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Indian Railways – On the Path to Reform

Indian Railways

After the Railway Budget was subsumed into the General Budget, the discussion on the state of Indian Railways has somewhat muted. However, that has not reduced the significance of Railways for the Narendra Modi government. Instead, a scan through the relevant sections of the Economic Survey 2019 show a significant positive change in various aspects of the performance of the Railways that have been happening over the past few years. Further, the Budget speech of the Finance Minister not only hints as large projects- it also identifies steps towards the beginning of the reform of one of the world’s largest train networks.

Trends On Increasing Revenue

Revenue Earning Freight loading during 2018-19 was 12,215 lakh tonnes, a 5.34 percent increase on 11,596 lakh tonnes for 2017-18. This is a positive step, since freight loading generates a significant chunk of the revenue for the railways. Passenger fare income has also seen a positive jump, thanks to the various reform measures that have taken place around it. Between 2017-18 and 2018-19, an increase of 1.85 per cent in passenger rides was observed on similar lines as freight loading.

Chart 1: Revenue Earning Freight loading Originating traffic (lakh tonnes) (excluding loading by Konkan Railways)

Chart 2: Passengers originating (in lakh) and Passengers Earnings ₹Crores) (includes Metro Railway/ Kolkata)

Safety Is Top Priority

Another important highlight has been safety with respect to railways. During 2018-19, consequential train accidents decreased from 73 to 59; it stood at 41 between April – October 2019. The elimination of unmanned level crossing accidents and the sharp decline in derailment related accidents stand out as a feather in the government’s cap.

Chart 3: Rate of occurrence of rail accidents

Cleanliness And Modernization

Cleanliness Campaigns under Swachh Bharat Abhiyan were launched by Indian Railways on October 2, 2014. Since then, over 2 lakh coaches today have bio-toilets, while mechanized cleaning contracts have been awarded for 940 stations across India. Moreover, 75 stations have received ISO 14001 Environment Management System certification, clearly showing the way the wind blows.

Modernization of Railway stations in Indian Railways is an on-going process, pursued with aggression. 1,253 stations have been identified for development under Adarsh Station Scheme and are planned to be developed by 2019-20. A dedicated SPV, Indian Railway Station Development Corporation (IRSDC) Limited has been set up to carry out modernization of railway stations. IRSDC is working on modernization of many stations on PPP mode.

NIP Committed To Reforms; Budget Endorses It

Within the National Infrastructure Pipeline (NIP), the government has highlighted a comprehensive roadmap for development. Within this roadmap, steps towards reform and liberalization of the sector have also been identified, which include the following:

  • Up to 30% of net cargo volumes and 500 passenger trains privatised
  • 30 of 750 stations privatised
  • Rolling stock from the private sector
  • Over 40% modal share of railways in freight traffic
  • 100% of the existing railway network electrified
  • Improved customer experience with high quality amenities, modern stations and quality catering

These commitments have been identified by the Economic Survey 2019, which has noted how ₹13.7 lakh crore investments are needed in the space alongside the necessary reform measures on such issues as developing a robust bond market for infrastructure companies, speedy resolution of infrastructure disputes, optimal risk sharing through better and balanced PPP contracts, and sanctity and enforceability of contracts.

Several steps in that direction reiterate what the government has been talking about the Railway modernization and reform. Private sector participation in the freight loading segment has been announced via PPP mechanism. The government has proposed to build “Kisan Rail” cold supply chain for perishables, inclusive of milk, meat and fish. Further, the Finance Minister has announced the redevelopment of four stations with the help of the private sector.

The government has reiterated its commitment to 100% railway electrification, noting how it helps to save on fuel costs. For the year 2019-20, a target of 27000 Km of tracks has been put out.

On the operation of trains, one can also see intentions of bringing in efficiency and competition. The process of inviting private participation for the operation of 150 passenger trains would be done through PPP mode has been specified by the government. To this end, the Economic Survey 2019 has highlighted that a dedicated SPV, Indian Railway Station Development Corporation (IRSDC) Limited has been set up to carry out modernization of railway stations. IRSDC is working on modernization of many stations on PPP mode. It has also highlighted very clearly the intention of introducing more private trains like the Tejas Express that connect iconic tourist destinations.

All of this is driven by the need for optimization of costs, a specialty of the private sector. This was also acknowledged in the NIP, which envisages 12% of all projects to be executed in the Railways sector. The ultimate objective of the government of this term, i.e. the promotion of Ease of Living for all its residents, can only be achieved when optimal value can be derived from all stakeholders of the economy.

The Railways has certainly seen improvements under the Modi government, and the Economic Survey has highlighted the four pillars alongside the NIP’s vision for the Railways, embedded in reform and modernization. This budget has set the ball rolling with its specific announcements, and we can certainly expect more to come on the path to a robust, comfortable and efficient railway network expansion that benefits everyone.

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