Joining ‘billion tonnes’ club could be a tough ask for Railways

The 2012-13 financial year is about to end in a few days, but figures and trends so far don’t seem to suggest that India will break the billion tonnes freight mark, as claimed by both Railway Minister Pawan Kumar Bansal and Railway Board chairman, and join the select club comprising China, Russia and the U.S.

The Railway Minister had declared in his budget speech that the Railways would achieve the mark in the current financial year by carrying 1,007 million tonnes of freight, and the claim was backed by chairman Vinay Mittal as recently as last week.

In the 11-month period till February, the Railways ferried about 911.53 million tonnes, just about 4.1 million more than the 875.65 million tonnes carried in the corresponding period a year ago. But still it fell short of the 913.58 million tonnes target by 2.05 million tonnes.

Thus the Railways is required to transport at least 88.47 million tonnes in March to reach the billion tonnes mark. But questions remain, given that its performance in February was a matter of concern. It carried just about 83.60 million tonnes last month, less than the 83.76 million tonnes transported in the corresponding month in 2011-12.

To meet the revised target of 1,007 million tonnes the Railways would actually have to transport 95.47 million tonnes this month which might prove to be a tough ask, particularly in light of the poor performance in February, when it fell short of the revised target of 85.68 million tonnes by 2.08 million tonnes or 2.43 per cent less.

Accruals, however, shot up riding on the hike that was affected over a year ago before the presentation of the 2012-13 budget.

For the 11 month period ending February there was a 24 per cent jump from Rs. 61203.42 crore to Rs. 76459.72 crore this year. But in February the rise was lower at 21.95 per cent, with earnings standing at Rs. 7113.09 crore, up from Rs. 5832.69 crore.

The target for the current year is Rs. 85956 crore, and too fulfil it the Railways would require to put in an extra effort to earn about Rs. 9496.38 crore, given that it had just about earned Rs. 7113.09 crore in February.

Railways may decide on passenger fare hike in October

A decision on a possible hike in passenger fares will be taken by the Railways in October, when it will review the fuel adjustment component (FAC) in the wake of rising fuel and energy costs.

While the freight rate will go up by about 5.7 per cent from April 1 due to the linking of the FAC to the freight tariff, the Railways will examine its applicability in its passenger services in October this year.

“There is a policy now and the FAC is linked with energy and fuel prices and calculated accordingly,” Railway Board chairman Vinay Mittal said at a conference.

Passenger fares could go up by 2 to 3 per cent if the FAC is linked to the basic fare in passenger services in October.

“The FAC will be reviewed after six months for both freight and passenger fares. Whether the FAC will be reduced or increased, it will be examined in October and a decision will be taken only then,” he said, adding, “by that time, the Rail Tariff Authority is also expected to be constituted.”

The Rail Tariff Authority, the first of its kind for the Railways, will suggest the level of tariffs for both freight and passenger services from time to time, taking into account input costs and market conditions.

Mr Mittal said currently the RTA is in the inter-ministerial consultation stage and a Cabinet note will be prepared for it shortly.

“The FAC for passenger and freight are calculated separately. While we decided to link the FAC with freight tariff from April 1, we absorbed the increased fuel cost of Rs. 800 crore and did not hike passenger fares,” he said.

“Since we raised the passenger fare in January we did not consider it again, and the FAC was implemented for freight only,” he said.

Asked repeatedly whether or not the FAC will be imposed in October, Mr Mittal, however, said “I am not in a position to say that now because it will be reviewed and then a decision will be

The FAC, which takes into account both electricity and diesel costs, is about 16 to 17 per cent of the total expenditure. There is a 39 per cent hike in fuel cost and an 8 per cent energy hike till January 2013 from April 2012.

Mr Mittal also said that the Railways is focusing on fiscal discipline by curbing expenditure.

Referring to passenger amenities, he said measures are being taken to bring down the accident rate and improving passenger amenities at rail premises.

Railways pay Rs.60,000 to theft victim

The Union Ministry of Railways has paid a Delhi resident Rs.60,000 on the instructions of the Delhi Consumer Disputes Forum which had directed that she be compensated for theft of her purse during travel.

The payment was made after the Forum issued summons to the Railway Board Chairman this past January threatening penalty under the Consumer Protection Act for failure to comply with its order of November 2012.

It was in February this year that Archana Raj, a resident of Rani Bagh, received the compensation from the Railway Ministry.

Ms. Raj had complained that her purse was stolen while she was travelling in an AC II Tier coach of AP Express from Secunderabad to New Delhi on August 14, 2009. The case took a long time and it was only on November 6, 2012, that the Forum ruled in her favour in an open court. When the Railways initially did not pay up, Ms. Raj again moved the Forum on December 19 last to demand that “because of deliberate disobedience of the order”, proceedings under Sections 25 and 27 of the Consumer Protection Act, 1986, be initiated to enforce and execute the order with suitable costs, compensation and interest.

Thereafter the Forum issued summons to the Railway Board Chairman on January 15 this year demanding to know why penalty as contemplated under Section 27 of the Consumer Protection Act, 1986, for not complying with the orders not be imposed on him. The summons had their effect and the complainant got her compensation through a cheque drawn on February 6.

Railways not competing with airlines: Rly Board chief

During his tenure as Railway Board Chairman since July 2011, Vinay Mittal has seen many a trough and some crests. He became Chairman of the cash-strapped Indian Railways and saw the system go monetarily negative. He also oversaw the hurried salvage act, in the form of an across-the-board freight hike in 2012. Perceived as frank, though media shy, Mittal prefers to work behind the scenes.

Soon after the Railway Budget in 2012, a political commotion broke out on the across-the-board passenger fare hikes. When asked what, he feared, could derail the proposals, Mittal simply said he was keeping his fingers crossed. Hopefully, he would have uncrossed them now, since the passenger fare hike came through two weeks ago.

How has the slowdown hit the Railways?

We were about 13 million tonnes short of target in freight till December. We are trying to make good in the remaining three months of this fiscal. The coal offer is good. Coal India, Coal Ministry and Railways have worked in close co-ordination to ensure availability at railheads. Till December, we had 9.3 per cent growth a year in coal loading, which is high, given the large base.

Will wagon procurement get hit?

Wagon procurement is a dynamic process. We plan procurement on yearly basis.

In 2011-12, we procured 18,000 wagons. In 2012-13, our procurement fell to 16,300 wagons. Now, if buoyancy returns to the economy, we will increase wagon procurement. By and large, we are able to procure as per target. Also, we don’t want stocks to be idle and divert valuable monetary resources.

But, in case there are wagons that stand idle in lean season, it should not be construed as excess procurement. We use the same idle wagons during peak season. For instance, there is a sudden demand for coal and food-grain movement, and fertiliser imports have started coming in. We are able to meet such sudden spurt in demand by using wagons that were idle in the lean season.

What are the segments in which you expect large private investments?

Primarily, terminal handling and building last mile rail links to connect ports and major factories, such as steel plants and industrial areas.

Could the usual delays due to environment and forest clearances affect rail link investments?

We have not faced problems except in deep forest belts and areas with wildlife presence. Now, a core group has been formed with Coal India’s Chairman Managing Director, Railways (Member-Engineering), and Railways’ infrastructure directorate, for quarterly review of major coal connectivity projects. Environment Ministry representatives are also part of the group.

There are three major coalfields that hold potential for production — North Karanpura in Jharkhand, Mand Raigarh in Chattisgarh and Ib Valley in Odisha. We have identified specific rail connectivity proposals with these fields.

Those projects had been identified earlier, too. But, didn’t they run into problems?

They did face environment problems. But, now we have sharp focus on these projects. Moreover, we are also looking at existing projects, such as sidings, where there are no environmental issues.

What is the status of the proposed regulator?

The proposal is being discussed. The regulator is coming for sure, that itself is significant. But its administrative powers, composition, authorisation and form, are under discussion.

After passenger fare hike, is there a chance that freight charges, traditionally perceived as high, will come down?

I don’t expect so, because input costs are continuously going up. Manpower and fuel costs are rising. There may be some minor, sector-specific rationalisation, at the most. Over a period of time, the perceived excess freight hike will get evened out. That is already happening. After the diesel hike in September 2012, we did not increase freight charges. I can already see some movement back to rail in cement, as the road segment has increased fares.

The Government has indicated that diesel prices may rise further. Do you think the fuel adjustment component as a surcharge should come in now? (After the interview, on December 17 night, diesel prices rose by Rs 10/ litre for bulk consumers like Railways.)

I feel the tariff authority will have to decide on issues such as the extent of the fuel component and how it should be spread over the services. We will have to wait for the tariff authority to come in. At present, we have gone for a modest fare hike on the passenger side.

The Railways had proposed building quite a few rolling stock factories on public-private partnership basis. When can we expect some concrete action on these?

These are complex projects, being attempted for the first time in India. They require work to be done. We are hopeful that given some time, if we take up at least one or two projects, they could pave the way for remaining projects.

As demand for AC travel goes up, has the share of AC 3-tier coaches increased?

Yes. We are augmenting all AC coaches by 20 per cent. In 2009-10, 15.55 per cent coaches were AC coaches. In 2011-12, the AC coaches account for 17.1 per cent share. The number of AC coaches has gone up to 7,631 from 6,402 during the period. The number of non-AC coaches, too, has gone up to 37,000 from 35,000. We are also introducing unreserved trains for the economically-weaker sections.

How much of a dent will low-cost airlines make to your AC traffic?

I don’t think, in the current backdrop, we can compare air travel with AC rail travel. At the most, AC first class, to some extent, can be compared. But definitely not AC three-tier, or AC two-tier, to a large extent. Air fares are too dynamic. Sometime ago, I had checked the return airfare between Delhi-Thiruvanathapuram was Rs 20,000 if you book six months in advance, and became Rs 42,000 a week in advance. We are not that dynamic.

In the freight segment, in which commodities do you expect an increase in share of transportation?

Coal and cement could see some increase. But, not for petroleum products, though we would like to see an increase. Domestic containerised traffic is another segment, where we like to increase the share of rail.

When can we expect significant monetary benefits to Railways from commercial land utilisation?

For over a year, we could not take up any land-related commercial proposals due to a Cabinet decision. Investors had also lost interest. Now, with a clear Cabinet decision, we are approaching investors. But, locations have to be chosen carefully. There are some sites that do not have many takers. After all, on a yearly revenue base of about Rs 1,30,000 crore for the Railways, there is a limit to the extent of difference such projects can make.