Railway freight: Taking the track less travelled

By: |
September 21, 2020 5:30 AM

The heart of the Indian Railways’ freight strategy should be the creation of high-volume, high-speed freight corridors, with critical mass carried in train loads. It needs to create this critical mass in partnership with other players—given roads’ role in first-/last-mile connectivity, road transport must be brought in as a partner.

Consider the Indian Railways’ lacklustre performance: Its freight loading rose over five years 2014-15 to 2018-19 at just 2.12% CAGR, and tonne-kilometres (NTKM) at only 0.26%.

Buoyed by a bright streak of rail freight loading and revenue last month, catching up with the August 2019 levels, railway minister Piyush Goyal recently hailed Indian Railways’ ‘serious efforts’ during the challenging Covid-19 days to raise its modal share in the nation’s freight transport market to 40% (from current estimated less than 30%).
Goyal spoke of customers appreciating railway managers’ outreach to them, and discounts of 5-50% offered in freight rates.

The Indian Railways’ high freight tariffs besides endemic capacity constraints on tracks and terminals, as also bureaucratic service regime, conspire to let the system wallow in only an incremental growth trajectory, far below its potential. Consider the Indian Railways’ lacklustre performance: Its freight loading rose over five years 2014-15 to 2018-19 at just 2.12% CAGR, and tonne-kilometres (NTKM) at only 0.26%.

Notwithstanding the Railways being a safe, energy-efficient, land use-efficient, and environmentally-benign mode, the rail-road mix in the country’s freight movement has developed sub-optimally. Several experts and committees recommended the Indian Railways to achieve an optimal 50% modal share by steadily raising the rail-road ratio of 35:65 in Plan XII (2012-17) to 39:61 in Plan XIII, 45:55 in Plan VIV, and to 50:50 by Plan XV. Rail share, instead of rising, has been continuously sliding—and precipitously.

For capacity increase, railways’ crucial need, the Indian Railways needed to sagely prioritise its investments and reform project management. Resources have been spread thinly on scattered projects, providing little tangible relief on congested routes or terminals. Characteristically, two DFCs, acutely critical for capacity enhancement, have languished for ten years. Seventy years ago, the Indian Railways commissioned the extremely challenging 200-km Assam Link in just 20 months.

Cessation of passenger trains during the Covid-19 crisis created a rare opportunity for the Indian Railways to dramatically reorganise its passenger business. It can have substantial sectional and terminal capacity released by drastically curtailing, if not eliminating, around 3,800 ‘regional’/sectional trains it runs daily for short distance (average 110 km) journeys. These are the services that also account for a major share in the annual loss of Rs 40,000 crore the Indian Railways incurs in passenger business. Low passenger fares compel the Indian Railways to jack up freight charges; high freight rates dampen freight volumes.

As it is, unwittingly, the Indian Railways let overall freight costs to escalate through wasteful concepts like exchange yards for large industries, and competitive departmental empire-building while providing connectivity by private sidings.

The nation’s freight pie got ever larger, but the Railways’ slice has got only thinner. The Indian Railways has remained overwhelmingly patronised by captive customers. Even in case of the nine bulk commodities, its bread and butter, its share has been dwindling. It carries a minuscule volume of the estimated 1,000 million tonne of piecemeal general goods journeying over 700 km and more. Considered preferable for containerised transport, FMCG (estimated annual market of value of Rs 4,50,000 crore) is a principal commodity group, which runs an annual logistics bill of Rs 35,000 crore. Several other prominent sectors would include automobiles, chemicals and textiles.
Today, two recurring themes reverberate across the logistics domain—digitalisation and multimodality.

The nature of freight being transported is changing fast from heavy bulk to lighter high-value goods to move in smaller consignment volumes. Speed in delivery is itself an important characteristic of product quality.

The heart of the Indian Railways’ freight strategy will be the creation of high-volume, high-speed freight corridors, with critical mass carried in train loads. It needs to create this critical mass in partnership with other players, aggregating/consolidating freight into train loads. Roads play a pivotal role for first/last mile connectivity; they need be co-opted as partners.

A major sector for the Indian Railways to focus on is the generic parcels traffic, which encompasses the express market. The Indian Railways may operate dedicated train formations conceptualised and developed by private entrepreneur/integrator analogous to envisaged private passenger train operators. Individual vans may be offered for intercity transport of freight/parcels/courier packages by fast passenger trains.

Some others may opt for dedicated space to be leased on long-term contract in VPs on such trains. Levying FAK rate, the Indian Railways may make no distinction between parcel and freight, pricing determined accordance to cost incurred and the level of service provided.

Amidst the current pandemic onslaught, the Indian Railways traffic managers overcame entrenched timidity at time-bound transit and ran on demand time-definite ‘parcel’ trains. They need to audaciously promote the door-to-door transit venture, strategically involving established integrators and logistics providers. Further, there appears potential for overnight intercity rail freight transport, like on Canadian Pacific between Montréal and Toronto, or as several European railways improvised high speed LGV train-sets to operate freight services similar to air freight carriers.

The Indian Railways may plan for overnight intercity journey of freight and documents, post-DFCs.
Along with appropriate software of policies and processes, the Indian Railways may concomitantly design and develop ancillary hardware, including a wagon for speeds about 120 km/h, with heavy loads, also when empty, like it developed new generation ‘high speed’, ‘high capacity’ parcel vans. The former senior railway engineer Naresh Kumar-designed ‘Dwarf’ container as also the standardised pallet/‘cube’ will incentivise break-bulk cargo by rail.

Now is a propitious time for the Indian Railways to prepare for the post-Covid-19 future by using the crisis to reimagine, reorient itself. Today, it’s not the big that eats the small; it’s the fast that eats the slow. The tsunami of fierce competition, volatile customer demands, rapidly evolving technologies would demand the Indian Railways’ managers to grasp the nettle—adapt its mammoth, moribund apparatus to operate in a new paradigm.

An important mandatory ingredient of the new normal will be optimising asset utilisation, accelerating asset velocity, embracing digital technologies, reducing unit cost, ensuring speed, timeliness, reliability of deliveries, and ease of doing business.

 

The author is senior fellow, Asian Institute of Transport Development, Delhi

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Covid-19 vaccine: Readying for roll-out in cities
2After losing Rs 21-trillion, time to relook the PSU policy
3New labour Codes are welcome, but for real labour reforms, laws have to ease at the state level