This is the second of a three-part series of articles on the Indian railways, its capital expenditure and freight business.
The Railways has been one of the more cheaper modes of transportation for moving bulk cargo. The government has therefore realised that it needs to be supported with reduced overall logistics costs and schemes to improve green mobility. Identifying infrastructure investment in the sector as a key thrust area, the Government of India has formulated two policies — the PM GatiShakti (PMGS) policy for a National Master Plan (NMP) and the National Logistics Policy (NLP). The PMGS aims to bring synergy to create a seamless multi-modal transport network in India, with the NMP employing technology and IT tools for coordinated planning of infrastructure. The NLP focuses on building a national logistics portal and integrating platforms of various ministries.
Not many major policy components and details are available in governmental websites on PMGS. In reference to the Indian Railways (IR), the Department for Promotion of Industry and Internal Trade’s website mentions three things: integration of postal and railway networks, one station – one product and the introduction of 400 Vande Bharat trains without anything about increasing the IR share in moving cargo.
Increasing bulk cargo
The IR has taken some initiatives in the bulk cargo arena. It relaxed block rake movement rules to provide a facility to load from/to multiple locations, permitted mini rakes, introduced private freight terminals (PFTs) and relaxed conditions in private sidings. The Gati Shakti Terminal (GCT) policy has eased the stipulations for the operation of these terminals and progressively all PFTs and private sidings are being converted into GCTs. The IR has also partnered with freight operators in recent years, encouraging them to invest in wagons for movement of their cargo thus helping in the induction of more than 16,000 privately-owned wagons to facilitate specialised traffic like automobiles and fly ash.
While it is early to judge the impact of these initiatives, the IR’s share in bulk cargo continues to decline. Some decline is expected as production becomes more decentralised and the IR’s cost advantage diminishes. To offset this, IR should reduce non-price barriers and distribute transaction costs associated with it to as many customers as possible.
A railway siding is a capital-intensive high-cost proposition and only large industries can manage them with others having to cover large distances to load their cargo. This increases the logistics costs and hence the reluctance to patronise the IR. For example, in the cement sector in 2017-18, thirty-three plants with less than one million tonne (MT) annual capacity had a production share of 6.5% but their share in rail loading was 3.8% whereas plants with more than 2.5 MT annual capacity with a production share of 57%, the rail share was 69.5%. Similar is the picture for many private mines, mini steel plants, agricultural markets etc.
There is an immediate need to develop common-user facilities at cargo aggregation and dispersal points in mining clusters, industrial clusters and large cities. The knowledge of these clusters rests with the States and not the IR or other central ministries, and thus collaboration with State governments is a sine qua non. The relationship of the IR with State governments has been a sort of patron-client relationship as many States regularly demand rail lines in their areas. A change in this attitude is necessary in order for the Railways to participate in the planning of industrial clusters and mines in cities/regions if it has to increase its share in the movement of cargo.
The IR must also look at new commodities like fly ash. The Ministry of Environment and Forests (MoEF) started issuing notifications since 1999 for the complete utilisation of fly ash; in 2021 the production was 232 MT and utilisation was 214 MT. The IR never realised the potential and approved many power plant sidings without fly ash loading facilities rendering it to be a minor player in its transportation, and it must proactively correct this wrong. Another necessity is for the IR to encourage and liberalise the design of new wagons amenable to higher and efficient loading to deal with new commodities.
Finally, environmental considerations are constraining loading by the IR. As per recent government regulations, environmental clearance for rail loading/unloading facilities has been made mandatory but the same has not been imposed on road loading/unloading facilities. These restrictions have made some users move cargo by road due to high transaction costs involved with environmental clearances. Such instructions should be mode-agnostic, based on the quantity of cargo loaded and the potential for environmental degradation. Otherwise rail loading will be hampered giving fillip to more environmentally polluting road transport.
Sudhanshu Mani is leader of Vande Bharat project and an independent rail consultant and M. Ravibabu is founding member, Anekdhara, a public policy portal.