What ails thee, Indian Railways?

Freight traffic, the bread and butter of Indian Railways, is not showing any signs of take-off to a higher trajectory, as trends till last November have revealed. Freight loading has been approximately 720 million tonnes, as against the proportionate budgeted target of 775.7 MT. Compared to the performance of the previous year of 711.2 MT for the same number of months, this is only an increase of 1.23 per cent. The Railway minister seeks sanction for investments in railway projects in the budget, but the Railway Board fails to pick up traffic even when the GDP increases by about 7.6 per cent , and the manufacturing sector grows by about 9.5 per cent in the current year.

The performance of the railways so far in the 12th Plan (2012 -2017) has been extremely dismal in freight transportation.

The performance of 2015-16 will leave a big gap from the budget estimate and consequently there will be major shortfall in earnings. The Government is trying to reduce the domino effect by revising various charges, but preparation of the forthcoming budget will be a tough task.

So, what ails thee, Indian Railways?

The question has been asked by many in the past, but answered squarely by few. A number of committees have probed this question at different points of time. The National Transport Development Policy Committee (NTDPC), headed by Rakesh Mohan, was the latest to have submitted a comprehensive report on all transport modes in 2013. Like other predecessor committees, the NTDPC also diagnosed lack of infrastructure as the root of all ills, and investment as the main panacea.

The traffic share of railways had been going down from decade to decade, and by 2007-08 the share dropped to 30 per cent in quantity , and to 36 per cent in traffic output from the height of about 89 per cent respectively in 1950-51. The Committee analysed the capacity constraint and recommended investment of Rs. 35311 billion (at 2011-12 prices) in rail infrastructure by 2032 to take the traffic share of railways to 50 per cent and reach the output level of 13000 billion net tonne kilometre in 2031-32. To work out this level of output and to justify the proposed capital expenditure, the committee assumed annual growth rate of 12 per cent for the railways.

The Committee took a one-sided view of the problem and did not look into the fact that the Chinese Railways produced traffic output of 1934.6 BTKM on 62,200 route Km in 2005, while Indian Railways generated only 507.3 BTKM over 63465 route Km in the same year. Is this on account of paucity of traffic? (The passenger-Km generated by Indian Railways was very close to that of Chinese Railways, according to an ADB report).

In the eleventh Plan, the expenditure for railways was Rs. 186284 crore. The traffic output increased from 523.2 BTKM in 2007-08 to 668.6 BTKM in 2011-12 at an average growth of 6.9 per cent. There is no sign of a turnaround in the traffic share during the 12th Plan despite sharp increase in Plan investments. In 2012-13 and 2013-14, more than Rs. 1 lakh crore was spent in fixed assets, rolling stock and traffic facilities but the traffic output remained stagnant during these years. The performance in 2014-15 has not been flattering, either. We are waiting to see if 688 Btkm could finally be achieved as indicated in the revised estimates. The growth rate of these three years has completely belied the expectations of the NTDPC.

The continuous drop in traffic share has happened on account of the shrinking commodity basket as well as the diversion of traditional traffic to roadways. This happened initially due to the preferential treatment accorded to limited commodity-sponsor combines over the rest of the market and was later aggravated due to the post-1980 operational strategy being pursued to a narrow, dogmatic extent.

The growth of the segment of transport market served mainly by the railways has been far less than the growth of the remaining segments. Between 1978-79 and 2007-08, rail traffic increased by four times whereas highway traffic increased 16 times. The market segment outside the sphere of influence of railways grew faster as a result of overall economic development and the development of roadways . In fact, the competition from highways was uneven till the 1960s, as highways were just coming up from near zero level. The electrifying performance of the road sector in the following decades was contributed by the development of the road network and made easy by the policy of discrimination followed by the railways.

In 1980, in order to overcome their weakness in piecemeal operation, the railways carried out major changes in their operating strategy to rest on the pillars of their inherent strength. So, the railways transformed themselves into a bulk carrier of goods. In doing this, the railways introduced the condition of full-train consignment size to be eligible for supply of wagons and made the cardinal mistake of throttling the demand for rail transportation.

The Railway Board took governmental patronage as an opportunity and lost sight of the demand of non-bulk traffic. The threat came mainly from road transport. After 1980, it was a cakewalk for other modes as the railways vacated enough space for them to grow like giants.

The traffic in finished products also shifted to roadways because the manufacturers were not ready to warehouse finished products in such huge quantity as is required for dispatching it by a goods train. There were few customers available at one place to order for about 3,000 tonnes of manufactured goods as a single consignment. For this reason, most of the high-yielding traffic moved far away from railways.

The share of highways in the market of finished Iron and steel goods increased to 79.7 per cent in 2007-08 from 54.4 per cent in 1985-86. Highways also increased their share in case of mineral oils, building materials, food-grain and containers. fruits and vegetables. Highways even increased their share in coal from 13.69 per cent to 16.45 per cent over this period. All these are the core traffic of railways and despite the governmental patronage, the railways are losing the game on their own turf.

The Total Transport System Study made by RITES revealed that the originating traffic picked up by all transport modes amounted to 2555.35 million tonnes in 2007- 08. Out of this, consignments of 768.72 million tonnes were carried by railways and 1558.87 MT were lifted by trucks. Road transport is contributing 5 per cent to national GDP, whereas railway's contribution is only one per cent. Naturally the Government likes to spend more for the development of roadways. For increased level of Plan expenditure, railways should display their keenness to come forward and play a bigger role in the theatre of national transport.

Many learned people are of the view that railways should continue with the carriage of bulk traffic, and carry coal, iron ore and other raw materials, in rakes, i.e. business as usual. This is an ignoble way to self-effacement. Rail co-efficient of these commodities is already very high leaving little scope for increasing the share further.

Use of fossil fuel as primary source of energy will be contained on environmental grounds in near future. Consumption of iron ore and other ores will also be restricted keeping the need of future generations in mind. States are endeavouring to be self-sufficient in food-grains. Cement and fertilizer will move in shorter radii. Marginal increase in their production will help railways to barely maintain the existing co-efficient for these commodities. The only ray of hope for survival lies in import-export traffic of containerised miscellanous goods and value-added mineral traffic in bulk, moving in railway wagons for long distances. Short and medium-distance movements of less-than-trainload size will continue to move by roadways unless the railways look beyond the present operating strategy.

There is an emergent need for increasing the commodity base of the railways. Automobile traffic is moving criss-cross over long distances. Road transportation enjoys a 97 per cent share of this market. Highways are carrying 67 per cent of petroleum and petroleum products. This is a high -yielding traffic under the railway freight classification. Roadways are carrying finished steel, another high-yielding traffic, to the extent of 80 per cent. This high-profit traffic can be brought to railways if railways are prepared to reduce the consignment size. We cannot go back to pre-1980 days but it is necessary to reengineer the business . Apart from this traffic, which fits more or less within the existing business strategy, railways should enlarge their scope of operation to include offers of 300-1000 tonnes consignment to be carried over short and medium distances. This may require different type of rolling stock including locomotive and selected routes avoiding the saturated trunk routes. Railway officers should be encouraged to improvise, innovate and develop new business modules parallel to the existing one, to grab a bigger piece of the traffic pie. Indian Railways must learn to swim in the sea of open market outside the cesspool of government programmes and sponsorships. Therein lies the hope for redemption.