Eng. B. D.

Rampala
Memorial Lecture 2010

100th Birth Anniversary of

Eng. B D Rampala
Engineer, Entrepreneur & Legend
November 14, 1910 – November 14, 2010
 By
Eng. Keerthi K. Hewavithana
Bsc (Eng) Hons. C.Eng.,(MIE)SL
Headquarters Engineer

Sri Lanka Railways

The Institution of Engineers, Sri Lanka

Wimalasurendra Auditorium
Monday - November 15, 2010
Successful
Turnaround of
Indian Railways &
Lessons Relevant
for Sri Lanka
Railways

A case study approach

Eng. B D Rampala Memorial Lecture-2010 4
• The Indian Railways – A Government
Department
•  Comes under
Total capital the Ministry
investment of US $ 14of Railways
billion
 Contributed to 1% of the GDP
 Total staff of 1.5 Million
 Largest employer in the organized business sector
 Track length of 63,322 km.
 Carries 14 Million passengers per day.
 Locomotives available 7,910
 Passenger service vehicles 42,441
 Other coaching vehicles 5,822
 Wagons 222,379
 Railway stations 7,133
Eng. B D Rampala Memorial Lecture-2010 5
 Alarm

Bankruptcy inevitable!

The Committee concluded in 2001 that:

"Today Indian Railways is on the verge of a financial crisis.
To put it bluntly, the 'business as usual, low growth' will
rapidly drive it to fatal bankruptcy, and in 16 years, the
Government of India will be saddled with additional financial
liability of over Rs 61,000 crores… On a pure operating
level, IR is in a terminal debt trap." RMC Report - 2001

Time was running out

for Indian railways!
Eng. B D Rampala Memorial Lecture-2010 6
 Symptom

Unable to respond to changes in transport market conditions in 1990s

Approach
Rakesh Mohan Committee (RMC)
• Appointed by Government
• Review the Indian Railways operations
• Members: vast knowledge in railway and transport sector plus those
with futuristic thinking and knowledge/education background.
• The RMC repot submitted in year 2001
Problems

 Loss of market share in the profitable freight business

 Lack of flexibility in pricing
 High cost of internally sourced products and services
 Investment in un-remunerative projects
Eng. B D Rampala Memorial Lecture-2010 7
 Core Problem!
Politicization of the decision making process that
emphasized taking populist actions, rather than hard
business decisions

Complete change in Philosophy of the business Solution

“Railway need to develop market oriented and customer

friendly outlook due to emerging competition within the
transport sector”
Hon. Nitish Kumar – Railway Minister

Eng. B D Rampala Memorial Lecture-2010 8

 Implementation
• RMC report submitted in year 2001

• Turnaround started in around year 2003

• Hon Minister Lalu Prasad Yadiv (Minister since 2004) continued the
philosophy & strategies

• Minister adopted a common sense based approach, and showed an

astute understanding of the market reality, and demonstrated that
good economies is good politics.

Results
 Within 3 years Indian Railways showed impressive results
 In year 2005 -2006 operating ratio of 83.5 % compared to 98.3% in year 2000
 Targeted to achieve operational ratio of 65% in year 2010

Eng. B D Rampala Memorial Lecture-2010 9

Best Performance indicator in railway business

Total Operating Expenses

Operating Ratio =
Gross Revenue Receipts

Year 2000 
2005-06 2010-11
Operating Ratio 98.3% 83.5% 65%
Eng. B D Rampala Memorial Lecture-2010 10
 1999-00

Eng. B D Rampala Memorial Lecture-2010 11

 Total Operating Expenses
Operating Ratio =
Gross Revenue Receipts

Operating ratio

Wagon Turnaround

Source : MOR India

Eng. B D Rampala Memorial Lecture-2010 12
Strategies Adopted
 Retrenchment strategies

 Repositioning strategies

 Reorganization strategies

 External Environmental strategies

Eng. B D Rampala Memorial Lecture-2010 13

 Cause pain,
stress and tension
amongst stakeholders!

Retrenchment (Cost Cutting Initiative)

Several retrenchment actions identified to review business units which are not value
adding.

• Withdraw from markets where firm is performing poorly

• Selling assets
• Reduce scale of operation
• Improve efficiency
• Downsizing
• Outsourcing

Eng. B D Rampala Memorial Lecture-2010 14

Eng. B D Rampala Memorial Lecture-2010 15
 Cause
Expectations,
Happiness!

 Focus on growth
 Product innovation
 Product differentiation
 Improving market shear

Eng. B D Rampala Memorial Lecture-2010 16

Eng. B D Rampala Memorial Lecture-2010 17
 Change in planning system
 Decentralizing
 Human resource initiative
 Change in organization culture

Eng. B D Rampala Memorial Lecture-2010 18

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Eng. B D Rampala Memorial Lecture-2010 22
 CONCOR RITES

IRFC RVNL

IRCON IRCTC

Indian Railway Ministry/ Railway

Board
Eng. B D Rampala Memorial Lecture-2010 23
 Some important steps taken by Railway Minister

• IRFC: 1986 (positive effect due to facilitation of

market borrowings for wagon procurement,
negative effect due to high interest rates)
• CONCOR:1989 (positive effect due to focus on
containerized movement of non-bulk)
• Project Unigauge: Early 90’s (negative effect in
the 90’s, including due to reduction in track
renewal works, positive in the recent and future
years)
• Fifth Pay Commission: 1997-98 (negative in the
late 90’s) Eng. B D Rampala Memorial Lecture-2010 24
Some important steps taken by Railway Minister

• Special Railway Safety Fund: 2001-02 onwards

(positive in the recent and future years)
• Reorganization from 9 to 16 zones: 2001-02 and
2002-03 (positive in the future years, due to
greater focus)
• Focus on PPP (public private partnership) format
for investments, catalyzed through RVNL:
2002-03 onwards (positive, due to the ability to
leverage other stakeholders’ funds).
• Market oriented tariffs (positive)
Eng. B D Rampala Memorial Lecture-2010 25
Some important steps taken by Railway Minister

• Focus on increasing asset utilization: 2004-05 and

2005-06 (positive, provided implications on asset
wear and tear are appropriately dealt with)
• Competition in container movement: 2006
(expected to be positive, though implementation
has to be seen)
(Ref G Raghuram .2007)

Eng. B D Rampala Memorial Lecture-2010 26

 Role of the Minister
The operationalisation of strategies over past years depende
significantly on the leadership style of Mr Lalu prasad.
 common sense based approach
 leverage the management and assets through empowerment and delegation.
Pillars of successes are the following five characteristics of the
Minister. • Non interference
• Direct approach
• Caring attitude
• Right people for right job (Identify right
people)
• Image building
(Ref
Minister set goals and expect results from the : G Raghuram .2007)
setup

Railway board functions as a cohesive entity due to the

force exerted on legitimate initiatives.
Eng. B D Rampala Memorial Lecture-2010 27
Non Interference

 Non interfering
 Sets goals
 Expects results
 Ensures organization alignment
 Follows up fundamental initiatives
 Autonomy to Railway Board
Eng. B D Rampala Memorial Lecture-2010 28
Direct Approach

 Periodically communicate with general

managers.

 Setting and reinforcing priorities.

 Precisely set targets and standards for

the prevailing matters.

Eng. B D Rampala Memorial Lecture-2010 29

Caring Attitude
“Downsizing may make Indian railway thinner, but not necessarily
healthier.”
He set his strategy based on “regenerate competitiveness and leverage
resources rather than restructure and downsize.”
He believed in instilling hope and excitement rather than fear and
anxiety.
 Positive attitude when dealing with staff and unions.
 Personally intervene to provide contributions to the staff welfare
fund when staff able to show financial performance better than
recommended.
 Whenever concerns were raised about downsizing of the Indian
railway, he came out with his Hindi one liner which translated to,

Eng. B D Rampala Memorial Lecture-2010 30

Identify Right People
Appointment of Officer on Special Duty (OSD)

All dealings with Minister and Indian Railway Board has been through a noble
person appointed as officer on special duty (OSD), Mr Sudhir Kumar.

Role:
Specially chosen by the minister for this position based on earlier experiences and
interactions with him. His role would be to provide the link between the minister and
railway board and translate the vision of minister into action in railway.

Some of the initiatives related to

1. axle load increase,
2. market oriented tariffs,
3. reducing wagon turnaround,
4. innumerable freight incentive schemes,
5. passenger profile management, up gradation of passengers,
6. leasing of parcel capacity and catering,

all this has happened through the existing systems and culture of the Indian railway.
Eng. B D Rampala Memorial Lecture-2010 31
Image Building

Achievements & Campaigns Publicized

Up lift the image of railway , its services and staff…….

Eng. B D Rampala Memorial Lecture-2010 32

Salient Results of Indian Railways Turnaround

 Following results speak volumes about the

success of the strategies adopted:
 Increase in income through advertising on all
Rajdhani Expresses coaches with the cost of
advertising being around US $ 1.26 million per
train.
 Introduction of new generation trains that would
be fuel efficient, recyclable and have low
emission to generate certified emission reduction
credits.

Eng. B D Rampala Memorial Lecture-2010 33

Salient Results of Indian Railways Turnaround

 Construction of dedicated freight corridor, with

an investment of US $ 81.92 million invested in
2008 to 2009 and US$ 614.4 in 2009-2010.
 Renewal of 44.5 million pre–stressed concrete
sleepers set for open line network.
 Development of PPP in new routes, railway
stations, logistics parks, cargo aggregation and
warehouses.
 Development of 100 budget hotels with private
partnership in the vicinity of railway stations.

Eng. B D Rampala Memorial Lecture-2010 34

Salient Results of Indian Railways Turnaround
 Installation of Wi-Fi to provide wireless access
at 500 stations.
 Development of agri-retail hubs, cold chains,
multi-purpose warehouses on surplus land with
in the Indian Railways.
 Training of railway managers to meet future
challenges, Indian railway is planning to set up
an International Management Institute in New
Delhi.
 Discount schemes, loyalty discount schemes and
long term fright discount schemes.
(Ref: Indian railway website. www.impactlab.net)
Eng. B D Rampala Memorial Lecture-2010 35
Sustainability of Strategies & Processes
Will Indian Railway capable to sustain the growth and achievement?

strategies and processes are mainly

focused on following areas to maintain
sustainability

Customer/Passenger oriented setup

Scientifically based strategies and processes

Sustainability

ICT as successes factor

(Ref Desh Gupta and Milind Sathye.2008)

Eng. B D Rampala Memorial Lecture-2010 36

Eng. B D Rampala Memorial Lecture-2010 37
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Eng. B D Rampala Memorial Lecture-2010 39
i Lanka its
 Lost market share in profitable freight
Railway – Current Situation
business;
 Lack of flexibility in pricing and unrealistic
pricing methods;
 High cost of internally sourced products and
services
 Investment in projects that do not yield a
return;
 Operating expenses much higher than gross
revenue (Grater than 100% operating ratio).
 Lack of market orientation
Same
 Politicization as Indian railways in 1990s!
of the decision making process
Eng. B D Rampala Memorial Lecture-2010 40
Eng. B D Rampala Memorial Lecture-2010 41
Sri Lanka Railway – The
Future Energy efficiency
★ Rail is on average 2 - 5 times more energy efficient than road,
shipping and aviation

climate change and cO2 emissions

★ Travelling by rail is on average 3-10 times less cO2 intensive
compared to road or air transport

★ The rail sector has committed itself to cut the specific emissions of
rail transport by 30% over the period 1990-2020

Land take
★ Railway infrastructure occupies 2-3 times less land per
passenger or freight unit than other modes of transport

★ Railways, having a market share of 6-10%, occupy less than 2%

of the land used for transport infrastructure in Europe( Benchmark)

External costs
★ The external costs of rail may be as low as 1% of those of roads

Eng. B D Rampala Memorial Lecture-2010 42 site

Ref: UIC official web
Plan to Turnaround

Introduce

Eng. B D Rampala Memorial Lecture-2010 43

References;

•G Raghuram (Turnaround of Indian railway).2007. Indian institute of management report.

•Rakesh Mohan Committee .2001. Highlights of the executive summary, available at http:/www.irastimes.org/rkmreportingexesummary.htm
accessed on 30 may 2007.

•World Bank. 1994. The World Bank railway database available at http:/www.worldbank.org/transport/rail/rdb.htm.

•Desh Gupta and Milind sathye (Financial turnaround of Indian railway) 2008. Accessed from Scribed web site. On 17.6.2010.
•IRFC Indian Railway Finance Corporation. 2004. Anual report of the Indian railway financial cooperation. New Delhi.

Eng. B D Rampala Memorial Lecture-2010 44

 Thank You!

Eng. B D Rampala Memorial Lecture-2010 45