1. Rail Budget: Privatisation key to modernising railways

Rail Budget: Privatisation key to modernising railways

Indian Railways must be empowered to function independently

Updated: February 23, 2015 9:25 AM
Indian Railways. Rail Budget

rail budget 2015-16, rail budget 2015, rail budget 2015 date, Railway budgets, Narendra Modi, Narendra Modi news

Railway budgets are usually a staid affair but this year’s railway budget, due to be tabled in Parliament on February 26, is expected to unfurl a series of much-needed reforms. This will be the first full railway budget of the Narendra Modi government and hopes are already running high that the document will contain innovative and out-of-the-box plans to turnaround railways and modernise the 63,000-km network and its supporting infrastructure.

Long-term, realistic vision needed

Indian Railways needs a long-term realistic vision and the concomitant organisational structures required to deliver passenger and freight services in line with customer expectations. Given the fact that we now have a stable government at the Centre, there is perhaps no better time than now to present a long-term vision, as well as the structural reforms required to achieve that vision. The current functional structure of the Railways is geared for an inward looking, production-oriented organisation. The performance indices and organisational structure foster unhealthy competition. The government needs to decisively put a stop to this by establishing well-empowered cross-functional teams to deliver on key outcomes in a time-bound manner. Separation of the ministry of railways and Indian Railways, while empowering the latter so that it has the operational flexibility to run as an efficient institution independently, is another key reform that begs implementation.

Dedicated freight corridors

The railways has been consistently losing market share in goods transportation to the roads sector as most of the existing tracks along the golden quadrilateral, which carries the majority of freight and passenger traffic, have become super-saturated. While it is working on implementing eastern and western dedicated freight corridors (DFC),these are unlikely to be operational any time soon, given the challenges in execution. Completion of DFCs is vital to the growth of the economy and to push revenue from rail freight, which has only doubled since FY02 to a little over 1,000 million tonnes. The budget for FY16 should lay out a clear timeline for getting these freight corridors operational. Simultaneously, by separating freight stream from passenger stream, railways can consider upgrading passenger services and rationalise cross-subsidisation between the two.

Securing safety

The safety record of the railways, which ferries nearly 25 million people every day, is also a cause of concern. The budget must step up investments on technology to make signalling systems more robust, introduce crash-resistant coaches, and streamline processes to bring down human intervention. The LHB designed coaches used by the Railways for its premier Rajdhani and Shatabdi trains are considered one of the safest. The advantages of LHB coaches include better fire-retardant ability, anti-toppling features, sleek ergonomics and higher service life compared to conventional ones. However, even the LHB technology is over 15 years old and the time has come to introduce new technology/systems. Similarly, automatic signalling has been provided on 2,290 route km on the high density network while work on another 1,750 route km is in progress. However, this is just a fraction of the entire network and needs to be taken to larger part of the rail network to bring down accidents.

Towards high-speed trains

The time has also come for the railways to unveil a detailed plan for introducing high-speed trains in India (with a top speed of 300-350 km per hour). While last year’s budget announced the first high-speed project between Mumbai and Ahmedabad, the budget should outline a work schedule and budget & financing sources for this mega project. Several sections getting earmarked for high-speed, along with implementation timelines, will help corner private investments. India can also tap into Europe’s vast experience in running high-speed trains like the AGV/TGV, along with the necessary technology. AGV is the first very-high-speed train to be entirely designed for an international market while fully taking into account environmental and safety concerns at speeds of up to 360 km/h. It will perhaps help if the railways launch a separate arm for executing high speed train projects that take care of design, financing and setting up of these dedicated networks.

Privatisation is key

While the railway minister has categorically ruled out privatisation of railways, the backbone of India’s transportation network still needs dollops of investments for its modernisation and expansion. Railways must learn to effectively use its huge land bank that can generate sizeable revenues. Opening up of the sector to foreign investment is a step in the right direction to fund expansion and modernisation programs. In the past, a number of global companies have been associated with railways for several decades and have contributed immensely in areas like signalling and manufacturing of coaches, besides offering an array of services for integrated urban transit systems. Some of the key companies have fully operational manufacturing as well as engineering facilities in India, in line with the government’s Make-in-India vision. Going forward, foreign investment, either through FDI or PPP will be critical in augmenting facilities and setting up new projects. However, to ensure that investments flow in, the budget must earmark areas for FDI, lay down clear norms, and allow investors the freedom to design and execute projects. Further, an Independent Railway Authority can be set up to oversee adherence to safety standards as well as tariff fixation.

The Indian Railways, which binds the nation into one with its 1.5-million-strong workforce, needs to be made world-class with better services, faster trains, more connectivity, and safer journey. This year’s rail budget should therefore talk of ideas, their implementation and lay down precise deadlines and not simply present a laundry list of announcements that further burden the existing network.

By Bharat Salhotra

The author is managing director (transport business), Alstom India

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