Though the proposals relating to public private partnership (PPP) and foreign direct investment (FDI) have garnered most of the attention, the future of the railways for the next five years will depend on how quickly it can activate three major projects — the east and west dedicated freight corridors (DFCs), evacuation of coal from three areas with huge deposits and getting piecemeal traffic back, said senior railway officials.
Having reconciled to the hard political reality of having to subsidise passenger operations, the railways have freight to bank upon for raising money. Most of its existing tracks that carry the bulk of the freight traffic have become “super saturated”.
Industrial growth will depend on how quickly the railways can activate the eastern and western DFCs (broadly Delhi-Mumbai and Delhi-Howrah) and begin work on similar tracks between Howrah and Chennai, Delhi and Chennai and Chennai to Mumbai via Vijayawada.
The DFC proposal was included in the budget during Lalu Prasad’s time as Railway Minister. The initial expectation was that it would be operationalised by 2015-16. It is still not progressing well and officials doubt whether it will be open in 2017-18. “This is very critical because the growth of the industrial sector cannot be handled by the present infrastructure of the railways,’’ warned officials.
The second area where the railways can even save foreign exchange and even contribute to the lowering of thermal power generation costs is taking the railway line to three coal rich regions — Tori-Kathuatia, Ib Valley (Jharsguda-Barpalli-Sardega) and Bhupdeopur-Raigarh-Mand area. These areas have the capacity to bring 100 million tonnes per annum (mtpa) of incremental coal traffic as also facilitate its faster transportation to thermal plants. This way the railways will not only shore up its balance sheet but substitute costlier imported coal with the cheaper indigenous variety, said officials.
Maoist activityThe only rub is Maoist activity in some of these areas. Though the railways run hugely profitable mineral evacuation operations from some of the areas where Maoists dominate, construction of new lines will be a major challenge, apprehend officials.
The third area is public-private partnership (PPP) in railway projects and foreign direct investment (FDI). Officials admit that previous versions of PPP did not give the anticipated results because it was tilted grossly in favour of the railways. “No businessperson will like to invest his good money for charity,’’ they acknowledged.
The highest hopes are pinned on inviting private investment for last mile connectivity — from the main railway lines to ports etc. One reason is that this concept has already taken off. The other reason why they anticipate more takers is the attractive revenue sharing clause.
Another PPP area is joint ventures with railways PSUs, a concept not really spelt out during the budget speech. The railways have attempted to infuse flexibility in the proposal by providing for a review and adjusting the rate of return accordingly.
Then there is the build-operate-transfer (BoT) mode in which the railways have introduced what is called the viability gap principle.
And finally, a revival of British India’s annuity model, a concept that saw the laying down of railway lines in undivided India in a big way.
But, railway officials say the Modi government will be able to fulfil budgetary promises about better passenger amenities and high speed trains by focussing on dedicated freight corridors and the coal linkage plan. Meanwhile, the railways will have to alter its accounting system, a prerequisite for FDI in many sectors.
