Economic Sustainability – Indian Railways Essay Example

India and the Government of Delhi and is an independent organisation not connected to the Indian Railways. Similarly Bangalore Metro, Hyderabad Metro, Mumbai Metro and Chennai Metro are also independent organisations.

Production Units Indian Railways manufactures much of its rolling stock and heavy engineering components at its six manufacturing plants, called Production Units, which are managed directly by the Ministry. Popular rolling stock builders such as CLW and DLW for electric and diesel locomotives; ICF and RCF for passenger coaches are Production Units of Indian Railways. Over the years, Indian Railways has not only achieved self-sufficiency in production of rolling stock in the country but also exported rolling stock to other countries.

Each of these six production units is headed by a General Manager, who also reports directly to the Railway Board. The six Production Units are:Sl. No 1. Name Chittaranjan Locomotive Works Diesel Locomotive Works Diesel-Loco Modernisation Works Integral Factory Rail Factory Rail Factory Coach Coach Abbr. Year Established 1947 Location Main products Electric Locomotives Diesel-electric Locomotives Diesel-electric Locomotives Passenger coaches Passenger coaches Railway wheels axles CLW Chittaranjan 2. DLW 1961 Varanasi 3. DMW 1981 Patiala 4. 5. ICF RCF 1952 1986 Chennai Kapurthala . Wheel RWF 1984 Bangalore and Other Subsidiaries There also exist independent organisations under the control of the Railway Board for electrification, modernisation, research and design and training of officers, each of which is headed by an officer of the rank of General Manager. A number of Public Sector Undertakings, which perform railway-related functions ranging from consultancy to ticketing, are also under the administrative control of the Ministry of railways. There are eleven public undertakings under the administrative control of the Ministry

of Railways.

Rail India Technical and Economic Services Limited; Indian Railway Construction International Limited; Indian Railway Finance Corporation Limited; Container Corporation of India Limited; Konkan Railway Corporation Limited. Indian Railway Catering and Tourism Corporation Limited; Railtel Corporation of India Limited; Mumbai Rail Vikas Nigam Limited; Rail Vikas Nigam Limited; and Dedicated Freight Corridor Corporation of India Limited; and Bharat Wagon and Engineering Co. Ltd.

Economic Sustainability Economic sustainability is the term used to identify various strategies that make it possible to utilize available resources to best advantage. The idea is to promote usage of those resources that is both efficient and responsible, and likely to provide long-tem benefits. In the case of a business operation, economic sustainability calls for using resources so that the business continues to function over a number of years, while consistently returning a profit. In most scenarios, the measure of economic sustainability is presented in monetary terms.

The worth of assets and resources in dollar figures is common, as is identifying the amount of return generated by the efficient use of those resources. The idea is to aid in identifying areas of the operation in which resources are not being utilized in the most efficient manner, and take the steps to correct the situation. At the same time, the proposed changes to the operation are considered in terms of their overall effect on the production flow, making it possible to address any potential difficulties later in the process before the changes are actually implemented.

Doing so means engaging in a strategy known as cross-sectoral coordination, which involves identifying what impact changes in one area of the operation will have on subsequent phases of the production

process. True economic sustainability encourages the responsible use of resources. This involves not only making sure that the business is making a profit, but that the operation is not creating environmental concerns that could cause harm to the balance of the local ecology.

By being mindful of the impact of the operation on the local community, the business is able to choose raw materials that are more environmentally friendly, and design a waste disposal strategy that does not damage the local environment. In the long run, attention to these types of details has the potential to increase the community’s investment in the continued operation of the business, and improve the chances for remaining a viable operation for a longer period of time. While the concept of economic sustainability is straightforward, there are potential obstacles that may be found in different companies.

Resistance to change can often lead to a less than efficient use of available resources. A failure to track expenses and justify expenditures will also have adverse effects on the long-term stability of the company and limit the potential foreconomic sustainability. For this reason, companies sometimes work with outside consultants who can evaluate the business operation with relatively little bias and point out what needs to be done to improve the sustainability of the operation.

With economic sustainability, the goal is to establish profitability over the long-term. A profitable business is much more likely to remain stable and continue to operate from one year to the next. From this perspective, economic sustainability can be seen as a tool to make sure the business does have a future and continues to contribute to the financial welfare of the

owners, the employees, and to the community where the business is located. Corporate Social Responsibility

While Corporate Social Responsibility has no single, commonly accepted definition, it generally refers to a business vision that links respect for ethical values, people, communities and environment. Leader companies see CSR not just as collection of discrete practices, occasional gestures, or initiatives motivated by marketing, public relations or other business benefits. Rather, they view it as a comprehensive set of policies, practices and programs, integrated throughout business operations and decision-making processes.

Over the past decade, a growing number of companies have recognized the business benefits of CSR policies and practices. Their experiences are bolstered by a growing body of empirical studies that demonstrate CSR is a positive impact on business economic performance, which can be measured in several ways. Companies have also been encouraged to adopt or expand CSR efforts as a result of pressure from customers, suppliers, employees, communities, investors, social activists and other stakeholders.

CSR has been systematically growing in companies of all sizes and across all sectors. Those companies have developed innovative strategies within their programs in areas such as: Workplace Environment Responsible Marketing Community Involvement The topic of Mission, Vision and Ethical Values as it relates to business is connected to the way in which a company integrates its underlying principles, thus structuring an overall “values-based” business approach.

Mission refers to a company's fundamental purpose and the main reason for its existence; it is an action-oriented and enduring expression of what a company wants to accomplish and how it plans to achieve that goal. Vision refers to a company's long-term goals; it is a conception of the organization's desired lasting

impact. Ethical Values refer to a company's core ideals and beliefs; these are the principles considered key factors to build a frame of reference to guide the organizational decisions.

Many companies are choosing to make an explicit commitment to corporate social responsibility in their mission, vision and values statements. Such statements frequently extend beyond profit maximization to include an acknowledgement of a company's responsibility to a broad range of stakeholders, as well as employees, customers, communities and the environment. Indian Railway Initiative Indian Railways services range from those for the discerning and rich to the commonest of people. We connect long distances and serve the urban commuters alike.

So, does it have something for the aam aadmi? Certainly. Miss Banerjee played the trick by keeping the passenger fares and freight tariff untouched. While talking of the Railways network expansion, she maintained her focus on the common man. She announced a cut in service charges on sleeper class and AC class fares, to Rs. 10 and Rs 20. Likewise, any cancer patient, going for treatment would be given a concession of 100% in 3rd AC and sleeper class tickets. The concession under Izzat scheme, for press correspondents and students of Madras would also continue.

She promised 54 new trains in FY11, ten new Durantos, some double-decker trains and suburban trains for Mumbaites. Ms Banerjee called for private partnership in Indian Railways, but ruled out the possibility of privatization. “Our target is to add 25,000 kms of new lines in the next ten years, as outlined in Vision 2020”; “the business community should come and join hands to build partnerships with the Railways”. Talking about the non completion of previous

year’s projects, she attached the reason of project delays to the “typical negative approach”.

In order to avoid this situation in the future, she announced the setting up of special structures for the new business model that would invite domestic investment through PPP mode. She spoke at length about the setting up of a new Special Task Force that would clear proposals for investment within 100 days. On the employment front, she declared that the recruitment policy of the Railway Recruitment Boards has been reviewed and the examination fee for women candidates and those belonging to minority and economically backward classes, having annual family income less than Rs 50,000 would be waived.

The question papers would be set in Hindi, Urdu and English as well as in local State languages. On the investment front, the Annual Plan outlay for the year 2010-11 has been proposed at Rs 41,426 crore, which is the highest ever plan investment. The real catalyst of socio-economic development, also the highlight of the budget, was ‘Vision 2020’. The vision aligns the Indian Railway Network on a higher growth trajectory. So far, this seems to be the most desirably attainable challenge for the Indian Industry.

Her Vision distributed equal attention to the alarming needs of strategic growth, inclusive development, employment generation and environmental sustainability. Although the budget did not fetch the anticipated brouhaha, it did prove to be promising and pragmatic at the same time. By keeping away from passenger fares, she did manage to save her ‘party image’ for the upcoming elections. The farsightedness in attaching Indian Railways as a direct contributor to the attainment of a double-digit GDP is remarkable.

Without losing grip on

the issues of growth and development, the budget this year, was a clean show. Enclosed below, are the highlights of the budget. Highlights of the Indian Railway Budget 2010-11 · Economic viability and Social responsibility – main consideration for taking up of the projects. · ‘Inclusive growth and expansion of rail network’ for development of the country. Special Task Force to clear proposals for investments within 100 days.   A separate structure will be created within the Railways for implementation of the business models.Commitments Fulfilled  Of the 120 new trains, extensions and increase in frequencies announced, 117 would be flagged off by the end of March 2010.  Recruitment policy of the Railway Recruitment Boards has been reviewed.  RRB examination fee for woman candidates and those belonging to minority and economically backward classes waived.  All question papers to be set in Hindi, Urdu, English and in local State languages and examination for a particular post will be held on the same date simultaneously by all RRBs. Izzat Scheme, implemented within three months of announcement.  Work initiated in all the 67 Multi-functional Complexes.

Development of Adarsh Stations started in phases. Passenger Amenities/Facilities  94 stations to be upgraded as Adarsh Stations  10 more stations identified to be converted as World Class Stations  Construction of additional 93 Multi Functional Complexes  Multi-level parking through PPP route. Six clean drinking water bottling plants to be set up through PPP for providing cheap bottled drinking water. SMS updates of reservation status and punctuality of trains to passengers,  SMS updates on the movement of wagons to freight customers.  RFID technology for tracking of wagons  to provide modern trolleys at all important stations to be handled

by uniformed attendants for senior citizens and ladies.  Allotment of iron ore rakes to be rationalised scientifically and would be accessible through the web.  Introduction of e-ticket based mobile vans for issuing tickets. Safety and Security  Automatic fire and smoke detection system to be introduced in 20 long distance trains. All the unmanned LCs to be manned within five years.  12 companies of women RPF personnel named ‘Mahila Vahini’ to be raised. Sports  Railways first recipient of Rashtriya Khel Protsahan Puraskar · Five Sports Academies at Delhi, Secunderabad, Chennai, Kolkata and Mumbai to be setup.  Astro-turfs to be provided at more places for hockey.  Railways will be lead partners of Common Wealth Games.  Railways to run a Commonwealth exhibition train.

Culture and Heritage  To set up a Railway Cultural & Heritage Promotion Board for coordinating and supervising all related activities on the railways. To set up Rabindra Museum at Howrah and Gitanjali Museum at Bolpur to commemorate 150th birth anniversary of Rabindranath Tagore.  To set up Shambhu Mitra Cultural Complex with performing arts and a music academy at Howrah. Staff Welfare and Health  A new scheme “House for All” to be launched, to provide residences to all railway employees in the next ten years with the help of Ministry of Urban Development.  MOU entered with Ministry of Health and Ministry of Human Resource Development for setting up of hospitals and educational institutions on surplus railway land. To set up about 522 hospitals and diagnostic centres, 50 Kendriya Vidyalayas, 10 residential schools on the pattern of Navodaya Vidyalaya, model degree colleges and technical and management institutions of national importance to benefit railway employees and their children. To

set up 50 creches for children of women employees and 20 hostels. Railways will also provide more numbers of community centres and stadiums.  Contribution to Staff Benefit Fund to be enhanced to Rs 500 per employee. · Scope of safety-related retirement scheme to be expanded to cover all safety category staff with a grade pay of Rs 1800. To extend Rashtriya Swasthya Bima Yojana to all licensed porters, vendors and hawkers, from unorganised sector and socially challenged.  To set up a state-of-the-art advanced loco pilot training centre at Kharagpur, an advanced railway track training centre at Beleghata and four multi-disciplinary training centres. Railway Research  A Centre for Railway Research to be set up at IIT, Kharagpur.

To establish strong research partnerships with premier institutes like IITs, NITs, CSIR and DRDO. Infrastructure  To modernize and augment the capacity of CLW to 275 locomotives. A Diesel Multiple Unit factory to be set up at Sankrail. · Second unit to be installed at ICF.  Wagon repair shop to be set up at Badnera.  Centres of Excellence in Wagon Prototyping to be set up at Kharagpur Workshop.  A new Rail Axle Factory to be set up in New Jalpaiguri under PPP/JV mode. · A Design Development and Testing Centre for Wheels to be set up at RWF, Bangalore. · A new MLR workshop of 250 coach capacity to be set up at Anara. Five state-of-the-art wagon factories to set up at Secunderabad, Barddhaman, Bhubaneshwar/Kalahandi, Guwahati and Haldia under PPP/JV mode. Two workshops for POH of high axle load wagons to be set up in Maharashtra and Dankuni.  Kisan Vision Project initiated at six locations, namely Dankuni, Mechheda, Nasik, New Jalpaiguri,

New Azadpur and Singur as pilot projects.

· To set up a refrigerated container factory on PPP mode at Budge Budge. Freight Business  A modified wagon investment scheme for high capacity general purpose and special purpose wagons to be introduced.

· Private operators to be permitted to invest in infrastructure and run special freight train.

· To set up automobile and ancillary hubs at 10 locations. Carbon Footprint

· Railways to distribute 2. million CFLs to railway employees.

· To introduce ten rakes with green toilets and install on diesel locomotives a GPS-based optimised driver guidance system.

· To set up 10 Rail Eco-parks to conserve, protect and promote Railways’ wetlands and forest areas. Other Projects · Preliminary Engineering-cum-Traffic Survey to be taken up for north-south, eastwest, east-south and south-south DFCs.  Six high speed passenger corridors identified, to be executed through PPP mode.

To set up a National High Speed Rail Authority for planning, standard setting, implementing and monitoring these projects. To provide rail link between Akhaura on Bangladesh side and Agartala on Indian side. · To new Railway projects viz. , Jogbani – Biratnagar new line and Jaynagar – Bijalpur gauge conversion with extension up to Bardibas have been taken up to improve transport infrastructure between the two countries.

Special Trains

· Sanskriti Express to run across the country to mark the 150th birth anniversary of Kabiguru Rabindranath Tagore. It is also proposed to take this train to Bangladesh.

· Ladies special trains to be renamed as ‘Matrabhoomi specials’.

· 3 unreserved trains named as ‘Karambhoomi trains’ to be introduced. A new weekly express train service ‘Janmabhoomi express’ to start between Ahmedabad and Udhampur .

· Special tourist trains called “Bharat Tirth” to start on 16

routes.

· 6 long route Duronto trains and 4 short distance Duronto day trains to be introduced. Other New Train Services

· 54 new train services to be introduced.

· 28 new passenger train services, 9 MEMU and 8 DEMU services to start.

· Extension of 21 trains and increase in frequency of 12 trains announced.

Railways went out of business in the West from the 1960s to 1990s due to its inability to respond to competition from road and air traffic systems. Since railways are large entities serving vast and expansive areas it is often believed that they are unable to adapt to changes in the environment. For decades the only news about rail systems was about their decline. This decline has been halted and reversed in many parts of the world. Railways are resurging based on new ideas, environmental friendliness, new customer oriented services and new attitudes all over the world.

Indian Railways is the largest railway network in the world operating under a single management. It is often called the `lifeline of India'. Indian Railways is the largest employer in the world, directly employing about 1. 4 million people. It is also providing indirect employment to over seven million people. One survey in the early-2000s revealed that one in every ten Indians depended on Indian Railways for his livelihood, directly or indirectly. Fifteen million people across the country travel by Indian Railways everyday on average.

IR operates as a department under the Government of India. It is the only department which presents its budget separately from the annual budget, presented by the Ministry of Finance. In the late 90s IR found itself in a grave situation. A number of

studies pointed towards the poor performance indicated by the declining revenues and shrinking market share as well as the declining capacity of the IR for financing its expansion and growth. Excerpts from two studies and Expert Group on IR reproduced below, are apt to illustrate the inevitable plight of Indian Railways during the late 1990s. it is unlikely that Railways would resort to any major reduction in staff strength, given the strength of their labour unions. The possibility of increasing the fares is very limited due to extreme sensitivity of the issue and the political repercussions. As far as freight traffic is concerned, it contributes a much smaller proportion to the total traffic revenue than say before 20 years. It is important that the increase in earnings from commodity movement should come not necessarily through increase in rates but through growth in traffic.

The rates for several commodities are already quite high and with any further increase in these, Railways run the risk of losing the traffic to road transport… Bringing out all these changes would require an innovative and enterprising management policy. In view of all these, IR maintaining a high growth in traffic revenue, generating a large part of the investible resources internally and, thereby, saving IR from the debt trap, without hampering the growth in different sectors of the economy, would be difficult and challenging task”. A similar forecast was made by the Expert Group on IR headed by Dr.

Rakesh Mohan. “Indian Railways is today on the verge of a financial crisis. To put it bluntly, the Business As Usual Low Growth will rapidly drive IR to fatal bankruptcy, and in sixteen years

Govt. of India will be saddled with an additional financial liability of over Rs. 61,000 crores. On a pure operating level, IR is in a terminal debt trap. ” The Expert Group on IR also recommended a set of changes to be implemented in IR. Two important ones among them were the following IR? s manpower of 1. 5 million should be downsized by 2. per cent over the next five years; and second class fares should be increased by 8 to10 percent every year over the next eight years. Causes for decline in performance There were external as well as internal causes for the declining performance of Indian Railways. Due to opening of the Indian economy following the economic liberalization, there was increasing pressure for reducing cost and improving quality. The budgetary support from the Central Government was dwindling and its financial situation did not allow higher budgetary support to the Ministry of Railways.

Besides the competition from road and air was increasing. Among the internal factors, the major ones were operational inefficiency, lack of market focus, politically driven pricing policy, lack of competitiveness, denominator based cost reduction policy, low employee productivity, uncoordinated investment decisions, investment in unremunerative projects, social obligations and the like. Diagnosis, recommendations and initiatives taken by IR The continuous decline in performance seized the attention of the top leadership and the need for diagnosing the sickness was felt.

This resulted into the constitution of Expert Group on Indian Railways, also known as Rakesh Mohan Committee which delivered its report in the year. This Committee among other things also recommended certain operational strategies to be adopted by Indian Railways, which are reproduced below

“A railway traffic strategy aiming to boost current prevailing growth rates under freight and passenger would be built around the following:

a) Increased average goods train speeds: Reduction in speed differentials between freight and passenger trains will be the best and most economical strategy for expanding the freight haulage capacity of the system.

b) High speed, modern passenger services

c) Commodity-specific freight strategies

d) Introduction of new technology: Experts estimate that a gap of nearly 20 years now separates the technology in use in Indian Railways and that of advanced systems. Inadequate attention has been paid to R&D and technology investments in IR. Being one of the largest rail systems in the world, IR must have access to R&D facilities that can be counted among the best in the world.

e) Harnessing Information Technology for freight operations and

f) Increase in capacity through advanced signaling and communication systems: Owing to the characteristics of freight and passenger movement in India, most of the potential traffic that will contribute to a high growth rate will move on the major trunk routes.

Route-wise studies need to be undertaken and investment programmes drawn up on the basis of full analysis of costs and expected benefits.