The passenger segment cannot charge realistic fares due to its social obligation but within the constraints, there are ways to improve earnings
In the first part, published on 31st July 2021, I talked of the optimism about the new minister for Indian Railways (IR), a professional with a repertoire of experiences, having been catapulted to that berth. To be firmly back on rails, IR needs some firm actions and consummate reforms to emerge from the smoke screen of hype, optics and financial jugglery. The minister has less than three years for this so I list some ‘to dos’ for him in short and medium terms.
Begin with operating performance: Some apologists maintain now that IR is part of the central government budget, IR should not be very worried about rising pension costs. There is, however a simple principle: earn significantly more than you spend. On this front IR has slid from a spend-to-earn ratio of 65 to 80 to more than 90 now. Leaving aside such issues as wrongly projected Operating Ratio and the promised Accrual Accounting, the primary concern should be to enhance its earnings.
IR’s earnings would be a function of cost and time of delivery. Traditional commodities like coal, cement, foodgrains, POL, iron ore, fertilizers, etc., will not see any significant increments. The leads for coal have reduced over the years as the feeds to powerhouses have changed, renewables are replacing coal, and earnings have actually gone down. Similarly, pipelines are increasingly the preferred mode for POL. There is need and scope to attract new traffic in multi-modal logistics like ‘Roll on-Roll off” (Ro-Ro) of trucks, automobiles, containers for white and Exim goods, etc. Since the fixed costs of IR are high, it must earn more by reclassifying the tariffs downwards while increasing the volume carried per wagon. The fixed infrastructure on crucial routes, therefore, has to be modified on war footing to be able to carry dwarf double-stack containers, all types of trucks in Ro-Ro mode and SUVs in two-tier. This improvement in SOD (Schedule of Dimensions) is not as daunting as it appears; it only needs a short-term plan to undertake an upgrade. More Multi-modal hubs would be needed, preferably through PPP. Tariff structure would also need a relook to do away with extra charges for Over Dimensional Consignments but the likely benefits even in short term can be high.
IR had to upgrade 5000 route km of feeder routes of the Dedicated Freight Corridors(DFC) such that they would complement the DFC on which bigger and heavier wagons would run. This would enable operating of high-capacity rakes of 25t and 22.9t axle-load wagons seamlessly from end to end. DFC will have both origin and destination of traffic on DFC itself only to the extent of around 25 per cent. There is lack of clarity about the compatibility of these upgraded routes in spite of massive expenditure. Those feeder routes which are commensurate with DFC operation should be clearly identified and notified to help the customers plan their traffic of not only heavier but taller wagons like those for regular double stack containers.
Increasing the average speed of wagons would not only boost traffic but also reduce the requirement of wagons, saving precious Capex. WhenLalu Yadav as minister got heavier wagons permitted, the permissible speed was 75 km/h, later downgraded to 60 km/h, with the provision that it would be upgraded based on the experience. Since then, huge expenditure has also been made on replacement of track to higher level of 60-Kg90-UTS type but neither a thorough review has been done nor the speed of operation increased beyond the dismal 60 km/h, although all the wagons in operation are cleared for this speed. Surprisingly, even on DFC, all the wagons certified fit for 100 km/h have been cleared for operation at speeds much below 100 km/h. This defeats the very purpose of the corridor. There is a departmental warfare going on and it needs to be addressed.
If it has to attract customers, IR should also enter parcel traffic in a big way but with time-tabled trains. Many express trains on the golden quadrilateral and diagonals run with much less than 24 coaches. The available vacancy should be used for Parcel Vans for perishable and white goods traffic.
IR should design and operate commodity-specific wagons for DFC and its upgraded routes and operate them as ‘proof of concept’ to attract private transporters to pitch in after witnessing the advantages. At present IR expects them to chip in with long-term investments in wagons, in spite of attendant risks, not a very smart way to attract traffic.
Believing that investmentswould drive growth, IR has increased its Capex three-fold. Investments have impacts on working expenses too in terms interest. Has IR evaluated whether the investments werejudicious? Infrastructural upgrades like doubling/quadrupling have long-terms benefits but the absence of honest pre/post evaluation of Capex is a damaging legacy. For example, doubling of Rewari-Ahmedabad route which, with DFC opening up shortly, may not bring any additional revenue? Some test cases of major investments should be identified for an analysis to see if the returns are anywhere near what was projected?
The passenger segment is a losing proposition as IR cannot charge fares realistically due to itssocial obligation. But within the constraints, there are ways to improve earnings. One is to exploit the available margin for increased fares of air-conditioned inter-city trains, say, 10 to 35 per cent higher than at present, with Train 18 like trains, which would cut down travel time with better travel experience. The minister has, reportedly, already acted in this direction. But the initiative of operation of private trains has come a cropper due to cussed bureaucracy. This project needs to be revived in the earnest. The minister should facilitate a move towards Aluminium-bodied energy-efficient train sets. Ham-handed effort towards this, like the one by Modern Coach Factory, would not work. The project should be assigned to Integral Coach Factory (ICF), the fountainhead of coaching designs.A blue print for this, titled Train 20, is ready with them. It was stalled in 2018 due to certain vested interests but it can be revived. If IR acts swiftly,a couple of truly world-class trains can be in operation by early 2024. Let us call them Train 24.
There are tourist attractions like Kalka-Simla and DHR sections which have a huge potential to earn more, provided they are run professionally by a competent entity from the hospitality sector. Why not run it in PPP mode with a share of revenue and let all the expenditure be borne by this partner? Or unremunerative branch lines, which are a drain, may be hived off to a private party which can run trains, with fares as on IR, with but its own skeletal staff operating DEMU/Rail Bus type services.
One way to make precious revenue for IR is to get the MoUD do away with the barriers in their bid documents which favour multi-nationals and deprive IR's factories to manufacture Metro coaches. IR, particularly ICF, can supply equivalent coaches at 60 to 70 per cent of the price and this can be a win-win for Metros and IR. After all, ICF manufactures trains for Kolkata Metro and Suburban trains, with the latter subjected to harsher conditions as compared to Metro trains.
(The writer is retired General Manager, Indian Railways. The views expressed are personal.)