From vision to reality: Towards changing a track record

Amidst the constant clamour from the various industries that use and would like to use rail logistics for transportation comes the Indian Railways Vision 2020 document, which is nothing like the Maritime Agenda 2020. It is more like a wish list. However, practitioners believe it would be an adequate document to work from if efforts are sincerely made.

It appears the railway ministry has finally been forced to recognise the need for operationalising its own repeated announcements and tentative steps towards letting the private sector participate in investing and reaping the benefits from the gigantic network. Shashidhar Nanjundaiah says such participation will catalyse rail logistics because of the sheer capability of the private sector to offer flexible solutions.

This year's Budget allocation is the highest ever, and nearly 30 per cent more than that of last year's. However, industries and connectivity have suffered partly because of non-availability of wagons. Rail freight is the answer to our overcrowded and somewhat unreliable road logistics. Rail logistics are cheaper as well. Yet it is still not the most preferred.

“A major issue is how to improve the share of railways in freight movement,” said Planning Commission Member BK Chaturvedi at a recent summit. There is little private investment in the sector barring the container operations, and even within that small domain, the regulator is also the operator—a Catch 22 fallacy.

In 1999-2001, Indian Railways was the second largest railway network under a single management in the world in terms of route length, after the Russian Railways. “It has now slipped to the third position behind the Chinese Railways,” says Minister of State for Railways Bharatsinh Solanki. The Vision 2020 document assumes all its tentative moves towards private participation will ensue. The assumption should give the industries—and private logistics companies—the hope that things they've dreamed of in cocktail parties may finally make their way to boardroom meetings.

One such dream has been either public-private or private-private partnerships and plain vanilla tie-ups in multi-modal transport, and the early birds will be the best learners. An example is a recent (December 2010) JV between Concor, the container logistics company, and Transport Corporation of India (TCI), a logistics company that divides its attention between rail and road. The companies hope that such integration will take care of the dreaded first-mile and last-mile logistics in the hands of the unorganised sector. “Containerised multi-modal door-to-door transport would prove to be better and more cost effective solution for heavy cargo over medium and long distances,” says Anil Gupta, Managing Director, Concor.

A policy is underway to facilitate “rapid development of a network of freight terminals with private investment to provide efficient and cost effective logistics services to end users including door to door services”. The plan identifies freight terminals as potential greenfield or brownfield sidings or container terminals on private land to be converted to private freight terminals.

The role of the Railway Ministry in augmenting technology is a cause for concern, who say that unless industry-specialised containers, high-speed rolling stock, and advanced signalling systems are invested in, the crux of the problem—time and safety—won't be resolved. In addition, the Railways must understand the need to facilitate infrastructure for private participation—even if that facilitation itself is open to private investment. Vineet Agarwal, Executive Director, TCI, which has launched a multi-modal service that includes a freight train from Bangalore to Guwahati recently, says: “Indian Railways (IR) needs to introduce a policy for major logistics solution providers to become its business partners.” One way, Agarwal says, is by offering the private sector space along major trunk routes in major cities or along the planned Dedicated Freight Corridors (DFCs) to build its own cargo base.

The Railways would also like to encourage or catalyse Rail Logistics Parks. “Strictly speaking,” SK Mishra, Executive Director, PPP, Railway Board, told us, “they are not railway projects but big hubs where transport exchanges can take place. Currently, they are run by the city governments to manage logistics in a more orderly fashion. The Railways would like to join hands with the state government and the private sector. Big logistics parks with big volumes would put the Railways in a better position to capture the traffic.”

Opportunities for private players could be in locomotive and coach manufacture to high speed rail, port connectivity. However, the Railway Board admits that it is experiencing “some delays in projects that involve complex decision-making,” Mishra says. “For example, in a locomotive or coach manufacturing unit, we need to enter into a long term commitment, and questions arise as to the kind and extent of obligations the Railways can undertake.”

Specialised cargo: automobiles

An example of the flip-floppy policies is the new auto transportation policy, which industry practitioners term “autocratic”, as it has failed to provide any customised solution to customers. Industry had been anticipating special rolling stocks to suit the needs of the product besides introducing special tariff rates. “IR has failed on both counts,” says Agarwal.

But now, that is set to change. While 70 per cent of automobile transport in the United States is via rail, that figure is five per cent in India. Last August, the Railways introduced the Automobile Freight Train Operator (AFTO) scheme, a widely tested initiative under which private companies can invest in inducting and operating special wagons on the existing network. These companies can avail a 15 per cent rebate on freight rates for every rake loaded, for 20 years, or till recovery of the cost of investment, whichever is earlier. The railways can take up the maintenance of wagons at their own cost.

A scheme is also under finalisation for development of automobile hubs near rail heads through PPP.

Competitiveness

The finance ministry is planning to increase service tax abatement for the inland shipping sector. (The abatement figure is 70 per cent for rail.) This means transport of goods through coastal and inland shipping may get cheaper, and will erode the Railways' share further—unless the Railways gets competitive.

That competitive spirit may be on the horizon. The potential for private participation is up to 12,500 km by 2020. While Railway Minister Mamata Banerjee's somewhat eccentrically Bengal-centric plans may not go down well with the industry, the sheer need to raise money will mean private participation is necessary, and that drags in the competitiveness aspect. The planned Accelerated Railway Development Fund (ARDF) with a budgetary commitment of Rs 5 lakh crore over 10 years may be the answer, and if the Fund materialises in the next year or so, bidding out PPP projects may be a reality soon after. The Vision document rightly projects that over time and with confidence, budgetary allocations need to be phased down.

The railways' vision to be a developmental as well as a business venture would both capitalise on latent strengths and utilise new transformational opportunities.