This article of mine is published in Observer Research Foundation Vol V Issue 48 13 -19 May 09
http://www.observerindia.com/cms/sites/orfonline/modules/newsbrief/NewsBriefDetail.html?cmaid=16274&mmacmaid=16276&volumeno=V&issueno=48
Introduction:
The Indian railway constitutes a critical component of India’s transport network. Generally it carries passengers and freight. It is cost effective and environment friendly. The Indian railways have 1.4 million employees and 64,000 kilometre-long network. Some inherent problems like capacity constraints and constraints in the freight segment have led to a significant shift from railways to road transport. However, the railways are poised for rapid growth in capacity expansion in recent future.
The high density eastern and western corridors are already saturated in terms of line capacity utilization. The economic growth of India has put a huge pressure on the network and increased congestion in these routes.
As freight is a major source of revenue to railways, there is a necessity of drawing a roadmap for the construction and operation of the dedicated freight corridors. The committee on infrastructure in its report proposed for a corporate entity which would provide the rail infrastructure, but would not engage in freight business, thus providing non discriminatory access on payment of haulage charges by train operators. The committee is of the view that it would help large scale private investment and competition in freight operations.
So, freight is the area where the Railways need to concentrate upon from the point of view of revenue. Around 55 per cent of the freight traffic is accounted for by coal, iron ore and steel. Since the revenue per-tonne-km is almost the same for most commodities, except iron ore and steel, this means the Railways need to look for new categories of freight (those being freighted by road) if they want additional revenues. This is where the role of Public-Private Partnership (PPP) comes in.
Role of private sector in railway transportation:
The government in its effort to efficiently manage the railways system has been proposing public private partnership (PPP) model. The PPP model aims at creating a system wherein the expertise of both the sectors can be exploited. The Railways need to involve the private sector in marketing for freight services, and to complete the last-mile in the supply chain.
As proposed by experts, hub-and-spoke model may be a good option wherein the Railways will carry the goods on the hubs, that is, from one station to the other; while the private sector transships the goods from the hub to the spoke, which is from the railway station to the customers’ godown/outlet. If the Railways use this model and offer attractive rates to transporters, it will incentivise them to divert goods from pure-road to road-cum-rail.
The Railways must increase their effort to enhance container train traffic. There are currently 13 private players, apart from the Railways’ subsidiary Container Corporation of India, who are running their own freight trains and who pay a track fee to the Railways. The Railways can explore the possibility of increasing track capacity for running more freight trains and taking more load per train through better design of wagons, softer and less investment-intensive methods like better signalling, de-bottlenecking, and, where feasible, by rearranging the priority for uneconomic passenger trains.
Experts are of the opinion that a long term strategy should be drawn so as to involve the private sector in creation of dedicated freight corridor, which, of course, is capital intensive. Traffic carried by Indian Railways has exhibited buoyant growth averaging 9% per annum in case of freight and 8% in case of passengers over the last five years. Ministry of Railways (MoR) has set itself an ambitious target of carrying 1100 million tones of freight and 8.4 billion originating passengers by the end of Eleventh Five Year Plan i.e 2011-12. It also plans to reposition its rail transport services competitively to expand its presence into non-traditional segments by offering innovative transport solutions, high quality of services in terms of safe and reliable delivery and transit times as also by adding other value –added logistics services.
The DFC Concept: Weighing the pros and cons:
Notwithstanding the importance of the Indian Railways in transportation network, it is marred with inefficiency and capacity constraints. IR runs sub-urban and other passengers at below cost, transport essential commodities at a loss, run branch lines that are not remunerative and is expected to provide increasing employment opportunities to the population. There should be different parameters to distinguish commercial and social activities. Dedicated Freight Corridor (DFC) presents a good opportunity to establish an independent organization and run this as commercial venture.
In recent times, railways have been losing their competitiveness to roads. Though it has a relative advantage in natural resources and intermediary good markets with large volume of movements, it certainly lacks agility in operation.
Through DFC, it will be possible to undertake periodic performance reviews and problem solving sessions with major clients to improve the service. According to Rakesh Mohan Committee Report, the Indian Railways was rated below roadways on almost all parameters like reliability, availability, price, time, connectivity, suitability, damages, information sharing, adaptability etc. All these factors signal that an independent organization is better equipped with to handle DFC than Railways.
With the abolition of import licensing and the gradual reduction in custom duties, Indian manufacturers have to compete with foreign manufacturers not only in foreign market but also in the domestic market. To remain competitive, the Indian industry has to keep its inventories down and produce just in time concept and all this can only be possible with a backing of highly efficient logistic chain. The dedicated freight corridor will address this problem in an efficient manner with a low cost approach. The need to have a separate organization which is not burdened with the task of balancing the conflicting objectives, would be in a much better position to follow a market savvy approach.
The project is capital intensive in nature and requires certain benchmark standards to run on commercial principles. The investment requirement as ascertained by the task force was Rs 22,500 crores. The task force suggested the assistance from the Japanese government through JICA (Japanese International Co operation Agency). The SPV can also help in raising loans from the market and the idea of running the track on a commercial basis could very well inspire confidence among investors.
Some of the stakeholders identified for this purpose are the port operators including port trusts, shipping and shipping related companies, coal, iron ore and steel companies such as CCL and SAIL and NMDC and power generation companies like NTPC.
Dedicated corridor for freight or passengers?
The existing infrastructure imposed significant technical constraints limiting the payload carrying capacity of freight trains. Axle Load permitted on the tracks is 20.3- 22.9 tonnes against 25 to 37.5 tonnes per axle carried by major freight carrying systems. The length of loops provided in yards and in stations is 686 metres, limiting the length of trains to 58 BOX ‘N’ wagons. Against this, heavy haul freight systems internationally carry more than 100 wagons, with the Australian system carrying over 300 wagons per train. The moving dimensions, which is the space envelope in which the locomotives, coaches or wagons have to be designed is restricted on the Indian railways.
The envelope in other countries is larger allowing use of wagons with higher cross-sectional area permitting increased payload in the same wagon. Payload to tare ratio i.e. the payload compared to empty weight of wagon is in the range of 4-7 internationally against 2.5 prevailing in India. The envelope cannot be increased as structures on the track like stations, platforms, roofs, bridges, tunnels, road over-bridges etc. have been constructed with clearances according to the current space envelope. The Railways may not be able to cope with the growth in container traffic of around 15% annually without double stack movement. Double stack container movement would not be possible due to the physical limitation imposed by the restrictive space envelope. Increasing clearances will mean large-scale investment in raising bridges, increasing width in platform areas, increasing height in platform areas, increasing height of electrical OHE, tunnel sizes etc.
One train in Australia clears the same payload as would require 6-7 trains in India. Thus the sectional capacity gets vitiated on the Indian Railways due to extra trains being run. Making the existing tracks fit for high axle load, increasing loop length and clearing physical impediments on existing structures would not only be very difficult but extremely costly, and a big challenge in built-up urban/semi-urban areas. A dedicated freight corridor free from the technical limitations enumerated above and fit for high axle load, longer trains and larger clearances can be constructed afresh with little extra investment compared to normal track construction.
A high-speed passenger corridor needs a higher level of technology to provide the necessary safeguards towards safety, and other systems including coaches, locos and signaling etc. The high-speed train system between Mumbai and Ahmedabad that was proposed in the past was estimated to cost around Rupees 70 crores per km. For the Delhi-Mumbai and Delhi-Howrah passenger corridors, a total distance of 2800 kms, the project cost would be around Rs 100,000 crores even at 50% of the earlier estimate. Against this the corresponding freight corridors are estimated to cost Rs 22500 crores. Given the magnitude of funds required for the passenger corridors, the project cannot be given priority over the freight corridors.
The dedicated freight corridor has to be preferred over high speed passenger corridor for the following reasons:
• The investment requirement to build passenger corridor is five times that required for freight corridor
• Simultaneously significantly heavy investments would be required to augment capacity on existing networks to cater to the freight business.
• Even after these investments physical limitations imposed by the restrictive space envelope would remain
Investment for the dedicated high-speed passenger corridors would have relatively lower returns on capital, which the country can ill-afford.
to be continued…
http://www.observerindia.com/cms/sites/orfonline/modules/newsbrief/NewsBriefDetail.html?cmaid=16274&mmacmaid=16276&volumeno=V&issueno=48
Introduction:
The Indian railway constitutes a critical component of India’s transport network. Generally it carries passengers and freight. It is cost effective and environment friendly. The Indian railways have 1.4 million employees and 64,000 kilometre-long network. Some inherent problems like capacity constraints and constraints in the freight segment have led to a significant shift from railways to road transport. However, the railways are poised for rapid growth in capacity expansion in recent future.
The high density eastern and western corridors are already saturated in terms of line capacity utilization. The economic growth of India has put a huge pressure on the network and increased congestion in these routes.
As freight is a major source of revenue to railways, there is a necessity of drawing a roadmap for the construction and operation of the dedicated freight corridors. The committee on infrastructure in its report proposed for a corporate entity which would provide the rail infrastructure, but would not engage in freight business, thus providing non discriminatory access on payment of haulage charges by train operators. The committee is of the view that it would help large scale private investment and competition in freight operations.
So, freight is the area where the Railways need to concentrate upon from the point of view of revenue. Around 55 per cent of the freight traffic is accounted for by coal, iron ore and steel. Since the revenue per-tonne-km is almost the same for most commodities, except iron ore and steel, this means the Railways need to look for new categories of freight (those being freighted by road) if they want additional revenues. This is where the role of Public-Private Partnership (PPP) comes in.
Role of private sector in railway transportation:
The government in its effort to efficiently manage the railways system has been proposing public private partnership (PPP) model. The PPP model aims at creating a system wherein the expertise of both the sectors can be exploited. The Railways need to involve the private sector in marketing for freight services, and to complete the last-mile in the supply chain.
As proposed by experts, hub-and-spoke model may be a good option wherein the Railways will carry the goods on the hubs, that is, from one station to the other; while the private sector transships the goods from the hub to the spoke, which is from the railway station to the customers’ godown/outlet. If the Railways use this model and offer attractive rates to transporters, it will incentivise them to divert goods from pure-road to road-cum-rail.
The Railways must increase their effort to enhance container train traffic. There are currently 13 private players, apart from the Railways’ subsidiary Container Corporation of India, who are running their own freight trains and who pay a track fee to the Railways. The Railways can explore the possibility of increasing track capacity for running more freight trains and taking more load per train through better design of wagons, softer and less investment-intensive methods like better signalling, de-bottlenecking, and, where feasible, by rearranging the priority for uneconomic passenger trains.
Experts are of the opinion that a long term strategy should be drawn so as to involve the private sector in creation of dedicated freight corridor, which, of course, is capital intensive. Traffic carried by Indian Railways has exhibited buoyant growth averaging 9% per annum in case of freight and 8% in case of passengers over the last five years. Ministry of Railways (MoR) has set itself an ambitious target of carrying 1100 million tones of freight and 8.4 billion originating passengers by the end of Eleventh Five Year Plan i.e 2011-12. It also plans to reposition its rail transport services competitively to expand its presence into non-traditional segments by offering innovative transport solutions, high quality of services in terms of safe and reliable delivery and transit times as also by adding other value –added logistics services.
The DFC Concept: Weighing the pros and cons:
Notwithstanding the importance of the Indian Railways in transportation network, it is marred with inefficiency and capacity constraints. IR runs sub-urban and other passengers at below cost, transport essential commodities at a loss, run branch lines that are not remunerative and is expected to provide increasing employment opportunities to the population. There should be different parameters to distinguish commercial and social activities. Dedicated Freight Corridor (DFC) presents a good opportunity to establish an independent organization and run this as commercial venture.
In recent times, railways have been losing their competitiveness to roads. Though it has a relative advantage in natural resources and intermediary good markets with large volume of movements, it certainly lacks agility in operation.
Through DFC, it will be possible to undertake periodic performance reviews and problem solving sessions with major clients to improve the service. According to Rakesh Mohan Committee Report, the Indian Railways was rated below roadways on almost all parameters like reliability, availability, price, time, connectivity, suitability, damages, information sharing, adaptability etc. All these factors signal that an independent organization is better equipped with to handle DFC than Railways.
With the abolition of import licensing and the gradual reduction in custom duties, Indian manufacturers have to compete with foreign manufacturers not only in foreign market but also in the domestic market. To remain competitive, the Indian industry has to keep its inventories down and produce just in time concept and all this can only be possible with a backing of highly efficient logistic chain. The dedicated freight corridor will address this problem in an efficient manner with a low cost approach. The need to have a separate organization which is not burdened with the task of balancing the conflicting objectives, would be in a much better position to follow a market savvy approach.
The project is capital intensive in nature and requires certain benchmark standards to run on commercial principles. The investment requirement as ascertained by the task force was Rs 22,500 crores. The task force suggested the assistance from the Japanese government through JICA (Japanese International Co operation Agency). The SPV can also help in raising loans from the market and the idea of running the track on a commercial basis could very well inspire confidence among investors.
Some of the stakeholders identified for this purpose are the port operators including port trusts, shipping and shipping related companies, coal, iron ore and steel companies such as CCL and SAIL and NMDC and power generation companies like NTPC.
Dedicated corridor for freight or passengers?
The existing infrastructure imposed significant technical constraints limiting the payload carrying capacity of freight trains. Axle Load permitted on the tracks is 20.3- 22.9 tonnes against 25 to 37.5 tonnes per axle carried by major freight carrying systems. The length of loops provided in yards and in stations is 686 metres, limiting the length of trains to 58 BOX ‘N’ wagons. Against this, heavy haul freight systems internationally carry more than 100 wagons, with the Australian system carrying over 300 wagons per train. The moving dimensions, which is the space envelope in which the locomotives, coaches or wagons have to be designed is restricted on the Indian railways.
The envelope in other countries is larger allowing use of wagons with higher cross-sectional area permitting increased payload in the same wagon. Payload to tare ratio i.e. the payload compared to empty weight of wagon is in the range of 4-7 internationally against 2.5 prevailing in India. The envelope cannot be increased as structures on the track like stations, platforms, roofs, bridges, tunnels, road over-bridges etc. have been constructed with clearances according to the current space envelope. The Railways may not be able to cope with the growth in container traffic of around 15% annually without double stack movement. Double stack container movement would not be possible due to the physical limitation imposed by the restrictive space envelope. Increasing clearances will mean large-scale investment in raising bridges, increasing width in platform areas, increasing height in platform areas, increasing height of electrical OHE, tunnel sizes etc.
One train in Australia clears the same payload as would require 6-7 trains in India. Thus the sectional capacity gets vitiated on the Indian Railways due to extra trains being run. Making the existing tracks fit for high axle load, increasing loop length and clearing physical impediments on existing structures would not only be very difficult but extremely costly, and a big challenge in built-up urban/semi-urban areas. A dedicated freight corridor free from the technical limitations enumerated above and fit for high axle load, longer trains and larger clearances can be constructed afresh with little extra investment compared to normal track construction.
A high-speed passenger corridor needs a higher level of technology to provide the necessary safeguards towards safety, and other systems including coaches, locos and signaling etc. The high-speed train system between Mumbai and Ahmedabad that was proposed in the past was estimated to cost around Rupees 70 crores per km. For the Delhi-Mumbai and Delhi-Howrah passenger corridors, a total distance of 2800 kms, the project cost would be around Rs 100,000 crores even at 50% of the earlier estimate. Against this the corresponding freight corridors are estimated to cost Rs 22500 crores. Given the magnitude of funds required for the passenger corridors, the project cannot be given priority over the freight corridors.
The dedicated freight corridor has to be preferred over high speed passenger corridor for the following reasons:
• The investment requirement to build passenger corridor is five times that required for freight corridor
• Simultaneously significantly heavy investments would be required to augment capacity on existing networks to cater to the freight business.
• Even after these investments physical limitations imposed by the restrictive space envelope would remain
Investment for the dedicated high-speed passenger corridors would have relatively lower returns on capital, which the country can ill-afford.
to be continued…
Posts
No comments:
Post a Comment