Financial Daily from THE HINDU group of publications
Monday, Jun 06, 2005
Railways: Raking in better times
Ashutosh Kumar Banerji
For the third year in a row, the Indian Railways has achieved significant improvement in loading of freight traffic and, thus, posted good growth in terms of efficiency indicators such as wagon turnaround, terminal detentions and operating ratio (80.8 per cent). The decline in share of the Railways in the transport mix too has been arrested to a certain extent.
There are strong indications that traffic offerings in future will be even higher. It was, therefore, hoped that the Railways Minister, while presenting the Budget for 2005-06, would put in place such projects and investments that would help the Railways fulfill the future needs.
However, that did not happen. But, then, piecemeal measures such as the construction of some new lines, doubling third-line construction in some other places, gauge conversion and electrification are not, strictly speaking, going to be of much help to achieve the objective of accelerated expansion of system capacity, improving financial liability and addressing safety issues.
The temptation of distributing the investments thinly over a plethora of unconnected projects must be given up. A case in point is the Integrated Railway Modernisation Plan, which has put together certain motley projects.
The Railway Safety Plan has also no focus and reflects the wishlist of the various departments that constitute the Railways, rather than aiming at fulfilling the corporate objective of ensuring safety in operation. All these documents and investment plans need to be scrapped, and a fresh set of projects, aimed at expanding system capacity, improving quality of service and, above all, reducing transportation cost and addressing safety concerns, identified.
Yet, the Rail Budget has a few welcome signals. There is a grudging acceptance of the urgent need for expanding system capacity to fulfill the even higher levels of transport demands that are expected to be placed upon the Railways in the coming days. Mention of port connectivity, operation of double stack containers, construction of dedicated container and freight corridors are reflections of this realisation.
The present approach of providing the entire matrix of services covering heavy haul freight, passenger, container and commuter services through a common amorphous infrastructure needs to be abandoned in favour of progressive separation of corridors, as the technical and operating requirements are totally different. The separation of the freight and passenger corridors would also take care of the safety concerns of the Railways in a decisive manner.
These projects, however, need to be carefully formulated so that the funds allocated are not frittered away in developing slipshod additions to the existing infrastructure. For instance, the freight corridor needs to be built, wherever possible, away from the existing alignment conforming to liberalised moving dimensions, so that it is capable of permitting wagons of higher cubic content and axle loads.
Similarly, the container corridor should have adequate clearances all round to permit operation of double stack containers up to 56 ft. length or six 20 ft. containers in two stacks.
Care also needs to be exercised to ensure that these corridors do not get` cluttered with passenger trains in course of time. Alignments that directly connect points of traffic generation with those of consumption bypassing urban conglomerates, would take care of this menace.
The selection of alignment for the dedicated freight and container corridor, along with the technical specifications of construction, should be handled by an expert body with representation from the Railways, industry and the ports, preferably under the aegis of the Planning Commission. A master plan should be prepared and focussed investments in these areas need to be undertaken. Till this approach is adopted, the promises made in the Budget would remain largely unfulfilled.
The Wagon Investment Scheme, aimed at securing investment in procurement of wagons by stakeholders in the private and the public sectors, is another bright initiative. The merit of the scheme, which came into force from April 2005, is its simplicity and transparency. It is a refreshing departure from the earlier Own Your Own Wagon Scheme that was launched with a lot of fanfare only to fizzle out subsequently.
Instead of the old concept of paying lease charges to the investors under the Own Your Wagon Scheme, the present scheme focusses on assured supply of a guaranteed number of rakes every month, based on the number of rakes procured along with building in freight concessions. The scheme also provides for supply of bonus rakes at normal tariff, which gets enhanced for customers, who opt for the Engine On Load System.
To begin with, two types of wagons covered (BCNA) and open (BOXN) have been included under the scheme. In both cases, 10 per cent freight rebate will be admissible lasting for 15 years in case of BCNA wagons, and 10 years for the BOXN type. The customers would be eligible for guaranteed supply of four rakes per month for the BCNA, and six rakes per month for the BOXN.
The scheme provides for additional guaranteed number of rakes without freight rebate or penalty to the extent of two rakes per month for normal free time, and four rakes per month for the customer who opts for the Engine on Load System.
After a long time, the Railway Ministry has come out with a scheme, which is based on the proper perceptions of the needs of the customers and the stakeholders. The simplicity of the scheme makes it a sure winner. The jury is still out to decide whether the Railway Ministry will be able to meet the commitment of guaranteed supplies that is one of the chief merits of the scheme. Be that as it may, it is a step in the right direction for meeting the transport demands that will be placed upon the Railways for meeting the GDP growth targets.
Simplification of goods tariff, incentives for construction of new sidings and replacement of the draconian and archaic commercial procedures by customer-friendly systems, are welcome measures awaiting early implementation. Finally, populism and dispensing of political favours are facts of life.
The only way out perhaps is to distance the financial decisions of the Railways from the political leadership. Appropriate structural and institutional changes can only provide effective protection. Whether that is possible in reality is, of course, another matter.
(The author is a former General Manager, Central Railways.)
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