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Consulting|Technology|International business

The Indian Railways and its return to profitability

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This topic even caught the interest of the Indian Institute of Management, Ahmedabad, India’s #1 business school.

How did Lalu really do this seemingly miraculous task?

Strategy

Its actually more of a sound monitoring from Lalu and a firm control on his GM’s (General Manager’s) in various divisions. There was also the stiff competition from alternate modes of transport such as low cost airlines etc.

The IIM Ahmedabad report that surmises this “turnaround” can be viewed here: http://www.iimahd.ernet.in/publications/data/2007-02-03graghuram.pdf

Essentially, there were flaws in the way the Indian Railways (IR) system used to work. Its no mean feat for the Indian railways to emerge as the 2nd most profitable enterprise among PSU’s (second only to the Navratna – Oil and Natural Gas Commission – ONGC)!

The net revenue of the Indian Railways (IR) as presented in the budget in Feb 2007 was almost Rs. 14870 crores with a cash surplus of Rs. 20000 crores! The IR employs close to 14 lac employees across the country! The operating ratio was less than 80% – which makes it join the select club of railways across the world to achieve this feat.

Source: http://indianrailways.gov.in/

Key facts of the IR are documented here: http://www.indianrail.gov.in/abir.html

Milk the cow, otherwise it will fall sick” – is Lalu’s formula adopted for this turnaround!

Reduce unit cost, volumes, give attention to detail to passenger comfort, make trains more accessible, improve wagon turnaround and increase axle loading.

http://economictimes.indiatimes.com/articleshow/1611991.cms

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Written by Naveen Athresh

April 1, 2007 at 7:51 pm

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