Derailing growth engine

There is a lot in common between India and China to compare in terms of development. There is a healthy competition between the two nations to outsmart each other. But how far does India stand up to the competition from China. Let us draw parallels between the nations in terms of railways.

In 1945, China had 27,000 km of rail track. When India got Independence, India had 53,596 km of track; thanks to the British! How do they compare today? Chinese Railways now has over 90,000 route kilometres. By contrast, Indian Railways has stagnated at 65,000 route kilometres of network. Chinese Railways has by far the highest traffic density. It is 10.5 times the world’s average. Its output per locomotive, per freight car, per passenger coach is among the highest. Chinese Railways track structure is being constantly upgraded. It has emerged as a strong manufacturer of railway equipment as much as a burgeoning market for it. By 2020, China will potentially be the global leader in rail technology.

Now, where do we stand? Around 400 projects of the railways are pending for three decades and there are high-cost overruns of around a lakh crores, which the CAG has pointed out. Estimated requirement is over Rs 2 lakh crore. The allotment in successive budgets is meagre. Completion of a project will yield rich dividends. For instance, the Karimnagar– Nizamabad new line was sanctioned way back in 1992, but is still not commissioned. If completed, the Peddapalli- Secunderabad route gets decongested of 25 per cent freight trains. This spared path can enable increase of speed of express trains. The freight traffic stands to benefit with around 70 per cent reduction in running time, thereby increase in wagon turnaround substantially. So also the industry gets the benefit of quicker delivery. It is estimated that the cost of a project can be recovered in 5 to 6 years time.

The railway tracks are saturated a lot, leaving little space and time for maintenance, which if neglected, affects safety. Third lines have to be laid. Lot of benefits can accrue from this. The speed of express trains can be increased from the current 50-60 kmph to 100-120 kmph. The goods trains running at an abysmally low 20 kmph can be speeded up. Such is the huge potential.

The Sam Pitroda Committee report 2012 wanted modernisation of the Railways at a cost of Rs 5.69 lakh crore. The Anil Kakodkar Committee recommended revamping of safety at a cost of Rs 1 lakh crore, which consisted of improving the signalling system and removal of all manned and un-manned level crossings, among others. The East and West Dedicated Freight Corridors are crying for a sum of Rs 1 lakh crore. We need more coach and loco-manufacturing units to cater to increased traffic, which again requires huge investment.

Several committees have now been set up, prominent among them is the Bibek Debroy committee to go into funding patterns, restructuring of the Railway Board. Posting IAS personnel on the top of the Board may lead to catastrophe, because railways is extremely complex technical industry, which needs Technocrats to guide through.

The railways thus requires several lakh crores of rupees for development. It is contemplated to get the money through Public Private Partnership (PPP) and Foreign Direct Investment route.

The 10th Plan projected 20 per cent of the expenditure through PPP, but less than 1 per cent only materialised. The 11th Plan also was not successful, as only 5 per cent expenditure had come through as against projected 35 per cent. The 12th Plan has set ambitious target of Rs 1 lakh crore which implies Rs 20,000 crore a year. But the materialisation is only Rs 4000 crore in the last two years. Several coach and loco factories were set up on PPP lines in Rae Bareli and Madhepura among others. Even though global tenders were called eight years ago, no production has started till now. Now the Railways is forced to take up the projects with loans from the World Bank.

The story of the 22.7 km Delhi airport Metro line, a project which Reliance Infrastructure’s subsidiary Delhi Airport Metro Express Private Ltd (DAMEPL), washed its hands off a month ago with great difficulty. Both the parents — the Delhi Metro Rail Corporation (DMRC), which built the civil structure and spent over half of the Rs 5,700-crore project cost and DAMEPL, which had brought in the rolling stock and accepted to run it for 30 years — are unwilling to operate the Metro rail service as they found the returns on their investments were not up to their expectations.

These are facts that needs to be reflected upon and lessons need to be learnt, more so, because the Government is pushing for many more such projects. The private players come in not just for profits, but for super profits as also instant profits. They would not wait for the long gestation period, the railways projects takes.

There are fears that FDI would be inducted into existing activities for instance the electric loco sheds at Kazipet and Ludhiana. The FDI eyes on existing coaches, loco manufacturing and maintenance units which tantamount to take over of those activities by private players.

To take recourse to PPP and FDI would mean cost escalation with the burden passed on to the freight and travel customers. Indian Railways is a proud transporter for common man. It should not be converted into a costly system and get out of reach for the common folk. The Mumbai Metropolitan Region Development Authority (MMRDA) charged Reliance Infrastructure (R-Infra)-led Mumbai Metro One Private Limited (MMOPL) for violation of the agreement on fare structure. It was agreed to fix Rs 9, Rs 11, Rs 13 whereas the MMOPL fixed Rs 10, Rs 20, Rs 30, Rs 40 instead, which is a huge increase. Even now, the British Rail cancels train services from London, when there assured passengers do not board!

Much is said of high operation ratios in railways. The productivity has increased five times over the last twenty years. Even the proportion of wages to the expenditure has come down. Though all these were done by lot of squeezing. Employees are made to work far above eight hours period. Twelve hours working in several activities still exists. The running staff, which is the prime movers of the trains, work up to 16-20 hours is a common feature. The coaching running staff virtually works every day! This also affects the safety due to fatigue. Two lakh vacancies exist today. Such a position was reflected in the Anil Kakodkar report, which then recommended to fill up all the vacancies in a 6-month period.

Everyone talks of treating the Indian Railways as infrastructure. The Unions have therefore suggested that huge investment should be forthcoming from the government itself. In China, the government pumps in billions of money into the railways and directs its expansion. Our leaders have pointed out that over Rs 2 lakh crore non-performing assets are due from big corporates. Every year more that Rs 5.5 lakh crore relief are granted to the big business. Loans can be taken from certain cash rich PSUs. The government should find resources through such sources and go for big ticket investment in railways. The railways can thus become a catalyst for engine of growth.

By: K Sivakumar