The Hindu Business Line : Rlys catches on to volumes game

Railways' business-friendly gesture not only brought a chunk of freight traffic back to the rail that was earlier lost to roads but also set its cash register ringing, driving home the message that accent on volume rather than on rate is what marks a winner from a also-ran.

Apart from savviness, which he possessed in abundance, Dhirubhai Ambani, the founder of the Reliance group, realised early in his business career that success hinges on the twin-pillar of economies of scale and full utilisation of capacity. Small wonder, he went for a record 27-million-tonne refinery at Jamnagar, which at that time was the largest single-location refinery defying and, in hindsight, disproving sceptics who thought the world suffered from excessive refining capacity.

In fact, there was nothing dramatic or remarkable about this strategy as it was rooted in the fundamentals of economics except that somehow its lessons were till recently lost on industrialists in this country. To wit, the road sector used heavy-duty trucks where light commercial vehicles would have done.

A turnaround story

Full marks must be given to the Railway Minister and his team for the belated realisation that the fundamentals of economics and costing apply as much to the public sector as they do to its private counterpart. Last year, the Railways pulled up its socks and decided to end the dismal spectacle of empty and half-empty rakes and wagons. And the results are there for everyone to see — a turnaround story on the back of efficient rolling stock utilisation without raising the freight rates which was de rigueur hitherto when faced with the prospect of deficit.

This business-friendly gesture not only brought a chunk of freight traffic back to the rail that was earlier lost to roads but also set its cash register ringing — it is going to end up with a profit of Rs 20,000 crore driving home the message that accent on volume rather than on rate is what marks a winner from a also-ran.

Extending the experiment

The lesson learnt in a short span of time has rightly spurred the organisation to extend the experiment across a wide front. With some increase in the axle strength of the wagons, the Railways has decided to go for double-decker wagons and wagons and rakes with larger carrying capacity.

On the passenger front, the desire to squeeze the last drop out of every rupee of fixed cost has manifested itself in lengthening the trains as much to the amusement of children — whose pastime it is to peer out of the window to take a snapshot of the semi-circle thus formed by a train in motion — as to the delight of the exchequer that can certainly do with more revenues from passengers without necessarily increasing the fares. The off-season discount on high-class tickets is of a piece with the Malaysian practice of charging more for electricity consumed during the peak time by households.

Last time, the Railways retrieved much of the lost freight traffic. This time round, hopefully, it will retrieve passengers that it lost to no-frills low-cost airlines.

(The author is a Delhi-based chartered accountant.)

More Stories on : Railway Budget | Strategy

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
A steaming performance

In Budget-making, inflation is best ignored

Making it less taxing for all

All signals green for a Railways on the move

Rail Budget — A pull for industry

Rlys catches on to volumes game

Railway Budget 2007-08 — On track to fuel growth, de-rail inflation

Fast-tracking rolling stock, loco production capacity

Positive fare