Aiming to transform the railway sector, the Ministry of Railways (MoR) has taken several steps towards the ease of doing business and to revive its position as the preferred mode of transportation in the country. Under the Make in India initiative, abundant opportunities have been opened up to manufacturers as well as investors. Further, the announcement of 100 per cent foreign direct investment (FDI) in the sector has given it an impetus with around 17 key areas identified for foreign investment. However, investor uncertainty regarding the lack of stability in rules and policies has been a major deterrent in attracting investments. That said, the sector has made significant headway in indigenising technologies and equipment and reducing reliance on foreign original equipment manufacturers (OEMs).
Key initiatives
Indian Railways (IR) has initiated several indigenisation initiatives. To promote the domestic manufacturing of safety and signalling equipment, all imported instruments approved so far by the Research Designs and Standards Organisation (RDSO) under the Cross Approval Policy have been planned for indigenisation as mandated in the policy. Modern signalling equipment like electronic interlocking and digital axle counters of foreign OEMs has already been indigenised.
Bio-toilets that are being installed across all IR coaches are based on an indigenous design developed in association with the Defence Research and Development Organisation. As of October 2016, around 48,000 bio-toilets have been installed and IR is targeting to fit bio-toilets in its entire fleet by 2021-22.
Besides, the RDSO (IR’s sole research and development organisation) has been spearheading the development of indigenous technologies. Some examples include the development of train collision avoidance systems; advanced auxiliary warning systems; a pilot assistance system for safety; satellite-based accident site communication systems, etc.
IR has also made considerable progress on rolling stock development. The first semi-high-speed train, the Gatimaan Express, was built at the Railway Coach Factory (RCF) at Kapurthala in Punjab, under the Make in India initiative, at a cost of around Rs 500 million. IR is also producing a 200 kmph fit rake domestically, based on the Linke Hofmann Busch technology, at the RCF, Kapurthala, which is expected to be commissioned soon. A high speed diesel multiple unit rake capable of running at 160 kmph (with a potential of up to 200 kmph) is currently under design and manufacturing at the ICF, Chennai.
Further, IR has signed an agreement for setting up the Diesel Locomotive Factory at Marhowrah in Bihar, for the procurement and maintenance of mainline most modern high power diesel electric locomotives with GE Diesel Locomotive Private Limited. An agreement has also been signed with Alstom for the setting up of an electric locomotive factory at Madhepura in Bihar, for the procurement and maintenance of most modern high power electric locomotives. These projects together will be one of the highest FDI in the country, amounting to an order book of almost Rs 400 billion.
Ease of doing business
With the aim of regaining the lost modal share of the railways, major policy reforms and initiatives have been undertaken to support the ease of doing business in the sector. This initiative also aims to attract FDI in the railways.
The MoR has initiated reforms such as the introduction of a liberalised private freight terminals policy; the abolition of the Dual Tariff Policy on Iron Ore; the withdrawal of the port congestion surcharge; tariff rationalisation of the merry-go-round system; the introduction of two/multi-point loading in covered rakes which will be distance based instead of station based; short distance concessions; automatic freight rebate on empty flow direction; liberalised station-to-station rate policy; the introduction of the Freight Incentive Scheme for loading bagged consignments in open and flat wagons; etc.
With the launch of the Make in India initiative as well as the eased FDI policy for the railways sector, several projects have been identified for development. Together, these projects entail an investment of Rs 232.87 billion.
The way forward
The Make in India initiative has brought abundant opportunities to both manufacturers and investors. Recent contracts to GE and Alstom have been dubbed big-ticket projects under this initiative, with an investment of over Rs 400 billion expected in these projects. Bhopal’s coach rehabilitation workshop in Nishatpura has also rolled out the first model of the Make in India luxury coach. However, there was a recent setback for the MoR when there was no taker for its Rs 25 billion train-set project which was in the bidding stage last year (2016). The possible reason for this could be the fear of instability in rules and policies as IR is both the sector regulator and an operator. Nevertheless, besides rolling stock, signalling and telecommunications, high speed corridors, and maintenance are possible areas of opportunity for both manufacturers and investors going forward.
