India eyes FDI to revive sinking railway sector
India eyes FDI to revive sinking railway sector - Newspaper - DAWN.COM
UNTIL a few years ago, travelling in a non-air-conditioned sleeper compartment of any express train of the Indian Railways was a joyful exercise. One could experience the vast countryside and the changing landscape, as the train hurtled through different states, even as one enjoyed the unfolding scenario from the relative comforts of the train.
But how things have changed, and for the worse. Today, it is often a nightmare to travel even in air-conditioned coaches of Indian Railways. Security is virtually non-existent, hygiene is an unheard of concept in most trains, and even prestigious services such as Shatabdi, Rajdhani and Duronto are losing their credibility, as hordes of unruly passengers — most without reservations and some without tickets — enter compartments and inconvenience the paying passengers.
Railway and security officials are conspicuous by their absence and there is no one to check the hooliganism. Toilets in most trains stink, and safely ensconced within the curtains, bedsheets and blankets provided by the railways are bugs and cockroaches. And at night, rats and other pests have a free run, even in air-conditioned compartments. Much of the food served in the trains is inedible.
Indian Railways, the 160-plus-year organisation, which carries more than 23m passengers every day, has been in a state of continuous decay, as ministers and politicians have ravaged its finances. Railway ministers have for years been announcing non-viable projects in politically important constituencies, introducing trains to their hometowns, without even studying the viability of the new launches.
And fears of alienating voters has prevented governments from raising fares, even adjusting for inflation and making provisions for increased wages to the army of railway employees. Consequently, railway finances have haemorrhaged over the decades.
Reformist railway ministers have been unceremoniously dumped in the past. When Suresh Prabhu, a chartered accountant, took over as railway minister last year, replacing an ineffective politician, there were hopes that the Narendra Modi government would finally be able to bring about much-needed changes in the organisation.
But while Prabhu draws up ambitious — often unattainable in the immediate future — plans and focuses on pie-in-the-sky projects, passenger services on Indian Railways continues to deteriorate. Safety too has taken a beating, with more than eight major accidents — including derailments and collisions — occurring so far this year.
Government leaders, including Prabhu, however, talk only about mega projects that will cost a fortune. One of the most bandied about is the concept of bullet trains. At a time when even fast express trains are unable to cross speeds of 100kmph, politicians are talking about introducing ‘bullet trains,’ speeding at 350kmph between Indian cities.
Japan and China are keen to participate in such projects. According to A.K. Mittal, chairman, Railway Board, while several players are offering high-speed technology, it is only Japan that has come forth with technology and funding (it is willing to extend soft loans covering 80pc of the cost at an interest rate of less than 1pc).
But it has finally dawned on politicians that bullet trains come at a huge cost — the one being talked about, a 500km corridor between Mumbai and Ahmedabad, will cost about $15bn — and that passengers wouldn’t be able to pay the stiff fares. They have started scaling down the ambitions. Railway officials now talk of high-speed and semi-high speed trains that will zoom at 160kmph.
The soon to be launched Gatimaan express, a semi-high-speed train, will travel at a maximum speed of 160kmph, covering the distance between Delhi and Agra in 105 minutes.
THE NDA government has two ambitious railway projects; one relates to a proposed diamond quadrilateral of high-speed railway corridors, and the second is the dedicated freight corridors project, launched by the United Progressive Allgovernment a few years ago.
The quadrilateral covers four corridors — Mumbai-Delhi, Mumbai-Chennai, Delhi-Kolkata and Delhi-Chennai. Recently, the government firmed up the international consortia that will undertake technical feasibility studies for these high speed rail corridors.
While the quadrilateral is still at an early stage, the dedicated freight corridors project is finally moving at a faster pace. The Rs820bn project — covering the western corridor (from Dadri near Delhi to Mumbai) and the eastern corridor (from Ludhiana in Punjab to Dankuni in West Bengal) — is progressing rapidly.
Next month, the first stretch of the eastern arm, a 56km corridor in Bihar, is likely to be commissioned. The freight corridors envisage separating freight and passenger trains, enabling faster movement of the billion-tonnes of cargo handled every year, which brings in huge revenues for the railways. The Japan International Cooperation Agency is funding the western corridor, while the World Bank is financing the eastern one.
The NDA government has also opened up the railways sector for foreign direct investment (FDI). This is also part of the government’s Made in India initiative, which plans to boost the manufacturing sector.
Two global majors — General Electric and Alstom — have been awarded contracts worth Rs400bn for setting up two locomotive manufacturing factories in Bihar. The two plants will start supplying 200 locomotives — with a capacity of 6,000HP and 12,000HP — every year. At present, Indian Railways operates locos with a capacity of 4,000-6,000HP.
With the dedicated freight corridor getting ready, the railways would need hundreds of new locos to operate the freight trains. At present, it has more than 10,000 locomotives to haul passenger and freight trains. Last financial year, Indian Railways inducted about 650 locomotives, manufactured by state-owned workshops. Over the next two years, the annual production of locos is expected to almost touch 1,000.
Other plans on the anvil include setting up ‘world-class railway stations,’ beefing up the IT infrastructure and setting up a Rs1.1tr special fund to finance the new expansion. The government, however, has failed to bring in legislation for setting up an independent tariff authority to fix passenger fares and freight rates
And real reforms would roll in only when the government unshackles the organisation from the clutches of the ministry, providing autonomy to the various railway zones and making each one of them a profit centre.
Published in Dawn, Business & Finance weekly, November 30th, 2015
@anant_s
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