operational reasons. This is largely due to historical reasons.  Diesel Locomotive Works. the manufacturing plants of the Indian Railways.  Chittaranjan Locomotive Works. is also an additional problem faced. The General Managers of the PUs report to the Railway Board. In the holiday seasons or on long weekends. USA. Overcrowding is the most widely faced problem with Indian Railways. Production Services The interior of an Express Train in India. the main reason is import substitution of expensive technology related products. Chittaranjan . Up to nine of these type coaches are usually coupled. Air conditioned coaches are also attached. which results in large losses for the IR. Ticket-less travel. are managed directly by the ministry. Freight trains use a large variety of wagons. This was relevant when the general state of the national engineering industry was immature. Each coach has different accommodation class. and a standard train may have between three and five air-conditioned coaches. Currently the factory is also producing locomotives in collaboration with General Motors. Varanasi Responsible for manufacturing all the mainline diesel-electrics used for passenger and freight traffic. The Indian Railways manufactures a lot of its rolling stock and heavy engineering components. but may actually accommodate many more during the holiday seasons and on busy routes. The plant also produces diesel-electric shunters. but some popular trains can have up to 24 coaches.

In addition. It also does heavy repair and overhaul of engines and locomotives. Axles are forged and machined in the same plant. Rs.18.125 wheels and 49. It sold products to the tune of Rs. 4 diesel locomotives were supplied to Non Railway Customers. DMW exported spares worth Rs.  Rail Spring Karkhana. Patiala Earlier called Diesel Component Works.201 coaches including 77 light weight LHB coaches with higher passenger comfort and amenities. Patiala successfully upgraded 74 nos. Most output is sent out as finished and pressed wheel & axle sets.  Rail Coach Factory. Kapurthala manufactured 1.   Chittaranjan Locomotive Works.Chittaranjan manufactures Electric Locomotives.  Diesel Loco Modernisation Workshop. Rail Coach Factory. Kapurthala The second coach factory is a more modern plant and has a much more flexible automation.69 lakh.502 axles. Bangalore Makes the cast wheels for wagons and other rolling stock. Bangalore produced 32.130. Chittaranjan manufactured 90 BG electric locomotives including 22 state-of-the-art 3-phase 6000 HP electric locos. In recent times. Traditionally. Gwalior Performance The performance of Production Units during 2004-05. It also manufactured 95. DMW makes key sub-assemblies for Diesel Locomotives. Chennai The first factory to make coaches for the Indian Railways. The coaches were monocoque structures.173.  Wheel & Axle Plant. the locomotives made by CLW use DC traction.    Integral Coach Factory.119 coaches including 112 Electric Multiple Units (EMUs). CLW has manufactures locomotives with AC-AC transmission.  Diesel-Loco Modernisation Works. Suburban rail .  Import content in the Railway Production Units expressed as percentage of total production cost is roughly 2%.27 lakh to various countries. 2600 HP WDM-2 diesel electric locomotives to 3100 HP thus increasing the hauling capacity to the extent of 3 to 4 additional coaches.39 crore to NCRs thus earning a profit of approx. Varanasi produced 121 BG diesel locomotives including 15 indigenous high power 4000 HP GM locomotives.732 wheel-sets. Rail Wheel Factory. was as under. Chennai manufactured 1. Diesel Locomotive Works. Import substitution is one of the main objectives of the production units.  Integral Coach Factory.

The Kolkata metro has the administrative status of a zonal railway. Kolkata (Calcutta). The Suburban trains in Mumbai handle more rush then any other suburban network in India. namely the New Delhi Metro. Hyderabad and Pune. The network has three lines viz. though it does not come under the seventeen railway zones. New Delhi. Currently. A standard coach is designed to accommodate 96 sitting passengers. Suburban trains that handle commuter traffic are mostly electric multiple units. Hyderabad. while those elsewhere use alternating current. western. central and harbor.The New Delhi Metro railway Many cities have their own dedicated suburban networks to cater to commuters. respectively. but the actual number of passengers can easily double or triple with standees during rush hour. Thus a nine coach EMU is made up of three units having one power car at each end and one at the middle. On 11th July 2006 six bomb blasted in these trains targetted at general public. They usually have nine coaches or sometimes twelve to handle rush hour traffic. Freight .Lucknow. Chennai (Madras). suburban networks operate in Mumbai (Bombay). The rakes in Mumbai run on direct current. the Chennai MRTS and the Kolkata metro. Delhi. It¶s considered to be the lifeline on Mumbai. Mumbai and Pune do not have dedicated suburban tracks but share the tracks with long distance trains. One unit of an EMU train consists of one power car and two general coaches. Chennai and Kolkata have their own metro networks.

Indian Railways has switched from small consignments to larger container movement which has helped speed up its operations. a narrow gauge train with a steam locomotive is classified as a World Heritage Site by UNESCO. and one of the few steam engines in operation in India. legalizing something that was already happening.700 metric tonne load. and uses these profits to cross-subsidise the loss-making passenger sector. Notable trains and achievements The Darjeeling Himalayan Railway is a World Heritage Site. agricultural produce.A single line rail bridge IR carries a huge variety of goods ranging from mineral ores. Ports and major urban areas have their own dedicated freight lines and yards. The Darjeeling Himalayan Railway.000 freight wagons by 11%. transportation by rail became advantageous financially. a hill station at an elevation of 2. The highest station in this route is Ghum. food grains and iron ore. The route starts at Siliguri in the plains in West Bengal and traverses tea gardens en route toDarjeeling. Recently Indian Railways introduced the special µContainer Rajdhani¶ or CONRAJ. petroleum. Recent changes have sought to boost the earnings from freight. The highest speed notched up for a freight train is 100 km/h (62 mph) for a 4. Indian Railways makes 70% of its revenues and most of its profits from the freight sector. The ³Green Van´ is a special type used to transport fresh food and vegetables. The railways has increased load limits for the system¶s 220. Most of its freight earnings come from such rakes carrying bulk goods such as coal. The first length of an 11. Due to increase in manufacturing transport in India that was augmented by the increase in fuel cost. cement. . A privatization scheme was introduced recently to improve the performance of freight trains. Companies are being allowed to run their own container trains. Refrigerated vans are also available in many areas. Indian Railways also transports vehicles over long distances. for high priority freight.000km freight corridor linking India¶s biggest cities has recently been approved. milk and vehicles.134 metres (7. competition from trucks which offer cheaper rates has seen a decrease in freight traffic in recent years. Many important freight stops have dedicated platforms and independent lines. New measures such as speeding up the turnaround times have added some 24% to freight revenues. However. Since the 1990s. Trucks that carry goods to a particular location are hauled back by trains saving the trucking company on unnecessary fuel expenses.000 ft).

The Rajdhani Express is a series of trains that journey to and from the Capital New Delhi. This train has a compartment that serves as an operating room. Among the famous locomotives. Kharagpurrailway station also has the distinction of being the world¶s longest railway platform at 1072 m (3. the Fairy Queen is the oldest running locomotive in the world today. The Maharashtra government did try and introduce the Deccan Odyssey along the Konkan route. a second one which serves as a storeroom and an additional two that serve as a patient ward. 37.[5] Indian Railways operates 7. for promoting tourism in Rajasthan.517 ft). The train travels around the country. 2006 since being closed down after the 1965 Indo-Pak war. The Kalka Shimla Railway till recently featured in the Guinness Book of World Records for offering the steepest rise in altitude in the space of 96 kilometers.853 stations. The Ghum station along the Toy Train route is the second highest railway station in the world to be reached by a steam locomotive. .54 million. though the distinction of the oldest surviving locomotive belongs to John Bull. hostilities between the two nations in 2001 saw the line being closed. is also classified as a World Heritage Site by UNESCO. It is also the only rack railway in India. There are a total of 6. but it did not enjoy the same success as the Palace on Wheels. TheChatrapati Shivaji Terminus (formerly Victoria Terminus) railway station in Mumbai is another World Heritage Site operated by Indian Railways. However. 700 repair shops and a total workforce of 1. It was reopened when the hostilities subsided in 2004. 2. 300 yards.300 goods-sheds. The Lifeline Express is a special train popularly known as the ³Hospital-on-Wheels´ which provides healthcare to the rural areas. staying at a location for about two months before moving elsewhere.566 locomotives.147 freight wagons. Shown here are two Rajdhani Trains approaching each other The Palace on Wheels is a specially designed train. The Samjhauta Express was a train that ran between India and Pakistan.TheNilgiri Mountain Railway. lugged by a steam engine. in the Nilgiri Hills in southern India. Another train connecting Khokhrapar (Pakistan) and Munabao (India) is the Thar Expressthat restarted operations on February 18.840 Coaching vehicles and 222.

TheBhopal Shatabdi Express is the fastest train in India today having a maximum speed of 140 km/h (87 mph) on the Faridabad-Agra section. The zones are further divided into divisions under the control of Divisional Railway Managers (DRM). has the longest run in terms of distance and time on Indian Railways network. Velu and Naranbhai J. R. travels non-stop between Vadodara and Kota. accounts. Each of the sixteen zones is headed by a General Manager (GM) who reports directly to the Railway Board. The fastest speed attained by any train is 184 km/h (114 mph) in 2000 during test runs. between Kanyakumari and Jammu Tawi. The Himsagar Express. The ministry is currently headed by Lalu Prasad Yadav. which has six members and a chairman. commercial and safety branches report to the respective Divisional Manager and are in charge of operation and maintenance of assets. covering a distance of 528 km (328 miles) in about 6. personnel. and has the longest continuous run on Indian Railways today. One reason attributed for this difference is that the tracks are not suited for higher speeds. The divisional officers of engineering. between Delhi¶s Nizamuddin Station and Trivandrum. Further down the hierarchy tree are . via the Ministry of Railways. This speed is much lower than fast trains in other parts of the world. operating. Rathwa.5 hours. mechanical. the Union Minister for Railways and assisted by two junior Ministers of State for Railways. electrical.327 miles) in about 74 hours and 55 minutes. The Trivandrum Rajdhani. signal & telecommunication.745 km (2.The Deccan odyssey is a new line of tourist trains that travel across the Indian State of Maharashtra The shortest named station is Ib and the longest is Sri Venkatanarasimharajuvariapeta. It covers 3. Organisational structure The headquarters of the Indian Railways in Delhi Indian Railways is a publicly owned company controlled by the Government of India. Reporting to them is the Railway Board.

there are six production units (PUs) each headed by a General Manager (GM). the level of resources required for railway¶s capital and revenue expenditure is worked out. the shortfall in the capital (plan) expenditure is met partly from borrowings (raised by Indian Railway Finance Corporation) and the rest from Budgetory support from the Central Government. Diesel Locomotive Works: Varanasi 3. Rail Wheel Factory: Yelahanka (Near Bangalore) 6. Integral Coach Factory: Perambur (Near Chennai) 4.the Station Masters who control individual stations and the train movement through the track territory under their stations¶ administration. Mumbai Rail Vikas Corporation 5. Rail budget and finances The Railway Budget deals with the induction and improvement of existing trains and routes. This organisation undertakes electrification projects of Indian Railway and monitors the progress of various electrification projects all over the country. RITES Ltd. Indian Railways are subject to the same audit control as other government revenue and expenditures. Indian Railways Catering and Tourism Corporation 2. which is responsible for developing the major software required by Indian Railways for its operations. Railtel Corporation of India ± Telecommunication Networks 6. Konkan Railway Corporation 3. The comments of the Rajya Sabha (Upper House) are non binding. In addition to the zones. Apart from these zones and production units. who also report directly to the Railway Board. These PSUs are: 1. The budget needs to be passed by a simple majority in the Lok Sabha (India¶s Lower House). ± Construction Division 8. Chittaranjan Locomotive Works: Chittaranjan 2. IRCON International Ltd. Indian Railways pays dividend to the Central Government for the capital invested by the Central Government. These production units are: 1. . While the revenue expenditure is met entirely by railways itself. This is located at Allahabad. Diesel Modernisation Works: Patiala In addition to this the Central Organisation for Railway Electrification (CORE) is also headed by a GM. the modernisation and most importantly the tariff for freight and passenger travel. ± Consulting Division of Indian Railways 7. Based on the anticipated traffic and the projected tariff. a number of Public Sector Undertakings (PSU) are under the administrative control of the ministry of railways. Rail Vikas Nigam Limited Centre for Railway Information Systems is an autonomous society under Railway Board. Rail Coach Factory: Kapurthala 5. Indian Railway Finance Corporation 4. The Parliament discusses the policies and allocations proposed in the budget.

280 cr (US $2. and scrap unpopular routes. In the first two months of India¶s fiscal year 2005-06 (April and May). two days prior to the General Budget. the Railways registered a 10% growth in passenger traffic.600 crores (Rs. Around 20% of the passenger revenue is earned from the upper class segments of the passenger segment (the air-conditioned classes). Mechanical. other coaching earnings and sundry other earnings increased by 7%. Financial Commissioner and other functional Members for Traffic. Current problems Level crossings like these usually see a high accident rate . Freight earnings increased by 10% from Rs. In a cost cutting move. the figures relating to the receipt and expenditure of the Railways are also shown in the General Budget.300 million). usually around 26 February. Electrical and Staff matters.54 billion). This document serves as a balance sheet of operations of the Railways during the previous year and lists out plans for expansion for the current year. the Railways plans to minimise unwanted cessations. and a 12% in passenger earnings. 19% and 56% respectively over previous year. The overall passenger traffic grew 7. A new concern faced by Indian Railways is competition from low cost airlines that has recently made its début in India.000 million or US$12. the Railway Budget is presented to the Parliament by the Union Railway Minister.450 cr (US$7.000 million) in the previous year. Its year end fund balance is expected to stand at Rs. As per the 2006 budget.5% in the previous year. 11.As per the Separation Convention. Passenger earnings. 54. The formation of policy and overall control of the railways is vested in Railway Board comprising the Chairman. Indian Railways earned Rs. 546. Though the Railway Budget is separately presented to the Parliament. since they are a part and parcel of the total receipts and expenditure of the Government of India. 1924. 30. Engineering.

In many places. In the latest instances of signalling control by means of interlinked stations (e. The rail network is the principal mode of mass transport in Mumbai. many are run over by trains. eliminating accidents is an unrealistic goal. However. The 5th corridor on Central Railway runs as the Harbour line starting from CST to Raoli Junction (11 Kms) from where the line splits. Indian Railways have accepted the fact that given the size of operations. Chennai ± Washermanpet). To enable the Mumbai Suburban Railway System to meet the demands of the ever-growing passenger traffic. However. the changeover to a new system would require a substantial investment. this is available in a very small subset of the total Railways. Human error is the primary cause (83%) blamed for mishaps. The Konkan Railway route suffers from landslides in the monsoonseason. Although accidents such as derailment and collisions are less common in recent times. Last year. that would make accidents more dangerous. India spent $28 billion. One area of upgrading badly required is an automated signalling system to prevent crashes.Indian railways suffers from deteriorating finances and lack the funds for future investment.710. vehicles or cyclists may cut across the tracks to save time. Most railway land in India is not fenced or restricted in any way. Overcrowding has grown to such an extent that 5. AN OVERVIEW OF MUMBAI RAILWAYS Two zonal Railways. and at best they can only minimise the accident rate. Two corridors (one local and other through) on Western Railway run northwards from Churchgate terminus parallel to the west coast up to Virar (60 Kms). from where it bifurcates into Kalyan-Kasara (67 Kms) in the north-east and Kalyan-Karjat-Khapoli (61 Kms) in south-east. as against the rated carrying capacity of 1. cattle and other animals may stray onto the tracks. The main problem plaguing the Railways is the high accident rate which stands at about three hundred a year. operate the Mumbai Suburban Railway system running in form of 9-car and 12-car rakes of Electric Multiple unit (EMU) trains. It is felt that this would be required given the gradual increase in train speeds and lengths. or 3. pedestrians. causing a safety hazard to the railways. failure-detection circuits are provided for each track circuit and signal circuit with notification to the signal control centres in case of problems [12]. Also. allowing free trespass. the Ministry of Railways and the State Government of Maharashtra joined hands to face the challenge and .g.6% of GDP. A number of train accidents happened due to a manual system of signals between stations. One line goes north-west to join WR at Bandra and goes up to Andheri (11 Kms) and the other goes eastward to terminate at Panvel (39 Kms) via New-Mumbai. the Western Railway (WR) and the Central Railway (CR). Contributing to the Railways¶ problems are the antiquated communication.000 passengers are travelling per 9-car train during peak hours. posing a much more serious safety hazard to fast-moving trains.. safety and signalling equipment. especially in crowded areas. which has caused fatal accidents in the recent past. there is an acute problem of encroachment by slum dwellers on the property of Indian Railways which has created the problem of safety of commuters. Aging colonial-era bridges and century-old tracks also require regular maintenance and upgrading. Two corridors (one local and other through) on Central Railway run from Chhatrapati Shivaji Terminus (CST) to Kalyan (54 Kms). In rural areas. on infrastructure. The pressure on the Mumbai Suburban Railway system has reached alarming proportions.

The map of Mumbai Suburban Railway . Coordinate and facilitate improvements of track drainage and removal of encroachments and trespassers. The Corporation is not only executing the projects identified so far. Karjat/ Khopoli and Panvel on Central Railway. Integrate urban development plan for Mumbai with rail capacity and propose investments. railway transport is the quickest and cheapest mode of transport among the two. Apart from execution of Railway projects in Mumbai. Undertake commercial development of Railway land and air space in Mumbai area. Mumbai city¶s public transport comprises of Buses operated by Brihanmumbai Electric Supply and Transport (BEST) and trains operated Central Railway and Western Railway. However. Coordinate with organizations operating the train services and responsible for protection of Railway¶s right of way and urban development for purposeful resolution of allied issues and problems. The researcher shall try to find out whether transfer of this organisation into private hands can improve its performance and can lead to a better future for commuters¶ travel in the city. the organisation has not been able fulfil the aims and objectives for which it was set up.formed MRVC. The geographical jurisdiction of MRVC is from Churchgate to Dahanu Road on Western Railway and from CSTM to Kasara. but also involved in the further planning and development of Mumbai Suburban Rail system for improved rail services in close coordination with Indian Railways and Government of Maharashtra. However. the two zonal railways of Indian Railways. the main functions of MRVC are:      Develop coordinated plans and implement the rail infrastructure projects.

RECENT PLANS Indian Railways plans 3 trillion rupees ($65. India wants to get rid of infrastructure bottlenecks so that the pace of economic growth can be accelerated to as much as 10 percent in the next decade from an average 6 percent since 1980.8 billion) of investment by 2012 to develop private container trains. Batra. More private companies will be allowed to run freight trains and they will also be allowed to improve facilities at railway stations. . said at an infrastructure conference in New Delhi today. chairman of the Indian Railway Board.P. J. freight corridors and upgrade stations.

to move gasoline and diesel faster to consumers across the world¶s seventh-biggest landmass.215 miles) of tracks connecting the financial hub of Mumbai on the west coast and Kolkata in the east to the capital New Delhi.4 billion) this year.35 1115.89 763.98 27834. 399. Indian Railways last month began constructing 220 billion rupees of freight-only lines aimed at improving infrastructure in the world¶s second-fastest growing major economy. Financial Results The financial performance of the Indian Railways for the period from 1998-99 to 2002-03 is shown below: (Rupees in crore) 1.78 2130. compared with 6 billion people in the previous year.78 307. Total Expenditure 3. The utility expects to carry 6.99 34667. The project.60 30843. will lay almost 10.67 1071. Net Dividend paid 1742. The government in February said it granted licenses to 14 companies to run private trains.74 41855. he said.08 Net Surplus available for appropriation (3 6.21 38025.83 50.30 1000. according to an e-mailed statement from his office.57 38630.18 2664.00 1889.53 3830.75 2141.000 kilometers (6.64 1337.83 845.08 ± 5) 1998-99 1999-00 2000-01 2001-02 2002-03 29975.18 2714. Batra said. the official said. 2007. Indian Railways may have a surplus of 200 billion rupees ($4.16 2735. Prime Minister Manmohan Singh opened the construction work in northern India¶s Punjab state.Construction of dedicated freight corridors will allow companies such as refiner Indian Oil Corp.40 The trend of growth in receipts and expenditure on Indian Railways is depicted in the following chart: . Net Revenue (1 ± 2) (a) Dividend payable to General Revenues for 4.5 billion people in the year ending March 31. The freight corridor will eventually be 11. more than the 726 million tons that had been targeted. Total Receipts 2.00 1823. Batra said. from a surplus of 136 billion rupees last year.66 35738.08 current year (b) Provision for payment of deferred dividend (c) Less Dividend deferred 5.34 36293.76 33579.59 1000.23 1889.94 2337.500 kilometers. 1742.23 2337. Indian Railways expects to carry 750 million tons of freight this year. the railways¶ biggest since India¶s independence in 1947. ending the monopoly of the government in the business.

RE and actuals of previous year¶s receipts is shown below: (Rupees in crore) Traffic Earnings (1) Passenger Goods Other Coaching Sundries including Suspense Total Passenger Earnings Actuals 2001-02 (2) 11196.01 41068. Due to shortfall in net revenue.1823. thus fell short of both the BE and RE projections.1000 crore in 2001-02.82 987.16 crore in 1998-99 and Rs.13450 crore in the BE.22 The passenger earnings target was fixed at Rs.40 872.1071. therefore. Though the financial results of 2002-03. declined sharply to Rs. The target was. the net revenue was not sufficient to entirely set off the deferred dividend of the previous years.720 crore in the RE to Rs.2141.32 per cent as compared to 2001-02. Passenger earnings.23 crore in 2000-01.44 26504.67 crore in 1999-2000. however.00 40867.00 Actuals 2002-03 (5) 12575. scaled down by Rs.45 24845.44 crore. showed a marked improvement over previous years.12730 crore. Goods Earnings . however.2735. the Railways had to defer payment of dividend of Rs.00 26118.12575. Railways.59 Budget Estimates Revised 2002-03 Estimates 2002-03 (3) (4) 13450.00 41538.00 26658.30 crore in 2000-01.95 1000.00 529. Net revenue registered a growth in 2001-02.00 1050.24 923. Gross Traffic Receipts The detailed break-up of the traffic receipts of Railways for the years 2002-03 along with the details of BE. The earnings. registered a growth of about 12. decided to defer dividend of Rs.The net revenue.00 920.00 950.00 12730. but was not adequate to meet the requirements of other funds and the dividend liability for the year. which was Rs.50 37837. The actual passenger earnings were Rs.

82 crore but fell short of the RE by Rs. Earnings from goods traffic were estimated to yield Rs. This was increased to 515 million tonnes in RE. µPOL¶ (Rs.26658 crore in the RE. µPOL¶.74 million tonnes respectively.42 crore (8.63 crore) and µRaw Material for Steel Plants¶ (Rs.1616. they have actually suffered loss of long lead traffic at the cost of short lead traffic.77 crore). The actuals during 200203 was 353194 million NTKMs.81 crore).04 million tonnes.82 crore were more than BE by Rs. The average lead for coal traffic.25 million tonnes. 2. Thus.63 crore).5 per cent) bringing the balance to Rs. which was 614 kms in 2001-02.153. .55 million tonnes.87 crore at the end of 2002-03. 1.137.1753. µFertilizers¶. µMiscellaneous Goods¶ (Rs.386. which was more than BE by 18981 million NTKMs but less than the RE by 3969 million NTKMs. The originating revenue earning goods traffic was projected at 510 million tonnes for 2002-03.57 million tonnes and 0. while the Railways have been able to bring in additional coal traffic.   Unrealised Earnings The total amount outstanding against the State Electricity Boards/ Power Houses which stood at Rs. Railways actually lifted 518.26504. The actual earnings of Rs. respectively.3.26118 crore in the BE and Rs.409. There was a shortfall in originating tonnage in respect of µOther Goods¶.91 crore).84 million tonnes and 0. µFertilizers¶ (Rs.147.59.75 million tonnes. 2. The target for volume of revenue earning goods traffic was projected at 334213 million net tonne kilometres (NTKMs) which was increased to 357163 million NTKMs in RE. had decreased to 601 kms in 200203. as compared to the actuals of 2001-02. µIron Ore for Export¶ (Rs. µCement¶ (Rs. µIron Ore for Export¶ and µCement¶ by 4.07 crore).148.   The increase / decrease in originating tonnage of various commodities in 2002-03 over 2001-02 is shown in the following chart:   The offering of µPOL¶ and µFertilizer¶ declined by 1. increased by Rs.155.26.74 million tonnes of revenue earning goods thereby exceeding the targets. There was a shortfall in goods earnings from µOther Goods¶ (Rs.45 crore at the end of 2001-02.63 crore).18 crore.

29 3.74 179. Outstanding Name of State Electricity as Board/ Power House on March 2002 Badarpur Thermal Power Station 957. Actual Budget Sources of Finance Expenditure Estimate 2001-02 2002-03 Central Revised Estimate 2002-03 Actual Expenditure 2002-03 .94 3.68 per cent) in 2002-03 for the Railways as a whole.99 Board dues Outstanding Increase in dues dues 31 as on 31 during March 2003 the year 966.30 Operating Ratio The Operating Ratio represents the percentage of working expenses (including the expenses not yet paid) to traffic earnings (including the earnings not yet realised).The outstanding dues against the main defaulting Power Houses/ State Electricity Boards was as under: (Rupees in crore) Sr.61 Punjab State Electricity Board 325. 6. 8.02 424.90 6.21 Madhya Pradesh State Electricity 2.27 Damodar Valley Corporation 4. 1. 2.36 19. improved to 92.88 19. 7. No 1.09 7. No. 5.31 Delhi Vidyut Board 160.63 9.86 Rajasthan State Electricity Board 105.34 per cent (by 3.92 4. 4. The operating ratio. 3.02 109. The operating ratio of Indian Railways during the last five years is shown in the following chart: Plan Expenditure Details of the plan expenditure met from Central Government support and internal resources during 2002-03 were as follows: (Rupees in crore) Sr.75 West Bengal State Electricity Board 4.11 3.05 98. which was 96.75 Uttar Pradesh State Electricity Board 8.19 8.17 27.02 per cent in 2001-02.

32 3113.00 264. Undischarged liabilities 4040.82 2045.00 164.00 3490.61 Reserve Fund ii) Development 449.Government Support (i) Budgetary Support (a) Borrowed Capital from 4376.86 1136. to traffic. The Railway Convention Committee (RCC) of Parliament determines the rate of dividend payable by the Railways to the General Revenues periodically. In accordance with the recommendation of the RCC:  A moratorium is given on the payment of interest (dividend) on investments made on new lines out of borrowed capital during the period of construction and for five years after a line is opened to traffic.17 Support 2.75 483.00 450.00 Safety Fund (ii) Contribution from Central Road 140.00 3431.00 860.00 550.31 28.06 (1+2) to the fund from its own resources.00 960. Internal Resources i) Depreciation 1569.00 5777.06 # Expenditure borne out of the SRSF financed by levy of safety surcharge and from Railways allocation The Railways are required to pay dividend at a fixed rate on the Capital advanced by the Government of India.00 1350.00 35.28 Fund to Railway Safety Fund Total Central Government 5517.00 4390.00 4263.00 9435.74 1350.28 Safety Fund # v) Open Line Works 31.00 550.89 Grand Total of Plan Funds 8002.00 1464. if not paid within 20 years of opening of a line. .53 -Revenue Total Internal Resources 2484.00 6004.24 8891.00 35.47 Fund iii) Capital Fund iv) Special Railway 434. The liability is written off.00 1886.00 1350.08 5840. The cumulative liability on this account is payable when the line shows surplus after meeting the current dividend.00 9330.89 General Revenues (b) Transfer to Special Railway 1000.

0.81 78. 1. 4. Name of Railway Eastern Southern Central North Eastern South Central Northern Amount 2933. Northeast Frontier.12 839. 6.61 2585. thus.91 709. the Railways maintain Depreciation Reserve Fund (DRF) financed by transfers from Revenue. labour welfare works.23 2421.94 1795.90 Withdrawals Accretion during during the year the year 1276. No. Any shortfall in the payment of current dividend. 2.0.81 78. Metro Railway Kolkata and all the Railway Production Units have appropriated more to the fund than the amount required for meeting the pensionary charges of 2002-03. 5.49 1569.14 2429. The balances in DRF for the last five years is shown in the following table: (Rupees in crore) Year 1998-99 1999-2000 2000-01 2001-02 2002-03 Notes: Opening Balance 1434.02 crore respectively is due to transfers made between DRF and Capital Fund. safety works and unremunerative operating improvement works.25 2402. These Railways have.72 50.39 2033.04 632.79 It implies that these Railways have not appropriated to the fund.76 81. Depreciation Reserve Fund: For replacement and renewal of assets. Accretion includes interest on the balance in the fund. is treated as deferred dividend liability.27 676. Western Railways. the amount needed to meet their pensionary charges. . On the other hand. Difference between closing balance of 2000-01 & 2001-02 and opening balance of 2001-02 & 200203 amounting to Rs.30 1464.78 1375.98 1753.06 crore and Rs.75 Closing Balance 676.72 50. Development Fund: This fund is financed by appropriation from surplus and/ or loans from General Revenues to the extent required to meet expenditure on works relating to amenities for users of Railway transport.55 737.10 632. Railway Funds Pension Fund: Railway-wise analysis of the Pension Fund balances on 31 March 2003 has revealed that the following Railways had adverse (debit) balances in the fund: (Rupees in crore) Sr.02 2124.45 1. when the net revenue is not adequate to meet current dividend. 3. 2. South Eastern. been able to depict a better/ improved operating ratio over the years.

32 0.45 0.50 282. Difference between closing balance of 2001-02 and opening balance of 2002-03 is due to transfer of Rs.04 crore from Capital to DF.47 483.41 Difference between closing balance of 1999-2000 & 2000-01 and opening balance of 2000-01 & 200102 amounting to Rs.43 crore at the BE stage.Appropriation from surplus to Development Fund (DF) was projected at Rs. Appropriation from surplus to Capital Fund (CF) was projected at Rs. The balances in DF for the last five years is shown in the following table: (Rupees in crore) Year 1998-99 1999-2000 2000-01 2001-02 2002-03 Note: Opening Balance 0.40 13.52 0.56 70.16 crore respectively is due to transfer between Capital and Capital Fund. The balance amount of surplus left after appropriation to Development Fund is credited to this fund.94 crore was credited to the fund as interest at 7 per cent per annum on the fund balance during the year 2002-03. The balances in CF for the last five years is shown in the following table: (Rupees in crore) Year 1998-99 1999-2000 2000-01 2001-02 2002-03 Note: Opening Balance 1200.42 crore and Rs.47 Accretion during the year 52.39 0.42 0.41 0.13 21.47 14.86 Closing Balance 0. Ministry actually appropriated Rs.87 496.06 crore from Capital and DRF.61 Difference between closing balance of 1998-99 and opening balance of 1999-2000 is due to rounding off while difference between closing balance of 2000-01 and opening balance of 2001-02 is due to transfer of Rs.89 497.88 21.94 Withdrawals during the year 990. Since the Railways have not been able to generate adequate surplus for appropriation to Capital Fund.11 449.71 0 Closing Balance 262.46 600.17.0.02 744.62 Accretion during the year 395.63 262. Capital Fund: This fund was created with effect from 1 April 1993 to finance the Capital works of the Railways.51 553.25 282.98 449.45 227.84 crore to Railway Safety Fund and transfer of Rs.62 0.85 Withdrawals during the year 395.550 crore in the BE and RE.550 crore as planned to this fund.88 21. the operation of Capital Fund has ceased for the time being.38 257.71 358.0.55 21.0.99 518. An amount of Rs.0.0. .226.56 13. In the RE there was no proposal to appropriate any surplus into the fund.23 249.

73 crore to be appropriated from the surplus during 2002-03.28 2486. to wipe out the arrears of replacements/ renewals of vital safety equipment on Railways in fixed time schedule of 5 to 7 years.5000 crore) and balance (Rs.08 392. The outgo on account of plan expenditure chargeable to this fund amounted to Rs.28 164.42 NET REVENUE RECEIPTS TREND 1950-51 1960-61 1970-71 1980-81 1990-91 1993-94 1994-95 .10 2517.31 crore leaving a balance of Rs.82 Accretion during the Withdrawals during the Closing year year Balance 1455. During the year 2002-03. namely Special Railway Safety Fund (SRSF) was set up in 2001-02.1350 crore by transfer from Capital and appropriation of Rs.452.91 1434.47 266.82 52. the Ministry received an amount of Rs. (i) contribution from Central Road Fund. This fund was to be financed partly through Railway Revenues by levy of safety surcharge (Rs.226.12000 crore) through additional financial assistance (dividend free Capital) from General Revenues.84 crore represents the transfer from DF on 1April 2001.264 crore from the Central Road Fund and Rs.Railway Safety Fund: This fund was created with effect from 1 April 2001 to finance works relating to Road Safety works viz.03 Accretion during the Withdrawals during the Closing year year Balance 305.84 392.91 crore (inclusive of Rs.602.74 140. The BE provided Rs.69 The opening balance of Rs.1167. (ii) Railway surplus left after payment of dividend and (iii) contribution which is made by the Ministry of Railways to the Railway Safety Works Fund (maintained by the Ministry of Finance) out of the Dividend payable to General Revenues.74 crore being contribution payable to Railway Safety Works Fund.42 crore in the fund on 31 March 2003. The balance in Railway Safety Fund (RSF) is shown in the following table: (Rupees in crore) Year 200102 200203 Note: Opening Balance 226. The fund is to be funded from three sources viz. The balance in SRSF is shown in the following table: (Rupees in crore) Year 200102 200203 YEAR Opening Balance ± 20. Special Railway Safety Fund: A new fund.51 crore of safety surcharge receipts) from Revenue.2486.52. (i) manning of un-manned level crossings and (ii) conversion of level crossings into road over/ under bridges. During the year 2002-03 this fund received Rs.2. However no amounts were appropriated from the surplus to the fund.03 494.31 20.

67 1. 11.56 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 4.102.43 2.024.87 144.141.11 Lalu¶s railways: An IIM case study There are few political leaders in the country who have been more sharply criticised than Railways Minister Lalu Prasad Yadav.071. an organisation heading towards bankruptcy three years ago when he took over.73 127. .808. Amazing feat The Indian railways. there is a genuine sense of respect for what Lalu has been able to achieve for Indian railways.830. When he wrestled the Railways Ministry from Ram Vilas Paswan.135.16 2.78 3.337. In fact. now has a surplus revenue of Rs.000 crore. saying Lalu would drive it into the ground.23 3.624.53 3. Lalu and his Railways Ministry have been so impressive that they are now a case study for the Indian Institute of Management (IIM). But now.49 1.735. a feat that has won grudging respect for Lalu.52 3. which is looking healthier than it has in years.113. But he¶s proved the skeptics wrong. many had written the obituary of the Indian railways.87.23 2.13 Net Revenue Receipts 47.07 3.

This would mainly facilitate the car exports from India. Delhi.´ added a confident Lalu. We will soon have a surplus of Rs 20. Railways officials are in a celebratory mood. distribution and marketing. Only passengers will be allowed to enter the platforms.´ he said. ³This is just the start. We will do more. Taking a dig at his predecessor Nitish Kumar. wherein retail stores would be set up at around 7. He also talked about providing rail connectivity to all the ports in the country. ³Today is not the day to discuss it. Global tenders will be invited. you see our profits will climb even further. he told media persons that the ministry plans to take measures to tighten security in the system. he said.000 crore. ³I am aware what he has been saying about our turnaround story and the situation in Bihar. I don¶t think he can.´ he said. Starting with stations at major cities like Ahmedabad.200 tonnes to 4. he steered clear of making any controversial statements. Mumbai and Patna the new station will have underground cross-over system to reach different platforms instead of an overbridge.´ . Turning to the Aam Aadmi slogan. He also raised the carrying capacity of goods trains from 3.000 tonnes. Effective steps Lalu achieved the feat by taking simple steps like competitive passenger fares and reducing the wagons¶ turnaround time from seven to five days.´ However. the minister said the railways will soon create economic opportunities for the farmers. While the minister termed the bullet train project unviable for the country.´ he said. IIM-A is taking the railways success as a case study.And with success has come recognition. Let us see if he is able to deliver. The minister also stated that he had big plans to enable travellers to get a worldclass experience.500 stations across the country. which led to higher freight earnings. ³We intend to ease the congestion on the road. We plan to involve corporates in this project. as they know their organisation has turned the corner and the architect of this success is the railways minister. Lalu Prasad said. We also plan to restrict entry at the platforms. It will facilitate procurement. When asked about his views on reservation. ³We plan to create a public-private partnership model. Chennai. ³We plan to introduce close circuit TVs and metal detectors at all the major stations.