Indian Railways at the Crossroads

            
 
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Case Details:

Case Code : ECON005
Case Length : 15 Pages
Period : 1990 - 2004
Pub Date : 2004
Teaching Note : Available
Organization : Indian Railways
Industry : -
Countries : India

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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Background

The development of IR had its roots in the 1800s, when India was a British colony3. The British East India Company and later, the British colonial governments were credited with starting a railway system in India. The British found it difficult to traverse great distances between different places in India. They felt the need to connect those places with trains to speed up the journey as well as to make it more comfortable than travel by road in the great heat. They also sought a more efficient means to transfer raw materials like cotton and wheat from the hinterlands of the country to the ports located in Bombay, Madras and Calcutta, from where they would be transported to factories in England.

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Besides, the mid-1800s were a period of mutiny and struggle for independence in India, with uprisings in several parts of the country. The British leaders wanted to be able to transfer soldiers quickly to places of unrest. Railways seemed to be the ideal solution to all these problems.

Work began on the development of railway systems in India in the early 1850s. Initially, trains were used to transport material between different places. The first commercial passenger train in India ran between Bombay and Thane (places in western India) on April 16, 1853. The distance of 34 kilometers4 was covered in about 75 minutes. Indians were initially apprehensive of accepting railways as a means of travel, but soon overcame that fear and railways gained popularity. Soon, railway lines began to be laid in other parts of the country, mostly by private British companies, and the major regions in India were connected by rail. To promote the construction of railway lines in India, the British Parliament introduced the guarantee system.

Under this system, any company that constructed railway lines in India was given a guarantee of a five percent return per annum on the capital invested. The company also had the right to pull out from the venture and receive compensation from the government at any time if it was not satisfied with the returns. This helped accelerate the development of railways in the country...

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3] V. S. Sambandan, Indian Railways: Preparing for Another Sunrise, The Hindu, August 30, 2001.

4] The Indian Parliament comprises of the Lok Sabha (Lower House), Rajya Sabha (Upper House) and the President of India.

 

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