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Railways

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Indian Railways

July, 2014

Introduction

The Indian Railways is among the biggest in the world. It plays a major role in looking after the transportation needs of the country, while also bringing together the diverse geographies and helping promote national integration. The railway network is ideal for long-distance travel and movement of bulk commodities, being an energy efficient and economic mode of transport.

With a total route network of about 64,600 km spread across 7,146 stations, with 19,000 trains operating the routes every day, India's railway network is recognised as one of the largest railway systems in the world under a single management.

Urbanisation is driving passenger growth in the country. Consequently, the Government of India has focused on investing on railway infrastructure by relaxing norms and making investor-friendly policies. It is moving swiftly to facilitate foreign direct investment (FDI) in railways to improve infrastructure for freight and high-speed trains. Presently, private sector companies are looking to invest in rail projects, a development which is helped largely by the government's approval of a policy in 2012, which enabled private ownership of some railway lines.

Market size

The total approximate earnings of the Indian Railways on originating basis during FY 14 were Rs 140,485.02 crore (US$ 23.38 billion) compared to Rs 121,831.65 crore (US$ 20.28 billion) during FY 13. Earnings stood at Rs 12,064.46 crore (US$ 2.01 billion) in April 2014 as against Rs 11,010.98 crore (US$ 1.83 billion)during the same period in 2013, an increase of 9.57 per cent.

The total goods earnings during FY 14 were Rs 94,925.02 crore (US$ 15.8 billion) as against Rs 82,852.54 crore (US$ 13.79 billion) in FY 13. Earnings stood at Rs 8,204 crore (US$ 1.36 billion) the month of April 2014 as against Rs 7,624 crore(US$ 1.26 billion) in April 2013.

The total approximate numbers of passengers booked during April 2014 were 685.85 million and the total passenger revenue earnings during the same period stood at Rs 3,406.76 crore (US$ 567.07 million).In the period FY 07-13, revenues from the passenger segment expanded at a compound annual growth rate (CAGR) of 10.9 per cent.

Investments

The following are some of the major investments and developments in the Indian railways sector:

  • The India Railways has decided to run premium trains on 36 new routes in an effort to cater to the summer rush as well as gain extra revenue. Through premium trains, the transporter will look to provide faster and comfortable travel to customers who are ready to pay a higher price. These trains will run on corridors which lead to hill stations and religious places, such as Shimla, Jammu, Kathgodam, Mahabaleshwar and Tirupati, among others.
  • Online railway ticket bookings almost trebled to reach 14.02 million units in March 2014, indicating that people are increasingly adopting the digital medium to plan their travel. "The online booking of railway tickets increased from 3.63 million in March 2013 to 14.02 million in March 2014, registering a year-on-year (y-o-y) growth of 286 per cent," according to the monthly tracker of Internet and Mobile Association of India (IAMAI) and IMRB.
  • The Metro rail link between Noida and Greater Noida has been given the go-ahead from the Urban Development Ministry. The 30 km link will cost around Rs 5,000 crore (US$ 832.25 million), with the construction work expected to commence after a Memorandum of Understanding (MoU) is signed between the Noida Authority and the Delhi Metro Rail Corporation (DMRC).
  • Steel Authority of India Ltd (SAIL) has won contracts for supplying over 117,000 tonnes of rails through successful bids for two global tenders floated by Rail Vikas Nigam Ltd (RVNL) for major upcoming passenger rail line projects in India. The combined value of the contracts is over Rs 650 crore (US$ 108.18 million).
  • Commuters could be travelling in high-speed trains in India very soon, with the Indian Railways focusing on incorporating new technology to trains. The first high-speed rail is likely to connect Mumbai and Ahmedabad, two of western India's most important financial hubs. The train is also expected to bring down travel time between these two cities to two hours, from the current eight hours. The Railways is also trying to attain speeds of 160-200 km/hour on existing tracks.

Government Initiatives

The Railway Board is actively considering the implementation of the recommendations of the High Level Safety Review Committee (Kakodkar Committee). The 106 recommendations made by the Committee pertain to general safety matters, empowerment at working level, organisational structure, vacancies in critical safety category, shortage of critical safety spares, human resource development with focus on education and training research,and safety architecture, among others.

The Union Cabinet has given the go-ahead for establishing a new rail coach manufacturing unit at Kolar, Karnataka. The unit will produce 500 coaches per annum at an anticipated cost of Rs 1,460.92 crore (US$ 243.14 million) excluding the cost of land, with active participation of the Karnataka government. The Ministry of Railways will provide 50 per cent of the finances with the Government of Karnataka providing land, free of cost, and the rest 50 per cent of the project completion cost with escalation.

The Asian Development Bank (ADB) and the Indian government signed loan agreements worth about US$ 605 million for three separate projects, earlier this year. The projects will aim to improve rail services, power and roads in the country. To enhance rail services along some of the most critical freight and passenger transport routes, a US$ 130 million loan has also been signed, which is part of the US$ 500million Railway Sector Investment Programme approved by ADB in 2011.

Road Ahead

The already massive network of the Indian Railways is growing. To meet this demand, an outlay of US$ 95.6 billion has been approved for the sector by the Planning Commission for the 12th Five-Year Plan. Freight traffic also looks likely to increase with investments and active participation of private sector companies. Additionally, investments to the tune of US$ 42 billion are anticipated in metro rail networks in the country by 2020.

Exchange Rate: INR 1 = US$ 0.0166 as on July 25, 2014

References: Press Releases, Department of Industrial Policy and Promotion, Press information Bureau, Media Reports