Ratan Tata-headed council to benchmark Indian Railways

Ratan Tata-headed council to benchmark Indian Railways against four global giants

To compare financial and operational performance indicators to turnaround Indian Railways

Sudheer Pal Singh  |  New Delhi 

June 2, 2015

The Ratan Tata-headed innovation council called Kayakalp, formed by Railway Minister Suresh Prabhu, has decided to benchmark Indian Railways against the train networks of four global giants – the US, China, Russia and Germany. The idea is to compare financial and operational performance indicators and work out a strategy for turning around the railways by using the best-suited model of innovation and development.
 

The council has asked the railway board for inputs on the railway systems operating in the four countries. The council held its first meeting on May 13 with Prabhu, Minister of State (MoS) Railways Manoj Sinha, Railway Board Chairman A K Mital, other board members and trade union representatives.
 

“It was decided in the meeting that the performance position of a few foreign railways including the US, Germany, Russia and China will be collected for the purpose of comparison and carrying out further analysis by the innovation council. The second meeting would be held then,” said an official privy to the developments.
 

India is similar to the nations on the list — except for Germany — in being a member of the 1-billion tonne freight club. India, the US, Russia and China are the only four countries in the world which carry more than a billion tonnes of freight on their railway networks annually.

However, India lags far behind the other nations in terms of structural and operational reforms, particularly in the freight segment. The US, China, Germany and Russia have already adopted significant degrees of privatisation and corporatisation of their railways over the past decades.
 

Of the two countries with railway systems most comparable to India, the US and China, the US has traditionally had a privately owned rail freight operations system. China has had a departmental system historically but has now progressively reorganised its structure to the point where there is now no Ministry of Rail. It has a national rail corporation and a number of regional operators and specialised private railway operators especially in dedicated freight haulage.
 

While Indian Railways’ efficiency indicators have improved over time, they are still low when compared to global benchmarks. For example, traffic unit (addition of net tonne km or NTKM and passenger km or PKM) per employee is 0.84 for India compared to 1.4 for China, 2.0 for Russia and 15.1 for the US .
 

According to Indian Railways’ recently released white paper, NTKM per employee is 1.81 million in Russia, 1.23 million in China and 0.44 million in India. Similarly, PKM per employee is 0.15 million in Russia, 0.38 million in China and 0.66 million in India. This indicates how India fares better on the passenger indicator and worse on freight performance.
 

“There is a rich experience from other countries in creating competition and India has a great deal to learn from it, particularly as it is one of the last countries to restructure,” the Bibek Debroy committee on restructuring of the railway board and mobilisation of funds for Indian Railways said in its draft report submitted recently.
 

In the US, 28 per cent of the railways’ revenue goes into labour costs and 20 per cent is channelised to source fuel. For comparison, in India, 32 per cent of operating revenue goes into staff wages while fuel costs eat up 18 per cent of earnings. The two nations are also similar in earning 40-45 per cent of freight earnings from coal transport alone.
 

Also, in the US the private companies fund a great majority of their own infrastructure capital investment projects from customers on a commercial basis. While the Federal Railroad Administration makes capital grants, the total amounts are minor compared to commercial funding raised by the private freight railroads themselves. For comparison, Indian Railways continues to source over 40 per cent of its Plan Budget of ~1 lakh crore as support from the Centre.