indian railway turnaround story

Eng. B D Rampala Memorial Lecture – 2010Eng. B D Rampala Memorial Lecture – 2010100100thth Birth Anniversary Birth Anniversary

Successful Successful Turnaround of Turnaround of Indian Railways & Indian Railways & Lessons Relevant Lessons Relevant for Sri Lanka for Sri Lanka RailwaysRailways

A Case Study Approach

Eng Keerthi K Hewavithana(Engineer Headquarters, Sri Lanka Railways)

Bsc Eng. (Hons.), C.Eng.,(MIE)SL, MBA.Phone 0714-399631, E mail [email protected]

The Institution of Engineers, Sri LankaThe Institution of Engineers, Sri Lanka

Successful Turnaround of Indian Railway & Lessons Relevant for Sri Lanka Railways

Successful Turnaround of Indian Railways andSuccessful Turnaround of Indian Railways and Lessons Relevant for Sri Lanka RailwaysLessons Relevant for Sri Lanka Railways

By

Eng Keerthi K Hewavithana(Engineer Headquarters, Sri Lanka Railways)

Bsc Eng. (Hons.), C.Eng.,(MIE)SL, MBAPhone 0714-399631, E mail [email protected]

President of the Institution of Engineers Prof. Ananda Jayawardane, Chairman of the Mechanical Engineering Sectional Committee Eng. Gratian A. Peiris, Executive Secretary Eng, Ms Arundathie Wimalasuriya, members of the family of late Eng. B D Rampala, distinguished invitees, Past Presidents and Members of the IESL:

We honour Eng. B D Rampala today as an Engineer, Entrepreneur and Legend who transformed the Ceylon Government Railway (CGR) from a facility that catered to the needs of the Colonial Masters to a public utility that assured access, speed, connectivity and safety to people. Eng. Rampala was born on November 14, 1910, hundred years ago yesterday. Today as we commemorate the life and contribution of this genius and his commitment to master technology to serve the people, the best honour that we could bestow on him is finding a strategy to transform the Sri Lanka Railways, which he loved and served with his whole heart and mind, to once again become a people friendly, commercially oriented, sustainable government enterprise with a strong service orientation.

Therefore I am humbled by this opportunity to deliver the Eng. B D Rampala Memorial Lecture and consider this as one of the most important milestones in my career as a young and upcoming engineer. May I thank the Institution, Mechanical Engineering Sectional Committee and my colleague Eng. Udhya Kumar who promoted me as the speaker for the Memorial Lecture this year, when we mark the 100th birth anniversary of the legendary Eng. Bamunuarchchige Don Rampala.

It is the tradition of the Institution to invite an eminent engineer to deliver each of the prestigious memorial lectures held annually to honour the engineering greats such as Eng. B D Rampala, Eng. Wimalasurendra, Eng. Dr Kulasinghe and others and to inspire young engineers to emulate the examples of these engineering giants and thereby enhance the practice of the engineering profession in Sri Lanka. Mr President, this year our Institution has made an exception to this tradition by inviting a young engineer in me, who has far less credentials and accolades than usually needed to qualify for delivering this memorial lecture. Therefore, Mr President and ladies and gentlemen, I consider this opportunity as a special recognition by the Institution of the young engineers who represent the aspirations, commitment and the future of the engineering profession in Sri Lanka.

I have selected the interesting and inspirational story of the ‘Successful Turnaround of theSuccessful Turnaround of the Indian Railways and Lessons Relevant for Sri Lankan Railways’Indian Railways and Lessons Relevant for Sri Lankan Railways’ as the theme for this year.

Eng B.D. Rampala Memorial Lecture- 2010 100th Birth Anniversary 1

Successful Turnaround of Indian Railway & Lessons Relevant for Sri Lanka RailwaysOver the next half an hour let me take you through this success story and draw inferences as to its relevance to the Sri Lanka Railways.

The dramatic turnaround story of 157 year old Indian Railways has not only amazed management experts but also caught the attention of premier global business schools like Harvard and Wharton and surely deserves our attention.

Indian Railways at a GlanceIndian Railways at a GlanceThe Indian Railways started its journey on April 16, 1853, and has become to reflect the pluralistic character of India with many unique features such as having the world's largest as well as the smallest stations, the oldest running locomotive and a separate budget since 1924.

The Indian Railways is a department of Government of India. It is one of the largest railroads organizations in the world and with a capital investment of US$ 14 billion (INR 550 billion), it is one of the biggest organizations in India. The Indian Railways is the largest employer in the organized business sector in India with a staff of 1.5 Million and contributes approximately 1% to the GDP. The track length of Indian Railways is 63,322 km and it carries 14 million passengers each day, about 75% of the population in Sri Lanka. It operates across the whole of India divided into 16 zones.

Indian Railway at a Glance (2004 - 2005)Plant and EquipmentCapital-at-charge INR Million 590,347Total investment INR Million 980,490Route length Km 63,322Running track Km 84,260Total track Km 108,805Locomotives No. 7,910Passenger service vehicles No. 42,441Other coaching vehicles No. 5,822Wagons No. 222,379Railway stations No. 7,133OperationsPassenger Train Million km 517Vehicle Million km 14,066Freight Train Million km 284Vehicle Million km 31,365

(Source: Indian Railways web site)

The Core ProblemThe Core Problem

During the 1990s the Indian Railways faced the difficulty of responding to both short and long term changes in transport market conditions. As a result it was not increasing revenue faster than the expenditure and the operating ratio became 98% in 2000. The Indian Government appointed a powerful committee known as Rakesh Mohan Committee (RMC) to review the operations of the Indian Railways and make recommendations. The Committee included members with vast


Successful Turnaround of Indian Railway & Lessons Relevant for Sri Lanka Railwaysknowledge in the railway and transport sector as well as those with futuristic thinking coupled with a sound knowledge and educational background. 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' will rapidly drive it to fatal bankruptcy, and in 16 years, the Government of India will be saddled with additional financial liability of over INR 610,000 million ($… On a pure operating level, IR is in a terminal debt trap."

The RMC identified the following major causes that lead to the poor financial performance of Indian Railways:

• Loss of market share in the profitable freight business;• Inflexible pricing that did not respond to market conditions;• High cost of internally sourced products and services; and• Investment in projects that did not yield a return.

(Source: Desh Gupta and Milind.2008)

Lack of accountability was identified as a systemic problem. Rising employee costs that accounted for nearly half the operating costs, coupled with poor staff productivity was a major concern. Political profligacy was identified as another major impediment that drained finances of the Indian Railways.

RMC concluded that the core problem for poor financial performance was:Politicization of the decision making process that emphasized taking populist actions, rather than hard business decisions.

(Source: RMC 2001)

Change in PhilosophyChange in PhilosophyIt was clear that a philosophical change was mandatory if the Indian Railways were to be transformed into a truly business oriented organization. This philosophical change was initiated by the then Transport Minister Hon. Nitish Kumar responding to the famous Rakesh Mohan Committee (RMC) Report in 2001 to turnaround the Indian Railways using the blueprint given by the RMC.

During the year 2001-02 budget speech the intention to turnaround the Indian railways was clearly expressed by the Minister Hon. Nitish Kumar when he stated “railways need to develop market oriented and customer friendfly outlook due to emerging competition within the transport sector” [Source: MOR, 2002, Internal Correspondence (2006 cited by Desh Gupta and Milind, 2008)].

Instead of instilling fear and anxiety that is normally associated with a turnaround of this nature, successive ministers chose to create excitement, hope, and empowerment amongst the management and staff. Asset base of the Indian railway was kept intact and was used to leverage public-private partnerships. Specialist activities such as finance, consulting, turnkey projects were assigned to subsidiaries set up for the specific purposes. Macro economic changes that were favourable for the Indian railway were identified and capitalized upon. Pricing was used as a flexible tool to


Successful Turnaround of Indian Railway & Lessons Relevant for Sri Lanka Railwaysrespond to market opportunities, competition and the needs of the general public. Indian Railways started thinking and acting like an enterprise.

Time Frame of the Turnaround Time Frame of the Turnaround

The real turnaround of Indian Railways started around 2003 and since then it was able to achieve impressive results. Within three years the tangible results were visible. By the year 2005-06 the Indian Railways has achieved cost reductions and turnover gains that resulted in an operating ratio of 83.5% (Operating ratio is the division of total operating expenses by total gross revenue). The Indian Railways was moving steadily towards its target to achieve an operating ratio of 65% in year 2010.

Strategies initiated by Hon. Nitish Kumar were followed by Hon. Lalu Prasad Yadav who succeeded as the Railway Minister in May 2004. Hon Lalu Prasad showed an astute understanding of the market reality and a strong common sense approach and stepped up the operationalisation strategies. Hon. Lalu Prasad demonstrated that good economies is good politics (Ref: G Raghuram,2007)

Turnaround Strategies Used by the Indian Railways Turnaround Strategies Used by the Indian Railways

Turnaround is defined among industry and business circles as ‘performance decline followed by performance improvement to recovery and successes’. It is obvious that a business in a continuous decline phase will eventually become bankrupt, unless it is turned around. However, nobody in business expects a turnaround to occur automatically or as a miracle through the intervention of a super natural force: a turnaround has to be carefully engineered by people.

The focus was to reduce the Operating RatioOperating Ratio which is arrived at by dividing the Total Working ExpensesTotal Working Expenses by the Gross Revenue ReceivedGross Revenue Received. The lower the ratio the better the situation and vice versa. The Operating Ratio of the best run railways like the China Railways is 65%.

The Indian Railways targeted an Operating Ratio of 65% by 2010 and to trim the staff by 10% in seven years through not recruiting for any vacancies that would be created by retirements and resignations. It created many public-private partnerships for advertising, parcel service and catering promoting outsourcing concept.

A turnaround relies on a combination of strategies aimed at cost reduction, productivity improvement, enhancing market share and increasing margins.

In a turnaround situation, appropriate management strategies must be developed through an in depth and careful investigation and implemented with caution. The following management strategies were identified for the turnaround of the Indian Railways:

1 Retrenchment Strategies;2 Repositioning Strategies;3 Reorganization Strategies;4 Environmental Factors.

(Source: Desh Gupta and Milind Sathye 2008)Eng B.D. Rampala Memorial Lecture- 2010 100th Birth Anniversary 4

Successful Turnaround of Indian Railway & Lessons Relevant for Sri Lanka Railways1. Retrenchment Strategies 1. Retrenchment Strategies

Retrenchment strategies aim at the reduction of operation costs and raising funds required for additional investment. Under retrenchment strategies, business units and assets that do not add value are targeted and dealt with in the appropriate manner. These strategies cause pain, stress and tension leading to unrest amongst stakeholders and the Indian Railways was very sensitive in resorting to these strategies . Relevant strategies used by the Indian railways include:

a. Withdrawing from markets where the firm is performing poorly;b. Selling assets;c. Reduction of the scale of operation;d. Improving efficiency; ande. Outsourcing.

(Source: Desh Gupta and Milind Sathye 2008)

The Indian Railway Minister Hon. Lalu Prasad Yadav in his 2004 budget speech emphasized on

cost control stating that “….operating expenses will no way be allowed to exceed the barest

minimum required…… and cost effective use of assets will be ensured…..”

The number of employees, which peaked at 1.652 million in 1991, was brought down progressively to 1.472 million by 2003, and to 1.412 million by 2006. Although one of the elements of retrenchment strategy is to trim off excess staff, the approach that the Indian railways adopted was not to fill in vacancies created due to retirement or other reasons.

A striking feature is not selling any of the priced assets of the Indian Railways as they were all ‘geese that with the promise of laying golden eggs’.

2. Repositioning Strategies2. Repositioning StrategiesRepositioning strategies are the most welcome strategies in a turn around as they bring hope and result in happiness in the organization. However, formulation of repositioning strategies require more knowledge and effort by the management team. Correct actions must be planned and


Successful Turnaround of Indian Railway & Lessons Relevant for Sri Lanka Railwaysimplemented by them. The focus here is to generate more net revenue through finding out new ways of doing business. The Indian Railways focused on the following repositioning strategies:

a. Focus on growth;b. Product innovation;c, Product differentiation; andd. Improving market share .


For instance, under product innovation price differentiation, e-ticketing and booking, matching products with market niches, passenger coaches with new layouts and amenities were introduced with resounding success. In improving market share pricing was used as a major leverage to position the products and services in relation to competition and become the preferred choice of the commuters.

The IR introduced double stack container trains on some diesel routes. These containers increased the carrying capacity of each train to 2,500 tonnes against 1,500 tonnes, and also reduced line capacity constraint by nearly half and ‘led to saving of about seven percent on capital cost and 25 percent in operating expense’



3. Reorganization3. ReorganizationThe Minister Hon. Lalu Prasad Yadav said in the 2004 budget speech that ‘Indian Railways is committed to ….. optimum utilization of human resources….’ and showed that commitment through the following sub-strategies:

a. Changes in planning system;b. Decentralizing;c. Human resource initiative; andd. Change in organization culture.


As an example, planning was improved tremendously by introducing accounting and management information systems to facilitate better and faster decisions, taking investment decisions well in advance and introducing Enterprise Resource Planning (ERP) Systems.

Care for people was shown through actions to reduce the fatigue of drivers and guards, crew friendly cabin designs, employee participation in management and developing staff through multi-tasking.


Successful Turnaround of Indian Railway & Lessons Relevant for Sri Lanka Railways4. Environmenal Factors4. Environmenal Factors

The Indian Railways zeroed on the outside business environment understanding its impact on performance. Although the external environment is not under the control of organization it influences the performance of the business either positively or negatively. Raghuram in a report published in 2007 points out that the growing macro economic conditions in India positively contributed to the turnaround of the Indian Railways:

a. Change in the macro economic conditions – positive impact;b. Rise in demand - positive impact;c. Change in the legal position – positive impact;d. Changes in accounting practices – positive impact;e. Impact of the pay commission – negative impact; andf. Decline in the financial cost – positive impact.


Pivotal Role Played by the Railway MinisterPivotal Role Played by the Railway Minister

(Source: MOR .2006, Annual report)Eng B.D. Rampala Memorial Lecture- 2010 100th Birth Anniversary 8


Within the Indian Railways structure the Railway Minister becomes the de-facto CEO and is well positioned to drive the whole organization. Some of the important business decisions and measures taken by successive ministers of railways are listed below: IRFC - Indian Railway Finance Cooperation Ltd - to raise funds for fixed assets: 1986 (positive

effect due to facilitation of market borrowings for wagon procurement, negative effect due to high interest rates);

IRCON - Indian Railway Construction Company Ltd and RITES - Engineering and Consulting Firm for local and overseas business promotion (positive effect);

CONCOR - Container Corporation of India Ltd, carrier, terminal operator and warehousing of containers :1989 (positive effect due to focus on containerized movement of non-bulk);

Project Uni-gauge: Early 90’s (negative effect in the 1990’s due to reduction in track renewal works, positive in the recent and future years);

Fifth Pay Commission: 1997-98 (negative in the late 1990’s); 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 to

greater focus); Focus on PPP (public-private partnership) format for investments, catalyzed through RVNL -

Rail Vikas Nigam Limited: 2002-03 onwards (positive, due to the ability to leverage other stakeholders’ funds);

Market oriented tariffs (positive); 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 is

yet to be seen); IRCTC - Indian Railway Catering and Tourism Ltd. (Positive).

(Source: G Raghuram 2007)

The operationalisation of the various strategies over the past years depended significantly on the leadership style of Hon. Lalu Prasad Yadav and with his common sense approach he was able to leverage the management and assets through empowerment and delegation:

Strategy Carefully formulated set of integrated strategies which were implemented to enhance sustainability and overcome difficult environment.

Empowerment Motivate and encourage people boosting moral to perform, and creating a conducive environment with adequate delegation of authority and protection.

Delegation Effective and efficient decentralization or distribution of authority to perform to their capacity. Each person in the structure given adequate authority to perform without hesitation.



The following five characteristics displayed by the Minister served as the main pillars of successes:

Non interference; Direct approach; Caring attitude; Right people for the right job (identify right people); Image building.

(Ref G Raghuram .2007)

✔✔ Non Interference Non Interference

Once the goals were set, results were identified and delegated, the Railway Minister did not interfere. That saved him enough time and energy to build the organization and ensure the alignment of other activities towards success. He allowed the Railway Board to function as a cohesive entity and oversee the implementation of the policies and strategies.

✔✔ Direct ApproachDirect Approach

In maintaining a direct link, the Minister periodically communicated with the general managers setting and reinforcing priorities and specifying targets and standards for performance and service delivery. Two of the letters written by the Minister given in Appendix I and II are an example of this approach.

✔✔ Caring AttitudeCaring Attitude

The Minister always emphasized the role of staff and unions. He himself intervened to provide contributions to the staff welfare fund when staff were able to achieve better financial performance than targeted. Whenever concerns were raised about downsizing of the Indian Railway, he came out with his Hindi one liner which translated to, ‘Downsizing may make Indian Railway thinner, but not necessarily healthier’ (Ref: G Raghuram, 2007). He set his strategy based on the concept ‘regenerate competitiveness and leverage resources rather than restructure and downsize’. He believed in instilling hope and excitement rather than fear and anxiety.

✔✔ Identify Right PeopleIdentify Right People

All the dealing between the Minister and the Indian Railway Board has been through a noble person appointed as Officer on Special Duty (OSD), Mr Sudhir Kumar. He was specially chosen by the Minister for this position based on his experience and interactions with the Minister. Mr Sudir Kumar provides the vital link between the Minister and the Railway Board and translate the vision of the Minister into strategies and action in the Indian Railways. The OSD was capable of understanding and supporting the tremendous strengths in the Indian Railways systems that ensured robust decision making.

He was mainly involved in the follow up of initiatives such as axle load increase, uni-guage project, market oriented tariffs, reducing wagon turnaround, innumerable freight incentive schemes, passenger profile management, upgrading of passengers and leasing of parcel service and


Successful Turnaround of Indian Railway & Lessons Relevant for Sri Lanka Railwayscatering services. The most important fact to notice is that, all above activities are done under the existing systems and within the culture of Indian Railways.

✔✔ Image Building Image Building

When ever there was an opportunity to highlight an initiative or an achievement the Indian Railways went to the towns with advertisements and marketing campaigns. Appendix 4 and 5 are an example of image building in IR.

Salient Results of Indian Railways TurnaroundSalient Results of Indian Railways TurnaroundFollowing results speak volumes about the success of the strategies adopted:

• According to the Indian Railways, cash surplus before dividend and net revenue were estimated by the government at US$ 6.17 billion and US$ 4.53 billion respectively for the year 2007-08.

• Indian Railways is today the second largest profit making Public Sector Undertaking after ONGC (Oil and Natural Gas Corporation). The fund balance crossed INR.120 billion (US$ 2.7 billion) in 2005-06, which had reached a low of just INR 1.49 billion (US$ 33.4 million) in 1990-2000. The total investment being planning for the eight-year time frame (2007-2015) was tentatively in the order of INR 3,500 billion (US$ 78.6 billion). This confidence is not only due to the rising trend of performance, but also due to the significant growth in the past two years.

• Turnaround of Indian railways is being studied by students of Harvard, Wharton and other prestigious management universities and by management experts.

• 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 low emission to generate certified emission reduction credits.

• Construction of dedicated freight corridor, with an investment of US $ 81.92 million invested in 2008 to 2009 and US$ 614.4 in 2009-2010.

• Renewal of 44.5 million pre–stressed concrete sleepers set for open line network.

• Technological upgrades and modernization for higher operating efficiency.

• Development of PPP in new routes, railway stations, logistics parks, cargo aggregation and warehouses.

• Development of 100 budget hotels under public-private partnership mode in the vicinity of railway stations.

• Installation of WI-FI to provide wireless access at 500 stations.

• Introduction of marketing rights for advertising on railway tickets and reservation charts.

• Establishment of integrated logistic parks on unused lands.

• Development of agri-retail hubs, cold chains, multi-purpose warehouses on surplus land within the Indian Railways.


Successful Turnaround of Indian Railway & Lessons Relevant for Sri Lanka Railways• Training of railway managers to meet future challenges, the Indian Railways is planing to set

up an International Management Institute in New Delhi.

• Renewal of over 2,941 km of rail, which will require 3.39 Million tonnes of rail steel and over 2,382 km of pre- stressed concrete sleepers.

• Implementation of dynamic pricing policy, tariff rationalization, non peak season, incremental freight discount scheme, empty flow direction freight.

• Discount schemes, loyalty discount schemes and long term freight discount schemes.

(Ref: Indian railway website. www.impactlab.net)

Sustainability of Turnaround of Indian Railways.The fundamental question is whether Indian Railways is capable of maintaining the high level of growth and achievements in the future. There is reassurance in this regard since strategies and processes are scrutinized using the following criteria:

Customer/Passenger Orientation Customer/Passenger Orientation Strategies and processes are focused on customer needs and activities are aligned with market segmentation.

Scientific Strategies and ProcessesScientific Strategies and ProcessesStrategies and processes are scientifically developed to achieve better asset utilization and organizational restructuring.

(Ref Desh Gupta and Milind Sathye 2008)

SustainabilitySustainabilitySustainability is achieved when social, environmental and economic dividends are derived simultaneously. It is an iterative process in which the philosophy, processes and practices need to be changed progressively to ensure congruence of economic, social and environmental goals and targets.

ICT as a the Base for Success ICT as a the Base for Success


http://www.impactlab.net/

http://en.wikipedia.org/wiki/File:Sustainable_development.svg

http://en.wikipedia.org/wiki/File:Nested_sustainability-v2.gif

Successful Turnaround of Indian Railway & Lessons Relevant for Sri Lanka RailwaysICT has played a major role in the turn around of the Indian Railways and will continue to be a corner stone in its success.

Comments on the Turnaround Comments on the Turnaround "The turnaround is not hype because the net revenues have increased sharply," said Prof. G. Raghuram. "By increasing the axle-loading of wagons (which increases freight traffic) and, combining it with a market-oriented approach, Lalu Prasad has contributed to the success of Indian Railways," Raghuram added.

And says KPMG: "Indian Railways is in a dynamic phase of growth with new initiatives planned to capitalise on the existing gains and moving steadier and closer to the larger objective of offering world-class services in both freight and passenger transportation."

"The railways are now working like a private sector corporation. This is great news for India. We wish other public services, especially in the social sector, like education and health would follow suit," Habil Khorakiwala, president of an apex industry group, the Federation of Indian Chambers of Commerce and Industry (FICCI), said.

There are areas that are still a concern to the commuters and other users of the Indian Railways facilities. These include delays, cleanliness of some of the infrastructure such as the stations etc. However, everyone agrees that the financial turnaround has been completed and the results need consolidation.

Please refer Appendix III for further comments on the turnaround.

Sri Lanka Railways – Current SituationSri Lanka Railways – Current Situation

Sri Lanka Railways is also in a similar position to that the Indian Railways found itself to be in the 1990s. The following are some of the critical problems faced by SLR:

✔ Lost its market share in profitable freight business;✔ Lack of flexibility in pricing and unrealistic pricing 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 (greater than 100% operating

ratio);✔ Lack of market orientation; and ✔ Politicization of the decision making process.

As per 2008 figures, the recurrent expenditure was Rs 8.0 billion with the total revenue under Rs 4.0 billion. This has further deteriorated over 2009 and 2010.While there are abilities, they are not converted into capabilities. For instance, when the SLR repaired and restored the coastal lines, bridges and signal systems in record time after the tsunami devastation and put trains back on track on full steam with the able assistance of the Central Engineering Consultancy Bureau (CECB), the State Development Corporation (SD&CC) and the State Engineering Corporation (SEC) we were hopeful that we would receive encouragement and support to revive the SLR. This fete of tsunami repairs was accomplished at a fraction of the estimates given by foreign companies


Successful Turnaround of Indian Railway & Lessons Relevant for Sri Lanka Railwaysand the time taken was also only a few months compared to years that were required by them. Unfortunately, our hopes for a SLR turnaround were only short lived.

Sri Lanka Railways – The FutureSri Lanka Railways – The Future

Just as in the case of the Indian economy, our economy is also set to grow at around 8-10% a year providing the buoyancy for the transport sector. SLR operations could be compared to one of the 16 zones in Indian Railways and could be modeled accordingly in a profitable manner.

SLR has a strong asset base that can be developed through genuine public-private partnerships. Outsourcing can be introduced as in the case of the Indian Railways to replace internal products and services that are loss makers. The end of the war has made all tracks in Sri Lanka operable and long haul lines could be operated in a more productive manner and round the clock.

Freight can be attracted especially with a network of storage facilities and a cold chain. Increasing tourist arrivals provide a great opportunity.

Railway is 2-5 times energy efficient. Electrification would create greater synergies and make travel greener and healthier. Railways uses 2-3 times less land mass for each passenger transported and saves precious urban and cleared land.

Therefore, let’s select the right strategies. Let’s create an era of caring and rewarding as in the case of the Indian Railways. Let there be political leadership void of political interference. Let there be goals and targets set and a policy and procedure framework made conducive for their achievement.

Then we can convert abilities into capabilities. Knowledge and experience into tangible results. Followers into leaders. Weaknesses into strengths and threats into opportunities. And SLR into a sustainable public utility.

ConclusionConclusion

As engineers who follow the tradition and in the foot steps of Eng B D Rampala, we the Sri Lanka Railway engineers are committed for invention, innovation, adaptation and adoption as necessary to put SLR back on the track that leads to sustainability and committed public service. We are supported by the SLR staff of all categories as well. Our universities and technical colleges produce some of the best engineers and technical people in the world and they also can join the team.

If we are provided with the correct political leadership by successive ministers in charge of SLR as in the case of the Indian Railways Turnaround Story, and if we are empowered as our Indian counterparts are, and if we are allowed to make decisions based on scientific and business fundamentals, then we can surprise the world through a faster than expected turnaround of SLR.

Once again, may I thank the Institution, Mechanical Engineering Sectional Committee, and you ladies and gentlemen for this opportunity and wish that the legend of Eng. B D Rampala be kept alive by making the SLR sustainable for the benefit of generations to come!

Thank you!



References1 G Raghuram (Turnaround of Indian railway) 2007. Indian Institute of Management Report.2 Rakesh Mohan Committee 2001. Highlights of the Executive Summary - available at

http:/www.irastimes.org/rkmreportingexesummary.htm accessed on 30 may 2007.3 World Bank 1994, The World Bank railway database available at

http:/www.worldbank.org/transport/rail/rdb.htm.4 Desh Gupta and Milind Sathye (Financial Turnaround of Indian Railways) 2008. Accessed

from Scribed web site on 17.6.2010.5 IRFC Indian Railway Finance Corporation 2004 Annual Report, New Delhi.6 The International Railway Union, www.uic.asso.fr

Appendix

1 Letter from Minister to GMs Dated 1st April, 2005

2 Letter from Minister to GMs Dated 27th March, 2006

3 Tracking the Indian Railways' Turnaround Saga

4 Advertisements published for IR image building

5 IR website pages.


http://www.uic.asso.fr/

Successful Turnaround of Indian Railway & Lessons Relevant for Sri Lanka RailwaysAppendix I: Letter from Minister to GMs Dated 1 st April, 2005

Ministry of Railways Government of India

No 2004/II(IV)/65/134 1 – 4 – 2005

My dear (All GMs),

As a result of the concerted efforts put in by all the Zonal Railways, IR is poised to achieve a land mark loading of 600 MTs in the financial year 2004-05 and regain some of the market share conceded to the road sector over the years. I would like to place on record my deep appreciation for the efforts made by you and your team of officers and staff for achieving this outstanding performance.

2. The task in the next financial year 2005-06 would be even more daunting and challenging as we have to gear up for Mission 700 MT freight loading. An action plan has been drawn for realizing this mission, a copy of which is enclosed. The GMs, PHODs and DRMs must execute this plan in MISSION MODE and earmark a senior officer of their respective offices to ensure strict compliance of all the points listed in the action plan on FAST TRACK basis.

3. Everyday over 325 rakes take more than 24 hours in loading/unloading and 170 rakes take more than 15 hours in train examination. The time taken in arrival to release is also abnormally high. I am constrained to note that GMs of some of the important freight loading railways having high terminal detentions and very poor freight rolling stock productivity parameters have not even once highlighted the steps taken by them to reduce terminal detentions and to improve these indicators during the last 6 to 8 months. THIS MUST CHANGE and all the GMs must highlight the steps taken by them to execute the aforesaid action plan and to improve productivity of assets in the main body of the MCDO. All the GMs MUST INITIATE measures as considered necessary for bringing down the time taken by every single rake in loading/unloading and train examination to less than 20 hours and 10 hours respectively. They should immediately send proposals for up gradation of terminals, asset maintenance, train examination and other traffic facility works for reducing terminal detention and enhancing throughput and I assure you that funds will not be a constraint for the timely execution of these critical works. All the on-going throughput enhancement including traffic facility works should also be targeted for completion on top priority basis.

4. It is learnt that some of the earnings contracts are not finalized for months together while some of those relating to catering, advertisement, bookstalls etc. are being renewed at ridiculously low license fees. As a result, we are incurring huge losses on catering (Rs 441 crores), parcel and other coaching services (Rs 782 crores). These losses need to be reduced by at least 50% in the course of this year by ensuring that all pending earnings contracts/licensees including those relating to catering and parcel services are finalized at realistic licensee fees without any further delay and in future if finalization of these contracts is delayed by more than 3 months, responsibilities should be fixed for the same. Steps should also be taken for increasing occupancy of trains by at least 2-3% by adding more coachs to popular trains, improving the time table of unpopular trains, rationalizing reservation quotas and checking ticket-less traveling.

With these efforts, I hope that we would not only maintain the trend of regaining market share in freight loading but also improve operating ratio to less than 88% by achieving higher productivity of assets and manpower in the next financial year. I would once again request that al the aforesaid points should regularly be highlighted in the MCDOs.

Encl: As above

Yours Sincerely,

(Lalu Prasad)

General Manager, (All Indian Railways)

[Source: MOR, 2006, Internal Correspondence (2006 cited by G Raghuram 2007)]


Successful Turnaround of Indian Railway & Lessons Relevant for Sri Lanka RailwaysAppendix II: Letter from Minister to GMs Dated 27 th March, 2006

Ministry of Railways Government of India

DO No MR/M/21/2006 27th March, 2006 My dear (All GMs),

Let me, first of all, congratulate you and your team of officers and staff for record breaking performance with internal generation of Rs 13,000 crore and operating ratio of 83% during the year 2005-06. However, this should not make us complacent and we should try for freight loading of 800 mt, internal generation of Rs 20,000 crore and operating ratio of 77% in the year 2006-07.

With this rate of growth, we would be able to carry 1200 mt of freight traffic and 8000 million passengers by 2012. We must, therefore, start thinking big and leverage annual plan size. All zonal railways, particularly SC, SE, SW and Eco in which over 30,000 iron ore indents are pending, supplementary/main budget for capacity augmentation and de-bottlenecking of junctions, yards and terminal operations (see Annex-I). GMs should not hesitate in sending such proposals irrespective of the amount involved. There is an urgent need to take away small works from CAO(C) and strengthen them further for completion of all on-going throughput enhancement works within the given deadlines. GMs should personally monitor this on a regular basis.

It is a matter of concern that still 25% rakes take more than 24 hours and over 50% rakes take more than 15 hours in loading and unloading. All zonal railways should identify such terminals/sidings and take immediate necessary steps for reducing terminal detentions below the national average of 16 hours at such stations. We should try to further improve productivity of rolling stock by improving loco outage beyond 10% and bringing down turn round time of wagons to 4.5 days (see Annex-II). Implementation of terminal incentive cum engine on load schemes on sidings handling one or two rakes per day should also be pursued vigorously.

Despite our resolve to celebrate 2006 as the year of ‘Serving the passengers with a smile’, passengers have so far not felt perceptible improvement in ‘touch and feel items’. DRMs should be asked to play a lead role in percolating this spirit down to the lowest level. Every DRM should select at least 5 stations and transform them into modern stations within a period of next 12 months. They should leverage public private partnerships for upgradation of stations, toilets, waiting rooms etc. They are also being empowered for sanctioning passenger amenities works upto Rs 30 lakhs and sufficient funds would be made available at their disposal for such works.

We have recorded around 50% growth in sundry and other coaching earnings in the year 2005-06 and we should try to surpass this growth rate during the next year. This would require (a) timely finalization of earning contracts, and (b) upward revision of license fees by 5-10 times in line with the true potential of land leasing and commercial earning contracts. As requested vide my earlier DO, I would again request you to bring down passenger losses by 50% and wipe out catering and parcel losses completely by the end of 2006-07.

I would like to be apprised on the steps taken by you on the aforesaid points through your MCDOs.

With best wishes,

Yours Sincerely, (Lalu Prasad)

[Source: MOR, 2006, Internal Correspondence (2006 cited by G Raghuram 2007)]


Successful Turnaround of Indian Railway & Lessons Relevant for Sri Lanka RailwaysAppendix III

Tracking the Indian Railways' Turnaround Saga

http://indiainteracts.in/columnist/2007/07/21/Tracking-the-Indian-Railways-turnaround-saga/

It's a turnaround story that has not only amazed management experts but also caught the attention of premier global business schools like Harvard and Wharton - the dramatic return to profitability for the 154-year-old Indian Railways, among the world's largest railroad networks.

In February, when Railway Minister Lalu Prasad presented India's railway budget for the 2007-08 fiscal, its most striking aspect was the Rs.215 billion ($4.5 billion) surplus he announced for the organisation that employs 1.5 million people and boasts a 63,332-kilometer network that ferries 14 million passengers daily in 9,000 trains (4,000 more for cargo) from 6,947 stations.

"The railways are poised to create history," exulted Lalu Prasad, one of India's most colourful politicians, during his 116-minute speech, referring to the highest-ever surplus - akin to profits for companies - which the Indian Railways was projected to post for the fiscal year ended March 31.

"This is the same railway that defaulted on the payment of dividend and whose fund balances had dipped to Rs.3.59 billion ($80 million) in 2001," said the minister to the amazement of industry honchos and experts who were listening attentively to the speech.

In fact, he not only said that the surplus would increase next fiscal but also belied speculation over freight and upper class fare hikes that had once been a regular feature for the railways to bridge deficits. In fact, he even announced an across-the-board cut in tariffs and rolled out plans for 40 new trains, extended the run of 23 and increased the frequencies of 14 others.

All this only left experts gasping. They wondered what had caused such a sharp turnaround in the organisation from being the backbone of the Indian economy to being termed a "white elephant" headed towards bankruptcy by a government-appointed expert group.

"Today Indian Railways is on the verge of a financial crisis. To put it bluntly, the 'business as usual, low growth' will rapidly drive it to fatal bankruptcy, and in 16 years, the Government of India will be saddled with additional financial liability," said the report presented in July 2001.

This was, indeed, alarming for the Indian Railways, which since the commencement of its first journey on April 16, 1853, has come to reflect the pluralistic character of the country with many unique features such as having the world's largest as well as the smallest stations, the oldest running locomotive and a separate budget since 1924.

But from 2005, the signs of change were visible and became well entrenched by 2007.

"The railways' renaissance has been engineered by simple entrepreneurial practices, which have evoked the admiration of internationally renowned institutions and companies alike," said a report by KPMG, which also conducted an international conference on railways in New Delhi last month.

"The railways are now working like a private sector corporation. This is great news for India. We wish other public services, especially in the social sector, like education and health would follow suit," Habil Khorakiwala, president of an apex industry group, the Federation of Indian Chambers of Commerce and Industry (FICCI), said.


http://indiainteracts.in/columnist/2007/07/21/Tracking-the-Indian-Railways-turnaround-saga/

Successful Turnaround of Indian Railway & Lessons Relevant for Sri Lanka Railways"The turnaround is not hype because the net revenues have increased sharply," said Prof. G. Raghuram, who has thoroughly examined the performance of the Indian Railways as a case study for the premier Indian Institute of Management at Ahmedabad, one of India's best-known business schools.

"By increasing the axle-loading of wagons (which increases freight traffic) and, combining it with a market-oriented approach, Lalu Prasad has contributed to the success of Indian Railways," Raghuram added.

Lalu Prasad attributed the transformation almost entirely to improved efficiency that was even able to withstand increased competition from budget carriers that were offering to fly passengers for the cost of a second-class air-conditioned fare of the railways.

"Over the past 30 months, freight volumes have grown by 10 percent. Similarly, growth in passenger volumes has been doubled," he explained to a group of 130 students from Harvard and Wharton a few months ago, while delivering a lecture on the transformation of Indian Railways.

"On the supply side, increase in load coupled with reduction in turnaround time of wagons from seven to five days has contributed to an incremental loading capacity," the minister said in the rather simplistic explanation.

With financial parameters back on track, the Indian Railways now has set itself ambitious targets in areas such as refurbishment of stations, passenger amenities, better coaches and new freight corridors as it approaches the 11th Five Year Plan that begins April 1.

And says KPMG: "Indian Railways is in a dynamic phase of growth with new initiatives planned to capitalize on the existing gains and moving steadier and closer to the larger objective of offering world-class services in both freight and passenger transportation."
