It has been gradually losing share of freight movement traditionally to road transport because of non-competitive tariff structure
With government putting the spotlight on augmenting road network through projects like Bharatmala coupled with likely competition from inland waterways, the Railways need to reinvent itself as the fastest and cheapest mode of transportation if it wants to stay relevant to the Indian economy.
It needs to scale up its capacities fast as well as become cost-competitive, and policy framework, now in absence of a dedicated central Budget, should strive for the goals in a time-bound manner.
Railways has been gradually losing share of freight movement traditionally to road transport because of non-competitive tariff structure.
“While the passenger fare had remained more or less flat, the freight fare has increased sharply over the year,” said the Economic Survey for FY18.
After raising rates on cement, coal, urea, kerosene, LPG food grain by up to 10% in FY16, in January this year, Indian Railways increased freight rates again by 4% for transport of coal, a commodity accounting for 49.35% of total freight traffic.
During April to September, Indian Railways carried 558.10 million tonnes of revenue earning freight traffic as against 531 million tonne in the year ago period, showing an increase of just 5%.
“Railways have lost traction on account of significant increase in freight charges to support passenger segment and decline in diesel prices, which has narrowed the pricing gap with the road segment. The under-development of freight terminals and challenges in managing first and last-mile connectivity are other reasons for lower attraction of railways. Despite opening up the sector to private investments, the share of private container train operators has also remained minuscule on account of frequent increase in haulage charges and restrictive business policies, thereby limiting their viability,” said a report on logistics from rating firm Icra.
To improve this situation, on the infrastructure side the government is taking transformative projects like dedicated freight corridors (DFC), high-speed rail, high-capacity rolling stock, last-mile rail linkages, port connectivity. It has also introduced steps like tariff rationalisation, expansion of freight basket through containerisation, withdrawal of dual freight policy for export of iron ore, rationalisation of coal tariff, merry-go-round system, new delivery models like Roll-on Roll-off services, re-introduction of short lead concession and reduction in minimum distance for charge, long-term tariff contract policyand liberalised automatic freight rebate scheme for traffic loaded in empty flow directions, the survey noted.
Though running late, the DFC project would enable railways re-capture market share in freight transportation, the Icra report said.
“The railway infrastructure development in the last decade has been lagging in comparison to roads and they now plan to incur significant capex to catch up. While funding of this capex will be primarily arranged by the Railways, the private sector’s expertise in project execution and management can help improve the execution pace, quality, and efficiency,” said Shubham Jain, sector head, corporate ratings, Icra.
“Roads provide point-to-point transport and cannot be replaced by other modes completely but railways can be a viable substitute for longer trips with point-to-point connectivity between, say, mines and power plants,” said Equirus Research in a recent report.
The pace of commissioning broad gauge lines and completion of electrification have been accelerated.
About 38,000 route kilometre of railway lines are likely to get electrified in the next five years at a cost of Rs 40,000 crore. This is sharply higher than average execution pace of 2580 km a year over the last three years. Station redevelopment is another focus area with plans of upgrading 100 stations over the next five years to be developed under the PPP model with the private sector getting revenues from real estate.
...& ANALYSIS
- It has been gradually losing share of freight movement traditionally to road transport because of non-competitive tariff structure
- While the passenger fare had remained more or less flat, the freight fare has increased sharply over the year
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 "Indian Railways")
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