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Construction : Cover Story | July 2018 | Source : Infrastructure Today

Need For Speed

For the ambitious plan of overhauling one of the world’s biggest transporters of men and materials, both the government and private sector need to develop novel synergies.

I need 100,000 wagons in the next five years–100,000, I said it to all of you. What do I get? December–486 wagons! Pardon me for this, but I am saying this because I want you to gear up. December–486 wagons, January–534 wagons, February–455 wagons, of course, if you were a PSU, you would have told me it is 28 days working, not 31, so it justifies. March–452, even less than February!

These words were uttered not by some distraught private transport operator miffed with his suppliers, but by Piyush Goyal, Minister of Railways, Government of India at a recent industry event in New Delhi to the private suppliers of the public sector transporter. Goyal was expressing his alarm at the Railways facing a shortage of wagons due to suppliers being unable to meet the demand.

The minister’s anxiety is not unfounded. The Railways’ plan to bid out an additional 22,000 wagons is currently on hold because 18,000 wagons ordered previously are still to be delivered. In a way, this shortage also points to the rising demand for not just wagons but other equipment and technologies by the Indian Railways as its ambitious modernisation programme entered its fifth year. The country’s railway sector is expected to become the third largest globally by 2022. The upcoming Dedicated Freight Corridors (DFCs) will enable the Railways to carry 30 per cent more freight over the 3 million tonnes (MT) that it presently carries daily.

The Railways is targeting to increase its freight carriage to 3.3 billion tonnes by 2030. Moreover, to develop three new arms of the DFC, the federal government has plans to invest another Rs 3.3 trillion in the project. Wagon shortage also highlights the absence of an adequate number of private-sector players who can keep the Railways supplied with the volumes that it so desperately needs to keep its growth plans on track.

A review by the Ministry of Railways of the pending projects also threw up several surprises. Some of them were hanging fire for decades, with the most delayed being the 182-kilometre long Barwadih-Chirmiri corridor that was sanctioned way back in 1947! The projects pertain to new lines, gauge conversion, doubling of tracks, road safety, signalling and telecom. In an October 2016 report, financial intermediary PhilipCapital India had claimed that the worth of such projects stood at a staggering $65 billion. The Railways has since identified nearly 500 projects and appointed nodal officers for each one to ensure their timely completion.

“Flexibility to absorb new ideas and thought processes will help the Railways get the private sector on board. However, that consultation needs to happen not only at the regional level, but further down as well,” advises Jagannarayan Padmanabhan, Director & Practice Leader, Transport and Logistics, CRISIL Infrastructure Advisory, when asked about how private sector participation in the railways can be enhanced.

The Indian Railways is also looking at adopting the European Train Control Systems (ETCS) which will lead to a further expansion of its infrastructure. But again, as some industry insiders confided to INFRASTRUCTURE TODAY, the timelines presently suggested by the Railways are too tight for its effective rollout.

Meanwhile, in June, the IPO of RITES, an Indian Railways undertaking, was oversubscribed by several times. It is now reported that two more undertakings, the Indian Railway Finance Corp (IRFC) and Ircon International, will be coming out with their IPOs in a couple of months.

It is often pointed out that every rupee invested in ramping up the railway infrastructure benefits the economy six times over. Soon after the National Democratic Alliance (NDA) government came to power in May 2014, a committee was formed under Professor Bibek Debroy to restructure the Railway Board, the powerful body that oversees all technical and policy matters pertaining to the public-sector transporter. A majority of recommendations made by the senior economist at the New Delhi-based Centre of Policy Research was implemented. Two cross-functional directorates for non-tariff revenue and mobility, reporting directly to the Chairman of the Railway Board, were constituted. Powers were also delegated to general managers and divisional railway managers to expedite decision-making.

Consequently, the Indian Railways capacity expansion over the last four years is nearly two-and-a-half times higher than in the corresponding period, according to government data. The line commissioning is nearly 60 per cent and rake renewal about 50 per cent higher than in 2014. In fact, from the usual 200 plus km that were being added monthly on an average, the Railways was able to touch a new high of 640 km in January to end the fiscal 2017–18 with around 4,400 km of new track. Similarly, railway electrification increased from around 618 km in 2013–14 to 4,087 km in 2017–18.

A record amount of Rs 1.48 trillion was allocated for the Indian Railways in the Union Budget for the fiscal 2018–19. A substantial part of the capacity expansion is for capacity creation, including track doubling, third and fourth line works, gauge conversion, new rolling stock and redevelopment of 600 stations. The overhauling of stations also includes equipping them with Wi-Fi and CCTV cameras and escalators for stations with footfalls of over 25,000 passengers.

The budget has also provisioned for the expansion of Mumbai’s suburban rail system at a cost of Rs 100 billion. An additional suburban network worth Rs 400 billion comprising elevated corridors is also proposed for the country’s commercial centre. Similarly, in a first, 160 km of the suburban rail network is provisioned for Bengaluru at a cost of Rs 170 billion.

Other than the budgetary allocation, the Railways has also been looking at innovative ways of generating revenue. For instance, operator Konkan Railways Corporation (KRCL) is planning a logistics arm for point-to-point delivery of cargo. Talking to the magazine in his office in Belapur, Navi Mumbai, Sanjeev Gupta, Chairman & Managing Director, KRCL informs, “We are in touch with some Europe-based firms that are active in the area. We plan to have some kind of collaboration with them so that they can share their experience for us to replicate it here. We have already started the process of setting up a total logistics company.”

CRISIL’s Padmanabhan opines that the Railways equally needs to pay attention to substantially improving its non-fare box revenue with private sector participation. “World over, it is close to 40 per cent but in the case of Indian Railways, it is nowhere near that number,” he says. In this case, it typically hovers between 4–5 per cent.”

Speaking at the same industry event, referring to the attitude that prevailed in the past, Goyal observes, “We had huge technology issues. There was very little effort to truly engage with modern technology. Since we have 22,000 trains running on the system, it must be functional. So, let it be!”

Therefore, in a bid to recondition its engagement with technology, the Indian Railways has identified two sub-themes for introducing top-notch practices. One, it has proposed modernisation through adoption of digitalisation and cutting-edge technology. This is sought to be achieved by best in class technology interventions like Enterprise Resource Planning (ERP), wireless corridor, heavy haul trains, and high-speed trains. Two, there are policy interventions like private partnerships, a new R&D organisation, and overhaul of its existing R&D arm, the Research Design and Standards Organisation (RDSO).

The Railways is increasingly adopting technologies like “fog safe” and Train Protection And Warning System (TPWS) and seeks to eliminate 4,267 unmanned level crossings over the next two years.

However, Mangal Dev, Head of Hitachi Rail Systems Co., India & South Asia Region submits that unless the Railways ensures that all its systems are duly integrated to function optimally as one complete whole, it might lose out in terms of operational efficiency. “The Railways was mindful of this fact when it launched the development of Indian Railways One Information and Communication Technology (IR-OneICT) digital platform to examine this in detail. But we feel it needs to be given precedence again as it has moved down in priority over time,” he recommends.

The Railways has envisaged doubling of average speed of freight trains and increasing the average speed of all non-suburban passenger trains by 25 km per hour in the next five years under its Mission Raftar, which translates as mission speed from Hindi. The six principle routes identified for raising speed under Mission Raftar are located on the Golden Quadrilateral and diagonals, and are, Delhi–Mumbai, Delhi–Howrah, Howrah–Chennai, Chennai–Mumbai, Delhi–Chennai, and Howrah–Mumbai. These six routes carry 58 per cent of freight traffic and 52 per cent of passenger traffic, with a share of only 16 per cent of the network. They are also prioritised for replacement of short distance passenger trains with the Mainline Electric Multiple Unit (MEMU) or Diesel–Electric Multiple Unit (DEMU) trains to provide better pick-up and braking.

Similarly, six corridors on the Diamond Quadrilateral connecting metropolitan cities and growth centres of the country, namely, Delhi, Mumbai, Chennai and Kolkata, were earmarked for the feasibility study for high-speed rail connectivity. They include Delhi–Mumbai, Mumbai–Chennai, Chennai–Kolkata, Kolkata–Delhi, and the diagonals Delhi–Chennai and Mumbai–Kolkata.

But as high-speed projects are highly capital- and technology-intensive, their approval is subject to their technical feasibility, financial viability and resource availability. Presently, the Mumbai–Ahmedabad rail corridor is the only sanctioned high-speed rail project in the country and is being implemented with technical and financial assistance from Japan. The estimated cost of the project is Rs 1.8 trillion. The Japanese government has agreed to provide a soft loan of 81 per cent of the total project cost with 0.1 per cent rate of interest per annum.

The time period for repayment of the loan is 50 years with 15 years grace period.“But just putting one corridor may not be enough as that will not be able to deliver the same benefits of high-speed rail that we see in Japan or in Europe. Multiple high-speed corridors that are well-integrated with the airport, metro rail, road and maritime transport systems of a city are required,” says Hitachi’s Dev. “The areas around railway stations in a high-corridor could be developed into self-sustaining smart cities that could serve as commercial, educational, or recreational hubs,” he adds citing similar developments elsewhere.

HSR Corridor
Despite political opposition continues for the bullet train project from states like Maharashtra and Gujarat, Union Railways Minister Piyush Goyal remains optimistic and does not see “any stress” in getting the land for the ambitious High Speed Rail (HSR) project, primarily on the increased compensation that the government is offering. A source from the government echoed his view and said that Japan, which is giving soft loans for the project, is increasing its funding for the project to $5 billion per year from the earlier commitment of $3 billion.

“The environmental and social impact studies either have been completed or are near completion. I personally don’t see any stress in getting the land (for the project),” Goyal told media representatives on the sidelines of AIIB 3rd Annual General Meeting.

He said the Government is not facing any resistance on land acquisition for infrastructure projects ever since it increased the compensation to four times of the value, and added that in the case of the Mumbai-Ahmedabad bullet train project, the same has been upped to five times if it is through consent.

Goyal said on the Mumbai-Ahmedabad metro, he has had detailed discussions with the Chief Ministers of both Maharashtra and Gujarat in order to expedite the project. He drew comparisons with the Beijing-Shanghai high speed connectivity project, and said that India also aspires to develop the Mumbai-Ahmedabad stretch into a high growth zone just like the stretch between the two Chinese cities.

Furthermore, he has had discussions with the Asian Infrastructure Investment Bank (AIIB) top brass as well on the country’s HSR ambitions and added that the multilateral institution has evinced interest in financing some of the projects in the future.

The minister also said that there will be more HSR corridors apart from the Mumbai-Ahmedabad stretch which will be floated by the government in the future.

President Jing of AIIB expressed a lot of interest in taking up the next level of HSR corridor projects that India would envisage going forward. GQ and its laterals also discussed, where we have demand for high speed connectivity and AIIB would possibly be on the horizon.

The government also approved the proposal of the Railways for redevelopment of a select category of stations by inviting open bids from interested parties for providing amenities and other requirements for the Railways, including permitting commercial development of real estate.

A dedicated special purpose vehicle (SPV), the Indian Railway Stations Development Corporation (IRSDCL) is overseeing the programme. In July 2016, the IRSDCL inked an agreement with a consortium of Bansal Construction Works and Prakash Asphalting and Toll Highways for modernisation of the Habibganj railway station in the central Indian state of Madhya Pradesh. The cost of redeveloping the station is Rs 1 billion and the estimated cost of commercial developments is Rs 3.5 billion. Habibganj is one of the eight stations identified by the Railways for redevelopment and modernisation under the public, private partnership (PPP) mode. The others are Chandigarh, Pune, Mohali, and two stations each in Delhi and Gujarat.

The extension of the lease period on railway land from 45 years to 99 years was widely welcomed by potential developers. “The longer the period, the lesser is the risk for a developer. The Railway Board has allowed multiple sub-leases of the built-up area. It has allowed residential development. If it is only a single type of development, then the risk is more. But if it is a mixed-use development, the mix is left to the developer as per the market demand,” declares Sanjeev Kumar Lohia, Managing Director & CEO, IRSDCL.

Moreover, the move by the Ministry of Finance to include station redevelopment along with commercial development under the category of infrastructure projects will help developers in arranging finance at lower interest rates from lenders.

According to Rajeev Mehrotra, Chairman and Managing Director, RITES, station redevelopment offers tremendous opportunities for developers. “They are (IRSDCL) targeting redevelopment of about 600 stations,” he says.

In the last few years, the operating ratio of Railways has been under stress due to fall in internal revenue and an increased expenditure on salaries and pensions. Padmanabhan thinks that the public-sector transporter can easily balance its social obligation with good economics by utilising the Unique Identification Authority of India (UIDAI) database to determine the truly deserving beneficiaries for subsidised travel. “Maybe 30 per cent of the passengers do not need the subsidy and the rest 70 per cent does; but that 30 per cent would add significantly to the profitability of the Railways. The social obligation can be tracked very well through individual need-based pricing, rather than a mass class of travel-based pricing,” he asserts.

In order to be the transporter of choice for a new India, the Railways will need to seriously weigh such options.

- Manish Pant

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