Growth Mode

Trends and developments in the railway sector

The railway sector has been on a high-growth trajectory for the past few years. While the pace of infrastructure creation has been at an all-time high, new and innovative ways to improve operational efficiency and passenger experience are also being focused upon. The introduction of high speed trains, modernisation of railway stations, initiatives to upgrade rolling stock and enhance passenger experience, turning to the freight segment to cover up for losses in the passenger segment due to Covid, and adoption of new technology solutions are some of the initiatives that have kept the sector abuzz with activity.

A snapshot of the noteworthy trends and developments over the past year and the outlook for the sector…

Indian Railways’ (IR) expenditure has been registering encouraging growth for the past few years. The cumulative capital expenditure in 2014-19 was more than double the cumulative expenditure during 2009-14. IR’s capital expenditure recorded a compound annual growth rate of around 14 per cent during the past five years (2016-20). The budgeted capital expenditure for 2020-21 stands at Rs 1.61 trillion.

While at present IR’s network is congested and overutilised leading to slower train speeds and a loss of potential revenue, higher investments have been made in the past few years for capacity enhancement. There has been a significant increase in the number of new lines, doubling and gauge conversion projects being undertaken by the railways. Further, markets such as the north-eastern region that have remained underpenetrated for a long time are receiving the required attention. IR registered a fourfold increase in the commissioning of doubling works during the 2014-20 period (1,458 km per year) as compared to the 2009-14 period (375 km per year).

IR accords high priority to safety and undertakes several measures for its enhancement including renewal of tracks, elimination of unmanned level crossings, adoption of new technologies, and regular safety audits. In light of the initiatives undertaken by IR, the total number of train accidents has declined significantly. Moreover, in a big achievement for IR, 2019-20 was one of the safest years in the history of the national transporter with zero passenger fatalities. Meanwhile, safety-related expenditure has increased from Rs 455 billion in 2015-16 to Rs 710 billion in 2020-21 (BE). IR has also set up the Rashtriya Rail Sanraksha Kosh worth Rs 1 trillion.

The national transporter is also taking initiatives to increase the average speed of trains. Currently, all LHB coaches can run at a maximum speed of 130 kmph. Some of the initiatives by IR in this area are the introduction of Vande Bharat trains, Tejas Express trains, Anubhuti coaches, double decker train coaches and Humsafar Trains.

Due attention has also been given to the digitalisation of operations to improve efficiency and enhance passenger convenience. The initiatives include the installation of point-of-sale machines and acceptance of UPI/Bharat interface for money, launching the Rail Madad app for providing assistance and information to passengers, and establishing an online dashboard, e-Drishti to review, monitor and analyse IR’s performance.

The government unveiled the National Infrastructure Pipeline (NIP) with the aim of channelling investments towards infrastructure sectors by listing out investible projects. As per the NIP, investments worth Rs 13.67 trillion are to be made in the railway sector during the period from 2019-20 to 2024-25. The figure translates into 12 per cent of the overall projected infrastructure investments of Rs 111 trillion during the period. It is estimated that IR will require investments worth Rs 50 trillion between 2018 and 2030 to improve the infrastructure in the sector. As the investments cannot be met by public sector expenditure alone, the Ministry of Railways is looking at the use of public-private partnerships to unleash faster development and completion of tracks, rolling-stock manufacturing, and delivery of passenger and freight services. The national transporter has also identified the potential areas for private sector participation in the railway sector including passenger train operations, railway electrification, suburban train operations, private freight terminals, container train operators, dedicated freight corridors (DFCs), and signalling and telecommunications.

The national transporter has several big-ticket programmes under way. Its station redevelopment programme aims at opening up about 20 million square feet of real estate, attracting an investment of Rs 500 billion. A total of 123 stations have been identified for this programme. Meanwhile, during 2020-21, work was awarded for major stations such as Delhi, Mumbai, Nagpur, Amritsar, Dehradun, Nellore, Tirupati and Puducherry.

IR plans to move to 100 per cent electrification in the next three and a half years and become 100 per cent “net zero” operator in the next 9-10 years. The two DFCs – the western DFC and the eastern DFC – are expected to be completed by June 2022. Another big-ticket project, the Mumbai-Ahmedabad High Speed Rail Corridor is expected to be completed by December 2023. IR has also planned to source around 1,000 MW of solar power and 200 MW of wind power by 2021-22 across zonal railways and production units. With regard to the regional rapid transit system (RRTS), the priority section of the Delhi-Meerut RRTS corridor (Sahibabad to Duhai) is scheduled to be completed by March 2023. Meanwhile, six projects under Mumbai Urban Transport Projects (MUTP) 3 are expected to be completed by 2022; 12 projects under MUTP 3A to be completed by 2024; and four corridors of the project are expected to become operational by 2026.

The Covid fallout  

The Covid-19 pandemic has had a significant impact on the railway sector. IR, which operated over 13,500 trains daily carrying around 23 million passengers, halted all its passenger services on March 22, 2020 to control the spread of Covid-19. However, the sector responded to the pandemic by turning to the freight segment to combat the losses incurred in the passenger segment and reducing wasteful expenditure through measures such as the rationalisation of manpower at workshops, closure of uneconomic railway lines and a greater emphasis on digitalisation.

IR has taken a number of initiatives to improve freight operations in spite of the pandemic. The key ones include revision in the classification of industrial salt from 120 to 100 A for the chemical industry from August 3, 2020; waiver of stabling charges for private container and automobile trains till October 31, 2020 from August 3, 2020; and a discount for pond ash (open wagon) to the tune of 40 per cent for power plants, cement, from August 3, 2020. IR also undertook passenger traffic-related initiatives during the first wave of Covid-19. IR’s coaches were modified into isolation wards to augment the quarantine facilities in the country. The government identified around 215 railway stations in 23 states and union territories for the deployment of 5,231 coaches as isolation wards. Separate coaches were provided for suspected and confirmed Cocivd-19 cases to avoid cross-infection. IR’s production units and workshops manufactured PPE coveralls for medical and healthcare personnel dealing with infected patients. IR allowed booking and cancellation of tickets till five minutes before the departure of trains.

What lies ahead

Going forward, the outlook for the sector remains positive on the back of big-ticket projects. Besides, given the size and per capita income levels in the country and the challenges faced in both the road and aviation sectors, railway is going to be preferred as the mode of transport. Further, IR’s Make in India initiatives are likely to gain further traction with the government’s focus on self-reliance.

For the sector to grow further, key issues such as procedural delays and financial instability need to be addressed by policymakers. While the government’s vision is to involve private players in the sector, it must be noted that this will happen only when the ground is set. Policy execution is equally important.

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