India's
rail network, once held up as a symbol of the
country's bureaucratic and slow-moving ways, is
hauling itself into the modern world with the
upgrades that include addition of two freight rail
corridors at a cost of US$7.5 billion after
turning to a profit under the leadership of
Railway Minister Lalu Prasad Yadav.
The
Indian government approved development of the
freight corridors as part of efforts that might
require as much as $475 billion in overall
spending to upgrade the country's infrastructure to
sustain an economy growing at
nearly 10% growth per year. Private investment
could provide $101.8 billion by 2012, say
consultants Ernst & Young in a study released
in November.
The investment on railway
development reflects the key role the transport
system plays in the economy. Indian Railways is
the world's fourth-largest carrier of freight -
moving an average of 1.49 million tonnes of
freight daily - and contributes 2.3% of India's
gross domestic product, according to the New
Delhi-based India Brand Equity Foundation, an
initiative of the Ministry of Commerce &
Industry. The railways are also the country's
single largest employer, directly employing 1.5
million people.
The economic significance
of the Indian Railways is such that the annual
railway budget is presented separately to
parliament a day or two before the general budget
in February. Its present budget outlay for growth
is a record US$ 5.9 billion.
Even so, that
pails beside the spending on railway upgrades by
the country's northern and fast expanding neighbor
China, where China Rail has been granted $20
billion for a major upgrade, the biggest budget in
its history.
Indian Railways link 6,856
stations and carries about 5 billion passengers
annually at an average of 14 million daily,
dwarfing China Rail's 1 billion passengers carried
annually, with 2,000 trains daily linking 3,000
stations.
The expansion by both countries
is part of a wider trend as rail markets in
Eastern Europe, the Commonwealth of Independent
States and Asia upgrade outdated networks amid
expected annual growth of more than 3% over the
next decade.
"Governments are showing
increasing support for the development of railways
and public transport," said Andreas Schwilling of
consultancy Roland Berger's Transportation
Competence Center, which was commissioned this
year by the Association of the European Railway
Industries (UNIFE) to study the global industry.
"This is because rail transportation plays an
important part in the sustained development of
their economies.''
One of India's new
railway freight corridors, to be built over five
years, will connect New Delhi and the country's
financial center, Mumbai. The other will connect
the prosperous north-western Indian state of
Punjab with Kolkata on the east coast. Japan in
August said it was considering offering
low-interest loans to help fund the Mumbai link.
"The project will provide the much needed
rail infrastructure for growth of Indian economy
and trade," Finance Minister Palaniappan
Chidambaram said on November 28. Specifically, the
multi-modal, high axle load freight corridors
would "immensely benefit" ports, exporters,
importers, shipping lines, container operators,
coal companies, steel plants and thermal power
stations.
A surging economy and
revitalization of the company by Railway Minister
Lalu Prasad Yadav have helped Indian Railways make
a dramatic turnaround in the past three years. The
1998 Rakesh Mohan Committee on Indian Railways,
headed by Rakesh Mohan, then Secretary, Department
of Economic Affairs, had called the company a
"white elephant" and gloomily predicted that it
would lose over $15 billion by 2008. Instead, it
posted gross earnings in 2006-07 of $15.19
billion, a 14% increase from $13.25 billion a year
earlier.
Remodeling of freight was a
crucial part of Indian Railways' success, with
Yadav increasing the capacity of each wagon load
and bringing private players into various aspects
of the business, such as in dedicated freight and
passenger corridor projects, container services,
railway station modernization, catering,
manufacturing facilities for locomotives and
coaches. The current budget aims at additional
loading of 4 to 8 tonnes per wagon which by itself
promises additional revenue of $1.2 billion.
According to the government, Indian
Railways carried 501.46 million tonnes of
revenue-earning freight during the first eight
months (April - November 2007) of the financial
year, an increase of 37.07 million tons, or about
8%, over the corresponding period last year.
Indian Railways is estimated to require
$56 billion of investment to meet infrastructure
demands in the next five years, of which debt and
public-private partnership are expected to account
for $15 billion.
In contrast, China has
taken the equity route to raise funds for its
railways and related infrastructure, a move that
Indian Railways might inevitably consider in
coming years. The state-owned railroad builder
China Railway Group recently raised $5.5 billion
from listing its shares in Hong Kong and Shanghai.
The group, which has built over two-thirds of
China's 75,000-plus kilometers of rail tracks and
95% of the country's electrific railway lines.
In India, international companies are
deeply involved in upgrading the rail system.
Canada's Bombardier Transportation is making rail
cars in Gujarat state, Japan's Mitsubishi
Corporation is considering a locomotive
manufacturing and maintenance facility in the
country and Toshiba is negotiating with Indian
Railways to manufacturing coaches and locomotives.
Also from Japan, Kawasaki Heavy Industries Ltd is
in the final round of talks with Indian Railways
for jointly producing freight carriages while from
the United States, General Electric plans to build
heavy-haul diesel locomotives in a joint venture
with the Indian operator.
Indian Railways
has launched a slew of schemes to increase
passenger facilities, such as rail ticket booking
through ATMs and cellular phones, cleaner trains
and stations and low-fare fully airconditioned
trains. On a more local basis, new German-designed
trains are to ease Mumbai's suburban rail traffic
- the city has the world's most crowded urban
transport system, carrying 6.5 million passengers
daily.
Thinking ahead, Yadav has asked to
have senior railway staff study at top global
business schools such as New York's Stern School
of Business, Wharton and Harvard in the US, and in
similar centers in Singapore and Europe. He hopes
the global administrative perspective this will
give his senior managers will serve Indian
Railways in coming decades, helping to keep the
profits rolling in and the country's economy
moving with ever better efficiency.
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