Monopoly of Indian Railways

Monopoly - Indian Railways

Monopoly - Introduction

What is a monopoly?

A firm is considered a monopoly if . . . it is the sole seller of its product. its product does not have close substitutes.

Monopoly - Introduction

• Primary characteristics of a monopoly– Single Sellers– No Close substitutes– Price Maker– Blocked Entry

Why do Monopolies Arise?

• Barriers to entry– Legal/Government Restrictions–High cost of entry–Advertising and product differentiation

Profit Maximization for Monopoly

• Monopoly• price

• Quantity• QMAX• 0

• Costs and• Revenue

• Demand

• Average total cost

• Marginal revenue

• Marginal• cost

• A

• 1. The intersection of the marginal-revenue curve and the marginal-cost curve determines the profit-maximizing quantity...

• B

• 2. ...and then the demand curve shows the price consistent with this quantity.

http://theindiapost.com/wp-content/uploads/2009/08/IndianRailwayslogo.jpg

INDIAN RAILWAYS - Evolution

• State owned company• Monopoly of country’s rail transport• In 1832, a proposal was made to build a railroad between

Madras & Bangalore, but it never materialized.• In 1845, two companies formed

– East Indian Railway Company operating from Calcutta– Great Indian Peninsula Railway operating from Bombay

• On December 22, 1851, first train is operational in India• April 16, 1853, first passenger train introduced between

Bombay & Thana.• Railways grows in India with encouragement of the British

Government.


Background Information - Evolution

• Due to Partition, India lost 40% of its existing rail network.• At independence, 42 rail systems were existing• In 1951, all systems were nationalized as one unit.• Total of 6 zones came into existence in 1952, later extended to

16 zones.• In 1985, steam locomotives are phased out.• In 1987, computerisation of reservation first was carried out in

Bombay• In 1989, train numbers were standardized to 4 digits.• In 1995, entire reservation system was computerized.• In 1998, Konkan Railway was opened spanning difficult terrain

through the Western Ghats.



Railways Zone



• Railways Zones – Sr. No. Name Abbr. Headquarters Date Established Divisions

1 Central CR November 5, 1951 Mumbai Mumbai, Bhusawal, Pune, Solapur, Nagpur

2 East Central ECR October 1, 2002 Hajipur Danapur, Dhanbad, Mughalsarai, Samastipur, Sonpur

3 East Coast ECoR April 1, 2003 Bhubaneswar Khurda Road, Sambalpur, Visakhapatnam

4 Eastern ER April, 1952 Kolkata Howrah, Sealdah, Asansol, Malda

5 North Central NCR April 1, 2003 Allahabad Allahabad, Agra, Jhansi

6 North Eastern NER 1952 Gorakhpur Izzatnagar, Lucknow, Varanasi

7 North Western NWR October 1, 2002 Jaipur Jaipur, Ajmer, Bikaner, Jodhpur

8 Northeast Frontier NFR 1958 Guwahati Alipurduar, Katihar, Lumding, Rangia, Tinsukia

9 Northern NR April 14, 1952 Delhi Delhi, Ambala, Firozpur, Lucknow, Moradabad

10 South Central SCR October 2, 1966 Secunderabad Secunderabad, Hyderabad, Guntakal, Guntur, Nanded, Vijayawada

11 South East Central SECR April 1, 2003 Bilaspur, CG Bilaspur, Raipur, Nagpur

12 South Eastern SER 1955 Kolkata Adra, Chakradharpur, Kharagpur, Ranchi

13 South Western SWR April 1, 2003 Hubli Hubli, Bangalore, Mysore

14 Southern SR April 14, 1951 Chennai Chennai, Madurai, Palakkad, Salem, Tiruchchirapalli, Thiruvanathapuram

15 West Central WCR April 1, 2003 Jabalpur Jabalpur, Bhopal, Kota

16 Western WR November 5, 1951 Mumbai Mumbai Central, Vadodara, Ratlam, Ahmedabad, Rajkot, Bhavnagar


Background Information - Services

• Passenger Services– Operates 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 problem– Ticket-less travel is also an additional problem

faced.

http://en.wikipedia.org/wiki/Sikkim



• Production Services– Manufactures most of its rolling stock and heavy

engineering component– Production units are managed directly by ministry– Each unit is headed by GM



• Production 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.

Name Headquarters Purpose

Diesel Locomotive Works Varanasi Manufacture mainline diesel-electric for passenger and freight traffic

Chittaranjan Locomotive Works Chittaranjan Manufacture electric locomotives using DC traction as well as AC-AC transmission

Diesel-Loco Modernisation Works Patiala Manufactures key sub-assemblies for Diesel Locomotives

Integral Coach Factory Chennai Make coaches for the Indian Railways

Rail Coach Factory Kapurthala Modern plant and has a much more flexible automation

Wheel & Axle Plant Bengaluru Makes cast wheels for wagons



• Freight– Carries variety of goods– Contributes to 70% of revenues– Last 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



• Suburban Rail– Many 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.


Background Information – Organizational Services


Background Information – Organizational Structure

• Other PSU’s under the control of Ministry of Railways– Indian Railways Catering and Tourism Corporation– Konkan Railway Corporation– Indian Railway Finance Corporation– Mumbai Rail Vikas Corporation– Railtel Corporation of India – Telecommunication Networks– RITES Ltd. – Consulting Division of Indian Railways– IRCON International Ltd. – Construction Division– Rail Vikas Nigam Limited

• Centre 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.


Indian Railways - Present

• World’s third largest railway network• Prime movers to the nation• Approximately 65,000 km of rail tracks and over 7,151 railway

stations.• IR owns a fleet of – 2,22,379 wagons– 42,441 coaches– 7,910 locomotives

• Operates 1,60,251 trains including 9,550 passenger trains, carrying about 1.6 million tonnes of freight and about 18 million passengers daily


Indian Railways - Present

• Prime infrastructural sector• World's largest commercial or utility employer, with more

than 1.5 million employees on its payrolls• Perform the dual role– Commercial Organization– Vehicle for fulfillment of social obligations

• Part and parcel of the total receipts and expenditure of the Government of India.

• Contributes to 1% of GDP of INDIA.


Indian Railways – The Mayhem

Indian Railways – The Mayhem

• In 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.


Indian Railways – Problems faced

• Surplus manpower…1.6 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


Indian Railways – Cost Structure


Indian Railways – Corrective Measures

• modernization • safety and security of passengers • replacement and renewal of assets• track 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.


Indian Railways – Strategic Performance Enhancement Initiatives

• Capacity Enhancement

• increasing wagon loading capacity• reducing wagon turnaround time• increasing length of wagon sidings(platforms)• reducing loading/unloading time• avoiding frequent train examination



• Capacity Utilization

• Dynamic pricing policy• Tariff Rationalization• Non-peak Season Incremental Freight Discount • Loyalty Discount Scheme• Long-term Freight Discount Scheme• Multiple Unloading



• Revenue Enhancement

• Focusing on low-cost high-volume operations• Revision in freight rates• Increasing number of coaches in popular trains• Reducing AC class fares • Introducing Garib Raths to attract volumes


Indian Railways – Favourable Factors

• Change in the macro-economic conditions• Rise in demand• Change in the legal position• Changes in organisational culture • Human resources initiatives • Downsizing • Decentralising


Indian Railways – The Recovery

• In 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 (2001–2006).• 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


Way Forward

Way Forward for Indian Railways..

• The XIth Plan (2007-12) lays ambitious targets for

1. Freight and passenger business transportation

2. Capacity augmentation

3. Technological up gradation.

4. Sustained improvement of services .



• The Head Start : Right sizing in the system.• Significant change was the Investment Strategy.

Freight was the . M.a.n.t.r.a .

$$ Freight acted as the major catalyst to boost revenue . $$



• 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 movement

• Modernization of freight and passenger terminals

• Developing world class stations

• Information Technology initiatives and technological up-gradations.



• Quantum increase in traffic through incremental capacity augmentation :

• Capacity creation targets in XIth Plan have been kept at twice/thrice.

• 2000 kms of new lines, convert 10000 kms of Meter/Narrow gauge lines to Broad

gauge, double 6000 kms of single track and electrify 3500 kms of network length

• Manufacture/ procure 1,55,000 wagons (equivalent 4 wheeler units), 17,500

coaches, 2800 EMUs.

• 2200 MEMU/DEMU and 3600 Locomotives (1800 Electric and 1800 Diesel)

http://www.theindiapost.com/2009/08/19/indian-railways-%E2%80%93-plan-priorities-and-challanges/



• How to attain the Rolling Stock ??• The INITIATIVES : 1. Electric Locomotive Manufacturing Unit2. Diesel Locomotive Manufacturing Unit3. main line EMU Manufacturing Unit, 4. two new Rail Coach Factories besides augmenting the capacity of

existing production units. 5. These new Manufacturing Units are to be setup as departmental

production units or through the Joint Venture route.

“ Indian Railways is also moving ahead with the Dedicated Freight Corridor Projects on Western Route from Jawaharlal Nehru Port Trust near Bombay to Rewari and Eastern Route from Ludhiana to Dankuni. These corridors would add significant capacity in freight transportation and would be operational in 2016-17. “



• Status Quo : Passenger Services - Trains

• 10 new Garib Raths introduced.

• 53 pairs of new trains.

• Extension of trains : 16 pairs.

• Increase in frequency : 11 pairs.



• Status Quo : Passenger Services – Trains

• 300 additional services in Mumbai suburban.

• Special train from Anandpur Sahib and Patna Sahib to Gurudwara Sachkhand

Sahib during tercentenary function of Shri Guru Granth Sahib of Gurta Gaddi.

• Special train between Pune and Delhi for Commonwealth Youth Games being

held in Pune from 12th-18th October this year.



• Amenities

• Provision 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.



• Concessions• Senior 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 ticketing • Termination 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 fares

• One 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 Business• Reductions & Concessions• 5% 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 Business• Reductions & Concessions• 30% 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.



• Initiatives

• Target 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.



• Initiatives

• Procurement 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 Measures• Social Welfare

• 99% backlog vacancies for SCs/STs filled up in special campaign launched since

2004.

• Appointment of candidates from SCs/STs/OBCs exceeded their respective quotas

in Group D appointments.

• Minorities welfare cells to be opened at Railway Board and Zonal Railways.



• Welfare Measures• Social Welfare

• One 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 Welfare

• Per-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 Welfare

• A 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 2025

• Aims at setting the roadmap for coming 17 years – customer centric

and market responsive strategic initiatives.

• Information Technology Vision 2012 aims at radical changes in IT

applications ,improvement in operational efficiency, transparency in

working ad better services to the customers.

• Multi-Departmental Innovation Promotion Group at Apex Level.



• Vision 2025

• Public-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.


THANK YOU !!

Documents

Monopoly of Indian Railways