Experiences from India Related to Railway Planning & Development. Prof. Hemant Godbole, National Academy of Indian Railways, Vadodara

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1 Experiences from India Related to Railway Planning & Development Prof. Hemant Godbole, National Academy of Indian Railways, Vadodara 1

Agenda 1 2 3 4 5 6 Background Planning Sources of Financing the CAPEX

2 Agenda Background Planning Sources of Financing the CAPEX Progress Made Concerns and Course Correction Measures Summary and Suggestions 2

Background First Railway line in India, from

companies and government agencies, network

Expansion was fostered by participation of

3 Background First Railway line in India, from Bori Bunder to Thane, started on 16th of April With combined efforts of a private railway companies and government agencies, network expanded, reaching yearly pace of 1000 miles. Expansion was fostered by participation of private companies as Government guaranteed minimum rate of return on capital employed. 3

4 Planning and Development Pre- Independence Post- Independence Inclusive Planning 4

5 Pre- Independence Budget and Accounts Separate Budget and Accounts since 1924 Capital at Charge Government Investments in Rlys Infrastructure to be treated as Loan Financial Indepen dence Rlys to earn and spend own incomes Pay assured dividend on Loan Current Rate is 5% Recommendations of Acworth Committee 5

6 Post- Independence Planning Commission Planning Commission started, with PM as Ex- officio chairman Plans First Plan started in Plans announced so far Part of GoI s 5 Yr Plan IR s 5 Year Plan and Annual Plan are subsets of GoI s 5 Year Pan and Annual Plan Five Year Plans Initiated 6

7 Evolution Inclusive Planning NITI Aayog National Institution for Transforming India replaces Planning Commission Inclusive Involves State Governments in policy making Evolution Detailed contours are evolving Shared Vision, Shared Resources 7

8 Sources of Financing the CAPEX (Plan Expenditure) Budgetary Support Every Year, IR Gets additional loan from GoI Typically, for additional Infrastructure yielding IRR of 14% or more. This is a major source of IR s Annual Plan Internal Provisions / Savings Internal Provisions like Depreciation Reserve Fund and Savings like Development Fund and Capital Fund also help finance the Capex Alternative Means 1. Taking Assets on Lease 2. Public-Public- Partnership 3. Public -Private-Partnership 4. SPV for Multimodal Service 8

9 Sources of financing CAPEX- 1. Taking Assets on Lease Alternative Means Indian Railway Finance Corporation (IRFC) incorporated in 1986 as a 100% Subsidiary of IR. It Borrows by issuing long term bonds, purchases Rolling Stock, leases it to Railways. 70% of such assets on the system now belong to IRFC. 2. Public Public Partnership Konkan Railway Corporation Ltd (KRCL) is a Public-Public- Partnership with 51% equity by IR and 49% by four beneficiary States. By 1998, It completed most difficult coastal line of 761 km and is operating it since. Great Engineering marvel, but financially it is struggling. 9

10 Source: KRCL website 10

11 Sources of financing CAPEX- 3. Public Private Partnership Alternative Means Under National Rail Vikas Yojana 2002, RVNL (Rail Vikas Nigam Ltd) was started for port connectivity and other projects. It initiated many PPP based SPVs. Two of them are in profit by now. They are: Kutch Railway Co. Ltd : converted 301 km of MG line to BG, attained huge financial success. Bharuch Dahej Rail Co. Ltd which converted 62 km of NG line to BG, built additional 5 km BG, making profit by second year of operation. Co-creating Value -Win Win situation 11

12 Kutch Railway Project Location 12

13 Sources of financing CAPEX- 4. Multimodal Transport Alternative Means Multimodal Transport through Container Corporation (CONCOR) Set up in 1988, now has 63 terminals sales INR 50 Billion, Net Profit INR 10 Billion Net worth INR 70 Billion 61.80% shares with IR Very successful, shares fetch huge market price. Convenient Conveyance for Customer: Faster, Smarter, Better 13

14 Progress Made 14

Network expansion and Gauge Conversion ROUTE KILOMETRE 1951 1991 2014 BROAD GAUGE 25,258 34,880 58,177

KILOMETRE 1951 1991 2014 BROAD GAUGE 42,013 72,174 1,07,513 METRE GAUGE 29,536 32,122 6,688 NARROW

15 Network expansion and Gauge Conversion ROUTE KILOMETRE BROAD GAUGE 25,258 34,880 58,177 METRE GAUGE 24,185 23,419 5,334 NARROW GAUGE 4,153 4,068 2,297 TOTAL 53,596 62,367 65,808 TOTAL TRACK KILOMETRE BROAD GAUGE 42,013 72,174 1,07,513 METRE GAUGE 29,536 32,122 6,688 NARROW GAUGE 6,075 4,562 2,564 TOTAL 77,624 1,08,858 1,16,765 Total Track Kilometers of BG grew by 160% since 1951 * 15

16 Development from ITEM % Variation Electrified Route Km Double/ multiple route length (Kms) , Running track Kms (all Gauges) 59,315 89, Freight carried (Million Tonnes) Passenger Kms (Millions) 66,517 11,58, Passengers Originating (Millions) 1,284 8, Seat/berth capacity(suburban) 87,986 15,28, Seat/Berth Capacity(non Suburban) 8,54,678 36,43, Wagon Turn around(days) (-)54 16

17 Railways Share of Investment in Five Year Plans I ( ) II ( ) III ( ) IV ( ) V ( ) VI ( ) VII ( ) VIII ( ) IX ( ) X ( ) XI ( ) XII ( ) Total Plan Outlay (INR Billion) Transport Sector as a Whole ((INR Biillion) Railways (INR Billion) Transport Sector Outlay as a percentage of Total Railway Outlay as Percentage of total Railway Outlay as Percentage of Transport Outlay Though the plan size has grown exponentially, Railways share is dwindling 17

18 Causes of Concern 1. Reduced Investment While on one hand, there is an impressive Development in the physical assets and performance over last six decades, proportion of investment in Railways within transport sector steadily declined. For sustenance of ecology and economy, this needs to be corrected. 2. Budget Allocation and Project Prioritization Railway Budget Speech in July 2014, mentions:- Focus has been on sanctioning projects, rather than completing. Less than half of the projects, sanctioned in last 30 years, are completed Thin spread Near Plan Holiday. 18

19 Causes of Concern 3. Congested Network 65% of sections on High Density Network (HDN) routes are saturated. 18% network carrying 56% traffic 19

20 Corrective Measures underway 1. Quantum jump in Investment Plan size more than doubled in to INR 1000 Billion Medium term perspective, investment of INR 8560 Billion proposed in Emphasis on Network Decongestion, Expansion, Station Development, High Speed Rail. Institutional Finance, routing it through PSU bonds for bankable projects. MOU with LIC of India for Term Loan of INR 1500 Billion signed 20

21 Corrective Measures underway 2. Improved Rail Port Connectivity For improved supply chain services, Sagarmala project, to bridge hinterland and ports. SPV with 90% equity by major ports and 10% by RVNL being formed for substantially reducing dwell time of cargo at ports and bringing down overall logistics costs. 21

22 Corrective Measures underway 3. Prioritization of Projects High Level Committee of Officers have prioritized Projects which would enhance capacity, remove bottlenecks, expedite last mile completion, provide alternate routes, enhance safety 22

23 Summary Impressive physical progress notwithstanding, there was chronic underinvestment in IR in recent years Besides, thin spread of resources has taken its toll. Course correction measures like pump priming IR with alternative means, port connectivity etc. being taken. 23

24 Suggestions for Sri Lanka More Demand Congestion Less Supply Demand Smooth Flow Supply Analyse and Manage Demand and Supply 24

25 Supply Management Based on PHPDT (Peak Hour Peak Direction Traffic) in various arteries in city like Colombo, plan Light Metro (LM) Say, for PHPDP of about car LM with 5-10 minute frequency PHPDP (000), 6 car, more frequency Only if PHPDP is 40 to 50 (000), full Metro with 6 to 8 cars at frequency of 2.5 minutes is justified. Construction will spur economic activity, multiplier effect. Increase availability of public transport by increasing frequency, speed, space 25

26 Demand Management Promote, incentivize public transport, car-pooling Restrict truck movement in cities in day time, permit it freely in night. Day time they may move intercity. Encourage BPOs that typically work in nights, thus reducing day time demand, also enhancing employment opportunities and earning FOREX from Western Countries. Promote training in IT. This will help working from home, reducing travel demand. Will help online ordering by customers, avoiding going to markets 26

27 Demand Management Where possible, promote two shift working, say, between 6 to 14 and 14 to 22 hours. Dispersal of offices, work places and markets Building / promoting satellite centers at the outskirts of cities (like Navi Mumbai) Promoting Export Processing Zones, manufacturing units in less developed areas with tax exemptions /concessions. Restrict /Shift /holidays to different days in week instead of on Saturday / Sunday, where possible 27

28 Demand and Supply Management Roll-on-roll-off trucks like in Konkan Railway, wherever possible Think win- win. 28

29 29

CHALLENGES BEFORE THE INDIAN RAILWAYS

1 INFRASTRUCTURE FINANCING CHALLENGES BEFORE THE INDIAN RAILWAYS 2 Structure Overview: Investment in Infrastructure: Needs & Stages Requirements: India Railways: Process Plans Requirements Finance: Sources