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Changing Tracks : Reinviting The Spirit Of Indian Railway

Changing Tracks : Reinviting The Spirit Of Indian Railway

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Changing Tracks : Reinviting The Spirit Of Indian Railway

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Lançado em:
Jul 22, 2015


How to make a 150-year-old run faster, carry more load and make more money In the year 2000, the Indian Railways - the world's second largest railway network under a single management was nearly bankrupt. Over the next eight years,however, there was a dramatic improvement in its performance. From a cash surplus before dividend of Rs 1,071 crores in 2000, it achieved an estimated Rs 25,000 crores (or around Rs 13,000 crores after accounting for all expenditures, receipts and depreciation) in 2008. Alongside came a dynamic and differential tariff policy, and technical changes that led to an enhanced carrying capacity. How all this was accomplished is the focus of this riveting study of change and innovation in the Indian Railways. Based on an extensive examination of internal documents of the Railways and in-depth interviews with key people involved in the change process, authors V. Nilakant and S. Ramnarayan identify four distinctive features associated with the organization's renewal between 2004 and 2008. The change leveraged the strengths of the organization, instead of being preoccupied with its weaknesses. The aim was to change mindsets about costs, revenues, investment and business models. The momentum of the change process was sustained by fostering positive emotions. Changes were persistently and patiently seen to completion by focusing on results. Confronting several myths about organizational change, the book offers powerful lessons for managers and administrators grappling with the challenges of generating innovation and improving performance radically in a changing world.
Lançado em:
Jul 22, 2015

Sobre o autor

V. Nilakant is on the faculty of the Department of Management at the University of Canterbury in Christchurch, New Zealand. He studied at the Indian Institute of Technology, Kanpur, and the Indian Institute of Management, Kolkata. He has worked with a variety of organizations in New Zealand, India, Australia and Malaysia on management development around change-related issues.He received his PhD from the Case Western Reserve University. He worked at the Tata Management Training Centre in Pune and co-authored the critically acclaimed Managing Organizational Change, based on case studies of forty-seven Indian organizations, and Change Management: Altering Mindsets in a Global Context.

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Changing Tracks - Nilakant V Ramnarayan S



A Snapshot of Change

Whether in a postcard or a movie, the image of a train reflects strength, energy and life. In this regard, the Indian Railways is no different from other great railways. About seventeen million passengers travel every day on 8,700 trains operated by it. That amounts to more than the entire world population being transported in one year. In 2007, India overtook China as the country with the largest passenger-kilometres travelled (695 billion) in a year. In addition to passengers, the Indian Railways’ 6,000 freight trains carry more than two million tonnes of freight every day. Its trains run twenty-four hours a day, seven days a week, 365 days a year. Each day, the total distance covered by its trains would equate to more than the distance to the moon and back.

As the statistics in Box 1.1 show, the Indian Railways is a colossal operation. Just to give you an idea of its size as an organization, only America’s Wal-Mart Stores with 1.9 million employees and China’s State Grid with 1.5 million employees are bigger in terms of direct employees.¹ However, unlike the Indian Railways, they do not support 1.1 million pensioners. Nor do they run schools, colleges and hospitals exclusively for their employees. The Indian Railways’ 100 hospitals employ a medical staff of 50,000. In addition, this venerable organization administers 750 educational institutions. No wonder that the Indian Railways is the world’s second largest railway network under a single management.²

Box 1.1

Indian Railways: Key Statistics

1.4 million employees

63,028 route kilometres

7,566 locomotives

27,840 coaches

222,147 freight wagons

6,853 stations

120,000 bridges

37,000 level crossings

300 yards

2,300 sheds

700 repair shops


More than 150 years old, the Indian Railways faced a severe crisis and teetered on the brink of bankruptcy at the beginning of the twenty-first century. Between 2000 and 2008, however, it went through a major renewal. According to the data available through the Indian Railways, its cash surplus before dividend increased from Rs 1,071 crores in 2000-01 to an estimated Rs 25,000 crores (more on this figure later) in 2008-09 (Box 1.2). The dramatic growth during 2004-08 has particularly attracted a great deal of attention.

In the popular press, changes in the Indian Railways have been called a ‘turnaround’. The success of this ‘turnaround’ is largely attributed to the wisdom and common sense of Lalu Prasad, who was the railway minister from 2004 to 2008. Although the press was initially dubious about the minister’s credentials, this turned into grudging respect as the Railways began to show enormous growth in revenues. He was extolled as a management guru who brought rustic simplicity into modern management. One such report piously noted: ‘There is little doubt that behind his deceptive exterior ticks an astute mind, which has little difficulty in mastering the complexities of a behemoth such as the Railways and ensuring that it operates at a profit.’³

The so-called turnaround of the Indian Railways also has its share of detractors. In 2008, Lalu Prasad told Parliament that if the Railways had been a private corporation, it would rank among the top 100 of the Fortune 500 companies in terms of its profitability. Quite understandably, such a tall claim attracted a great deal of scepticism. The seemingly huge surpluses generated by the Railways have been dismissed as accounting jugglery by sceptics. Critics contend that the Railways did not really improve its performance but has simply changed the way its results are presented.

As academic researchers, we were drawn to these claims and wished to test their veracity. The research on which the book is based was conducted over a two-year period (2006-08). We received complete cooperation and support from all levels in the Railways, including the minister, Lalu Prasad, and his adviser, Sudhir Kumar. We were given access to important internal documents and memos between 2004 and 2008. We conducted face-to-face and telephonic interviews with key people who were involved in the change process. Some of these interviews lasted for several hours, over a number of days. These interviews were recorded, transcribed and analysed. We cross-checked data collected in interviews against official documents. Over a period of time, a coherent story of what happened began to emerge. We wrote this as a draft manuscript and circulated it among fellow academics and other professionals and officers in the Railways who were not involved in the research. We also sought responses on the draft manuscript from the people we had interviewed. We collected more data as new facts came to light. On the basis of comments and criticisms that we received, we revised our initial manuscript several times.



Some critics have claimed that the huge surpluses reported by Lalu Prasad were non-existent. One of the reasons for the confusion about the performance of the Railways is the way its accounts are presented. The word ‘surplus’ does not mean profits. For example, the Railways estimated that it would generate a surplus of Rs 25,000 crores in 2009. This cash surplus was calculated by subtracting the total expenditure from total receipts. However, the receipts also included interest earnings, safety surcharges, capital recovery components and sundry other earnings amounting to about Rs 5,000 crores. The total expenditure did not include the amount that needs to be set aside for depreciation (Depreciation Reserve Fund). For 2008-09, this was about Rs 7,000 crores. The actual surplus would thus reduce by Rs 12,000 crores from the Rs 25,000 crore figure that was estimated for 2008-09. That still left a substantial surplus of around Rs 13,000 crores.⁴ In our opinion, there is little doubt that the performance of the Railways improved significantly between 2000 and 2008. An independent study by Prof. Raghuram of the Indian Institute of Management, Ahmedabad, published in 2007, has confirmed that the ‘turnaround’ was real.⁵

In 2009, the situation was further complicated by the slowdown in the global economy. The commodity markets had suffered the impact of the global financial meltdown, and the freight traffic of the Railways was adversely affected. The Sixth Pay Commission had substantially increased the salaries of government employees. However, these setbacks do not take anything away from the truly impressive performance of the Railways between 2004 and 2008.

We deal with the criticisms of the success and extent of the transformation in greater detail in the last chapter of the book. Here we simply acknowledge what the new railway minister, Mamata Banerjee, said in her budget speech to Parliament in 2009. She reported that ‘despite the economic slowdown in the last financial year, the Railways loaded 833 million tonnes of freight cargo, which is a 5 per cent growth over the previous year. Traffic receipts grew by 11.4 per cent to reach Rs 79,862 crores. A saving of Rs 676 crores was achieved in expenditure, through stringent economy measures. Even after having disbursed Rs 13,600 crores towards implementation of the Sixth Pay Commission recommendations, the Railways was successful in generating a cash surplus before dividend of Rs 17,400 crores and, after fulfilling its full dividend liability of Rs 4,717 crores, was able to maintain internal generation for investment at Rs 12,681 crores.’⁶ Therefore, even after discounting the earlier surplus figures, the performance improvement is substantial. The Railways deserves credit for this improvement in performance.


How did the Railways manage to leverage its strengths and transform itself from a colonial workhorse and social equalizer into a modern piece of critical infrastructure carrying India into the twenty-first century? This is the question that drove us to write this book. This is our journey to unravel the story of how this iconic Indian organization moved into the modern age, renewing its relevance while preserving its unique character and culture.

The renewal is particularly important for two reasons. First, what is so remarkable about the changes in the Railways is not the scale of its profits but the fact that they happened at all. International research data show that most organizational change efforts usually fail to meet their objectives. The median success rate for change initiatives in organizations is around 33 per cent.⁷ In other words, the probability of any organizational change effort being successful is less than 40 per cent. How did the Railways beat these odds?

Second, the renewal of the Railways also confounds conventional wisdom on how to effectively manage change. In 2000, the organization faced a serious financial crisis. A committee of eminent economists, set up in the mid-1990s to examine the working of the Railways, had bleakly warned that the organization was in a ‘terminal debt trap’ and faced extinction if radical measures were not undertaken immediately. In keeping with the widely prevailing views during that period, the committee advocated corporatization, downsizing and hiking of passenger fares to restore the health of the Railways. However, as it turned out, the actual renewal of the Railways was accomplished without any restructuring, downsizing or increase in passenger fares. How did the Railways achieve this?

The Indian Railways story offers important lessons to managers and administrators who constantly grapple with the challenging task of managing in a changing world. Its lessons are invaluable for large public organizations in India that are constantly underperforming, specially those that are engaged in renewing their infrastructure. If India aspires to be a global economic power, it cannot afford to ignore the powerful principles that underlie the successful overhaul of the Railways. In this chapter, we present a snapshot of this overhaul. The rest of the book presents the whole story of how the Railways effectively transformed itself.

Initially, we were sceptical about this story, as we knew that changing any organization is a formidable task. When we began our study, our interest was mainly academic, and we were keen to test our ideas and hypotheses against real data from the Railways. However, as the research progressed, we realized that the account of change in the Railways was a fascinating story that held powerful lessons for a variety of people and organizations in India. As the study progressed, we came to appreciate the Railways as not just an exemplary organization but a great one, despite its weaknesses and problems.


The Railways provides cheap (subsidized) public transport for the common man. A 1,000-kilometre journey on the Indian Railways costs less than Rs 1,200 by air-conditioned three-tier sleeper, less than Rs 720 by non-air-conditioned coach and less than Rs 480 by an unreserved coach. The Railways is a lifeline for ordinary Indians. Whether it is a student or a teacher, a milkman or a vegetable seller, a tourist or a pilgrim, a white-or a blue-collar worker, a farmer or a small business person, it is hard to find any mode of transport that is safer and cheaper than the Indian Railways.

The well-known travel writer, Paul Theroux, echoes this sentiment in his new book, Ghost Train to the Eastern Star: ‘I wrote, India works because the railway works… I had believed that on my first visit; I still believed it. Because of the vast network of Indian Railways, I could go anywhere in the country. I could sleep on the train in comfort; I could eat on it, read a book, write my notes: I could talk with anyone.’⁸ He goes on to explain just why. There may be, as he acknowledges, buses, taxis and limousines, and numerous airlines but to him, it is the Railways that remain the one dependable way of leaving on time and arriving safely. And in another compliment, he says, ‘because they were an institution, Indian railway stations were well organized and efficient.’

Far-flung states in India like the north-eastern states, Sikkim, Jammu and Kashmir and countries like Bhutan and Nepal depend on the Indian Railways for the transport of food grains and other essential commodities. Most of the states hold a limited buffer stock of these commodities, which would not last more than a fortnight in the case of an emergency. Any disruption of rail services, therefore, can cause huge problems.

But the Railways is not just an organization providing subsidized mass transport. It is deeply embedded in the Indian psyche as a cultural icon. Like the army and cricket, the Railways is an institution that binds India across geography, culture, religion and language.

Nowhere else is the pervasiveness of the Railways more evident than in Bollywood movies. From Kala Bazaar (1960) to the recent Oscar-winning Slumdog Millionaire, the Indian Railways lurks in the background as a prop in many Bollywood movies. Take the 2007 movie Jab We Met. Could Geet and Aditya have met without the train? Or, recall Aradhana of 1969, with Rajesh Khanna in a jeep singing ‘Mere sapnon ki rani’ to Sharmila Tagore, who was on a Darjeeling Himalayan Railways (DHR) train. Can you recall the hit song ‘Chal chaiyan chaiyan’? Shah Rukh Khan and Malaika Arora danced to this song atop a Nilgiri Railway train in Mani Ratnam’s Dil Se (1998). The climactic scene in Dilwale Dulhaniyan Le Jayenge (1995) takes place in a railway station and the hero and heroine depart in a train to live happily ever after. In Sholay (1975), we are introduced to Jai and Veeru in a goods train hauled by an H/4 class No. 026472 steam engine. Later, Veeru charms Basanti by singing ‘Koi haseena jab rooth jaati hai’ while a passenger train hauled by a steam engine of South Central Railway passes by in the background.⁹ As an article in The Telegraph notes, ‘The train has served as incubator for many a love story, backdrop for a fight sequence and platform for comedy and searing chemistry alike.’¹⁰


Despite its service to the nation, the Indian Railways has always remained a soft target for protestors, agitators and social malcontents. Indeed, it is during times of disaster such as cyclones, earthquakes and terrorist attacks that India rediscovers the true value of its most precious national asset.

Take, for instance, the case of Mumbai. More than six million people travel every day by the suburban rail system in Mumbai. On 11 July 2006, in one of the worst terrorist attacks in India, bombs were planted in seven trains of the suburban rail service in Mumbai. The bombs exploded between 6.28 p.m. and 6.35 p.m. during rush hour, killing more than 200 people and injuring more than 700.

Vivek Sahai was an additional general manager in Western Railway on that fateful day. When he rushed to Mahim station, he was greeted by the ghastly sight of the mangled remains of a train, bodies strewn everywhere, traumatized victims and general chaos. Sahai rushed to Western Railway’s control room and, within thirty minutes, despatched eight medical teams to the blast sites. He called the chief mechanical and the chief electrical engineers (CME and CEE). The CME was given the job of cutting damaged coaches and removing them from the tracks. The CEE was asked to repair the overhead wires, which had been blown to bits at several places. Sahai also got the central workshop at Parel opened and, by 8 p.m., several groups of workers from the Railways had arrived at the workshop to volunteer their services. By 9 p.m., five teams from the mechanical department were working on restoration.

Meanwhile, Sahai had to rush to several emergency meetings called by the chief minister of Maharashtra and the railway minister, Lalu Prasad, who had arrived from Delhi. Sahai got permission from the Mumbai police commissioner to remove objects strewn over the tracks. At 10.45 p.m., the first train was run between Borivali and Dadar.

Sahai accompanied the railway minister as they went around the hospitals visiting the injured. By 3 a.m. he also obtained permission to clear the tracks and trains that were the targets of bombings. In the next three hours, his mechanical and electrical teams had cut through the heaps of steel and iron coaches and repaired the overhead wires. By 6 a.m. on 12 July 2006, all the tracks were clear and trains started running once again. In less than twelve hours, working non-stop throughout the night, Vivek Sahai and his team had restored the lifelines to Mumbai after one of the deadliest terrorist attacks in India.

In the unpredictable times that we live in, the Indian Railways, through its countless Vivek Sahais, has managed to retain an ethos of public service that is fast disappearing in other walks of life. Its unglamorous engineers and workers can be counted on to make sacrifices in any emergency to ensure that the lifeline to the nation is not disrupted.


When India became independent of British rule in 1947, it was impoverished, with a large illiterate population engaged in subsistence agriculture. India opted for a Soviet-style, centrally planned economic model of development. Government policies were driven by an ideology of self-reliance that actively discouraged imports. Import-substitution was the catchphrase that pervaded economic policies. This policy of ‘import-substitution-led industrialization’ resulted in the creation of state-owned enterprises in the manufacturing sector.

The import-substitution policy led to the Railways becoming a vertically integrated entity producing its own assets, such as rolling stock. More importantly, the socialist model of development led to an overemphasis on the common man and underemphasis on revenue generation. For instance, passenger and freight fares in the Railways were based on the notion of affordability. Those who could afford more were charged more to subsidize those who could afford less. Thus, higher-class passengers, such as those travelling in air-conditioned coaches, were charged more whereas passenger fares for ordinary,

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