Turnaround of Indian Railways: A Critical Appraisal of Strategies and Processes

Indian Railways (IR), which was declared to be heading towards bankruptcy as per the Expert Group on Indian Railways in 2001, is today the second largest profit making Public Sector Undertaking after ONGC. The fund balance crossed Rs.12,000 crores in 2005-06, which had reached a low of just Rs.149 crores in 1990-2000. The total investment being planning for the eight-year time frame (2007-2015) is tentatively in the order of Rs.350,000 crores. This confidence is not only due to the rising trend of performance, but also due to the significant growth in the past two years. These two years coincided with Mr. Lalu Prasad being at the helm of affairs of the IR, having moved into his position on 23rd May, 2004. Railway officials called this as the ‘turnaround’ of IR. This paper attempts a diagnosis of the ‘turnaround,’ beginning with the question as to whether it really was a ‘turnaround’. This paper then carried out an analysis of the various determinants of the ‘turnaround’ related to goods, passenger and other operations. This is followed by a critical assessment of the strategies and key processes being the ‘turnaround’. Finally the sustainability of the ‘turnaround’ is explored.

Toilets and Trains

<div align=justify>Indian Railways (IR) is a large transport organization running 8700 trains, reaching 7000 stations and handling about 1.6 crore passengers per day. IR runs several long distant trains, some of which involve journeys upto three nights. The number of non suburban passengers traveling on IR is about 0.6 crore per day. There are three sources of fecal matter generation in IR (i) Toilets in trains, (ii) Railway stations; and (iii) Use of railway tracks for open defecation. The existing toilet system in the coaches discharges excreta directly to the ground and the railway tracks. The consequences include unacceptable hygienic conditions, particularly in the railway stations, and damage to rails. IR is making efforts to introduce environment friendly toilet discharge system, for which three options are being considered; modular, vacuum and chemical. Toilets at stations are a part of amenities being provided, linked to the category of the station. There is an attempt to modernize toilets at important stations. A related socio economic problem is that of people residing near the railway stations, without access to toilet facilities, using tracks for open defecation. The issue of dealing with fecal matter should be viewed in the larger context of waste management. With effective waste management, fecal matter can be recycled and used as liquid fertilizers and quality organic manures. This paper attempts to understand the issues related to fecal matter management on the IR, and provide a framework for solutions.</div>

Experiences of Various Forms of Commercial Partnerships in Indian Railways

This paper brings out issues of governance between the Ministry of Railways and various service delivering commercial entities under the Ministry. Some of this is accentuated by both the ministerial and administrative powers vested in the same body, namely the Railway Board. We examine a set of eight case situations, wherein there has been an attempt to focus on a commercial approach. However, the extent of success/failure is varied. A study of these cases brings out the potential of improving railway infrastructure under a governance framework of (i) distancing the ministerial role from the commercial activity, (ii) increased private participation, (iii) improving transparency, contestability and competition, and (iv) appropriate regulations We describe salient features of each of the cases, with comments from the perspective of commercial viability. A concluding section brings out some of the key concepts which would be relevant for such commercial partnerships in the future. At a broader level, given the budgetary constraints, under exploited potential of the IRs assets and service possibilities, lack of commercially oriented professional and accountable management, such commercial partnerships have implicitly been accepted (by both the central government and the top management of IR) as the way forward.

Dollar Shortages and Crises

Emerging markets do not handle adverse shocks well. In this paper, I will outline an explanation of why emerging markets are so fragile, and why they may adopt contractual mechanisms -- such as a dollarized banking system -- that increase their fragility. I draw on this analysis to explain why dollarized economies may be prone to dollar shortages and twin crises. The model of crises described here differs in some important aspects from what is now termed the first, second, and third generation models of crises. I then examine how domestic policies, especially monetary policy, can mitigate the adverse effects of these crises. Finally, I will ask if there is a constructive role for international financial institutions both in helping to prevent the crises and in helping resolve them.

Competitive Rent Preservation, Reform Paralysis, and the Persistence of Underdevelopment

Initial inequality in endowments and opportunities, together with low average levels of endowments, can create constituencies in a society that combine to paralyze reforms, even though the status quo hurts them collectively. Each constituency prefers reforms that expand its opportunities, but in an unequal society, this will typically hurt another constituency’s rents. Competitive rent preservation ensures no comprehensive reform path may command broad support. Though the initial conditions may well be a legacy of the colonial past, persistence does not require the presence of coercive political institutions, perhaps one reason why underdevelopment has survived independence and democratization. Instead, the roots of underdevelopment may lie in the natural tendency towards rent preservation in a divided society.

The credit crisis and cycle-proof regulation

This article was originally presented as the Homer Jones Memorial Lecture, organized by the Federal Reserve Bank of St. Louis, St. Louis, Missouri, April 15, 2009.Financial crises ; Systemic risk

Has Financial Development Made the World Riskier?

Developments in the financial sector have led to an expansion in its ability to spread risks. The increase in the risk bearing capacity of economies, as well as in actual risk taking, has led to a range of financial transactions that hitherto were not possible, and has created much greater access to finance for firms and households. On net, this has made the world much better off. Concurrently, however, we have also seen the emergence of a whole range of intermediaries, whose size and appetite for risk may expand over the cycle. Not only can these intermediaries accentuate real fluctuations, they can also leave themselves exposed to certain small probability risks that their own collective behavior makes more likely. As a result, under some conditions, economies may be more exposed to financial-sector-induced turmoil than in the past. The paper discusses the implications for monetary policy and prudential supervision. In particular, it suggests market-friendly policies that would reduce the incentive of intermediary managers to take excessive risk.

Lessons from PPPs of Indian Railways and Way Forward

The Indian Railways (IR) have grand plans. They would like to leapfrog to a higher growth trajectory during 2010-20. Towards this, they would like to see a total investment of Rs 14,00,000 crores (cr), as stated in the Vision 2020, brought out by the Ministry of Railways (MoR) in December 2009. With whatever level of optimistic projections for the internal resources and borrowings for the coming decade, clearly, PPPs would have to be a significant source. This makes it imperative for the IR to create a policy framework that would attract PPPs, especially in the context that the PPPs in IR have not taken off as projected. This paper reviews PPP projects that the IR has evolved over the past 25 years. These include operating partnership projects of IR including with the state government, PPPs in the pipeline, and discontinued partnership projects in IR. The paper brings out issues that have implications for PPPs in IR. The significant ones are focus on infrastructure creation PPPs rather than service PPPs, partner selection more contextually based than through open competitive bidding, more than acceptable time lags between conceptualization and project execution, issues in extending the project scope, non mutuality in contractual arrangements, and conflict of interest due to multiple roles of IR. Based on these issues, the paper derives certain key lessons and provides a way forward.

Roadmap for Logistics Excellence: Need to Break the Unholy Equilibrium

This white paper attempts to provide a roadmap for India to move towards logistics excellence. Apart from raising issues that are currently relevant, it also draws from the issues that were raised in the previous three logistics summits and continue to be relevant today. As a departure from the earlier summits, it was felt that some of the issues could be presented even prior to the summit, to enable discussions and prioritization during the summit. The paper begins with an assessment of the overall performance of logistics in India, followed by a framework of an “unholy equilibrium” that seeks to explain where we are and why, and then provides actor wise action agenda as the roadmap towards logistics excellence.