Monopoly - Indian Railways

Way Forward for Indian Railways..

Monopoly - IntroductionPrimary characteristics of a monopolySingle SellersNo Close substitutesPrice MakerBlocked Entry1Profit Maximization for MonopolyMonopolypriceQuantityQMAX0Costs andRevenueDemandAverage total costMarginal revenueMarginalcostA1. The intersection of the marginal-revenue curve and the marginal-cost curve determines the profit-maximizing quantity...B2. ...and then the demand curve shows the price consistent with this quantity.2Background Information - Evolution

3Background Information - EvolutionRailways Zones

Sr. No.NameAbbr.HeadquartersDate EstablishedDivisions1Central CR November 5, 1951 Mumbai Mumbai, Bhusawal, Pune, Solapur, Nagpur2East Central ECR October 1, 2002 Hajipur Danapur, Dhanbad, Mughalsarai, Samastipur, Sonpur3East Coast ECoR April 1, 2003 Bhubaneswar Khurda Road, Sambalpur, Visakhapatnam4Eastern ER April, 1952 Kolkata Howrah, Sealdah, Asansol, Malda5North Central NCR April 1, 2003 Allahabad Allahabad, Agra, Jhansi6North Eastern NER 1952Gorakhpur Izzatnagar, Lucknow, Varanasi7North Western NWR October 1, 2002 Jaipur Jaipur, Ajmer, Bikaner, Jodhpur8Northeast Frontier NFR 1958Guwahati Alipurduar, Katihar, Lumding, Rangia, Tinsukia9Northern NR April 14, 1952 Delhi Delhi, Ambala, Firozpur, Lucknow, Moradabad10South Central SCR October 2, 1966 Secunderabad Secunderabad, Hyderabad, Guntakal, Guntur, Nanded, Vijayawada11South East Central SECR April 1, 2003 Bilaspur, CG Bilaspur, Raipur, Nagpur12South Eastern SER 1955Kolkata Adra, Chakradharpur, Kharagpur, Ranchi13South Western SWR April 1, 2003 Hubli Hubli, Bangalore, Mysore14Southern SR April 14, 1951 Chennai Chennai, Madurai, Palakkad, Salem, Tiruchchirapalli, Thiruvanathapuram15West Central WCR April 1, 2003 Jabalpur Jabalpur, Bhopal, Kota16Western WR November 5, 1951 Mumbai Mumbai Central, Vadodara, Ratlam, Ahmedabad, Rajkot, Bhavnagar4Background Information - ServicesPassenger ServicesOperates over 9000 trains and transports over 5 billion annually across India. Preferred mode of transport in most of the country.Overcrowding is a widely faced problemTicket-less travel is also an additional problem faced.

5Background Information - ServicesProduction Services

In addition, Central Organisation for Railway Electrification (CORE) headquartered at Allahabad is also headed by a GM.Its job is to undertake electrification projects of IR & monitor their progress across the country.

NameHeadquartersPurposeDiesel Locomotive WorksVaranasiManufacture mainline diesel-electric for passenger and freight trafficChittaranjan Locomotive WorksChittaranjanManufacture electric locomotives using DC traction as well as AC-AC transmissionDiesel-Loco Modernisation WorksPatialaManufactures key sub-assemblies for Diesel LocomotivesIntegral Coach FactoryChennaiMake coaches for the Indian RailwaysRail Coach FactoryKapurthalaModern plant and has a much more flexible automationWheel & Axle PlantBengaluruMakes cast wheels for wagons6Background Information - ServicesFreightCarries variety of goodsContributes to 70% of revenuesLast 2 decades, shifted to large container movement.Majority of earnings comes from carrying bulk goods like iron ore, coal.Introduced CONRAJ for high priority freight

7Background Information - ServicesSuburban RailMany cities have dedicated suburban networks.Cities include Mumbai, Chennai, Delhi, Hyderabad, Kolkata, Lucknow & Pune.Only Mumbai, Pune & Hyderabad share tracks with long distance trains.Trains are mostly electric multiple units.Only in Mumbai trains run on Direct Current, rest run on Alternating Current.

8Background Information Organizational Services

9Background Information Organizational StructureOther PSUs under the control of Ministry of RailwaysIndian Railways Catering and Tourism CorporationKonkan Railway CorporationIndian Railway Finance CorporationMumbai Rail Vikas CorporationRailtel Corporation of India Telecommunication NetworksRITES Ltd. Consulting Division of Indian RailwaysIRCON International Ltd. Construction DivisionRail Vikas Nigam LimitedCentre for Railway Information Systems is an autonomous society under Railway Board, which is responsible for developing the major software required by Indian Railways for its operations.

10Indian Railways - PresentWorlds third largest railway networkPrime movers to the nationApproximately 65,000 km of rail tracks and over 7,151 railway stations.IR owns a fleet of 2,22,379 wagons42,441 coaches7,910 locomotivesOperates 1,60,251 trains including 9,550 passenger trains, carrying about 1.6 million tonnes of freight and about 18 million passengers daily

11Indian Railways - PresentPrime infrastructural sectorWorld's largest commercial or utility employer, with more than 1.5million employees on its payrollsCommercial OrganizationPerform the dual roleVehicle for fulfillment of social obligationsPart and parcel of the total receipts and expenditure of the Government of India. Contributes to 1% of GDP of INDIA.

12Indian Railways The MayhemIn 2002-03, 'social service obligation' of Indian Railways worked out Rs 37.87 billion.A 2001-02 review of all "branch lines" disclosed that 115 trains had become uneconomical, accounting for an annual loss of Rs 434 crore.In 2001, the ratio of net revenue to capital declined to 2.5 In 1999-2000, fund balances had touched a low of Rs. 1.49 billion.Operating ratio reached 98.8 percent in the year ending March 2001.

13Indian Railways Problems facedSurplus manpower1.6 million in FY 2001.Poor staff productivity. Loss of market share in the profitable freight business.Lack of flexibility in pricing. Lack of accountability.Politicization of the decision-making processes

14Indian Railways Cost Structure

15Indian Railways Corrective Measuresmodernization safety and security of passengers replacement and renewal of assetstrack renewal & improvement in passenger amenities increase in productivity and reduction in operating ratio. computerization of railway systems.induction of new technologies for signalling and telecom. prevention of leakages of revenue.

16Indian Railways Strategic Performance Enhancement InitiativesCapacity Enhancement

increasing wagon loading capacityreducing wagon turnaround timeincreasing length of wagon sidings(platforms)reducing loading/unloading timeavoiding frequent train examination

17Indian Railways Strategic Performance Enhancement InitiativesCapacity Utilization

Dynamic pricing policyTariff RationalizationNon-peak Season Incremental Freight Discount Loyalty Discount SchemeLong-term Freight Discount SchemeMultiple Unloading

18Indian Railways Strategic Performance Enhancement InitiativesRevenue Enhancement

Focusing on low-cost high-volume operationsRevision in freight ratesIncreasing number of coaches in popular trainsReducing AC class fares Introducing Garib Raths to attract volumes

19Indian Railways Favourable FactorsChange in the macro-economic conditionsRise in demandChange in the legal position Changes in organisational culture Human resources initiatives Downsizing Decentralising

20Indian Railways The RecoveryIn FY 2006-2007, IR registered profits of Rs. 200 billion. As of 2007, IR was India's second largest profit making PSU after ONGC.Revenue per staff witnessed a rise by 68 percent (20012006).Operating Ratio was brought down to 78.7 percent by 2007. Enhanced axle load and reduction in turnaround time of wagons increased by 14% IR increased wagon capacity available per day by 36 %The number of employees reduced to 1.412 million by 2006 . The number of accidents have been more than halved from 473 (2001) to 200 (2007) Increase in the volume of passengers by approx 29 percent over the period 2001 to 2007

21Way Forward for Indian Railways..

Increase in market share in freight traffic, both bulk and non-bulk, was the important focus area. Plan priorities for IR - building capacity for handling traffic growth Up-gradation for heavy axle load movementModernization of freight and passenger terminals Developing world class stations Information Technology initiatives and technological up-gradations.


AmenitiesProvision of on-line coach indication display board; on-line train arrival departure information board; on-line reservation availability information board.Provision of discharge-free green toilets in all 36,000 coaches in XI Plan period at a cost of about Rs.4,000 cr.LHB design coaches for all Rajdhani and Shatabdi trains over next few years.Provision of LHB coaches with stainless steel bogies in Mail/Express trains.


ConcessionsSenior citizen concession for women enhanced to 50% from existing 30%.Free Monthly Seasonal Ticket to girl students up to graduation level in place of 12th standard and for boys up to 12th standard in place of 10th standard.Improvements in ticketingTermination of queues at ticket counters targeted in two years.Ticket booking on mobile phones; E-ticket for waitlisted passengers.Increase in Unreserved Ticketing Systems counters to 15,000 and ATVMs to 6000.


Reduction in passenger faresOne rupee discount per passenger for fares up to Rs.50 in non suburban Second Class (ordinary and mail/express)5% discount across the board for passenger fares beyond Rs.50 for all non suburban Second Class (ordinary and mail/express).Increase in discount for travel in new design high capacity reserved coaches.Reduction in fare AC-I : 7%; and AC-II : 4% (the reduction will be half for popular trains and during peak period).


Freight BusinessReductions & Concessions5% reduction in freight rates for Petrol and Diesel.14% reduction in freight rate of Fly-ash.Liberalisation of Traditional Empty Flow direction incentive scheme


Freight BusinessReductions & Concessions30% discount on entire traffic in place of incremental traffic booked from goods shed.Increase in discount on incremental traffic booked from private sidings from 30% to 40%.6% freight concession for traffic booked from other States for stations in North Eastern States.


InitiativesTarget for loading fixed at 850 MT in 2008-09.Blue - Print prepared for High Density Network.Top priority being given to port rail connectivity projects.New and dedicated iron ore routes to be upgraded/constructed.Work on Eastern freight corridor from Ludhiana to Dankuni (Kolkata) and Western freight corridor from Delhi to JNPT to start in 2008-09.


InitiativesProcurement of Rolling Stock: All time high of 20,000 wagons, 250 diesel and 220 electric locomotives to be manufactured.New Wagon Leasing Policy and Wagon Investment Scheme formulated to increase availability of wagons in the system.Discounts for development of bulk and non-bulk goods terminals.


Safety & Security Multi-pronged scheme to strengthen railway safety through various automatic devices like anti-collision device etc.Rail accidents have reduced remarkably despite substantial increase in gross traffic volumes.Fire resistant material to be used in coaches.Unmanned level crossings at busy sections to be manned on a fast track basis.Integrated security plan drawn up through installation of CCTVs, metal detectors etc.


Welfare MeasuresSocial Welfare99% backlog vacancies for SCs/STs filled up in special campaign launched since 2004.Appointment of candidates from SCs/STs/OBCs exceeded their respective quotas inGroup D appointments.Minorities welfare cells to be opened at Railway Board and Zonal Railways.


Welfare MeasuresSocial WelfareOne time exercise of appointing Railway Porters as gangmen and to other Group D posts.Mother-Child Health Express to be run on a pilot basis at concessional fares in collaboration with Rajiv Gandhi Foundation for providing medical facilities to mother and child.


Staff WelfarePer-capita contribution to Staff Benefit Fund to be increased by ten times from Rs.35 to Rs.350 for 2008-09.Northern Railway Central Hospital at Delhi to be made centrally air-conditioned.Two divisional hospitals at Jaipur and Hubli to be upgraded to central hospitals.


Staff WelfareA new divisional hospital at Ranchi and an OPD block at Integral Coach Factory to be constructed.Employees who joined Railways from other agencies/PSUs etc and are eligible for pensionary benefits, would now be eligible for post retirement complimentary passes as per the norms being set.


Vision 2025Public-Private Partnership schemes to be launched for attracting an investment of Rs.1,00,000 cr over the next five years for developing world class stations, rolling stock ad other logistics.Commercial use of Railway land by Rail Land Development Authority to give a boost to Railway Revenues.

35Chart10.440.140.090.060.050.050.17

Sales

Sheet1SalesStaff & Pension44%Fuel14%Lease9%Dividend6%Depriciation5%Store5%Others17%To resize chart data range, drag lower right corner of range.

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Monopoly - Indian Railways