Expertspeak: Towards a corporate attitude

Indian Railways needs to tweak its procedures towards competing with the road logistics sector and communicate more effectively with its stakeholders in order to unleash its true potential, says Anurag Mishra.

For most businesses, transport is a necessary evil because it is not the main product but is still critical. For example, take steel or cement, the owner would like to concentrate on producing steel or cement or fertilizer, and for this business owner, transportation is a means. That's where he doesn't want to waste too much of time, he doesn't want pinpricks, and had rather outsource it.

Businesses such as those would like to have wagons whenever there is a need. Unfortunately, the Railways, being a government organisation, put them at the bottom of a queue. In a straightforward situation, jumping the queue is not an option there. Especially for finished products, this poses a problem.

In road transport, that is hardly an issue. Trucks are available at the businessperson's disposal. Jumping the queue at worst cost a differential amount or just permitted for the prospect of a long term relationship.

There is a more intangible reason. Because the railways will not give a single paisa as a commission or something to anybody, and a private road haulier will oblige a lot of people, there is more flexibility in their operations.

The road sector also has a natural, unfair price advantage because, typically, road transporters do not pay for the infrastructure—the road itself—which the government builds for them.

The current system of queuing up customer indiscriminately does not make sense for anyone. The Railways need to appreciate that the first-come-first-serve basis can hurt because businesses have varying demands. It is all right during a lean season, but during a busy season it hurts. This is why the Railways must go in for contracts—long term contracts—for, say, five years, on a Take and Pay agreement. It could work on reservation, perhaps an 80 percent reservation for the big players and the remaining for the smaller or new players.

Let me give you an example. Suppose a fertilizer plant exists in a region, already functioning, and another one comes up in the vicinity. Now, given the same capacity, how will the Railways fulfil the new demand? The current system would perhaps entail that the Railways would halve the supply to each—which is unfair. With a five-year contract under a Take and Pay method, the customer has a comfort level and the Railways have assured revenue.

Secondly, the Railways must start a system of supplying wagons on a systemised schedule. Currently, if you book a wagon for 30 April, you enter the queue on 30 April.

Much has been said about artificially subsidised prices for passengers. Actually, prices are artificially increased for freight. Cross subsidisation of almost Rs 20,000 crore subsidies from freight towards passengers is like killing the proverbial goose.
That brings me to the crux of the problem: whether the Railways as a group has failed in convincing their Minister and the Prime Minister and the public at large about what can work. I believe the Railways Public Relations (PR) is among the poorest. Although there are plenty of good things that the Railways is doing, they have not been communicated well. The wonderful work that railways has always done let it be Tsunami or Gujarat earthquake or Orissa cyclone railways are first to reach and first to restore.

Recently the Railways increased the container prices for a few commodities. There was a furore among users, mainly because it was felt that the Railways did so arbitrarily, without attributing proper reason or justification. The rationale behind a changed policy must be communicated to the users.

While the Railways are experts at the game, they have failed to cash in on the expertise and handed it over to someone else. The failure of railway officers as a community to project what is needed for the country, I believe, has been their biggest failure.

However, there are some changes that we see lately. Any new policy is first put up on the Railways' website, comments invited and then changed if necessary. An attitudinal change, therefore, is starting to happen. Businessmen are no longer seen as rich people with sacks full of money who can yield to any demands. Now the Railways are realising that all projects have to be bankable projects, so the new reason is the rationale of viability.

The recent Railways' Infrastructure of Industry Initiative (R3i), which was announced in July last year, is a wonderful step. It makes rail freight option more competitive for prospective customers by sharing their burden in getting rail connectivity and allowing them to get a share in the freight revenues generated through freight traffic moving via new line. This is a very fair offer, because a company that invests in the line should break even in 25-30 years if there is enough traffic, but if not, it can revert the line to the Railways. Seasoned players can get into this activity, and the industry which crops up in the vicinity can share the burden as well.

The author is Advisor, JSW, and ex-Managing Director, Konkan Railway Corporation.