Railways could turn the corner with infra push

Raghu Dayal | Updated on September 17, 2021

The National Rail Plan and other marquee projects can have a transformative effect

Amidst the Covid-triggered gloom that has permeated the country, the Indian Railways has shown resilience and optimism. It recorded highest ever annual freight loading of 1,233 million tonnes (mt) in 2020-21, exceeding the preceding year’s 1,210 mt. It has maintained the momentum in FY22 as well, despite the crippling restrictions and lockdowns.

Though around one lakh of railway staff and their families were struck by the rampaging virus, all ranks of frontline railwaymen demonstrated 24x7 readiness when called to deliver, winning yet again the nation’s trust. Recall how they speedily improvised all equipment and infrastructure to operate the Oxygen Expresses, delivering more than 30,000 tonnes of liquid medical oxygen, the veritable elixir for patients battling for life in hospitals.

What could signify an inflexion point for the Railways to leap ahead, despite its current dwindling modal share and weakening finances, are two significant developments: One, an ambitious 30-year (2021-2051), ₹38-lakh crore National Rail Plan that Ministry of Railways unveiled amidst the pandemic. And, two, the major milestone of fitting the last piece of metal on the 467-metre central arch span over the Chenab river gorge at a height of 359 metre that would make it the world’s tallest rail bridge. This is part of the much-delayed national Kashmir Rail project, which is to be completed soon.

Hailing the National Rail Plan, Finance Minister Nirmala Sitharaman said in her Budget speech that it would create a ‘future ready’ railway system by 2030. Keeping the year 2050 as the horizon, the NRP charts out a strategic grid for the Railways to follow for the short term (up to 2024) and the medium term (up to 2031). Simultaneously, it lays out a vision to traverse a long-term journey to be able to gain leadership role in India’s logistics industry by 2051.

NRP’s main milestone is to increase the Railways’ modal share, from the current around 26 per cent originating tonnage to 45 per cent by 2030. The NRP projects the Railways to lift 3,167 mt by 2031, from the 1,208 mt it lifted in 2019-20, implying its freight volumes to grow at a CAGR of over 9 per cent. Similarly, moving up to 12,164 million rail journeys in 2030-31, from actual of 8,109 million in 2019-20, would mean a CAGR of around 4 per cent.

To gauge the challenges for achieving these growth rates, let us juxtapose the Railways’ actual performance in normal times, before the disruption caused by the pandemic: the Railways’ freight traffic increased just by an average of 1.65 per cent a year, from 1,095 million tonnes in 2014-15 to 1,208 mt in 2019-20; and passenger rider-ship fell by an average of 1.28 per cent from 8,224 million to 8,086 million over that six- year period.

In the passenger sector, the NRP envisages all major cities in the north, west and south to be connected by high speed rail (HSR). Involving an outlay of ₹15-lakh crore, it proposes a 7,449 km HSR network.

The NRP assumes the increase in freight output to be predicated on (i) substantial reduction in transit time by gradually increasing average speed of freight trains from 22-24 km/h to 50 km/h, and (ii) lowering overall cost of transportation by gradual tariff reduction of 30 per cent, in addition to construction of identified three additional dedicated freight corridors (DFCs). These are: (i) the 2,328 km East-West DFC (cost: ₹1,61,000 crore) between Kolkata and Mumbai; (ii) the 2,327 km North-South DFC (₹1,67,100 crore) from Delhi to Arakkonam; and (iii) the 1,114 km East Coast DFC (₹74,800 crore) from Kharagpur to Vijayawada.

The Plan envisages substantial investment of ₹16.74-lakh crore over the years 2022-2031 for developing infrastructure and acquiring mobile assets, and an additional ₹21.48-lakh crore in the next 20 years, up to 2051. A cumulative outlay for the entire Plan period 2021-51 is estimated at ₹38,20,516 crore.

High expectations

Clearly, some benchmarks and expectations in the document appear unrealistic: for example, the avowed aim to wrest 45 per cent of the country’s freight market by 2030 (from the current 26 per cent) is predicated on its carrying capacity getting ahead of demand. Further, the NRP makes a bold statement that post-2030, the revenue surplus generated by the Railways would be adequate to finance future capital investment as well as provide for the burden of debt-service ratio of the capital already invested.

To cope with the formidable challenges it encounters, the Railways needs to transform its entrenched operational and commercial practices. Even the projected level of investment will not by itself yield the estimated, and desired, additional modal share in freight and passenger businesses. Looking to a post-coronavirus ‘new normal’, the Railwys has much to do if it is to achieve the ambitious objectives set out in the NRP.

It needs to start addressing its productivity and efficiency indices, with a view to maximising resource utilisation and improving average system velocity. For enhancing its modal share, the Railways will need to cater to freight transport demand of other commodities (non-conventional as well as conventional high-value) through appropriate interventions, strategies, and product offerings.

A single window, end-to-end solution has increasingly become the norm for logistics services demanded by customers. The Railways can partner with logistics service providers to leverage their superior market access and flexible parcel sizes through consolidation services, and thereby letting the Railways re-focus its attention from a supply-determined to a demand-driven organisation.

The writer is a former Managing Director, Container Corporation of India

Published on September 17, 2021

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