COMMERCIALIZATION OF INDIAN RAILWAY

Prepared by :Mukesh Kumar Md. Danish Akhtar Rahul Patel Udita Agrawal

OUTLINE
History of Indian Railway  Historic Tournaround  Existing Private Railways  Commercialization  Refrences

HISTORY
• •

A plan for a rail system in India was first put forward in 1832 In 1844, the Governor-General of India Lord Hardinge allowed private entrepreneurs to set up a rail system in India. The first train in India became operational on 1851-12-22, and was used for the hauling of construction material in Roorkee. On 1853-04-16, the first passenger train between BoriBunder and Thana covering a distance of 34 km was inaugurated, formally heralding the birth of railways in India.
Source:- “IR History: Early Days". Indian Railways Fan Club. Retrieved 25-10-2010

http://www.jpg Retrieved 28-10-2010 .Source:.hampi.in/images/Indian-Railway-network.

25-10-2010 .http://www.000 are passenger trains).49 million tones of freight every day.  Largest employer in the world  Supports a work force of over 1.  Source:.irfca.6 million constituting 6% of the 27 million people employed in the organized sector.  In terms of contribution to the gross national product the railways account for 1 % of India‟s GNP.org/faq/ Retrieved:.7 million passengers and 1.TODAY'S INDIAN RAILWAYS The Railways have been described as the „lifeline of the nation‟  Operating approximately 12.000 trains a day (of which 11.  Carries about 17.

Rakesh Mohan Committee report 2001 .THE EXPERT-GROUP REPORT SUBMITTED IN JULY 2001 STATED: “Today Indian Railway is on the verge of a financial crisis. and in sixteen years Government of India will be saddled with an additional financial liability of over Rs 61. IR is in a terminal debt trap... the „business as usual low growth ‟ will rapidly drive IR to fatal bankruptcy.000 cores… On a pure operating level.”  Source:. To put it bluntly.

"General Information".16.149 crore (in 1990-2000) and which had been written off as a bankrupt department. Central Organisation for Railway Electrification.170 crore. Ministry of Railways. This is the same Indian Railways whose fund balances had reduced to just Rs. Indian Railways is today the second largest profit making Public Sector Undertaking after ONGC. Source:. The total planned investment for the eight-year time frame (20072015) is tentatively in the order of Rs.3.50.9% in 2009-10 which is comparable to that achieved by the North American Class I railroads.000 crore in 2005-06 and by the end of this financial year it is estimated at Rs. It achieved an operating ratio of 75.A HISTORIC TURNAROUND      The fund balances have grown to over Rs 12. Government of India.000 crore. Retrieved 20-10-2010 .

and to 1. Retrieved 29-10-2010 . which peaked at 1."Strategy of Indian Railways During the Eleventh Five Year Plan". the IR also outsourced advertising activity. The approach that the IR adopted was not to fill in vacancies created due to retirement or other reasons. Source:. 2007-2008.472 million by 2003.412 million by 2006.STRATEGIES THE INDIAN ADOPTED: RAILWAYS Downsizing The number of employees. Government of India.652 million in 1991. was brought down progressively to 1.  Outsourcing Besides the catering and parcel service activity.

CONT. Product Innovation .

These containers increased the carrying capacity of each train to 2.500 tones against 1. The effect of these measures can be seen in higher freight revenue. Retrieved 29-10-2010 .500 tones. 2007-2008."Strategy of Indian Railways During the Eleventh Five Year Plan". It ‘led to saving of about 7% on capital cost and 25 % in operating expense’. Further. Source:. Government of India. it introduced new design of wagons with higher pay load (carrying capacity) but lower tare weight (weight of the empty wagon) that improved safety features.CONT…  Product Innovation The IR introduced double stack container trains on some diesel routes.

etc. dams. as does the Madras Port Trust. There are also some railway lines owned and operated by companies for their own purposes. usually small sections on private estates. etc.SOME EXISTING PRIVATE RAILWAYS • • • • • • Though the Indian Railways enjoys a near monopoly in India. mines. The Calcutta Port Commission Railway is a BG railway. left over from the days of the Raj. The Vishakhapatnam Port Trust has BG and NG (2'6") railways. sugar mills. few private railways do exist. harbors and ports. by plantations. The Bhilai Steel Plant has a BG railway network. The Bombay Port Trust ran BG railway of its own. collieries. .

should be privatized and if yes. the Indian Railways. then based on what model?  .PRIVATIZATION /COMMERCIALIZATION How about privatizing the whole Indian Railways now?  The largest government undertaking.

Sustenance and the Leap Forward A Case Study. One option is complete privatization of IR i. 1  Indian Railways is the biggest railway network in the world that is being managed by the state.MODEL NO.IITD .e. Source :.Indian Railways Growth. But that would not be a good idea either broadly because of the following reasons. sell IR to a company like Tatas or Ambanis.

If only for these reasons. and above all for military purposes. Railways have continued to be a highly visible national symbol. economic development and exploitation of resources. which is possible only when they are run as a departmental undertaking. it is necessary that the government exercises direct control over their operations. . There is no comparison between other infrastructure facilities and railway facilities as far as transport by rail is concerned.REASONS…      Railways were built in India for national integration. Orissa cyclone and military operations like Kargil is something that cannot be replicated by any corporation. but are completely dependent on Railways for transport. Defense services have built up alternative arrangements in all fields including postal service and communications network. Railway operations require constant co-ordination with state governments and other wings of the Centre. All the strategic rail lines are owned and operated by the Railways. and the role played by them in times of crises like the Gujarat quake.

 The role of the railways is too critical for the Indian economy. due to the national importance it will be never be actually be possible to pass on IR to complete private hands as government intervention will be required for most of the decisions. Also. .

Indian Railways Growth.MODEL NO. Sustenance and the Leap Forward A Case Study. for each task have multiple competing companies and all these companies coordinate with each other for the smooth functioning of Railways. Also.IITD . 2  The other model of privatization is to break down the whole organization into various chunks where each chunk represents a very specific task. This model was followed in case of British Railways Source :.

BRITISH RAILWAYS PRIVATIZED IN 1990S Shortcomings • Atomization of BR • Maintenance of a network of more than 100 companies • Increase in government expenditure two Billion Pounds annually • Role of government still required • Employee dissatisfaction .

.BY ANALYSIS OF BOTH MODEL The two major reasons for the failure were – (1) BR was too big to be broken down into very small parts (2) Privatization procedure was not well managed and maybe was a bit too quick and drastic. Thus the above two models of privatization are not feasible for the Indian Railways.

WHAT CAN BE DONE…. • Partial privatization Non core activities outsourced • .

Of the 14 tenders called. 80 cores. The scheme was reviewed. The maintenance of the line is with railways and the contractor is being paid fixed annuity for the construction.BUILD OPERATE LEASE TRANSFER / BUILD OPERATE TRANSFER  The original scheme was launched in 1994. Source :-Eleventh five year plan . So far only one project. has been completed at cost Rs.Mehsana. 12 were cancelled for high lease demand and the other two failed at various stages. gauge conversion of Viramgam.

The scheme has been revamped and renamed as Wagon Investment Scheme (WIS) with the provisions for freight rebate and supply of guaranteed number of rakes over a period ranging from 7-15 years for various categories of wagons.OWN YOUR WAGON / WAGON INVESTMENT SCHEME  Own Your Wagon Scheme has been in existence for many years. 516 crores were mobilized from railway customers during the IX Five year Plan. during the first four years of the Tenth Plan no private investment has come under this scheme. The new scheme has been well received. . An amount of around Rs. Further.

The SPV also achieved remarkable results in establishing efficient benchmarks in operation and maintenance.Rajula city and its extension to the Pipavav port was executed under a joint venture arrangement . Source :-Eleventh five year plan .The SPV Joint Venture named Pipavav Rail Corporation Limited (PRCL) was established in 2001 with Rs 200 crores equity and Rs 173 crores debt.JOINT VENTURES / SPECIAL PURPOSE VEHICLES  Gauge conversion of Surendranagar . The project was successfully completed and commissioned during the Tenth plan. The equity was shared equally between both the partners.

. running rooms and on board train services. budget hotels. Corporations like IRCTC can carry out such bidding. The prerequisite to success of such private partnerships are. meticulous attention to definition and specification of service standards. which are either loss making or underutilize the railway‟s existing assets. Among these are catering.HOSPITALITY SECTOR  There are several activities. and competitive bidding. advertising. These activities require managerial approaches that can respond fast and efficiently to changing market demand and passenger expectations.

PARCEL SERVICES  Leasing of parcel vans in some important mail express trains has already been tried on Indian Railways. The underlying principle is that private sector is good at aggregating piecemeal bookings and arranging “first mile” and “last mile” services. . A logical extension of the policy would be to lease full parcel services between a pair of cities that might run periodically at a frequency determined by market demand. Railways could then concentrate on carrying the parcels. exactly as at present. which pose no problem as these are to be carried by Mail/express trains.

000 hectares of vacant land. . RLDA would mainly put railway assets as equity whereas private partner could put cash as equity forming the project SPV. Implementation would be mainly through public private partnerships. providing world class state of the art passenger facilities and services at stations.COMMERCIAL DEVELOPMENT OF LAND AND AIR SPACE  Indian Railways has approximately 43. Rail Land Development Authority (RLDA) has been set up by an amendment to the Railway Act 1989 in the year 2005 with main objectives of generating revenue. upgrading railway assets.

TELECOM NETWORK  Partnerships in sharing of infrastructural assets like towers. Value added services emerging from providing Internet connectivity on trains would be the focus of such partnerships . to provide better services for the customers are also envisaged. OFC network.

Multi-Departmental Innovation Promotion Group   . Information Technology Vision 2012 aims at radical changes in IT applications .VISION 2025  Aims at setting the roadmap for coming 17 years – customer centric and market responsive strategic initiatives.improvement in operational efficiency. transparency in working ad better services to the customers.

VISION 2025  Public-Private Partnership schemes to be launched for attracting an investment of Rs.000 cr over the next five years for development.1.00.  Commercial use of Railway land by Rail Land Development Authority to give a boost to Railway Revenues. .

2007-2008.REFERENCES “IR History: Early Days". Retrieved 20-10-2010  Indian Railways Growth.IITD  Eleventh five year plan  . Government of India. Ministry of Railways. Retrieved 29-10-2010  "General Information". Retrieved 25-10-2010  "Strategy of Indian Railways During the Eleventh Five Year Plan". Government of India. Central Organisation for Railway Electrification. Indian Railways Fan Club. Sustenance and the Leap Forward A Case Study.

THANK YOU !! .

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