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100th Birth Anniversary of Eng. B D Rampala Engineer, Entrepreneur & Legend November 14, 1910 – November 14, 2010 Eng. B. D. Rampala Memorial Lecture 2010

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100th Birth Anniversary of 

Eng. B D Rampala

Engineer, Entrepreneur & LegendNovember 14, 1910 – November 14, 2010

Eng. B. D. Rampala

Memorial Lecture 2010

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By

Eng. Keerthi K. HewavithanaBsc (Eng) Hons. C.Eng.,(MIE)SL 

Headquarters Engineer

Sri Lanka Railways

 The Institution of Engineers, Sri Lanka 

Wimalasurendra Auditorium

Monday - November 15, 2010

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A case study approach

SuccessfulSuccessful

Turnaround of Turnaround of 

Indian Railways &Indian Railways &Lessons RelevantLessons Relevant

for Sri Lankafor Sri Lanka

RailwaysRailways

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4Eng. B D Rampala Memorial Lecture-2010

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•  The Indian Railways – A GovernmentDepartment

• Comes under the Ministry of Railways

5Eng. B D Rampala Memorial Lecture-2010

 

Total capital investment of US $ 14 billion 

Contributed to 1% of the GDP

Total staff of 1.5 Million

Largest employer in the organized business sector

Track length of 63,322 km.

Carries 14 Million passengers per day.

Locomotives available 7,910

Passenger service vehicles 42,441

Other coaching vehicles 5,822

Wagons 222,379

Railway stations 7,133

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6Eng. B D Rampala Memorial Lecture-2010

Bankruptcy inevitable!

Alarm

Time was running out

for Indian railways!

The Committee concluded in 2001 that:"Today Indian Railways is on the verge of a financial crisis.To put it bluntly, the 'business as usual, low growth' willrapidly drive it to fatal bankruptcy, and in 16 years, theGovernment of India will be saddled with additional financialliability of over Rs 61,000 crores… On a pure operatinglevel, IR is in a terminal debt trap." RMC Report - 2001

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Rakesh Mohan Committee (RMC) 

• Appointed by Government

• Review the Indian Railways operations

• Members: vast knowledge in railway and transport sector plus those

with futuristic thinking and knowledge/education background.

•  The RMC repot submitted in year 2001

Loss of market share in the profitable freight business Lack of flexibility in pricing High cost of internally sourced products and services Investment in un-remunerative projects

7Eng. B D Rampala Memorial Lecture-2010

Unable to respond to changes in transport market conditions in 1990s

Symptom

Approach

Problems

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Core Problem!

Politicization of the decision making process that

emphasized taking populist actions, rather than hard

business decisions 

SolutionComplete change in PhilosophyPhilosophy of the business

“Railway need to develop market oriented and customer 

friendly outlook due to emerging competition within the

transport sector”

Hon. Nitish Kumar – Railway Minister 

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Implementation• RMC report submitted in year 2001

• Turnaround started in around year 2003

• Hon Minister Lalu Prasad Yadiv (Minister since 2004) continued thephilosophy & strategies

• Minister adopted a common sense based approach, and showed anastute understanding of the market reality, and demonstrated thatgood economies is good politics.

Within 3 years Indian Railways showed impressive results

In year 2005 -2006 operating ratio of 83.5 % compared to 98.3% in year 2000

Targeted to achieve operational ratio of 65% in year 2010

Results

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Best Performance indicator in railway business

Operating Ratio =Total Operating Expenses

Gross Revenue Receipts

Year 2000 2005-06 2010-11

Operating Ratio 98.3% 83.5% 65%

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1999-00

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Operating ratio

Wagon Turnaround

Source : MOR India 12Eng. B D Rampala Memorial Lecture-2010

Operating Ratio =

Total Operating Expenses

Gross Revenue Receipts

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Retrenchment strategies

Repositioning strategies

Reorganization strategies

External Environmental strategies

13Eng. B D Rampala Memorial Lecture-2010

Strategies Adopted

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Cause pain,

stress and tension

amongst stakeholders!

Retrenchment (Cost Cutting Initiative)

Several retrenchment actions identified to review business units which are not value

adding.

• Withdraw from markets where firm is performing poorly

• Selling assets

• Reduce scale of operation

• Improve efficiency

• Downsizing

• Outsourcing

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Cause

Expectations,

Happiness!

Focus on growth

Product innovation

Product differentiation

Improving market shear

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Change in planning system

Decentralizing

Human resource initiative

Change in organization culture

18Eng. B D Rampala Memorial Lecture-2010

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Indian Railway Ministry/ RailwayBoard

IRCON

IRFC

CONCOR RITES

RVNL

IRCTC

23Eng. B D Rampala Memorial Lecture-2010

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• IRFC: 1986 (  positive effect due to facilitation of market borrowings for wagon procurement,

negative effect due to high interest rates)•

CONCOR:1989 (  positive effect due to focus oncontainerized movement of non-bulk)• Project Unigauge: Early 90’s (negative effect in

the 90’s, including due to reduction in track 

renewal works,   positive in the recent and futureyears)

• Fifth Pay Commission: 1997-98 (negative in the

late 90’s)

Some important steps taken by Railway Minister

 

24Eng. B D Rampala Memorial Lecture-2010

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• Special Railway Safety Fund: 2001-02 onwards( positive in the recent and future years)

• Reorganization from 9 to 16 zones: 2001-02 and

2002-03 ( positive in the future years, due togreater focus)

• Focus on PPP (public private partnership) format

for investments, catalyzed through RVNL:2002-03 onwards ( positive, due to the ability to

leverage other stakeholders’ funds).• Market oriented tariffs ( positive)

Some important steps taken by Railway Minister

 

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26Eng. B D Rampala Memorial Lecture-2010

• Focus on increasing asset utilization: 2004-05 and

2005-06 ( positive, provided implications on asset

wear and tear are appropriately dealt with)

• Competition in container movement: 2006(expected to be positive, though implementation

has to be seen)

(Ref G Raghuram .2007)

Some important steps taken by Railway Minister

 

R l f th Mi i t

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common sense based approach leverage the management and assets through empowerment and delegation.

• Non interference

• Direct approach• Caring attitude

• Right people for right job (Identify right

people)

• Image building(Ref : G Raghuram .2007)Minister set goals and expect results from the setup

Railway board functions as a cohesive entity due to theforce exerted on legitimate initiatives.

27Eng. B D Rampala Memorial Lecture-2010

Pillars of successes are the following five characteristics of the

Minister.

Role of the Minister

The operationalisation of strategies over past years depend

significantly on the leadership style of Mr Lalu prasad.

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 Non interfering

Sets goals

Expects results

Ensures organization alignment

Follows up fundamental initiatives

Autonomy to Railway Board

28Eng. B D Rampala Memorial Lecture-2010

Non Interference

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Periodically communicate with general

managers.

Setting and reinforcing priorities.

Precisely set targets and standards for the prevailing matters.

29Eng. B D Rampala Memorial Lecture-2010

Direct Approach

C i Attit d

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Positive attitude when dealing with staff and unions.

Personally intervene to provide contributions to the staff welfare

fund when staff able to show financial performance better than

recommended. Whenever concerns were raised about downsizing of the Indian

railway, he came out with his Hindi one liner which translated to,

30Eng. B D Rampala Memorial Lecture-2010

Caring Attitude

“Downsizing may make Indian railway thinner, but not necessarily

healthier.”

He set his strategy based on “regenerate competitiveness and leverage

resources rather than restructure and downsize.”He believed in instilling hope and excitement rather than fear and

anxiety.

Id tif Ri ht P l

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Appointment of Officer on Special Duty (OSD)

All dealings with Minister and Indian Railway Board has been through a noble

person appointed as officer on special duty (OSD), Mr Sudhir Kumar.

Role:

Specially chosen by the minister for this position based on earlier experiences and

interactions with him. His role would be to provide the link between the minister and

railway board and translate the vision of minister into action in railway.

Some of the initiatives related to

1. axle load increase,

2. market oriented tariffs,

3. reducing wagon turnaround,

4. innumerable freight incentive schemes,

5. passenger profile management, up gradation of passengers,

6. leasing of parcel capacity and catering,

all this has happened through the existing systems and culture of the Indian railway.

31Eng. B D Rampala Memorial Lecture-2010

Identify Right People

I B ildi

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Achievements & Campaigns Publicized

Up lift the image of railway , its services and staff…….

32Eng. B D Rampala Memorial Lecture-2010

Image Building

Salient Results of Indian Railways TurnaroundSalient Results of Indian Railways Turnaround

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Eng. B D Rampala Memorial Lecture-2010 33

Salient Results of Indian Railways TurnaroundSalient Results of Indian Railways Turnaround

Following results speak volumes about the

success of the strategies adopted: Increase in income through advertising on all

Rajdhani Expresses coaches with the cost of 

advertising being around US $ 1.26 million per train.

Introduction of new generation trains that would

 be fuel efficient, recyclable and have lowemission to generate certified emission reduction

credits.

Salient Results of Indian Railways TurnaroundSalient Results of Indian Railways Turnaround

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Eng. B D Rampala Memorial Lecture-2010 34

Salient Results of Indian Railways TurnaroundSalient Results of Indian Railways Turnaround

Construction of dedicated freight corridor, with

an investment of US $ 81.92 million invested in2008 to 2009 and US$ 614.4 in 2009-2010.

Renewal of 44.5 million pre–stressed concrete

sleepers set for open line network. Development of PPP in new routes, railway

stations, logistics parks, cargo aggregation and

warehouses. Development of 100 budget hotels with private

 partnership in the vicinity of railway stations.

Salient Results of Indian Railways TurnaroundSalient Results of Indian Railways Turnaround

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Salient Results of Indian Railways TurnaroundSalient Results of Indian Railways Turnaround

Installation of Wi-Fi to provide wireless access

at 500 stations. Development of agri-retail hubs, cold chains,

multi-purpose warehouses on surplus land with

in the Indian Railways.

Training of railway managers to meet futurechallenges, Indian railway is planning to set up

an International Management Institute in New

Delhi. Discount schemes, loyalty discount schemes and

long term fright discount schemes.(Ref: Indian railway website. www.impactlab.net)

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Lanka Railway – Current Situation Lost its market share in profitable freight

business;

Lack of flexibility in pricing and unrealisticpricing methods;

High cost of internally sourced products and

services Investment in projects that do not yield a

return;

Operating expenses much higher than gross

revenue (Grater than 100% operating ratio).

Lack of market orientation

Politicization of the decision making process40Eng. B D Rampala Memorial Lecture-2010

Same as Indian railways in 1990s!

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41Eng. B D Rampala Memorial Lecture-2010

Sri Lanka Railway The

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Energy efficiency★ Rail is on average 2 - 5 times more energy efficient than road,shipping and aviation

climate change and cO2 emissions★ Travelling by rail is on average 3-10 times less cO2 intensivecompared to road or air transport

★ The rail sector has committed itself to cut the specific emissions of 

rail transport by 30% over the period 1990-2020

Ref: UIC official web sit

Land take★ Railway infrastructure occupies 2-3 times less land perpassenger or freight unit than other modes of transport

★ Railways, having a market share of 6-10%, occupy less than 2%of the land used for transport infrastructure in Europe( Benchmark)

External costs★ The external costs of rail may be as low as 1% of those of roads

42Eng. B D Rampala Memorial Lecture-2010

Sri Lanka Railway – TheFuture

Plan to Turnaround

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Introduce 

43Eng. B D Rampala Memorial Lecture-2010

Plan to Turnaround

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References;

•G Raghuram (Turnaround of Indian railway).2007. Indian institute of management report.

•Rakesh Mohan Committee .2001. Highlights of the executive summary, available at http:/www.irastimes.org/rkmreportingexesummary.htm

accessed on 30 may 2007.

•World Bank. 1994. The World Bank railway database available at http:/www.worldbank.org/transport/rail/rdb.htm.

•Desh Gupta and Milind sathye (Financial turnaround of Indian railway) 2008. Accessed from Scribed web site. On 17.6.2010.•IRFC Indian Railway Finance Corporation. 2004. Anual report of the Indian railway financial cooperation. New Delhi.

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Thank You!