Natural gas may emerge as a potential fuel (for locomotives) — to augment diesel fuel usage, if not replace it.

As the Indian Railways embarks on the Rs 95,000-crore dedicated rail freight corridor project to carry heavy loads with 25 tonne an axle, it is also preparing its feeder lines to handle heavy trains. In this context, Business Line caught up with Semih Kalay, Vice-Chairman, International Heavy Haul Association , who was recently visiting India to catch up with the global trends in the sector. The Association is a body of global railways engaged in world’s heavy-haul rail operations and its members comprise stakeholders from Australia, Brazil, Canada, China, India, Russia, South Africa and the US. Edited excerpts:

What are the business prospects of heavy-haul railroads globally?

Future prospects of railroads are good. We will see the railroads grow across countries — the US railroads are expected to grow by 40 per cent by 2040, 30 per cent in Europe. Australia is expected to see good business from iron ore mining, driven partly by the Chinese moving iron ore to increase their steel production. Other countries where the railroads are expected to see good growth would be Brazil and South Africa.

Can you share some trends where railroads had to find new business, as traditional cargo disappeared?

One trend in the West was that of the coal business (which has been a traditional mainstay for railways) going down, as there is a larger shift to natural gas. But even shift to natural has led to a surge in transportation of frack oil. (Fracking is a process through which oil is extracted from large deposits of shale gas, by flooding those deposits with water.) The only thing that is stymieing the growth of such oil transportation is unavailability of tanker cars or wagons.

Moreover, in the US, domestic coal consumption may be going down, but there is also an increase in coal exports. So, even as traditional cargoes dip, railroads have been flexible enough to find new avenues of business. As populations in the West increase, the highways are bound to get into gridlock and movement will have to shift to railroads. US railroads are making a lot of capital investments in the infrastructure to increase capacity of the network.

How are railroads being flexible?

The railroads are being innovative. For instance, as the natural gas usage grows — a commodity which is actually hitting the coal traffic — railroads are looking to use natural gas in their locomotives. They go after what they find cost effective. At one time, North American railroads were on the verge of bankruptcy. After the Staggers Act in 1980, they were economically deregulated, and productivity increased, investments increased, volumes went up, the railway rates came down.

Any data on the kinds of fuel used to move freight locomotives globally?

Most of the US railways, Western Australia, Brazil use diesel locomotives for heavy haul. Sweden and South Africa use electrification. Now, electrification is desirable in the US, but who is going to pay for the electrification of over 150,000 miles of track? So, electrification is not cost effective till the Government or some other entity pays for the electrification of tracks.

What would be the new sources of fuel for powering locos?

Natural gas may emerge as a potential fuel — to augment diesel fuel usage, if not replace it. Suppliers are working with the railroads in the US today on this issue. In Brazil, railroads use biofuel products, sourced from sugarcane. They are blending (high-speed diesel) up to even 50 per cent levels. The problem is many manufacturers do not provide warranty for locomotives using blended fuel, as they feel biofuel corrodes some parts of the locomotive.

Any instances of the organisational structure of heavy-haul railroads that prevail globally?

In the US, heavy-haul railroads are privately owned and publicly traded. The railroads own infrastructure and equipment, although 50 per cent of wagons are owned by shippers and leasers. The broad trend is towards privatisation. Even the Chinese Railways is encouraging privatised or semi-privatised heavy-haul movement. In European countries, the Government owns infrastructure and operations are handled by private firms. Transnet in South Africa is a private company. In India, perhaps that is not the case yet. But you may have to start thinking about it.

What kind of private investors do you expect?

Well, one of the most interesting trends is Warren Buffet investing in railroads — Burlington Northern Santa Fe. An individual investing in a railroad is a big thing! So, private investors are expecting tremendous growth in this business, which is why they are investing.

Tell us about the Heavy Haul Association.

IHHA looks to capture best practices in heavy-haul railroading. We are a not-for-profit organisation, we captures experiences that can help countries looking to increase axle loads. We also provide funding for students to come those conferences so they can specialise and find employment in the sector.

What is happening on inter-country railway movement, given that that could boost the overall business?

We do see the European Union driving interoperability, although they do complain that border regulations hamper the movement. In the US — where railroads are owned by different private companies and have different systems — we see flawless interchanges, driven by American Association of Railroads. In the Nordic, we see that happen between Sweden, Norway, and to a certain extent Finland.

India has a mixed-traffic railway system. What is happening in the US where freight railway firms are resisting the Government move to allow passenger trains on their system?

It is a win-win situation for railroads. But the costs and benefits have to be shared. Freight railroads are not designed for speeds higher than 90-100 miles per hour. If somebody wants to run trains at 125 miles an hour, they have to pay for the infrastructure upgrade. Moreover, railroads are already facing capacity crunch. They would not want to allow some other operations creating major problems. Moreover, somebody will have to pay for the liabilities of passenger services.

There is only one line where passenger services are connecting Chicago, but for that Government provided TIGER (Transportation Investments Generating Economic Recovery programme) funds for improving the infrastructure.

(This article was published on February 17, 2013)
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