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The Problem with Indian Railways
Yahoo News, United States Monday, May 24, 2010

Mohit Satyanand
Two people were killed in a stampede at New Delhi railway station. Indian railway has no idea on how to deal with success. A growth in demand would lead to surpluses, and increased supply. Moreover, it will attract competition. Unfortunately, things don't work that way in the case of railways.The case of mobile phones must be an example for everyone to see. Within years, competition drove down prices and raised the quality of service, writes Mohit Satyanand in Yahoo News.

Two people were killed at New Delhi Railway Station on May 16th, when the platform designated for the arrival of a train was changed minutes before it was to roll in, setting off a stampede.

"It is not the failure of the administration. People are responsible for such chaos. It is difficult to control such situations," Railway Minister Mamata Banerjee was reported to have said.

... ... ...

63 years after Independence, the Indian Railways have not learned to manage success. Three months before the date of travel, train seats are booked out within minutes of bookings being opened. On the very weekend of the station stampede, at a railway reservation counter in south Delhi, a 70-year old lady broke her arm when a group of young men crowded into the queue for senior citizens. A squad of police were on duty, to prevent such a development, but were unable to act in time.

My concern here is not with the inability of the police to deal with an emergency, but with the need for predictable spikes in train travel to become emergencies in the first place. For any well-managed enterprise, sustained growth in demand would generate surpluses - another term for that ugly word, profit. These surpluses would be leveraged to mobilize more funds, managerial resources and technology, to create supply that meets not only average demand, but also peak demand.

Meanwhile, the obvious success of such an enterprise would also attract competition, which would create additional supply, rapidly leading to adequate capacity.


In the case of the Indian Railways, and a whole host of "public services", none of these mechanisms are allowed to operate. Prices are fixed on arbitrary notions of what is affordable. Firstly, artificially low prices create artificially high demand. Secondly, they prevent an enterprise from generating surpluses that could be used to augment capacity. Low prices, subsidized by the tax-payer, also serve the doubtless useful function of inhibiting private enterprises from entering into competition without the benefit of such subsidies. But, just to ensure that no foolhardy entrepreneur decides to enter the fray nevertheless, the state has also legislated that railways are to be a monopoly of the state.

... ...

As an example of the first, think of satellite TV, whose emergence had not been foreseen by legislation. By the time the government could come to terms with the dimensions of this monster that was threatening Doordarshan, satellite TV had become too popular for its abolition to be politically viable.

As an example of the second, think of mobile phones. When the service was launched in 1995, the official view was that its users would be the business elite. At Rs16 per minute of usage, of both incoming and outgoing calls, this certainly seemed to be the case. But it took entrepreneurs with vision, and the ability to respond to the customer, to drive prices down, and service levels up. And rather than complain about "over-crowding and heavy rush", managers treated demand as a signal to rapidly ramp up supply.

... ...

This article was published in the Yahoo News on Monday, May 24, 2010. Please read the original article here.
Author : Mr Mohit Satyanand is a management consultant, investor, columnist, and presently the Chairman of the board of Liberty Institute.
Tags- Find more articles on - mobile phones | New Delhi

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