Next Steps: Rolling stock needs and requirements of the urban rail sector

Rolling stock needs and requirements of the urban rail sector

The demand for rolling stock is expected to increase at a rapid pace over the next few years. This can be attributed to the expanding metro rail network and the development of new modes of rapid transit systems in the country. India currently adds about 100 km to its metro rail network every year. This is planned to be increased to 150 km in the coming years, which, in turn, will generate a demand for the procurement of 500-600 metro cars. This will be supplemented by the development of metro systems in Tier II and Tier III cities. Further, to ensure last-mile connectivity, the development of light rail transit (LRT) systems is considered essential, and this will also increase the demand for rolling stock. Thus, the total rail rolling stock requirement over the next few years is estimated to be 1,000-1,500 cars per year.

State governments are taking various steps to assist developers in completing their projects on time. A project is usually expected to be completed within five years of obtaining all clearances. Developers need to ensure better interface between rolling stock and signaling systems due to increased interface between the two components.

Key issues and challenges

At present, rolling stock suppliers face several challenges. Many manufacturers have established manufacturing units in the country and want to strongly support the Make in India initiative. However, during the financing phase, financiers place restrictions on the design and supply of rolling stock. This restricts the manufacturer’s capacity and capability to provide

suitable rolling stock. At times, the financier mandates that operators procure the rolling stock from companies based in their home country. Moreover, the goods and service tax (GST) structure is hitting manufacturers hard. While several manufacturers have set up factories in India, they are unable to compete with the rolling stock imported from abroad because of the incentives given to the importing companies.

A major challenge for rolling stock contractors is that different metro systems in the country have widely varying technical configurations, leaving no scope for utilising existing solutions. Currently, manufacturers need to produce different variants for different metro rail projects. Although the matter has been under discussion for over five years, no concrete step has been taken to implement standardisation and reduce the burden on manufacturers.

Manufacturers are also unwilling to deliver new designs of rolling stock or various combinations thereof (be it two cars, three cars or four cars). They want to establish basic eligibility conditions, which can at times be modified, but want to be rigid in terms of technical, eligibility and commercial conditions.

Rolling stock manufacturers also need at least 22-24 months to design and manufacture cars. If the timeline for delivery is reduced and pressure is exerted on manufacturers to deliver rolling stock before time, the chances of producing faulty designs increases. In case there is any fault in the design, it gets replicated in all the cars being manufactured and hits the project severely.

Key planned initiatives

Developers need to move away from specifying strict conditions about the trains they want to deploy. This will allow bidders to offer standardised designs and improve the reliability of rolling stock. Further, in some Tier II and Tier III cities, the demand for rolling stock may be as low as 80-100 cars and this aggravates the need for the pooling volumes across different metro systems in the country. It is also advisable to award turnkey contracts for rolling stock, signalling and power supply. Further, the creation of a special purpose vehicle (SPV) for every project is not a viable option as each SPV executes only a few lines. Instead, a state-level SPV needs to be created that can implement multiple projects. This will have a twofold benefit – resources can be utilised efficiently and the experience garnered from one project can be utilised in other projects, resulting in successful project implementation.

A major initiative that is needed is in terms of the compensation to be provided to manufacturers in case of extension of time (EoT) of a project. The provision of an EoT compensation clause is needed to compensate the contractor for delays in payments. At times, even the most successful project can face a crisis and get delayed. Thus, the EoT compensation clause is imperative for contractors, and this should be clearly mentioned in the contract and not left for discussion at a later stage.

Further, some clauses in the contract need to be redefined so that manufacturers are not at the losing end. For instance, the clause for interest on delayed payments should be included in the contract. Such commercial challenges need to be addressed with open discussions at the start of the contract.

The maintenance cost of rolling stock constitutes a major part of the expenditure incurred by operators. Life cycle costs need to be determined at the beginning of a project to give the real expenditure that will be incurred on rolling stock. At present, there is no clear formula to calculate life cycle costs for rolling stock and this is a major obstacle in determining the real cost figure for the trains. In Europe, the life cycle cost also incorporates the track damage that occurs due to rolling stock. Life cycle costs involve both capital expenditure and operating expenditure.

Contractors need to raise such issues at the pre-bid meetings and not merely agree to all the conditions laid down in the bid document. Pre-bid meetings are conducted to actually figure out the deficiencies in the contract conditions.

Case for India

One apex body developing several projects will eliminate the problems that arise due to lack of standardisation. This will benefit both stakeholders – the developer and the contractor. For instance, plans have been announced to establish an entity in Uttar Pradesh, along the lines of the MAHA-METRO Rail Corporation in Maharashtra, and all metro rail projects in the state will be developed by only that corporation.

Further, not only has China taken up standardisation quite seriously, India too has decided upon some technical parameters. It has shortlisted two voltages, car configurations (two-car, three-car and four-car trains), etc. in a bid to move towards maintaining uniformity. It plans to implement this on a larger scale and on multiple projects. The Delhi metro began with 50 per cent standardisation of its cars and since then major changes have taken place in terms of motorisation, car size, voltage, etc. Cities which have higher peak hour peak direction traffic (PHPDT) have opted for a 25 kV AC system (existing Lucknow metro and upcoming Kanpur metro) while cities with lower PHPDT (upcoming Agra metro and Meerut metro) have opted for a 750 V DC system.

In India, the Ministry of Housing and Urban Affairs had assessed the concept of standardisation and prepared a report on it, but this was not taken forward. There is a need to form a nodal agency that can rigorously implement the concept of standardisation and takes into consideration the demands of both developers and contractors. It can begin with standardising car configuration, carside, etc.

In total, it is essential for the agencies, developers and suppliers to identify the primary features that should be standardised. However, it is also advisable that some areas should be left for the smooth incorporation of technological changes that come up in the near future, including surveillance systems, internet of things, asset management, predictive meters, etc.

The way ahead

Since multilateral agencies are now reluctant to fund projects, there is a need to look for alternative sources of funding for metro projects. The Metro Rail Policy, 2017, states that all financing options should be explored before a project is funded by the central or state government. The policy also mentions that unless there is a comprehensive metro plan for the city, funding will not be closed. The study will also identify alternatives such as trams, LRT, etc. Thus, unless there is a comprehensive plan, funds will not be granted. Further, all the funds for urban transportation will lie with one body.

The policy does not state that the entire project has to be developed on a public-private partnership (PPP) basis but there needs to be some element of PPP. For instance, the Kochi metro, Noida metro and Nagpur metro have engaged a private player to implement the fare system. This means the projects can be part-funded by private players.

To conclude, the development of alternative modes of urban transport is imperative to ensure last-mile connectivity. The modes should be complementary to each other and not competitive. Cities which have a PHPDT of less than 5,000 should opt for bus, bus rapid transit and tram systems. Developers and operators should be encouraged to take up alternative modes too.

Based on a panel discussion among Mangal Dev, Director, Hitachi India, and Head, Railway System Business, India and South Asia; Mahendra Kumar, Director, Rolling Stocks and Systems, LMRC; Deepak Maharishi, Head, Contracts and Legal Affairs, India and Southeast Asia, Bombardier Transportation; Sriram Raju, Customer Director, South, Alstom Transport India; and Tilak Raj Seth, Chief Executive Officer, Mobility, Siemens, at a recent India Infrastructure conference.