Laloo's paper profits

It turns out that most of the profits shown by the Indian Railways under Lalooji's amazing management skills accrued mostly due to accounting tricks. Many independent analysts had secretly opined about this - although their opinions got silenced by Laloo's adulating admirers.

Laloo has been claiming that the railways made a profit of Rs 21,578 crore in 2006-07. But the actual figure was Rs 11,000 crore. Here's the secret of Laloo's added profits:

• Rs 9,000 crore pension funds shown as cash surplus
  
• Miscellaneous funds-Rs 2,500 crore-included in earnings
  
• Rs 1,700 crore due to the Indian Railway Finance Commission as dividend for lease of wagons put in the profit account
  
• Profits shored up by showing advance earnings for 2007-2008 in last year's balance-sheet
  
• Monies in the suspense account-funds promised but not yet transferred-reflected in the earnings/profits
  
• Tonnage carried by freight trains raised despite repeated objections and safety concerns. This brought in Rs 5,000 crore.
  
• Hidden costs to passenger tickets earned the railways Rs 325 crore [link]

As one official put it, "The turnaround is probably one-third true, one-third well-orchestrated publicity, one-third jugglery of figures."

The one-third true part would have come from the booming economy and a naturally increased demand for freight trains.

The worrying part is that a lot of this was achieved by putting the lives of the aam aadmi at risk. Under Laloo, railways overloaded their wagons and allowed local passengers to flood reserved trains. We will not speculate if the recent increased spate of railway robberies or molestations is a result of this.

This story also vindicates Nitish Kumar who had claimed earlier that he deserved credit for the turnaround. Well, had Nitish Kumar not undertaken a Rs. 17,000 crore infrastructure hardeining, we would perhaps see many Hyderabad flyover type collapses of bridges.

So, what about the various felicitations of leading management schools etc. heaped on Laloo?

The IIM study did make Laloo the man of the moment. So much so, visiting students from the Harvard Business School, Wharton and MIT were queuing up to study the miracle he had wrought. Or so it was projected. Now it seems that the visit by the students of the Harvard Business School in December 2006 was not to study any railway turnaround; they had merely called on the rail minister as part of their Camp India programme. Outlook contacted Seth Cohen, one of those students who had attended Camp India. He had this to say: "The visit was informal," he said, "arranged by our Indian hosts. It was not connected to any academic project." Ditto the MIT students toasted and hosted by Laloo.They came to India during their spring break in April 2007; the railways was another diversion during their eight-day break.

Do read the whole article.