Wednesday, January 30, 2008

INDIAN RAILWAYS TURNAROUND: A MYTH

Laloo Brags

Railways Minister Laloo Prasad Yadav has been trumpeting from atop the Red Fort that he has got the railways to perform and earn a profit of Rs 21,578 crores during 2006-7, surpassing the ONGC. As it later turned out, the turnaround story was one third true, one third media hype and one third jugglery of figures. A close scrutiny of railways accounts reveals a net profit of Rs 11,000 crores. Even this amount was earned at the expense of unsuspecting passengers and at risk to their safety. A large amount of money reflected as profit is not available to be ploughed back. Part of it is suspense account, money promised to the railways but not yet in its kitty.

Disturbing Facts
Laloo Prasad claimed the railways made a profit of Rs 21,578 crores.
Actual profits work out to Rs 11,000 crores.
Rs 9000 crores pension fund shown as profits.
Miscellaneous funds – Rs 2,500 crores included in profits.
Rs 1,700 crores meant for lease of wagons reflected as profits.
Profit figures inflated by advance earnings for 2007-8 in last year’s balance sheet.
Funds promised by Finance Ministry, but not yet received, included as profits.
Excess tonnage carried ignoring safety concerns fetched Rs 5000 crores.
Hidden costs to passengers earned Rs 325 crores.

The Subterfuge
The railway under Laloo has altered the way the balance sheet is presented. It has shown a remarkable creativity to artificially inflate revenues while at the same time degrading the quality of service. Consider the following:
Diluting Tatkal. 10 % seats meant for those traveling in emergency earned Rs 100 per ticket. This has now been changed to 30 % seats with a surcharged of Rs 250 per ticket.
Declaring Trains Superfast. Over 100 trains have been declared Superfast without any change in running time or facilities. The Superfast tag fetches Rs 75 crores.
Doubling Cancellation Charge. Added profits Rs 100 crores.
Costlier Return Tickets. Profits Rs 30 crores.
Onward Journey More Expensive. One can no longer buy a single ticket if one has to change trains for an onward destination.
Safety Surcharge. Was to be levied only upto Mar 2007, Laloo converted it to ‘Development Surcharge’ without cabinet approval. Profits 2,500 crores.
Licence Fee. Rs 550 crores for running container trains converted to profits.

The Actual Profits
The railways primarily did two things: substantially increased the load carried by freight trains and put in place a slew of ticketing rules which extracted money from passengers even as Laloo Prasad claimed he had not raised fares.

The chunk of the profits, Rs 5000 crores, came by increasing the carrying capacity of container wagons by ten tones each. In private, however, experts have questioned on grounds of safety. The rail infrastructure – tracks, wagons, engines can only be stretched to a limit. While the loads carried increased there was no corresponding enhancement of maintenance standards/schedules. Earlier, train examination was done every time a train returned to its base station, irrespective of the distance traveled. This was changed to every 7,500 Km. As a result; various zonal divisions reported increased rail fractures, stress on old bridges and wagon coupler failures due to increased axel loads and less frequent maintenance. The axel loads were increased without any trials, checks, tests or technical analysis. It is ironic that Laloo Prasad could increase the axel loads because of infrastructure upgradation executed by his predecessor, Nitish Kumar.

False Propaganda
The much projected IIM Ahemdabad report concealed the remarks of Professor G Raghuraman that without safety and infrastructure enhancement, the profits are not sustainable and that the turnaround has failed in terms of improvement in amenities and facilities for the passengers.

Visiting students from Harvard Business School, Wharton and MIT in 2006-7 claimed the interaction with Laloo was organized by the hosts and not connected with any academic project. The visits were deliberately made much of to claim false credit.

Conclusion
In the light of the foregoing, it is unfair to compare Laloo’s performance with that of his predecessor, unless the previous years’ accounts are placed in the same format. Once again, the ‘Fodder Scam’ tainted minister has managed to get the better of the country.



4 comments:

Anonymous said...

As I suspected. The media have a habit of exaggerating false claims without actually doing a professional analysis. What really exasperates me is the fact that Indian public blindly accepts media's incompetent reports. It's good to know that at least someone is out there questioning this facade of high profits. Good work Col. Jagdish

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