MANY private sector Indian companies prefer transporting goods by road, spending hefty sums on this mode of transportation, instead of opting for the relatively cheaper means of sending goods by rail.

And the reason is obvious. Indian Railways is a massive government-owned entity, where things progress at a slow pace. Sending goods by rail could result in uncertainty about delivery, and raise concerns about the safety of the goods sent.

Most companies do not mind sending their goods by road, even though the costs are much higher. The trucking industry, dominated by the private sector, ensures a swift and safer movement of goods.

And thanks to the industry’s deployment of containers and other sophisticated trucks, it has become far more convenient to transport products across the country in these vehicles.

Of course, Indian Railways has never been bothered about the private sector opting for road transport, as virtually all the giant public sector undertakings use the official railway service for transporting goods including raw materials and finished products.

Ideally, transporting goods by rail should have been a cheaper — and quicker — option in India, but years of neglect and mismanagement have resulted in at least the private sector preferring road transport.

And freight costs on the railways have also been rising sharply over the years as Indian Railways is forced to jack up the rates to make up for the losses suffered in offering subsidised low passenger fares.

But with a degree of professionalism now entering the railway sector as well — with the government reluctant to continue subsidising it indefinitely — the giant rail transporter is also moving ahead with freight rate hikes.

With a degree of professionalism now entering the railway sector as well — with the government reluctant to continue subsidising it indefinitely — the giant rail transporter is also moving ahead with freight rate hikes

Last week, for instance, Indian Railways jacked up the freight rates for coal, steel, iron ore and raw materials for steel plants by 8.75 per cent. It also hiked the haulage charges for containers by five per cent.

The move to “rationalise freight rates” will generate additional revenues of Rs33.45 billion for the railways, which it expects “will further help enhance various aspects of the railways including safety, service and punctuality,” says the state-owned operator.

But the railways decided not to touch freight rates for food grains, flours, pulses, fertilisers, salt, sugar, cement and petroleum products as these are products used by common folk, and no government would tolerate hikes, especially with general elections just about six months away.

In the first half of the current fiscal (April-September), freight traffic on the railways was up by 5.4pc, adding up to more than 588 million tonnes. Revenues too were up by 2.7pc to Rs536.14bn.

Passenger revenues though were up by almost five per cent, amounting to Rs255.9bn, with a 1.6pc rise in the number of passengers.

Indian Railways recently also entered into a contract with state-owned power producer, NTPC (formerly National Thermal Power Corporation), for transporting coal from mines.

NTPC has agreed to pay Rs100bn in advance in three installments. The railways have for long had problems in getting paid for transportation services for public sector undertakings.

In return, the transporter has assured fixed prices for transporting the coal for this fiscal and the next financial year and also preferential allotment of rakes.

INDIAN Railways has embarked on a major modernisation drive, which will see it launch new corridors such as the Dedicated Freight Corridors (DFCs) linking the four major cities comprising Delhi, Mumbai, Kolkata, and Chennai through a ‘golden quadrilateral’ and two ‘diagonals,’ (Delhi-Chennai and Mumbai-Kolkata).

The ambitious, 10,000km-long golden quadrilateral network accounts for 55pc of the railway traffic, but only 20pc of the total railway tracks.

The DFC aims to segregate passenger and freight traffic and also speeding up train services on the important corridors to 160km an hour speeds.

Unfortunately, the ambitious, multi-billion-rupee projects have been moving at a terribly slow pace. In fact, a worried Indian government recently pulled up many state governments for the lackadaisical approach in implementing the two most important corridors linking Delhi-Mumbai and Delhi-Kolkata.

The western DFC is a 1,500km-long corridor linking Dadri, located near Delhi, to the Jawaharlal Nehru Port near Mumbai, while the eastern DFC will be a nearly 1,900km-long corridor from Ludhiana in Punjab to Dankuni, an industrial city near Kolkata.

The two corridors will traverse through major states including Haryana, Rajasthan, Gujarat, Maharashtra, Uttar Pradesh and West Bengal.

The central government said that timely execution and commissioning of the projects was needed, especially considering the huge multilateral and bilateral loans that were involved.

It also urged the state governments to ensure forest clearance for 321 acres of green land and to permit the construction of 180 road over-bridges in the two corridors.

Delays in executing the DFC projects have seen costs spurt sharply in recent years — from an earlier Rs281bn estimated in 2008 to a whopping Rs815bn in 2016. The cost for the Delhi-Mumbai corridor itself has flared from an estimated Rs165bn to nearly Rs500bn.

The Indian government is also concerned about the progress of the much touted bullet train service between Ahmedabad and Mumbai. The project is expected to cost Rs1.1 trillion, with Japan providing a loan of Rs880bn at an interest rate of 0.01pc, to be repaid over 50 years.

But Indian Railways continues to face a financial crunch. It is now planning to seek additional funding of Rs180bn of gross budgetary support (GBS) from the finance ministry to boost its infrastructure projects.

It has already utilised 60pc of its GBS so far and has been seeking additional funds. The finance ministry, however, is reluctant to meet demands.

Published in Dawn, The Business and Finance Weekly, November 5th, 2018