August , 2017
Is revival of Indian Railways in the offing?
14:54 pm

Kishore Kumar Biswas

few days ago the reporter had to face an unfortunate situation at a railway booking counter in Kolkata. He was to buy a ticket for Trivandrum. He had to opt for a break at Chennai with a gap of about two hours to catch another train. This was because there was no suitable direct train to reach his destination according to his work schedule. But the lady at the counter told him that the rule had changed for higher class passengers and he had to take separate tickets, one for Howrahto Chennai and another for Chennai to Trivandrum. This meant he had to spend several hundred rupees more to reach his destination. Why has this type of decision been taken by Indian Railways (IR)? It was said that this is an effect of the Goods and Services Tax (GST). Otherwise it may be due to its dire need to increase revenue or there may be other reasons. IR has been running at high operating ratios (OR) for quite some time. Presently, the OR is more than 96. It  means IR is spending a little more than` 96 to earn`100. In this case there will be a highly inadequate revenue surplus in the amount spent on in railway infrastructure or other development purposes. Thus, the scope for increase in development expenditure or capacity enhancement of IR is narrowed. Here lies the need for enhancing revenue.

IR is in a vicious cycle of underdevelopment

In India, passenger trains are not good revenue generators. The average passenger fare in the IR is one of the least
in the world. On the other hand, the freight charge is known to be comparable to many other countries including China.
In IR, two-thirds of the tracks are utilised by passengertrains but its revenue earning is about one-third of the
total. So there has been a cross subsidy of passengerfare of about
` 30,000 crore per annum by freight in IR. The newly formed Railway Development Authority (RDA) headquartered in New Delhi, will have a chairman and
three members. The RDA can engage experts from relevant areas. The job of RDA will also be tariff determination, ensuring fair play and a level-playing field for stakeholders and setting efficiency and performance standards. It is also to be noted that the formation of RDA has been a matter of debate amongstakeholders and observers. Over the last two decades, about 5,000 new trains have been added. Presently, passenger trains of about 9,000 are running every day. But the addition to the freight section during this period has hardly been 1,000 trains.

A visible changeover to IR from road or other mode of transportation

From an IR source, it is known that there has been a reverse trend of a section of higher class rail passengers opting for cheap plane travel. The exact estimate of this change-over is yet to be known but the trend is visible, according to IR sources. Thisis due to several measures taken by IR like introduction of some quality trains on different busy routes, emphasis on improvement in cleanliness of trains and station premises with supply of quality food and water supply there increase in safety measures, etc.

The brighter ray of hope has come recently in the freightarea. It is reported that a number of well known cement
makers have signed long-term contracts with IR for transporting cement. This has already opened the door for other bulk transports for IR. In 2016-17, IR carried 71 million tonnes of cement, which is about only 6% of the
total freight carried by IR. It is also reported that about 1/4th of the total operating cost of the cement industry is onaccount of freight and forwarding. It is expected that IRfreight service will reduce the cost of cement. It is also known that a section of steel makers are interested in using IR services on a long- term basis. Tata Steel, for example, has an MoU with South Eastern Railwayin this respect. Reports are coming from coal companies to use IR freight services in the coming days. Does such information suggest that there is a possibility of revival of IR in different ways?

IR is trying to increase its freight in different ways. A few months ago, Ghanshyam Sing (now a board member, IR) was the GM, Eastern Railway (ER). He told the reporter that ER was negotiating with the FMCG companies to use rail freight to transport their products even at a distance of 150 km or so. He pointed out that Kolkata-based FMCG companies can have cost benefits by using the IR instead of using road transport to send their products to Durgapur, Asansol and such places which are not very far from production centres. But before that there should be a better scope for freight transport facility and good management.

Huge investment in IR infrastructure

IR is gripped by a vicious cycle of underdevelopment. Its low investible surplus causes poor service. This in turn reduces business, which means low revenue and investible surplus to develop railway infrastructure. The point is to break the vicious cycle. The present government is now trying to invest a huge amount of money to develop IRs infrastructure. The government has planned to complete dedicated freight corridors as soon as possible. After the completion of the project it is expected that the average speed of the goods trains will be 75 km/ hour. This is 25 km/hour now. In such a situation the goods train service is expected to have an unprecedented growth in transport. On financing of infrastructure projects, the Life Insurance Corporation of India (LICI) has assured as much as` 1.5 lakh crore loans to IR, which has now
been on the fast track to undertake 70 capacity enhancing projects. There are other sources to finance the railway development projects.

Is IR facing severe challenge?

There are mainly three broad areas that are thought to be challenging. First is the decreasing dependence on coal, which is 70% freight earner of IR. The main reason is the plan for increasing non-coal based energy in the country. But the estimation of International Energy Association shows that India will remain primarily a coal-based energy producer for as long as 50 years more. Second, it is thought that faster implementation of national highway projects may decrease IR's earnings. But the efficiency of the railways is much higher than the roadways. Railway is six times more energy efficient than road transport. So if IR can improve its management it can overcome the roadservice threat easily. Third is the preference of higher class rail passengers for air services. But the trend has been changing and expected to change more if IR management is improved.

One can notice how IR's managerial efficiency has sought to maintain the loading target of IR in the initial quarters of FY 2017-18 when loading of coal had been decreasing due to some short-term problems. The Budget estimation of last quarters was 275.90 MT. But that has grown to 281.23 MT in initial quarters of thisFY. That has been 271.09 MT in the last year of the corresponding period. The point to be noticed is that the loading target has been more than the targeted level and it has been possible because of transport switching over to other materials in a bigger amount. This has been an example of managerial efficiency.


IR is facing a crisis but it is expected that the situation is going to change for the better as the government has taken measures to improve it. There has been a suggestion to privatise different sections of IR or corporatise it to increase efficiency. But it may be another mistake diagnosing the proper weakness. In that case the social responsibility of IR will be lost and that will affect the entire economy. If it is properly governed the revival of IR is not impossible. Some signs of change are visible too. The need is to do it properly.

Add new comment

Filtered HTML

  • Web page addresses and e-mail addresses turn into links automatically.
  • Allowed HTML tags: <a> <em> <strong> <cite> <blockquote> <code> <ul> <ol> <li> <dl> <dt> <dd>
  • Lines and paragraphs break automatically.

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.