Indian Railways

The Hypotheses of this project are:

1 - Indian railways made profit after 2004 due to increase in freight volume. 2 - Railways would have got more profit if the hikes announced were continued, which were partially rolled back. Indian Railways is one of the largest and busiest rail networks in the world comprising 115,000 km of track over a route of 65,000 km and 7,500 stations. Railways were started in India in 1853. In 1951 the systems were nationalised as one unit, becoming one of the largest networks in the world. It is one of the world's largest employers, with more than 16 lakh employees. Indian Railways per se is considered to be a monopolistic market since it doesnt face any direct competition though other modes of transport such as Airways and buses compete indirectly. For freight transport there are other modes like trucks which are an alternative to railways. Around 70% of Indian Railways revenue is from freights and around 27% is from passenger fare. The remaining is from sources like leasing and licensing of its land. In 2004 Indian Railways was supposed to be heading for bankruptcy. An expert group report in 2001 had even predicted that it would impart the government a liability of over Rs.61,000 crore in 16 years. There was a major turnaround since then. From 2005 to 2007 it earned cash profits. In March 2007 it announced a cash surplus of Rs.20,000 crore for 2006-07. Railways recorded a profit of Rs 13,431.09 crore in 2007-08. Profits had started showing a decline in 2008-09, when it came down to Rs 4,456.78. In 2009-10 the profit declined to 951 crore. The Railways operating ratio (the sum of money spent to earn a sum of Rs 100) is a good indicator of its financial health. In 2001-02, the operating ratio had reached 96 per cent. The Railways then made dramatic improvements and it was brought down to 75.9 per cent in 200708. In 2008-09, it again deteriorated, to 90.5 per cent, and then to 94.7 in 2009-10. From 2004-05 to 2007-08 the % increase in freight volume was 8.02%, 10.69%, 9.19%, 9.09%. These were the years in which Indian Railways did well. In 2008-09 Railways performance began to decline. And in this year the freight increase was 4.97% much lower than in the years of good performance. The other source of income, passengers increased from 2004-05 to 2007-08 by 5.24%, 6.52%, 8.60%, 4.91%. In 2008-09 it increased by 6.05%. Reduction in expenditure was also not a cause which could be attributed to improvement in Railways f inancial performance. This shows that

though the increase in passengers in 2008-09 was not less than during the years of good performance, the decline in freights reduced the performance of the Railways.

The major features of the original Railway budget of 2012-13 were:

1- Setting up of Railway Tariff Regulatory Authority to be considered. 2-Passenger fares increased by 2 paise per km for suburban and ordinary second class; 3 paise per km for mail/express second class; 5 paise per km for sleeper class; 10 paise per km for AC Chair Car, AC 3 tier and First Class; 15 paise per km for AC 2 tier and 30 paise per km for AC I. 3- Except AC 1, AC 2 and First Class rest was rolled back by the new Minister Mukul Roy. Had the increase in price been continued and not rolled back the revenue for railways would have increased. The spiel of not increasing passenger fares has served political expediency and provided the Railways a handy cover for not bothering about the quality of passenger services they provide for the travelling public. There are many other issues in Indian Railways apart from freight and passenger revenue. The number of employees in Railways (16 lakh) is much more than what is needed. Over 50% of the revenue earned by Railways is spent in paying the salaries of the employees. Other perks and privileges to the employees are reported to be far more than needed resulting in massive expenditure.

Suggestions:
The Railways is dependent a lot on at-times populist railway ministers It needs to be run with the plan of making profit, with good strategic thinking There should be shown the courage to take unpopular decisions like reducing the Railway staff and expenditure on them Remove operational and marketing inefficiencies such as: (i) The inability to be a low-cost carrier by drastically pruning working expenses. (ii) Lack of marketing ideas for enhancing non-fare box revenues. (iii) Poor skills in innovative land use for commercial exploitation. (iv) Avoidable competition with road transport and fixing predatory prices for shortdistance rail travel.