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  A white elephant turns pink

The story of 153 year old Indian Railways has for long been one of a modern technology gone native. It has been an object of veneration and worshipped, but also indulgently forgiven as subject to karma, like you and me. It is rarely expected to be answerable or accountable. Its losses are stoically dismissed as part of an essential national service. So, if we are now told that the Indian Railways has just become the second most profitable public enterprise after the ONGC, we are likely to be likely to be surprised. How did that happen?

Let us begin with a look at the gentle beast. There are today 84,000 km of rail track around the country on which over 16,000 trains run daily, threading through 36,000 stations. The railways are never still. They are the heart-beats of the nation. At any given time, somewhere, some train is unfussily running.

Trains have become a part of Indian life. They have been the cause of social change [-castes have had to share the same space], urbanization [-migration to far off cities became possible] and national integration. Passenger usage has grown: from 4 billion passengers in 1996, the number grew to 5.7 billion in 2006.

With this huge growth, sloth also settled in. It’s Ministership has been sought after and fought over as it is a seat of patronage: it employs 1.4 million people and has a budget of Rs.55,000 crores.

Presentation of its annual budget was met with resigned boredom by Indians. To cover deficits, passengers fares and freight rates were regularly raised. Obviously it was not the right recipe, though people accepted rises as inevitable. Net Revenue Receipts [NRR] fell from Rs.4135 crores in 1996 to Rs.1071 crores in 2001.

Then how come the NRR has come to stand at a whopping Rs.14,300 crores in 2006, breathing down the neck of topper ONGC’s Rs.15,143 cr? First came the realisation in 2004, that no amount of price increases can pay the bills; to make ends meet, the freight revenue had to increase. The economy was growing and so there was enough business but industry was not going to take flat dictated rates. The new Golden Quadrilateral too, was making road transport quick and attractively priced.

Correctly reading the sign of the times, Railway management looked inwards. They discovered that it took a wagon 7 days to turn around at each end. By merely reducing this to the current 5.5 days, the number of trains available for transport increased from 565 to 800. All without any additional investment or increase in costs. They then adopted flexible pricing. The steel industry which is among its largest customers, got a negotiated rate. In essence, that has been about the extent of reforms so far, but the dramatic increase in profits has whetted their appetite.

On the anvil is a freight corridor, exclusively for freight trains. This will be a parallel of the highways but will be aligned to run through major industries. Railways are benchmarking themselves against China, a country comparable in size and growth rate. China’s trains run at 150 kmph and India’s at 25; China strings together 150 wagons per train and India, a mere 65. It is common for a goods train to stand aside to let as many as ten express trains. The exclusive freight corridor will change all that. Even though it will cost an astounding Rs.65,000 crores, freight volume growing at 15% per year will easily make that investment profitable.

Rising diesel prices have played to railroad’s advantage. 60% of a truck’s operating cost is due to diesel; for trains, it’s a mere 8%. As this article goes online, there has been another fuel price rise. The Railway Minister Mr Lalu Prasad Yadav, however has spun that to an advantage. While the truckers have to increase freight rates, the railways won’t, he says. Quite soon, all trains will go electric, he added.

Though it is freight that is more profitable, the passenger sector is not being ignored. The growing number of private airlines have not so much sucked away rail travellers as they have created a new market. Here too, rising fuel prices has increased the fare differential. Railways are also piling on friendlier service. Greater attention is being paid to cleanliness. Ticketing has become hassle free, trains tend to be reasonably punctual and their coverage is wider. For destinations that can be reached by an overnight journey, trains are the first choice.

Selective privatisation has added to railways’ profits and passengers’ convenience. Vast free spaces of stations are being turned into arcades for franchisees’ shops. Food courts, convenience stores, browsing centres, WiFi networks are becoming common. Recently the State Bank of India offered Rs 14.5 crores as license fee to locate 650 ATMs. Many consumer brands are likewise bidding for opportunities to sell to 5 billion annual foot-falls. Innovations are being daringly experimented with by the management team. Double decker trains for containers, ferrying loaded trucks over hilly terrains, growing jatropha in its wastelands to produce biodiesel for its use, setting up of its own broadband network along track-ways, inviting modern hotel chains to set up on its vacant lots are all initiatives one is not likely to associate with staid old Indian Railways.

It’d be churlish therefore, not to acknowledge that all these transformations are being brought about by our much reviled politicians and bureaucrats with nary a big-name consultant in sight.