We consider the problem of determining asymptotic bounds on the capacity of a random adhoc network. Previous approaches assumed a link layer model in which if a transmitter-receiver pair can communicate with each other, i.e., the signal to interference and noise ratio (SINR) is above a certain threshold, then the transmitted packet is received error-free by the receiver thereby. Using this model, the per node capacity of the network was shown to be Theta(radic(nlogn)/1). In reality, for any finite link SINR, there is a nonzero probability of erroneous reception of the packet. We show that in a large network, as the packet travels an asymptotically large number of hops from source to destination, the cumulative impact of packet losses over intermediate links results in a per-node throughput of only O(radic(n)/1) under the previously proposed routing and scheduling strategy. We then propose a new scheduling scheme to counter this effect. The proposed scheme provides tight guarantees on end-to-end packet loss probability, and improves the per-node throughput to Omega(radic(n)(logn)/12(alpha-2)/alpha+2) where alpha>2 is the path loss exponent.