Indian railway turnaround story

Eng. B D Rampala MMeemmoorriiaall LLeeccttuurree –– 22001100
110000tthh BBiirrtthh AAnnnniivveerrssaarryy
SSuucccceessssffuull
TTuurrnnaarroouunndd ooff
IInnddiiaann RRaaiillwwaayyss &&
LLeessssoonnss RReelleevvaanntt
ffoorr SSrrii LLaannkkaa
RRaaiillwwaayyss
A Case Study Approach
Eng Keerthi K Hewavithana
(Engineer Headquarters, Sri Lanka Railways)
Bsc Eng. (Hons.), C.Eng.,(MIE)SL, MBA.
Phone 0714-399631, E mail Keerthieh@gmail.com
TThhee IInnssttiittuuttiioonn ooff EEnnggiinneeeerrss,, SSrrii LLaannkkaa

Successful Turnaround of Indian Railway & Lessons Relevant for Sri Lanka Railways
Successful TTuurrnnaarroouunndd ooff IInnddiiaann RRaaiillwwaayyss aanndd
LLeessssoonnss RReelleevvaanntt ffoorr SSrrii LLaannkkaa RRaaiillwwaayyss
By
Eng Keerthi K Hewavithana
(Engineer Headquarters, Sri Lanka Railways)
Bsc Eng. (Hons.), C.Eng.,(MIE)SL, MBA
Phone 0714-399631, E mail Keerthieh@gmail.com
President of the Institution of Engineers Prof. Ananda Jayawardane, Chairman of the Mechanical
Engineering Sectional Committee Eng. Gratian A. Peiris, Executive Secretary Eng, Ms Arundathie
Wimalasuriya, members of the family of late Eng. B D Rampala, distinguished invitees, Past
Presidents and Members of the IESL:
We honour Eng. B D Rampala today as an Engineer, Entrepreneur and Legend who transformed
the Ceylon Government Railway (CGR) from a facility that catered to the needs of the Colonial
Masters to a public utility that assured access, speed, connectivity and safety to people. Eng.
Rampala was born on November 14, 1910, hundred years ago yesterday. Today as we
commemorate the life and contribution of this genius and his commitment to master technology to
serve the people, the best honour that we could bestow on him is finding a strategy to transform the
Sri Lanka Railways, which he loved and served with his whole heart and mind, to once again
become a people friendly, commercially oriented, sustainable government enterprise with a strong
service orientation.
Therefore I am humbled by this opportunity to deliver the Eng. B D Rampala Memorial Lecture
and consider this as one of the most important milestones in my career as a young and upcoming
engineer. May I thank the Institution, Mechanical Engineering Sectional Committee and my
colleague Eng. Udhya Kumar who promoted me as the speaker for the Memorial Lecture this year,
when we mark the 100th birth anniversary of the legendary Eng. Bamunuarchchige Don Rampala.
It is the tradition of the Institution to invite an eminent engineer to deliver each of the prestigious
memorial lectures held annually to honour the engineering greats such as Eng. B D Rampala, Eng.
Wimalasurendra, Eng. Dr Kulasinghe and others and to inspire young engineers to emulate the
examples of these engineering giants and thereby enhance the practice of the engineering
profession in Sri Lanka. Mr President, this year our Institution has made an exception to this
tradition by inviting a young engineer in me, who has far less credentials and accolades than
usually needed to qualify for delivering this memorial lecture. Therefore, Mr President and ladies
and gentlemen, I consider this opportunity as a special recognition by the Institution of the young
engineers who represent the aspirations, commitment and the future of the engineering profession
in Sri Lanka.
I have selected the interesting and inspirational story of the ‘SSuucccceessssffuull TTuurrnnaarroouunndd ooff tthhee
IInnddiiaann RRaaiillwwaayyss aanndd LLeessssoonnss RReelleevvaanntt ffoorr SSrrii LLaannkkaann RRaaiillwwaayyss’’ as the theme for this year.
Eng B.D. Rampala Memorial Lecture- 2010 100th Birth Anniversary 1

Over the next half an hour let me take you through this success story and draw inferences as to its
relevance to the Sri Lanka Railways.
The dramatic turnaround story of 157 year old Indian Railways has not only amazed management
experts but also caught the attention of premier global business schools like Harvard and Wharton
and surely deserves our attention.
IInnddiiaann RRaaiillwwaayyss aatt aa GGllaannccee
The Indian Railways started its journey on April 16, 1853, and has become to reflect the pluralistic
character of India with many unique features such as having the world's largest as well as the
smallest stations, the oldest running locomotive and a separate budget since 1924.
The Indian Railways is a department of Government of India. It is one of the largest railroads
organizations in the world and with a capital investment of US$ 14 billion (INR 550 billion), it is
one of the biggest organizations in India. The Indian Railways is the largest employer in the
organized business sector in India with a staff of 1.5 Million and contributes approximately 1% to
the GDP. The track length of Indian Railways is 63,322 km and it carries 14 million passengers
each day, about 75% of the population in Sri Lanka. It operates across the whole of India divided
into 16 zones.
Indian Railway at a Glance (2004 - 2005)
Plant and Equipment
Capital-at-charge INR Million 590,347
Total investment INR Million 980,490
Route length Km 63,322
Running track Km 84,260
Total track Km 108,805
Locomotives No. 7,910
Passenger service vehicles No. 42,441
Other coaching vehicles No. 5,822
Wagons No. 222,379
Railway stations No. 7,133
Operations
Passenger Train Million km 517
Vehicle Million km 14,066
Freight Train Million km 284
Vehicle Million km 31,365
(Source: Indian Railways web site)
TThhee CCoorree PPrroobblleemm
During the 1990s the Indian Railways faced the difficulty of responding to both short and long
term changes in transport market conditions. As a result it was not increasing revenue faster than
the expenditure and the operating ratio became 98% in 2000. The Indian Government appointed a
powerful committee known as Rakesh Mohan Committee (RMC) to review the operations of the
Indian Railways and make recommendations. The Committee included members with vast

knowledge in the railway and transport sector as well as those with futuristic thinking coupled with
a sound knowledge and educational background. The Committee concluded in 2001 that:
"Today Indian Railways is on the verge of a financial crisis. To put it bluntly, the 'business
as usual, low growth' will rapidly drive it to fatal bankruptcy, and in 16 years, the
Government of India will be saddled with additional financial liability of over INR 610,000
million ($… On a pure operating level, IR is in a terminal debt trap."
The RMC identified the following major causes that lead to the poor financial performance of
Indian Railways:
· Loss of market share in the profitable freight business;
· Inflexible pricing that did not respond to market conditions;
· High cost of internally sourced products and services; and
· Investment in projects that did not yield a return.
(Source: Desh Gupta and Milind.2008)
Lack of accountability was identified as a systemic problem. Rising employee costs that accounted
for nearly half the operating costs, coupled with poor staff productivity was a major concern.
Political profligacy was identified as another major impediment that drained finances of the Indian
Railways.
RMC concluded that the core problem for poor financial performance was:
Politicization of the decision making process that emphasized taking
populist actions, rather than hard business decisions.
(Source: RMC 2001)
CChhaannggee iinn PPhhiilloossoopphhyy
It was clear that a philosophical change was mandatory if the Indian Railways were to be
transformed into a truly business oriented organization. This philosophical change was initiated by
the then Transport Minister Hon. Nitish Kumar responding to the famous Rakesh Mohan
Committee (RMC) Report in 2001 to turnaround the Indian Railways using the blueprint given
by the RMC.
During the year 2001-02 budget speech the intention to turnaround the Indian railways was clearly
expressed by the Minister Hon. Nitish Kumar when he stated “railways need to develop market
oriented and customer friendfly outlook due to emerging competition within the transport
sector” [Source: MOR, 2002, Internal Correspondence (2006 cited by Desh Gupta and Milind, 2008)].
Instead of instilling fear and anxiety that is normally associated with a turnaround of this nature,
successive ministers chose to create excitement, hope, and empowerment amongst the management
and staff. Asset base of the Indian railway was kept intact and was used to leverage public-private
partnerships. Specialist activities such as finance, consulting, turnkey projects were assigned to
subsidiaries set up for the specific purposes. Macro economic changes that were favourable for
the Indian railway were identified and capitalized upon. Pricing was used as a flexible tool to

respond to market opportunities, competition and the needs of the general public. Indian Railways
started thinking and acting like an enterprise.
TTiimmee FFrraammee ooff tthhee TTuurrnnaarroouunndd
The real turnaround of Indian Railways started around 2003 and since then it was able to achieve
impressive results. Within three years the tangible results were visible. By the year 2005-06 the
Indian Railways has achieved cost reductions and turnover gains that resulted in an operating ratio
of 83.5% (Operating ratio is the division of total operating expenses by total gross revenue). The
Indian Railways was moving steadily towards its target to achieve an operating ratio of 65% in
year 2010.
Strategies initiated by Hon. Nitish Kumar were followed by Hon. Lalu Prasad Yadav who succeeded
as the Railway Minister in May 2004. Hon Lalu Prasad showed an astute understanding of the
market reality and a strong common sense approach and stepped up the operationalisation
strategies. Hon. Lalu Prasad demonstrated that good economies is good politics (Ref: G
Raghuram,2007)
TTuurrnnaarroouunndd SSttrraatteeggiieess UUsseedd bbyy tthhee IInnddiiaann RRaaiillwwaayyss
Turnaround is defined among industry and business circles as ‘performance decline followed by
performance improvement to recovery and successes’. It is obvious that a business in a
continuous decline phase will eventually become bankrupt, unless it is turned around. However,
nobody in business expects a turnaround to occur automatically or as a miracle through the
intervention of a super natural force: a turnaround has to be carefully engineered by people.
The focus was to reduce the OOppeerraattiinngg RRaattiioo which is arrived at by dividing the TToottaall WWoorrkkiinngg EExxppeennsseess
by the GGrroossss RReevveennuuee RReecceeiivveedd. The lower the ratio the better the situation and vice versa. The
Operating Ratio of the best run railways like the China Railways is 65%.
The Indian Railways targeted an Operating Ratio of 65% by 2010 and to trim the staff by 10% in
seven years through not recruiting for any vacancies that would be created by retirements and
resignations. It created many public-private partnerships for advertising, parcel service and catering
promoting outsourcing concept.
A turnaround relies on a combination of strategies aimed at cost reduction, productivity
improvement, enhancing market share and increasing margins.
In a turnaround situation, appropriate management strategies must be developed through an in
depth and careful investigation and implemented with caution. The following management
strategies were identified for the turnaround of the Indian Railways:
1 Retrenchment Strategies;
2 Repositioning Strategies;
3 Reorganization Strategies;
4 Environmental Factors.
(Source: Desh Gupta and Milind Sathye 2008)

1. Retrenchment SSttrraatteeggiieess
Retrenchment strategies aim at the reduction of operation costs and raising funds required for
additional investment. Under retrenchment strategies, business units and assets that do not add
value are targeted and dealt with in the appropriate manner. These strategies cause pain, stress and
tension leading to unrest amongst stakeholders and the Indian Railways was very sensitive in
resorting to these strategies . Relevant strategies used by the Indian railways include:
a. Withdrawing from markets where the firm is performing poorly;
b. Selling assets;
c. Reduction of the scale of operation;
d. Improving efficiency; and
e. Outsourcing.
The Indian Railway Minister Hon. Lalu Prasad Yadav in his 2004 budget speech emphasized on
cost control stating that “….operating expenses will no way be allowed to exceed the barest
minimum required…… and cost effective use of assets will be ensured…..”
The number of employees, which peaked at 1.652 million in 1991, was brought down
progressively to 1.472 million by 2003, and to 1.412 million by 2006. Although one of the
elements of retrenchment strategy is to trim off excess staff, the approach that the Indian railways
adopted was not to fill in vacancies created due to retirement or other reasons.
A striking feature is not selling any of the priced assets of the Indian Railways as they were all
‘geese that with the promise of laying golden eggs’.
22.. RReeppoossiittiioonniinngg SSttrraatteeggiieess
Repositioning strategies are the most welcome strategies in a turn around as they bring hope and
result in happiness in the organization. However, formulation of repositioning strategies require
more knowledge and effort by the management team. Correct actions must be planned and

implemented by them. The focus here is to generate more net revenue through finding out new
ways of doing business. The Indian Railways focused on the following repositioning strategies:
a. Focus on growth;
b. Product innovation;
c, Product differentiation; and
d. Improving market share .
For instance, under product innovation price differentiation, e-ticketing and booking, matching
products with market niches, passenger coaches with new layouts and amenities were introduced
with resounding success. In improving market share pricing was used as a major leverage to
position the products and services in relation to competition and become the preferred choice of the
commuters.
The IR introduced double stack container trains on some diesel routes. These containers increased
the carrying capacity of each train to 2,500 tonnes against 1,500 tonnes, and also reduced line
capacity constraint by nearly half and ‘led to saving of about seven percent on capital cost and 25
percent in operating expense’

33.. RReeoorrggaanniizzaattiioonn
The Minister Hon. Lalu Prasad Yadav said in the 2004 budget speech that ‘Indian Railways is
committed to ….. optimum utilization of human resources….’ and showed that commitment
through the following sub-strategies:
a. Changes in planning system;
b. Decentralizing;
c. Human resource initiative; and
d. Change in organization culture.
As an example, planning was improved tremendously by introducing accounting and management
information systems to facilitate better and faster decisions, taking investment decisions well in
advance and introducing Enterprise Resource Planning (ERP) Systems.
Care for people was shown through actions to reduce the fatigue of drivers and guards, crew
friendly cabin designs, employee participation in management and developing staff through multi-tasking.

44.. EEnnvviirroonnmmeennaall FFaaccttoorrss
The Indian Railways zeroed on the outside business environment understanding its impact on
performance. Although the external environment is not under the control of organization it
influences the performance of the business either positively or negatively. Raghuram in a report
published in 2007 points out that the growing macro economic conditions in India positively
contributed to the turnaround of the Indian Railways:
a. Change in the macro economic conditions – positive impact;
b. Rise in demand - positive impact;
c. Change in the legal position – positive impact;
d. Changes in accounting practices – positive impact;
e. Impact of the pay commission – negative impact; and
f. Decline in the financial cost – positive impact.
PPiivvoottaall RRoollee PPllaayyeedd bbyy tthhee RRaaiillwwaayy MMiinniisstteerr
(Source: MOR .2006, Annual report)

Within the Indian Railways structure the Railway Minister becomes the de-facto CEO and is well
positioned to drive the whole organization. Some of the important business decisions and
measures taken by successive ministers of railways are listed below:
 IRFC - Indian Railway Finance Cooperation Ltd - to raise funds for fixed assets: 1986 (positive
effect due to facilitation of market borrowings for wagon procurement, negative effect due to
high interest rates);
 IRCON - Indian Railway Construction Company Ltd and RITES - Engineering and Consulting
Firm for local and overseas business promotion (positive effect);
 CONCOR - Container Corporation of India Ltd, carrier, terminal operator and warehousing
of containers :1989 (positive effect due to focus on containerized movement of non-bulk);
 Project Uni-gauge: Early 90’s (negative effect in the 1990’s due to reduction in track renewal
works, positive in the recent and future years);
 Fifth Pay Commission: 1997-98 (negative in the late 1990’s);
 Special Railway Safety Fund: 2001-02 onwards (positive in the recent and future years);
 Reorganization from 9 to 16 zones: 2001-02 and 2002-03 (positive in the future years, due to
greater focus);
 Focus on PPP (public-private partnership) format for investments, catalyzed through RVNL -
Rail Vikas Nigam Limited: 2002-03 onwards (positive, due to the ability to leverage other
stakeholders’ funds);
 Market oriented tariffs (positive);
 Focus on increasing asset utilization: 2004-05 and 2005-06 (positive, provided implications
on asset wear and tear are appropriately dealt with);
 Competition in container movement: 2006 (expected to be positive, though implementation is
yet to be seen);
 IRCTC - Indian Railway Catering and Tourism Ltd. (Positive).
(Source: G Raghuram 2007)
The operationalisation of the various strategies over the past years depended significantly on the
leadership style of Hon. Lalu Prasad Yadav and with his common sense approach he was able to
leverage the management and assets through empowerment and delegation:
Strategy Carefully formulated set of integrated strategies which were
implemented to enhance sustainability and overcome difficult
environment.
Empowerment Motivate and encourage people boosting moral to perform, and
creating a conducive environment with adequate delegation of
authority and protection.
Delegation Effective and efficient decentralization or distribution of authority to
perform to their capacity. Each person in the structure given
adequate authority to perform without hesitation.

The following five characteristics displayed by the Minister served as the main pillars of
successes:
 Non interference;
 Direct approach;
 Caring attitude;
 Right people for the right job (identify right people);
 Image building.
(Ref G Raghuram .2007)
✔ NNoonn IInntteerrffeerreennccee
Once the goals were set, results were identified and delegated, the Railway Minister did not
interfere. That saved him enough time and energy to build the organization and ensure the
alignment of other activities towards success. He allowed the Railway Board to function as a
cohesive entity and oversee the implementation of the policies and strategies.
✔DDiirreecctt AApppprrooaacchh
In maintaining a direct link, the Minister periodically communicated with the general managers
setting and reinforcing priorities and specifying targets and standards for performance and service
delivery. Two of the letters written by the Minister given in Appendix I and II are an example of
this approach.
✔ CCaarriinngg AAttttiittuuddee
The Minister always emphasized the role of staff and unions. He himself intervened to provide
contributions to the staff welfare fund when staff were able to achieve better financial performance
than targeted. Whenever concerns were raised about downsizing of the Indian Railway, he came
out with his Hindi one liner which translated to, ‘Downsizing may make Indian Railway thinner,
but not necessarily healthier’ (Ref: G Raghuram, 2007). He set his strategy based on the concept
‘regenerate competitiveness and leverage resources rather than restructure and downsize’. He
believed in instilling hope and excitement rather than fear and anxiety.
✔IIddeennttiiffyy RRiigghhtt PPeeooppllee
All the dealing between the Minister and the Indian Railway Board has been through a noble
person appointed as Officer on Special Duty (OSD), Mr Sudhir Kumar. He was specially
chosen by the Minister for this position based on his experience and interactions with the Minister.
Mr Sudir Kumar provides the vital link between the Minister and the Railway Board and translate
the vision of the Minister into strategies and action in the Indian Railways. The OSD was capable
of understanding and supporting the tremendous strengths in the Indian Railways systems
that ensured robust decision making.
He was mainly involved in the follow up of initiatives such as axle load increase, uni-guage
project, market oriented tariffs, reducing wagon turnaround, innumerable freight incentive
schemes, passenger profile management, upgrading of passengers and leasing of parcel service and

catering services. The most important fact to notice is that, all above activities are done under the
existing systems and within the culture of Indian Railways.
✔IImmaaggee BBuuiillddiinngg
When ever there was an opportunity to highlight an initiative or an achievement the Indian Railways
went to the towns with advertisements and marketing campaigns. Appendix 4 and 5 are an example of
image building in IR.
SSaalliieenntt RReessuullttss ooff IInnddiiaann RRaaiillwwaayyss TTuurrnnaarroouunndd
Following results speak volumes about the success of the strategies adopted:
· According to the Indian Railways, cash surplus before dividend and net revenue were
estimated by the government at US$ 6.17 billion and US$ 4.53 billion respectively for the
year 2007-08.
· Indian Railways is today the second largest profit making Public Sector Undertaking after
ONGC (Oil and Natural Gas Corporation). The fund balance crossed INR.120 billion (US$
2.7 billion) in 2005-06, which had reached a low of just INR 1.49 billion (US$ 33.4 million)
in 1990-2000. The total investment being planning for the eight-year time frame (2007-2015)
was tentatively in the order of INR 3,500 billion (US$ 78.6 billion). This confidence is not
only due to the rising trend of performance, but also due to the significant growth in the past
two years.
· Turnaround of Indian railways is being studied by students of Harvard, Wharton and other
prestigious management universities and by management experts.
· Increase in income through advertising on all Rajdhani Expresses coaches with the cost of
advertising being around US $ 1.26 million per train.
· Introduction of new generation trains that would be fuel efficient, recyclable and have low
emission to generate certified emission reduction credits.
· Construction of dedicated freight corridor, with an investment of US $ 81.92 million invested
in 2008 to 2009 and US$ 614.4 in 2009-2010.
· Renewal of 44.5 million pre–stressed concrete sleepers set for open line network.
· Technological upgrades and modernization for higher operating efficiency.
· Development of PPP in new routes, railway stations, logistics parks, cargo aggregation and
warehouses.
· Development of 100 budget hotels under public-private partnership mode in the vicinity of
railway stations.
· Installation of WI-FI to provide wireless access at 500 stations.
· Introduction of marketing rights for advertising on railway tickets and reservation charts.
· Establishment of integrated logistic parks on unused lands.
· Development of agri-retail hubs, cold chains, multi-purpose warehouses on surplus land
within the Indian Railways.

· Training of railway managers to meet future challenges, the Indian Railways is planing to set
up an International Management Institute in New Delhi.
· Renewal of over 2,941 km of rail, which will require 3.39 Million tonnes of rail steel and
over 2,382 km of pre- stressed concrete sleepers.
· Implementation of dynamic pricing policy, tariff rationalization, non peak season,
incremental freight discount scheme, empty flow direction freight.
· Discount schemes, loyalty discount schemes and long term freight discount schemes.
(Ref: Indian railway website. www.impactlab.net)
Sustainability of Turnaround of Indian Railways.
The fundamental question is whether Indian Railways is capable of maintaining the high level of
growth and achievements in the future. There is reassurance in this regard since strategies and
processes are scrutinized using the following criteria:
Customer/PPaasssseennggeerr OOrriieennttaattiioonn
Strategies and processes are focused on customer needs and activities are aligned with
market segmentation.
SScciieennttiiffiicc SSttrraatteeggiieess aanndd PPrroocceesssseess
Strategies and processes are scientifically developed to achieve better asset utilization and
organizational restructuring.
(Ref Desh Gupta and Milind Sathye 2008)
SSuussttaaiinnaabbiilliittyy
Sustainability is achieved when social, environmental and economic dividends are derived
simultaneously. It is an iterative process in which the philosophy, processes and practices
need to be changed progressively to ensure congruence of economic, social and
environmental goals and targets.
IICCTT aass aa tthhee BBaassee ffoorr SSuucccceessss

ICT has played a major role in the turn around of the Indian Railways and will continue to be
a corner stone in its success.
CCoommmmeennttss oonn tthhee TTuurrnnaarroouunndd
"The turnaround is not hype because the net revenues have increased sharply," said Prof. G.
Raghuram. "By increasing the axle-loading of wagons (which increases freight traffic) and,
combining it with a market-oriented approach, Lalu Prasad has contributed to the success of Indian
Railways," Raghuram added.
And says KPMG: "Indian Railways is in a dynamic phase of growth with new initiatives planned
to capitalise on the existing gains and moving steadier and closer to the larger objective of offering
world-class services in both freight and passenger transportation."
"The railways are now working like a private sector corporation. This is great news for India. We
wish other public services, especially in the social sector, like education and health would follow
suit," Habil Khorakiwala, president of an apex industry group, the Federation of Indian Chambers
of Commerce and Industry (FICCI), said.
There are areas that are still a concern to the commuters and other users of the Indian Railways
facilities. These include delays, cleanliness of some of the infrastructure such as the stations etc.
However, everyone agrees that the financial turnaround has been completed and the results need
consolidation.
Please refer Appendix III for further comments on the turnaround.
SSrrii LLaannkkaa RRaaiillwwaayyss –– CCuurrrreenntt SSiittuuaattiioonn
Sri Lanka Railways is also in a similar position to that the Indian Railways found itself to be in the
1990s. The following are some of the critical problems faced by SLR:
✔ Lost its market share in profitable freight business;
✔ Lack of flexibility in pricing and unrealistic pricing methods;
✔ High cost of internally sourced products and services;
✔ Investment in projects that do not yield a return;
✔ Operating expenses much higher than gross revenue (greater than 100% operating
ratio);
✔ Lack of market orientation; and
✔ Politicization of the decision making process.
As per 2008 figures, the recurrent expenditure was Rs 8.0 billion with the total revenue under Rs
4.0 billion. This has further deteriorated over 2009 and 2010.While there are abilities, they are not
converted into capabilities. For instance, when the SLR repaired and restored the coastal lines,
bridges and signal systems in record time after the tsunami devastation and put trains back on
track on full steam with the able assistance of the Central Engineering Consultancy Bureau
(CECB), the State Development Corporation (SD&CC) and the State Engineering Corporation
(SEC) we were hopeful that we would receive encouragement and support to revive the SLR. This
fete of tsunami repairs was accomplished at a fraction of the estimates given by foreign companies

and the time taken was also only a few months compared to years that were required by them.
Unfortunately, our hopes for a SLR turnaround were only short lived.
SSrrii LLaannkkaa RRaaiillwwaayyss –– TThhee FFuuttuurree
Just as in the case of the Indian economy, our economy is also set to grow at around 8-10% a year
providing the buoyancy for the transport sector. SLR operations could be compared to one of the
16 zones in Indian Railways and could be modeled accordingly in a profitable manner.
SLR has a strong asset base that can be developed through genuine public-private partnerships.
Outsourcing can be introduced as in the case of the Indian Railways to replace internal products
and services that are loss makers. The end of the war has made all tracks in Sri Lanka operable and
long haul lines could be operated in a more productive manner and round the clock.
Freight can be attracted especially with a network of storage facilities and a cold chain. Increasing
tourist arrivals provide a great opportunity.
Railway is 2-5 times energy efficient. Electrification would create greater synergies and make
travel greener and healthier. Railways uses 2-3 times less land mass for each passenger transported
and saves precious urban and cleared land.
Therefore, let’s select the right strategies. Let’s create an era of caring and rewarding as in the case
of the Indian Railways. Let there be political leadership void of political interference. Let there be
goals and targets set and a policy and procedure framework made conducive for their achievement.
Then we can convert abilities into capabilities. Knowledge and experience into tangible results.
Followers into leaders. Weaknesses into strengths and threats into opportunities. And SLR into a
sustainable public utility.
CCoonncclluussiioonn
As engineers who follow the tradition and in the foot steps of Eng B D Rampala, we the Sri Lanka
Railway engineers are committed for invention, innovation, adaptation and adoption as necessary
to put SLR back on the track that leads to sustainability and committed public service. We are
supported by the SLR staff of all categories as well. Our universities and technical colleges
produce some of the best engineers and technical people in the world and they also can join the
team.
If we are provided with the correct political leadership by successive ministers in charge of SLR as
in the case of the Indian Railways Turnaround Story, and if we are empowered as our Indian
counterparts are, and if we are allowed to make decisions based on scientific and business
fundamentals, then we can surprise the world through a faster than expected turnaround of SLR.
Once again, may I thank the Institution, Mechanical Engineering Sectional Committee, and you
ladies and gentlemen for this opportunity and wish that the legend of Eng. B D Rampala be kept
alive by making the SLR sustainable for the benefit of generations to come!
Thank you!

References
1 G Raghuram (Turnaround of Indian railway) 2007. Indian Institute of Management Report.
2 Rakesh Mohan Committee 2001. Highlights of the Executive Summary - available at
http:/www.irastimes.org/rkmreportingexesummary.htm accessed on 30 may 2007.
3 World Bank 1994, The World Bank railway database available at
http:/www.worldbank.org/transport/rail/rdb.htm.
4 Desh Gupta and Milind Sathye (Financial Turnaround of Indian Railways) 2008. Accessed
from Scribed web site on 17.6.2010.
5 IRFC Indian Railway Finance Corporation 2004 Annual Report, New Delhi.
6 The International Railway Union, www.uic.asso.fr
Appendix
1 Letter from Minister to GMs Dated 1st April, 2005
2 Letter from Minister to GMs Dated 27th March, 2006
3 Tracking the Indian Railways' Turnaround Saga
4 Advertisements published for IR image building
5 IR website pages.

Appendix I: Letter from Minister to GMs Dated 1 st April, 2005
Ministry of Railways
Government of India
No 2004/II(IV)/65/134 1 – 4 – 2005
My dear (All GMs),
As a result of the concerted efforts put in by all the Zonal Railways, IR is poised to achieve a land mark
loading of 600 MTs in the financial year 2004-05 and regain some of the market share conceded to the road
sector over the years. I would like to place on record my deep appreciation for the efforts made by you and
your team of officers and staff for achieving this outstanding performance.
2. The task in the next financial year 2005-06 would be even more daunting and challenging as we have to
gear up for Mission 700 MT freight loading. An action plan has been drawn for realizing this mission, a
copy of which is enclosed. The GMs, PHODs and DRMs must execute this plan in MISSION MODE and
earmark a senior officer of their respective offices to ensure strict compliance of all the points listed in the
action plan on FAST TRACK basis.
3. Everyday over 325 rakes take more than 24 hours in loading/unloading and 170 rakes take more than 15
hours in train examination. The time taken in arrival to release is also abnormally high. I am constrained to
note that GMs of some of the important freight loading railways having high terminal detentions and very
poor freight rolling stock productivity parameters have not even once highlighted the steps taken by them to
reduce terminal detentions and to improve these indicators during the last 6 to 8 months. THIS MUST
CHANGE and all the GMs must highlight the steps taken by them to execute the aforesaid action plan and
to improve productivity of assets in the main body of the MCDO. All the GMs MUST INITIATE measures
as considered necessary for bringing down the time taken by every single rake in loading/unloading and
train examination to less than 20 hours and 10 hours respectively. They should immediately send proposals
for up gradation of terminals, asset maintenance, train examination and other traffic facility works for
reducing terminal detention and enhancing throughput and I assure you that funds will not be a constraint
for the timely execution of these critical works. All the on-going throughput enhancement including traffic
facility works should also be targeted for completion on top priority basis.
4. It is learnt that some of the earnings contracts are not finalized for months together while some of those
relating to catering, advertisement, bookstalls etc. are being renewed at ridiculously low license fees. As a
result, we are incurring huge losses on catering (Rs 441 crores), parcel and other coaching services (Rs 782
crores). These losses need to be reduced by at least 50% in the course of this year by ensuring that all
pending earnings contracts/licensees including those relating to catering and parcel services are finalized at
realistic licensee fees without any further delay and in future if finalization of these contracts is delayed by
more than 3 months, responsibilities should be fixed for the same. Steps should also be taken for increasing
occupancy of trains by at least 2-3% by adding more coachs to popular trains, improving the time table of
unpopular trains, rationalizing reservation quotas and checking ticket-less traveling.
With these efforts, I hope that we would not only maintain the trend of regaining market share in freight
loading but also improve operating ratio to less than 88% by achieving higher productivity of assets and
manpower in the next financial year. I would once again request that al the aforesaid points should regularly
be highlighted in the MCDOs.
Encl: As above
Yours Sincerely,
(Lalu Prasad)
General Manager,
(All Indian Railways)
[Source: MOR, 2006, Internal Correspondence (2006 cited by G Raghuram 2007)]

Appendix II: Le tter from Minister to GMs Dated 27 th March, 2006
Ministry of Railways
Government of India
DO No MR/M/21/2006 27th March, 2006
My dear (All GMs),
Let me, first of all, congratulate you and your team of officers and staff for record breaking performance
with internal generation of Rs 13,000 crore and operating ratio of 83% during the year 2005-06. However,
this should not make us complacent and we should try for freight loading of 800 mt, internal generation of
Rs 20,000 crore and operating ratio of 77% in the year 2006-07.
With this rate of growth, we would be able to carry 1200 mt of freight traffic and 8000 million passengers
by 2012. We must, therefore, start thinking big and leverage annual plan size. All zonal railways,
particularly SC, SE, SW and Eco in which over 30,000 iron ore indents are pending, supplementary/main
budget for capacity augmentation and de-bottlenecking of junctions, yards and terminal operations (see
Annex-I). GMs should not hesitate in sending such proposals irrespective of the amount involved. There is
an urgent need to take away small works from CAO(C) and strengthen them further for completion of all
on-going throughput enhancement works within the given deadlines. GMs should personally monitor this on
a regular basis.
It is a matter of concern that still 25% rakes take more than 24 hours and over 50% rakes take more than 15
hours in loading and unloading. All zonal railways should identify such terminals/sidings and take
immediate necessary steps for reducing terminal detentions below the national average of 16 hours at such
stations. We should try to further improve productivity of rolling stock by improving loco outage beyond
10% and bringing down turn round time of wagons to 4.5 days (see Annex-II). Implementation of terminal
incentive cum engine on load schemes on sidings handling one or two rakes per day should also be pursued
vigorously.
Despite our resolve to celebrate 2006 as the year of ‘Serving the passengers with a smile’, passengers have
so far not felt perceptible improvement in ‘touch and feel items’. DRMs should be asked to play a lead role
in percolating this spirit down to the lowest level. Every DRM should select at least 5 stations and transform
them into modern stations within a period of next 12 months. They should leverage public private
partnerships for upgradation of stations, toilets, waiting rooms etc. They are also being empowered for
sanctioning passenger amenities works upto Rs 30 lakhs and sufficient funds would be made available at
their disposal for such works.
We have recorded around 50% growth in sundry and other coaching earnings in the year 2005-06 and we
should try to surpass this growth rate during the next year. This would require (a) timely finalization of
earning contracts, and (b) upward revision of license fees by 5-10 times in line with the true potential of
land leasing and commercial earning contracts. As requested vide my earlier DO, I would again request you
to bring down passenger losses by 50% and wipe out catering and parcel losses completely by the end of
2006-07.
I would like to be apprised on the steps taken by you on the aforesaid points through your MCDOs.
With best wishes,
Yours Sincerely,
(Lalu Prasad)
[Source: MOR, 2006, Internal Correspondence (2006 cited by G Raghuram
2007)]

Appendix III
Tracking the Indian Railways' Turnaround Saga
http://indiainteracts.in/columnist/2007/07/21/Tracking-the-Indian-Railways-turnaround-saga/
It's a turnaround story that has not only amazed management experts but also caught the
attention of premier global business schools like Harvard and Wharton - the dramatic return to
profitability for the 154-year-old Indian Railways, among the world's largest railroad
networks.
In February, when Railway Minister Lalu Prasad presented India's railway budget for the 2007-
08 fiscal, its most striking aspect was the Rs.215 billion ($4.5 billion) surplus he announced
for the organisation that employs 1.5 million people and boasts a 63,332-kilometer network
that ferries 14 million passengers daily in 9,000 trains (4,000 more for cargo) from 6,947
stations.
"The railways are poised to create history," exulted Lalu Prasad, one of India's most colourful
politicians, during his 116-minute speech, referring to the highest-ever surplus - akin to
profits for companies - which the Indian Railways was projected to post for the fiscal year
ended March 31.
"This is the same railway that defaulted on the payment of dividend and whose fund balances
had dipped to Rs.3.59 billion ($80 million) in 2001," said the minister to the amazement of
industry honchos and experts who were listening attentively to the speech.
In fact, he not only said that the surplus would increase next fiscal but also belied speculation
over freight and upper class fare hikes that had once been a regular feature for the railways
to bridge deficits. In fact, he even announced an across-the-board cut in tariffs and rolled out
plans for 40 new trains, extended the run of 23 and increased the frequencies of 14 others.
All this only left experts gasping. They wondered what had caused such a sharp turnaround in
the organisation from being the backbone of the Indian economy to being termed a "white
elephant" headed towards bankruptcy by a government-appointed expert group.
"Today Indian Railways is on the verge of a financial crisis. To put it bluntly, the
'business as usual, low growth' will rapidly drive it to fatal bankruptcy, and in 16 years,
the Government of India will be saddled with additional financial liability," said the
report presented in July 2001.
This was, indeed, alarming for the Indian Railways, which since the commencement of its first
journey on April 16, 1853, has come to reflect the pluralistic character of the country with
many unique features such as having the world's largest as well as the smallest stations, the
oldest running locomotive and a separate budget since 1924.
But from 2005, the signs of change were visible and became well entrenched by 2007.
"The railways' renaissance has been engineered by simple entrepreneurial practices, which
have evoked the admiration of internationally renowned institutions and companies alike,"
said a report by KPMG, which also conducted an international conference on railways in New
Delhi last month.
"The railways are now working like a private sector corporation. This is great news for India.
We wish other public services, especially in the social sector, like education and health would
follow suit," Habil Khorakiwala, president of an apex industry group, the Federation of Indian
Chambers of Commerce and Industry (FICCI), said.

"The turnaround is not hype because the net revenues have increased sharply," said Prof. G.
Raghuram, who has thoroughly examined the performance of the Indian Railways as a case
study for the premier Indian Institute of Management at Ahmedabad, one of India's best-known
business schools.
"By increasing the axle-loading of wagons (which increases freight traffic) and, combining it
with a market-oriented approach, Lalu Prasad has contributed to the success of Indian
Railways," Raghuram added.
Lalu Prasad attributed the transformation almost entirely to improved efficiency that was even
able to withstand increased competition from budget carriers that were offering to fly
passengers for the cost of a second-class air-conditioned fare of the railways.
"Over the past 30 months, freight volumes have grown by 10 percent. Similarly, growth in
passenger volumes has been doubled," he explained to a group of 130 students from Harvard
and Wharton a few months ago, while delivering a lecture on the transformation of Indian
Railways.
"On the supply side, increase in load coupled with reduction in turnaround time of wagons
from seven to five days has contributed to an incremental loading capacity," the minister said
in the rather simplistic explanation.
With financial parameters back on track, the Indian Railways now has set itself ambitious
targets in areas such as refurbishment of stations, passenger amenities, better coaches and
new freight corridors as it approaches the 11th Five Year Plan that begins April 1.
And says KPMG: "Indian Railways is in a dynamic phase of growth with new initiatives planned
to capitalize on the existing gains and moving steadier and closer to the larger objective of
offering world-class services in both freight and passenger transportation."

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