A PPP model to fast track Indian railways?

Impressed with the dramatic transformation of the Indian Railways from a loss making entity to a profit making public sector unit (PSU), the students of Jamnalal Bajaj Institute of Management Studies (JBIMS) have offered a model to sustain the turnaround for years to come.

As part of its research project under ‘Strategym’, the institute’s annual business convention, the students have developed an innovative public private partnership (PPP) model to give a major boost to the freight business, which has seen a reduction in market share in the past few years due to its immediate competitor in the freight business viz roadways.

“Freight business is considered to be the earning horse for this PSU, providing substantial revenues to its kitty. However it has been seen that the market share of Indian Railways in overall freight business has reduced in the last few years. This is mainly because roads have captured subsequent freight business from railways due to some inherent advantages it offers like last mile connectivity and low initial investment. In order for Indian Railways to achieve sustainable growth year over year, the freight business needs to be revamped,” says Abhishek Sule, one of the five team members, who are working on the project.

According to the students, along with bulk commodities like iron ore and cement, movement of non bulk goods like fruits, milk, apparel and the like becomes complex due to safety and investment issues like building warehouses.

Also since railways do not have last mile connectivity, end to end transport time exceeds that of roads even though rail transport speed is faster than roads. Since low transport time is crucial in case of perishable goods like fruits, packaged food and milk, roads are preferred over railways.

While the paper recommends cold chains and movement of non bulk goods over long distances with minimum wastage, better security and higher speed, it also offers a PPP model for developing warehouses and cold chains. “Private players can play a significant role in developing rail side warehouses and in freight movement.

By developing warehouses, the problem of last mile connectivity can be solved. With faster movement of agricultural products across the country it would help minimise the wastage, this in turn would lead to narrowing of the demand supply gap of agriculture products. With the privately owned logistics parks, the security issues of goods in transit can be substantially eliminated,” says Sule.

Besides, the students feel that these initiatives will significantly benefit all the stakeholders involved. The paper states that the overall impact of the project would be two-fold. The social benefit, besides decongesting highways would be making roads safer for passenger vehicles.

It would significantly improve travelling by road. For instance, every new inter-modal train carrying containers double-stacked on flat cars takes 280 trucks off the highways. Reduced pollution would be an add-on benefit. Secondly, the financial benefit the project offers is that will help Indian Railways and the farmers in terms of increased revenue.

The additional revenues generated by Indian Railways will not only help to wipe out the fiscal deficit but also help to maintain sustainable growth of GDP thus benefitting the entire nation.

Moreover, the students believe that the implementation of their model will also help the freight corridor project which will come up in five years’ time.