Indian Railways -Growth

Indian Railways -Growth

Introduction

• The Indian Railways is among the world’s largest rail networks. Spread across 6,853 stations, the 108,706-km network enables the running of 11,000 trains on a daily basis. India's railway network is recognised as one of the largest railway systems in the world under single management.
• The railway network is also ideal for long-distance travel and movement of bulk commodities, apart from being an energy efficient and economic mode of conveyance and transport.
• The Government of India has focused on investing on railway infrastructure by making investor-friendly policies. It has moved quickly to enable Foreign Direct Investment (FDI) in railways to improve infrastructure for freight and high-speed trains. At present, several domestic and foreign companies are also looking to invest in Indian rail projects.

Market size

• The revenue generated by the Railways is expected to grow at 10 per cent in the next fiscal year 2017-18. The Union Budget 2017-18 estimated that the overall earnings will rise to Rs 189,498.37 crore (US$ 28.42 billion) in 2017-18, compared to Rs 172,305 crore (US$ 25.84 billion) in the current fiscal year 2016-17.

Investments/Developments

• Foreign Direct Investment (FDI) inflows into Railways related components from April 2000 to December 2016 were US$ 789.03 million.
• Following are some of the major investments and developments in India’s railways sector:
• A Universal Rail Mill worth Rs 1,200 crore (US$ 180 million) was inaugurated at Steel Authority of India's (SAIL’s) Bhilai Steel Plant by Mr Birender Singh, Union Minister of Steel, which will produce world’s longest single rail of 130 meters.
• The Indian Railways plans to set up a US$ 5 billion Railways of India Development Fund (RIDF) for investments of it projects.
• The Indian Railways is looking to award six tenders worth Rs 8,000 crores (US$ 1.2 billion), for setting up a country-wide electricity transmission network, as part of a strategy to reduce electricity bills.
• Mr Nitin Gadkari, Minister for Road Transport and Highways and Shipping, has stated that India will likely collaborate with Germany for projects worth Rs 1 trillion (US$ 15 billion), aimed at enhancing railway connectivity of Indian ports and identifying environment-friendly technology for scrapping of old vehicles.
• Mr Suresh Prabhu, Railway Minister of India, has unveiled Mission 41k initiative, aimed at saving Rs 41,000 crore (US$ 6.15 billion) on the Indian Railways' expenditure on energy consumption over the next 10 years by doubling the annual rate of electrification from 2,000 km to 4,000 km in the next two years.
• Bombardier Transportation, the rail equipment division of the Canadian firm Bombardier Incorporation, plans to participate in the bidding of upcoming Metro rail contracts of Mumbai, Nagpur, Pune, Bengaluru and Chennai, beside the expansion of a line in Delhi, in a bid to increase its revenue from India to US$ 1 billion by 2020.
• The Indian Railways is working on a new advertising policy aimed at installing 100,000 big digital screens at 2,175 railway stations across the country, which is expected to generate Rs 11,770 crore (US$ 1.76 billion) revenue by 2022.
• The Government of India plans to invest around Rs 330,000 crore (US$ 49.5 billion) for setting up three new arms of the Dedicated Railway Freight Corridors (DFC), crisscrossing the length and breadth of the country, in the next eight years.
• The Union cabinet has approved investments worth Rs 10,736 crore (US$ 1.6 billion) in five railway projects involving the decongestion of existing network by doubling and tripling of existing lines.
• The Indian Railways plans to deploy the European Train Control System (ETCS), aimed at preventing head-on collisions of trains, on 28 projects across the country in the next five years, thereby strengthening the safety of India’s railway network.
• Indian Railways have signed a Memorandum of Understanding (MoU) with Indian Space Research Organisation (ISRO) for developing applications and services such as warning systems for road users, geospatial technology for mapping assets of railways and real time train information system to track trains on real time basis.
• Toshiba Corporation of Japan plans to set up a facility in Hyderabad by April 2017 to produce railway systems electrical equipment, power conversion systems and train control systems that provide overall operation management, and hire over 100 employees by 2020.
• The Cabinet Committee of Economic Affairs (CCEA) has approved construction of six railway Lines and a railway bridge incurring a total outlay of over Rs 10,700 crore (US$ 1.6 billion) which will help to meet the growing needs for transportation of passengers and freight across several parts of India.
• The Madhya Pradesh government has obtained Rs 12,000 crore (US$ 1.8 billion) loan from Japan International Cooperation Agency (JICA) for its Bhopal and Indore Metro rail projects.
• Indian Railways has issued a Letter of Award (LoA) to US-based General Electric (GE) for a Rs 14,656 crore (US$ 2.19 billion) diesel locomotive factory project at Marhowra, and to French transport major Alstom for Rs 20,000 crore (US$ 3 billion) electric locomotive project in Madhepura, both in the state of Bihar.
• The Government of India will be spending Rs 850,000 crore (US$ 127.5 billion) over the next five years to modernise Indian Railways for which they have received a 30 year loan from LIC. The Cabinet also cleared the Rs 82,000 crore (US$ 12.3 billion) dedicated freight corridor for decongesting existing network.
• Encouraging private sector participation in Railways, Mr Suresh Prabhu, in his maiden Railway Budget, amalgamated public welfare with private investment. While investment through public-private partnerships (PPP) was increased to Rs 5,781 crore (US$ 867.15 million), several schemes for improving efficiency of the Railways were kept under this head.
• With the objective of cutting energy costs, the Indian Railways has signed a bilateral power procurement agreement with the Damodar Valley Corporation (DVC). Under the agreement, railways will buy 50 MW of power from DVC at Auraiya Grid Sub-station facilitated by Railways Energy Management Co. Ltd, a joint venture of the Indian Railways and RITES, a public sector unit of the Ministry of Railways.
• The Ministry of Railways has sanctioned implementation of Eastern Dedicated Freight Corridor (EDFC) and Western Dedicated Freight Corridor (WDFC) with freight train speeds of maximum 100 kmph.

Government Initiatives:

• Mr Arun Jaitley, Finance Minister of India, announced the following reforms in the Railway sector in the Union Budget 2017-18.
• The Government will provide Rs 55,000 crore (US$ 8.25 billion) towards capital and development expenditure of Railways
• A fund named Rashtriya Rail Sanraksha Kosh worth Rs 100,000 crore (US$ 15 billion) will be created, which will be directed towards passenger safety
• All the coaches of the Indian Railways will be fitted with bio toilets by the year 2019
• Railway lines of 3,500 kms will be commissioned in 2017-18.
• The other initiatives taken up by the Government are:
• The Railway Minister of India has launched the first phase of station redevelopment programme, covering commercial redevelopment of 23 out of 400 A1 and A category stations across the country.
• Union Ministry of Railways plan to cover the length and breadth of Arunachal Pradesh by rail network requiring an initial investment of around Rs 50,000 – 70,000 crore (US$ 7.4 - 10.4 billion)at an elevation range of 500 to 9,000 feet.
• The Ministry of Railways has signed a memorandum of understanding (MoU) with Italy-based Ferrovie Dello Stato Italiane Group, for technical cooperation in railway sector, especially in the area of safety.
• The Ministry of Railways has signed a memorandum of understanding (MoU) with the Ministry of Urban Development, under which railway stations in each city included in the SMART Cities and AMRUT scheme will be redeveloped to create an integrated public transit hub around the railway stations and encourage transit oriented development.
• The Government of India and The World Bank have signed a US$ 650 million loan agreement for the Eastern Dedicated Freight Corridor-III (EDFC-III) project, which is expected to enhance railway transport capacity, improve service quality and boost freight carriage on the 401-km- long Ludhiana-Khurja section of the EDFC, along with developing institutional capacity of Dedicated Freight Corridor Corporation of India Ltd (DFCCIL) to build, maintain and operate the entire network.
• The Union Cabinet approved the merger of Railway budget with the Union budget, which is expected to help initiate revenue mobilisation and capital expenditure measures from the beginning of the fiscal year.
• The Cabinet Committee on Economic Affairs (CCEA) has approved nine projects worth Rs 24,374.86 crore (US$ 3.6 billion) for expansion of railway network and connectivity, which is expected to ease traffic bottlenecks and help the upcoming industries in the region and additional transport capacity to meet their requirements.
• Mr Suresh Prabhu, Minister of Railways, has launched free Wi-Fi facility at eight stations of Mumbai suburban railway network, which will provide high speed access network to all railway users.
• The state of Haryana has taken the lead among all states of India to partner with the Ministry of Railways in creating rail infrastructure, by formation of a Special Purpose Vehicle (SPV) between Haryana and Indian Railways, as announced by Mr Suresh Prabhu, Minister of Railways, and Government of India.
• The Indian Railways have finalised a policy to set up solar power plants on rooftops of railway premises, which will help to reduce dependence on fossil fuels by generating electricity from solar panels, as part of the Solar Mission of Indian Railways.
• Ministry of Railways has signed a Memorandum of Cooperation (MoC) and Memorandum of Understanding (MoU) with governments and national railways of Japan and Russia for cooperation in areas such as high speed corridors, speed raising of existing routes, development of world class stations, heavy haul operations and modernisation of rail infrastructure.
• The Railway Ministry plans to give a digital push to the India Railways by introducing bar-coded tickets, Global Positioning System (GPS) based information systems inside coaches, Information Technology (IT) integration of all facilities dealing with ticketing issues, Wi-Fi facilities at the stations, super-fast long-route train service for unreserved passengers among other developments, which will help to increase the passenger traffic.
• According to Mr N Sreekumar, Chief General Manager of Container Corporation of India Limited, the Indian Railways is coming out with a new rating system. Addressing an event organised by Indian Institute of Logistics, Mr Sreekumar said the government is going to restructure the railway board. He also stated that the total logistics sector in India would undergo a transformation with the east and west freight corridor coming into being.
• Promising "watershed development" of Indian Railways, Minister of Railways Mr Suresh Prabhu announced a series of reforms in the rail sector, including the introduction of remote sensing technology to improve safety, rail bookings on mobile phones and wi-fi at railway stations.
• State government of Maharashtra has planned to set up a Special Purpose Vehicle (SPV), Maharashtra Railway Infrastructure Development Company, with a view to ensure that the various development projects are completed in a time bound manner.
• A memorandum of understanding (MoU) and an Action Plan have been signed between the Government of India and the Government of China to improve technical cooperation in the railways sector, at delegation level talks between the two countries. Prime Minister Mr Narendra Modi and the visiting President of China, Xi Jinping, were present at the signing.
• The Government of India has cleared a proposal to allow 100 per cent FDI in railway infrastructure, barring operations, via the automatic route. FDI channelled through this route does not require prior government approvals.
• The Railway Board is considering the implementation of the 106 recommendations of the High Level Safety Review Committee (Kakodkar Committee) pertaining to general safety matters, empowerment at working level, vacancies in critical safety category, organisational structure, shortage of critical safety spares, human resource development with focus on education and training research, among others.
• The Union Cabinet has given its approval for establishing a new rail coach manufacturing unit at Kolar, Karnataka. The unit will produce 500 coaches per annum at a projected cost of Rs 1,460.92 crore (US$ 219.13 million). The Ministry of Railways will provide 50 per cent of the finances with the Karnataka government providing land, free of cost, and the remaining 50 per cent of the project completion cost with escalation.

Road Ahead

• The Indian Railway network is growing at a healthy rate. In the next five years, the Indian railway market will be the third largest, accounting for 10 per cent of the global market.
• Exchange Rate Used: INR 1 = US$ 0.015 as on February 9, 2017
• References: Press Releases, Department of Industrial Policy and Promotion, Press information Bureau, Media Reports, Railways Budget 2016-17

Source:IBEF