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How Lalu changed the track of Indian Railways

Lalu not only confounded critics but turned around the world's second largest railroad network to a pre-eminent, modern service provider.

india Updated: Feb 25, 2006 17:39 IST

For a man who had become a metaphor for Bihar's ills and whose rusticity made him the laughing stock of the chattering classes, the success story in the"historical turnaround" of the Indian Railways has been nothing short of a "miracle" - as minister Lalu Prasad himself suggested.

By combining common wisdom with economic shrewdness, and by raising the bar of efficiency and standards, Lalu Prasad not only confounded critics but turned around the world's second largest railroad network from an institution enmeshed in a terminal debt trap not long ago to one that now looks to become a pre-eminent, modern service provider in the future.

And what makes this story interesting is that this "historical turnaround", as he himself put in his speech in parliament while presenting therailway budgetwas achieved without traversing the beaten track.

He refrained from the temptation of tariff increases, which experts said, could have further exacerbated the situation due to stiff competition from mushrooming budget carriers in the air passenger segment and truckers for freight.

"The credit of quick decisions, good implementation and understanding of issues goes to Lalu Prasad," said Shanti Narain, a former railway board member who had headed an expert panel a few years ago to turnaround the Indian Railways.

"You might term it a miracle but I was confident," a beaming Lalu Prasad said in his 110-minute speech that demonstrated a corporate-style planning and execution hitherto hidden in his rustic demeanour.

The policies since he took charge in May 24 2004 have resulted in a sharp growth in fund balances to Rs 110 billion ($2.5 billion) from just Rs 3.5 billion ($77 million) in 2001, enabling the highest ever annual plan outlay of Rs.234.75 billion ($5.2 billion) for 2006-07.

Under him, the railways also made a striking improvement in the operating ratio - a measure of efficiency that looks at operating expenses in the light of revenues - that dipped sharply from 91 per cent to 83.7 per cent.

Similarly, the turnaround time in wagons - another performance indicator - was also reduced to 5.5 days from seven days, besides adding additional tonnage to the extent of eight tonnes per wagon, experts explained.

It is undeniable that the 152-year-old Indian Railways is the country's lifeline for long distance travel - 14 million passengers travel daily on its 63,000 km network that accommodates 15,000 trains and 635 million tones of cargo each day.

But the challenges came from low-cost carriers that started wooing away upper class passengers with low fares and truckers who offered door-to-door delivery of cargo and other specialised services, minus the loading and unloading cost of the railway transport system, said experts.

These two segments are the two main sources for surplus for the Indian Railways.

"Some of the proposals of Lalu Prasad like beating back competition from budget carriers for upper class air-conditioned segment signifies out of box thinking," said economist Sunil Sinha of the Crisil Centre for Economic Research.

What the railway minister managed was to cut thefaresfor air-conditioned first class by 18 per cent and for air-conditioned second class by 10 per cent - besides announcing 55new trainsextension of 37 existing routes, higher frequency for 12 pairs of trains and re-routing of two others.

"In my view, the basic mantra for being successful in a competitive market is not by increasing tariffs but reaching the benefits of lower cost to customers," said Lalu Prasad, adding that travellers on Indian Railways will now be kings.

Experts said Lalu Prasad also realised that while speed was a something where it was not possible to compete with budget carriers, efficiency and standards were factors that needed to be addressed to woo back passengers.

That was the main logic behind converting over 200 mail and express trains into super-fast services, reducing the journey time of special trains like Shatabdi Express and Rajdhani Express and adding morecoaches to 190 trains.

He also showed some marketing skills by declaring 2006 as the year of passenger service with a smile and promised modern look for the country's train stations with food plazas, ATMs and cyber cafes to attract the young and the trendy.

"The budget has attempted to strike a balance in an adroit fashion by not hiking fares for both passengers and freight and ensuring adequate resources for future growth," said YC Deveshwar, president of the Confederation of Indian Industry.

Some experts said there were other factors as well that helped Lalu Prasad in transforming the railways. "The railways also benefited from the rise in global price of crude oil, which has made road transport more expensive," said Sinha.

"Otherwise I believe that reforms within the railways were on for the past five or six years when it was realised that because of unrealistic freight rates they were losing traffic to the roads," he added.

There were other initiatives as well - "Dynamic Pricing Policy" of airline-style scheme to levy differential rates for peak and non-peak seasons, extension of e-ticketing service to all trains and public-private partnership to attract funds.

In a self-congratulatory mode, Lalu said these all these were measures that will go a long way to make Indian Railways a modern service. "The entire nation sees that the track is the same, staff is the same but railways' image is aglow."