Big Plans, Small Steps

IR yet to improve operating performance

IIn recent years, the railway sector has undoubtedly attracted considerable government attention aimed at a transformation to make the carrier more modern, safe and self-sustainable. However, only modest progress has been achieved in this regard. The Mumbai-Ahmedabad high speed rail project appears to be moving ahead, with the civil works expected to begin in June 2018. Progress has also been achieved in the areas of track modernisation, station redevelopment and energy efficiency, and the deployment of digital technology, and signalling and telecommunications systems, among others. However, the safety scenario continues to remain a major concern, with over 100 accidents still occurring each year. Further, the share of derailments in total accidents increased to almost 75 per cent in 2016-17. The financial performance of IR has also worsened with the operating ratio reaching the highest level recorded in the past five years at 94.9 per cent in 2016-17.

Key trends

In Budget 2018-19, a capex of Rs 1.48 trillion was allocated to the sector. The government also accorded the highest priority to safety and has planned a total expenditure of Rs 730.65 billion (budget estimates [BE]) in 2018-19, including allocations made under the Rashtriya Rail Sanraksha Kosh. Further, emphasis has been laid on the development of suburban train systems, especially in Mumbai, where an investment of Rs 110 billion has been planned for network expansion works and an additional Rs 400 billion for a new suburban network in the city.

As of August 2017, IR’s total route km stood at 67,404 km, of which around 45 per cent was electrified. Meanwhile, as of March 2016, track km stood at 119,578 km. During financial year 2016-17, around 2,013 km of railway tracks were electrified, 1,000 km of tracks doubled and 2,857 km of new lines constructed and gauge converted. Further, 17,235 coaches were acquired, which was 5.9 per cent lower than in 2015-16.

Besides, a trend emerging over the past few decades has been the declining modal share of IR, from around 89 per cent in 1950-51 to only 27 per cent in 2016-17. The road sector has been a key competitor, given the lack of multimodal logistics parks, and IR’s strained infrastructure and poor last-mile connectivity. Another development has been the growing government assistance to IR through gross budgetary support (GBS), which recorded the highest value (since 2012-13) of Rs 463.55 billion in 2016-17. Furthermore, the BE of the GBS in 2017-18 has been pegged at Rs 550 billion, which is 18.65 per cent higher than the previous year.

The railway sector has also witnessed an increasing focus on digital technology with the launch of various projects – Station Wi-Fi, Rail Cloud, Rail SAARTHI, IRCTC-Rail Connect, NIVARAN, SFOORTI, etc. Non-fare revenue has also emerged as a growing source of revenue for IR, recording a compound annual growth rate (CAGR) of 42.69 per cent growing from Rs 50.92 billion in 2014-15 to Rs 103.68 billion in 2016-17.

Freight traffic trends and earnings: Growth in IR’s freight traffic volumes has shown a downward trend over the past couple of years, recording a year-on-year growth of just 0.63 per cent and 0.46 per cent in 2015-16 and 2016-17 respectively. In fact, freight traffic grew at a meagre CAGR of 2.37 per cent between 2012-13 and 2016-17. As of February 2018, the cumulative freight traffic volume stood at 1,049.39 million tonnes.

With regard to earnings too, IR has witnessed a declining growth trend over the five financial years (2012-13 to 2016-17), with the first ever negative growth of 4.49 per cent recorded in 2016-17. As of February 2018, cumulative freight earnings stood at Rs 1,018.86 billion.

Passenger traffic trends and earnings: Over financial years 2012-13 to 2016-17, IR’s passenger traffic volumes witnessed a declining trend till 2015-16, after which they showed signs of recovery in 2016-17, clocking a meagre positive growth of 0.83 per cent to reach 8,219 million passengers. As of February 2018, the cumulative passenger traffic for 2017-18 stood at 7,578 million passengers.

With regard to earnings, the passenger segment witnessed an increasing trend over the five-year period reaching Rs 462.79 billion in 2016-17. As of February 2018, the cumulative passenger earnings for 2017-18 stood at Rs 443.02 billion.

Recent developments

IR is currently in the process of constituting new organisations such as the Special Railway Establishment for Strategic Technology and Holistic Advancement (SRESTHA) to cater to the future technology needs of the carrier; the Special Unit for Transportation Research and Analytics (SUTRA) for undertaking detailed analytics to optimise investment decisions and operations; and the Rail Development Authority (RDA) that will be responsible for ensuring a level playing field for various stakeholders in the sector.

Augmenting rolling stock features has been on IR’s priority list. In this regard, IR recently clocked a new milestone by surpassing its target and producing a record 2,503 coaches in 2017-18. Of these 1,100 were Linke-Hoffman-Busch coaches, known for their better safety features.

On the policy front, the new Catering Policy, 2017, was issued in February 2017 mandating the unbundling of the current catering services on trains. Further, the new Water Management Policy, 2017, was launched with the aim to curb water wastage and reduce expenditure on fresh water.

Freight segment initiatives: The Ministry of Railways (MoR) has introduced a number of initiatives in the freight segment aimed at rationalising tariffs and freight services. Some of these are the withdrawal of port congestion charges, removal of busy surcharge, and withdrawal of the dual freight policy for iron ore. Further, new delivery systems were also introduced. In March 2017, a confirmatory trial run of the double stack dwarf container train was conducted between Ambala and Jamnagar after which commercial runs were started. Roll on, roll off freight services were also launched on the Ganga river in Bihar between Bihta and Turki, Bhanga and Churaibari, Nagothane and Boisar, and Garhi Harsaru and Muradnagar. Further, a container train was introduced on a pilot basis between Dhaka and Kolkata to assess the feasibility of extending the international service on a commercial basis.

In February 2017, IR entered into a partnership with the Department of Post to carry its parcels in the guard’s compartment of selected trains. IR also entered into long-term tariff agreements/contracts with its key freight customers using the predetermined price escalation principle. Other initiatives introduced were electronic registration and transmission of receipts, appointment of key customer managers, an online vendor registration system, expansion of the commodity basket, etc.

Passenger segment initiatives: In the passenger segment, various ticketing and digital initiatives were launched such as the Rail SAARTHI app, the UPI/BHIM app, the IRCTC Rail Connect app, the Rail Cloud Project, the withdrawal of service charge on booking e-tickets, etc. Further, under passenger amenities, facilities such as an alternative train accommodation scheme VIKALP, paperless unreserved ticket booking through mobile phones, automatic ticket vending machines, Yatri Ticket Suvidha Kendras, Sarathi Seva to help old and disabled passengers, and a Centralised Catering Service Monitoring Cell for prompt redressal of passenger grievances relating to catering services were introduced, among other initiatives.

New train services: In July 2017, India’s first high speed train – Tejas Express – capable of running at 200 kmph was launched between Mumbai and Karmali in Goa. A new passenger train was also launched from Kolkata in West Bengal to Khulna in Bangladesh in November 2017. Further, the first AC electric multiple unit consisting of 12 coaches, fitted with an indigenous three-phase propulsion system, was run on the Mumbai suburban section. A new coach – the Vistadome Tourist Coach – with glass walls was launched at Visakhapatnam. Meanwhile, the fourth Humsafar clan of trains and the first Antyodaya clan of trains were launched in February 2017.

Revenue augmentation initiatives: To expand its revenue inflows, IR introduced a “flexi fare system” to charge higher prices with an increase in demand. Additional earnings of around Rs 5.51 billion were generated under this system between September 9, 2016 and June 30, 2017. Further, various new policies were announced under the non-fare revenue segment such as the Out of Home Advertising Policy, Mobile Assets Policy, Rail Display Network Policy, Content on Demand Policy, ATM Policy, and the Policy on Unsolicited Non-Fare Revenue Proposals, to enhance IR’s revenue collections.

Funding initiatives: To implement its ambitious plans, IR intends to raise funds worth Rs 180 billion from the Life Insurance Corporation (LIC) through bonds issued by the Indian Railway Finance Corporation (IRFC). Till 2020, IR has been permitted to raise a total of Rs 1.5 trillion from LIC. Further, a Rs 350 billion fund – the Railways of India Development Fund – has been planned for creation with assistance from the World Bank for all big-ticket projects. Meanwhile, IRFC listed its first green bond issue, for 10 years, valued at $500 million on the London Stock Exchange’s new International Securities Market, and was oversubscribed by three times. The corporation also listed its green bonds on the Bombay Stock Exchange’s India International Exchange. Further, to kick start the Public Sector Enterprises [PSE] Disinvestment Programme, the cabinet has approved the listing of five rail PSEs – IRFC, IRCON, RITES, Rail Vikas Nigam Limited and the Indian Railway Catering and Tourism Corporation.

In conclusion

In a nutshell, much more needs to be achieved in the areas of last-mile connectivity, development of rail-based multimodal logistics parks, stations and freight terminals, higher speeds of freight and passenger trains, etc. Further, safety-related concerns mandating the installation of modern signalling equipment, network expansion, and upgradation of bridges and tracks need to be addressed on a priority basis.

 

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