Indian Railways investment Opportunity

1. CASE: Strategic Capacity Management in Indian Railways
Indian Railways (IR) plays a vital role in supporting the economic activities of India. It operates on the
most extensive rail networks in the world. It achieved a fantastic double-digit growth in freight revenue
after 2004. One of the significant contributors to the so-called turnaround of IR is an increase in freight
revenue. During the financial year 2016-17, it carried 1107 million tons of goods and earned a record
level of INR 1.67 lakh crore from freight transportation". Capacity management, organization, and
professional management practices were at the core of this achievement. Increased axle loading,
reduced wagon turnaround, and market-oriented tariffs were three essential pillars of IR's operating
procedures to achieve this. The first two helped to jump IR's capacity for the next loading. Through
enhanced capacity to handle sub- substantially higher volume of loaded freight on the wheel at a
shorter time for a cash turnaround time of wagons by 14 percent, the IR increased the available wagon
capacity per day by 36 percent),
Increased Axle Load Capacity
Enhanced axle load increases the capacity of the same wagon. IR relaxed its four-decade-old wagon
loading norm of 20.3 tonnes per wagon and scaled it up by increasing the loading limit by another
eight tonnes. This immediately created an extra 64 million tonnes of freight capacity per year.
There were a few criticisms due to the apprehensions about safety compromises. However,
technocrats in IR believed that due to a switchover from locomotive engines to electric and diesel
engines, an additional 25-30 percent track load was created. This was due to the "hammer blow"
phenomenon of locomotive engines, which no longer exists. Moreover, IR now uses superior 60-kg
rails placed on concrete compared to earlier 45-kg rails on wooden sleepers. According to the then
Railway Minister, freight earnings were increased through carrying increased tonnage, which was by
enhancement of loading limits), About 170 million tonnes increase in loading capacity was achieved in
three years starting in 2004. This increased about 170 million tonnes of power, which exceeded the
total incremental loading in the 1990s by 120 percent.
Increased Turnaround Time
The following operational measures were taken to increase the turnaround time: (1) Taster train
movement on the track ii) high Speed of loading/unloading. (ii) increase in the working hours of
loading/unloading, (iv) mechanization of track modernization, (v) reduced number of level-crossing,
(vi) dedicated freight corridors to decrease the turnaround time and thus increase in on-the-move time
available for the rakes. Round-the-clock loading and unloading were facilitated, which was earlier
possible during the daytime only. Freight Operations Information System (FOIS) helped strict control
of the idle wagon capacity. With these efforts, the average wagon turnaround time decreased from
seven to five days. Theoretically, it is equivalent to creating an extra 30 percent capacity ((100*(7-5)/7)
= 30).
Dedicated Freight Corridors
IR is already working on its busiest route to create additional capacity by developing Dedicated Freight
Corridors (DFCs)4; around 1,504 KM of Western DFC is planned from Jawaharlal Nehru Port (JNPT) in
Mumbai to Tughlakabad and Dadri near Delhi. It would support the transportation requirements of
containers between the existing and emerging ports in Maharashtra and Gujrat and the northern part
of India.

2. Similarly, around 1.856 KM of Eastern DFC are planned from Ludhiana in Punjab to Dankuni near
Kolkata. DFCs will help IR to substantially increase its capacity as DFCS can handle double-stack
containers of 25 tonnes axle load, resulting in an additional 25 percent cargo handling capacity. It can
support a 1.5 KM long train compared to a conventional goods train of 650 meters long. The speed of
these high-capacity goods trains can be fast as 100 KM per hour as compared to the current maximum
of 75 KM per hour. The learning of IR's freight capacity management is simple yet valuable. Extra
capacity can be created by removing inefficiencies, in-built redundancies, and over-precautions in the
existing systems. Faster speed in operation and delivery can result in the system's extra power without
adding additional resources like machines, manpower, wagon, etc.
Questions
1. Critically examine the IR turnaround story. What are the criticisms related to its capacity
expansion plans?
2. Explain different approaches towards the capacity expansion of IR. Is there any learning lesson
for the Indian manufacturing and service industry?
3. In the role of operation manager, discuss your view on making IR more efficient and effective.
References
1. https://www. India today. in/India/story/railways-freight-passenger-revenue-increase-record-suresh-prabhu-
969486-2017-04-04(Accessed on 15 January 2018)
2. KPMG: Indian Railways: The turnaround, International Railway Conference, New Delhi (Background note).
Available at http://www.in.kpmg.com/pdf/Railway_ Conf.pdf (Accessed on 15 January 2018)
3. Yadav. L. P. 2007. Speech of Shri Lalu Prasad Yadav: Railway Budget 2007-08 (Part I), February 26.
Yadav, L.P. 2007. Speech of Shri Lalu Prasad Yadav: Railway Budget 2007-08 (Part I), February 26, [http://www
Rediff com/money/2007/feb/26bud28.htm) (Accessed on 15 January 2018)
5. Corporate website of Dedicated Freight Corridor Corporation of India (DFCCIL) http://dfccil.gov.in/dfccil
app/Home

3. Sure, based on the provided article, here are the answers to the questions:
1. Critically examine the IR turnaround story. What are the criticisms related to its capacity expansion plans?
The Indian Railways (IR) witnessed a significant turnaround by achieving double-digit growth in freight revenue
after 2004. This turnaround was driven by capacity management, organizational improvements, and
professional management practices. Some of the key factors contributing to this turnaround included increased
axle loading, reduced wagon turnaround time, and market-oriented tariffs. The increase in axle load capacity
allowed for more goods to be transported in the same wagons, while efforts to enhance the turnaround time
and efficient operations further bolstered the capacity.
However, there were criticisms related to safety concerns due to the relaxation of wagon loading norms, which
allowed for higher axle loads. Some apprehensions were raised about potential compromises in safety due to
the increased loads. Additionally, the shift from traditional locomotive engines to electric and diesel engines
was believed to create a higher track load, raising questions about infrastructure durability and maintenance
requirements. Despite these concerns, proponents argued that improved technology and infrastructure
enhancements addressed these issues.
2. Explain different approaches towards the capacity expansion of IR. Is there any learning lesson for the
Indian manufacturing and service industry?
The capacity expansion of Indian Railways (IR) was achieved through various approaches:
 Increased Axle Load Capacity: Relaxing the traditional wagon loading norms by increasing the axle load
capacity resulted in the ability to transport more goods in the same wagons. This immediate increase in
freight capacity was a notable contributor.
 Increased Turnaround Time: Operational measures such as faster train movements, high-speed
loading/unloading, extended working hours, mechanization, and reduced level crossings all contributed
to decreased wagon turnaround time. This effectively created extra capacity by optimizing existing
resources.
 Dedicated Freight Corridors (DFCs): IR's strategy to develop Dedicated Freight Corridors (DFCs) helped
increase capacity substantially. These corridors could handle double-stack containers with higher axle
loads and increased train speeds, resulting in a significant cargo handling capacity boost.
The learning lesson for the Indian manufacturing and service industry lies in the potential to create extra
capacity by eliminating inefficiencies and over-precautions in existing systems. By optimizing operations,
improving resource utilization, and embracing technology, industries can enhance their capacity without
necessarily requiring additional resources. Efficient utilization of existing resources and the adoption of
innovative approaches can lead to substantial capacity expansion.
3. In the role of operation manager, discuss your view on making IR more efficient and effective.
As an operations manager, my perspective on making Indian Railways (IR) more efficient and effective would
involve a multi-pronged approach:
 Advanced Technology Integration: Embrace cutting-edge technologies like Internet of Things (IoT),
predictive analytics, and automation to monitor and manage train movements, track maintenance, and
equipment health in real time. This would enable proactive decision-making and minimize disruptions.
 Data-Driven Decision-Making: Implement data analytics to analyze historical performance data,
identify bottlenecks, predict maintenance requirements, and optimize resource allocation for improved
efficiency and reduced downtime.
 Optimized Scheduling: Develop optimized scheduling algorithms for train movements,
loading/unloading, and maintenance activities to minimize idle time and maximize resource utilization.
 Infrastructure Modernization: Invest in modernizing tracks, stations, and signaling systems to
accommodate higher speeds and heavier loads, ultimately increasing overall capacity.
 Skill Development: Train and empower the workforce with the necessary skills to operate and maintain
advanced technologies, ensuring seamless operations and quicker issue resolution.
 Collaboration with Stakeholders: Collaborate closely with manufacturers, freight companies, and other
stakeholders to streamline logistics, reduce turnaround times, and enhance coordination across the
supply chain.
 Continuous Improvement: Implement a culture of continuous improvement through regular audits,
feedback loops, and process enhancements to identify opportunities for further optimization.
By implementing these strategies, Indian Railways can evolve into a more efficient and effective transportation
network, contributing to economic growth and maintaining its status as a crucial component of India's

4. infrastructure.