Infrastructure Today Magazine | “We are contemplating moving into total logistics”

“We are contemplating moving into total logistics”

Cover Story / Jul 01, 2018

Sanjay Gupta is the youngest Chairman & Managing Director in the 28-year history of Konkan Railway Corporation (KRCL). In an exclusive interaction with INFRASTRUCTURE TODAY at KRCL headquarters in Belapur, Navi Mumbai, Gupta informs that not only is the company on the lookout for more new projects within India and overseas, but also is planning a logistics arm for point-to-point delivery of cargo.

It was in March 1993 that the maiden trial run happened on the Konkan Railway between Mangaluru and Udupi. Twenty-five years on, how has the first major expansion by the Indian Railways in post-Independent India been a game changer for the historic Konkan region?
The Konkan Railway has been a game changer in many ways. For a civil servant in Maharashtra, a posting in Ratnagiri or Sindhudurg was once considered a punishment because travelling to those places was quite a task. But now you have people from the Konkan region working in Mumbai travelling home on weekends. Some of our trains like Konkan Kanya and Jan Shatabdi run to full capacity almost every day. Therefore, the railway has opened up the region to people by providing a fast and safe mode of transport. Even after the construction of four-lane highways, the railway would still be the fastest means to travel through the region because of the hilly terrain. Another important thing that has happened is improvement in connectivity to coastal Karnataka with the journey time to Mangaluru being cut down drastically. Similarly, connectivity to Kerala has also improved. In Goa, the number of tourist arrivals has gone up to 20 times!

Despite the innumerable challenges such as the unique topography of the region and uncertain weather, the Konkan Railway was completed in record seven years’ time without KRCL making any demands. In hindsight, what were some of the major learnings for the country’s infrastructure sector from the project’s successful execution?
The funding was a mix of the federal and state government financing. About 20–23 per cent of the total cost was in the form of equity from the governments and the rest was through borrowings. This was a very tough break-up of debt–equity. A little more equity was required in the initial stages, but we managed somehow. The public also contributed in terms of tax-free bonds, and some capital was raised from banks. Over the years, the federal and state governments have given additional equity for expansion. The railway is a public service and hence running it is very different from operating a factory.

What are some of the major capex projects proposed to be undertaken as a part of `49.80 billion capacity augmentation?
The traffic was very less when the Konkan Railway was completed. One of the important items for the throughput of traffic is the inter-station distance. We had missed out some stations in between to reduce the cost of getting the line through. Now that traffic has picked up, we can build those stations. Then there are certain sections that are continuously graded, where we will build stations or take up doubling of the track. Since we have more traffic between Mumbai and Madgaon, we have planned more works to remove bottlenecks. Subject to approvals, we intend to start construction after achieving financial closure towards the end of 2018–19 fiscal.

Are you looking at offering your engineering and construction expertise to overseas markets, especially in the developing economies?
We would like to do that since the expertise is readily available with us. When the Konkan Railway was being built, a lot of civil engineers were inducted. A few years down the line, we got the Jammu and Kashmir project and were able to utilise the services of those engineers there. We now have a set of highly-experienced senior civil engineers who can take up leadership roles in any construction project. We were shortlisted for a railway project in Oman. We were also shortlisted in Saudi Arabia for an operation and maintenance (O&M) project. We are also in touch with the Ministry of External Affairs for a government-to-government project in Africa and South East Asia. Since KRCL operates a rail network, we are available to provide both consultancy and O&M.

Tell us more about the recently inaugurated multi-modal logistics park developed by KRCL and CONCOR under a MoU at Balli in South Goa. Also, what new facilities are likely to get added there going forward?
Freight is our bread and butter and we are constantly working towards increasing its carriage. We have identified Balli for the creation of a terminal, but it is not a fully equipped container freight station (CFS). The domestic movement of cargo can happen from there, but not exports, as the process for getting clearances is yet to be completed. Therefore, CONCOR is working to organise that. There is a possibility that fisheries exports from Karnataka and Goa coasts might get clubbed and moved to Balli.

CONCOR will tie-up with one of the shipping lines to have it loaded at the Jawaharlal Nehru Port Trust (JNPT). CONCOR has also identified some pharmaceutical white goods manufacturers for the integration of cargo and running of trains. Besides Balli, there is another terminal from where containers with pig iron pellets produced by Sesa Goa are moved to Punjab for re-smelting and rolling. Besides, we have a facility on our last point called Thokur near Mangaluru.

We are building a siding there for Mangalore Refinery and Petrochemicals (MRPL) for petcoke and liquid products. A large quantity of purified terephthalic acid (PTA)–the raw material used for making PET bottles–is moved from the JBF Petrochemicals, which is downstream from MRPL. Plus, fertiliser is also moved. CONCOR has taken a facility in the port area for moving domestic containers.

In Ratnagiri, we are connecting the Jaigarh Port, which receives the largest ships on the West Coast. Then we have conducted the survey for a private port near Honnavar.

Our revenue on train operations was Rs 24.67 billion of which the traffic operating revenue was Rs 11.80 billion. Of this about Rs 6.45 billion is from coaching and Rs 5.22 billion is from freight.

As the youngest ever CMD of KRCL with a strong background in mechanical engineering, what are some of the areas that you began to address on priority since your appointment in October 2016?
My first priority was to maintain the financial health of the organisation. We had, what is called preferred equity, which was a legacy of the construction period. Therefore, we organised the second financial restructuring of KRCL, where the preferred equity was turned into non-redeemable compulsorily convertible preferred shares. Towards the end of the tenure in 2024 and 2029, they will get converted into equity. That reduces the pressure on the corporation’s net worth because as per the new International Financial Reporting Standards (IFRS) and new financial ways of doing representation, it would have eroded the net worth of the company in the days to come and we would not have been able to access the banks and other lending institutions to finance our development. Since Konkan Railway presently operates at 140 per cent of its designed capacity, we were able to convince the union and all the four state governments to contribute Rs 3 billion for doubling and electrification of rail lines. An additional priority is to get more projects. Moreover, to maintain profitability, we need to get more freight traffic. We are even contemplating of moving into total logistics or point-to-point delivery. Some of the railway systems in Europe have created a vertical for total logistics. For instance, the major logistics player DB Schenker is actually a logistics vertical of the German rail operator Deutsche Bahn. We are in touch with some Europe-based firms that are active in the area. We plan to have some kind of collaboration with them so that they can share their experience and we can then replicate it here. We have already started the process of setting up a total logistics company.

The next thing on our agenda is to get thesanction of Expanded Board of Railways (EBR) on capacity enhancement. Once that gets completed, the foundation for the complete doubling of the Konkan Railway track would have also been laid. That has to do with the growth in industries and ports.

KRCL is in the process of setting up tunnel technology and skill development institutes in Goa and Karnataka, respectively. To what extent will these establishments be able to address the issue of providing trained manpower to India’s rapidly expanding railway segment?
The institute at Goa is for tunnelling technology. It is more geared towards civil engineers who are technologists. It has MoUs with ETH Zurich university, Hagerbach Test Gallery, and IIT Bombay. We will shortly be deploying our own civil engineers to run the course programmes. The institute in Karnataka’s Udupi district is into skill development and has already trained around 1,000 students in soft skills as part of our corporate social responsibility (CSR) initiative. Then we will be getting some CSR funding from Indian Railway Finance Corporation (IRFC) that will be utilised to impart training in mechatronics, since there is a lot of demand for such personnel in the maintenance of factory automation, earth moving equipment, and machine tools. The building is presently under construction and will be completed in a year’s time.

- Manish Pant

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