Things Looking Up for India's Trains

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The notorious India Railways, a legendary mess of cramped and dirty coaches on which millions of long-suffering commuters are often forced to perch dangerously atop long-delayed and slow-moving trains, is starting to show signs of a turnaround.

The state-owned network is the world’s single biggest employer with nearly 1.5 million workers. It currently operates nearly 15,000 trains, including over 10,000 passenger trains, across a 70,000 km network, ferrying more than 15 million passengers and more than 1.5 million tonnes of freight daily. It has been the luckless star of countless movies for its tardiness, legions of passengers hanging on for dear life, and shambolic stations.

However, Federal Railway Minister Lalu Prasad Yadav, has become an unlikely hero, with the railway’s financial turnaround creating a new sobriquet, ``Lalunomics.’’

In 2004, when Lalu began his term, the system was on the verge of bankruptcy. The return to the black has been achieved without raising fares, which in fact have been cut, contributing to the minister’s popularity.

In February last year, while delivering his budget, Lalu said: ``The railways are poised to create history by generating a cash surplus before dividend of Rs200 billion (about US$5 billion) against Rs147 billion the previous year.’’ The net surplus in FY 2006-7 was over Rs 100 billion.

``This is the same railway that defaulted on payment of dividend and whose fund balances had dipped to Rs.3.59 billion in 2001,’’ he added. The good news made Lalu a much-sought-after speaker at top business schools around the world and in India. Harvard and the reputed Indian Institutes of Management, vie for words of wisdom from a person who was once a cowherd.

Quite a bit of the success obviously has to do with the sheer rise in volume of passengers and freight, given the fast growing Indian economy. But there is considerably more going on. The railway is working on a US$100 billion vision plan for 2007-2012, a huge boost from plans to spend a meager US$15 billion. US$25 billion is expected to be raised internally and through market borrowings and the rest from public-private partnerships, drawing the attention of some of the biggest global asset managers, investment bankers and consultants including UBS, Goldman Sachs, Deutsche Bank, McKinsey & Co and Credit Agricole’s CLSA.

In addition to public-private partnerships, the easing of close government control has helped accord the railway its new global profile. A dedicated freight corridor is expected to cost US$16 billion over five years. Another US$8 billion is to be spent on “mineral routes” and connection to sea ports and US$4 billion on a 12,000-km gauge conversion for outmoded rails.

For optimal use of the new corridor, the railways will need more wagons (US$10 billion), modern signaling and telecommunication (US$6 billion), upgraded tracks and bridges (US$10 billion).

Thankfully, the financials look good, which should make some of the efforts easier to implement, though given India’s corrupt systems, red tape and unending delays in infrastructure projects, it is anybody’s guess how the exercise will finally pan out.

To Lalu’s credit, though, he has tried to buttress the process via modernization, overhauling freight services and innovative measures that have generated new income and enhanced passenger comfort.

In the meantime, the railway is experimenting with some unique marketing strategies. As with Hong Kong’s colorful trams, the marketing community is reaching out to customers by sponsoring trains, the travel mainstay of millions.

In this deluge, there is the Kurkure (a salty snack by Pepsi Foods) Chennai Express; recently another busy train, the Prayag Raj Express to the holy city of Allahabad has been picked up for advertising by a major consumer goods company.

The trend began sometime back with the Airtel Rajdhani Express that connects Delhi to Bangalore in the south. The train, with wagons wrapped with large format digital prints of the telecom service provider, has been a success.

Indian Railways has now decided to offer sponsorship options on all long-haul Rajdhanis that connect the national capital to the main cities of India. According to railway officials, at least 20 more trains originating from Delhi will be offered to advertisers in the near future.

``Sponsors are targeting trains that attract tourist and high-end traffic as well as the mass consumer,’’ a rail official said. The railways estimate a train branding market of US$50 million annually, growing at 25% a year.