Indian Railways
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Introduction
Indian Railways (IR) has been the prime mover of the nation and has the distinction of being the largest
railway system in Asia and the second largest railway system in the World under single management. IR
operates more than 11,000 trains per day of which 7000 are passenger trains. The railways have played
a critical role in catalysing the pace of economic development and continue to be an integral part of the
growth engine of the country.


The Turnaround Story
In this section, we look at some major strategies followed by the Indian Railways which led to the complete
turnaround. All the data mentioned in this section had been sourced from o±cial Press
Releases of Indian Railways. [2], [3]. For a complete analysis of the strategies and their critical
appraisals, see this report from IIM Ahmedabad [4].


2.1 Capacity Enhancement
The Indian Railways has a massive infrastructure in place and the costs incurred are predominantly ¯xed
and independent of the operations. The challenge was therefore to achieve enhanced capacity while not
incurring additional capital expenditure. Following are some key innovative and e®ective measures that
led to this:


² Productivity Improvement - By increasing wagon loading capacity and signi¯cantly reducing wagon
turnaround time. This is seen from data in Figure 2.
² In the past, loading/unloading was done only during day time (10 hours a day on an average)
and trains used to lie idle at customer sites overnight. The Indian Railways provided incentives to
customers to undertake loading/unloading 24 hours a day. Consequently, the average time taken
for loading came down from 30hrs to 16hrs and for unloading from 34hrs to 18hrs, reducing the
turnaround time by over a day.
² IR did away with the system of train examination, which consumes about 16 hrs on an average.
Earlier, train examination was done every time a train came back to its base station, irrespective of
the distance traveled in the interim. In recent times, examination is being conducted only after 4,500
kms. or 15days (whichever is later). This strategy was very successful and has been later extended
to 7,500 kms.

2.2 Capacity Utilization
² Dynamic Pricing Policy
Till recently, IR had a ¯xed price policy, irrespective of demand scenario and competition. In order
to be able to e®ectively face the challenges posed by sti® competition, a Dynamic Pricing Policy
was introduced for freight as well as passenger, for peak and non-peak seasons, premium and non-
premium services, and for busy and non-busy routes. As per this policy the rates for non-peak season,
non-premium service and empty °ow directions would be less than the general rates and the rates
for peak season and premium services could be higher than normal.
² Tari® Rationalization
To simplify and rationalize goods tari®, the classi¯cation of items was reduced from over 4000 to a
mere 28 groups of commodities. In 2005-06, the total number of classes in the freight tari® schedule
was reduced from 27 to 19. The highest class - 250 for charging freight was lowered to 220 in 2006-07.
This was a very clever policy as more classes were put in the higher price category. Thus
even though the maximum cost was lower in new tari® rates, the nett revenue weighted
over the tra±c in all the classes was larger.