ATURN AROUND

STORY

PRESENTATIONBY

SUDHIR KUMAR, IASOfficer on Special Duty/Minister for Railways

INDIAN RAILWAYS A TURN AROUND STORY

ATURN AROUND

STORY

“Indian Railways is today on the verge of a financial crisis. To put it bluntly, the Business As Usual Low Growth will rapidly drive IR to fatal bankruptcy, and in sixteen years Govt. of India will be saddled with an additional financial liability of over Rs.61,000 crores. On a pure operating level, IR is in a terminal debt trap.”

- Expert Group on IR headed by Dr. Rakesh Mohan – July 2001.

INDIAN RAILWAYS – IN FINANCIAL CRISIS

01

ATURN AROUND

STORY

“xk; dk iwjk nw/k ugha nqgus ls xk; chekj gks tkrh gSA”

(“If you do not milk the cow fully, it falls sick.”)

RUSTIC BRILLIANCE

“oSxu jsyos dk dekÅ ?kksM+k gS] ml ij iwjk cks>k ykfn,A mls nkSM+kb,] cSBkdj er

lM+kb,A”(“Wagon is the bread earning horse of the Railways, load it adequately. Make it run and don’t stable it.”)

Shri Lalu Prasad, Minister for Railways – July 2004

02

ATURN AROUND

STORY

What is the VARIABLE component of the Rupee

Salary & Pension42%

Lease Charges / Dividend / DRF /

SRSF / DF27%

Fuel & Stores22%

Others9%

IR IS A PLAY ON VOLUMES

03

ATURN AROUND

STORY

100

300

500

700

900

1100

1300

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Inde

x

Unit Cost Index of NTKMs

Index of T.W.E.

Unit Cost Index of PKMs

1981-82 1991-92 1997-98

124 259

13.06

Total Earnings (in Billion Rs.) 36 138 286 353 428

Total Earnings CAGR(%) 14.53 12.83 7.30 6.68

BTKMs CAGR(%) 4.30 2.15 3.19 6.87

284

14.56

250

2000-01 2003-04

T.W.E. (in Billion Rs.) 32 347

T.W.E. CAGR(%) 10.24 4.40

312

395

BTKMs 164 381

Index of T.W.E., Unit cost of PKMs, NTKMs at current prices (81-82 to 03-04)

IR IS A PLAY ON VOLUMES

(2000-01)

04

ATURN AROUND

STORY

(1990-91)

HOW LONG IS LONG-TERM(LTVC may be taken as 78.5% – F.Code, para 217)

80

100

120

140

160

180

200

220

240

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Inde

x

Index of GTKM

Index of T.W.E.

1981-82 1982-83 1990-91 2000-01 1981-82 to 2003-04

518

34

1007

-

35

-

-

3.92%3.63%

(1991-92 to 2000-01)

705

40

CAGR GTKM-

3.89%(1981-82 to 1990-91)

5.00%(2001-02 to 2002-03

2003-04

GTKM (Billion) 500 1166

T.W.E. (Billion Rs.) 32 33

Years (1981-82 to 2003-04)

Index of T.W.E. at constant prices and GTKMs

IR IS A PLAY ON VOLUMES

(2000-01)(1982-83)

05

ATURN AROUND

STORY

25

45

65

85

105

125

145

165

185

205

225

245

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

(1990-91)

Index of NTKm

Index of Cost per NTKm

Inde

xIndex of NTKM and cost per NTKM at

constant prices

1981-82 1990-91 2000-01 1981-82 to 2003-04

312 -

-

3.90%

Freight Earnings at Current Prices (Billion Rs.)

24 84 233 276

Freight Earnings at Constant Yield (Billion Rs.)

24 34 45 55

Rate Per NTKM (Paise) 14.35 35.66 74.61 72.44

6.09

2.85%(1991-92 to 2000-01)

236

10.01CAGR NTKM - 4.10%

(1981-82 to 1990-91)6.87%

(2001-02 to 2003-04)

2003-04

NTKM (Billion) 164 381Cost per NTKM (Paise) 12.39 4.28

Years (1981-82 to 2003-04)

IR IS A PLAY ON VOLUMES

(2000-01)

06

ATURN AROUND

STORY

25

50

75

100

125

150

175

200

225

250

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Index of PKm

Index of Cost per PKM

Years (1981-82 to 2003-04)

Inde

xIndex of PKM and Unit Cost at

constant prices

1981-82 1992-93 2003-04

PKM (Billion) 221 300

6.44

Passenger Earnings at current prices (Billion Rs.)

10 43 133

Passenger Earnings at Constant Yield (Billion Rs.)

10 13 24

Earnings PKM (Paise) 4.48 14.37 24.53

541

Cost per PKM (Paise.) 7.19 3.42

(1992-93)

IR IS A PLAY ON VOLUMES

(2000-01)

07

ATURN AROUND

STORY

100

200

300

400

500

600

700

800

900

1000

1100

1200

1981-82 1986-87 1990-91 1994-95 1999-00 2003-04

Index of Earnings/NTKM

IR IS A PLAY ON VOLUMESIndex of Unit Freight Cost and Realisation at

Current Prices

Years

Index of input cost

Index of Cost/NTKM

1981-82 2003-04

Index of Input Cost 100 1188

Cost/NTKM (Paise) 12.39 50.89

Earnings/NTKM (Paise) 14.35 72.44

Inde

x

08

ATURN AROUND

STORY

IR IS A PLAY ON VOLUMESOperating Efficiency, Technology and

Productivity Gains

30

40

50

60

70

80

90

100

1980-81 1990-91 1995-96 1999-00 2003-04

Inde

x

Years

Index of Wagon Turn-Round

Index of Energy Consumption

1980-81 2003-04

Wagon Turn-round 15.2 6.7

Energy Consumption (in thousand Frt. GTKM)

30.6 14.15 09

ATURN AROUND

STORY

55

60

65

70

75

80

85

90

95

100

1980-81 1990-91 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04

Index of Diesel Consumption

IR IS A PLAY ON VOLUMES

Inde

x

Years

Index of Electricity Consumption

Operating Efficiency, Technology and Productivity Gains

10

ATURN AROUND

STORY

IR IS A PLAY ON VOLUMES

100

125

150

175

200

225

250

275

300

1980-81 1990-91 1995-96 1999-00 2003-04

Inde

x

Years

NTKM per Wagon DayTraffic Output (in ‘000)/ Employee

Traffic Density MGTKm/Running Track Km

1980-81 2003-04

NTKM Per Wagon Day 986 2570

Traffic Density MGTKm per Running Track Km

8.84 15.92

Traffic Output (in thousand) Per Employee/annum

244 686

Operating Efficiency, Technology and Productivity Gains

11

ATURN AROUND

STORY

Play on freight volumes to reduce unit cost.a) Enhancement of carrying capacity of wagons

i) BOX-N increased from 60 tonnes to 70 tonnesii) BCN increased from 58 tonnes to 63 tonnes

b) Reducing turn around time of wagons from 7 to 5 days.

Implement three categories of investments on HDN in parallelUpgrade existing infrastructure for higher operating efficiencyInvest in additional track capacity/electrification of routesIncrease reliability of systems (wagons/coaches, locos, tracks, signalling)

Operating strategy for maximisation of throughput

KEY STRATEGY

IR IS A PLAY ON VOLUMES

12

ATURN AROUND

STORY

Reduce passenger losses by

a) increasing occupancy of trains through passenger profile management b) Increasing volume of upper class travel c) Augmenting load of well patronized trains to 24 d) Reducing losses on catering and parcel by 50% in 2005-06

KEY STRATEGY

IR IS A PLAY ON VOLUMES

13

ATURN AROUND

STORY

COMMERCIAL, OPERATIONAL & INVESTMENT ISSUES

Full rake placements Round the clock workingElectrification of diesel sidings on electrified routesAmendment in Preferential Tariff Schedule (PTS)Faster train examination

REDUCING THE TURN ROUND TIME OF WAGONS TO 5 DAYS

IR IS A PLAY ON VOLUMES

14

ATURN AROUND

STORY

IR has no real competition in “door to door” bulk and heavy freight delivery beyond 400 kms

a) Freight of raw materials/minerals increased.b) Freight of finished products reduced.

Scraping of minimum weight condition concept

4000 commodities grouped into 19 commodity heads with single uniform class for different commodities in the same group.

TARIFF RATIONALISATION

IR IS A PLAY ON VOLUMES

15

ATURN AROUND

STORY

310

250

208

165

100

175

250

325

1990-91 1999-2000

AC First Class AC - 2 Tier Sleeper (Mail/Exp) Second Class (Mail/Exp)

Increase in Passenger Fares (from 1990-91 to 1999-2000)

Year

HITHERTO RECIPE FOR SOLVENCYP

asse

nger

Far

e In

dex

15a

ATURN AROUND

STORY

201197186178

214

100

125

150

175

200

225

1990-91 1999-2000

Cement Coal Iron & Steel Fertilizer POL (HSD)

Rat

e pe

r Ton

ne In

dex

Increase in Freight Rates of Major Commodities (from 1990-91 to 1999-2000)

Year

HITHERTO RECIPE FOR SOLVENCY

15b

ATURN AROUND

STORY

525 493

624725

0

150

300

450

600

750

9th Plan 10th Plan

NINTH & TENTH FIVE YEAR PLAN TARGET AND ACHIEVEMENT

Mill

ion

Tonn

es

Target

Achievement

2006-07 (Proj.)

Freight loading target is likely to be surpassed in 2005-06 and is likely to be exceeded by 18-20% in 2006-07.

IR IS A PLAY ON VOLUMES

16

ATURN AROUND

STORY

353 333

396 460

0

100

200

300

400

500

9th Plan 10th Plan

BTK

Ms

Freight tonne Km target has been surpassed by 4% in 2004-05 and is likely to be exceeded by 16% in 2006-07.

Target

Achievement

2006-07 (Proj.)

IR IS A PLAY ON VOLUMES

NINTH & TENTH FIVE YEAR PLAN TARGET AND ACHIEVEMENT

17

ATURN AROUND

STORY

GROWTH IN PASSENGER, FREIGHT , OTHER COACHING AND TOTAL TRAFFIC EARNINGS

6.1

1011.4

18

7.4

21

9.8

16

0

5

10

15

20

25

Passengerearnings

Freight earnings Other Coachingearnings

Total trafficearnings

2004-05April-Sept.05

NO PASSENGER FARE HIKENO PARCEL RATE HIKE

Perc

ent

IR IS A PLAY ON VOLUMES

18

ATURN AROUND

STORY

IR IS A PLAY ON VOLUMES

98

91

87

70

75

80

85

90

95

100

105

2000-01 2004-05 2005-06(Projected)

Ope

ratin

g R

atio

(%)

Operating Ratio TURN AROUND STORY

Year

19

ATURN AROUND

STORY

IR IS A PLAY ON VOLUMES

1071

5274

8000

300

2300

4300

6300

2000-01 2004-05 2005-06(Projected)

Year

Net

Rev

enue

(Bef

ore

Div

iden

d)(R

s. in

cro

re)

8000

NET REVENUE

A MIDAS TOUCH

20

ATURN AROUND

STORY

IR IS A PLAY ON VOLUMES

359

7800

11000

300

5000

9700

14400

2000-01 2004-05 2005-06(Projected)

Fund

Bal

ance

s (R

s. in

cro

re)

Year

GROWTH IN FUND BALANCES

TURN AROUND STORY

21

ATURN AROUND

STORY

IR IS A PLAY ON VOLUMES

Bringing down unit cost of freight traffic at current prices by 50% over five years:-

a) Universalization of 22.9 t axle load on IR.b) Increasing axle load for iron ore movement from 22.9 to 25 tonnes.c) Improving loaded empty ratio to 75% over a period of 3-4 years.d) Transformation of IR from a bulk transporter to a multi-modal

transporter.Promoting a consolidation industry for non-bulk traffic Aggressively promoting EXIM and domestic containerized

movement through PPPDevelopment of integrated multi-modal logistics parks

Technology upgradation and modernisation including application of IT.Construction of dedicated Freight Corridors.

CHALLENGES AHEAD

22

ATURN AROUND

STORY

THE END