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The advent of budget airlines has
eroded high-margin upper class
segment of the Indian Railways (IR)
two years in a row causing it to
lose over 10% in revenues and
analysts predict this trend to
continue. However, IR is
undeterred by the loss of revenue
from the most profitable segment
confident of gaining the lost
market share without stating how
they plan to achieve this feat.
Higher classes are blocked en
masse for politicians, senior
bureaucrats, and railway
employees and released much later
in the reservation cycle.
Moreover, plum seats are given to
non-paying Railway employees and
passengers paying full fare and
given the worst seats. Moreover,
the upper class coaches are
always in the most inconvenient
locations making those who paid
the most money walk the most.
These socialism inspired
processes encourage many to seek
alternate modes of
transportation.
The IR has been forming very well
for the last 3 years thanks to
deregulation of the freight
handling, processing, and
handling which is the second most
profitable segment. Operational
ratios have been consistently
improving year on year, revenues
have grown, and so has reserves.
It earned a profit of USD 2.9
billion last year and plans to
earn USD 4.5 billion this year.
The IR plans to build a new
corridor dedicated for freight.
Laying the foundation stone for
the first phase, Federal Minister
for IR said that the Government
will build a separate freight
corridor to link
Punjab’s
industrial hub Ludhiana to major
ports such as Mumbai and Kolkata.
He said because of increased
profits, the IR will not increase
the fares to increase profits. He
did not say how he will cover the
global increase in the price of
oil and maintain his profit
projection.
Private container operators are
also demanding that they be given
permission to operate, manage,
and maintain wagons owned by
them. They experience large
delays from service bookings with
the IR which increases their
operating cost and reduces their
margin. It looks like IR may
actually allow such deregulation.
However, it would be wise to set
up a strict quality and penalty
regime so ill-maintained wagons
do not cause trains to derail,
cause damage to tracks, or
increase the drag on engines to
reduce their life-span. The last
thing India needs is the quality
of wagons similar to the trucks
on the roads.
Meanwhile, a delegation if senior
academicians from premier
educational establishment Indian
Institute of Management at
Ahmedabad met with Yadav and
proposed that he appoint an
advisory committee of senior
academicians from IIM and Indian
Institute of Technologies. Prof.
G. Raghuram is part of an
official committee that predicted
that the IR will incur losses of
USD 13.483 and slip into
bankruptcy in 10 years. Yadav
declined the proposal and said
that the IR has enough experts
and can manage things on their
own.
The IR has seen vast investments
from India and has earned profits
for the first year. To sustain
profits and keep growing, it
needs large investments to
modernize the fleet, upgrade
tracks, improve signaling,
increase capacity, overhaul
infrastructure. It is not clear
how Yadav plans to do all these
things without increased
investments and a plan.
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