Gaining Momentum: Freight segment makes good for Covid-led passenger traffic slowdown

Freight segment makes good for Covid-led passenger traffic slowdown

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. India has the fourth largest railway network in the world after the US, China and Russia.

With the outbreak of the ongoing pandemic, the year 2020 presented the sector with never-seen-before adversities. For the first time in its 167-year history, Indian Railways (IR) shut down all its passenger services. The national transporter, which ferries nearly 8 billion passengers daily in about 13,500 trains, suspended operations as part of government directives to stall public transportation in order to contain the spread of Covid-19.

Indian Infrastructure takes a look at the growth of the railway sector, the impact of Covid-19 and the future outlook…

Sector overview

According to the Indian Railways Year Book 2019-20, the railway network in 2019-20 stood at 67,956 rkm. From 2015-16 to 2019-20, the track network grew at a compound annual growth rate of 0.64 per cent. During the period 2014-21, 17,720 km worth of work (3,681 km of new lines, 4,871 km gauge conversion and 9,168 km line doubling) has been commissioned at an average of 2,531 km per year, which is 67 per cent higher than the average commissioning during 2009-14 (1,520 km per year).

Despite the outbreak of the pandemic, IR managed to commission 2,370 km of new line, gauge conversion and doubling work during 2020-21 and 133 km of doubling and third line work during 2021-22 (as of June 29, 2021). A total of 1,009 bridges were repaired, strengthened, rehabilitated or rebuilt, and 925 road overbridges/road under-bridges were constructed. Further, 4,363 km (in complete track renewal units) of track renewal was carried out in 2020-21, and 751 km in 2021-22 (as of June 2021).

As of April 1, 2021, 484 railway projects spanning 51,165 km, costing approximately Rs 7,530 billion, are at different stages of planning, sanction or execution. Of this, 10,638 km has been commissioned and an expenditure of Rs 2,140 billion has been incurred as of March 2021. Under the Union Budget 2021-22, the central government has allocated Rs 162.46 billion for construction of new lines, Rs 18.03 billion for gauge conversion, Rs 30 billion for line doubling and Rs 106.95 for track renewals.

In a notable development, IR electrified sections of the railway aggregating 6,015 rkm during 2020-21 – its highest ever. Despite Covid-19, it surpassed the previous record of 5,276 rkm, achieved in 2018-19. As of March 31, 2021, IR has electrified 71 per cent (45,881 rkm) of its total broad gauge network (64,689 rkm, including Konkan Railway). Of the total 45,881 rkm electrified so far, 34 per cent was electrified in the past three years.

The year also marked the completion of many important projects. In a major development, the Ministry of Railways completed the arch closure of the Chenab bridge under the Jammu-Udhampur-Katra-Qazigund-Baramulla railway line project on April 5, 2021. In another development, the Gandhinagar railway station was inaugurated in July 2021. The dedicated freight corridor (DFC) project also witnessed the completion of important sections of the eastern and western DFCs early in the year. The two DFCs are expected to be completed by June 2022. The final location survey and technical investigations of another big-ticket project, the Mumbai-Ahmedabad high speed rail corridor, were also completed. However, the project’s completion date has been pushed to 2027.

The Covid crisis

The nation came to a standstill on March 23, 2020 when the government announced a nationwide lockdown. IR, which operates as many as 13,500 trains, halted its passenger service to stem the spread of the virus. At present, only special trains are being operated,

keeping in view the concerns and suggestions of state governments and health advisories. As of August 1, 2021, IR, on a daily average basis, is operating 6,166 special train services, including 1,517 mail/express trains and 846 passenger trains.

Despite witnessing a decline in the passenger segment, the sector responded to the pandemic remarkably well by turning to the freight segment to combat the losses incurred in the passenger segment. It focused on reducing wasteful expenditure by incorporating measures such as the rationalisation of manpower at workshops, closure of uneconomical railway lines and laying greater emphasis on digitalisation. IR successfully turned this crisis into an opportunity to grow its freight traffic. Since September 2020, the sector has witnessed all-time high records in freight loading and revenue generation. The sector was also better equipped to handle the second wave of Covid-19. During the rise in Covid-19 cases during the second wave, IR began operation of the “Oxygen Express” in a bid to transport liquid medical oxygen across the country and aid in the collective fight against the pandemic.

During the initial nationwide lockdown, there was a slowdown in the execution of railway projects. However, with the gradual easing of lockdown restrictions, construction and other infrastructure development activities started gaining momentum. Moreover, due to meticulous planning, prioritisation of projects and a focused approach to execution, infrastructure works are now on in full swing.

Pain points

Approvals and clearances remain a major challenge for the railway sector. Factors such as quick land acquisition by state governments, forest clearance by officials of the forest department, deposition of cost share by the government in cost sharing projects, priority of projects, shifting of infringing utilities, statutory clearances from various authorities, geological and topographical conditions of the area, and the law and order situation in the project site affect the overall execution and completion time of projects.

Inadequate capacity is another major roadblock for the sector. The absence of adequate infrastructure and growing traffic have restricted speed levels. Congestion on IR’s network has also led to an inability to increase the number of trains, especially freight, and therefore, to enhance revenues. Further, IR is heavily dependent on gross budgetary support for its growth and expansion. Most of the railway’s financial resources are spent towards meeting operational expenses. Hence, IR is left with very few resources to invest in capacity augmentation.

With the growing complexities of railway operations, there exists a demand for skilled employees capable of performing tasks effectively in their respective spheres. It is expected that enhanced training will be important going forward, for upgrading staff skills.

In times to come

The railway sector emerged as a key contributor in India’s response to the Covid-19 crisis. It played a crucial role in maintaining the supply of essential items such as foodgrains, milk and dairy products, medicines, coal, and petroleum products. IR emerged as a huge support, transporting essential items across the length and breadth of the country.

Going forward, the outlook for the sector remains positive, buoyed by the big-ticket projects being implemented. In a bid to become future ready, IR is planning to complete 58 super critical and 68 critical projects entailing an investment of more than Rs 1,150 billion in the next few years. Of the 58 supercritical projects (of a total length of 3,750 km at an investment of Rs 396.63 billion), 29 projects spanning 1,044 km were commissioned last year at an investment of Rs 115.88 billion. About 27 projects are expected to be completed by December 2021, and the remaining two will be handed over by March 2022. Of the 68 critical projects (of a total length of 6,913 km at an investment of Rs 757.36 billion), four projects spanning 108 km entailing an investment of Rs 14.08 billion have been completed (as of June 29, 2021), and the remaining projects are targeted to be completed by March 2024. For 2021-22, IR has set a target of completing 2,400 km of new lines, the doubling and gauge conversion projects – 300 km of new lines, 1,600 km of doubling single-line sections, and gauge conversion of 500 km. In addition, electrification of 6,000 km of lines is also to be completed in the financial year 2022.

According to National Monetisation Pipeline unveiled on August 23, 2021, railway assets would contribute 26 per cent of the aggregate asset pipeline of Rs 6,000 billion. The monetisation of railway’s brownfield assets is expected to reap more than Rs 1,520 billion in four years. Of this, Rs 178.10 billion would be monetised in 2021-22, Rs 572.22 billion in 2022-23, Rs 449.07 billion in 2023-24 and Rs 325.57 billion in 2024-25.

Further, as per the National Infrastructure Pipeline, investments of Rs 13.67 trillion (about 12 per cent of the projected infrastructure investments) are to be made in the railway sector during the period 2019-20 to 2024-25. This is expected to improve freight efficiency, augment the speed of trains, improve passenger amenities, enhance safety and ensure better connectivity.