Is the business model of the Indian Railways broken? Is corrective action, even where it is being taken, too little and coming in too late?
July has been a particularly cruel month. There was a scathing report by the Comptroller and Auditor General of India (CAG) on the quality of food served to passengers. As if to validate this, media splashed reports thereafter of a dead lizard being found in the veg biriyani served to a passenger. The CAG also found the blankets supplied to passengers in AC compartments were filthy and the Railways were levying a surcharge for journey on “superfast” trains when these often ran late.
Negative as all this is, what should really worry the Railways is the finding of an internal study that after losing passengers on short haul to bus services and long haul to air services, their share of medium-haul intercity passenger traffic is also under threat.
The number of air passengers has been growing in double digits in the last five years. During financial 2016, the number of air passengers grew by 15 per cent, whereas the number of passengers in the four rail upper classes actually declined.
What is most disturbing is the inadequacy of the administrative culture or governance. When the passenger who was served the biriyani with the lizard complained to the railway staff on board he did not get a proper response. Then when he tweeted the railway minister, several senior railways staff were waiting for him at the next big station to shower all possible attention.
If this is the state of the passenger business, which is in any case loss making, how is the real revenue earner, freight traffic, faring? If anything, worse. Last year, for the first time the Railways not only missed their freight carrying target, total tonnage carried actually went down, compared to the previous year.
The weakness of the Railways’ freight business is its over reliance on bulk commodities. At a time of industrial slowdown, shipment of bulk commodities will be sluggish. The Railways is particularly vulnerable because around half of the freight traffic comes from carrying coal and India has stopped conceiving new coal-fired power projects to addresses global warming concerns over burning of fossil fuels.
There is no long-term future in carrying coal. Railway minister Suresh Prabhu is mindful of this and said the Railways is focusing on things such as white goods and cars. Additionally, it is actually trying to do a selling job.
“We are going to the customers. We have customer managers for our key clients. We are signing long-term contracts and offering discounts to clients,” said Prabhu. Further, smaller cargoes have to be targeted and door to door delivery, maybe by tying up with logistics companies, undertaken.
Must change trackThe Railways hope for a turnaround pivots on a key factor — the dedicated freight corridors. These will simultaneously address both the needs of freight and passenger traffic. The freight corridors will greatly speed up the movement of freight traffic, challenging the competitiveness of road haulage.
Also, with freight trains being taken off, today’s main traffic arteries will get unclogged and allow long-distance passenger trains in particular to travel much faster. But till now only two have been sanctioned (eastern and western), four are planned (east-west, north-south, east coast and south-west) and one (Chennai-Goa) proposed. Only the first two are under construction and about a third of the total stretch will be ready by election year 2019. But the internal study says, by 2019-20, airlines will carry more passengers than upper class rail travel!
The dedicated freight corridors represent moving in the right direction in terms of seeking the right kind of business and therefore ensuring future revenue flows. But what about costs?
The narrative so far has been that political considerations have prevented timely raising of passenger fares, resulting in a loss in the passenger services which has had to be made up by raising freight rates.
The loss on passengers is seen as part of the social service obligations of the Railways. A regulator has been created to recommend fare rises and thus take the politics out of pricing decisions.
A study led by Bibek Debroy of NITI Aayog points out that exclusive focus on social service obligations ignores issues such as “inefficiencies in cost structures, impact of competition”. “In a competitive market where demand for transport is elastic, IR will have a limitation increasing fares.” The Railways will swim or sink depending on how well they can control costs and survive in a competitive market.
Food for thoughtA glimpse into how the Railways react can be had from their most recent reactions. To address the issue of poor quality food, they are making food optional so passengers can bring their own food and get a discount. On blankets, a pilot has been launched to raise minimum temperatures under air conditioning and stop supplying blankets.
There are also reports that the National Institute of Fashion Technology will design light blankets which can be cleaned easily but the immediate reaction is to downgrade the product.
An appropriate reaction would have been to improve the product and thus offer greater value for money. Railway stations are mostly right in the heart of a city. A comfortable night journey with a wholesome dinner (hence no need to carry food) will enable a business traveller to save on both a hotel night and airport-city transfer.
What is needed is to be able to use a clean bathroom (say at the nearby Rail Yatri Nivas) so that you can be at your first appointment in the morning rested and freshened.
Then, after a full day’s work you take a similar night train back. Such a product will be able to snatch back from airlines some long distance travellers who are happy to avoid getting up at an unearthly hour to catch an early morning flight.
The writer is a senior journalist