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Will railways’ investment result in growth?

Will railways’ investment result in growth?
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First Published: Tue, Feb 27 2007. 12 45 AM IST
Updated: Tue, Feb 27 2007. 12 45 AM IST
Indian Railways (IR) have had a good year. The question is, how long can Lalu Prasad deliver such performance?
The growth story, thus far, has been built largely on utilization of slack in wagon loading and turnaround, with some revenue com-ing from tweaking freight rates. That slack is now largely gone.
Maintaining the current growth rates in freight, as reflected in the goal of 1,100 million tonnes in the next five years, will require finding the hidden capacity.
IR appear to believe “expansion of capacity on the 20,000km long high-density network” is possible through boosting its ability to carry more load and increasing line capacity by reducing distance between trains using automatic signalling, and investment in infrastructure to synchronize train speeds. This is to be complemented by adding more wagons and engines. But, will this be sufficient till the current investment in capacity expansion becomes available?
The answer depends on the pace of implementation, and there appears to be commendable emphasis on public-private partnerships (PPPs) as a mechanism to expedite execution. However, while a special PPP cell has been established, there seems to be limited recognition that PPP is not just a better procurement tool,but a new business model requiring new operating practices.
Moreover, it is unclear how far this approach extends. Even as IR emphasize core competence by offering service-level agreements to power plants to run their rail-based fuel transport systems (Merry-Go-Round System for coal) more efficiently, their temptation to continue investing in non-core manufacturing activities remains strong. Apart from a Rs1,300-crore electric locomotive plant in Laluji’s Madhepura, there is a proposed manufacturing complex in Dalmianagar, Bihar and a coach factory in joint venture with the Kerala government.
Other investments could also be questioned; for example, how many of the existing narrow-gauge lines should be closed down instead of converting them to broad-gauge? Similarly, while electrification may be sensible, given the outlook for oil prices and energy-security considerations, diesel is still the motive power of choice for railways worldwide, especially considering the restrictions imposed on multiple stacking by the height of overhead traction equipment. The jury is therefore still out on whether IR’s investments will bear the needed fruit.
Such cavils aside, there are many praiseworthy proposals, such as improving efficiency by using the Freight Operating Information System (FOIS) to reduce empty-running of wagons and making real-time communication possible between the ticket examiners’ hand-held devices and the passenger reservation system. They show a growing understanding of how information technology (IT) can be used to improve efficiency. If this appreciation of IT could be reflected in IR’s approach to suburban rail systems, they could become the core of a modern multi-modal, transferable-ticket urban transport system. The smart card scheme could be a trendsetter.
Similarly, the plan to exploit private-sector design capabilities in wagon making, an odd bedfellow of the decision to invest in manufacturing plants, indicates an increasingly commercial approach. The offer to prioritize investments in states that share the burden of investment is another such example.
IR’s moves to exploit their real-estate holdings at stations more effectively also appear promising, though one will have to wait for the detailed concession agreements before passing a final judgement.
The strategy of attracting a larger share of container traffic and other new traffic, such as car containers, will be enhanced by competition from the new private operators, since the reductions in freight tariffs are more likely to be passed on to the final users, unlike in the monopoly days of Concor.
Despite plans to strengthen and empower general managers and divisional railway managers, there is still limited pricing flexibility, and the effort to make pricing more commercial without jettisoning the existing strait-jacket structure is increasing the number of tariff classes, even as the number of freight categories is reduced.
Setting all this aside, Laluji’s credentials as a sapnon ka saudagar (dream merchant) are reinforced by his plan for 300kmph passenger corridors. Just think what urban India would be like if it took around an hour to travel from Delhi to Chandigarh, Jaipur or Gwalior; or for that matter, from Mumbai to Pune or Surat; from Chennai to Bangalore or Kolkata to Tatanagar. That would be a real game-changer and Railways could make it happen. In your dreams, did I hear you say?
(Partha Mukhopadhyay is with the Centre for Policy Research, New Delhi.
The views are personal.)
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First Published: Tue, Feb 27 2007. 12 45 AM IST
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