Rail modernisation requires technology, and much of this is already available today in the private sector. The Railways has identified several investment areas for private players. Several PPP projects are on anvil and these offer substantial opportunities to the private sector. If a proper framework is made for the implementation of the PPP initiatives, then it will certainly give a boost to private investments in future and eventually will play a vital role in railway infrastructure development.
Our Experts
Manish Puri, Managing Director, Pivot Consultants, an advisory firm with rail expertise
Sanjay Chandra, Chief Executive – Railways, KEC International, a global infrastructure EPC company
Sunil Srivastava, Managing Director, Barsyl, leading railways and metro rail consulting engineers in India
Sameer Gandhi, Vice President – Strategic Account Management, ABB India, which provide contemporary products and technology for Railways
After 160 years of service, where does IR stand in terms of technology upgradation and use of new equipment?
Puri
Indian Railways (IR) has set up various organisations and institutions to address the issue of modernisation and technology upgradation. However, the extent of change in technology and use of new equipment has been limited. Most of the technology changes have been of an incremental nature.
The Railways needs to be more proactive in terms of its ability to attract private investment and initiative in the technology space. Addressing issues of protection of intellectual rights on designs, sharing of benefits with technology innovators, and a greater degree of openness in terms of looking for reasons for “why to innovate” rather than following a “what can go wrong” approach can go a long way.
Chandra
IR compared to other countries is lacking in techÂnologies like in signalling where countries in Europe are working on cab signalling, moving block system, and European Train Control System (ETCS) whereas here we are adopting fixed block systems and use of Automatic Signalling systems is still in its nascent stage. IR also lacks in use of new technology in locomotives, as countries like Japan and China have already developed fuel cell-based locomotives to drive their high speed trains.
Gandhi
We have been in the railways sector for a long while. We see continuous efforts in adoption of technology to improve efficiency of the overall rail infrastructure. However, there exist a lot of opportunities to speed up implementation of new technology in comparison to other geographies. One can also look at implementing technology in not just a particular aspect of rail infrastructure like the engine or a traction system but also in terms of enhancing overall passenger experience.
Where is India lacking in efficient rail infrastructure?
Puri
There are essentially three components of rail infrastructure. The first is track and track-related infrastructure, the second is rolling stock (locomotives, wagons and coaches), and the third is terminals. In India, the entire focus on infrastructure development of rail has usually been on only the first of these components.
Technology in wagons remains outdated, and little attention has been paid to modernisation of the fleet. Also, due to shortage of capital, rolling stock equipment is often used beyond its usual condemnation limits, which results in both inefficient and often unsafe operations.
The Railways has never seen terminal whether for passengers or freight for the potential they bring as “windows” into the rail network. Railway strategy has been to invest the least amount possible in terminals as these are perceived as cost rather than revenue centres. The revenue potential of these terminals can only be realised if investments are made to upgrade quality and provide value added services through these locations.
Chandra
The country presently suffers from a severe and chronic under-investment in railway infrastructure. The resultant disproportionate diversion of freight and passenger traffic to roads while causing substantial loss in revenue to the IR also impose a heavy burden on the country which is measurable in terms of a much larger freight cost-to-GDP ratio and higher environmental cost per route km of freight and passenger traffic than in other countries.
Our rapidly growing economy has been offering promising possibilities for the future. However, Railways is lagging behind efficient rail infrastructure because of some of the below mentioned reasons:
Project execution: Pre-feasibility reports, which form a very essential part of project structuring, are poorly prepared for railway projects. They are not attractive for the bidders/sponsors to raise finances for funding proposed projects.
Paucity of funds: Lack of funds has delayed several major railway projects. At present, projects involving new lines, gauge conversion and line doubling, worth Rs 1.5 trillion, are stuck owing to shortage of funds. Similarly, due to shortage of funds, Railways has not been able to invest in new and latest technologies as the prime consideration so far has been to complete the old projects only.
Rolling stock – supply constraints: The first and foremost issue is that of meeting the current and future demand of rolling stock. There is a huge supply constraint of in-house production units and capacity augmentation of existing production units is limited and imports are very expensive.
Capacity constraints: A major challenge is capacity constraints on most of the high density routes of the railways. The trunk routes of railways comprise merely 16 per cent of the network and carry more than 50 per cent of the traffic. These routes, on most of the stretches, have already reached over-saturated levels of capacity utilisation. Lack of private interest: The lack of private interest could be attributed to the fact that railway projects require huge investments and have long gestation periods and as a result return on investment are received after a considerable period of time.
Srivastava
IndiaÂ’s rail network is a vestige of British rule. Over 80 per cent of the current network was built before the countryÂ’s independence. While traffic on rail has grown more than 12 fold between 1951 and now, rail track length has only grown 1.5 times in the same period.
The main area where we are lacking is appropriate funding for new projects as a majority of projects are economically unviable but are socially needed. Hence appropriate mechanism has to be developed to fund such projects at the same time not burdening the financials of Railways.
Gandhi
It is not that India is lagging behind, itÂ’s the chaÂllenges that we have as a country in terms of complexities and the vastness of the rail network and the number of people who depend on it. The opportunities to make the infrastructure efficient are many and big. Prioritising where one should invest should hinge on where the impact is maximum, especially in the current environÂment where funding is limited.
Will the implementation of new technologies and solution help revive Indian rail sector? What kind of technologies do we need?
Puri
Investment in technologies can be the key driver for reviving the rail sector. The introduction of net-based passenger reservation has already been experienced by rail users as a major benefit of technology. Essentially, technology can be introduced in three key areas for bringing about improvements in the rail sector. These are IT, safety of rail operations, and efficiency improvements in wagons, locomotives etc.
There has to be a change of focus from the current “fail-safe” philosophy which directs the impact of failures towards non-fatal impact, towards a “fail-not” approach which addresses safety issues more directly by using automation and redundancy systems to prevent failures from taking place in the first instance.
Chandra
At present, IR is close to falling into the vicious circle of diminishing efficiency, falling safety standards, eroding share in national freight and passenger traffic and possibly ending up as a burden on the national economy instead of being its bulwark and vital support. This downtrend must be arrested now so that the IR becomes operationally and financially sound and this can only be possible with the use of new technologies and solutions to revive the industry. There is an urgent need to modernise the key revenue generating assets of the Railways.
Srivastava
There is a definite need to modernise IR in order to enhance capacity, meet the countryÂ’s social and economic aspirations and restoration of balance in the intermodal transport mix. There is an urgent need to modernise IR by revenue generating assets such as track, bridges, signalling, rolling stock, stations and terminals. IR should focus on key enablers such as information and communication technology (ICT), indigenous developÂment and safety, etc.
Gandhi
If you were to look at the technology adapted by the western world and their impact on common man, you realise that technology has prompted people to use rail for fairly longer distances than road and air travel. It has created the need that never existed. The same goes for our country.
Is adoption or availability of technology a problem for inadequate safety initiatives in Indian Railways?
Puri
There is no major difficulty in the availability of technology for various applications on the Indian Railways. There are however some difficulties in adoption of new technology due to the difficulty face with certain rules and regulations that are notified which come into conflict with such technology. For example, the concept of Last Vehicle Sensing device that determines that a train has passed complete from a station is difficult to implement because the Railway rules requires that this task of train completeness be performed by a person riding in the last wagon of the train who is called the train guard. Similarly other technologies that automate certain practices do not yet find place in the General and Supplementary Rules of IR, which have to be notified by the commisioner of railway safety. The adoption of technology will therefore need parallel changes in the rules and operating regulations in order for these changes to be effective.
Chandra
There is an urgent need to modernise the safety aspects such as deploy latest track machines for mechanised maintenance of track, install wheel impact load detectors, modernise and renovate railway workshops, install vehicle borne digitised and recordable ultrasonic flaw detectors to cover the entire railway system, eliminate unmanned level crossings by manning, closure, merger, construction of over bridges and underpasses etc, use of advanced signalling systems like Train Protection Warning System (TPWS), Anti Collision Devices (ACDs), Automatic Warning Systems (AWS) are also necessary for improving safety.
Srivastava
Availability of technology I do not think is a problem for IR, there are any number of technology providers who would like to do business with them. The issue is more of adaptability and willingness to adapt. It is also a problem with mindset. As you have rightly mentioned the ACD has been developed quite some time back by KRCL but is still not implemented in a big way due to internal turf wars.
What is your view on the governmentÂ’s rail modernisation plan?
Chandra
Railways had earmarked Rs 14 lakh crore through its ambitious plan of Vision 2020 to remove infrastructure bottlenecks, build capacity, design and deliver market driven services and provide safe operations. However, till date only Rs 2.15 lakh crore has been sanctioned in annual plans till 2013-14 with very minimal private sector participation. On infrastructure front, except for new line construction, the targets have not been met. With fund crunch it seems Railways is focusing only to complete the old jobs and has put hold to its plans for investing in new technologies.
Srivastava
Government of India has appointed a committee under chairmanship of Sam Pitroda. The committee has submitted a report for modernisation plan of Rs 800,000 crore. They have pointed out the key areas of modernisation and possible methods to generate finance. So unless the government takes some key decisions the plans will have no meaning.
What are the opportunities for private sector in rail modernisation?
Srivastava
As per the Report of Expert Group for Modernisation of IR submitted in February 2012, opportunities have been identified for private sector participation in areas covering high speed rail corridor, Mumbai suburban elevated rail corridor, redevelopment of stations, DFC, logistics parks, wagon leasing, loco and coach manufacturing units and port connectivity projects.
Puri
Finances on the Indian Railway system have been in difficulty for a few years, with the operating ratio hovering in the 95-plus range in the last few years. This essentially means that for every rupee earned, as much as 95 paise is spent on operations. The only way to bridge the investment gap that such a ratio causes over the long term is to attract private investment into the rail sector. Rail modernisation requires technology, and much of this technology is already available today in the private sector. In light of the financial gap that prevents the Railways from direct investments in such modernisation technology an opportunity gets created for private sector.
Chandra
The Railways has identified several investment areas for private players. Several PPP projects are on anvil and these offer substantial opportunities to the private sector, some of these are: operation of container trains, investment in wagons, private freight terminals and auto hubs, operation of special freight trains, port and other connectivity works, setting up of manufacturing units for rolling stock, world class railway stations, construction of parts of DFCs, high-speed rail corridors, elevated suburban rail corridors, and optical fibre cables.
Despite the above opportunities projected, it seems highly unlikely for the sector to realise the estimated 20 per cent investment envisaged under the 12th Plan.
Gandhi
As we have seen in other sectors, the private sector looks to bring in the most current technology and practices prevalent across the globe. ItÂ’s the business model and drivers that forces private players to get more aggressive in implementing and adapting new learning there by accelerating modernisation and better expeÂrience for passengers. This approach often opens up new revenue streams as customers are most likely to pay for better services.
Do you think PPP is a viable option in rail infrastructure development? Why?
Puri
Most railway PPP initiatives have either not got off the ground or not yielded the desired results. There is a need to define specific objectives for PPP: To leverage private sector implementation efficiencies; To attract development capital in the infrastructure space; To provide opportunities for private capital to fill the “investment gap” by the vacation of specific spaces in the area of production of “public goods and services” by IR; and To create a regime of “fair returns” for investors while at the same time proÂtecting consumer rights against monopoly exploitation.
Chandra
It is clear that IR is being forced to look outwards for finance and techno managerial skills. The rationale for doing projects in PPP format appears to be lack of resources rather than this route being a more efficient or cost-effective service delivery mechanism. The Railways need to have a clear roadmap – a blueprint for projects to be done in PPP format and selected on the basis of their amenability to PPP and driven by value for money philosophy rather than a resource augmenting measure. Such initiatives like PPP are also of paramount importance considering competition from other modes in all transport markets.
New transport needs are emerging with economic transition and development. The objective of such rail reforms should not be to achieve a given end-state but to create an industry which is itself capable of future adaptation to markets without constant policy intervention. The private sector should be invited as it has greater flexibility in adjusting its resources (personnel, equipment, and materials) to a constantly changing situation. If a proper framework is made for the implementation of these PPP initiatives, then we are very positive that it will certainly give a boost to private investments in future and eventually will play a vital role in railway infrastructure development.
Srivastava
It is estimated that IR requires Rs 5.2 trillion of public investment in 12th Plan (2012-17). IR may raise Rs 1 trillion and the balance has to be through PPP modules. However, PPP experience in Railways has been a mixed bag so far. So, while there is a large opportunity for PPP projects in IR, this option needs to be further developed in consultation with all stakeholders before it can be successfully implemented.
The Modernisation Report has also made certain recommendations on making PPP successful. If the Railways is serious about PPP then they need to take immediate action to address these issues. If these are addressed, I am confident the PPP can be a successful option for IR.
Gandhi
Most likely. Opportunities exist in privatisation of lines, various services like ticketing, maintenance, catering, data management, traffic controls, freight handling etc.
The right balance of investment and return model can prove to be beneficial to all – goverÂnment, private players and more importantly passengers.
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