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The
Indian Railways (IR), the world's largest rail network under a
single management, registered total earnings of approximately Rs.
444.72 billion for the period April-November 2007.
This represented a growth of 12.11 percent compared to the same
period in 2006.1
Analysts felt the figures showed that the dramatic turnaround
story of the IR continued. IR was in deep financial trouble in
the 1990s. Its fund balances had touched a low of Rs. 1.49
billion in FY 1999-2000.2
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IR cited many reasons for its bad performance
including the leadership of the then Railway Minister, Nitish Kumar.
Some analysts attributed the dramatic turnaround to the leadership
qualities of Laloo Prasad Yadav (Yadav) who became the Minister of
Railways in May 2004.
Though IR was the world's fourth largest freight carrier, and also the
largest employer in India, it was consistently losing money in the
1990s. In mid-2001, the Expert Group on Railways3
noted, "Today IR is 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 will
be saddled with an additional financial liability of over Rs 61,000
crore [610 billion]... On a pure operating level, IR is in a terminal debt
trap."4 The bleeding continued
through 2004, with IR incurring losses of around Rs. 1.37 billion in FY
2002-2003 and again in FY 2003-2004.5
However, in FY 2005-2006, in what was termed as the most remarkable
turnaround of any company ever, IR registered profits of Rs. 150
billion.6 The next year, it
generated profits of Rs. 147 billion and in FY 2006-2007, of around Rs.
200 billion despite a cut in passenger fares.7
As of 2007, IR was India's second largest profit making Public Sector
Undertaking (PSU) after Oil and Natural Gas Corporation Ltd. (ONGC).
Some analysts felt that Yadav had not only turned IR around, but had
also been able to significantly boost its financial performance. Under
the turnaround plan, Yadav focused on certain key determinants which
would help in reviving the IR, such as, goods, passengers, and other
services related to parcel, catering, and advertising.
Initially, he emphasized bolstering the freight carriage system since it
was the major revenue earner for IR, contributing to 70 percent of its
annual revenues. The freight revenues were earned due to an increase in
the loadings of coal, steel, iron ore, and cement.
In 2006, the freight carrying capacity of IR was pushed up by increasing
the wagonload by 64 million tons. This led to a significant hike in
earnings.
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1] "Indian Railway's Strides of Progress in 2007," www.inrnews.com, December 27, 2007.
2] Karan Kumar, "Public-Private Partnership in
Indian Railways," www.ccsindia.org, 2007.
3] The Expert Group on Railways was constituted under
the chairmanship of Rakesh Mohan, the then Director General of the National
Council of Applied Economic Research (NCAER).
4] G Raghuram, "Turnaround of Indian Railways: A
Critical Appraisal of Strategies and Processes," www.iimahd.ernet.in, February
2007.
5] "Review on Passenger Revenue Management in Indian
Railways," www.cag.nic.in, 2005.
6] "Lalu to Teach Management at IIM-A," www.in.rediff.com, August 30, 2006.
7] "UPDATE 1-Indian Railways Makes $4.5 Bln Profit in
2006/07," www.reuters.com, February 26, 2007. |
