New Initiatives: IR to address issues in freight and passenger segments

IR to address issues in freight and passenger segments

The railway sector holds a vital position in India’s transport infrastructure. Unfortunately, the sector has been beset by several challenges, which have led to a decline in its modal share from almost 89 per cent in 1950-51 to around 30 per cent in recent years.

Network congestion and chronic underinvestment have plagued the sector. Total track km grew by 27 per cent between 1950-51 and 2014-15. During the same period, passenger km and freight carried increased by almost 1,642 per cent and 1,344 per cent respectively, while the capacity of coaches and total carrying capacity of wagons increased by only 475 per cent and 246 per cent respectively. Of the 212 sections on the high density network, 141 sections exceeded 100 per cent line capacity utilisation.

Congestion on Indian Railways’ (IR) network has also led to the inability to increase the number of trains, especially freight, to enhance revenues. Moreover, factors like the reduction in diesel prices and heavy investments made by the National Highways Authority of India in road development have led to a modal shift from rail to roads. The demand for railway transport, being a derived demand, has also been severely affected due to the tepid growth in core sectors. The global recession and the downward trend in imports and exports (nearly 18-25 per cent) over the past one and a half years have further affected IR’s performance. In addition, revenues generated by the freight segment are used for cross-subsidising the Rs 330 billion loss generated by the passenger segment, resulting in reduced profits for IR.

Key initiatives

Recently, a number of initiatives have been taken to revive the railway sector. For the period 2015-19, a total investment of over Rs 8 trillion has been planned towards addressing network congestion, developing stations and logistic parks, and undertaking safety and high speed projects. IR’s total plan size has also increased from Rs 587 billion in 2014-15 to Rs 1 trillion in 2015-16 and Rs 1.21 trillion in 2016-17.

Long-term investment plans pertain to procuring high-axle wagons and high horsepower locomotives, doubling of lines, expanding terminals and developing new port connectivity projects. In addition to the two dedicated freight corridor (DFC) projects, feasibility studies for four additional DFCs are currently under way.

In the short term, tariff rationalisation and policy reforms for demand stimulation, freight-based expansion and development of new delivery models will be key areas of focus. A number of policy reforms have already been initiated to promote the ease of doing business. Several initiatives have been introduced in the freight and passenger segments.

Freight segment

  • Liberalised private freight terminals policy;
  • New delivery models and digital initiatives;
  • Timetabled freight services;
  • Discontinuing port congestion charge and season surcharge;
  • Policy guidelines on the merry-go-round system and coastal shipping of iron ore;
  • Extension of automatic freight rebate scheme;
  • Opening of rail auto hubs;
  • Elimination of dual freight policy for iron ore;
  • Expansion of commodity basket to include 43 more commodities for containers at freight-all-kind rate;
  • Rationalisation of the wagon investment schemes and the parcel sector;
  • Launch of rationalised siding policy;
  • Decentralisation of powers to determine freight rates to zonal railways;
  • Liberalising the policy for empty flow concessions.

Passenger segment

  • Launch of 111 pairs of new trains between 2014-16 along with the announcement of new trains, namely, Tejas Express, Humsafar Express, Antyodaya Express and the Utkrisht Double Decker Air Conditioned Yatri (UDAY) Express in Budget 2016;
  • Faster trains and passenger insurance;
  • Hand-held terminals  for unreserved tickets;
  • New on-board facilities to enhance customer experience;
  • Enhanced capacity of new-generation e-ticketing, along with ease of ticket booking and cancellation;
  • Ticket vending machines at 246 stations;
  • Improved amenities (catering, restrooms, Wi-Fi at stations, etc.);

Improving customer engagement through integrated social media platforms and interactive voice response system.

Going forward, IR aims to increase its earnings through greater emphasis on the parcel business and non-fare-box revenue areas like advertisements, land leasing, catering, etc. A new cross-functional non-fare revenue directorate has already been set up under the Railway Board. The directorate’s target is to increase non-fare revenues from 5 per cent in 2015-16 to about 10 per cent in 2016-17 and further to 25 per cent in the next three years, to be at par with international levels.

Overall, given the capacity constraints of the railway sector in India, investments in infrastructure will be key in reducing this pressure. Recent IR initiatives, both in the passenger as well as freight segments, are expected to go a long way in improving revenue growth in the sector.

Based on a presentation by Mohd. Jamshed,  Member, Traffic, Railway Board, at a recent India Infrastructure conference