Experts Frown At Rlys Gauge Conversion Viability

The railways have over the past few years spent Rs 6,000 crore for converting metre gauge tracks to broad gauge. This has been done to bring about a unigauge structure in the railway network which was the pet project of former railway minister C K Jafar Sharif. It has been pursued with the same zeal by the present railway minister, Ram Vilas Paswan.

The moot question doing the rounds at the Rail Bhavan and among major users of rail transport is whether the huge investment for gauge conversion could be justified in terms of returns. Experts feel the railways could have significantly enhanced earnings and met the transportation needs of industry in greater measure if a part of the funds spent on gauge conversion was used for lying new lines in the busy sectors of the rail network.

 

A recent study on freight earnings has projected a compounded growth rate of five per cent a year over five years beginning last April. A time trend analysis done by a working group headed by the railway board chairman shows that revenue tonnage will grow from 410 million tonnes in 1996-97 to 490 million tonnes in 2001-02 and to 587 million tonnes in 2006-07.

Most of this growth will come in the diamond triangle, the quadrilateral routes covering the four metropolitan cities of Mumbai, Chennai, Calcutta and Delhi and the diagonal lines running through the country.

There has hardly been any addition to track capacity in these sectors which carry over 80 per cent of the total traffic. As a result, these sectors are operating at over 100 % capacity which is also a reason for frequent derailment, delays and hold-ups in coach and wagon transit. The recent spurt in private investment in infrastructure areas like power, ports and roads has necessitated the lying of new tracks which is bound to check the diversion of goods traffic to road transport and enhance business for the railways.

But the railways simply does not have enough funds to lay new tracks and buy more wagons because of the huge investment made in gauge conversion. The conversion itself has necessitated large scale purchase of wagons and coaches for use in the newly-converted tracks since the smaller sized wagons and coaches which were being used on metre gauge routes had to be scrapped.

The railways are having difficulties selling the own-your-wagon scheme to the industry which is reluctant to invest in asset creation at a time when recession has hit large segments of the industry. The railways recently halved this years resource mobilisation target through own-your-wagon to Rs 450 crore and asked Indian Railways Finance Corporation, a fully-owned subsidiary, to raise the remaining Rs 450 crore through market borrowings. Thus, IRFCs target for the current year has risen from Rs 2,150 crore to Rs 2,600 crore.

Most of the metre gauge lines were laid during British era in inaccessible and hilly regions of the country like the north-east. As metre gauge lines were easier, cheaper and quicker to lay than broad gauge tracks, the British preferred the former to meet transportation needs. Deve-lopment of these areas have lagged half a century after independence and continue to provide very little business.

The railways are subsiding services in these areas at the cost of the revenue paying customers in and around the metropolitan cities and growth centres.

Thus, largescale gauge conversion of the backward regions does not make business sense. The railways were, however, forced to take the decision for political reasons. Gauge conversion has turned into a political slogan in the backward regions over the past decade or so. Some experts even suspect that gauge conversion was pursued because it offers great opportunities for leakage of funds. An analysis of future freight earnings indicate the areas which underwent gauge conversion are not likely to provide increased traffic in the next five years because overall industrial development continues to lag behind. Gauge conversioncannot work as a catalyst for growth.

Commoditywise projections

The railways transport about 60 per cent of the coal produced in the country and 90% of imported coal.

Though it is not possible to arrive at a precise estimate of the coal transportation in coming years, because of the fluctuations and huge gap in the demand and supply of coal, the ministry has estimated the railways will transport 243 mn tonnes of coal by 2001-02 and 318 million tonnes by 2006-07 as against 186 million tonnes in 96-97.

Rail loading of fertilisers will go up from 25.1 million tonnes in 1996-97 to 32.8 million tonnes if the price correction is carried out in the case of urea. The FCI has estimated it will transport 26.5 million tonnes in 2001-02 as against 21 million tonnes in 1996-97. The railways is likely to move an additional 6.5 million tonnes of food grains for customers other than the FCI.

The cement sectors need for rail transport is seen growing from 46 million tonnes to 63 million tonnes between 1997-98 and 2001-02.

The petroleum, oil and lubricants sector is expected to transport 45 million tonnes through rail in 2001-02 and 65 million tonnes in 2006-07 as against 32 million tonnes in 1996-97.

Container traffic will increase from 6.81 million tonnes to 12.71 million tonnes between 1996-97 and 2001-02. These are the projections made on the basis of a trend analysis of data and demands projected by different rail-users.

The moot question is whether the railways have the track and wagon capacity to meet the projected demand and the ability to finance new assets.

Since most of the projected demand emanates from areas where track capacity has crossed 100 per cent, the railways are in a quandary about its growth prospects.

The huge investment in gauge conversion is clearly not going to help its business prospects much in future.