Indian Railways

Lifeline of the nation

(A White Paper)
February 2015
Government of India Ministry of Railways NEW DELHI
S.Mookerjee
Director General
National Academy of Indian Railways

FOREWORD
Indian Railways, Empire within an empire
Indian Railways has suffered from
considerable under-investment. This is a
vicious circle.
It is the only organization in the
Government of India that pays for its wage
bill, pensions and working expenses in its
entirety.
It also accounts for replacements and
depreciation like any commercial concern.

OBJECTIVE
To show the challenges before IR
This status paper first in the series,
Second is the budget,
Third- A Vision 2030 document

INTRODUCTION
Runs 19,000
trains
daily

7,000 freight
trains per day

Select club of
countries,
1008.09 million
tonnes

12,000 trains for

23 million
passengers per
day, 8,000
stations

It is equivalent to
moving the entire
population of
Australia.

3 million tonnes
of freight

65,000 route, Is
more than one
and half times the
circumference of
the earth

Indian Railways carried 1.05 billion

tonnes of revenue earning freight traffic
and is expected to carry 1.1. billion
tonnes in 2014-15

INTRODUCTION.
Expenditure on Railways as a percentage of
total transport expenditure has declined
7th Plan (198590)
11th Plan (200712)

56%
30%

Remained under-invested
Share of IR in overall GDP - Static at 1%,
Has actually gone down to 0.9% in 2012-13.

Share of Transport Sector in Overall

GDP (%)
20122008- 2009- 2010- 201113
09
10
11
12
(1st
RE)
Overall Transport of
which

6.6

6.6

6.5

6.6

6.7

0.9

Road Transport

4.7

4.7

4.6

4.8

4.9

Water Transport

0.2

0.2

0.2

0.2

0.2

Air Transport

0.2

0.2

0.3

0.3

0.3

Services incidental
to transport

0.4

0.4

0.4

0.4

0.4

Railways

Key Parameters
Items

1950-51

2013-14

%Variation

Route Kms (All Gauges)

53,596

65,806

23%

Total Track (Kms)

90,500 (1964-65)

1,14,907

27%

Double & Multiple Route Length

5,127
(Kms)

19,887

289%

Freight Carried (Million Tonnes) 73

1,054

1344%

Wagon Turn Round (Days)

11

5.13

(-)54%

Passenger Originating (In

Millions)

1,284

8,420

556%

Passenger Kms (In Millions)

66,517

11,58,742

1642%

No. of Passenger Trains Run

Daily (Base Year 1982-83)

6,392

12,874

102%

Large scale congestion impacts passenger satisfaction.

Growth of the network not commensurate with the growth of the
traffic

Traffic Density

Challenges
Inability to meet the demands of its
customers, both freight and passenger.
Quality of delivery is also an issue.
Cleanliness, punctuality of services,
safety, quality of terminals,
capacity of trains,
quality of food,
security of passengers,
ease of booking tickets.

Challenges
Under-investment, Expansion and modernization has
not happened, Organization needs to become
operationally and financially sound.
This can be achieved, by eliminating bottlenecks,
improving productivity of assets, efficiency of
operations, optimal employment of its resources
including human capital.
High density networks,- faces acute capacity
constraints
Low passenger fares - leading to increases in freight
tariffs to cross subsidize passenger revenues.
Does not leave enough resources for investment.

ChallengesFinancing the Railway Plan

% Share

2011-12

2012-13

2013-14

2014-15 (BE)

Budgetary
Support

44%

48%

51%

46%

Railway
Safety Fund

3%

3%

4%

3%

Internal
Resources

20%

19%

17%

23%

Extrabudgetary
resources

33%

30%

28%

27%

Investments in safety suffered, low internal generation of

resources.

Productivity of IR
It does not match up with other countries
Passenger Service Yields in some Major
Economies

Freight Yields in some Major

Economies

Benchmarking Indian Railways with

Chinese and Russian Railways

It is evident that the real issue today is the lack of physical

capacity over IR on key routes due to severe congestion
The incremental traffic is being offered on the saturated
routes only.

Project Planning and

Implementation
Railways traffic is a derived demand.
Table depicts Trends in Traffic Growth

Project Planning and

Implementation- Challenges
Significant investment in the network
Prioritised capacity enhancement worksdoubling/tripling/quadrupling and traffic facility
works
Intermediate Block Sections, passes, loops, long
haul trains.
Goods sheds need to be strengthened.
Capacity of workshops needs to be enhanced.
Prioritized electrification
Signalling & telecom works for safety and
efficiency.

Project Planning and

Implementation- Challenges
Large shelf of pending projects
Rs 4,91,510 crore.
Fund requirement for the prioritized works
estimated at Rs 2,08,054 crore.
Requirements - sustained flow of funds for
such projects
Focused attention early completion,
commissioning.
There are constant demands for new lines.

Project Planning and

Implementation- Challenges
All of these demands do not translate into
viable projects.
Large number of socially desirable projects
have been sanctioned, creating huge throwforward liability
Partnership with State Governments would be
the way forward.
In the current year, projects have been
prioritized, funding assured for all the projects
that can be taken up for early completion.

Congestion over IR
Line Capacity Utilisation on IR
Most of the Zonal Railways are in the of range of optimal and higher
than optimal utilization. 65% of the sections are running at
100% or above line capacity on High Density Network (HDN)
routes

Total no of
routes

>100%
utilisation

1219

492

40.36%

247(HDN)

161

65.18%

Network Expansion
During the last four years- new lines- a growth of 74%
Doubling - 167%
Electrification - 21%
Table depicts Network Expansion during last 5 years

Network Expansion :
Throw-forward of priority projects

64% of cost
With the present levels of funding, the prioritized projects may take
anywhere from 3 to 13 years to complete.

Network Expansion:
Categorisation of projects

362 numbers of sanctioned projects of new lines, doubling and gauge

conversion which are included in the table above.
Critical sanctioned works of Traffic Facility, Signal & Telecom,
Workshops, Electrification, Track Renewals and Bridges that need to be
undertaken on priority( DF/DRF).

Challenges in speedy creation of

infrastructure
Absence of assured funding:
Completion period of most of the projects is 3-4 years,
assured funding would enable completion in an
efficient and time bound
Land acquisition and clearances:
Last 3-4 years, the cost of land in most has increased
manifold. Process of acquisition much lengthier.
Suffering due to clearance from forest, wild life, etc.
Law & Order problems
Many projects suffering on account of law & order
problems.

Special Purpose Vehicles for

execution of projects
Initiatives have been taken to generate additional resources
through non-budgetary measures funding by state
governments other beneficiaries, execution of projects through
Special Purpose Vehicles basis etc.
Table depicts details of projects executed through SPVs
& Cost-Sharing Basis.

Special Purpose Vehicles for

execution of projects
NTDPC estimated Indian Railways should
invest
Rs. 900 billion in the 12th Plan,
Rs. 1.9 trillion in the 13th Plan and
Rs. 4.6 trillion in the 15th Plan to regain its lost
share in the transport sector.

Focus on investments which are remunerative.

For financing socially desirable projects, a
separate mechanism, which insulates the
Railways from losses.

Safety
Major Accidents
Level Crossing Accidents,
Derailments,
Fire,
Collisions

Global standard - safety

performance
Comparison of IR accident statistics with European Rail
Systems depicts that the safety record of Indian Railways
compares favourably with that of advanced systems of
European Railways. However, there is scope for
improvement
Country
Accidents per million Train Km
United
Kingdom
Spain
Germany
Denmark
France
Netherlands
India
Sweden
Belgium
Austria
Finland
Portugal

0.05
0.12
0.13
0.16
0.17
0.17
0.2
0.23
0.24
0.29
0.31
0.35

Causes of Accidents
Financial constraints- Arrears of track
renewal are accumulating.
Highest fatalities - accidents at unmanned
level crossings.
Train incidents at unmanned level crossings
has reduced over the years, various
measures, intensive publicity campaigns,
social awareness programmes
Removing the unmanned level crossings Road Over Bridges, Low Height Subways.

Accidents.
As on 1st April 2014, 11,563 unmanned Level Crossings
still required to be eliminated.
730 removed - current year.
IR needs Rs.39,001 crore to complete all the ongoing
works of constructing Road Over Bridges, Low Height
Subways and elimination of all the remaining unmanned
Level Crossings.
Initiatives have been undertaken to streamline clearances
and procedures.
Funding from share of IR in Diesel Cess, Central Road Fund
Act. IR gets only 12.5%, Roads get 50%.
IR has been pursuing a higher share from the allocations
to the Central Road Fund.

Accidents

Loco drivers error addressed

through technological intervention:
Automatic Train Protection (ATP) systems.
Train Protection & Warning System
(TPWS).
TPWS has also been approved for 3300
Route Km
Automatic Signalling Sections on IR
network.

Funds requirement for improving

safety
Special Railway Safety Fund (SRSF) Phase-I
implemented 2003-2008 Rs.16,318 crore.
High Level Safety Review Committee
Chairmanship of Shri Anil Kakodkar was set up
in September 2011.
Committee has estimated expenditure of
Rs.103,110 crore in 5 years, Rs.20,000 crore
per annum for a 5 years period.
IR has requested Ministry of Finance for a
second phase of Special Railway Safety
Fund.

Global Benchmark in
Signalling
It is proposed to adopt global bench
marks in Signalling over next 3 to 4
years; availability of funds is the
major issue.

Customer Engagement
Low recovery of costs on the passenger segment, high freight
rates led to imbalance in the revenues two business segments.
Unit Cost vis--vis Yield per Unit in Table:

Customer Engagement
Issues related to passenger business
Cleanliness and catering
Poor quality of toilets, cleanliness of trains,
cleanliness of bed rolls, quality of food.

Toilets
IR have developed bio-toilets use in
coaches, jointly by IR and DRDO.
First of its kind in Railway Systems in the
world.

Punctuality
IT enabled Integrated Coaching Management
System (ICMS) helps in online monitoring of the
running of trains.
Table on Punctuality of Trains

Punctuality.
Punctuality severely affected on trunk routes due to
over saturation, factors beyond control, eg. fog, law
& order, running of pilots ahead of Mail/Express
trains in areas affected by Extremism, unplanned
traffic blocks capacity enhancement / project
implementation, up-gradation of existing assets.
For improving the punctuality, developing additional
infrastructure needs to be undertaken on priority.
Proposal to Upgrade Passenger Trains Speed:
New Delhi Agra Section 160 kmph.
Speed of a higher number of trains 100/110 to 130
kmph

Table : Sections for Speed Upgradation

Losses in Coaching
Operations
Overall loss of Rs.21,391 crore
Net suburban losses of Rs 2,852.32
crore
Efforts are required to be made to cut
down losses -Train Audit.
Implementation of High level
Committee (Mittal) Committee Report
on financial health of IR (Dec. 2014)

Losses in Coaching
Operations

Premium trains needs to be enhanced

Running longer trains
Augmentation of coaches
Pattern of examination
A key change
New introduction of trains should be avoided
Running of AC-3 tier coach is most suitable for railways;
should be augmented
Parcel business should be separated from passenger
operation business
Stoppages/trains without commercial justification should
be reviewed

Losses in Coaching
Operations..
Poor quality of terminals
Modern passenger terminals
Station redevelopment is required
Through PPP
The arrival and departure areas need to be
segregated

Ticketing on e-platform - unreserved

traveller
Purchase of tickets through mobiles launched
Setting up of vending machines

Freight Business Some parameters

Freight Business
Main constraint- Congestion on all Routes and
terminals

Initiatives taken:
Computerization of Goods Terminal:
Terminal Management System (TMS)

Mode of Payment:
70% of the payment electronically

Wagon Registration Fee (WRF):

Exempted payment of WRF by premier customers who pay
more than Rs. 10 crore per year.

Freight Incentive Scheme:

Plethora of schemes for its freight
customers
Concessions in freight rates
To garner additional revenue
Productivity test for the schemes to
be introduced
Terminal Infrastructure:
A number of works sanctioned
Improvement of goods
Standards for all amenities at

Private Freight Terminal (PFT)

Policy was launched as a major PPP
initiative in 2010
50% of terminal charges were made
available to the investors
@ Rs.16 per tonne is now realized from
the PFT investor
Policy is being reviewed to make it
more attractive
E-demand module
Registration of wagon on-line

Parcel Business
Parcel business has a potentially
huge market in India.
Share of Railways is very limited
In 2013-14 IR earned Rs.1800 crore.
Debate: Will segregation help ?

Parcel Business

Presently transported by Assistant Guards Cabin

Break Vans, Parcel Vans, Special Parcel Trains
There are a number of issues that have hampered the
growth
The booking is done manually
Non-availability of space in trains
Over-carriage of parcels
no prior intimation regarding arrival of parcels; damage during transit
passenger business is being separated from parcel business
These shall run in full parcel trains

Fixation of Tariffs
Recover the cost of service and to
factor in inflation
A mechanism needs to be put in
place
Critical: The true evaluation of
cost of service
Accounting Reforms & Dynamic
Costing model to be invoked after
HLC on Rly. Restructuring
Committee( headed by Sri Bibek

Rolling Stock
Indian Railways has a total holding of
10,749 locos
5,749 diesel locos
5,000 electric locos
71 sheds

63,511 Broad Gauge coaches

9,319 are AC coaches
All Mail and Express trains are being
introduced with LHB coaches for 130
Kmph

Wagons
New initiatives
Development of wagons with higher
pay to tare ratio
Open BOXN wagons (Pay to tare 2.5)
Upgraded to Stainless steel in BOXNHL
(pay to tare 3.46)
BCN type (pay to tare 2.31)
Micro-alloyed steels are now being used
in BCNHL wagons (Pay to tare 3.40)
22.9T axle load

Development of Special types of

wagons
There is need to develop special types of
wagons for bulk movement of specific
commodities
RDSO has already developed special types
of wagons to carry fly ash, food grains,
automobiles, salt, parcels, steel coils etc.
New design of Autocar wagons capable of
318 cars have been developed. Participation
with M/s. Maruti Suzuki India Ltd. (MSIL)
Develop parcel, steel coil wagons

Development of Light weight

wagons for salt movement
Two designs of wagons are being
developed:
Open wagon Fibre Reinforced Plastic
(FRP)
Covered wagons of FRP/synthetic
material

Locomotives
Western DFC (Package-7) STEP Loan
Procurement of 200 locomotives of 9000 HP
Infrastructure at Rewari
Special Terms for Economic Partnership
(STEP) loan agreement of Japan International
Cooperating Agency (JICA)
Western DFC Project
Energy Efficient
Regenerative braking
IGBT Propulsion Technology

High Horse Power Electric Locos at

CLW
High horse power 3-phase electric locomotives
(HHP)
Regenerative braking, energy efficient, less
maintenance requirement
It is planned to completely switch over to
production of HHP locos at CLW
High horse power diesel locos are being
manufactured at DLW
Setting up of loco factories (diesel and electric)
in Bihar, through PPP, is also under
consideration.

Financial Status
Structure of IRs Finance
Divided into revenue and capital expenditures
Revenue expenditure takes care of the day to
day and operational working expenses, inclusive
of debt servicing and dividend payment, capital
expenditures take care of IRs investments
Three streams for Capital expenditure
Budgetary Support
Internal Generation
Leasing from IRFC/EBR

Revenue Expenditure

Revenue Expenditure

Revenue Share

Trends in OWE

Operating Ratio

IR fully met for the successive pay commissions from out of its internal resources

Working Expenses
IR has 13.07 lakh employees
Increase in staff costs over the previous year is 12%
IRFC Payments:
Market borrowings
Extra Budgetary Resource
25-30% of the IRs plan size
Invested mainly in rolling stock assets
Leased for a period of 30 years
Targeted to be Rs.11,790 crores
Cost of borrowing in 2013-14 is around 8.4% to IR while
lease rentals are around 11.4%.

Fuel
31% of the OWE
Diesel (21.4%)
Electric (9.7%)
Major contributor - Increase in fuel outlays
Steady increase in prices

Alternate Fuels
Bio-diesel, CNG/LNG Cheaper
Aggressive push towards alternate
fuels
IR is also aggressively working
towards reducing cost of fuel
Signing long term PPAs.
Procuring power from power
exchanges

Pensions
Witnessed a high growth rate
Number of pensioners on IR is
13.64 lakh as on 31-03-2013
13.07 Lakh serving staff
To grow over 17% over the previous year
DANGER: Acturial liability before 6th PC was > Rs. 5 lakh crores
!

Contribution to Depreciation
Reserve Fund
Budget estimate for DRF is based on
the replacement program
Currently minimal balance available
in the fund due to lack of adequate
surplus
Committed working expenses
Restricts the capacity to fully provide
for this

Dividend
Budgetary support from General Revenues -Held as capital-at-charge on
the IR
In MoF, Budgetary Support (i.e. capital-at-charge) is treated as loan
extended to the Railways
Dividend being paid as interest
Total capital-at-charge of IR stands at Rs 1, 74,625 crore as on 31.03.2014
The rate of dividend is Determined by the Railway Convention Committee
(RCC) of Parliament
Presently dividend is paid to the MoF at 5%
Staff quarters paid at 3.5%
2014-15 (BE) dividend payable Rs.9,135 Crore
Subsidy Rs.4,059 Crore
Net basis Rs. 5.067 Crore

Issue: Can we demand linking Dividend(interest) with net

surplus?

Social Service Obligations of

IR
Service obligation of around Rs 25,000 crore every year
Committee of Secretaries had recommended that
these be reimbursed still remains unresolved
Service Obligation borne by IR in 2013-14 is Rs 21,391
crore
Main elements Commodities carried below cost
Essential Commodities.
Passengers particularly in Second Class-90% pays 10%
Operation of uneconomic branch lines
New lines opened for traffic during the last 15 years
Passengers 94.63 % share concentrated in unreserved
segment Loss in 68%

Earnings
Growth in earnings - 14.5%
Rs in crore

Year

Goods

Passenger

Sundry

Other Coaching

Total

2011-12

69548

28246

3643

2717

104154

2012-13

85263

31323

4261

3054

123901

2013-14

93906

36532

5721

3679

139838

105770

44645

5500

4200

160115

106927

43002

5241

4028

159198

121423

50175

7318

4612

183528

2014-15
(BE)
2014-15
(RE)
2015-16
(BE)

Goods Earnings
Traffic Earnings (Traffic Plan: Goods):
NTKM decreased during 2013-14
Tonnes Originating (in million)

Net Tonne Kms. ( in

millions) Earnings

Earnings in Rs cr

Co
mm
odit
y

2010-11

2011-12

2012-13

2013-14
2013-14
2013-14
2010-11 2011-12 2012-13
2010-11 2011-12 2012-13
(R.E.)
(R.E.)
(R.E.)

Total

921.73

969.05

1008.09

1051.55 625,723 667,607 691,658 654,395

62844

69548

85263

94000

Passenger Earnings
Traffic Plan: Passenger
After a high growth registered in 2013-14 in Originating Passengers,
growth this year is estimated to be negative relative to last
year. Non-PRS segment registered a negative growth last year.
IR increased the passenger fares in last two years
The lead came down as did the number of passengers travelling
mostly in the segment of the unreserved travel
Passenger Originating (in million)
2010-11 2011-12 2012-13

Total

Passenger Kms. ( in millions)

Earnings in Rs cr

2013-14
2013-14
2013-14
2010-11 2011-12 2012-13
2010-11 2011-12 2012-13
(R.E.)
(R.E.)
(R.E.)

7809.09 8224.38 8420.71 8471.97 9,80,131 10,46,522 10,98,105 10,72,542 25793

28246

31323

37500

Capital Expenditure
Share of Fund Sources
Declining share of internal resources
increasing reliance on borrowings as well as GBS, both of
which carry a cost
Other and alternate means of resources are required to be
tapped for funding of bankable projects
We must search for Alternate Financing Models of funding.

Alternate Financing Options

Involving customers in building rail lines
especially for ports and mines have been a
successful experiment on Indian Railways
Pipavav, Mundra, Mangalore, Kandla, Dahej,
Krishnapatnam and Dhamra
Bringing private investments in rail sector
Wagon investment/ leasing schemes, private
operations of container trains
Development of private freight terminals
and private sidings

Alternate Financing Options

Efforts are also being made

Private investments
Locomotive factories
Redevelopment of stations
For PPP projects; appropriate risk
allocation between public and private
needs to be done

Alternate Financing Options

Projects amenable to alternate means of
financing
Construction of New Lines, Doubling, Gauge
Conversion, construction of Dedicated
Freight Corridors, High Speed Corridors
Manufacturing/maintenance units for rolling
stock
Electrification and signaling
Railways would be required to lay down
certain benchmarks for appraisal

Private Participation in Building Rail

Connectivity
December-2012
Participation of the private sector
The policy had proposed the following five methods:
Non-Government private line model
Joint venture
Capacity augmentation through funding by customer
BOT
Capacity augmentation through annuity model

The first three models involve participation of strategic

investors/customers and leverage the requirement of such
investors and railways for having last mile connectivity. The other
two-models are pure PPP models
Three Model Concession been approved and put in public domain.
The agreements for the other two models are under approval
process

Private Participation in Building Rail

Connectivity
Agreements have tried to balance the risk
allocations between private and public
sector
Rail connectivity to Dhamra Port has been
commissioned. Projects of rail connectivity
to Tuna Port, Jaigarh Port and coal
connectivity projects in Chhattisgarh are
under implementation
Four projects under customer funded model
In principle Approval by MoR

Projects under PPP

Foreign Direct Investment

(FDI)
Vide Notification No. S.O.2113(E) dated August
22, 2014, Government of India has opened up
the following activities of Indian Railways for
FDI- construction, operation, maintenance of :
(i) Suburban corridor projects through PPP- ;
(ii) High speed train projects ;
(iii) Dedicated freight lines,;
(iv) Rolling stock including train sets, and
locomotives or coaches manufacturing and
maintenance facilities;
Details of models and Agreements are on Rly Bd website here:
http://
www.indianrailways.gov.in/railwayboard/uploads/directorate/infra/downloads/Framework_NGRPLM_FINAL_
40_AW.pdf

Foreign Direct Investment

(FDI)2
(v) Railway Electrification;
(vi) Signaling systems;
(vii) Freight terminals;
(viii) Passenger terminals;
(ix) Infrastructure in industrial park
pertaining to railway lines or sidings
including electrified railway lines and
connectivity to main railway lines; and
(x) Mass Rapid Transport Systems.
Details of models and Agreements are on Rly Bd website here:
http://
www.indianrailways.gov.in/railwayboard/uploads/directorate/infra/downloads/Framework_NGRPLM_FINAL_
40_AW.pdf

Commercial utilization of Surplus

Railway land
The total area of land under Railway network is
4,58,589 hectares, out of which approx. 46,409
hectare is vacant (as on 31.03.2014).
The vacant land, which is not required by Railways
can be utilized for commercial development,
wherever feasible through Rail Land Development
Authority (RLDA).
102 sites measuring 916 hectare of Railway land
has been entrusted to RLDA for commercial
development. Out of 102 sites, 62 sites totaling
597 hectares are amenable for commercial
development.

Station Re-development by
PPP
5 stations were entrusted to Indian Railway
Stations Development Corporation (IRSDC) viz.
Habibganj, Chandigarh, Bijwasan, Shivaji Nagar
and Anand Vihar
Approvals have been obtained for Habibganj.
Surat station has been entrusted to IRSDC for
redevelopment
New Bhubaneswar and Baiyyappanahalli
(Bengaluru) stations are identified for
prefeasibility studies by China Railway
Construction Engineering Group at their cost

The way forward

New areas identified
1. MOUs with State Govt Participation with IR through joint
ventures for critical projects.
2. Action to make PUs and Workshops self-sustaining.
3. Involvement of Corporates and MPLAD fund for improving
Passenger Amenities
4. Plan for long term funding through Multi lateral development
funds, pension funds etc.
5. JVs with major Public Sector customers for new lines.
6. Formation of Financing cell
1. JV with NBFC, PSU and IRFC for raising term debt for
domestic/overseas sources
2. Institutional finance for multi lateral and bilateral FIs.
3. Monetizing of assets

The way forward

1. Offering stations, trains for corporate branding
2. Coastal connectivity programme in partnership
with ports.

Transport Logistics Corporation of India

TRANSLOC for following activities
1. Developing common user facilities
2. Provide end to end logistics solution
through PPP.

Discussion