Regaining Traction: Railway sector gets on to the reforms and restructuring track

Railway sector gets on to the reforms and restructuring track

The railway sector has emerged as a beacon of hope amidst the Covid-19 crisis. It has responded to the pandemic by turning to the freight segment to combat the losses incurred in the passenger segment. Further, the introduction of the Oxygen Express, special parcel trains and the Kisan Express was crucial in providing relief to the country. Despite facing issues relating to labour mobilisation, material procurement and liquidity, the sector has witnessed steady investments as well. The government is constantly making plans to develop railway infrastructure and increase revenue generation. Indian Infrastructure presents the views of leading experts on the railway sector’s progress, the impact of Covid-19 and the future outlook…

What has been the progress in the railway sector over the past one year?

Rajaji Meshram Independent Transport Sector Expert
Rajaji Meshram, Independent Transport Sector Expert

Rajaji Meshram

Indian Railways (IR) played a stellar role in the country’s response to the Covid-19 crisis. When the lockdown was imposed in March 2020, for the first time in the history of the railway sector, no passenger trains ran. It was a time of crisis and uncertainty and the course of future events was unknown. The railwaymen of India rose to the occasion. First, freight train operations never stopped. Power plants had to keep running, and foodgrains had to be transported across the country, especially at a time when road traffic was drastically constrained. Second, IR started running special parcel trains to transport essential commodities across the country. Third, in May 2020, IR started Shramik Special trains, 4,621 of which were run to get 6.31 million migrant workers back to their families. Moreover, to assist in the fight against the pandemic, IR converted 5,600 coaches to Covid care centres, and manufactured 0.55 million units of personal protective equipment for health workers and 0.14 million litres of sanitiser. IR converted the crisis into an opportunity and used the time window of lower traffic to complete pending track renewals and doubling-related works. The speed of freight trains, which has traditionally been around 25 km per hour, was increased to close to 50 km per hour. While passenger traffic declined in 2020-21, freight loading amounted to 1.23 billion tonnes, 1.93 per cent higher than in 2019-20. This is an outstanding performance and speaks not only for the resilience of IR, but also the spirit of the railwaymen of our country.

R.G. Saini Director, Megametro Engineering Private Limited
R.G. Saini Director, Megametro Engineering Private Limited

R.G. Saini

The railway sector has made significant progress in the past few years. The freight segment has been the revenue generator last year, generating 65 per cent of the total revenue. In a bid to improve freight movement, Dedicated Freight Corridor Corporation of India Limited (DFCCIL) is working on progressively operationalising its corridors. By the end of 2021-22, 40 per cent of the corridors will be operational. The government also approved the Pune-Nashik corridor in June 2021, to be built under the Maharashtra Rail Infrastructure Development Corporation. The project has a total length of 235 km, and is expected to entail an investment of Rs 160 billion. Meanwhile, the central government has approved Rs 250 billion for the uptake of 4G technology in the next five-year plan. Moreover, IR made remarkable progress in electrification work by electrifying more than 6,000 rkm in 2020-21. The Chenab bridge, the world’s highest railway bridge, was also completed by IR in April 2021. Further, the railway ministry approved 56 new projects recently. These will be implemented across all railway zones and are expected to be completed by March 2022. The detailed project reports of seven new high speed railway projects are at the final stage. The metro sector is also progressing in all cities with new corridors, and there will be new construction works spanning 80 km across seven cities.

What has been the impact of the key initiatives undertaken by the government?

Rajaji Meshram

Major reforms are under way in the railway sector. Change always begins at the top, and the restructuring of the Railway Board was a transformational step taken in 2020-21. The chairman of the Railway Board is now also its CEO. The Railway Board now has five members, including the chairman and the CEO. The member, infrastructure is now responsible for all infrastructure assets, be it railway track or signalling. The member, traction and rolling stock, will look after coaches, wagons and locomotives. The legacy of mechanical and electrical departments being responsible for separate types of rolling stock has been done away with, at least at the apex. This change will go a long way in removing the “departmental” culture from IR in the long term. Some sections of the dedicated freight corridors (DFCs) were commissioned in 2020-21. The two DFCs, once fully functional (as per estimates in 2022), will enable the railways to compete for cargo that is currently transported by road, and will also be a pillar for IR to introduce more private train operations in the freight segment. Some other initiatives, specifically targeted towards increasing safety of railway operations, such as elimination of unmanned level crossings and stopping production of the Integral Coach Factory design of coaches, have contributed to a significant reduction in railway accidents.

R.G. Saini

In addition to the progress mentioned above, IR is trying to bring in the public-private partnership (PPP) model by privatising passenger train operations. It is expected that this initiative will attract more investment to the sector. Initiatives such as online vendor registration, and online design approval by the Research Designs and Standards Organisation have also been undertaken to enable digitalisation and improve transparency and processing in the sector. Many tenders are being invited for new metro corridors across Delhi Metro Phase IV (65 km) and Chennai Metro Phase II (104 km), and a mass rapid transit system  for the Agra Metro spanning nearly 30 km.

“Change always begins at the top, and the restructuring of the Railway Board was a transformational step taken in 2020-21.” Rajaji Meshram

What has been the impact of Covid-19 on the sector? What has been your organisation’s response to the pandemic?

Rajaji Meshram

When the going gets tough, the tough get going. This phrase very appropriately describes the railway sector’s response to the pandemic. In numerous ways, the railway sector has converted the crisis into an opportunity. Kisan rail and special parcel trains were introduced to cater to non-bulk cargo. Oxygen trains were a life-saver for many states. The speed with which IR developed processes and collaboratively worked with state governments and the private sector to deliver the much-needed oxygen to patients across the country was indeed inspirational. Covid-19 literally brought passenger trains to a standstill. Over the course of 2020-21, trains have been gradually reintroduced by IR. While the pandemic has had a disruptive impact on passenger trains, it has also given IR an opportunity to go back to the drawing board and prepare a “zero-based” timetable to optimise the number of trains that run on the railway network. The digital method of working has also been a positive effect of the pandemic on IR. Physical files, the bane of any government office, were a potential spreader of the contagious virus and the pressing need to avoid them caused the quick adoption of e-office and virtual meetings across IR. This has made many processes faster and more efficient.

R.G.Saini

The outbreak of the pandemic has impacted the overall economy of the country. Not only the railways, but all infrastructure sectors are facing the brunt of the ongoing pandemic. It resulted in a massive revenue decline in the passenger segment during the lockdown. Progress of the ongoing projects was also hampered due to the pandemic. Traffic revenue declined by 42 per cent as compared to the corresponding period in the previous year. Originating passengers also reduced to barely 1.27 per cent. Alongside affecting connectivity, the pandemic impacted the supply chain, and the transfer of essential goods and other services. Over a period of time, the sector has regained traction and restored freight operations entirely. During the second wave of the pandemic, the railway sector worked tirelessly and commenced services such as the Oxygen Express, which transported liquid medical oxygen across the length and breadth of the country. The government also extended massive support to the sector by issuing timely payments and pushing back deadlines. Contractors have delivered their best during this period by providing good support in order to retain as many of their workmen as possible.

“The launch of the National Rail Plan Vision 2024 has opened up many opportunities for all stakeholders in the railway sector.” R.G. Saini

What are the key challenges that remain unaddressed?

Rajaji Meshram

The National Monetisation Pipeline that has been recently introduced by the finance minister has set a big target for the railways. Private passenger trains, the redevelopment of railway stations, and the divestment of Konkan Railway, hill railways, and track overhead equipment are the specific monetisation targets for the sector. For this to be successful, having a competent railway regulator, independent of IR, is essential. Unlike roads, where the traffic is independent of government authorities (such as the NHAI), in railways, the trains are run by IR, the sole operator in the railway ecosystem in India. The same entity being the authority, the infrastructure owner and the operator creates inherent conflicts of interest in a PPP context. IR’s recent tender to introduce private trains across 12 clusters did not get adequate bids, and the absence of a regulator was an important factor in the lack of interest from the private sector. So, the sooner a railway regulator, with competent and experienced personnel, is set up, the better for the monetisation programme in the railway sector. Another key challenge is the financial status of IR. The operating ratio has been above 95 for many years, implying that IR is not able to generate any monetary surplus from its operations. A large reason for this is the salary and pension bills that IR has to pay. No other central government department pays its pension bills on its own. Removing the pension liability from IR’s books will certainly give IR more headroom to invest surplus in infrastructure enhancements.

R.G. Saini

Gauge conversion is one of the biggest challenges faced by the sector. Since 1992, IR has been struggling to complete gauge conversion, as it requires strengthening of the existing infrastructure. More than 2,500 km of narrow gauge and meter gauge is required to be converted. Incorporation of modern signalling is also a challenge. Moreover, ageing bridges and infrastructure need to be upgraded. More than 500 bridges have already been identified for upgradation. The outbreak of the pandemic also posed various challenges, including difficulty in mobilisation of labour and material. Maintaining a skilled workforce across projects in multiple locations is a challenge for contractors.

What is the outlook for the sector for the next couple of years?

Rajaji Meshram

Many transformational events will come together in the railway sector in the next couple of years. First, the two DFCs will become fully operational. This will usher in faster freight trains that run as per a timetable, a concept that would be inconceivable in a mixed-traffic scenario (both passenger and freight trains running on the same track). DFC infrastructure is owned by DFCCIL, a corporation under the railways, and the train operations will be done by IR. IR will pay “track access charges” to DFCCIL. The implementation of this mechanism is the first step in enabling the introduction of private freight train operations. A key enabler, however, would be the setting up of a railway regulator. Second, station redevelopment is expected to progress significantly in coming times. A key reason for this is the approval of “user charges” as a part of the revenue stream of private developers. Earlier, the only revenue stream that the private sector was allowed was that from commercial real estate. With a stable and predictable revenue stream from “user charges”, which will be charged as a part of the ticket of each passenger using a railway station, the station redevelopment projects will be more bankable. Third, during the pandemic, special parcel trains were run, and this service was availed of by e-commerce entities. This is a new segment of traffic for the railways, and if the goods shed PPP programme and special parcel trains initiative are implemented in an integrated manner, there could be a large diversion of e-commerce traffic to railways.

R.G. Saini

The launch of the National Rail Plan Vision 2024 has opened up many opportunities for all stakeholders in the railway sector. It focuses on accelerated completion of critical projects, multi-track congestion route clearance, achieving 100 per cent electrification, upgrading

speeds on many sections, promoting private investment, and station redevelopment programmes. Larger tunnelling projects across urban segments are also a challenge, as far as technology and timely resource deployment by contractors are concerned.