IR still years away from its own High Speed Rail record – Thanks to former Rail Ministers under UPA Govt.

Highspeed railThe setting of a new High Speed Rail (HSR) record earlier this week by Japan, a breath-taking 603 kilometres per hour under test conditions, has led many to ask how long before India starts setting similar records in train speeds – many thanks to various politicians who served as Union Railway Ministers in the earlier governments viz.Lalu Prasad Yadav, Nitish Kumar, Mamta Banerjee and Pawan Bansal who all practiced the principle launching politically motivated schemes for their personal agenda, thereby contributing for an unenriched Railway System in India without looking at innovative and path breaking measures that eventually led to financial bankruptcy of Indian Railways.  World knew very well how sufficiently ex.Railway Minister Mamta Banerjee killed the very system of Indian Railways during her unique regime is better not to speak enough!  Surprisingly, the other politician who served as Railway Minister from under the same Party owned by Mamata Banerjee came out with a beautiful report speaks about their compromising character in the guise of politics.

And it does not take a genius to fathom the correct answer – let alone records, India may still be many years away from kick-starting High Speed Rail operations. While bullet trains have been talked about in India since the 1980s, the country has only just started with the planning process. Two feasibility studies are being undertaken for two separate stretches identified for initial HSR operations – Mumbai-Ahmedabad and Delhi-Chennai corridors. So while the “maglev” train operated by JR Central was clocking the 603 kmph speed at a track near Mount Fuji, breaking its own 2003 record of 590 KPH, India was waiting for the two study reports to be delivered.

It is worth remembering that Japan had already developed the world’s first system of bullet trains as early as 1960s. The train that has set the high speed record last Tuesday runs on high-end Magnetic Levitation – or ‘maglev’ for short – technology that employs use of electromagnets to propel train cars above the tracks. That means there is nothing but air in between the tracks and the wheels as the car hovers 10 centimetres above the rails. For comparison, in India, large stones often get stuck between the wheels and the rails, leading to derailments.

Nevertheless, India has made a humble beginning. It is seeking to secure technology tie-ups with multiple nations which have proven HSR expertise and working out a detailed funding plan for the capital intensive venture. The success of the plan will depend critically on several factors – the model of HSR development (fully dedicated HSR lines, increasing speed on existing rail lines or a mix of both), accurate projection of demand (low footfalls have led to failure of HSR lines globally), planning the correct alignments (HSR systems are known to be financially viable in linear alignments) and an independent tariff setting process that could ensure financial health (all but a few HSR systems globally survive on massive subsidy support from national governments).

In the Indian context, these challenges are facing our railways in a rather disappointing backdrop. A parliamentary panel led by former rail minister Dinesh Trivedi has just submitted its report lambasting Indian Railways’ managers on grounds that are not easy to brush aside. The panel has said, after two years of healthy operations, a severe financial crisis has gripped Indian Railways once again. Tearing into the government’s claim of a visible turnaround in operations, the panel has highlighted declining system productivity, rise in unit cost of operation and an unrealistic Operating Ratio (OR) target based on “textbook solutions”.

In this backdrop, India must act carefully but quickly to identify the right approach for its grand HSR plans that includes constructing a diamond quadrilateral of high speed lines connecting its four metro cities, selecting the right technology to develop the new-age signaling systems necessary for running HSR lines and, most importantly, finalizing an effective methodology for selection of a private sector partner on its much-awaited high speed journey.

Not surprisingly, India lags behind both China and Russia in network productivity (as measured by net tonne per km/network length). Another symptom of the problem is the ceding of considerable share of freight traffic to roads. Think of the opening scene in the first part of Satyajit Ray’s great Apu trilogy.

As the object of awe, wonder, and thrill for young Apu, the onrushing train is a majestic metaphor for escape, opportunity and connectivity.

domestic freightThat deep, intuitive, and dare we say romantic, case for the railways underlay the prime minister’s speech in Varanasi last year when he spoke of the railways as the backbone of India’s development.

But there is also the more prosaically rational case for the railways made in Chapter 6 (Volume I) of this year’s Economic Survey.

To understand this case, consider the problem, symptoms, and consequences.

Today, the ‘lifeline of the nation’ operates over 19,000 trains carrying 23 million passengers, and over three million tonnes of freight per day.

But these big numbers obscure serious deficiencies, a major one being chronic under-investment.

The share of railways in total developmental expenditure has remained at less than 2 per cent since 1990s (whereas the share of roads and bridges has been at around 7 per cent).

The contrast with China is striking. Chinese investment in railways, especially over 2005-12, has been about 11 times higher in per-capita terms. As a result, China, which had lower capacity in 1990, overtook India by the mid-1990s and as of 2010, outstripped India by about 25,000-route km.

Passr & Freight IndexThis problem of under-investment manifests itself in several symptoms.

There is serious network congestion with 65 per cent of sections operating at above 100 per cent capacity.

With the same network being used by both freight and passenger trains and priority generally accorded to passenger traffic, average freight train speeds have almost stagnated between 2000-01 and 2012-13.

Not surprisingly, India lags behind both China and Russia in network productivity (as measured by net tonne per km/network length).

Another symptom of the problem is the ceding of considerable share of freight traffic to roads.

The modal share of Indian Railways in freight traffic has declined to around 33 per cent in 2011, and estimated to decline further to 25 per cent by 2020 if the current state of affairs continues.

The comparable numbers in China and Russia are significantly greater.

What are some of the consequences?

Efficiency IndicatorThe substitution of railways by roads entails large private costs in the form of worsening competitiveness and significant social costs in terms of more accidents, greater mortality, congestion and environmental pollution, including higher greenhouse gas emissions.

Another consequence, which relates as much to policy choices as under-investment, is the impact on the economy’s competitiveness.

The Indian Railways has had to shoulder social responsibilities defined largely by the ability to provide cheap and subsidised passenger services.

Over the years, passenger fares have increased negligibly compared to freight rates, resulting in rates that are among the highest globally (in purchasing power parity terms).

The neglect of freight has dented the competitiveness of Indian industry, which is very logistics-intensive.

Indian Railways transports only about a third of the amount of coal transported in China per hour, and does so at more than double the cost. It is then not surprising that Indian manufacturing and exports become less competitive.

We know that the consequences of under-investment are substantial because our analysis shows that additional investments generate over-size returns.

Based on input-output tables, we estimate in the Economic Survey 2014-15 (Vol I, Chapter 6) that the large backward and forward linkages related to the railways generate a railways investment multiplier of about five.

Similarly, other econometric evidence suggests that public investment in the railways, would positively and durably affect levels of manufacturing and aggregate output, with multipliers of around five: that is, Rs 1-increase in railways investment is expected to boost economy-wide manufacturing output by Rs 5 over the medium term.

While under-investment is a major problem, there are perhaps even deeper influences such as organisational structure, legacy factors and incentives that need to be addressed, which have been discussed in several recent reports on the railways, including that of the National Transport Development Policy Committee (NTDPC 2014).

A good start towards turning around the railways was begun in the recent Budget under new and dynamic leadership.

There is a long road – or rather track – to travel but an auspicious beginning has been made.

One of the lesser known facts about Chinese history is the importance of railways to Deng Xiaoping’s attempt to turning the economy around and ushering in the Chinese miracle.

After his third and final rehabilitation, he implemented famously the reform of Chinese agriculture. But after his second rehabilitation, he focused on improving the performance of the Chinese railways.

Should India and the government do for the Indian Railways what Deng did for China’s railways?

Should the government do for Indian Railways what the previous National Democratic Alliance government did for roads via the Pradhan Mantri Gram Sadak Yojana and the National Highways Development Project (NHDP)?

Our analysis suggests that the answers to both the questions are resoundingly yes.

Contributed by Rangeet Ghosh, Arora, Arvind Subramanian.  Ghosh is OSD to the Chief Economic Advisor, Arora is Assistant Director in the Ministry of Finance, Roy is a Fulbright Scholar at the JohnsHopkins University, and Arvind Subramanian is an Indian economist and the current Chief Economic Adviser to the Government of India (Ministry of Finance), having taken charge of the position on 16 October 2014 succeeding Mr.Raghuram Rajan (currently Governor/RBI)