Up to Speed: Trends and outlook for the railway sector

Trends and outlook for the railway sector

The railway sector has been registering high growth rates over the past few years. While infrastructure creation has been at an all-time high, new ways of improving operati­onal efficiency and passenger experience have also been given due attention. The sector has been abuzz with activity – from the introduction of high speed rail and dedicated freight corridors to the modernisation of existing stations, initiatives to upgrade rolling stock and the ad­option of new and innovative technologies, etc. While the outbreak of the Covid-19 pan­demic presented unprecedented challen­ges, the railway sector emerged as a key contri­butor in en­suring the transportation of essentials across the country.

Indian Infrastructure presents an overview of the noteworthy trends and developments, key challenges faced, expansion plans and outlook for the sector…

The trendsetters

Increasing network size

According to the Railways Year Book 2019-20, the railway network stood at 67,956 rkm. In terms of running track km, the network inc­rea­sed from 92,084 km during 2015-16 to 99,235 km during 2019-20. However, Indian Railways (IR)’ routes are heavily congested with 51 per cent of the network carrying 96 per cent of the traffic. To this end, IR has set a target of 100 per cent electrification by the year 2023. This will make it the first major railway in the world to have fully electrified a broad gauge railway network of such size. Around 6,015 rkm was electrified during 2020-21.

As on April 1, 2021, 484 railway projects of 51,165 km length, costing approximately Rs 7,530 billion were at different stages of plan­­ning/sanction/execution. Of this, 10,638 km length has been commissioned and an expenditure of Rs 2,140 billion has been incurred up to March 2021.

Quantum leap in capital expenditure and improved financial performance

The cumulative capital expenditure during 2014-19 was more than double the cumulative capital expenditure during 2009-14. IR’s capital expenditure recorded a compound annual growth rate of around 12 per cent during the past five financial years (2016-21). The budgeted capital expenditure for 2021-22 stands at Rs 2.15 trillion.

With regard to financial performance, IR’s operating ratio increased from 91.3 per cent to 98.40 per cent during the period from 2014-15 to 2019-20. However, du­ring 2020-21, its operating ratio stood at 97.45 per cent, which is slightly better than that in 2019-20. In 2021-22, the IR’s operating ra­­tio is estimated to be 96.2 per cent.

A decline in the growth of internal revenue generation has resulted in a fall in the share of IR’s internal resources in total capital ex­penditure.

Highest priority to safety in train operations

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 various initiatives undertaken by it, the nu­mber of train accidents has declined substantially from 122 in 2012-13 to 21 in 2020-21.

In particular, in July 2021, the Rail Coach Fa­c­tory, Kapurthala, developed five coa­ches using fire-retardant materials and roof-mounted air-conditioning package units with a reverse cycle feature for heating arrangements besides automatic smoke detection.

Introduction of new trains and modernisation of rolling stock

IR has been taking a plethora of initiatives to modernise its rolling stock and im­prove the passenger experience. It is also inc­reasing the average speed of trains. All LHB coa­ches are now fit for running at a maximum spe­ed of 130 km per hour. Some of the new trains that have been introduced are Vande Bharat trains, Tejas Express trains, Double-decker tr­ain coaches, Anubhuti coaches, Humsafar tra­ins, Antyo­daya trains, Uday trains, Deen Dayalu coaches, Him­darshan Express and Uttam coaches.

Digital transformation of railways

Due attention has also been given to the digitalisation of operations to improve efficiency and enhance passenger convenience. The Ministry of Railways has approved the installation of clo­sed-circuit television (CCTV) cameras in all train coaches including electric multiple coaches and passenger trains. At present, CCTV cameras have already been provided in 4,141 coaches. The other digital initiatives undertaken by the ministry include internet-based video surveillance systems at 269 railway stations in 10 zo­nes, point of sale ma­chines and acceptance of UPI/Bharat Interface for payments, the Rail Madad app for providing assistance and information to passengers, the SFOORTI mobile app for monitoring and managing the freight business using GIS-based da­sh­boards, the launch of an unreserved ticketing system to promote digital transactions and increase customer convenience, and a real-time train information system for automatic chart preparation and passenger train information. Meanwhile, as of July 28, 2021, Wi-Fi facilities have been provided at 6,045 stations. The provision of Wi-Fi at the balance stations is in progress and is dependent up­on the availability of infrastructure such as optical fibre cable at these stations.

Pain points

Approvals and clearances remain a major challenge for the railway sector. Procedural delays in project execution is another major roadblock. Congestion in the network has also led to an inability to increase the number of trains, es­pecially freight trains, to enhance revenues. Fu­r­ther, IR depends heavily on gross budgetary support for its growth and expansion. Most of the railway’s financial resources are spent towards meeting operational expenses. Hence, it 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. Enhanced tra­ining will be important, going forward, to up­grade staff skills. Besides, IR operates passenger tra­ins at low and static prices with the aim to pro­­vide affordable travel for the masses, providing limited scope for increasing passenger revenue.

Expansion plans

With the aim of reducing carbon emissions, IR plans to move to 100 per cent el­e­ctrification by December 2023 and become 100 per cent net zero operator in the next 9-10 years. The national transporter also plans to remove all level crossings on the Golden Quadrilateral and Gol­den Diagonal routes by 2024, besides up­gra­ding the Delhi-Mumbai and Delhi-Howrah route to 160 kmph.

By 2024, IR aims to achieve do­ubling, tripling and quadrupling of nearly 12,000 rkm track length. It has decided to invest in the highly utilised network, including the high density net­work of the Golden Quadrilateral and Golden Diagonal routes between the four metropolises, and 11 other routes wherein last-mile connectivity for much of the traffic is placed on. With respect to electrification, IR is planning to electrify 28,143 km of tracks between 2019-20 and 2023-25. Of this, 6,000 rkm is planned to be electrified during 2021-22.

What lies ahead

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

According to the National Monetisation Pipeline unveiled in August 2021, railway ass­ets worth Rs 1.52 trillion are planned to be mo­netised during financial years 2022-25. The plan is to monetise railway stations, passenger trains, sheds for goods, Konkan Railway, Hill Railways, dedicated freight corridors and railway stadiums. The monetisation of brownfield railway assets is expected to reap over Rs 1.52 trillion in four years.

Further, as per the National Infrastructure Pipeline, investments to the tune 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, passenger amenities, the speed and safety of trains, and ensure better connectivity.

All these initiatives, along with the ministry’s intent to take IR to new hei­ghts, bodes well for the sector.