Despite having the largest rail network in Asia, Indian Railways has not been able to make much progress. The reasons for its dismal growth are known. Union Railway Minister Suresh Prabhu has ambitious plans of expansion and capacity building. In this regard, he says that in the high density routes, there has been considerable underinvestment, resulting in congestion. The inability to introduce more trains, has impacted IR´s capacity to generate additional revenues. He talks to INFRASTRUCTURE TODAY about the financial situation of the railways, its investments plans, backlog of pending projects, digitisation plans and much more. Excerpts:
What is the financial situation of Indian Railways? You have given investment plan of Rs 8.50 lakh crore till 2019. Do you think this investment plan is adequate for turnaround of the railways? Can you please apprise us about your plans to raise further funds?
Indian Railways earns enough to meet its working expenses and pension liabilities. It also generates resources from its revenues for replacement of ageing assets, passenger amenities, traffic facilities, etc. At present, we are not able to generate enough to expand our network. In the high density routes, there has been considerable underinvestment resulting in congestion. Hence, we are not able to introduce more trains on the existing system. Naturally, this impacts our capacity to generate additional revenues. The aim of the investment plan of Rs 8.5 lakh crore, therefore, is to focus on decongestion of the network. Moreover, the Dedicated Freight Corridor should also be commissioned in 2019. In the medium term, I think the present proposed investment should be sufficient to take care of our requirements.
Traditionally, Indian Railways´ capital expenditure has been financed through internal resources and gross budgetary support from the Central Government. The rolling stock is taken on lease from Indian Railways Finance Corporation (IRFC) Ltd. This year it is proposed to explore alternate means of financing such as raising debt from insurance and pension funds, setting up financing arrangements involving the World Bank, ADB, IFC, etc. We are involving state governments and PSUs in the formation of JVs so that focused attention is available to their priority projects. We have already signed a Memorandum of Understanding (MoU) with LIC for raising Rs 1.5 lakh crore in the next five years for financing our projects.
Indian Railways has accumulated a huge backlog of pending projects worth as much as Rs 4.9 trillion based on their originally-estimated costs. How will the government raise the funds for these delayed projects?
As I had stated in my Budget Speech, Indian Railways has suffered from considerable underinvestment over the years. This has been the major cause of delay. This year we have carried out a process of prioritisation whereby longer loops, doubling projects and electrification have been given priority. The focus will be on doubling rather than new lines and gauge conversion over the next few years. The doubling projects on the high density networks would get priority. These projects should be able to generate revenues sufficient to write off the debt that the railways will be required to take in order to invest in such projects.
To improve the absorptive capacity, PSUs are being roped in to get the projects executed within a specified timeframe and cost. We are also forming joint ventures (JVs) with State Governments and PSUs so that state or sector specific projects also get executed.
China has developed a 10,000 km high-speed network, while India´s trains run at an average speed of just 55km/h. Can you please tell us about the factors that have led to dismal growth of railways?
Over the years, the investment priority has been given to roads sector as it was in dismal shape. However, we intend to gradually get back our market share by augmenting our ability to carry more. There is a realization within the railways that if we do not enhance our capacity, the growth of the economy will suffer. For instance, by 2020, it is expected that 1.5 billion tonne of coal would have to be evacuated. Today, Indian Railways transports 90 per cent of the total coal transported, which is about 660 million tonne. This would give you an idea about the capacity that needs to be created within the railways.
So far as China is concerned, it invests about 1.3 per cent of its Gross Domestic Product (GDP) in rail sector whereas our investment in the railways has been within 0.5 per cent of GDP. As per the Statistical Year Book for Asia and the Pacific 2011, in 2008, China had 6.5 km of railway line per 1000 sq km of land area whereas India had 21.3 kilometre of railway line for a similar measure. Of course, China has undertaken a lot of expansion in the last seven years, however, from the point of view of connectivity, India does not really lag behind.
Indian Railways´ contribution to national GDP stands at one per cent during last five years and it has been continuously falling while road sector´s share to national GDP has witnessed a jump at 4.9 per cent in 2012-13. Please tell us about the Railways´ plans to increase its GDP?
It is natural that if our plans for decongestion materialise, we should be able to generate much higher revenues. Not only this, the Economic Survey this year has worked out forward and backward linkages of investment in the railways. Combining the forward and backward linkages, the Economic Survey suggests a multiplier of about five of investment in the railways.
As per media reports, the Railway Ministry has approached World Bank and agencies like ADB, IFC for funds. How much have they committed? What is the progress on pension funds for railway infrastructure?
This is the second month of the current fiscal year. So, we do not have any firm commitments from them as yet. However, preliminary discussions are on to set up a financing facility with their assistance. This facility with lending from international multi-lateral agencies will be able to attract funding from pension funds as such funds are interested in safe investments.
What kind of opportunities will digitisation of Railways create?
Indian Railways is a massive organization covering the length and breadth of the country. Digitization holds enormous efficiencies in terms of information flow and monitoring. As of now, the usage of digitisation is minimal. However, it holds significant potential. For example, we own large parcels of land, which may or may not be mapped in physical terms. We hope to complete shortly the digitised mapping of these parcels of land. This will help us to have a clear idea about the land we possess and also enable us to prevent encroachments that take place on such land.
How will the ministry execute 77 projects at a cost of Rs 96,182 crore? Please give us the break-up of funds allocation for each project?
We are finalizing our implementation plan for all our sanctioned projects. The 77 projects being referred are in various stages hence, I would not be able to inform you about the funds allocated to each project. What is the current status of the implementation of two Dedicated Freight Corridor (DFC) projects on the Eastern and Western routes?
Two Dedicated Freight Corridor projects on Eastern and Western routes are under progress. In 2015-16, the civil contracts for 750 km and 1300 km are targeted to be awarded. Durgawati-Sasaram, a 55 km section of Eastern DFC is proposed to be commissioned this year. Preliminary Engineering-cum-Traffic Survey (PETS) for four other DFCs is in progress and will be completed in 2015. Action for project development or funding for East-West DFC between Kharagpur to Mumbai would be initiated. Land acquisition for the project is substantially completed.
The public-private partnership (PPP) model hasn´t been very successful in the railways. What, according to you, should be done to make PPP model work? Please tell us about the projects sanctioned under PPP?
I am aware that Indian Railways (IR) has not been able to generate resources through PPP like roads and ports. Ajay Shankar is assisting us in drawing up a framework to strengthen the PPP cell. At present the locomotive factories at Madhepura and Marhowra are under bidding stage in the PPP mode. Various models for private sector engagement are under review to make them attractive to the private sector.
In 2015-16, Indian Railways in participation with ports will undertake rail connectivity to the ports of Nargol, Chharra, Dighi, Rewas, and Tuna, thereby, generating private investments of approximately Rs 2,000 crore. Also projects worth Rs 2,500 crore are proposed to be launched through BOT or Annuity route.
Can you please tell us about the government´s strategy for ramping up of Railways capacity for handling cargo from one billion tonne to 1.5 billion tonne (BnT)?
We have prepared a detailed traffic plan and zone-wise targets have been fixed for the current year and division-wise targets are under preparation. A departmental committee has indicated that loading in 2015-16 can reach 100 million tonne (MnT), however, the current year traffic plan is built on a more conservative estimate. The loading projections have been made with the assumption that incremental loading of 85 MnT is anticipated; the break-up of which is coal 42 MnT, cement 7.3 MnT, food grains 4.75 MnT, iron ore 9.6 MnT, pig iron and finished steel 3 MnT, and container traffic 3.9 MnT. Going further, we can reach the anticipated target by focusing on investment in capacity enhancement works and preparing an operating action plan. Total coal transportation is targeted to go upto 1.5 BnT by 2019-20 from the present 612 MnT. This is our bulk commodity since the railways carries about 90 per cent of the total coal transported. By 2025, IR intends to transport 300 MnT of steel. For that, we will also require transportation of 500 MnT of iron ore, 150 MnT of coking coal and 950 MnT of dolomite and limestone.
Railway Ministry has planned to tie up with CIL for providing linkages for carrying coal across the country. Please update us on this.
We have already entered into an MoU with Coal India and Government of Odisha for evacuation of coal. However, the engagement with them is likely to grow. We intend forming a JV with them in order to give primary focus to their projects. They happen to be our main customer. We are also looking at proposals from their end regarding wagon leasing, etc.
Is Railway Ministry planning to come up with satellite terminals? How much investment is needed for each terminal?
Most of the railway terminals in big cities are located in very congested areas. We propose to develop satellite railway terminals in major cities with the twin purpose of decongesting the city as well as providing service to passengers residing in suburbs. The satellite terminals will have modern facilities for originating and terminating trains, which will also briefly stop at the existing major terminals. Ten select stations will be taken up in 2015-16 for this purpose. A detailed plan is being worked out.
After allowing FDI in rail sector including station development, installation of bio-toilets, setting up of laundries and cleaning of trains and stations, how would you envisage the growth of the railways in next five years?
It is my desire to see Indian Railways as one of the premier service providers in the country, bringing it on the global railway platform. In five years from now, we should be looking at faster trains and more passenger friendly stations and services.