Tag Archives: Rolling stock

How Railways are the new growth locomotive

At a time when public investment is sorely needed to crowd in reluctant private investment, it is welcome to note that the Railways is rising to the challenge.

It is coagulating capital on a scale far in excess of what would be possible purely on the strength of support from the general Budget, lowering its operational costs, restructuring the decision-making process to make it faster and setting up a regulator to ensure fair treatment of private partners as they deal with the behemoth. The Railways’ job is to be a vital component of globalising India’s transport infrastructure.
Investing in itself to realise this goal also drives India’s growth. The goal to invest Rs 8.5 lakh crore over the next five years is ambitious but needed, to add and improve the quality of rolling stock, upgrade signalling and increase capacity along the routes that offer maximum revenue potential.

The Railways is raising resources in innovative ways: foreign direct investment in new-age locomotives and coaches, long-term, surprisingly low-cost debt from the Life Insurance Corporation, leveraging railway land around stations to develop commercial real estate via private sector partners, and setting up new corporations for new projects.

It is also developing projects for rail connectivity to many ports and mines. Strikingly, 17 states have agreed to set up special purpose vehicles to undertake projects, raising debt several times its equity to carry out investment.

The Railways expects large-scale procurement orders from the enterprises it owns to enhance the value of these companies that can be discovered by stake sales and listing, leading to larger mobilisation of debt for investment. This amounts to corporatisation of the Railways by the backdoor, without much resistance from the unions.

The Railways is aggressively moving to lower its fuel costs. The long-term strategy is electrification, while the short-term one is to become a licensee that can buy power directly from generation companies such as the Ratnagiri Gas and Power, which will sell it power at Rs 5 a unit, while the Railways pays Rs 7 a unit. Way to go!

Leave a comment

Posted by on October 8, 2015 in Uncategorized


Tags: ,

Indian Railways’ capex on the slow track

Although it is not short of funds, the pace of capital expenditure at Indian Railwaysdoesn’t seem to have gathered speed, reports fe Bureau in New Delhi. In the five months to August, capex on key areas such as electrification, new lines, doubling and renewal of tracks, conversion of gauges and rolling stock has been virtually flat at Rs 14,700 crore. Numbers crunched by Ambit Capital show that spends on rolling stock are down 60% year-on-year while those on track renewals are down 24% y-o-y. Some of this has been offset by higher spends on other areas — for instance, more new lines are being built and more of them electrified.

The total spends at Rs 21,300 crore are up 12% y-o-y with funds having been channelled into joint ventures and SPVs of Northern Railways. Meanwhile, revenues have risen 10% y-o-y and are around 8% below target. That appears to have pressured the operating ratio which at 92.6% is above the targeted 88.5% for the first five months.


Leave a comment

Posted by on September 28, 2015 in Uncategorized


Tags: , ,

Indian Railways to procure sensor devices to detect defects on tracks

In order to prevent catastrophic damages to its assets,Indian Railways is going for offshore procurement of high-powered sensor-based equipment, a first-of-its-kind for the public transporter, to detect defects on tracks and rolling stock.

The sensor-based equipment, known as on board condition monitoring system, currently operational in countries like the US, the UK and Israel, will monitor the condition of tracks, coaches, wagons and locomotives, and send early signal to the control room in case of any deficiency.

“We will purchase 6,800 sensor-based systems to be installed in coaches, wagons and locomotives at an estimated cost of Rs 63 crore,” said a senior Railway Ministry official.

Railways will equip the system in selected assets on a trial basis in the current fiscal as it was one of the Rail Budget proposals. The system will be fitted on wheels and the control room will receive signals through vibrations.

The official said the system is operational in railways of the US and the UK, while Israel is using it in its aircraft and helicopter service.

“Any slightest defect on track or rolling stock will be immediately spotted at the control room. Besides, the condition of the assets can be constantly monitored,” he said.

Railways will be able to know the exact condition through micro-analysis of data and this will reduce the possibility of sudden catastrophic failures. As a result, the safety aspect of track and rolling stock will be enhanced.

It will also enable the Railways to prepare a predictive maintenance schedule for its assets.

Indian Railways had issued the expression of interest (EoI) seeking response from interested vendors for the Rs 63 crore deal.

“Since it will be procured from outside the country we have sought global response,” the official said.

Railways will open the EoI documents on September 7 to know responses from prospective bidders.


Leave a comment

Posted by on September 5, 2015 in Uncategorized


Tags: ,

Indian Railway tries to lure Investors

Suresh Prabhu the Railway Minister has asked foreign funds and domestic investors to replicate with the railways, their success in the telecom, power and road sectors as the department needs a whopping Rs 1 lakh crore in funds this year and Rs 8.5 lakh crore over the next five years.

“You have successfully invested in the telecom and power and roads sector, but never in the railways. The government also didn’t invest during the past two decades and so we’ve chalked out a five-year plan under which we are looking at an investment of Rs 1 lakh crore this financial year and Rs 8.5 lakh crore over the next five years,” Mr Prabhu told.

Mr Prabhu rolled out the red carpet for foreign funds and domestic investors, including multinational i-bankers, FIIs, domestic insurers like LIC and other financial institutions for the development of Indian railways.

“We are looking at private sector investments, too, though we know it will take time,” the minister said. “This means we need to invest $200 billion annually in the railways over the next five years, after which we need an annual investment of 1.5 times more than this (or $350 billion) for the next five years,” Mr Prabhu said.

Mr Prabhu said in a meeting that while as much as 65 percent of the rolling stock was passenger trains, they generate only 30 percent of revenue, leaving 70 percent of revenue to be mobilised by freight trains, which constitute only 35 percent of the rolling stock.

He said that the national transporter is on its way to constructing 400 model railway stations in this fiscal year. He also said that as many as 79 of the announcements made in the rail budget for the year have already been implemented.

He said, “We have already signed MoUs with Maharashtra and Odisha and are on our way to doing the same with a total of 17 states.” “On the part of the Railways, we will be investing Rs 70-80,000 crore in Maharashtra over next five years,” he added.

Leave a comment

Posted by on August 8, 2015 in Uncategorized


Tags: , ,

Indian Railways facing shortage of 2,000 wagons daily

With the wagon procurement programme running behind schedule, Indian railways is facing an acute shortage of about 2,000 wagons every day for carrying coal, causing strain on its ambitious target of transporting 1.18 billion tons freight this year.

Taking note of the prevailing situation, Railway Minister Suresh Prabhu expressed his concern during a recent meeting and asked the directorate concerned to do the needful so that coal transportation was not hampered.

The meeting was called on May 14 to draw a roadmap for increasing the wagon availability for goods transportation.

There is a wagon crisis and the issue is being addressed, said Railway Board Member (Traffic) Ajay Shukla.

Railways needs an additional 17,000-18,000 wagons annually to meet the growing demand. Of this, 5,000-6,000 are being met through its own capacity and 10,000-12,000 through external procurement.

It has been decided to expedite the finalisation of the new tender for procurement of 6,000 wagons, said a senior Railway Ministry official, who attended the meeting.

According to the practice, the Railways assesses the requirement of wagons and places demand for new wagons every year as augmentation of freight stock is a continuous process.

However, at the moment, the wagon procurement from the market is running a year behind schedule. While no tender has been issued for 2014-15, the order for 9,000 wagons issued in the last fiscal was that of financial year 2013-14 and the procurement is still in the process.

He said the wagon shortage has reached this stage because of inadequate ordering in recent years and blamed financial crunch for this inordinate delays in wagon procurement.

Prabhu had announced in the Rail Budget that the freight traffic would grow from 1,101 million tons (MT) in 2014-15 to 1,186 MT in 2015-16, an increase of 85 MT.

Of the additional tonnage of 85 MT, 42 would be accounted for by coal, which is the largest component of the railways’ freight commodity, while 9 MT would come from iron ore and 7 MT from cement traffic.

With an average wagon life of about 30 years, railways has a wagon fleet of 2.43 lakh wagons, of which about 1.4 lakh wagons are box-type that are usually used to carry coal.Many wagons also get damaged during mechanised loading/ unloading due to improper practices adopted by some of the sidings. “The damaged wagons get held up in workshops due to capacity constraints,” the official said.

In order to tide over the crisis, it has been decided to delay the junking of old wagons and the periodic overhauling of wagons is also being postponed.

Railways has wagon investment schemes that allow customers to invest in rolling stock and get some freight discount, among other benefits, over a long period of time.

There have been investments by petroleum product companies, mining firms and cement firms in such schemes.

According to the official, Coal India is likely to make a considerable investment for procurement of railway wagons for carrying coal.

Financial Express

Leave a comment

Posted by on May 19, 2015 in Uncategorized


Tags: , , ,

Govt support can’t be railways’ only investment source: Suresh Prabhu

Railway minister Suresh Prabhakar Prabhu is busy turning around the 160-year-old transport behemoth, having laid out a rather ambitious Rs 8.5-lakh crore investment road map for the next five years. The focus is on tapping all possible resources, including foreign agencies, domestic institutions and leveraging rail PSUs, the 61-year-old banker-cum-politician tells Jyoti Mukul and Sudheer Pal Singh in an interview. Edited excerpts:

How have you taken forward the investment road map rolled out in the Budget?

The white paper we brought out was a diagnosis of the financials. And one of the points that came out as a result of this diagnosis was that there is under-investment in the railways. With a Rs 8,50,000-crore Plan size for five years, we are focusing on investment to decongest our network and improve the throughput so that we can increase our earning capacity. We will leverage the books of public sector undertakings. Projects where the internal rate of return is higher than the dividend will be taken up.

Financing of railway projects cannot be left to depend entirely on internal generation. It has never happened anywhere in the world. That is why our dependence on budgetary support and extra-budgetary resources has gone up.

Revenue will increase when volume will increase which, in turn, will increase if you increase the capacity to handle more traffic. Otherwise, revenue and profit will never increase. This is the simple philosophy of any organisation. We will leverage the books of public sector undertakings. Projects where the internal rate of return is high will be taken up on priority. Multilateral agencies are willing to provide us assistance. Also, we will get money from tax-free bonds which the Finance Ministry has already announced. As of now, there is no problem of shortage of money for the railways.

Wouldn’t it lead to excessive dependence on debt?

Gross budgetary support from the government cannot be the only source for investment. Worldwide, for financing railway infrastructure, debt is taken. Currently, the debt liability of Indian Railways is just 13 per cent of the traffic receipts, which is lower than in other countries. For instance, debt was 41 per cent of the German Railways’ total revenue of 39 billion euros in 2013.

What kind of financing model will be put in place for funding projects?

We are exploring the possibility of adopting the annuity or deferred payment model for implementing projects through PSUs. SBI Caps is rendering financial advisory services to us. Of the total of Rs 8,50,000 crore, Rs 2,50,000 crore would be through market borrowing, including IRFC borrowing for rolling stock. We will use funds from Life Insurance Corporation, pension funds, etc. This does not include lending from multilateral agencies, which will come through gross budgetary support from the ministry of finance.

We have the model of leasing through IRFC and it has worked well. Seventy seven projects worth around Rs 1 lakh crore have been shortlisted which we will focus on doubling.

Your ministry has just announced the implementation of 39 Budget announcements in 36 days since April 1. But critics point out that most of these are related to relatively small and non-core issues.

All of our efforts are customer-centric. Our Budget document is a five-year plan and this plan is being unfolded by way of the Budget being passed. So, what we are trying to do is to implement each and every point I have made in my Budget speech. All of them have been turned into action points.

That is why in the first month itself we have managed to implement 39 of the Budget announcements. In addition, we have started online monitoring called E-Samiksha of all the projects.

Have you managed to bring the protesting trade unions on board on key issues, such as privatisation?

The unions, which were considered a part of the problem earlier, have become a part of the solution now. Representatives of both the trade unions came and met me today. And they have told me that the entire organisation was demoralised earlier and I have re-energised it. So, we are trying to engage with them and work with them.

What role has been envisaged for the Rail Tariff Authority?

We have started the process of setting up a working group to draw the contours of a railway regulator. The regulator’s role will be more than just tariff. It will be entrusted with making regulations, setting performance standards and determining tariffs. It will also adjudicate among licensees and private partners.

Leave a comment

Posted by on May 9, 2015 in Uncategorized


Tags: , , ,

Prabhu for pruning freight rates over two years

Railway minister Suresh Prabhu expects to reduce the state-run behemoth’s freight rates sharply in the next couple of years to take on competition from the road sector and even undertake disinvestment in some of the ministry’s enterprises.

The minister said this would be possible as the railways is targeting a 50 per cent rise in revenue within a five year time frame, while he anticipates gross expenditure to rise by a far more modest rate of 15 per cent. “The spread can be used to either show an increase in profitability of railway operations or passed on as a cut in freight rates,” he told The Indian Express.

The minister said the revenues would rise riding the efficiency of the railway-owned enterprises. Those enterprises will shoulder the largest responsibility of adding to tracks and rolling stock of the railways from now.

Prabhu said that making companies like Ircon undertake additional capital expenditure also made sense as it would raise their valuations. The additional valuation allows for their disinvestment at attractive rates, he added. The disinvestment would provide additional revenue to railways.

This buffer can then be used to offer lower freight rates. Making capital expenditure only through the railway ministry’s own divisions did not offer any such advantage. With a larger capacity to run freight trains and more tracks to run them on, Prabhu said, he was sure he had a “game changer plan”.

“I would not need to service the entire additional money from the railway earnings only. I will get it from these companies, which adds to my capacity massively. So it becomes a game changer for the railways,” he said.

In the Railway Budget 2015-16 the minister has penciled an annual freight revenue target of 1.5 billion tonnes to be reached in five years, a 50 per cent increase from the current 1 billion tonnes per year. Most of the annual increase, the minister expects to earn by reducing the freight rates to lower than what truck operators demand. “It’s a doable plan,” he said.

Prabhu said this line of action has been overlooked by commentators who have instead claimed it would be difficult for him to finance the ambitious investment of Rs 8.56 lakh crore between now and 2019. They have pointed out that financing this level of investment would need about Rs 1,80,000 crore to be spent each year. But the Railway Budget has projected a plan outlay of only Rs 1,00,011 crore, a gap of nearly Rs 80,000 crore.

Within that, too, the railways has inked in Rs 17,655 crore as additional market borrowing. The interest cost on this borrowing will be a huge drag on railway revenue, they point out.

Prabhu said he is aware of the cost. He would consequently prefer to let the public sector companies share in the expansion plan. “So I don’t need budget for this from the department’s limited resource. Their borrowing on their balance sheet does not increase my liability,” he signs off.

Indian Express

Leave a comment

Posted by on April 17, 2015 in Uncategorized


Tags: , , ,