The reforms undertaken by then Railway Minister Lalu Prasad Yadav led to an impressive turnaround of the Indian Railways. Some key reforms included focusing on reducing transportation costs by running faster and heavier trains, increasing freight rates, investing in technology, and enhancing services for poorer passengers. While these reforms helped put the Railways on a stronger financial footing, some questions remained about their long-term sustainability without continued leadership focus and additional structural changes.

1. Indian Railways: Building a Permanent Legacy
(PGP group 08)-
120116 Tiasha Banerjee
120117 Ujjwal Aaishwarya
120119 Vikash Mishra
120120 Yukti Sharma
110072 Ankur Das
110090 Nitish Kumar Sinha

2. Q.1) How efficient is the Indian Railways
(IR) network?
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3. • Indian Railways was a nation’s lifeline and played a key role in connecting and binding together
1.15 billion people dispersed across a vast territory.
• Indian railways was efficient as it made incremental investments in freight operations
information system.
• It ensured tracking of consignments, optimize empty rakes for loading and lay the foundation for
a complete logistics management system, which would furnish real time information on the chain
of physical distribution.
• IR adopted the airlines model of upgrading customers to higher classes to increase capacity
utilization and obtain incremental revenue by moving passengers from unreserved to the reserved
category.
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4. • IR set up electronic payment gateways for various freight customers to ensure the speedy
and secure transfer of funds.
• IR enhanced the TATKAL(“ immediate”) service, which enabled last minute booking of
train tickets to include more trains, classes and seats.
• IR with the help of technology enhance the customer experience. It invested in an
unreserved ticketing system, passenger reservation system and ticket vending machines
to help reduce the bottlenecks in ticketing.
• Further it introduced the computerized charting to enable better forecasting of trains.
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5. Q 2. Should government be in the transportation business? Use proper reasons to substantiate
your answer. You may compare with some other countries like China/ Germany where it is
nationalized and US where it is privately owned.

6. Yes, government should be in transportation business.
Privatization of Indian Railway would lead to –
• Railway facilities would only be provided in the profitable regions
• Accountability of any miss happening or accidents would be of private entity
• Railways are considered as medium of social reform as people of all classes use railways as a
medium of transportation and could easily afford it, privatization would lead to hike in tariff
• Railways are also used as a medium of transportations in flood prone areas or drought areas to
provide social welfare
• Indian railway is the second-largest nonmilitary employer in the world after Wal-Mart, and largest
world public utility employer with 1.4 million people on its payrolls.

7. Size & Scale Indicators India China U.S ( All class 1)
Total Route (Km) 63,465 62,200 153,787
Passengers(‘000) 5,378,000 1,106,510 NA
Freight Tons(Mn) 602 2,309 1,723
Freight Tons Km (Mn) 407,398 1,934,612 2,478,914
Ratio Passenger to Freight
Rates
0.36 1.32 NA
Comparison Chart

8. 3. “Indian Railways was on the brink of bankruptcy in 2001”. What was
wrong? What were the factors, you think, that contributed to this
situation?

9. • Investments not yielding results
• Decline in share of passenger and goods
• Social service obligation
• The ration of earnings per passenger KM to freight earning per ton KM
decline from 0.5 in 1951 to 0.3 in 2001.
• The operating ratio reached an all time high of 98.3%.
• Lack of commercial orientation
• Failure to close unprofitable and uneconomical branch lines
• Uncontrolled workforce expenses
• IR’s fleet and infrastructure was ageing resulting in terrible accidents.
• In 2001, Financial crisis culminated when IR was compelled to defer the
dividend payable to the government.

10. 4.Do you think the factors that contributed to bankruptcy of Indian Railways in 2001 apply to any state
owned enterprises(SOE) which are, in general, considered to be relatively less efficient when
compared to private companies? Give reasons and examples to support your answer.

11. • PSUs could not utilize their entire capacity which was created at high cost.
• Input- output ratio is not optimum .
• Manpower is in excess of actual requirements in a number of cases.
• Projects took longer time to complete than was initially envisaged.
• There was indiscipline among workers.
• Lack of managerial efficiency and effectiveness.

12. 5) What were the reforms undertaken by the then Railway Minister Sri Lalu
Prasad Yadav that led to the impressive turnaround of IR since 2004 ?
• Prasad and his team focused on reducing the unit cost of transportation by using “faster
and heavier trains”.
• Faster train referred to a reduction in turn around time .
• Heavier trains meant that IR manager could increase profit without having to increase
their rolling stock.
• Electrification of some track junctions allows faster transition and reduced the detention
time of some rakes.
• Maintenance practices were changed so that the time between successive reexamination
of rolling stock was increased , leading to a reduced number of examination as well as
increased utilization of existing capacity.
• Increased the iron ore for exports freight rates by 110%.
• IR made significant investment in technology to enhance productivity .

13. • IR progressively set up electronic payment gateways for various freight
customers to ensure speedy and secure transfer of funds.
• IR reduced premium class fares due to unoccupancy and tailored services to the
poor at affordable prices and also introduced Garib Rath.
• Enhancement of Tatkal which enabled last minute booking of trains tickets at a
premium price.
• IR adopted the airlines model of upgrading customers to higher classes to
increase capacity utilization.

14. Q.6 If the Indian Railways were a private company
and you were hired as a consultant to revamp the
company in 2004, what would you recommend?
How would your recommendations differ from
those adopted by the then railway minister and his
Officer on Special Duty?

15. • Separate suburban services and run them as joint ventures with state
governments.
• Private entry into running both freight and passenger trains in competition
with Indian Railways
• Separation of rail track from rolling stock.
• Downsizing of manpower.
• Increase in passenger tariff.
• Collaboration with competitors.
• Link increase in passenger fares to better passenger services
• Create a separate company for railway infrastructure
• Open access for any new operator who wishes to enter the market for
operating trains

16. Q-7. Do you think the reforms brought in by Sri Lalu Prasad Yadav
could be long lasting? Give reasons for both why they could be and
they could not be expected to be long lasting.

17. • Leadership style of Mr Lalu Prasad was a common sense based approach,
showing an astute understanding of the market reality, the asset base of the
IR and the expertise and capability of the IR‘s management and systems.
Consequently, he followed this up with the principles of leveraging the
assets and empowerment and delegation.
• Caring Attitude - Staff and Unions Mr Lalu Prasad had a positive approach
in dealing with the staff and unions. Given the financial performance of the
IR, the unions wanted a doubling of the contribution to the staff welfare
fund. He offered them more.

18. Past Approach
• Nothing can Change
• IR is in the Business of Railways.(i.e. A monopoly)
• Tariff focused
• Restructuring and Rightsizing
Present Approach
• Passion and Integrity to Change
• IR is in the business of transportation. A highly competitive market.
• Unit-Cost focused
• Regeneration and Competitiveness

19. • Lalu had highlighted his priorities, the first one was restoring the Indian Railways'
financial loss, then improving it.
• 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. It was supposed to be
heading for bankruptcy.
• There has been a major turnaround since then. For the past two years, it has been
earning cash profits

20. 8. Analyse the effectiveness of the reforms from what actually
happened in Indian Railways after the reforms.

21. • Downsizing- No. of employees in 1991 was 1.652, was brought down to 1.472 in 2003 and to 1.412
million in 2006. The aim was to remove excess staff. Indian railways did not filled any vacancies created
due to retirement or any other reasons.
• Outsourcing- Besides the catering and parcel service activity, the IR also outsourced advertising activity.
the strategy of outsourcing through public private partnership and wholesaling rather than retailing was
adopted.
• Product Innovation- 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.
• New design- Indian Railways also introduced new design of wagons with higher pay load (carrying
capacity) but lower tare weight (weight of the empty wagon) that improved safety features. The effect of
these measures can be seen in higher freight revenue.
• Rise in demand- The rise in freight revenue - the main plank of the IR turnaround. IR raised the freight on
iron ore by 17%.