A win-win budget, sans populism
Losing track of the whole

Railways, prime mover

Roads should be used only where rail is less cost-effective.

The suboptimal distribution of passenger and freight traffic between rail and road has measurable economic implications. (Reuters) The suboptimal distribution of passenger and freight traffic between rail and road has measurable economic implications. (Reuters)

As the new government prepares to present the rail and general budgets, the focus is likely to be on developing rail and road infrastructure. A robust rail-road network will be essential to meet growth-led ­demand for passenger and freight tra­ffic in the years to come. Consi­dering the scale of investment inv­olved, the government may need to make hard choices in proritising between the rail and road networks.

In 1951, the railways carried the bulk of the freight (almost 90 per cent) and passenger (almost 70 per cent) traffic. Succeeding years saw a gradual shift away from rail to roads. At the moment, about 90 per cent of India’s freight is carried on the rail-road network, which is in turn shared between roads and railways in a 70:30 ratio. The road-rail network carries almost the entire passenger traffic in a 90:10 ratio.

The shift from rail to roads def­ies economic or social logic. Low freight and passenger rail fares have done immeasurable public good. The graded freight structure of the railways, which is inversely proportional to distance, has ensu­red that low-value cargo such as coal, minerals, fertilisers, food gra­ins and cement can be carried at substantially low rates. In general, railway freight charges are about half the road transportation char­ges for commonly used commodities.

The economic, social and environmental costs of building and maintaining a rail network is far lower than for roads. Building a rail network requires much less land, reducing land acquisition costs not only in terms of the area to be acquired, but also in time saved in prolonged land acquisition proce­edings. The railways are comparatively more energy efficient, less polluting and less of a drain on natural resources, both during the construction and operation phases.

As a more organised set-up, the rail offers greater scope to implement and enforce quality control. While roads are eventually clogged with linear ribbon development along the road network, the rail network is unaffected by such developments. Finally, while much needs to be done to improve rail safety, in comparison to road safety, the railways are several notches higher.

The suboptimal distribution of passenger and freight traffic bet­ween rail and road has measurable economic implications. In simple terms, if the railways moved 1 billion tonne of freight during 2013-14 and earned Rs 950 billion, the carriage of the same amount of freight thro­ugh roads would cost twice as mu­ch.

In other words, if the railways hand­led an additional 1 billion tonne of freight every year, preventing its div­ersion to roads, the resultant ­financial savings to the tune of Rs 950 billion may boost India’s GDP by more than 1 per cent. Also, an efficient and enhanced rail network is likely to decongest roads, thereby reducing the need for incremental investment in building road networks.

Considering an average GDP growth of about 8 per cent during the 12th to 15th Five Year Plan periods and demand elasticity of 1.2, India’s total freight traffic is expected to grow sixfold and passenger traffic is likely to grow 16 times by 2032. If the railways maintain the present inter-modal share vis-a-vis roads, they will need to expand freight-carrying capacity by six times.

If a 50:50 share is to be achi­eved, the railways will need to exp­and freight-carrying capacity to ­almost 10 times the current level. To achieve a 50:50 rail-road share of passenger traffic, present capacity will have to be multiplied almost 80 times during the same period. Creating capacities of this magnitude is no easy task due to a lack of funds and other challenges. On the other hand, if these capacities are not ­created, the economy may become less competitive.

Any expansion or modernisation plan will need meticulous planning. To reduce haulage and travel distances and avoid multiple freight handling, production, consumption and storage locations need to be strategically planned. The railways need to develop a dedicated freight corridor and unlock the value of their land bank and utilise it to ­improve facilities, particularly for cargo handling. Increasing safe speed limits on existing tracks is ­another method by which capacity can be enhanced with minimal marginal investment.

The idea of high-speed trains too needs a push. Recovering costs through freight and passenger fares is likely to remain a politically sensitive matter, even if facilities are improved. Improving scale and efficiency remain the only other options. To improve effici­ency, the railways need to invest in training, skill development and ado­ption of newer technologies.

From the governance standpoint, the railways need an independent governance model, with limited government interference. Social obligations need to be within the limits of economic prudence and, in suitable cases, they need to be compensated by state agencies for fulfilling such roles.

The government should adopt a coordinated approach for the dev­elopment of rail and road networks. The railways must be developed as the preferred mode of transport for long- and medium-distance traffic (500 km and above), while roads should be improved and developed to serve short- and medium-distance traffic.

Roads should be used only where rail is found to be less cost-effective. It is imperative to treat the railways as the prime mover of the economy, even if that means diverting investment from roads to rail.

The writer is a former ­additional director general, ministry of road transport and highways

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