Bankruptcy To Billions
How The Indian Railways Transformed;
By Sudhir Kumar, Shagun Mehrotra;
Publisher: Oxford University Press;
Pages: 202; Price: Rs 495
Can populism and profitability go hand in hand? Can a politician, turfed out of his state on corruption charges, infuse new life into a dying organisation?
The answer is yes, according to Bankruptcy To Billions, the turnaround story of the Indian Railways. The book gives insights into one of the most baffling mysteries of recent times: how did an organisation, whose obituary was written in 2001 (by the Rakesh Mohan committee, which predicted a Rs 61,000-crore loss and fatal bankruptcy for the Railways by 2015) ever manage an investible surplus of Rs 20,000 crore by 2008?
As Lalu (Prasad) Express puffed into the IIMs, the irony was difficult to miss — how could the man, under whose rule Bihar’s GDP declined to abysmal levels, suddenly develop such great managerial acumen? Indeed, enough blog space has been devoted to the great Indian Railways turnaround drama, with one camp totally bowled over by the rustic wisdom of the former Bihar chief minister, and the other sceptical. Was it really a turnaround or simply a case of creative accounting?
In this book, Sudhir Kumar and Shagun Mehrotra present a convincing story about how the transformation was effected.
It is a snappy little volume and the numbers are presented in an easy-to-figure fashion, so you can at once see where the improvements have been made, where the wastages have been cut, and where innovative measures have paid off. And no, there were no radical measures — no retrenchment, privatisation, regulation or passenger fare hikes (all suggested by the expert committee). There was no political space to do so; it would have meant sacrificing the interests of the railway employees, who number over 1.4 million, and the vote banks of the ruling party.
Instead, the solutions — really simple and effective ones — were found within the system itself. So, why wasn’t it done earlier?
Shagun Mehrotra is currently pursuing doctoral studies at Columbia University, New York. He has done research on economic development and urban poverty in South-East Asia, China and India.
Sudhir Kumar is an IAS officer on special duty to the railways minister. Kumar assisted the minister in crafting a reform strategy for the railways that does not burden poor consumers.
The answer to that, say the authors, is that inclusive reforms require a productive interface between bureaucrats and politicians. There has to be mutual trust and understanding between the two for things to move in government. Indeed, the account of the movement of a file within the Railways system fills you with horror — the authors describe how a file on increasing axle load travels across 2,250 desks.
So, what exactly did happen? Well, decisions were taken faster, implementations were sped up, the monopoly mindset of the Railways was changed, rates were rationalised, differential pricing introduced (especially in freight, parcel and AC-passenger segments, which are apolitical), and the Railways finally began listening to customer demands and made changes dictated by market reality.
For instance, the Railways enjoys a monopoly in iron ore freight and provides door-to-door service (from the mine pithead to factory). And yet, the charges are nominal since iron ore is a ‘raw material’, and commodity rates are fixed depending on ‘finished’ or ‘raw’. Now, in the case of finished products such as steel or cement, the Railways only provides station-to-station solution, and yet charges much higher.
Obviously, steel makers prefer to use roadways. Now, business logic dictates that where the Railways enjoys a monopoly it should squeeze profits, and where there is competition, it should cut rates. It took a free and frank meeting between the Railways and the steel industry before the former understood why the steel industry was unhappy using trains and worked out a solution.
As the authors say, suddenly the Railways woke up to the fact that it had to concede battles to win the war.
Other simple measures helped. For instance, the Tatkal scheme has not only eliminated touts, but today rakes in Rs 300 crore per year for the Railways. Till 2001, the Railways used to be disinterested in monetising non-ticketing revenues — whether catering services or leveraging advertising space. Even the metro rail transport in Singapore, a tiny city state, had more ad revenue than the Indian Railways, which attracts footfalls and eyeballs of 14 million passengers daily. Now that is changing.
The book has neat prescriptions for other state-owned monoliths too. Oh, and what about Lalu’s role? The authors are full of praise for his native shrewdness. Notably, the introduction of Garib Rath, the Tata Nano of the Railways, they say, has four integrated attributes — affordability, scale, aspiration and efficiency. Clearly, the joker of Indian politics has had the last laugh.
This review was published in the Businessworld issue dated Dated 14-20 April 2009
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Bankruptcy To Billions
