Looking at some of Nitin Gadkari's ideas would be a good place to start to fix railways' problems.
Senior officials of the Indian Railways recently hauled up one of their colleagues for writing an article that was critical of the railways management.
It is quite possible that the colleague had violated the employment guidelines of the government by writing articles without permission of his seniors. But a quick analysis of some of the figures given in the latest Railways Yearbook suggests that this organisation could be in big trouble.
A critical parameter for judging efficiency – for ships, aircraft and even railways – is turnaround time. For the railways, turnaround time worsened from 5.18 days to 5.32 days. Wagon-km per wagon per day also worsened. Freight earning also declined, if one excludes demurrage and wharfage. What is worse is that return on capital plummeted from 6.99 percent to 1.62 percent.
To understand the crisis, one must bear in mind that unlike other developed countries, Indian Railways makes its money on freight. It is this money, which allows it to subsidise passenger traffic to a great extent. Passengers represent votes and there are studies, which show that passengers do not really pay the full cost of railway transport.
If freight is critically important to the railways, the organisation should have ensured that it retained its edge in freight management. But for the past two decades, the railways has continued to slip in terms of freight market share. By 1999-2000, more cargo travelled by road than by rail. For that year, the railways carried 305.2 billion tonnes-km, while roads carried 467 billion tonnes-km.
Since then, the railways’ attempts to regain freight market share has been a losing proposition. Thus, with freight earnings not coming in, it was inevitable that the railways would push up both passenger and freight tariffs.
As a result, currently, more than 50 percent of India’s freight is carried by roads, which is easily one of the most expensive forms of transport in India and the world.
Water transport is the cheapest form of transport, followed by railways. Road transport is at times double the costs of railways on a per tonne per km basis.
What this means is that customers were willing to opt for the most expensive form of transport because the India Railways was not found acceptable despite its lower costs. The railways continue to lose market share.
This situation could become worse with Union minister Nitin Gadkari aggressively pushing for revival of water transport through inland waterways and coastal shipping. That means that the railways will have even more competition trying to grab its freight (as well as passenger) business.
But why do people not like the railways? One simple reason is that while roads allow for door-to-door pickup and delivery, the railways operate only from point to point.
The railways have tried to address this problem, by trying to work with road transporters to pick up and delivery from the doorsteps of their customers. But that requires multiple handling and is too messy and expensive. After all, the railways are not the most efficient when it comes to loading and unloading operations.
The railways have tried to find another solution in what it calls roadrailer train services. In this, railway wagons are designed with both rail and road wheels. When the wagon is attached to a trailer, the the road tyres take over. It is a solution, but not an elegant one.
Maybe, it should instead try a new method – it could learn from the ro-ro and ro-pax services that Nitin Gadkari’s ministry has been pushing both for waterways and for coastal transport. Ro-ro boats are those which allow for a vehicle – not just cars but fully loaded container trucks as well – to drive on to ships, and then drive off these vessels at the destination ports.
The railways should redesign their rakes to allow fully laden trucks to roll on to trains, and then roll off at destination stations. That way, the truck will save on fuel costs, the customer has to ensure loading and unloading of the consignment only once, and the truck offers door-to-door service in partnership with the railways. And the railways have better capacity utilization.
But this requires the railway management to be imaginative and to work with market developers – like Gadkari’s ministry has done. It must urge them to develop new vehicles, new solutions and also new packages. If the railways does not do this, it will see more business slipping away.
That would be unfortunate because the railways is still the pride of India. It runs one of the largest network of railway lines in the world. And it is a very large employer in India (it employed 1.3 million regular employees at last count accounting for a wage bill of Rs.1.15 lakh crore annually. It also employs two or three times this number as contract employees).
Can that be done? Can the railways stop bleeding? Will the railways ministry provide people some answers?The author is consulting editor with Moneycontrol.com