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Tuesday, February 18, 2020

The three key issues that Budget 2020 can tackle to put the Railways on the fast track

Ahead of Bduget 2020 here's a look at what it could do to boost the growth and performance of the Indian Railways.

New Delhi | Published: January 27, 2020 1:18:04 pm
Vande Bharat express Representational image. Express Photo by Gurmeet Singh.

By Peeyush Naidu

The previous Budget had proposals for giving a massive boost to the infrastructure sector, including Railways. The investment requirement for railway infrastructure was pegged at Rs 50 lakh crore till 2030. The Report of the Task Force on National Infrastructure Pipeline (NIP) for 2019-2025 that released on December 31, 2019, pegs the projected capital expenditure in Railways at about Rs 13.7 lakh crore – of which about Rs 1.3 lakh crore is projected for FY20, with major projects including the dedicated freight corridors and high speed rail.

The previous budget had also indicated use of Public Private Partnerships (PPP) to unleash faster development and delivery of passenger and freight services. The NIP also envisions healthy private sector participation – with implementation of about 12 per cent of the projected capital expenditure over 2019-2025 i.e. Rs 1.6 lakh crore by the private sector.

At this stage, the upcoming budget would possibly do well to address three key issues on how Indian Railways could consider providing ‘enhanced traction’ to these initiatives and targets:

First, the Railways should consider creating a roadmap and a time-bound implementation plan on how it efficiently and effectively will cater to the transportation & logistics requirements of its key freight (revenue) segment.

With the commissioning of the Dedicated Freight Corridors (DFCs) at significant investment, line capacities on two major trunk routes of Railways are likely to be more than adequate. This should ideally result in improved availability of services along these major routes, and increase in the Railway’s freight share.

For the anticipated cost-savings/ overall logistics benefits to accrue to users because of the DFCs, it is essential for Railways to consider investing in track doubling and gauge conversions to offer deeper and effective feeder connectivity, creation of logistics facilities encompassing warehousing and efficient cargo handling systems, acquisition of higher-capacity wagons, etc.

This may require attendant investment planning and prioritization that is broader/ goal-based as well as with a longer-term view – accompanied with continuous project monitoring and evaluation.

In this context, rationalisation of the policy regime on investments in new wagons and terminals to increase Private Sector Participation could also be a priority area.

Second, Public Private Partnerships (PPPs) have the potential to unleash capacity for the Railways through the involvement of other stakeholders in development, as well as delivery, of services.

In this context, PPP projects do need substantial investment of time and concerted effort in undertaking market consultations, adequate project structuring, and implementation and, in most cases, would need substantial change management within the Railways. A meaningful and actionable roadmap for the next two-three years could be far more effective in signaling to the market the opportunity as well as facilitate interactions and project development, rather than any short-term targets in crashed timelines – putting the initiative itself at risk. At the same time, effective program monitoring and implementation would be required to facilitate delivery of some of these required initiatives.

In this context, the Railways have recently announced the introduction of private train operations. These could also effectively use the freed-up capacity along existing lines (when freight moves to DFCs along the two major trunk routes) to provide a differentiated product/ service to passengers.

Third, technology has today influenced and redefined consumer demands across transportation and logistics, which has affecting older customer archetypes across products and service lines. Today what customers are focusing on and demanding from transportation and logistics service providers are: punctuality, reliability, convenience, real-time visibility/traceability, etc., along with optimal time and cost of the core product/service.

It is critical for the Railways to consider focusing on technology adoption and use data-enabled decision-making and drive initiatives like network optimization with autonomous asset planning; condition monitoring and optimized maintenance; optimal personnel rostering; differential pricing and other high impact initiatives. At the same time, there is a case for further experimentation with automation at loading and unloading terminals as well as equipment (rolling stock) for efficiently moving freight, as well as passengers, to enhance overall system value and efficiency.

There is also an urgent need for the Railways to consider focusing on improving its operating ratio and profitability so as to sustainably support India’s economic growth. The Budget could serve this objective by putting focus on a meaningful and actionable roadmap for implementing some of the above mentioned aspects.

The author is a Partner at Deloitte India. Views expressed are the author’s.

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