Mumbai/New Delhi: Presenting his fifth budget, railway minister Lalu Prasad promised to release a vision statement for 2025 soon. This is the first time that the railways has decided to think long-term, instead of relying on a bunch of ad hoc decisions. The promise to release the document in the next six months comes in the backdrop of several steps that the minister has taken over 2007 to set out a corporate strategy for the railways. In the budget for 2008-09, the minister has taken this process forward.
Axle load: To address the demand of the power sector for cost-effective coal supplies, Prasad announced that most of the new dedicated routes for coal movement will operate wagons with 25% more carrying capacity. (Photo: Rajeev Dabral/Mint)
With one of the largest networks in the world, the Indian Railways is attempting a makeover from being a pure-play passenger and freight transporter to include complete logistics services, taking competition from roads head on.
The railways is entering the door-to-door logistics business providing services such as modern cargo-handling facilities, warehousing and multimodal logistic parks, railway minister Prasad said, presenting the budget.
The railways currently moves around 35% of India’s total cargo, down from 65% in the 1950s. About 65% of the cargo now moves by road.
Prasad also opened up one more key area to private investments. Some of the country’s port-rail connectivity projects will now be taken up on a build-operate-transfer (BOT) route through open tenders, on a pilot basis, to boost movement of cargo by rail.
“This is being done to prevent time and cost overruns and facilitate real price discovery. The beneficiaries of the new line will have to give traffic guarantees to the railways,” Prasad said. Under the BOT format, the project will be financed, implemented and operated by a private firm for a certain period, typically spanning over 30 years.
The port-rail connectivity projects cleared for implementation include the Kurla-Wadala rail link for the Mumbai port, the Surat-Hazira port, Pen-Rewas port, the Dhamra port line, the Dighi port line, the Kirtaniya port line and the Attipattu-Puttur line linking the Ennore port.
Out of the railways’ total freight traffic of 790 million tonnes (mt) a year, around 25%, or 197mt, is generated from various ports.
The railways now plans to increase its share of cargo from ports to 300mt,?as?India’s external trade is set to increase from 650mt to 1,100mt by 2012. “The railways is therefore giving top priority to port rail connectivity projects,” Prasad said.
“Hinterland connectivity is key to evacuation of import cargo landing at ports and for moving export cargo to the ports,” said Dinesh Lall, executive director at Maersk India Pvt. Ltd, the Indian unit of the world’s biggest container shipping firm, Maersk Line.
The railways is also taking up capacity expansion projects to double cement loading to 200mt a year by 2012. India’s cement production is estimated to rise from 170mt to 280mt by 2012.
To meet its revised target, the rail budget proposed a new Bhanupali-Bilaspur-Beri line in Himachal Pradesh, where there could be a demand for cement loading. Besides, the railways has proposed to double the Daund-Gulbarga section and electrify the Pune-Guntakal line to meet the demand of cement manufacturers in the Wadi region.
To address the demand of the power sector for efficient and cost-effective coal supplies, Prasad announced that most of the new dedicated routes for coal movement will operate wagons with 25% more carrying capacity.
This is being achieved by operating wagons with a 25 tonne axle load, as opposed to the existing 20 tonne axle load.
Axle load is the maximum permissible weight on each pair of wheels in a wagon for any given section of track.
The railways has projected that it will move 338.35mt of coal this fiscal. In 2008-09, it projects that coal freight traffic will be 355mt—of this, around 252.65mt, or 71%, will be destined for power projects.
“Coal has relatively lower density which makes wagon loading to optimum levels difficult. This axle load increase will help the industry to ferry greater tonnage of coal,” said Dipesh Dipu, a manager with accounting firm PricewaterhouseCoopers.
India has a power generation capacity of 140,000MW and plans to add 78,577MW by 2012. The power sector has a coal requirement of around 350mt per annum at present.
“Of the new capacity except for 1,500MW, the entire coal linkage has been tied up. In order to transport this coal, the railways will have to increase their efficiency so that the power projects are adequately stocked with coal,” said a senior power ministry official, who asked not to be named.
“Increasing the axle load will help in reducing the transportation costs with the carrying capacity of the wagons increasing. However, the railways will have to increase the wagon availability for the power projects... Higher turnaround time...is also a concern,” said Y. Harish Chandra Prasad, chairman, Malaxmi Infra Ventures (India) Pvt. Ltd.
Prasad also announced the strengthening of the rail route infrastructure for coal supplies to power projects. For this, the government plans to spend Rs75,000 crore by 2016 to increase rail links by 20,000km to transport coal and iron ore.
In order to meet the demands of the power projects based in north India, the railways will also double the rail links on the Alwar-Rewari and Mughalsarai-Lucknow route.
The railways is also increasing the rail links on the Urkura-Bhatapara route and Bilaspur-Annupur route for higher and smoother traffic between the coal mining areas of Orissa’s Talcher and Ib Valley and Chhattisgarh’s Korba.
However, the power ministry is not convinced. “Unless the exclusive freight corridor comes in, initiatives such as these will not solve the coal linkage problem. The railways will also have to take care of the wagon problems as there is a limited number of wagons that are available for moving coal to the power projects,” said a power ministry official who did not wish to be identified.
To wean traffic away from the merry-go-round (MGR) systems developed by power project developers, the railways will offer the same facilities and charge a special lump sum rate of around Rs25 per tonne for loading two rakes of BOXN (a high-capacity wagon type) for a distance of 30km.
“Similarly, there will be special lump sum rates for different distances and different volumes of MGR traffic. To avail this facility, customers will have to provide track, OHE (overhead equipment) and terminals at both ends,” Prasad said in his budget speech.
Analysts do not agree and believe it is too smart by far.
Kuljit Singh, partner at audit and consulting firm Ernst and Young, said, “Power project developers will stick to their own MGR systems if they will have to lay their own tracks for the same. What railways is proposing is nothing but just to provide wagons.”
But what has got approval from analysts is Prasad’s approval of Rs5,000 crore for the second phase of the Mumbai Urban Transport Project.
“All efforts would be made to complete Phase II during the 11th Five-year Plan,” the minister said.
He also announced a pre-feasibility study for the introduction of a fully elevated service between Mumbai Central and Virar stations in suburban Mumbai. This, subject to financial viability, could be implemented with private sector participation, he said.
Mumbai’s suburban rail system carries an estimated 6.4 million passengers per day, with almost 4,700 passengers travelling in a nine-coach train in peak hours, against its rated carrying capacity of only 1,700.
The second phase will be jointly financed by the railways, the Maharashtra government and through multilateral assistance. The project had earlier run into a roadblock over funding.
Work on the first phase of the project, which envisages augmenting the suburban rail network in Mumbai, is expected to be completed by December 2009.
But analysts say the agencies involved had to ensure that suburban networks from different agencies do not run along the same alignments.
“The whole involvement of the railways in suburban areas is a good thing... But I am a bit concerned about the plan for an elevated track in Phase II... I believe that the Maharashtra government has plans for an underground network along a similar route, so they need to be careful where they are investing in,” said O.P. Agarwal, an urban transport planner and chief executive officer of Urban Mass Transit Co. Ltd, a joint venture between the urban development ministry and Infrastructure Leasing and Financial Services Ltd.
PTI contributed to this story.