Indian Railways has been facing a challenging year because of the coronavirus outbreak. With passenger revenues hit by the limited train services in the first quarter of the fiscal, the national transporter is pinning hopes on an increase in freight revenue and lower expenditure to match last year’s operating ratio.
Plans are being finalized for private firms to run freight trains on dedicated freight corridors, Railway Board chairman Vinod Yadav said in an interview. Also, for the first time, 150 modern passenger trains will be launched by private companies in the next three years. The private sector will also take part in the redevelopment and transformation of railway stations into commercial hubs. Edited excerpts:
There has been a rising focus on diversifying infrastructure financing models, with asset monetization being one of them. What is the plan of Indian Railways in this regard?
Let me give you a macro picture. There is a lot of thrust on infrastructure development and modernization of our network. The infrastructure pipeline capital expenditure for the next five years is around ₹13.6 trillion. Of this, financing for ₹10 trillion has been frozen. This also includes work on the dedicated freight corridor and the bullet train project.
The second type of finance is through extra budgetary resources, borrowing from those Indian Railway Finance Corp. projects where the rate of return is more than 12%.
The third type of projects involve those of national importance, such as the ones in Jammu and Kashmir, and improving connectivity with the northeastern part of the country. These projects don’t have a rate of return and are being implemented as they will improve the condition of people staying in such areas.
The fourth type is asset monetization. Railways has taken two initiatives.
One is where passenger trains will be run by private players via public private partnership (PPP). While the fixed infrastructure will be controlled by Indian Railways, we are allowing private train operators to bring more rolling stock, which will entail an investment of ₹30,000 crore.
The other one is the station redevelopment plan. Some projects, Habibganj, Bhopal, and Gandhinagar, will be completed by December.
We plan to finalize the tender for 50 more stations in this fiscal. We have already floated six tenders and the response has been very good. This is another way of financing the development of the stations to make it world class, without taking any money from the cental government.
So, the remaining ₹3.6 trillion (out of ₹13.6 trillion), will be financed through PPP, asset monetization, or any other means. Those details are yet to be worked out.
Will private passenger trains have any advantages over those being operated at present by Indian Railways?
We are not thinking in terms of giving them any advantage. However, across the world, it has been proved that with improved efficiency of operations and maintenance, the cost of operations of these private trains will be much less.
The only benefit will be that Indian Railways is not free to revise fares because of social considerations, but these private players will have the freedom to fix their fares according to market conditions.
However, while fixing the fares, they will have to see that there will be competition from roads, air-conditioned buses, and airlines.
How has the response from private companies been so far? What is the quantum of penalty for not maintaining punctuality and other key performance indicators (KPI)?
We will deploy a regulator to keep a tab on these. We are working towards that. There are KPIs for every division of Indian Railways. It will be similar for private train operators. Right now, we are at the request for quotation (RFQ) stage (to shortlist bidders), where we only give broad contours of the project.
We will float requests for proposals (RFPs) in November. Penalties will be defined in the RFP document. We still have sufficient time for that.
The response on RFQ has been good and we got a lot of queries on bidding parameters and operations.
We will not be able to disclose details at this stage. We have another pre-bid conference this week. We are open to making changes in RFQ based on the feedback received from companies.
When do we get to see private trains on the dedicated freight corridor (DFC)? How will you implement this and how many routes are you looking at?
We are trying to complete the dedicated freight corridor project by December 2021. There have been some problems (in the progress of this project) because of covid-19, but we are trying to sort it out. As of now, the work has picked up well. Having said this, we are working out the business development plans.
When this DFC is completed, there will be a lot of capacity, where we will be able to run many trains. The DFC is designed for 100 km per hour and there will be a lot of network capacity available to introduce more freight trains.
We have decided that we will be going for private freight operators also for these corridors. The point that I want to make is that we can go for bidding only when these corridors are commissioned and trains start operating.
The bidding process will start closer to commissioning of the railway lines. Right now we are working out the details and the project report. We have deputed a consultant. The details and contours are still being worked on.
Can you take us through your earnings position this fiscal?
If you look at last year, ₹50,000 crore was earned from the passenger segment, ₹1.15 trillion from freight revenue, and then non-fare revenue of ₹9,000 crore was earned.
In April-June this year, the passenger earning is almost zero, as railways was able to run limited trains and a lot of refunds had to be made on advance bookings done till March. As far as freight revenue is concerned, we have earned ₹22,000 crore (in April-June) as compared to ₹29,000 crore last year. However, the good news over the last few days is that our freight loading and revenue has been more than last year.
There are two or three reasons for that. We did safety-related work and improved mobility during the lockdown. As all the passenger trains are not running, we have a lot of network capacity. So, we have increased the average speed of our freight trains from 23 km per hour to 46 km per hour. So, we are in a position to carry more freight.
We have also utilized the covid-19 lockdown and set up business development units and they have started interacting with our stakeholders. While there has been a reduction in coal loading, fertilizer and cement has grown, foodgrain loading has doubled and additional commodities are coming to us.
In this fiscal, we may earn ₹15,000- ₹20,000 crore from the passenger segment, depending on the coronavirus situation. Whatever we are going to lose in the passenger segment, we are making an effort to make it up in the freight segment. We will try to reach as close as possible and also bring down expenditure by cutting fuel cost, coach maintenance cost, redeployment of staff without reducing staff or allowances. A reduction in cost will increase earnings, but there is no way for us to reduce staff or cut back on any allowances.
We hope to maintain an operating ratio similar to that of last year (2019-20) at 98.36% by increasing freight revenue and reducing expenses.
News Source: Livemint