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Market Structure in Indian Railways

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Management Research Report On Indian Railways

A report submitted in partial fulfillment of the requirement of the PGPM program of- IBS Mumbai

Submitted To :
Prof. Swaha Shome Faculty, IBS Mumbai

Compiled By :
Hitesh Nanda (11BSP1200) Rohan Mohanty(11BSP1811) Shailja Kapoor (11BSP0920) Shashank Rai (11BSP0931) Sudhanshu Gaur (11BSP1014) (IBS_MUMBAI 2011-2013)

Date of Submission:3rd October 2011

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ACKNOWLEDGEMENT
Apart from the efforts made by us, the success of any project depends largely on the encouragement and guidelines of many others. We take this opportunity to express our gratitude to the people who have been instrumental in the successful completion of this project. We would like to show our greatest appreciation and respect to our Faculty Guide and Mentor, Mrs. Swaha Shome Professor of Economics, IBS Mumbai for her continuous encouragement, guidance and support. We are heartily thankful for her tremendous support and help. Without her encouragement and guidance this project would not have materialized. The constant guidance and support received from all the members who contributed and who are contributing to this project, was vital for the success of the project. We are grateful for their constant help and support.

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Table of Contents
S.No. 1 2 3 4 5 6 7 Introduction Background/History Railway Zones Monopoly Price setting for unregulated monopoly Contents Page Number 05 05 06 11 12

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Introduction to Indian Railways Indian Railways (IR) is the state-owned railway company of India. Indian Railways had, until very recently, a monopoly on the countrys rail transport. It is one of the largest and busiest rail networks in the world, transporting just over six billion passengers and almost 750 million tonnes of freight annually. IR is the worlds largest commercial or utility employer, with more than 1.6 million employees. The railways traverse through the length and width of the country; the routes cover a total length of 63,940 km (39,230 miles). As of 2005 IR owns a total of 216,717 wagons, 39,936 coaches and 7,339 locomotives and runs a total of 14,244 trains daily, including about 8,002 passenger trains. Railways were first introduced to India in 1853. By 1947, the year of Indias independence, there were forty-two rail systems. In 1951 the systems were nationalised as one unit, becoming one of the largest networks in the world. Indian Railways operates both long distance and suburban rail systems. Background The development of IR had its roots in the 1800s, when India was a British colony. The British East India Company and later, the British colonial governments were credited with starting a railway system in India.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. 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, Madras and Calcutta, from where they would be transported to factories in England. Besides, the mid-1800s were a period of mutiny and struggle for independence in India, with uprisings in several parts of the country. The British leaders wanted to be able to transfer soldiers quickly to places of unrest. Railways seemed to be the ideal solution to all these problems. Work began on the development of railway systems in India in the early 1850s. Initially, trains were used to transport material between different places. The first commercial passenger train in India ran between Bombay and Thane (places in western India) on April 16, 1853. The distance of 34 kilometers was covered in about 75 minutes. Indians were initially apprehensive of accepting railways as a means of travel, but soon overcame that fear and railways gained popularity. Soon, railway lines began to be laid in other parts of the country, mostly by private British companies, and the major regions in India were connected by rail. To promote the construction of railway lines in India, the British Parliament introduced the guarantee system.

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Under this system, any company that constructed railway lines in India was given a guarantee of a five percent return per annum on the capital invested. The company also had the right to pull out from the venture and receive compensation from the government at any time if it was not satisfied with the returns. This helped accelerate the development of railways in the country.A number of railway companies were incorporated between 1855 and 1870. Most of them operated at a regional level. By the beginning of the 1870s, the total track coverage in India was 4000 miles. In addition to commercial objectives, railways also began to play a social role in India. When there were famines in several parts of the country between 1870 and 1880, railways played a very important role in providing relief to the affected areas. By the end of 1880, the total track coverage increased to 9000 miles. In 1880, the Darjeeling Steam Tramway started operating (the name was changed to Darjeeling Himalayan Railway in 1881). This railway track was considered one of the greatest engineering feats in the history of IR, crossing as it did, rough and dangerous mountain terrain at a steep gradient. In 1890, the British Government passed the Railways Act, to govern the construction and operation of railways in India. By the beginning of the 20th century, there were nearly 25,000 miles of railway track in the country. Railway zones

The Map of India above shows the different railway zones in India. The zones are numbered in the map. The red dots are the zonal headquarters. For administrative purposes, Indian Railways is divided into sixteen zones. Given below is the table showing these 16 zones. A Konkan Railway (KR) is constituted as a separately incorporated railway, with its headquarters at Belapur CBD (Navi Mumbai). It comes under the control of the Railway Ministry and the Railway Board. The Calcutta Metro is owned and operated by Indian Railways, but is not a part of any of the zones. It is administratively considered to have the status of a zonal railway.

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Sr. No. Name 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. Northern Railway North Eastern Railway

Abbr. NR NER

Headquarters Delhi Gorakhpur

Date Established April 14, 1952 1952

Northeast Frontier NFR Railway Eastern Railway ER South Eastern Railway SER South Central Railway SCR Southern Railway SR Central Railway Western Railway South Western Railway North Western Railway West Central Railway CR WR SWR NWR WCR

Maligaon(Guwahati) 1958 Kolkata Kolkata Secunderabad Chennai Mumbai Mumbai Hubli Jaipur Jabalpur April, 1952 1955 October 2, 1966 April 14, 1951 November 5, 1951 November 5, 1951 April 1, 2003 Oct 1, 2002 April 1, 2003 April 1, 2003 April 1, 2003 April 1, 2003 Oct 1, 2002 Jan 26, 1998

North Central Railway NCR Allahabad South East Central SECR Bilaspur, CG Railway East Coast Railway East Central Railway Konkan Railway* ECoR ECR KR Bhubaneswar Hajipur Navi Mumbai

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Passenger services

Indian Railways operates 8,702 passenger trains and transports around five billion annually across twenty-seven states and three union territories (Delhi, Pondicherry and Chandigarh). Sikkim is the only state not connected. The passenger division is the most preferred form of long distance transport in most of the country. In South India and North-East India however, buses are the preferred mode of transport for medium to long distance transport. A standard passenger train consists of eighteen coaches, but some popular trains can have up to 24 coaches. Coaches are designed to accommodate anywhere from 18 to 72 passengers, but may actually accommodate many more during the holiday seasons and on busy routes. The coaches in use are vestibules, but some of these may be dummied on some trains for operational reasons. Freight trains use a large variety of wagons. Each coach has different accommodation class; the most popular being the sleeper class. Up to nine of these type coaches are usually coupled. Air conditioned coaches are also attached, and a standard train may have between three and five air-conditioned coaches. Overcrowding is the most widely faced problem with Indian Railways. In the holiday seasons or on long weekends, trains are usually packed more than their prescribed limit. Ticket-less travel, which results in large losses for the IR, is also an additional problem faced.

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Production Services

The interior of an Express Train in India. Food is being served by an Indian Railways employee. The Indian Railways manufactures a lot of its rolling stock and heavy engineering components. This is largely due to historical reasons. As with most developing economies, the main reason is import substitution of expensive technology related products. This was relevant when the general state of the national engineering industry was immature. Production Units, the manufacturing plants of the Indian Railways, are managed directly by the ministry. The General Managers of the PUs report to the Railway Board. The Production Units are,

Diesel Locomotive Works, Varanasi

Responsible for manufacturing all the mainline diesel-electrics used for passenger and freight traffic. The plant also produces diesel-electric shunters. Currently the factory is also producing locomotives in collaboration with General Motors, USA.

Chittaranjan Locomotive Works, Chittaranjan

Chittaranjan manufactures Electric Locomotives. Traditionally, the locomotives made by CLW use DC traction. In recent times, CLW has manufactures locomotives with AC-AC transmission.

Diesel-Loco Modernisation Works, Patiala

Earlier called Diesel Component Works, DMW makes key sub-assemblies for Diesel Locomotives. It also does heavy repair and overhaul of engines and locomotives.

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Integral Coach Factory, Chennai

The first factory to make coaches for the Indian Railways. The coaches were monocoque structures.

Rail Coach Factory, Kapurthala

The second coach factory is a more modern plant and has a much more flexible automation.

Wheel & Axle Plant, Bangalore

Makes the cast wheels for wagons and other rolling stock. Axles are forged and machined in the same plant. Most output is sent out as finished and pressed wheel & axle sets.

Rail Spring Karkhana, Gwalior

Performance The performance of Production Units during 2004-05, was as under,


Chittaranjan Locomotive Works, Chittaranjan manufactured 90 BG electric locomotives including 22 state-of-the-art 3-phase 6000 HP electric locos. Diesel Locomotive Works, Varanasi produced 121 BG diesel locomotives including 15 indigenous high power 4000 HP GM locomotives. In addition, 4 diesel locomotives were supplied to Non Railway Customers. Integral Coach Factory, Chennai manufactured 1,119 coaches including 112 Electric Multiple Units (EMUs). Rail Coach Factory, Kapurthala manufactured 1,201 coaches including 77 light weight LHB coaches with higher passenger comfort and amenities. Rail Wheel Factory, Bangalore produced 32,732 wheel-sets. It also manufactured 95,125 wheels and 49,502 axles. It sold products to the tune of Rs.18.39 crore to NCRs thus earning a profit of approx. Rs.173.69 lakh. Diesel Loco Modernisation Workshop, Patiala successfully upgraded 74 nos. 2600 HP WDM-2 diesel electric locomotives to 3100 HP thus increasing the hauling capacity to the extent of 3 to 4 additional coaches. DMW exported spares worth Rs.130.27 lakh to various countries. Import content in the Railway Production Units expressed as percentage of total production cost is roughly 2%. Import substitution is one of the main objectives of the production units.

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MONOPOLY 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

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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).

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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 monopolists 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 economy as a whole loses out when monopoly power is used in this way, 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. Freight

A single line rail bridge IR carries a huge variety of goods ranging from mineral ores, agricultural produce, petroleum, milk and vehicles. Ports and major urban areas have their own dedicated freight lines and yards. Many important freight stops have dedicated platforms and independent lines. Indian Railways makes 70% of its revenues and most of its profits from the freight sector, and uses these profits to cross-subsidise the loss-making passenger sector. However, competition from trucks which offer cheaper rates has seen a decrease in freight traffic in recent years. Since the 1990s, Indian Railways has switched from small consignments to larger container movement which has helped speed up its operations. Most of its freight earnings come from such rakes carrying bulk goods such as coal, cement, food grains and iron ore.

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Indian Railways also transports vehicles over long distances. Trucks that carry goods to a particular location are hauled back by trains saving the trucking company on unnecessary fuel expenses. Refrigerated vans are also available in many areas. The Green Van is a special type used to transport fresh food and vegetables. Recently Indian Railways introduced the special Container Rajdhani or CONRAJ, for high priority freight. The highest speed notched up for a freight train is 100 km/h (62 mph) for a 4,700 metric tonne load. Recent changes have sought to boost the earnings from freight. A privatization scheme was introduced recently to improve the performance of freight trains. Companies are being allowed to run their own container trains. The first length of an 11,000km freight corridor linking Indias biggest cities has recently been approved. The railways has increased load limits for the systems 220,000 freight wagons by 11%, legalizing something that was already happening. Due to increase in manufacturing transport in India that was augmented by the increase in fuel cost, transportation by rail became advantageous financially. New measures such as speeding up the turnaround times have added some 24% to freight revenues. Notable trains and achievements The Darjeeling Himalayan Railway is a World Heritage Site, and one of the few steam engines in operation in India.

The Darjeeling Himalayan Railway, a narrow gauge train with a steam locomotive is classified as a World Heritage Site by UNESCO. The route starts at Siliguri in the plains in West Bengal and traverses tea gardens en route to Darjeeling, a hill station at an elevation of 2,134 metres (7,000 ft). The highest station in this route is Ghum. The Nilgiri Mountain Railway, in the Nilgiri Hills in southern India, is also classified as a World Heritage Site by UNESCO. It is also the only rack railway in India. The Chatrapati Shivaji Terminus (formerly Victoria Terminus) railway station in Mumbai is another World Heritage Site operated by Indian Railways.

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The Rajdhani Express is a series of trains that journey to and from the Capital New Delhi. Shown here are two Rajdhani Trains approaching each other The Palace on Wheels is a specially designed train, lugged by a steam engine, for promoting tourism in Rajasthan. The Maharashtra government did try and introduce the Deccan Odyssey along the Konkan route, but it did not enjoy the same success as the Palace on Wheels. The Samjhauta Express was a train that ran between India and Pakistan. However, hostilities between the two nations in 2001 saw the line being closed. It was reopened when the hostilities subsided in 2004. Another train connecting Khokhrapar (Pakistan) and Munabao (India) is the Thar Express that restarted operations on February 18, 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. The Lifeline Express is a special train popularly known as the Hospital-on-Wheels which provides healthcare to the rural areas. This train has a compartment that serves as an operating room, a second one which serves as a storeroom and an additional two that serve as a patient ward. The train travels around the country, staying at a location for about two months before moving elsewhere. Among the famous locomotives, the Fairy Queen is the oldest running locomotive in the world today, though the distinction of the oldest surviving locomotive belongs to John Bull. Kharagpur railway station also has the distinction of being the worlds longest railway platform at 1072 m (3,517 ft). The Ghum station along the Toy Train route is the second highest railway station in the world to be reached by a steam locomotive.[5] Indian Railways operates 7,566 locomotives; 37,840 Coaching vehicles and 222,147 freight wagons. There are a total of 6,853 stations; 300 yards; 2,300 goods-sheds; 700 repair shops and a total workforce of 1.54 million.

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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. The Himsagar Express, between Kanyakumari and Jammu Tawi, has the longest run in terms of distance and time on Indian Railways network. It covers 3,745 km (2,327 miles) in about 74 hours and 55 minutes. The Trivandrum Rajdhani, between Delhis Nizamuddin Station and Trivandrum, travels non-stop between Vadodara and Kota, covering a distance of 528 km (328 miles) in about 6.5 hours, and has the longest continuous run on Indian Railways today. The Bhopal 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 fastest speed attained by any train is 184 km/h (114 mph) in 2000 during test runs. This speed is much lower than fast trains in other parts of the world. One reason attributed for this difference is that the tracks are not suited for higher speeds. Organisational structure

The headquarters of the Indian Railways in Delhi.Indian Railways is a publicly owned company controlled by the Government of India, via the Ministry of Railways. The ministry is currently headed by Lalu Prasad Yadav, the Union Minister for Railways and assisted by two junior Ministers of State for Railways, R. Velu and Naranbhai J. Rathwa. Reporting to them is the Railway Board, which has six members and a chairman.

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Each of the sixteen zones is headed by a General Manager (GM) who reports directly to the Railway Board. The zones are further divided into divisions under the control of Divisional Railway Managers (DRM). The divisional officers of engineering, mechanical, electrical, signal & telecommunication, accounts, personnel, operating, commercial and safety branches report to the respective Divisional Manager and are in charge of operation and maintenance of assets. Further down the hierarchy tree are the Station Masters who control individual stations and the train movement through the track territory under their stations administration. In addition to the zones, there are six production units (PUs) each headed by a General Manager (GM), who also report directly to the Railway Board. These production units are: 1. 2. 3. 4. 5. 6. Chittaranjan Locomotive Works: Chittaranjan Diesel Locomotive Works: Varanasi Integral Coach Factory: Perambur (Near Chennai) Rail Coach Factory: Kapurthala Rail Wheel Factory: Yelahanka (Near Bangalore) Diesel Modernisation Works: Patiala

In addition to this the Central Organisation for Railway Electrification (CORE) is also headed by a GM. This is located at Allahabad. This organisation undertakes electrification projects of Indian Railway and monitors the progress of various electrification projects all over the country. Apart from these zones and production units, a number of Public Sector Undertakings (PSU) are under the administrative control of the ministry of railways. These PSUs are: 1. Indian Railways Catering and Tourism Corporation 2. Konkan Railway Corporation 3. Indian Railway Finance Corporation 4. Mumbai Rail Vikas Corporation 5. Railtel Corporation of India Telecommunication Networks 6. RITES Ltd. Consulting Division of Indian Railways 7. IRCON International Ltd. Construction Division 8. Rail Vikas Nigam Limited Centre for Railway Information Systems is an autonomous society under Railway Board, which is responsible for developing the major software required by Indian Railways for its operations. Rail budget and finances The Railway Budget deals with the induction and improvement of existing trains and routes, the modernisation and most importantly the tariff for freight and passenger travel. The Parliament discusses the policies and allocations proposed in the budget.

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The budget needs to be passed by a simple majority in the Lok Sabha (Indias Lower House). The comments of the Rajya Sabha (Upper House) are non binding. Indian Railways are subject to the same audit control as other government revenue and expenditures. Based on the anticipated traffic and the projected tariff, the level of resources required for railways capital and revenue expenditure is worked out. While the revenue expenditure is met entirely by railways itself, 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. Indian Railways pays dividend to the Central Government for the capital invested by the Central Government. As per the Separation Convention, 1924, the Railway Budget is presented to the Parliament by the Union Railway Minister, two days prior to the General Budget, usually around 26 February. Though the Railway Budget is separately presented to the Parliament, the figures relating to the receipt and expenditure of the Railways are also shown in the General Budget, since they are a part and parcel of the total receipts and expenditure of the Government of India. 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 formation of policy and overall control of the railways is vested in Railway Board comprising the Chairman, Financial Commissioner and other functional Members for Traffic, Engineering, Mechanical, Electrical and Staff matters. As per the 2006 budget, Indian Railways earned Rs. 54,600 crores (Rs. 546,000 million or US$12,300 million). Freight earnings increased by 10% from Rs. 30,450 cr (US$7,000 million) in the previous year. Passenger earnings, other coaching earnings and sundry other earnings increased by 7%, 19% and 56% respectively over previous year. Its year end fund balance is expected to stand at Rs. 11,280 cr (US $2.54 billion). Around 20% of the passenger revenue is earned from the upper class segments of the passenger segment (the air-conditioned classes). The overall passenger traffic grew 7.5% in the previous year. In the first two months of Indias fiscal year 2005-06 (April and May), the Railways registered a 10% growth in passenger traffic, and a 12% in passenger earnings. A new concern faced by Indian Railways is competition from low cost airlines that has recently made its dbut in India. In a cost cutting move, the Railways plans to minimise unwanted cessations, and scrap unpopular routes.

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Lalus railways: (2004-2009)

There are few political leaders in the country who have been more sharply criticised than Railways Minister Lalu Prasad Yadav. But now, there is a genuine sense of respect for what Lalu has been able to achieve for Indian railways, which is looking healthier than it has in years. In fact, Lalu and his Railways Ministry have been so impressive that they are now a case study for the Indian Institute of Management (IIM). When he wrestled the Railways Ministry from Ram Vilas Paswan, many had written the obituary of the Indian railways, saying Lalu would drive it into the ground. But hes proved the skeptics wrong. Amazing feat The Indian railways, an organisation heading towards bankruptcy three years ago when he took over, now has a surplus revenue of Rs. 11,000 crore, a feat that has won grudging respect for Lalu.And with success has come recognition. IIM-A is taking the railways success as a case study. 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.He also raised the carrying capacity of goods trains from 3,200 tonnes to 4,000 tonnes, which led to higher freight earnings. This is just the start. We will soon have a surplus of Rs 20,000 crore. We will do more, you see our profits will climb even further, added a confident Lalu. Railways officials were in a celebratory mood, as they know their organisation has turned the corner and the architect of this success is the railways minister.Lalu was also invited to Harvard University to give a lecture on the turnaround of railways and the management techniques he used as a minister.

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WAS LALUNOMICS A MIRAGE? UPA again won the 2009 general assembly elections and came to the power as UPA 2. However that election prove to be very fatal for Lalu in Bihar when he lost the elections and also the Ministry Of Railways. Mamta Banerjee took the Ministry in 2009 and he alleged that the figures and claims given by Lalu in those budgets were all inflated and the reality is something very different and harsh. She demanded a White Paper in the Parliament. According to the white paper, he did three things. First, funds earmarked for investing in railway safety were shown as part of the cash surplus. Secondly, the depreciation reserve fund, which should have been part of working expenses, was shown as cash surplus. Thirdly expenses were understated by not deducting the heavy liabilities on account of higher salaries due to the sixth Pay Commission payout. And interest received on fund balances was also shown as the income of the railways which was not the case earlier. In fact, the paper claims the boot may have been on the other foot. It dubbed the performance of the railways during Lalu's tenure as " below par". It pointed out that the losses from passenger operations was almost Rs 14,000 crore in 2008- 09. A feisty Lalu promptly termed the white paper as a " black paper" and said Banerjee had been ' misled' by some officers. The railways made profit during my tenure. Prime Minister Manmohan Singh had congratulated me for my work. All the accounts were correct and the railways had the best period during my tenure," Yadav said outside Parliament. MAMTA BANERJEES RAILWAY After becoming railway minister in 2009, she has given 3 rail budget since then i.e 2009-2010, 2010-2011, 2011-2012. She stated that the huge profits mentioned by Lalu in his railway budget were all false. Figures shown by Lalu Prasad Yadav were all inflated as stated by Mamta Banerjee in her Rail Budget Speech in 2009. In real terms, the railways are in huge losses. But railway being a public sector unit and its main objective being public welfare and not profit maximization, it cannot shutdown. Its business is continued even in losses. This situation is shown in the diagram below:

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The point b represents the monopoly price. The point a helps in finding the costs incurred. Thus the bigger rectangle represents the total costs incurred whereas the rectangle PBQO represents the monopoly price. Hence the yellow rectangle represents the loss. Also since the AVC is below the monopoly price, the firm does not shutdown. RAIL BUDGETS PRESENTED BY MAMTA BANERJEE Here

are certain highlights of the rail budget 2010-2011: No hike in passenger fares Railways to employ ex-servicemen for railway security Railways to employ ex-servicemen for railway security Railways to borrow Rs 9120 Crores this fiscal Railways profit at Rs 1328 Crores Metro Railway to be expanded in Kolkata on priority National High Speed rail authority to be set up Bharat Teerth train in memory of Tagore to connect 16 destinations in India FY11 total gross earnings Rs 88,281 Crores Rs 4,411 cr allocated for new rail lines. No forcible acquisition of land, one member of land losing family to get a job. FY11 working spend Rs 87100 Crores 54 new trains to be introduced in FY11 FY11 Gross Budgetary Support Rs 15,800 Crores FY11 dividend liability Rs 6600 Crores FY11 Plan Outlay at Rs 41,426 Crores

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Tourist trains to be launched on 16 routes Premium Tatkal service for parcel, freight movements Dedicated passenger corridors planned 10 more Duronto trains to be introduced Dividend to exchequer at Rs 6608 Crores 2 freight corridors planned in Maharashtra 5 wagon factories planned 101 new suburban trains for Mumbai

And here are certain highlights of the rail budget 2011-2012:


No increase in fares. Earnings for 2010-11 set to exceed Rs.1 lakh crore. Working expenditure during 2011-12 estimated at Rs.87,000 crore. Outlay of Rs.57,630 crore for 2011-12, the highest investment in one year. Rs.10,000 crore to be raised through railway bonds Decided to set-up rail-based industries. Passing through a difficult phase; 97 percent increase in expenditure in 2010-11 due to implementation of Sixth Pay Commission report. Loss of Rs.3,500 crore in 2010-11. Ten-year backlog of 1.75 lakh jobs being addressed; 16,000 ex-servicemen to be given jobs in railways. Safety first priority; accident rate has come down. Anti-collision device, successful in North West Frontier Railway, to be extended to three more zonal railways. Will add 180 km of rail lines in 2011-12 Pradhan Mantri Rail Vikas Yojna to be launched. Multi-purpose smart card to be introduced for all-India travel. Airport-like trolleys to be provided at more stations. Railways to set up a sports cadre. Concession for physically handicapped and gallantry award winners for travel in Rajdhani and Shatabdi expresses. After the resignation of Mamta Banerjee in May 2011, DINESH TRIVEDI took charge of the ministry and he is the current Minister of Railways as of now.