MIME-Version: 1.0 Content-Type: multipart/related; boundary="----=_NextPart_01C80B30.28218400" This document is a Single File Web Page, also known as a Web Archive file. If you are seeing this message, your browser or editor doesn't support Web Archive files. Please download a browser that supports Web Archive, such as Windows® Internet Explorer®. ------=_NextPart_01C80B30.28218400 Content-Location: file:///C:/C5248572/Financial_Turnaround_of_IR.htm Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii" FINANCIAL TURNROUND OF INDIAN RAILWAYS

FINANCIA= L TURN AROUND OF INDIAN RAILWAYS

        &= nbsp;           &nbs= p;         V.A. PADMANABHAM, IRAS,

               = ;              DY.FA & CAO/C/SCR.

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* *  * * *

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The fina= ncial crisis of IR was best summed up by Rakesh Mohan Committee in 2001 as under:=

 

“Indian Railways is today on the verge of a financial crisis. To put it bluntly, the Business as usual Low Growth will rapidly drive IR to fatal bankruptcy and in sixteen years Government of India<= /st1:place> will be saddled with an additional financial liability of over Rs.61000 cro= res. On a pure operating level, IR is in a terminal debt trap.”=

 

Thanks t= o the determined and dynamic leadership provided in IR backed by political and administrative initiatives, the prophesy of the = above Committee did not come true.  = On the other hand, IR achieved the impossibility – realizing the financial success.  Thus, it has woken u= p the entire gamut of Economists and Financial analysts to understand the secret = of amazing financial turn round of IR. In other words, the growth rate of IR proved to be beyond the rate of growth of Indian Economy- IR grew at 11% whereas Indian economic growth is around 8 to 9%.         

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The fina= ncial success story of Indian Railways is a matter of great interest in recent ti= mes  for economists, research scholars, business practitioners and more recently business schools around the globe started evincing interest to know how it could be a reality for IR to take = the organization to growth path from almost a stage of financial bankruptcy in = the year 2000-01 to the present stage of declaring a financial surplus of Rs.20= 000 crores in the year 2006-07. The road-map of IR in its course of realizing amazing financial turn round is hard, painstaking and full of decisions both financial and organizational duly supported by the dedicated efforts of 14 = lakh employees who strived to provide a meaningful shape to the vision of top management.

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FINANCES OF IR IN 2000-01

 

In any s= tudy of financial turn around of any business organization, the starting point shou= ld be a loss making point. In respect of IR it could be no better time than the year 2000-01. The financials will prove this point. In the financial year 2000-01, IR could not pay dividend to Government of India and deferred the = same by Rs.1823 crore and in next year also by Rs. 1000 crore  Another angle to judge finances is = its fund balances which dipped to Rs.359 crore after withdrawal of Rs.2400 crore from old balances of DRF.  The Net Revenue of IR before Dividend was Rs.1071 crores. The health of IR is judge= d by its Operating Ratio which stood at 98%.   In real terms, it could be mu= ch more than 100% had IR not deferred the Dividend and withdrew its fund balan= ces.

 

 

STRATEGIES ADOPTED TO BRING OUT CHANGE *

 

IR employed following key strategies.

 

  • PLAY ON FREIGHT VOLUMES AND REDUCE UNIT COSTS

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    1. Enhancing carrying capacity of wagons (I) Box N wagons from 60 tonnes to 70 tonnes and BCN from 58 t to 63t
    2. Reducing wagon Turn round

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  • ADOPT THREE-PRONGED STRATEGY OF INVESTMENT

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    1. Upgrade existing infrastructure for higher operating efficiency.
    2. Invest in additional track capacity and electri= fication routes
    3. Increase reliability of systems Viz. wagons/coaches, locos, tracks,S&T and = other assets.

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·         OPE= RATING STRATEGY IO MAXIMISE THROUGHPUT

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1.   &n= bsp;  Increase occupancy of trains through passenger prof= ile management

2.   &n= bsp;  Increasing volume of Upper Class travel

3.   &n= bsp;  Augmenting load of Well patronized trains to 24

4.   &n= bsp;  Reducing losses on catering and parcel services

 

·         COM= MERCIAL OPERATIONAL AND INVESTMENT ISSUES

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1    Full rake placements

 

2    Round the clock working=

 

3    Electrification of dies= el sidings on electrifies routes

 

4    Amendment to Preferenti= al Tariff Schedule (PTS)

 

5    Faster Train Examinatio= n

 

·         TAR= IFF RATIONALISATION

 

1.   &n= bsp;  Freight on raw materials and minerals increased

2.   &n= bsp;  Freight on finished products reduced.

3.   &n= bsp;  Minimum weight condition scrapped.

4.   &n= bsp;  Regrouping of commodity heads with uniform head for different commodities in the same group.

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A great = number of initiatives were taken by IR in last 5 to 6 years on all fronts besides motivating staff to increase their productivity. Some of the initiatives are listed below:

 

·         &nb= sp;     Introduction of Tatkal scheme in Reservation= s

·         &nb= sp;     Increasing No. of Super fast trains.

·         &nb= sp;     Improving Catering Services at stations and trains

·         &nb= sp;     Introduction of Unreserved Ticketing Systems (UTS)

·         &nb= sp;     Introduction of E ticketing

·         &nb= sp;     Clean stations

·         &nb= sp;     Clean trains

·         &nb= sp;     Additional coaches

·         &nb= sp;     Additional trains

·         &nb= sp;     Increasing frequency of trains

·         &nb= sp;     Introducing differential fare system based on peak and slack seasons

·         &nb= sp;     Up gradation of reservation without charging extra amount.

·         &nb= sp;     Leasing of space in break vans and Parcel va= ns

·         &nb= sp;     Converting&= nbsp; luggage space in Luggage Vans into General Coaches

·         &nb= sp;     Minimum condition of 150 KG in parcels has b= een removed

·         &nb= sp;     Enhancing production capacity of Production Units of Railways

·         &nb= sp;     Reduction of wagon turn round to 5 to 6 days=

·         &nb= sp;     Increasing loading capacity of wagons

·         &nb= sp;     Better round the clock train/wagon examinati= on

·         &nb= sp;     Introduction of 25 tonne axle load trains

·         &nb= sp;     Utilization of Land Space by leasing out for Warehouses

·         &nb= sp;     Freight Discount Scheme

·         &nb= sp;     Change of accounting treatment of Lease char= ges payable to IRFC

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AMAZING RESULTS

 

The init= iatives taken by IR coupled with dedicated efforts put in by Railway staff led to amazing financial turn round acclaimed by all.

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  • Freight Loading touched to 785 MT
  • Passenger Traffic reached 6606 Millions
  • Freight earnings reached Rs.46,943 Crores
  • Overall earnings of IR touched Rs.71000 Crores.
  • Investment Projected during 2007-08 is Rs.31000 c= rore
  • Wagon turn round reduced to 6 days
  • Energy Consumption improved.
  • NTKMs increased to9.05 millions in 2005-06 agains= t 6.96 millions in 2000-01
  • Operating Ratio improved to 78.7% almost first ti= me in the history of IR
  • Paid dividend of Rs.3579 crore and deferred divid= end of Rs.663 crore during the year
  • Ended up in financial surplus of  Rs.14870 crore after paying Dividend and Deferred Dividend
  • Fund balances are expected to reach Rs.16000 cror= e and Net Revenue to Capital Ratio is expected to reach 20 %
  • Incremental loading achieved is 170 MT which has exceeded total incremental loading by 120% achieved by IR in 90s

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The above spectacular performance was achieved without any increase in fares/freights= in last three years.  On the other hand, fares in all classes have been slashed from 4% to 6% in the Budget 2007-08 and also reduction in freight in respect of diesel has been effecte= d. 

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·         LOO= KING INTO FUTURE

 

Not being complacent with what had been achieved, IR is set to write= new success story by adopting following strategies.

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<= span style=3D'font-family:Symbol;mso-fareast-font-family:Symbol;mso-bidi-font-fa= mily: Symbol'>·         By the end of the year 2011, IR is targeting= to achieve freight loading of 1100 MT.

<= span style=3D'font-family:Symbol;mso-fareast-font-family:Symbol;mso-bidi-font-fa= mily: Symbol'>·         Cement and Steel Industry loading of 200 MT<= /p>

<= span style=3D'font-family:Symbol;mso-fareast-font-family:Symbol;mso-bidi-font-fa= mily: Symbol'>·         Mission Container   Traffic-100 M= T

<= span style=3D'font-family:Symbol;mso-fareast-font-family:Symbol;mso-bidi-font-fa= mily: Symbol'>·         Introduction of Triple Stack Container Train=

<= span style=3D'font-family:Symbol;mso-fareast-font-family:Symbol;mso-bidi-font-fa= mily: Symbol'>·         Entering into LSAs for 30 years with Coal, Cement, Steel and Mega Power Plants

<= span style=3D'font-family:Symbol;mso-fareast-font-family:Symbol;mso-bidi-font-fa= mily: Symbol'>·         Merry Go Round  System for Coal

<= span style=3D'font-family:Symbol;mso-fareast-font-family:Symbol;mso-bidi-font-fa= mily: Symbol'>·         Development of freight terminals

<= span style=3D'font-family:Symbol;mso-fareast-font-family:Symbol;mso-bidi-font-fa= mily: Symbol'>·         Reduction of losses in Parcels and other Coaching services by 25% from the existing level of Rs.1000 crores in two to three years.

<= span style=3D'font-family:Symbol;mso-fareast-font-family:Symbol;mso-bidi-font-fa= mily: Symbol'>·         Improvement of NTKM to GTKM ratio by 1% would lead to additional earning of Rs.1500 crore a year.

<= span style=3D'font-family:Symbol;mso-fareast-font-family:Symbol;mso-bidi-font-fa= mily: Symbol'>·         Higher Axle load trains

<= span style=3D'font-family:Symbol;mso-fareast-font-family:Symbol;mso-bidi-font-fa= mily: Symbol'>·         Construction of Budget hotels at 100 stations across the country

<= span style=3D'font-family:Symbol;mso-fareast-font-family:Symbol;mso-bidi-font-fa= mily: Symbol'>·         Inviting private capital in manufacture of Rolling Stock

Sources:

* Presentation of Sri Sudheer Kumar from IR web site=

^ Figures adapted from Explanatory Memoranda to Rly.Budget and the Budget Speeches of Hon.MR

 

* * * * *

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