An attempt is made in this article to discuss the key aspects of the Indian railways budget 2016-17 and compare the same with the vision 2020 document (prepared in 2009) as well as the five point strategy prepared by the current railways minister Mr.Suresh Prabhu to transform the Indian railways.
In December, 2009 Indian Railways have prepared a vision document, 2020. This vision document states:
- The IR (Indian Railways) future strategy, Vision 2020, assumes a substantial injection of new public finance.
- Mode share in freight 2007 to 2020 (projections)
- Railways market share in passenger and freight traffic:
- IR s share (in originating tonnage) has come down from 89% in 1951 to 30% in 2007-08.
- IR s share in passenger transport (in PKMs) has declined from 74.3 % in 1951 to 12.9% in 2004-05 whereas the Share of road has increased from 25.7% to 86.7% from 1951 to 2004-05.
- Railway network:
- In 1947, Indian Railways inherited 53,996 of route kms of rail network from the british government and in 2009 rail network stood at 64,099 kms –An increase of just 10,000 KMs in 62 years post independence. !!!
- Vision 2020 document proposes to add 25,000 kms of New Lines by 2020, supported by government funding and a major increase in Public Private Partnerships (PPPs).
- More than 30,000 kms of route would be of double/multiple lines (compared to around 18,000 kms in 2009).
- Of this, more than 6,000 kms would be quadrupled lines with segregation of passenger and freight services into separate double-line corridors.
- This includes Delhi- Kolkata, Delhi-Mumbai, Kolkata-Mumbai and Delhi-Chennai routes on which Dedicated Freight Corridors (DFC) would come.
- Maximum speed of passenger trains would be raised from 110 or 130 kmph at present to 160- 200 kmph on these segregated routes and, similarly, maximum speed of freight trains would be raised from 60-70 kmph to over 100 kmph.
As per the statement made by the railways minister in his budget 2016-17 statement – Almost all contracts for civil engineering works to be awarded by March 31st 2016; Rs. 24,000 crore contracts already awarded since November 2014 as against Rs. 13,000 crore contracts awarded in the 6 years prior.
Financial performance of Indian railways:
- Gross Traffic Receipts of the Railways went up from Rs.1,23,732.59 crore in 2012-13 to Rs.1,39,558.18 crore in 2013-14. Total Working Expenses increased from Rs.1,11,572.04 crore in 2012-13 to Rs.1,30,320.76 crore in 2013-14.
- After taking into account the miscellaneous transactions, the Net Revenue Receipts in 2013-14 were Rs.11,749.07 crore.
- Passenger Earnings formed 26.18% of the Gross Earnings, of which 6.19% was from Suburban Services, 80.81% from Express Long distance and 13.00% from Ordinary Short distance traffic.
- Operating ratio– (worryingly increasing trend during UPA-2)
- 2011-12 : 85%
- 2012-13 : 90.19%
- 2013-14 : 93.60%
As per the National Transport Development Policy Committee document prepared in 2013 at the behest of the erstwhile Planning Commission the Projections for 2032 are:
- Rail freight traffic is expected to grow at slightly more than 10 per cent in the first nine years and at close to 13 per cent in the next 10 years to reach around 6,500 billion NTKMs ( Net Tonne Kilo Metre) by 2032.
- Passenger traffic (PKM) is estimated to grow at close to 9 per cent p.a. to reach around 5,700 billion passenger kms in 2032 compared to 1047 billion passenger kms in the year 2011-12.
- Revenue per NTKM (i.e. the freight tariff) is expected to remain unchanged in real terms but revenue per PKM (passenger tariff) will grow by 4 per cent p.a. in real terms to reach a level of 54.7 paise in 2030 compared to 26 paise at present.
- Operating ratio expected to reach 84 per cent in the year 2020-21 where it will get stabilized.
- Capacity augmentation needed for Indian Railways by 2032 Rs. 18.15 lakh crores !!!
- Railways are funding most of their asset purchase (particularly the rolling stock) by availing leasing finance from IRFC (Indian Railway Finance Corporation).
- The fleet of assets leased by IRFC to Indian Railways represents over 70% of all rolling stock in operation on Indian Railways.
- At the end of 2013-14 IRFC had provided funding of over Rs. 1.15 Lakh Crores to the Ministry of Railways and other Railway entities.
2015-16-Achievements and action plan for 2016-17:
- 2015-16 – Assured funding through LIC; commissioning of 2,500 kms Broad Gauge lines; commissioning of 1,600 kms of electrification (highest ever).
- In 2016-17 – targeted commissioning 2,800 kms of track; commissioning Broad Gauge lines @over 7 kms per day against an average of about 4.3 kms per day in the last 6 years.
- This would increase to about 13 kms per day in 2017-18 and 19 kms per day in 2018-19;
- This will generate employment of about 9 crore man days in 2017-18 and 14 crore man days in 2018-19. Outlay for railway electrification increased in 2016-17 by almost 50%; target to electrify 2,000 kms.
Capacity Building for the future
- Partnerships – Cabinet approval for JVs with State Governments, 17 consented and 6 MOUs signed with State Governments. 44 new partnership works covering about 5,300 kms and valuing about Rs. 92,714 crore have been indicated in the Budget documents.
- Customer Interface – Interaction and feedback through social media & dedicated IVRS system.
- Making travel comfortable – Generating over 65,000 additional berths, installing 2,500 water vending machines; introducing ‘Mahamana Express’ with modern refurbished coaches; 17,000 bio-toilets in trains; world’s first Bio-Vacuum toilet developed.
- Ticketing – Introduced 1,780 Automatic Ticket Vending Machines, mobile apps & ‘GoIndia’ smartcard for cashless purchase of UTS (Unreserved Ticketing System) and PRS (Passenger Reservation System) tickets, enhanced capacity of e-ticketing system from 2,000 tickets per minute to 7,200 tickets per minute and to support 1,20,000 concurrent users as against only 40,000 earlier.
- Wi-Fi provided in 100 stations, to be provided in 400 more.
- Security through helplines & CCTVs.
- Safety – 350 manned level crossings closed, eliminated 1,000 unmanned level crossings, 820 ROB/RUB completed in the current year and work going on in 1,350 of them.
Other major initiatives
- Energy constitutes roughly 24 per cent of the working expenses of Indian Railways. IR accounts for close to 2.3 per cent of the country’s total electricity consumption (for example, IR utilised more than 16 billion kilowatt-hour (kWhr) electricity in 2010- 11 out of the total country’s estimated electricity consumption of 694 billion kWhr23). Annualized savings of Rs. 3,000 crore to be achieved in the next financial year itself, a year earlier than announced; achieved by procuring power directly at competitive rates using IR’s status as Deemed Distribution Licensee.
- Since 95 per cent of the trains are connected to the grid, the solar power generated can contribute to the grid, when the train is stationary. Railways have plans to generate 1000 MW solar power in the next five years. Steps are being taken to install solar plants at railway building rooftops and level crossings across the country. According to the plan, railways proposes to install solar power plants of about 8.8 MW capacity at railway stations, railway office buildings and level crossing gates throughout the country under railway funding.
- Conducted energy audits for reducing energy consumption in non-traction area by 10% to 15% – all new light provisions will be LED luminaire and all Railway stations to be covered with LED luminaire in next 2 to 3 years.
- More than 2,000 locations provided with Rain Water Harvesting facility. In place of steel sleepers on steel bridges environmentally friendly composite sleepers made of recycled plastic waste will be used over all girder bridges.
- 32 stations and 10 coaching depots have been identified for installation of water recycling plants in the coming years.
- Digital India: application of Track Management System (TMS) launched, inventory management module of TMS has resulted in inventory reduction by 27,000 MT resulting in saving of Rs.64 crore and scrap identification of 22,000 MT equivalent to Rs. 53 crore.
- Cleanliness –‘Clean my Coach’ service through SMS, ranking of A1 and A stations based on periodic third party audit and passenger feedback; waste segregation and recycling centres; ‘Awareness campaigns’; additional 30,000 bio-toilets; providing portable structures with biotoilets at all platforms of select stations for senior citizens, Divyang and women travellers; plan to explore innovative means of providing and maintaining toilets such as advertisement rights, CSR, voluntary support from social organizations.
- Travel Insurance to passengers – to offer optional travel insurance for rail journeys at the time of booking.
- Janani sewa: children’s menu items on trains, baby foods, hot milk and hot water would be made available
Five Point Strategy To Transform Indian Railways By Mr.Suresh Prabhu, the current Railway Minister
Medium term perspective
- Envisaged a total investment of Rs 8,56,020 crore between 2015 to 2019. Average capital expenditure over 2009-14 was just Rs. 48,100 crore, average growth of 8% per annum.
- 2015-16 investment would be close to double of the average of previous 5 years.
- 2016-17 CAPEX pegged at Rs. 1.21 lakh crore; implementation through joint ventures with states, developing new frameworks for PPP, etc.
Public and private partnerships
Railways will work with PSUs and private organizations to raise long term financial resources on risk sharing basis. Railways will also seek better technology from overseas.
To fund the Rs 8,56,020 crore investment, IR will approach banks, pension funds and multilateral banks.
Operating ratio of Indian Railways stood at 91.8% in 2014-15 (as against 93.4% in 2013-14). 2016-17- Targeted Operating Ratio (OR) – 92%,
Railway budget 2016-17 statement by the minister says delegation has led to compression of project sanction time to 6-8 months from 2 years earlier, key result areas identified to judge performance of GMs and DRMs, performance related MOUs signed with few Zones, to be replicated for all zones.
Many Structural Interventions are planned-
- Organizational Restructuring: proposed to reorganize the Railway Board along business lines and suitably empower Chairman, Railway Board.
- Improving the planning practices: To set up a Railway Planning & Investment Organization for drafting medium (5 years) and long (10 years) term corporate plans; identify projects which fulfill the corporate goal. Prepare a National Rail Plan to harmonize and integrate the rail network with other modes of transport and create synergy for achieving seamless multi-modal transportation network across the country.
- Consolidation: Forming a holding company of companies owned by IR.
- Investing in the future: to set up a R&D organization, a Special Railway Establishment for Strategic Technology & Holistic Advancement (SRESHTA).
- Analyzing data: a dedicated, cross functional team called Special Unit for Transportation Research and Analytics (SUTRA) would be set up for carrying out detailed analytics leading to optimized investment decisions and operations
- Innovation: by setting aside a sum of Rs. 50 crore for providing innovation grants to employees, startups and small businesses.
From the above data and budget statements one can infer that Indian Railways are making genuine efforts to expand the infrastructure, regain their lost market share in freight and passenger segments, increase the operational efficiency and enhance customer satisfaction in order to improve the overall performance.
While Indian Railways’ efficiency indicators have improved over time, they are still low when compared to global benchmarks. For example, traffic unit (addition of net tonne km or NTKM and passenger km or PKM) per employee is 0.84 for India compared to 1.4 for China, 2.0 for Russia and 15.1 for the US. In the US, 28 per cent of the railways’ revenue goes into labour costs and 20 per cent is channelized to source fuel. For comparison, in India, 32 per cent of operating revenue goes into staff wages while fuel costs eat up 18 per cent of earnings. The two nations are also similar in earning 40-45 per cent of freight earnings from coal transport alone.
While the proposed DFCs aim at regaining the major market share lost to the road transport in freight segment, there are several other areas where hidden opportunities could be exploited like-
- These DFCs could be built as elevated corridors in keeping with the pattern of habitation and the constraint of land in our country. Though the cost of elevated corridors for DFCs will be much higher it will get more than compensated by the immense potential to generate solar power on roof top of these corridors and the rain water conservation and its usage for irrigation and other purposes.
- Unlocking the hidden value in land bank: Roughly 10 per cent of the total land under the possession of Indian Railways is vacant (estimated at approximately 4,300 hectares). Total land value – Rs. 6,786.76 Crs. (2013-14). Commercial utilization of vacant railway land, not required for operational use, can generate sustainable streams of revenue to finance the growth of Railways.
- Cold storage – On account of poor warehousing and storage infrastructure, a sizeable proportion of food materials which is estimated at around 35 percent go waste in Bharat. Though Bharat is ranked second globally, in the production of fruits and vegetables, Bharat wastes more fruits and vegetables than cumulatively consumed in the whole of U.K. annually. Against a requirement of over 31 million tonnes of cold storage, India has over 5,101 cold storage units with a cumulative capacity of nearly 21.7 million tonnes, leading to a loss of about 40% of the agri-produce post-harvest. The Country approximately produces nearly 137 Million Tons of fruits and vegetables annually which accounts for 10% and 14% of the global production. Indian Railways have enormous potential to develop chain of cold storage outlets at strategic locations which will boost their freight revenues significantly. Indian railways have taken the following initiatives in this regard.
- Kisan Vision Project –
- Temperature controlled perishable (Cold storage) cargo centres through Container Corporation of India limited,(CONCOR), CWC,.( 6 locations), Central Rail side Warehouse Company ( CRWC) warehouses. To boost up rail movement of fruits and vegetables by providing temperature controlled cold storage and its aggregation and distribution from rail terminals. ( 4 warehouses)
- Indian Railways are planning to step up their annualized non fare revenues from the above mentioned sources including from parcel business to Rs. 4,000 crores by 2020.
Let us hope there will be continuity in the execution of the short term and long term plans of the Indian Railways through cost control, operational efficiency, additional revenue generation and adequate budgetary allocations in the coming years to achieve the objectives of vision 2020 and beyond.
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