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Railways on Overdrive

Railways on Overdrive

Chug-chugging its way to becoming the world´s fourth largest railway network since rail was first introduced to India in 1853, the Indian Railways is finally getting a much-needed makeover.
While all the pressure to build a railway network in India in the mid-nineteenth century came from London, it is well into the 21st century that pressures of a very different kind are at work in modern-day India. While there was not a single kilometre of railway line back in 1848, the country today boasts 115,000 km of track over a route of 65,808 km and roughly 8,000 stations.

Within these time periods, the storied past of the Indian Railways reflects, in a microcosm, the history of colonial rule in India, the period of economic boom between the Great Wars, the fallout from the Great Depression thereafter, and lastly, the Independence era. During the Great War, the railways were used to meet the needs of the British outside India. In the following period, during the twenties, it was already carrying some 620 million passengers and about 90 million tonne of goods annually, most of it meant for export to Britain.

However, following the second World War, the network was severely crippled. Starting 1939, about 40 per cent of the rolling stock, including locomotives and coaches, were taken to the Middle East. Railway workshops were converted into ammunitions workshops and many railway tracks were dismantled to help the Allies. By 1946, all rail systems had been taken over by the government.

Inheriting a decreipt rail network, the Indian Railways, formed after Independence, out of the mess that was the British-India Railways (comprising about 42-odd railway companies), had its work cut out.

Modernisation (Part I)
Several big-ticket projects were initiated, geared towards addressing infrastructure needs and overhauling the network. It was decided by 1957 that the network needed to be gradually electrified with 25kV AC to be adopted as traction, upon recommendation from SNCF, the French National Railway. Zones were created, based on geography, for increased efficiency. In 1951, Southern Railways was the first to be inaugurated follwed by the Northern, North Frontier, Eastern, Central and Western Railway zones. More zones were added later. Today, there are 17 zones including the Kolkata Metro!

However, none of these projects paid heed to passengers, their comfort, speed of the trains or the important issue of safety. There were no plans to increase running speed, upgrade existing lines or improve amenities in trains, provide comfortable and sensible classes of accommodation or even update the design of the trains. These outdated, obsolete relics from a bygone era continued to huff and puff around the countryside with their passengers, more often than not in miserable conditions. Third Class existed till 1972 when it was renamed as Second Class Sitting. Sleeper Class wasn´t used in a widespread way until the nineties and AC 3-tier only in the late eighties. The so-called modernisation drive hadn´t even begun until 1956 when the then Railway Minister Lal Bahadur Shastri famously resigned after the derailment of the 603 Madras-Tuticorin Express, citing´moral responsibility´ For those of a certain age, this is still the most remembered railway accident in India.

Source: UIC Statistics

Despite this major accident, projects continued at a snail´s pace and took another decade to implement, and even then, in half measures.

Lost opportunities
The fastest train in India today is the Gatimaan Express, running at a top speed of 160 kph between New Delhi and Agra. Not many will know that test trials for trains running at 160 kph were first conducted in 1963!

Imagine the scenario now had this project been followed through then.

Instead, India is looking towards Japan for high-speed train technology and to global manufacturers for rolling stock and other equipment and systems. However, in the beginning, Indian Railways was not unfavourably placed at all. Japan and China did not have any railway network to speak of. Most European railway networks were struggling to stay afloat in a post-war scenario. The USA had already started moving from railroads to automobiles and subsequently moved to air travel.

Source: World Bank (2012): Railways International Overview: Issues for India (12th Plan document)

Russia hadn´t yet thought up the Trans-Siberian Railway. India, on the other hand, had 50,000 km of rail line already ready. It had a huge and more than wiling customer base, world-class rolling stock designed by the Swiss themselves and modern, brand-new WP Pacific-class locomotives churned out of her own plants. All that was required was a modernisation programme with a clear vision for the road ahead.

Instead, what you had was a very slow economy in the seventies, political upheaval and the Hindu rate of growth in the mid-eighties followed by populist measures in the nineties. Development occurred in bits and spurts with laying of new lines, expansion of the network, electrification of lines, purchase of locomotives and the creation of the online passenger reservation system, all taking the best part of half a century. Since the decade of liberalisation and the start of the new millenium, educated and increasingly demanding passengers have forced the Indian Railways to act, focussing on passenger comfort and amenities. The stranglehold of babudom is slowly loosening.

This is not to say the history of the Indian Railways, post Independence, has been one of unending gloom. On the contrary, the construction of the Konkan Railway line must easily rank as among the top, most expansive and biggest infrastructure projects till date ever undertaken in the history of India. It connected the western coast to the rest of the country and was the last missing link on the map of the Indian Railways. Second, Project Unigauge aimed at converting the entire network into broad gauge and was among the most ambitious projects that the Indian Railways had ever taken up. From about 47 per cent of the share in 1951, broad gauge has come up to over 90 per cent share of the total network today. No major mainline trunk routes remain on metre gauge.

Source: World Bank (2012): Railways International Overview: Issues for India
(12th Plan document)
*PPP: Purchasing Power Parity

Third, most carriages before Independence were made of wood panelling. After IR was formed, Integral Coach Factory (ICF) and Rail Coach Factory (RCF) were set up to exclusively make coaches for IR, based on a single standard configuration to ensure uniformity. This was path-breaking design and technology at that time and was designed by Schlieren AG of Switzerland which also helped to set up the ICF manufacturing facility at Perambur near Chennai. It was only 2000 onwards that IR started procuring the modern, lightweight coaches from Linke Hoffmann-Busch, first introduced on trains like the Rajdhanis, Shatabdis and Durontos.

With respect to locomotives, out of 8,078 of them at the time of Independence, 7,988 were steam locos.
Of them, 2,233 were more than 35 years old, including 357 that were more than 45 years old. Most of them were old Vulcans imported from Britian since 1852 by the then Great Indian Peninsula Railway.

These were now antiques and would not pull more than five coaches. Post Independence, Chittaranjan Locomotive Works (CLW) was set up to locally manufacture locomotives for IR. The first one rolled out in 1950. The plan, at that time, was to invest in steam as diesel was expensive and unknown while electric needed more technological knowhow. Today, IR has about 10,000 locomotives with both electric and diesel engines. The production of steam locos was halted in 1972.

Electrification continues to be a mjor theme even today and is carried out by the Central Organisation for Railway Electrification (CORE), a body that was set up in 1979 under the Railways Ministry for the purpose.

In 25 years, from 1980 till 2005, 23,066 track km, (12,562 route km [RKM]) has been electrified, which is about 2.52 km of track electrified per day on an average for 25 years! During the first three years of the 12th Five-Year Plan (2012-17), 4,042 route RKM of railway track were electrified against the total target of 6,500 RKM. Up to March 2015, the total electrified RKM stood at 26,269. During the financial year 2014-15, 1,089 RKM were electrified by CORE. In 2015-16, a further 1,600 km were electrified, the highest ever in a single year and the target for 2016-17 is even higher at 2,000 km. Consequently, the outlay for electrification has been increased for 2016-17 by almost 50 per cent.

Last but not least, one of the biggest achievements has been the computerised passenger reservation system which is known to be one of the most complicated and intricate database systems in the world.

Indian Railways´ performance today IR today has one of the largest customer bases of the world of any organisation. It accommodates 7 billion passengers who travel on its network every year (as much as the global population). It has over 8,000 stations and is the highest consumer of electricity in the country. It is also the biggest freight handler, having moved almost 1.2 billion tonnes in the last year.

Having got this far, how does it compare to some other railway networks of the world on certain key parameters such as employee, network and wagon productivity, passenger and freight yields, traffic growth and last but not least, safety?
Sadly, they do not match up with China, Russia, Japan and Germany or the other developed rail networks elsewhere in the world. Due to the underinvestment, Indian Railways´ network suffers from the effects of severe congestion. This has led to its inability to accommodate more trains or increase the speed of the existing ones, susbsequently impacting network expansion, customer satisfaction, project planning, safety and several other performance-related aspects.

Politicians with their petty interests, still have a grip on the Railways. The disparate fare structure between passenger and freight is not doing anyone any good. The financial performance has suffered on account of this. Indian Railways has been suffering heavy losses. Also, till recently, accidents were frequent due to old worn-out rolling stock and crumbling infrastructure.

The Bibek Debroy Committee Report, tabled in 2015, revealed just how much an Indian train makes or loses every time it runs. In this report, Debroy, an economist, and his colleagues argued that many decisions ´like increase in fare, introduction of new trains, provision of halts and establishment of new projects´ are taken for reasons other than ´commercial considerations´. Further, because of the nature of the accounting systems it uses, the gains and losses of the Railways on its investments are impossible to measure.

The committee made an attempt to work out the cost of running 16 trains – the faster and more expensive Rajdhanis, Shatabdis and Durontos – as well as the revenue earned in ticket sale from each train, to work out whether the train runs – literally -on a profit or loss. While the exact breakdown of the math is not shared in the report, the authors say that such a calculation should account for ´different types of coaches, power car, pantry and parcel van, add depreciation and interest costs, add terminal and line haul costs and so on, imputing perhaps costs because of loss of path to goods trains´.

What they found was that half the trains are running at a loss, every trip. This includes all the five Durontos the committee looked at, two Rajdhanis and one Shatabdi. On average, across the 16 trains, every train runs a loss of Rs 1.7 lakh per trip. Only the Shatabdis, on average, run a profit, with the Delhi-Bhopal Shatabdi being the most profitable. Moreover, the report highlighted the need for commercial accounting, not only for the private sector to know the rate of return on projects, but also for the benefit of the government and the Railways.

The report argued that even on routes serving better-off travellers, tickets are priced too low. In fact, budget documents show that this is having an impact on finances, evidenced by a growing disparity between earnings from passenger and freight fares over time. With freight subsidising fares, in 2012-13, for instance, IR made just over `37 from each passenger.

Budget documents show that the bulk of long-distance passenger earnings still come from its three cheapest ticket segments, which make up over 95 per cent of all passengers (on non-suburban routes). The committee believes these passengers can afford to pay more provided there is an improvement in service delivery. Herein lies the crux of the issue. Governments have always said that IR is not meant to be purely profit-making, but serves a social service commitment as well. The Debroy Committee Report, through its recommendations, makes the crucial point that the exact cost of this social service needs to be accounted for in order to make the all-important decisions on fares and pricing.

Despite its problems, Indian Railways is the only organisation in the Government of India that pays for its wage bill, pensions and working expenses in its entirety.

That successive governments haven´t been able to take advantage of the headstart they were handed on a platter, only reflect their inadequacies, unwillingness to progress and lack of competitive spirit, or perhaps all three. Astonishingly, the Railways manages to survive in spite of 69 years of chronic underinvestment in the post-Independence era and continues to carry millions of people daily to far corners of the country on ridiculously cheap fares, pretty much on time.

Modernisation (Part II)
The Honourable Indian Minister for Railways Suresh Prabhu has pretty much taken the social media world by storm, initiating action within the Railways in response to passengers´ tweets pointing out lapses in amenities and basic hygiene. If ever a man led from the front, this is surely it. And while Union ministers and people in positions of power directly engaging with ordinary citizens via social media can be construed as gimmicky, the visible improvement in services and amenities in IR demonstrates Prabhu´s serious intentions to bring about change. In fact, earlier this year, in his budget speech, Prabhu had made considerable mention about the need to uplift the image of the Indian Railways.

The budget speech was also filled with references to analytics, drones and geospatial technology. When implemented, these technology initiatives will transform an old-economy leviathan into a fast, efficient and people-friendly giant. Prabhu also proposed to set up a cross-functional team – the Special Unit for Transport Research and Analytics (SUTRA). Indeed, cross-leveraging its huge asset base and resources can yield a huge revenue boost for IR. Already, IR generates thousands of gigabytes of customer data. This will only increase with Google offering free Wi-Fi in railway stations. IR will know in an instant what lakhs of Indians consume online and off, leading to vast opportunities for monetising this data. Meanwhile, global consultancy Ernst & Young is already working on an assignment to point out advertising opportunities to IR along its vast network of trains and stations, an opporutnity that has been described as a veritable gold mine.

Technology, training and awareness initiatives are also being rolled out for safety and security, especially for women and children and such steps will only help modernise IR from an image and customer perspective. With respect to the heavy duty projects, more than 40 countries are already working with IR in various capacities. There is no denying that IR´s capex is growing and the numbers of vendors to IR will increase substantially as more and more global companies look to provide their technologies here.

The association with SNCF dates back to 1957, as mentioned earlier, and the French state-owned railway company is set to send a delegation to New Delhi in June this year to explore more areas of cooperation. Currently, SNCF is already working on two major projects.

The Spanish company, Talgo, is also working on the Delhi-Mumbai sector for introduction of high speed trains. It has brought its coaches to India and these will be integrated with Indian Railways´ engines to run at higher speeds. The rake will be imported in knocked-down condition and will be assembled in India. Depending on the results of the trial, IR will consider introducing the high-speed trains. Meanwhile, Talgo has offered to test-run the trains free of cost. The Spanish train maker´s coaches are said to weigh much less than an average IR coach. This is what the company claims will help it to run trains at higher speeds on India´s existing tracks.

Even as General Electric and Alstom SA hogged the limelight late last year with their multi-billion dollar contracts for building locomotives for IR, Prabhu was already thinking about creating a rolling stock technology-developing process to create exportable products.

Hence, late last month, the Railways Ministry convened a meeting of the heads of Indian Space Research Organisation (ISRO), Council of Scientific & Industrial Research (CSIR), Defence Research and Development Organisation (DRDO), Research Designs & Standards Organisation (RDSO), Department of Science and Technology and Department of Defence Production.

A scientific and technological collaboration forum was formed for developing special material and technologies to improve railway rolling stock for providing safer, more comfortable, efficient and economical services. The aim is to develop systems for IR which are best suited to the country´s local conditions and needs. Development of Maglev and special alloy aluminium coaches were identified as areas for cooperation for development of prototypes.

Source: UIC Statistics 2009-10 (12th Plan document)

The areas in which IR sought collaboration from the technical agencies were diverse, from structural and panelling material for coaches to noise and thermal insulation material, fog vision technologies and embedded systems for on-board condition-monitoring of rolling stock.

Bio-Toilets on Railways
In 2014, the Indian Railways took the decision to develop a bio-toilet in place of the existing direct-discharge toilets. Till then, the direct-dishcarge toilets were the main type of toilet that was being used in the railway coaches. The direct discharge of human waste onto the tracks had been corroding the rails, resulting in costs of crores of rupees annually to the Indian Railways for replacing the damaged rails.

Alternately, flushing a bio-toilet discharges the waste into a holding tank under the floor where anaerobic bacteria remove the harmful pathogens. They break the waste into neutral water, methane and other gases which can then be discharged onto the tracks without dirtying the area. These are harmless and also do not corrode and damage the tracks, nor do they emit a foul odour. By 2020-2021, the Indian Railways plans to completely phase out direct-discharge toilets. As of March 2015, 17,338 bio-toilets had been installed on newly built coaches, with all new coaches to have bio-toilets from 2016; older rolling stock are be retrofitted.

´The world´s first bio-vacuum toilet developed by the Indian Railways is being used in Dibrugarh Rajdhani Express. Seventy-four more trains have been added under on-board housekeeping services and another 400 are to be covered soon, leading to a total number of almost 1,000 trains under the ´Swachh Rail Swachh Bharat´ (´Clean Rail-Clean India´) scheme,´ Union Railway Minister Suresh Prabhu said, while presenting this year´s railway budget in the Lok Sabha.

´In pursuance of our mission ´Swachh Rail Swachh Bharat´, Indian Railways will provide 17,000 bio-toilets in trains and additional toilets at 475 stations before the closure of this financial year,´ he added.

Overall, as part of its Vision 2020, the Indian Railways is in a transformational phase, striving to become more accountable and transparent, delegating decision-making power in order to fast-track project approvals, bringing in a more collaborative work culture within different verticals and partnering with various countries (for capex funding and technology transfer) as well as state governments (to improve railways infrastructure). This strong infrastructure growth in the Indian Railways will, in time, begin to have a bigger effect on the economy. Clearly, under Prabhu, the team seems set to transform IR over the next few years, striving to significantly improve its service delivery, with both strong capex outlay and sustainable capex funding plans, and reorganising itself to improve synergy and lower operating cost.


  • Long-felt desires of the common man to be fulfilled, i.e., reserved accommodation on trains available on demand
  • Time-tabled freight trains
  • High-end technology to improve safety record
  • Elimination of all unmanned level crossings
  • Improved punctuality
  • Higher average speed of freight trains
  • Semi high-speed trains running along the Golden Quadrilateral
  • Zero direct discharge of human waste

Source: www.indianrailways.gov.in


  • Link increase in passenger fares to better passenger services
  • Create a separate company for railway infrastructure
  • Allow access for any new operator who wishes to enter the market for operating trains
  • Separate suburban services and run them as joint ventures with state governments
  • Allow private entry into running both freight and passenger trains in competition with Indian Railways
  • Separate rail track from rolling stock


  • 2015-16: Assured funding from LIC
  • Commissioning of 2,500 km broad gauge lines
  • Commissioning of 1,600 km of electrification is the highest ever
  • In 2016-17, targeted commissioning 2,800 km of track
  • Commissioning broad gauge lines @ over 7 km per day against an average of about 4.3 km per day in the last six years
  • Would increase to about 13 km per day in 2017-18 and 19 km per day in 2018-19
  • Will generate employment of about 9 crore man days in 2017-18 and 14 crore man days in 2018-19
  • Outlay for railway electrification increased in 2016-17 by almost 50 per cent? Target to electrify 2,000 km?


  • Interaction and feedback through social media and dedicated IVRS system
  • Making travel comfortable by generating over 65,000 additional berths, installing 2,500 water vending machines; introducing ´Mahamana Express´ with modern refurbished coaches; 17,000 bio-toilets in trains; world´s first bio-vacuum toilet developed
  • Improving punctuality operations audit for Ghaziabad to Mughalsarai section
  • Ticketing: Introduced 1,780 Automatic Ticket Vending Machines, mobile apps and GoIndia smartcard for cashless purchase of UTS and PRS tickets; enhanced capacity of e-ticketing system from 2,000 tickets per minute to 7,200 tickets per minute; and to support 1,20,000 concurrent users as against only 40,000 earlier
  • Social initiatives: One-time registration for availing concessions while booking tickets online, online booking of wheelchairs and Braille-enabled new coaches introduced for the Divyang; increased quota of lower berths for senior citizens and women, middle bays reserved in coaches for women
  • Wi-Fi in 100 stations, to be provided in 400 more
  • Stations being redeveloped – financial bid received for Habibganj, Bhopal; Cabinet approval for stations to be taken up under PPP
  • Security through helplines & CCTVs
  • Safety – 350 manned level crossings closed, eliminated 1,000 unmanned level crossings, 820 ROB/RUB completed in the current year and work going on in 1,350 of them

Key Takeaways

  • IR delivered strong capex of Rs 940 billion in FY16 (70 per cent jump YoY). It missed the budgeted target by a modest 6 per cent. A large part of the capex (40-45 per cent) was executed in Q4 FY16. FY16E capex is more than double the average run-rate of Rs 450 billion spent by IR during the past five years. Further, the management is confident of achieving its FY17E target of Rs1.2 trillion, a 28 per cent YoY growth.
  • IR lowered its operating ratio to 90 per cent in FY16 from 91.3 per cent in FY15 and 93.6 per cent in FY14. Various cost optimisation measures including increase in the share of low-cost open access power, train route optimisation exercise to reduce power demand during peak hours, and lower fuel costs benefits, etc drove cost reduction.
  • For FY17, the operating ratio is targeted at 92 per cent, higher than 90 per cent in FY16, due to the impact of the 7th Pay Commission implementation (400 bps increase in operating ratio). Excluding the pay revision impact, the operating ratio would have declined to 88 per cent.
  • In the FY16 budget, IR had set a five-year capex master plan entailing total capex of Rs 8.6 trillion. It has set up innovative financing to fund this mega capex through a mix of enhanced budgetary support, internal generation, institutional financing and PPP. While IR expects to fund 45 per cent of its capex through budgetary support and internal accruals, the remaining 55 per cent would come from external debt, PPPs and state JVs.
  • The minister highlighted decentralisation of power to ensure project execution and operating cost reduction. Project approval cycle has reduced to 6 months from 24 months earlier.
  • To improve efficiency, IR is now benchmarking itself with other global railway systems. The minister highlighted that globally, non-freight income currently forms 20 per cent share in total revenue of the railways vs 2-3 per cent for Indian Railways. Hence, IR has a vast scope for monetising its land banks and creating other innovative revenue streams so as to reduce the pressure on it to continuously increase cargo freight rate (currently accounting for two-thirds of its total revenue). ?IR is making efforts to offer confirmed tickets for all its passengers as well as to offer ´time-table based´ operation of cargo trains in India by 2020. By then, IR expects even the dedicated rail freight corridor to be fully operational.

Source: Centrum Infrastructure Advisory

Rouhan Sharma

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