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Another core focus area for IR was the passenger segment. IR aimed to increase
its earnings from passengers by deploying 24 coach trains, installing additional
coaches, running additional trains, etc. The demand for the additional trains
was determined based on the data obtained by the passenger reservation system.
Other initiatives taken by the IR to increase revenues from the passenger
segment included increasing cancellation charges for tickets and
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augmenting the time limit for the 'tatkal scheme',
that targeted 'last minute' passengers, from one day to three days and
later to five days.
The tatkal scheme helped in boosting IR revenues as the Railways adopted
a differential pricing strategy, the charges depending on the booking
time. As a result, IR reported passenger earnings of Rs. 10.13 billion
in FY 2005-2006.
Yadav also focused on other areas including services related to parcel,
catering, and advertising. The IR parcel capacity utilization was a mere
5 million tons compared to its capacity of 35 million tons. The cost
incurred by IR on parcel services was Rs. 18 billion including haulage
costs and staff salaries while revenues earned from the services were
only Rs. 5 billion.
To address this issue, IR adopted an outsourcing strategy through a
public private partnership. The parcel services were leased out to
parcel service providers, thereby decreasing costs to IR. Similarly,
catering contracts were leased to caterers through an annual open
tendering system by the Indian Railway Catering and Tourism Corporation
(IRCTC).
IR proposed to increase its earnings from advertising services by open
competitive bidding of space for hoardings and advertisements and
wholesale leasing of stations in contrast to retail leasing. On the
whole, parcel, catering, and advertising services contributed earnings
of Rs. 5.99 billion in FY 2005-2006.
IR's successful turnaround caught the attention of renowned business
schools and corporations around the world as well as railway
service-providers of other nations. In late 2006, around 100 students
from the Harvard Business School and 30 students from Wharton School of
the University of Pennsylvania along with seven professors came to
attend a lecture by Yadav on the IR turnaround story.
However, not everyone was impressed. Critics said that the 'turnaround'
was not a result of better management but rather of some 'innovative
accounting practices on the one hand and some changes in key commercial
practices on the other.'8 They
argued that the model adopted by Yadav was not sustainable.
In January 2008, IR announced its plans to modernize railway stations
and offer value-added services like restaurants, cyber cafes, shopping
malls, etc. These services were mainly targeted at people who came to
the railway stations to send off or receive passengers.
Several corporations such as the Tata Group, Reliance Industries Ltd.,
Larsen & Toubro, GVK Group, etc., expressed interest in modernizing the
railway network. Commenting on railway modernization, G Raghunathan (Raghunathan),
a Professor of the Indian Institute of Management, Ahmedabad, who had
prepared a case study on the turnaround story, said, "The principles of
airport modernization can be applied to railway station modernization,
too. There is huge potential for non-ticket-based revenues in railway
stations like the concept of non-aeronautical revenues in the
privately-run airports."9
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8] V Sridhar, "Feel-good Train," www.frontline.in,
March 10-23, 2007.
9] P R Sanjai, "Tatas, Ambanis, DLF Interested in
Modernizing Railway Stations," www.livemint.com, January 4, 2008.
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