Lalu and the Indian Railways

"Lalu doles out the Prasad for the common man", declared the Economic Times when the 2004 Railway budget was declared and no hikes in the passenger fares were announced. 14 months later, the September 26, 2005 issue of the India Today reports about Lalu's railways in an article called "On the Fast Track, Believe it or not". The title gives it away. The article is full of praise for Lalu for the way he has spearheaded the transformation of the railways to a more efficient and profitable organization than it was a few months earlier.

Indeed, part of the reason that the railways is doing well is because two of its biggest customers, namely, the cement and the steel indutries, are doing well. Also, some schemes (though the article does not say which ones) launched during Nitish Kumar's days (Lalu's predecessor) are only bearing fruit now. Still, the article argues, Lalu's role has been commendable.

First of all, the article argues that freezing the passenger fares, though populist at face value, could well prove sensible from a business view too. This is because, firstly, the highway infrastructure is improving; and secondly, the low-cost airline market is picking up. In presence of these trends, if railways were made increasingly expensive, they may actually lose customers, especially those at the top of the ladder. Lalu's idea is to make better use of the resources elsewhere and not burden the passenger directly.

Within a month of taking charge, it is said that Lalu paid a surprise visit to a goods train near Patna. This trigerred more such surprise inspections in the other parts of the country. An offshoot of these surprise visits was that the freight carrying capacity of the wagons was increased, though the article does not explain how exactly that was done. From what I infer, the situation was that the trains were carrying more than the earlier prescribed capacity, but the railways was not gaining anything as those things were being illegally transported, without paying the necessary tarriffs. Now, with the increase in prescribed load, I guess the railways can charge for all that it actually carries. It is reported that trains now are carrying about 8-16% more load than earlier, adding capacity, and hence increasing revenues. Other achievements in the freight sector include the reduction of the turnaround time of wagons from seven days to 5.5 days and an increase in the loading/unloading hours from 8 hours previously to 24 hours now. All these factors have been profitable from the railways point of view.

New measures have reportedly been initiated on the passenger side too. Officials at the level of the Divisional Railway Managers have been given the powers to reallocate the coaches as per the demand. Thus, coaches can be removed from trains that run vacant seats and be attached instead to trains that have been having a long waiting list. Previously, more senior officials could take such decisions, presumably making it a slow and non-responsive process. Being able to allocate the berths ``on demand'' reduces the ticket cancellation events. It is reported that every day, the railways returns about 8-10 crore rupees for cancelled tickets! Another innovative scheme being worked out to reduce cancellations is that people on the waiting lists could sometimes be upgraded to the higher classes. On an average, 53% of AC I, 38% of AC II and 22% of AC III seats are empty, whereas the occupancy for the sleeper class is about 112%. Thus, moving some randomly chosen customer up from the sleeper class to the AC class could potentially prevent the ticket cancellation, while also increasing the customer goodwill. What I am not sure, and the article does not mention, is how the railways intends to handle the practical problems that such an arrangement might create: "Why is it that his ticket was upgraded to AC while mine wasn't? Did we not pay the same fare?". Another enhanced facility that is coming the passengers' way, slowly but surely, is the feature of e-tickets. Currently this is available only on a few trains. The railways are also planning improvements in the railways enquiries, which it is planning to outsource.

Laloo is also said to have completely revolutionised the catering and the parcel businesses. Let us take the catering for example. Previously, the contracts were based on an application-based system, and the rates used were completely outdated. Now, the railways have moved to a bidding-based system. On Kalka mail, for example, an annual catering contract could be won for about 5-lakh rupees. Now, with the application based bidding, the same contract goes for Rs. 83.60 lakhs---an increase of 1575%. What I did not understand is that if the cost of the catering contract has gone up, the cost of the food on-board the trains should also go up. If I am not wrong, the meals are included in the tickets for only a few trains. So, in effect, this will raise the passenger fares---thus going against the minister's original philosophy. Anyways, this bidding based system has also been introduced to the parcel business and the food stalls on the stations; as expected, there has been a massive profit there too.

In short, railways looks to be in a good shape in Lalu's hands as per the India Today article. I have not done any more research to hear any counter views. But reading this India Today article, I was so pleasantly so surprised that I decided to summarize it here. Any comments?