Wednesday, March 13, 2013

Indian Railway may be wasting $10 billion worth of resources

By Atanu Dey on March 13, 2013
Railways are an essential part of the transportation infrastructure of any large economy. They have to be efficient and widespread in India. The primary reason is that for moving large numbers of people and large volumes of goods, it is the most effective mode of transportation. Aviation and road transportation have their place but cannot form the backbone of the transportation system because they are costly compared to steel-wheels on steel rails.
The Indian Railways can be cited for many reasons but being modern and efficient is not one of them. And the main reason behind why it is dilapidated, slow and inefficient is that it is Government-owned. That is another way of saying that it is public property and therefore nobody owns it.
It need not be necessarily so but when something is owned by nobody, it suffers from neglect and general abuse. That is a law of human nature, almost akin to a law of nature like gravity but not quite as all pervasive.
Neglect and waste of railway property is evident, and to me it is heartbreaking. Every rail journey is marred by the recognition that the railways could have been otherwise. Here’s what I mean.
Take a look outside on your next train journey in India. You will see that next to the tracks lie unused sleepers and steel rails. Sleepers used to be made of wood but now they are made of steel-reinforced concrete. Every stretch of track has dozens of them unused, wasting and weathering away. From the steel tracks just lying around, you can tell that a significant portion of steel rails bought never get used.
Let’s do a back-of-the-envelope calculation. From eyeballing the side of the tracks, I estimate that there’s one sleeper per 5 metres of track just wasting away. That’s about 200 sleepers per kilometre of track. India has 65,000 kilometres of track. Assume conservatively that each sleeper was acquired by the railways at a cost of Rs 5,000. Doing the arithmetic gives us a total of 13 million sleepers wasted at a total cost of Rs 65 billion (or Rs 6,500 crores).
Now let’s do the numbers for the waste of steel tracks. Two assumptions here. One, the cost of per kilometre of track: Rs 50 lakhs. Second, the length of track lying wasted next to each kilometre of track in use: 0.5 km. Total cost of wasted track: Rs 162.5 billion (or Rs 16,250 crores).
Add up the two numbers and you get around Rs 23,000 crores. Just to get a perspective on that, the revenue of Indian Railways (2011-2012) was around Rs 100,000 crores, and a net income of Rs 14,000 crores. So the money wasted in the unused sleepers and track (over the last few decades) represents around 25 per cent of the annual revenues of the railways.
A final word on these numbers: These are estimates with very little hard data to back them up. Estimating magnitudes helps us figure out whether it is worthwhile or not to pursue a deeper investigation. The estimate says that the waste due to unused material lying around the tracks is Rs 23,000 crores – or let’s say $5 billion.
What that tells us is that the waste is not a mere $100 million or that it is not $20 billion. It could be that the actual number lies between $3 and $10 billion.
What that means and what must be done, I will go into the  next  time


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