Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

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Railway Reform: Toolkit for Improving Rail Sector Performance Case Study: Indian Railways cent. India has a mix of passenger services. Over the last thirty years, as cities have expanded, suburban passenger journey length has increased from an average of about 20 kms/trip to 36 kms/trip, and average journey lengths for intercity services increased from about 87 kms/trip to 230 kms/trip. In terms of modal share, IR is estimated to carry about 15 percent of non urban passenger traffic. At the present phase of development, India’s economy generates large volumes of freight types that are well-suited to railway transport and carried for relatively long distances. In 2008, coal comprised an estimated 40 percent of rail freight ton-km, followed by iron ore with 9.5 percent, cement, 8.8 percent, and grains, 8.3 percent. Rapidly growing container traffic now constitutes nearly 7.0 percent of traffic task. The average freight haulage length is nearly 660 kms, and IR carries an estimated one-third of national inland freight task. If the MOR (IRB) regularly monitors customer perceptions of its services, it does not publish them, but it does carry out ad hoc consumer research. Vision 2020 suggests many areas for improvement—a new “look and feel” for passenger services that need to become… “fast, punctual, clean”. The MOR (IRB) acknowledges deficiencies in meeting passenger demand, including long waits to buy tickets. As a result, MOR (IRB) has adopted a Citizen’s Charter as part of service performance standards. So far, no performance measurements against those standards have been published. Vision 2020 also sees a need to “…reinvent freight services” by “…creating adequate carrying capacity, achieving cost effectiveness, improving quality of service and providing new value-adding services.” 2.4 Transport Operations Trends in operational indices are summarized in Figure 4; most resource utilization indicators show significant improvement. Over the last two decades, passenger train speeds have increased by 27 percent and passenger loadings per railcar by 88 percent. Freight train weight has increased by 61 percent and output per freight locomotive has increased by about one-third. In 2001, the Mohan Report criticized IR’s transport operations, citing an outdated business structure, inefficiency and low productivity, low-quality overpriced rail freight services, lack of customer focus in freight and passenger services, and a serious infrastructure maintenance and renewal backlog. At that time, the system was run down and floundering under huge arrears of renewals and replacements, high asset failure rates, and a poor and deteriorating financial operating ratio. Yet by 2008, IR had eliminated maintenance deferrals, paid back Government for deferred dividends, replenished its depreciation reserves, and earned record surpluses. The World Bank Page 356
Railway Reform: Toolkit for Improving Rail Sector Performance Case Study: Indian Railways In 2007, the World Bank commissioned independent research on this remarkable turnaround. The study found that some accounting changes had improved the operating ratio, but even allowing for that, IR had improved its real commercial performance and financial results substantially, based on the following. • Traffic growth. IR enjoyed a period of increasing volumes; most incremental railway traffic can be carried at a marginal cost much lower than average cost, thus improving financial performance (Figures 5 and 7). • Tariff increases. Gains due to higher volumes and lower average costs were magnified by real increases in freight rates during this period, implemented as part of a revised and simplified tariff system. • Labor productivity. Beginning in 2001, labor productivity accelerated and by 2007, had almost doubled, reflecting traffic growth and a policy of labor force downsizing. The World Bank Page 357
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Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

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