INTRO: Rail freight’s market share in India will increase from 40% to 50% if IR can push through a package of commercial incentives and improvements for customers proposed in the 2000-01 budget. There are ambitious plans to build new lines and continue the gauge conversion programme, but Chris Bushell finds that fundamental problems such as low passenger fares must be tackled if IR is to prosper in the years to come
ON THE SURFACE, the world’s second-largest national rail network looks in good shape. With 63000 route-km carrying 13 million passengers and 1á2 million tonnes daily, Indian Railways continues to turn in an operating surplus, while market share stands at an enviable 40% for freight and 20% for passengers. But IR’s impressive statistics are achieved in the face of severe capacity shortages due to long-term under-investment, indifferent service quality, and a huge unfunded burden of social obligations.
Market share is, in fact, substantially down, and earnings growth is failing to match increased expenditure, for example on measures to improve safety standards. Railway Minister Mamata Banerjee emphasises the gravity of the current situation: ’Railways are at a turning point ... there is the opportunity to reach new heights of performance, as well as the chance of a dangerous decline.’ This is the challenge Ms Banerjee took up in her first budget which was approved by parliament on March 13.
Despite its prodigious freight traffic, IR has become increasingly passenger dominated. Under heavy pressure from public and parliament, new and expanded services are provided at below cost, so that passenger operations currently account for 62% of the transport task but bring in only 28% of revenue. Political considerations keep many fares low, cross-subsidised by freight tariffs pushed to levels that are now bordering on the uncompetitive.
Railway Board Chairman V K Agarwal points to loss-making passenger trains occupying scarce track capacity at the expense of profitable freight, thus damaging service quality and encouraging premium customers to defect to road transport. Despite the big construction, electrification and gauge-conversion projects of the past two decades, IR now finds it difficult to fulfil the needs of freight customers who have tasted the fruits of deregulation.
Now a start is being made to address these deficiencies by two long-term strategies outlined in the 2000-01 budget - expansion of non-core activities to bring in substantial new revenue for investment, and an eight-point plan to raise freight market share. In addition, there is to be increased spending on safety, capacity improvements and better passenger facilities. Investment in new lines rises 61%, three new gauge-conversion projects are funded, and a further 15 doubling schemes were announced.
While Ms Banerjee proposed a 23% increase in investment for 2000-01 to Rs110bn, it is recognised that the greater part of this and future capital investment will have to be generated internally. The current ninth plan (1997-98 to 2001-02) had already identified non-core activities as a fruitful source of additional revenue, and a start had been made with the ’Own your wagon’ private-owner scheme and the first tentative public/private partnerships. Together, these brought additional investment of Rs9bn in the first year of the plan.
One of the new minister’s early actions was to set up a task force to examine other possibilities. Its main proposal is for aggressive development of surplus land and air space, with initial plans for building budget hotels and shopping centres at 100 stations. Utilisation of rights-of-way for optic fibre communications networks, for which IR is seeking joint venture partners, is also favoured. Other useful revenue will come from sale of advertisements on rolling stock, stations and hoardings.
Freight rescue package
Another new policy is aimed at reversing the decline in freight’s market share. Hand-in-hand with capacity improvements, IR plans to:
- recover non-bulk high-value traffic through better marketing;
- provide incentives in a volume discount scheme;
lease space to freight forwarders on mail and express trains;
- provide warehousing at hub rail terminals and private-sector freight depots;
- extend piggyback operations to offer door-to-door service;
- run more fixed-schedule trains to improve delivery times;
- set up the Freight Operations Information System to provide real-time customer information;
- path high-speed freights to run immediately behind express passenger services.
IR hopes these measures will raise market share from the current 40% to 50% by 2010. As a start, Ms Banerjee resisted the usual hike in tariffs, confining the rise to 5% to cover higher fuel costs, while essential commodities escaped any increase. The budget forecasts tonnage to grow by 5á5% or 25 million tonnes in the current year on account of the buoyant economy; 23000 wagons will be ordered to cope with this extra traffic.
Safety spending has come to the fore in the wake of recent serious accidents and the Railway Safety Review Committee’s findings that expenditure of Rs150bn is required to replace obsolete equipment and introduce new technology in signalling and communications. S&T spending rises by 26% in 2000-01, allocated to provision of radio communication between train crew and controllers, mobile radios, track circuiting and axle counters, plus a step-up in the replacement rate of mechanical signalling. Rs3bn will fund the first stage of a five-year plan which will see more than 4000 unstaffed level crossings converted to staffed operation, with telephones to be provided at a further 1500 and interlockings at 1060. The programme will also see many of the busiest crossings replaced by bridges.
Long-term, the decision to adopt a radio-based automatic warning system based on ETCS Level 2 will necessitate commitment to substantial expenditure. Pre-qualification bids were sought in May for a pilot installation involving 40 locomotives on Central Railway’s 84km Delhi-Mathura Junction section. Technical support for this trial is being provided by UIC. Track circuit installation, running at 700 stations a year, should be completed at all 2062 stations on Category A, B and C routes by the end of 2002. All A and B routes will have colourlight signalling by 2004, and the majority of the loco fleet will be radio-equipped by 2005. Data loggers are being installed at the busiest locations as part of a move towards preventive maintenance of signalling and safety systems, rather than fire-fighting when failures occur.
Spending on new line construction rises to Rs8á2bn. This year the money is particularly aimed at bringing forward schemes announced in previous budgets but which have languished owing to planning difficulties. The seven newly-approved projects have already received full clearance; a further 25 are to be surveyed. Gauge conversion receives a boost, with an additional Rs1bn and three new schemes announced. A target of 300km has been set for track doubling during 2000-01, comprising 15 portions of route costed at Rs6á5bn, while funds for general track renewal rise by 37% to Rs20bn.
Electrification of 2300route-km was scheduled during the current plan period, of which almost 1500km had been energised by March 2000. A further 500km will be completed during 2000-01, the one new start being Eastern Railway’s Krishnanagar-Lalgola line. It has also been decided to convert to 25kV AC the obsolete 1á5kV DC network around Mumbai. Work will be carried out gradually to minimise disruption for the area’s six million daily commuters; altogether the scheme will cost Rs10bn.
On the highly-visible main line passenger side, some 20 new trains are to be introduced, along with increased frequency on a number of routes. Many trains will have more coaches to help ease overcrowding, and a further nine routes are to be turned over to EMU or DMU operation. Passenger amenities are to be improved by extension of the ’model station’ concept to all 150 Class A stations at a cost of Rs20m.
Other passenger developments include the first internet-based enquiry service, extension of telephone/web reservation systems, and trials with smart card ticketing. A further 80 stations are to be linked to the computerised reservation network.
The new focus on safety will see development of a medical facilities database so that emergency assistance can be provided more quickly. All long-distance trains will have better first aid equipment, and major stations may have medical teams on duty at busy times.
More funds are being allocated to accelerate construction of the Kolkata metro extension from Tollyganj to Garia, while electrification of the Circular Railway is to be extended from Tala to Principghat and a new link built to serve the airport.
The increasing value of tourism is recognised by establishment of Indian Railway Catering & Tourism Corp to sell value-added services to domestic and foreign tourists. Inspection saloons are to be made to earn their keep as private-hire carriages or by inclusion in luxury cruise trains, and another ’Palace on Wheels’ is to be created in conjunction with the government of Maharashtra state.
These measures alone will not be sufficient to restore IR’s competitive position or its financial health. Chairman Agarwal knows that a start must be made on raising second class fares to a level where they cover costs. On the really sensitive issue of commuter fares, he will seek contributions from state governments. Tough internal cost controls have already begun to bear fruit, but the high cost of salaries and pensions for 1á6 million staff-amounting to 56% of working expenditure- has yet to be tackled.
CAPTION: A new policy is being launched to revitalise IR’s freight business, where traffic has been falling because of high tariffs charged to cross-subsidise passenger services
CAPTION: IR’s Shatabdi and Rajdhani Express trains are very popular, but many other services are unprofitable; passenger trains account for 62% of all operations, but contribute only 28% of revenue
CAPTION: Private sector partnerships and air rights developments are envisaged to revitalise many of India’s major stations, with improved amenities scheduled for 150 Class A stations. Commercial developments include 100 new budget hotels and shopping centres
CAPTION: Rolling stock modernisation is set to continue, following the delivery of GT46MAC diesel locos from General Motors (below), electric WAP9 passenger and WAG7 freight locos from Adtranz (bottom) and new inter-city coaches from Alstom-LHB (RG 8.99 p515)