It is likely to be a lukewarm year for the country’s core sector and, as a ripple effect, a tough year for Indian Railways.
The infrastructure sectors have spelled out below-par projections for the next financial year to Railways vis-a-vis freight movement, effectively painting a gloomy picture for the Indian economy in 2016-17.
Sectors like coal, cement, power, steel, foodgrains, fertilizers, petroleum and others have communicated largely an absence of any growth over this year’s volume of business/activities, keeping their sector-wise forecast either same as this year, or lower, or cautiously, albeit marginally better— a far cry from the rosy picture that the government would like for the economy.
The review of projections for the next fiscal took place in a recent meeting of the national transporter with representatives of various ministries and manufacturers pertaining to the infrastructure sectors.
As 65 per cent of its earnings are from the freight business, it is trouble for Indian Railways, which has been battling a slowdown in earnings plagued with shortfalls and missed targets throughout this year.
Coal India, accounting for majority of freight earnings for Railways, has pegged 585 million tonnes of production, a mere 50 million tonne — less than 10 per cent — increase from this year. However, the amount to be carried by railways would remain the same as this year at 320 million tonnes, it has said.
The power sector, too, has said that the movement of domestic coal for power plants is going to be the same as 2015-16 next fiscal. This is because, as per the Central Electricity Authority analysis, the power sector growth has been just about seven per cent this fiscal, as against an estimated 11 per cent. Next fiscal may not be any better.
The country’s largest power producer, NTPC has told Railways that it estimates 25 rakes (trains) for non-pit head railway stations and 16 rakes for pit head railway stations next year. It expects less coal requirement in 2016-17 at Mouda, Badarpur and Dadri power houses. While those in Bangargaon and Kudgi might see some more coal movement.
A key takeaway from the projections is that while both coal and power ministries have forecast a decrease in imported coal, there is no significant increase in domestic volume projection for next year.
Construction sectors like cement represented by the cement manufacturers have projected a modest growth of 376 million tonnes and for better movement by railways have sought a number of policy interventions by the national transporter like review of the freight rationalisation scheme, removal of busy season surcharge and among others. “In both cement and clinker, rail share has come down by 4 per cent in the last 3-4 months whereas overall cement production has increased by 4 million tonnes,” the cement manufacturers have told Railways.
The steel sector, represented by the Steel Authority of India, too, has said that there is no major expansion plan, so rail movement of raw materials and finished products would remain at this year’s levels.
Movement of petroleum products by railways, as per the oil ministry, would be just about 0.5 million tonne more than this year’s 45 million tonnes. The oil ministry has said that the oil companies were working on a 10-year expansion plan and would communicate that to the Railways soon. Movement of foodgrains and fertilizers, too would remain tepid at FY16 levels — 45 million tonnes and 48 million tonnes, respectively.
In a nutshell, the overall picture that Railways has got after taking inputs from all the key sectors it services is that projecting huge earnings target for next fiscal in the Rail Budget could eventually backfire.
In any case, Railways is not likely to meet this year’s target of achieving 85 million tonnes of incremental loading over last year’s figures. So far the incremental loading stands at around 8.5 million tonnes with just three months to go.
Trouble for Railways is more because its salary and pension bills will increase by around Rs 30,000 next year. With an operating ratio of around 96 per cent, it is already finding it tough to run its household.
One of the reasons why Railways’ share in the country’s freight movement has been shrinking is the lack of reliability of its service, thanks to capacity constraints of its congested network. Addressing the problem, Railways has this fiscal embarked on the task of massive augmentation of network capacity and production/procurement of wagons. But these measures will take at least two to three years to bear fruit.
“There is a need for Railways to foray into movement of automobiles and such white goods like milk and others. As long as it gets to carry 80 per cent of the total coal produced in the country, there is no problem for the transporter,” said Devi Prasad Pande, former Railway Board Member (Traffic).
2016-17 projections from various ministries/sectors to Railways
* 535 million tonnes in 2015-16
* 585 million tonnes in 2016-17
* Coal import to be less in 2016-17
Power (Central Electricity AUTHORITY)
* Power sector growth in 2015-16 is less than anticipated (7% against projection of 11%).
* Domestic coal movement in 2016-17 may remain at FY16 levels.
* Imported coal movement may decrease by 4 to 5 million tonnes.
* Less coal requirement in 2016-17 at Mouda, Badarpur and Dadri power houses.
* Expected requirement for coal transportation by rail in 2016-17 – 25 rakes for non-pit head railway stations and 16 rakes for pit head railway stations
* No major expansions expected in 2016-17
* Rail movement of raw materials and dispatch of finished products expected to remain at the same 2015-16 levels
Food Corporation of India
* 45 million tonnes movement of foodgrains target in 2015-16, against which 26 MTs achieved till November, 2015.
* Anticipated movement in 2016-17 likely to be 45 MTs (same as 2015-16)
Cement Manufacturers Association
* 7-8% growth expected
* Less demand in current Financial Year 2015-16 due to which cement prices remained at low levels
* In both cement and clinker rail share has come down by 4% in the last 3-4 months whereas overall cement production has increased by 4 Mts.
* Loading volume for next year to be same as this year — 48 MT
* Around 8.3% less traffic carried by rail in 2015-16
* 10% growth expected in container loading in 2016-17
* Expected POL loading in the year 2015-16 is 45 MTs. Projected loading in 2016-17 – 45.5 MT (0.5 MT incremental)
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