It is never too late to buy the latest and most modern equipment available, to get the job done in the Railways and the funding through FDI can help in this

Recently, Moneylife carried a story on the prospects of foreign direct investment (FDI) in the Indian Railways. As mentioned therein, the Department of Industrial Policy and Promotion had felt that the Railway Ministry's response to the draft cabinet note was confusing and therefore, it needed some more clarifications before further action could be taken. This is likely to take some more time, but in the meanwhile, it would help matters to review and consider what areas FDI participation would truly help India.

According to information available, rail wagons are designed to carry a load of pre-defined capacity plus nine tonnes with leeway to load one more tonne without any overload penalty across the entire railway network, as per the interim budget, presented recently.

The average load carried per wagon is about 62 tonnes though some wagons carry about 67 tonnes. As per a railway official, as reported in the press, a capacity creation of 15 million tonnes (mt) will account for about 30% of the 50 mt incremental loading that the railways aim to move during 2014-15. They have set a target to achieve 1,101 mt of cargo to be moved in this fiscal year.

However, in order to carry higher load per wagon, the Railways need to invest in wagons, improve rail tracks and bridges. For this purpose, Railways propose a market borrowing of Rs12,800 crore against Rs14,000 crore last year, to procure rolling stocks, including wagons, locomotives and coaches. Should the need arise, they will revise the target and borrowing accordingly.

One of the biggest problems that Railways have faced continuously is the issue relating to extension of rail-track laying, for which there are no indigenous technology or capacity. In fact, worldwide, there are only a few companies who can do this job meticulously and who are in great demand. The three principal companies are reported to be Harsco Corporation of the US, ETF of France and China Railway Shanghai Design Institute Group Company. The railway track laying machines are manufactured by the above three major companies, who, on obtaining overseas contracts, bring in their equipment, lay the track, complete their job on schedule, and take back the equipment, to another location for a new assignment!

Readers may recall that for the Eastern Railway Freight Corridor, according to information available, there are 16 bidders, both Indian and foreign, but most of whom have taken supporting bids from two of the above named specialists in the field. This corridor is likely to be completed in four years' time after the award.

According to an official of the Railways, as reported in the media, there are 35,000 route Kms that cover 70% of rail lines engaged in carrying freight allow for higher carrying capacity. The load per wagon will increase only by about 2 tonnes, as the routes currently permit 2 tonnes less loads per wagon. But to do so, Railways will have to make an incremental investment of Rs2,000 crore to replace old tracks and engage in upgrades in some areas.

With these data in the background, it is hoped, that when the final directives are outlined for the FDI in Railways, the following factors will also play a vital role in the development:

a) to engage in serious joint venture discussions to actually start manufacturing the track laying machinery in India itself - need and scope for continuous exists for a few decades to come;

b) to have a separate joint venture with the same FDI (or the second company) to take contracts for fresh track laying and to renew the old and worn out ones that need to be replaced for improvement and safety;

c) to have a separate organisation only for maintenance and repairs of all railway tracks in the country

d) current passenger coaches are mostly (almost 95-98%) in single decks only; double-decker passenger coaches area novelty; since in many areas the traffic is high, double-deckers would help faster movement

e) if Railways do not have a separate division for procurement of land in the proposed areas for laying tracks and stations, this should be established as a separate entity

All these and more and innovative ideas will take at least a decade or more to accomplish, but it is time we set the goals right and focus to reach those objectives. Just in passing reference may be made that a few years ago, these track laying machines cost between Rs10 crore and Rs30 crore, and why these were not purchased by the Ministry of Railways is a serious issue that they can only answer, since these would be more expensive now. But it is never too late to buy the latest and most modern equipment available, to get the job done!

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)