Monopoly - Indian Railways

What is a monopoly? A firm is considered a monopoly if . . . it is the sole seller of its product. its product does not have close substitutes.

 Primary characteristics of a monopoly Single Sellers No Close substitutes Price Maker Blocked Entry

 Barriers to entry Legal/Government Restrictions High cost of entry Advertising and product differentiation

Costs and Revenue

2. ...and then the demand curve shows the price consistent with this quantity. B

Monopoly price

1. The intersection of the marginal-revenue curve and the marginal-cost curve determines the profit-maximizing quantity...
Average total cost

A Demand

Marginal cost

Marginal revenue
0 QMAX Quantity

 State owned company Monopoly of countrys rail transport In 1832, a proposal was made to build a railroad between Madras & Bangalore, but it never materialized. In 1845, two companies formed
East Indian Railway Company operating from Calcutta Great Indian Peninsula Railway operating from Bombay

On December 22, 1851, first train is operational in India April 16, 1853, first passenger train introduced between Bombay & Thana. Railways grows in India with encouragement of the British Government.

Due to Partition, India lost 40% of its existing rail network. At independence, 42 rail systems were existing In 1951, all systems were nationalized as one unit. Total of 6 zones came into existence in 1952, later extended to 16 zones. In 1985, steam locomotives are phased out. In 1987, computerisation of reservation first was carried out in Bombay In 1989, train numbers were standardized to 4 digits. In 1995, entire reservation system was computerized. In 1998, Konkan Railway was opened spanning difficult terrain through the Western Ghats.

Railways Zone

 Railways Zones
Sr. No. Name 1 Central 2 East Central 3 East Coast Abbr. Headquarters CR ECR ECoR October 1, 2002 April 1, 2003 Date Established Divisions Mumbai, Bhusawal, Pune, Solapur, Nagpur Danapur, Dhanbad, Mughalsarai, Samastipur, Sonpur Khurda Road, Sambalpur, Visakhapatnam Hajipur Bhubaneswar November 5, 1951 Mumbai

4 Eastern 5 North Central 6 North Eastern

7 North Western 8 Northeast Frontier 9 Northern 10 South Central 11 South East Central 12 South Eastern 13 South Western 14 Southern 15 West Central 16 Western

ER NCR NER
NWR NFR NR SCR SECR SER SWR SR WCR WR

April, 1952 April 1, 2003 1952

October 1, 2002 1958 April 14, 1952 October 2, 1966 April 1, 2003 1955 April 1, 2003 April 14, 1951 April 1, 2003

Kolkata Allahabad Gorakhpur

Jaipur Guwahati Delhi Secunderabad Bilaspur, CG Kolkata Hubli Chennai Jabalpur

Howrah, Sealdah, Asansol, Malda Allahabad, Agra, Jhansi Izzatnagar, Lucknow, Varanasi
Jaipur, Ajmer, Bikaner, Jodhpur Alipurduar, Katihar, Lumding, Rangia, Tinsukia Delhi, Ambala, Firozpur, Lucknow, Moradabad Secunderabad, Hyderabad, Guntakal, Guntur, Nanded, Vijayawada Bilaspur, Raipur, Nagpur Adra, Chakradharpur, Kharagpur, Ranchi Hubli, Bangalore, Mysore Chennai, Madurai, Palakkad, Salem, Tiruchchirapalli, Thiruvanathapuram Jabalpur, Bhopal, Kota Mumbai Central, Vadodara, Ratlam, Ahmedabad, Rajkot, Bhavnagar

November 5, 1951 Mumbai

 Passenger Services
Operates over 9000 trains and transports over 5 billion annually across India. Preferred mode of transport in most of the country. Overcrowding is a widely faced problem Ticket-less travel is also an additional problem faced.

 Production Services
Manufactures most of its rolling stock and heavy engineering component Production units are managed directly by ministry Each unit is headed by GM

 Production Services
Name Diesel Locomotive Works Headquarters Purpose Varanasi Manufacture mainline diesel-electric for passenger and freight traffic

Chittaranjan Locomotive Works

Chittaranjan Manufacture electric locomotives using DC traction as well as AC-AC transmission

Manufactures key sub-assemblies for Diesel Locomotives Make coaches for the Indian Railways Modern plant and has a much more flexible automation Makes cast wheels for wagons

Diesel-Loco Modernisation Works Patiala Integral Coach Factory Rail Coach Factory Wheel & Axle Plant Chennai Kapurthala Bengaluru

In addition, Central Organisation for Railway Electrification (CORE) headquartered at Allahabad is also headed by a GM. Its job is to undertake electrification projects of IR & monitor their progress across the country.

 Freight
Carries variety of goods Contributes to 70% of revenues Last 2 decades, shifted to large container movement. Majority of earnings comes from carrying bulk goods like iron ore, coal. Introduced CONRAJ for high priority freight

 Suburban Rail
Many cities have dedicated suburban networks. Cities include Mumbai, Chennai, Delhi, Hyderabad, Kolkata, Lucknow & Pune. Only Mumbai, Pune & Hyderabad share tracks with long distance trains. Trains are mostly electric multiple units. Only in Mumbai trains run on Direct Current, rest run on Alternating Current.

 Other PSUs under the control of Ministry of Railways

Indian Railways Catering and Tourism Corporation Konkan Railway Corporation Indian Railway Finance Corporation Mumbai Rail Vikas Corporation Railtel Corporation of India Telecommunication Networks RITES Ltd. Consulting Division of Indian Railways IRCON International Ltd. Construction Division Rail Vikas Nigam Limited

Centre for Railway Information Systems is an autonomous society under Railway Board, which is responsible for developing the major software required by Indian Railways for its operations.

 Worlds third largest railway network Prime movers to the nation Approximately 65,000 km of rail tracks and over 7,151 railway stations. IR owns a fleet of 2,22,379 wagons 42,441 coaches 7,910 locomotives Operates 1,60,251 trains including 9,550 passenger trains, carrying about 1.6 million tonnes of freight and about 18 million passengers daily

 Prime infrastructural sector World's largest commercial or utility employer, with more than 1.5 million employees on its payrolls Perform the dual role Commercial Organization Vehicle for fulfillment of social obligations Part and parcel of the total receipts and expenditure of the Government of India. Contributes to 1% of GDP of INDIA.

 In 2002-03, 'social service obligation' of Indian Railways worked out Rs 37.87 billion. A 2001-02 review of all "branch lines" disclosed that 115 trains had become uneconomical, accounting for an annual loss of Rs 434 crore. In 2001, the ratio of net revenue to capital declined to 2.5 In 1999-2000, fund balances had touched a low of Rs. 1.49 billion. Operating ratio reached 98.8 percent in the year ending March 2001.

 Surplus manpower1.6 million in FY 2001. Poor staff productivity. Loss of market share in the profitable freight business. Lack of flexibility in pricing. Lack of accountability. Politicization of the decision-making processes

modernization safety and security of passengers replacement and renewal of assets track renewal & improvement in passenger amenities increase in productivity and reduction in operating ratio. computerization of railway systems. induction of new technologies for signalling and telecom. prevention of leakages of revenue.

 Capacity Enhancement
increasing wagon loading capacity reducing wagon turnaround time increasing length of wagon sidings(platforms) reducing loading/unloading time avoiding frequent train examination

 Capacity Utilization
Dynamic pricing policy Tariff Rationalization Non-peak Season Incremental Freight Discount Loyalty Discount Scheme Long-term Freight Discount Scheme Multiple Unloading

 Revenue Enhancement
Focusing on low-cost high-volume operations Revision in freight rates Increasing number of coaches in popular trains Reducing AC class fares Introducing Garib Raths to attract volumes

Change in the macro-economic conditions Rise in demand Change in the legal position Changes in organisational culture Human resources initiatives Downsizing Decentralising

In FY 2006-2007, IR registered profits of Rs. 200 billion. As of 2007, IR was India's second largest profit making PSU after ONGC. Revenue per staff witnessed a rise by 68 percent (20012006). Operating Ratio was brought down to 78.7 percent by 2007. Enhanced axle load and reduction in turnaround time of wagons increased by 14% IR increased wagon capacity available per day by 36 % The number of employees reduced to 1.412 million by 2006 . The number of accidents have been more than halved from 473 (2001) to 200 (2007) Increase in the volume of passengers by approx 29 percent over the period 2001 to 2007

 The XIth Plan (2007-12) lays ambitious targets for

1. 2. 3. 4. Freight and passenger business transportation Capacity augmentation Technological up gradation. Sustained improvement of services .

 The Head Start : Right sizing in the system. Significant change was the Investment Strategy.

$$ Freight acted as the major catalyst to boost revenue . $$

 Increase in market share in freight traffic, both bulk and non-bulk, was the

important focus area.

Plan priorities for IR - building capacity for handling traffic growth Up-gradation for heavy axle load movement Modernization of freight and passenger terminals Developing world class stations Information Technology initiatives and technological up-gradations.

Quantum increase in traffic through incremental

capacity augmentation :
Capacity creation targets in XIth Plan have been kept at twice/thrice. 2000 kms of new lines, convert 10000 kms of Meter/Narrow gauge lines to Broad

gauge, double 6000 kms of single track and electrify 3500 kms of network length
Manufacture/ procure 1,55,000 wagons (equivalent 4 wheeler units), 17,500 coaches, 2800 EMUs. 2200 MEMU/DEMU and 3600 Locomotives (1800 Electric and 1800 Diesel)

 How to attain the Rolling Stock ??

The INITIATIVES : 1. Electric Locomotive Manufacturing Unit 2. Diesel Locomotive Manufacturing Unit 3. main line EMU Manufacturing Unit, 4. two new Rail Coach Factories besides augmenting the capacity of existing production units. 5. These new Manufacturing Units are to be setup as departmental production units or through the Joint Venture route.
Indian Railways is also moving ahead with the Dedicated Freight Corridor Projects on Western Route from Jawaharlal Nehru Port Trust near Bombay to Rewari and Eastern Route from Ludhiana to Dankuni. These corridors would add significant capacity in freight transportation and would be operational in 201617.

 Status Quo : Passenger Services - Trains

10 new Garib Raths introduced.

53 pairs of new trains.

Extension of trains : 16 pairs.

Increase in frequency : 11 pairs.

 Status Quo : Passenger Services Trains

300 additional services in Mumbai suburban.

Special train from Anandpur Sahib and Patna Sahib to Gurudwara Sachkhand

Sahib during tercentenary function of Shri Guru Granth Sahib of Gurta Gaddi.
Special train between Pune and Delhi for Commonwealth Youth Games being

held in Pune from 12th-18th October this year.

 Amenities
Provision of on-line coach indication display board; on-line train arrival departure
information board; on-line reservation availability information board. Provision of discharge-free green toilets in all 36,000 coaches in XI Plan period at a cost of about Rs.4,000 cr. LHB design coaches for all Rajdhani and Shatabdi trains over next few years. Provision of LHB coaches with stainless steel bogies in Mail/Express trains.

 Concessions

Senior citizen concession for women enhanced to 50% from existing 30%.
Free Monthly Seasonal Ticket to girl students up to graduation level in place of 12th standard and for boys up to 12th standard in place of 10th standard.

Improvements in ticketing
Termination of queues at ticket counters targeted in two years. Ticket booking on mobile phones; E-ticket for waitlisted passengers.

Increase in Unreserved Ticketing Systems counters to 15,000 and ATVMs to

6000.

 Reduction in passenger fares

One rupee discount per passenger for fares up to Rs.50 in non suburban
Second Class (ordinary and mail/express) 5% discount across the board for passenger fares beyond Rs.50 for all non suburban Second Class (ordinary and mail/express). Increase in discount for travel in new design high capacity reserved coaches. Reduction in fare AC-I : 7%; and AC-II : 4% (the reduction will be half for popular trains and during peak period).

 Freight Business Reductions & Concessions

5% reduction in freight rates for Petrol and Diesel. 14% reduction in freight rate of Fly-ash. Liberalisation of Traditional Empty Flow direction incentive scheme

 Freight Business Reductions & Concessions

30% discount on entire traffic in place of incremental traffic booked from goods shed. Increase in discount on incremental traffic booked from private sidings from 30% to 40%. 6% freight concession for traffic booked from other States for stations in North Eastern States.

Initiatives Target for loading fixed at 850 MT in 2008-09. Blue - Print prepared for High Density Network. Top priority being given to port rail connectivity projects. New and dedicated iron ore routes to be upgraded/constructed. Work on Eastern freight corridor from Ludhiana to Dankuni (Kolkata) and Western freight corridor from Delhi to JNPT to start in 2008-09.

 Initiatives Procurement of Rolling Stock: All time high of 20,000 wagons, 250 diesel and 220 electric locomotives to be manufactured.

New Wagon Leasing Policy and Wagon Investment Scheme formulated to increase availability of wagons in the system.
Discounts for development of bulk and non-bulk goods terminals.

 Safety & Security

Multi-pronged scheme to strengthen railway safety through various automatic
devices like anti-collision device etc. Rail accidents have reduced remarkably despite substantial increase in gross

traffic volumes.
Fire resistant material to be used in coaches. Unmanned level crossings at busy sections to be manned on a fast track basis.

Integrated security plan drawn up through installation of CCTVs, metal

detectors etc.

 Welfare Measures Social Welfare

99% backlog vacancies for SCs/STs filled up in special campaign launched since 2004. Appointment of candidates from SCs/STs/OBCs exceeded their respective quotas in Group D appointments. Minorities welfare cells to be opened at Railway Board and Zonal Railways.

 Welfare Measures Social Welfare

One time exercise of appointing Railway Porters as gangmen and to other Group D posts. Mother-Child Health Express to be run on a pilot basis at concessional fares in collaboration with Rajiv Gandhi Foundation for providing medical facilities to mother and child.

 Staff Welfare
Per-capita contribution to Staff Benefit Fund to be increased by ten times from Rs.35 to Rs.350 for 2008-09. Northern Railway Central Hospital at Delhi to be made centrally airconditioned. Two divisional hospitals at Jaipur and Hubli to be upgraded to central hospitals.

 Staff Welfare
A new divisional hospital at Ranchi and an OPD block at Integral
Coach Factory to be constructed.

Employees who joined Railways from other agencies/PSUs etc and

are eligible for pensionary benefits, would now be eligible for post

retirement complimentary passes as per the norms being set.

 Vision 2025

Aims at setting the roadmap for coming 17 years customer

centric and market responsive strategic initiatives.

Information Technology Vision 2012 aims at radical changes in IT

applications ,improvement in operational efficiency, transparency in working ad better services to the customers.

Multi-Departmental Innovation Promotion Group at Apex Level.

 Vision 2025
Public-Private Partnership schemes to be launched for attracting
an investment of Rs.1,00,000 cr over the next five years for

developing world class stations, rolling stock ad other logistics.

Commercial use of Railway land by Rail Land Development

Authority to give a boost to Railway Revenues.

THANK YOU !!