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Factors Influencing the investment profile on Indian Railways

Date of Post: 18/11/2015

Category: Bridges & Tunnels   Type: Articles

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India is a large country with extreme diversities between different regions in terms of topography, population density, household consumption patterns, work culture, efficiency levels of supporting infrastructure and a host of other socio economic factors which influence transportation requirements. The Indian Railways, with a 68,000 km network, are the fourth largest national railway system in the world, and are burdened with overwhelming and diverse expectations from all segments of the society.

 

Transportation is based on derived demand. Experts generally agree that creation of transportation infrastructure helps speed up the development process. But this also involves a level of precision in micromanagement of transportation assets that can be achieved only by looking at the entire transportation as a whole. Therefore, before any investment is made in railways in a particular sector, the possibility of the road sector sharing some of the needs in that particular area have to be examined.

 

 India has the second largest road network in the world. Its quantitative density (i.e., length of road per sq. kilometer of land surface) is 0.64, almost the same as of USA at 0.65.  It is much higher than that of countries like Brazil (0.20) or China (0.16). Out of nearly 0.5 million km of the road network in India, only about 20% constitute national highways, most of it already coming to world standards. State highways, district roads and rural roads account for the balance 80%, maintained by the state governments, which also provide road transportation for passengers through state controlled agencies and also by giving licenses to private operators throughout the state, including on the national highways passing through the state. The quality of services provided on these roads has a direct and identifiable impact on the nature of demand for railway services in various regions. Therefore, it is not prudent to analyze the investment requirements of railways in passenger transportation in isolation without taking into account the nature of competing or supporting road transport in various regions.

 

Indian Railways have been engaged all along in building up throughput on the oversaturated quadrilateral routes linking the four metros, as also on their north-south and east-west diagonals.  Reduction in transit time has not been the thrust area. However, from the point of view of revenue augmentation and customer satisfaction, cutting down transit time between nearly thirty other large cities, each one having  a population ranging between two million to four million, would bring about a revolutionary impact on the way  people expect to travel in this country. This calls for tremendous innovation in planning and synchronization in creation of new railway assets. All over the western world, investments in railways are being planned to cut down on transit time. Indian Railways have to switch over to the same approach.

 

The most welcome change that has come about in India is that the political class is realizing that the public does not give a second chance to those political dispensations which fail to provide efficient delivery systems. Many state governments have drastically revised their internal business processes in their quest for investments from foreign firms for the much needed capital to raise the quality of their infrastructure and to create more jobs. Metro projects   being planned in nearly 20 cities are a visible example of this approach. Acquiring land for setting up projects is not a problem for anyone willing to pay the market price. All state governments would go out of their way to welcome investors setting up railway related manufacturing facilities.

 

It is in respect of freight transport that paradigm shifts are needed to be brought about.  Indian Railways carry more than one billion tonnes of freight each year, of which 45% is coal alone. Cement, steel, fertilizer, iron ore etc. would account for another 40%. To support  a growing economy, railways have to adopt a bolder policy of carrying a larger number of commodities by diversifying its freight rolling stock, and creating an imaginative tariff which the market can bear. To be a catalyst of change, railways must carry at least 40% of all traffic moving on the land surface, as against only 20% at present. Huge investments which are being made in the eastern and western freight corridors, under construction with Japanese assistance, take care of the bulk traffic. But a vibrant economy needs a choice factor which is environment friendly. This offers the most exciting prospects for investors willing to invest in Indian Railways. The biggest advantage is that Indian Railways are a disciplined organization, considered, in public perception, next only to the armed forces. The Indian Railways have very stable administrative traditions coupled with a reputation for financial prudence and tough budgetary control. The railway engineering services and its administrative cadres are a veritable powerhouse of talent. Indian Railways provide an excellent platform for making high technology investments to develop a suitable infrastructure for what is going to be among the most powerful economies in the world within the next one decade itself.


We are highly thankful to Mr Asit Kumar Chaturvedi (From India) for contributing this valuable article. 

 



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