Milkman's fattest milch cow

The recent upswing in Indian Railways’ (IR) operational and financial performance is the matter of much discussion in drawing rooms and street corners. The gap in information on how it has been done is authoritatively filled by Bankruptcy to Billions, a concise and erudite dissertation, which is eminently readable.

With a sense of the dramatic, the authors start off with a delightful dialectal dialogue between Railway Minister Lalu Yadav and people from his constituency, highlighting Lalu’s earthy common sense which prompts him to work on their psychology, for example, by making a token reduction of a rupee in second class passenger fares, at a cost of Rs 250 crore to IR.

Signifying “nifty management and operating strategies”, the basic mantra of “no privatisation, no retrenchment, and no fare-hike” suggested by the minister stemmed from his profound political acumen coupled with sturdy common sense that an expensive milch cow had to be fully milked. This indicated a clear direction for IR to optimise the utilisation of costly assets. This, in turn, gave rise to the second mantra, “faster, longer and heavier trains” in order to extract the utmost yield from the assets. Faster trains, in reality, implied better turnround, by reducing delays in transit and at terminals. Heavier trains meant extracting higher yields from the permanent way and rolling stock.

This expedience alone helped freight and passenger volumes clock a 9 per cent CAGR between 2004 and 2008 and, concomitantly, raise asset and labour productivity at twice the rate of the 1990s, resulting in declining unit costs. A third mantra of “dynamic, differential and market-driven” pricing was used, encompassing, in fact, a whole panoply of revenue-raising measures, many of them euphemistically termed. With these and other strategies and interventions, IR in the 2004-2008 period achieved an enviable operating ratio of below 76 per cent and more than Rs 22,000 crore in the happy state of super-solvency. It will be a travesty to proclaim that increases in income have come about without raising fare or freight rates.

The book could well have been sub-titled “What makes Lalu tick?”. So much does it dwell on that quintessentially earthy but consummately astute politician, transforming that “joker of Indian politics” into “Professor Lalu”. As the hype generated around his persona already seems to lull the organisation into complacency, IR must realise it has an enormous task ahead to expeditiously expand its capacity for an optimal share of around 50 per cent of the nation’s freight market and 30 per cent of passenger traffic.

Let it be confessed in all humility, and honesty, that the upsurge in IR output in the last five years, howsoever “phenomenal”, constitutes no “veritable revolution” nor a structural “transformation”. Lalu rose above the petty shenanigans associated with many of his ministerial tribe with his “ zero tolerance for political interference with railways’ daily operations”.

As the lengthened shadow of the man at the helm, the organisation could have achieved a lot more. A great communicator endowed with the magnetism of a cultivated rustic idiom, Lalu had an obligation to initiate the difficult phase of reform. Howsoever specious the reasoning one may adduce, for instance, in the name of political economy compulsions or pragmatism, IR can no longer afford to ignore the essential changes it must effect in its very ethos, structure and organisation, prune tiers and layers, do away with the legacy of departments and institutions which have merrily proliferated and expanded, and tackle the “ deep rifts between functional silos that are organised into departments”. No argument will ever help justify the anomalous and irrational pricing of passenger services and continuation of hundreds of slow-moving sectional passenger trains. There is a huge scope for IR to trim itself and cut costs, and reduce freight and some fare charges. Of course, Lalu commendably rendered Parliament irrelevant for the myriad changes his tenure brought about in commercial matters of tariffs and rates.

When one ignores or debunks history one is liable to go astray. IR’s pains of cyclical growth need to be borne in mind. It kept sliding back even though it often recorded higher levels of traffic and revenue. The Ides of March seem to be already upon us. The gross traffic receipts of Rs 93,159 crore and total working expenses of Rs 83,600 crore projected in Interim Budget 2009-2010, with an operating ratio of 89.95 per cent, point towards the business as usual syndrome, harking us back to the financial travails IR endured for a decade prior to the days of the billions in its kitty during the last four years of Lalu’s domain.

BANKRUPTCY TO BILLIONS
HOW THE INDIAN RAILWAYS TRANSFORMED

Sudhir Kumar & Shagun Mehrotra
Oxford University Press
206 pages; Rs 495