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CASE STUDY

:-
“Turn Around of Indian Railways
2004-2006”

SUBMITTED TO: - Prof. Samik Shome

SUBMITTED BY: GROUP -4
Aditya Jain – 09PG303
Chawla Manisha – 09PG313
Karthik Vishwanath- 09PG323
Pooja Prasad- 09PG333
Sandeep Babaji- 09PG342
Swati Ray – 09PG352

SUBMITTED ON: - 9th NOVEMBER 2009

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Future Scenario of Indian Railway 13 Industry A) Challenges B) Prospects C) Recommendations 6. Introduction 4 4. Issue statement 3 3.2 PESTLE Analysis 4.1 SWOT Analysis 4.CONTENTS:- Sr No :. Executive Summary 3 2. Conclusion 14 2 . Topic Page no 1. Analysis of the case 7 4.3 GRAPHICAL Analysis 5.

But after 2001 there was a sudden boost in the Railway Industry . today is on edge of second largest profit making Public Sector Undertaking. 000 crores. The main aim is to understand the strategies implemented to bring this significant change and to face future challenges. The total investment planning for the eight-year time frame (2007-2015) is tentatively in the order of Rs.149 crores in 1990-2000. which had reached a low of just Rs. This made the Indian Railways with various determinants.12. but also due to the significant growth in the past two years and continues to be part of an essential part of the growth engine of the Indian economy.EXECUTIVE SUMMARY:- The Indian Railways Once considered as non performing and non profit Public Sector Undertaking. This confidence is not only due to the rising trend of performance. 3 .The fund balance crossed Rs. In the year 1990’s Indian Railways experienced huge financial crisis due to IR (Indian Railways) losing traffic to the roads rapidly and freight services repeatedly subsidized passenger services. different strategies and operations to be successful and this is what the Case deals with called the Turnaround of Indian railways. 000 crores in 2005-06. ISSUE STATEMENT:- The case basically deals with the comparison of present day growth of Indian Railways with the difficulties and losses faced by it earlier.350.

Implementation of fifth pay commission resulted in increase in the staff costs. 60600 crores.During 1990’s. freight traffic reduced by 29%. 2.83 million tones of freights under single management. the IR suffered losses due to snatching over of freight carriage by roadways . IR (Indian railways) operates long distance and suburban rail systems on a multi gauge network of broad.68 million passengers and more than 1.There were also doubts about the performance of IR in future. This golden period of growth and development has come after long period of struggle and apprehensions faced earlier by IR . from 2002-07 with the total budget of Rs. increasing share of freight and passenger traffic etc. the key concern areas were technological up-gradation. 4 . It also owns locomotive and coach production facilities. the attitude of government towards IR as public entity forced people to use road transportation.INTRODUCTION:- Indian Railways is one of the largest and busiest rail networks in the world.07 crores. diversion of freight traffic to the roads in bulk and for longer distance and price discrimination i. this increase in efficiency of IR has been termed as The Turn’ around in Indian Railways. not providing lower class consumer any subsidy resulted in the turmoil. FACTS:- 1. The situation worsened and Expert group commented that IR will not survive for long and by 2016 it will become bankrupt. According to Expert Group. If we compare this with the tenth five year plan. IR draws up its development plans with framework of National Five Year Plans. from 1951-56. 267.e. But after 2004-05 considerable growth has been witnessed in IR. In the first five year plan. transporting over 15. replacement of over aged assets was the key area of concern for IR with the total fund of Rs. The ninth five year plan from 1997-2002 reflects the turbulent time of Indian railways. Internal reasons such as government’s attitude. meter and narrow gauges. improving assets efficiency.

in 2005-06.  Railway coaches were redesigned using imported technology from Germany. THE FOLLOWING STEPS WERE TAKEN FOR THE TURNAROUND OF IR :  Number of Diesel and Electric engine on broad gauge tracks were increased.  Wagon loading capacity was increased and wagon turnaround time was reduced. 119 lakhs cases of ticket less travelled were checked and amount of Rs. REASONS FOR TURNAROUND:- The Rail budget proposed Strategic plans which were able to attract funds from the government . The tenth five year plan laid the foundation of growth of IR with exceptional performance in the year 2002-07. This was the turnaround point in Indian Railways.  Up gradation was introduced to optimize accommodation in trains.The implementation of these plans led to maximum utilization of resources and hence resulted in growth in IR. 3.  Passenger Reservation System (PRS) were increased to 1315 locations  Catering services were improved by adopting the concept of food plazas.  Existing stations were upgraded and new stations were built to meet passenger services.  Reduction in fare to make the travel cost more effective  IR also introduced 178 new trains and extended 105 existing trains.  IR also set up a PPP (Public Private Partnership) cell to develop railway infrastructure. During the same year i. this resulted in passenger traffic and hence revenues. 5 .11crores were collected.233.e. It also increased the frequency of 28 trains.The growth in freight loading increased by 10% while that of freight revenues increased by 17%.

 Zonal railways were advertised to promote railway. Also allowing advertisements of different companies like Kurkure. 6 . Reliance. IR earnings from advertisements increased from Rs 50. and Airtel etc on railway platforms led to increase in revenues. They also generated revenues from internet café and internet facilities inside the trains like Rajdhani and Shatabdi on some routes and also on platforms. Garib Rath trains for poor people were introduced with 50% concession in train fares and also introduced Palace on Wheels which attracted tourists and also promoted Indian culture.2 crores in 2004-05 to Rs 78.1crore in 2005- 06.

Opportunities  Use of Latest Technology. Threats  Heavy vehicles with two trailers may replace freights carriage  Low cost airlines  Development of roadways 7 .  Lack of safety measures in all trains.  Metro trains in cosmopolitans cities.  Delay in train timings. lot of negligence.ANALYSIS OF THE CASE: SWOT Analysis: Strengths  Financial back up from government  Biggest company in the world in terms of Employee Strength  Large Infrastructure  Large Network across the country  Luxurious and also affordable to common man Weakness  Assets are not properly utilized  Government protocols.  Better customer service.

Economic: IR is a Public Sector Undertaking so fund flows were taken care of by the government and Revenue generated helped in economic prosperity of the country. Also introduction of Kulhars (cups made of mud) and ban on use of plastic cups in train also led to decrease in pollution and gave financial help to potters. As a result there was lot of policy changes which resulted in increase in efficiency of the railways during the period 2004-05. Social: As there was no further hike in the travel fare. Technological: Introduction of Diesel engines. Legal: The contracts undertaken by the railways for freight carriages and insurance are major of Legal aspects Environmental: Introduction of electric engine helped in decreasing the pollution. 8 . so travel was made affordable for common man at the same time the additional services were also provided. redesigning of coaches and improved safety measures were undertaken which earned more revenues to the railways. This led to considerable increase in revenues and tourism. Electric super fast trains.PESTLE Analysis: Political: The Indian Railways is owned and run by the government of India.

45. over a period of time. which made it profitable. the Ups and Downs in the earnings and expenses of Indian railways. There was a 16 % increase in the total earnings as compared to previous year and 7 % in total working expenses in the same year as compared to previous year. Y axis: Year wise Source:. The increase in net revenue is significantly due to freight rolling stock and reduced operating costs with no idle time. During 2005-06. 9 .iimahd.http://www.pdf The Figure above shows.Graphical Analysis: A) X axis: Growth Rate in % .in/publications/data/2007-02-03graghuram. the total earnings reached Rs.ernet.573 crores. the total working expenses were Rs. 54.404 crores.

pdf ANALYSIS OF THE CASE:- As shown in above figure. This was due to non proper utilization of funds which relatively shows poor performance.in/publications/data/2007-02-03graghuram.B) OPERATING RATIO:- X axis: Operating Ratio in % .http://www. which was due to introduction of high efficient trains and better utilization of rolling stock. 10 . Operating Ratio is ratio of total working expenses to total earnings. But in 2005-06 it declined to 84% showing efficient performance of IR. The Operating ratio was 98% in 2000-01 and expenditure was almost equivalent. Y axis: Year wise Source:.iimahd. This is an indicator of the efficiency of IR.ernet.

The dividend payable in 2000-01 and 2001-02 worked out to be Rs 2.250 crores in 2000-01 reached to Rs. 11 .The deferred dividend liability from 1978-79 onwards aggregated to Rs 428. Y axis: Year wise Source:.131 crore and 2. out of which Rs 1823 crore and Rs 1000 crore respectively have been transferred to a deferred dividend liability account.ernet.http://www. 1990.pdf ANALYSIS OF THE GRAPH:- From the graph it can be analyzed that the net revenue which was 1071 crores in 2000-2001 reached to 8005 crores in 2005-2006 and dividend which was approximately Rs.iimahd.43 crore by end of March.3750 crores in 2005. C) Net Revenue: X axis: Net Revenue .337 crore respectively.in/publications/data/2007-02-03graghuram. The amount was cleared by 1992-93.

pdf From the above graph it can be analyzed that coal loading increased by nearly 8%. 12 .iimahd. cement by nearly 2%.D) Commodity wise Freight Earning X axis: Commodity wise Freight Earnings.in/publications/data/2007-02-03graghuram.ernet. Therefore freight loading capacity was increased by increasing the Wagon loading capacity and the freight charges were reduced. Y axis: Year wise Source:.Main revenue to IR comes from freight transport of which coal and iron ores take the major share. iron and iron ore by 7%.http://www. food grains supply reduced by 2% from 1988 to 2005. So IR was able to generate more revenues.

Railways should resort to progressive suppression of railway infrastructure and operation and maintenance. Increase in financial and commercial investment to attract FDI. 13 . High way Golden Quadrilateral Plan should be complemented. Independent and transparent rail tariff authority should be created. 8. Rationalization of freight tariffs to simplify freight tariff slabs. so as to balance Northern Rail freight corridors railway. 3. PPT frame work should be developed for the manufacture of state-of-art rolling stock. 7. Over use of old tracks can lead to accidents. Implementation of freight and high speed corridors in southern region should be done. B) Prospects:- 1. 5. Private sector investments should be allowed so that financial and operational burden is met. track equipment and signaling infrastructure coupled with technology transfer arrangements.FUTURE SCENERIO OF INDIAN RAILWAY INDUSTRY A) Challenges:- 1. 2. 6. Development of infrastructure for Inter Modal connectivity. 4. 2. Increasing number of trains requires sufficient number of tracks and setting up of tracks requires huge amount of time and expenditure. locomotives. 9.

ernet. Increasing customer expectations and rapid technological advances with considering customer focus should be the main motto of the Indian Railways. thus adding support to the economic development of the country. CONCLUSION: Indian railways should aim at performance enhancement keeping in mind performance maintenance.C) Recommendations: 1. 2. 4. Third track should be made for better freight transport. 5. Customer services should be taken care of by improvement of resting rooms on stations.iimahd.in/publications/data/2007-02-03graghuram. Special teams should be appointed to check ticket less traveling.pdf 14 . Courtesy : http://www. 3. Safety measures of the railway should be checked at regular intervals and should be updated with the latest technology. Censor monitoring system should be implemented to check extra luggage carriage.