We need to fix rail container policy, build the right incentives
In 2006, the Planning Commission and the Railway Ministry took a historical step towards privatising container rail movement in India. While the Indian Railways have shown a compounded annual growth rate (CAGR) of 14 per cent in rail container freight, nearly twice the overall railway freight growth rate of 7.5 per cent and 11 per cent in the road sector, we are far from realising the true potential of Public Private Partnership (PPP) in this space, writes Ajay S Mittal.india Updated: May 30, 2010 22:39 IST
In 2006, the Planning Commission and the Railway Ministry took a historical step towards privatising container rail movement in India. While the Indian Railways have shown a compounded annual growth rate (CAGR) of 14 per cent in rail container freight, nearly twice the overall railway freight growth rate of 7.5 per cent and 11 per cent in the road sector, we are far from realising the true potential of Public Private Partnership (PPP) in this space.
While more than 85 rakes have been added to India’s railway network with investments over Rs. 2,200 crore from the Private Container Train Operators (PCTOs), the railways still have only 30 per cent market share of India’s net domestic freight movement whereas the road sector has 65 per cent.
We have not yet been able to create forward thinking policies that will incentivise rail movement for many product types and not been able to accelerate the induction of privatised rail terminals into the Indian railway network. Our inability to do this is costing us a lot.
Both the PCTOs and the Railways need to show better understanding to move forward. Like many privatisation initiatives in India, the momentum is slow, with the public and private sector participants treating each other as competition. The task is huge.
As much as 62 per cent of containers handled by India come into just one place – the Jawaharlal Nehru Port Trust, Mumbai. But the National Capital Region (NCR), a major manufacturing centre, is 2,000 km away. There is a lack of rail terminals at both these ends.
Even if India grows at only 6 per cent per annum over the next decade, the freight system should swell to approximately 5.2 billion metric tonnes from the current 2.8 billion tonnes. Even if the railways sustain the current 30 per cent market share in freight, it would mean more than 2 billion tonnes to be moved by rail by 2020 from the current 840 million. And that still doesn’t answer how we expect roads to carry 65 per cent of 5.2 billion tonnes by 2020!
Road congestion can get serious and costs can soar unless something is done.
Under its Vision 2020 plan, the Indian Railways intend to add 1,000 km of new lines, 700 km in doubling and 800 km in gauge conversion in 2010-11 with an overall 10-year target of 25,000 km. In addition to this, the government has promised dedicated freight corridors. All this will not be possible without the right framework to attract funds in PPPs.
The plans laid out for this year alone may cost Rs. 12,000 to 15,000 crore. The five dedicated freight corridors would carry a price tag of Rs. 250,000 crore. The government also plans to double the freight that Indian Railways will carry. That means doubling the number of rakes to 28,000. At Rs. 12-15 crore per rake, this means an additional investment of Rs. 200,000 crore. Locomotive costs are additional.
The railways have Rs 1,000 crore in surplus now and need much more. Not getting this right, I dare say, is something this country can ill-afford.
The future of India and providing value to the Indian citizen (may it be a consumer or manufacturer or trader) depends on it.
The author is chairman and managing director of Arshiya International