Indian Railways: In Quest of a Sustainable Turnaround

Abstract

The case focuses on evaluating the various turn around strategies available to the Indian Railways to improve its profit margin or operating ratio in railway industry parlance. Though Indian Railways is a government body, it is required to function as a commercial enterprise. It receives no budgetary support for its revenue expenses. It does receive some budgetary support for its capital expenditure, but has to pay dividends on the capital received until perpetuity. However, it does not have the freedom to decide on the pricing of transport products, the remuneration of its employees or close down services on un-remunerative sections of the network. It has to contend with powerful employee unions and demands of the populace and industry for more services and higher levels of service. This case is a typical illustration of demands made on public sector organizations operating in developing countries. The lessons derived from this case could well be applied to private sector enterprises operating in highly competitive environments, where the market forces decide the pricing. The case is intended for use in courses on costing and strategic management. The case could also be used for demonstrating the inherent problems of managing a public sector enterprise in a democratic country in a public systems course or searching for evidences of Leibenstein's X inefficiency concept in monopolies in an economics course.