June 28, 2013

Things can only get better for Indian Railways

Written by  Raghav Thakur
  • Print
  • Email

India waved goodbye to its fifth railway minister in four years last month following allegations of corruption that shook the nation. Raghav Thakur considers the prospects for Indian Railway following the cash for jobs scandal.

AS Indian Railways (IR) picks itself up and dusts itself off following its latest setback, it is clear that the political instability of the past few years has taken a huge toll on operations.

Internal assessments show that in the first two years of the 12th five-year plan from 2012 to 2014, IR will be able to invest just Rs 1.05 trillion ($US 19.8bn), around half of the amount originally planned.

Traffic figures make similarly depressing reading. In 2012-13 total freight volumes came in 28 million tonnes short of its goal - posing a huge question over whether the target of 1.41 billion tonnes in 2016-17, the final year of the 12th plan, will be met.

IR is also far behind the 12th plan targets for procuring 105,659 wagons as well as other projects focusing on capacity enhancement and physical output. Big-ticket projects - with the exception of the Dedicated Freight Corridor (DFC) scheme (IRJ March p18) - have simply not taken off, while public-private partnership (PPP) financing plans have floundered.

In the past four years, no less than five cabinet ministers have been at the helm; the most recent being Mr Pawan Kumar Bansal, who was forced to make an inglorious exit in May following a corruption scandal involving his nephew Mr Vijay Singla and railway board member, staff, Mr Mahesh Kumar.

While dark clouds have circled over IR's Rail Bhavan headquarters in Delhi for some time now, the silver lining - if there is one - is found in this scenario: in what is the last year of the UPA coalition government, Mr Mapanna Mallikarjun Kharge, who was appointed railways minister on June 18, will have little option but to push through the reforms and modernisation plans that have remained on the drawing board for the past few years.

Dr C P Joshi, who assumed temporary control of the railways portfolio following Bansal's resignation, started to move in this direction at the start of June by inviting vendors at a pre-bid conference to set up diesel and electric locomotive factories at Marhoura and Madhepura in Bihar province under a PPP structure.

The firms shortlisted for the proposed joint venture - GE, EMD, Bombardier, Siemens and Alstom - have been offered revised terms of engagement, which includes an assured maintenance contract of five years, while IR has agreed to purchase locomotives from the two factories at a higher price: Rs 160m for a diesel unit and Rs 260m for an electric.

The two plants, which will cost approximately Rs 40bn, are expected to roll out 800 8.95MW electric Bo-Bo locomotives and 700 diesel units of 3.4MW and 300 of 4.5MW over 11 years. Global bids for setting up the two facilities are expected to be invited at the end of September.

Following this month's Tokyo summit between India's prime minister Mr Manmohan Singh and his Japanese counterpart Mr Shinzo Abe, India's high-speed plans have also taken a step forward.

"There are some reservations and political sensitivities involved, but it is quite likely that in the months leading to the 2014 general elections, the UPA coalition would want to initiate the process on constructing high-speed lines on one of the identified routes as a showcase project," a senior official said.

A Japanese consortium recently submitted a pre-feasibility study report for running trains at an average speed of 200km/h initially on the existing Delhi - Mumbai route. Track upgrade and fencing costs are estimated at Rs 80bn while the acquisition of a fleet of trains to operate on the route is estimated to cost Rs 70bn.

India-bridgeIndia's railway network statistics offers staggering reading: 7083 stations, 131,205 bridges, 9000 locomotives, 51,030 passenger coaches, 219,931 freight wagons and 63,974 route-km, while IR operates 19,000 trains and carries 2.65 million tonnes of freight and 23 million passengers each day. Despite its problems and its vastness, the system is functioning and trains are running on time, with one official stating that IR has survived merely "because of its institutional strength."

But there is a less complimentary side: India's rail network in 1947 consisted of 54,000 route-km and was ahead of China's. A further 10,000 route-km has been built in the past 65 years and India's network today stands at 64,540 route-km. In comparison, China's network grew to 78,000km in 2007, 91,000km in 2010, and 110,000km in 2012.

The lack of progress is similarly apparent when considering the introduction of high-speed trains. India is yet to overcome its dilemmas, while China has progressed rapidly in the past decade to now operate 1580 services every day and is on course to open 18,000km of high-speed lines by 2015. It is a similar story for freight.

The United States, China and Russia separately carry approximately five times the volumes of India. Japan and China also carry more passengers than India each day.

Clearly, IR has been unable to keep pace with technological upgrade and infrastructure expansion plans with barely any capacity expansion taking place in the last 20 years.

The skewed policy of passenger fares versus freight tariffs also afflicts IR. For every Rs 100 earned by the railways, Rs 64 comes from freight and Rs 34 from passenger traffic. The remaining Rs 2 in revenues come from sundry earnings such as license fees, platform tickets, running special trains and advertisements.

But to earn Rs 34 from passenger traffic, the railways have to spend approximately Rs 60. Because of such inter-modal distortions, freight's market share has slowly declined. IR carried 80% of inland freight traffic in 1947, but carries around 25% now.

Proposals to set up a rail tariff regulatory authority to rationalise fares have been on the drawing board for several months. But the political leadership has yet to make a decision on the matter.

All is not lost

Despite this, all is not lost for IR. Rapid progress has been reported in the implementation of the Rs 960bn DFC project to build 3330km of new freight lines on India's eastern and western flanks.

Following the award of a Rs 33bn contract to build 343km of new track from Khurja to Kanpur on the eastern corridor in January, the DFC corporation last month awarded a Rs 67bn contract to the Larsen and Toubro/Solitz joint venture to build a 640km double-track section from Rewari to Palanpur on the Western Corridor.

The project is expected to become operational by March 2017. And with DFC trains likely to carry four times more freight than those on the existing network, the project will go a long way to de-clogging the choked arteries of the mainline routes.

However, striking a note of caution is former railway board chairman Mr J P Batra. "Construction of the eastern and western DFCs will not solve all the problems," he says. "There is a pressing need to initiate work on constructing the other freight corridors planned. Unfortunately nothing much has been done."

Indeed plans to build four additional dedicated freight corridors remain on the drawing board. These include the 2001km East-West Corridor from Kolkata to Mumbai, the 2173km North-South line from Delhi to Chennai, the 1110km Kharakpur - Vijaywada East Corridor, and the 890km Southern Corridor.

Will the next railways minister bite off more than he can chew? Can he possibly accelerate big-ticket schemes such as the Rs 25bn plans for constructing elevated rail corridors in Mumbai? These are the multi-billion dollar questions facing IR in the next few years.

Mapanna Kharge appointed new railways minister

INDIA's new railways minister Mr Mapanna Mallikarjun Kharge took office on June 18, succeeding Mr Pawan Bansal, who resigned on May 10 amid corruption allegations, and interim minister Dr C P Joshi.

Kharge is considered an unlikely figure for the task of pursuing a pro-reform agenda for Indian Railways. The

71-year-old socialist began his political life five decades ago as a trade unionist and has remained committed to the cause of empowering the deprived sections of Indian society.

In his administrative assignments in his home state of Karnataka - and more recently as the Indian labour minister - Kharge has largely been concerned with filling vacancies in government jobs, and he is expected to focus on recruitment for 22,000 unfilled posts at Indian Railways.

"Proposals for opening up production units for private participation or big ticket projects such as high-speed rail are unlikely to get a big push forward in the coming months," a senior ministry official said.

With India's next general election scheduled for the start of next year, Kharge's tenure is likely to last only around six months, and he will not have the opportunity to present the next railway budget.

Nonetheless, supporters insist he will make an impact on Indian Railways.

"It would be a fallacy to consider him a stopgap railways minister," a source close to the new minister said. "He reads files meticulously; has a hands-on approach and will make the best use of the time available to him."

Kharge spelt out his priorities on June 18, saying that "filling vacancies on the Railway Board would be his first priority."

Three key management positions, including the post of chairman, railway board will become vacant this month and there has been intensive lobbying among the candidates for these positions in recent weeks.

After months of controversy and scandal, another immediate focus will be to restore stability to Indian Railways.

Get the latest rail news

IRJ Rail Brief newsletter covers global railway news