Jun 15, 2006
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.