At present, roads cater to 85% of passenger and over 70% of the freight traffic. The reasons for this shift are manifold. Transport of goods and peoples being time- sensitive, consumers are increasingly demanding convenient, reliable, faster, and safe services. Road transport has the advantage of being user-friendly in terms of providing greater flexibility and door-to-door service. Further, the sector is going to become even more attractive with tremendous improvements in the road network that are expected under the Rs 540 billion National Highway Development Project (NHDP) being undertaken by the National Highways Authority of India (NHAI).
The project envisages connecting the four metropolitan cities as well as the North-South and East-West corridors. Connectivity to 10 major ports is also being improved as part of the NHDP. It is set to bring about a change in the road commuting standards in the country with average speeds expected to rise to about 60 km per hour on the new four-lane highways.
The strengthening and widening of the national highways is also likely to promote the use of multi axle vehicles (MAV). MAVs require a minimum of two lane pavement and adequate geometrics and load bearing capacity for safe movement, which NHDP would provide. The improvements in road quality will translate into reduced costs. Due to rough roads, it has been reported that maintenance cost of the vehicles in our country is 40 % higher compared to Europe and America. The likely improvement in fuel efficiency of all vehicles due to this project will also be beneficial in terms of lower tail pipe emissions, lesser ambient pollution levels and hence, health benefits. Railways, on the other hand, is currently grappling with a number of problems like financial viability, operational concerns etc.
Indian Railways is burdened with discharging social obligations while at the same time it is expected to operate on commercial lines. This has manifested itself in passenger fares being kept low through cross subsidy from the freight business. Within the freight sector also, essential commodities have been historically cross-subsidised by the remaining freight business like steel, cement, petroleum products, and other non-bulk freight. Moreover, these rates are determined centrally by the Railway Ministry and are not entirely in tune with prevailing market dynamics.
Railways have attempted to improve its user-friendliness through containerisation, which is handled by Container Corporation of India (Concor). However, it has not been very successful in improving the market share of Railways and high freight charges are attributed to be one of the main reasons for this. Further, there is very little emphasis on technology upgradation. In freight business, in particular, technology upgradation is essential for revenue growth.
Another issue is that being a monopoly, Railways suffers from monopoly-induced inefficiencies. Its complacency is of a much higher order than that witnessed in the road transport sector. Although, in the past few Budgets, some initiatives have been taken to restore the market share of the Railways, these efforts are mostly piecemeal in nature. One of the important initiatives taken to develop the Railways is the National Rail Vikas Yojana, announced by the Government in 2002. The aim of the project was to augment rail services on all high-density routes. Interestingly, all the routes under this project run parallel to the NHDP. However, the total investment for the Rail Vikas Yojana is much lower (Rs 150 billion) in comparison to the NHDP.
Moreover, there is an additional allocation of Rs 400 billion for road projects, over and above the NHDP. Hence, the Rail Vikas Yojana is not expected to significantly impact modal shares in the transport sector. In the absence of any change in the way Indian Railways operates and given the inherent advantages that the road sector enjoys, the shift towards roads is likely to continue.
This increasing share of road transport is a cause for concern. The impacts of this on the economy, particularly energy consumption, are likely to be severe given that the Railways are a more fuel-efficient and environmentally friendly mode of transport.
The writer is Research Associate, Teri