“We're eyeing Rs.4,000 crore in export revenues in five years” March 2018 issue

“We're eyeing Rs.4,000 crore in export revenues in five years”

Indian Railways – undoubtedly one of the lifelines of logistics for Indian exporters and importers – has witnessed a wave of reforms under Suresh Prabhu, the Union Minister of Railways, GoI. In an exclusive interview, Prabhu talks about the initiatives taken under his regime to facilitate a host of changes and reveals the road ahead for the Railways, including execution of foreign railway infrastructure projects.

Interview By Manishika Miglani | April Issue 2017 | The Dollar Business

TDB: Over the last few decades Railways has lost a significant part of cargo to road transport. What is Ministry of Railways doing about it?

Suresh Prabhakar Prabhu (SPP): Indian Railways used to have a modal share of 85% in ferrying cargo in 1947. It has now come down to about 28%. There are many reasons that can be attributed to this decline, such as under-investment in Indian Railways and the fact that we now have better roads and vehicles. This is a very serious concern and to address it we have come up with a road map to increase the modal share to 45%, in the next few years. To achieve this target, the Ministry of Railways has introduced a slew of measures such as the introduction of Special Freight Train Operator (SFTO) scheme and Automobile Freight Train Operator (AFTO) scheme.

SFTO provides investments for procurement of high-capacity and special-purpose wagons for specific commodities like molasses, fly ash, edible oil, caustic soda, chemicals, petrochemicals, alumina and bulk cement. AFTO, on the other hand, is a scheme which takes care of procurement and operation of special-purpose wagons for the transportation of automobiles including two/three-wheelers, cars and tractors, etc.

Another step in this direction is the rationalisation of Merry-Go-Round (MGR) system, which has been in effect since April 2016. We have also withdrawn the port congestion charge and the busy season charge for traffic loaded in BCN group and BCNHL wagons. At the same time the Dual Freight Policy, which is the tariff for transportation of iron ore to ports for exports, has been withdrawn. Our freight business suffered losses of about Rs.29,000 crore during 2008-2013 period due to dual pricing system for transporting iron ore. We have also re-introduced short-lead concession and reduction of minimum distance for the charge from 125 km to 100 km.

We have introduced a liberalised two-point rake policy for covered wagons in which any two stations within a distance of 200 km in the busy seasons and 400 km in the lean season have been permitted for a two-point booking. We have also liberalised the charging of commodities for transportation by containers along with issuing guidelines for station-to-station rate policy.

TDB: Indian Railways is in the process of setting up a dedicated $5 billion Railways of India Development Fund (RIDF) to make commercial investments across the country. What kind of projects will be included under this?

SPP: The Railways of India Development Fund (RIDF) is being created to cater to infrastructure development needs in both Railways and private sector. Under RIDF, funds allotted to Indian Railways will be utilised primarily for network decongestion (i.e. doubling or laying additional lines on existing network), network expansion and electrification. Projects such as dedicated freight corridors, port to mine connectivity, station redevelopment, and private freight terminals, etc., may also be funded through RIDF.

TDB: Can you shed some light on exports of locomotives by Railways? Is a foray into infrastructure development or consulting on cards?

SPP: We do export locomotives and rolling stock manufactured by RITES, a public sector undertaking under the aegis of Indian Railways. Currently, we are exporting to railways of Sri Lanka, Bangladesh and Myanmar. RITES, on behalf of Indian Railways, has been trying to meet the demand of railways in these countries by supplying customised, new or in-service locomotives, of various gauges and capacities.

We also export passenger coaches. In addition to this, we are also into supplying locomotives on a lease basis to reduce the financial burden of our foreign clients. So far, RITES has undertaken the leasing of locomotives in Mozambique and other African countries. It is also serving some clients in Southeast Asia – for technical studies with their Detailed Project Reports (DPRs) for laying down of new railway lines and rehabilitation of the old ones. The department is also exploring the business potential for the construction of highways, ports and airports in these regions. Apart from this, RITES provides technical consultancy and services such as repair, maintenance, overhaul and rehabilitation.

Similarly, IRCON International Limited, a wholly-owned central public sector enterprise of the Ministry of Railways, has been undertaking major railway infrastructure development works in 23 countries across the globe to strengthen India's bilateral relations with these countries. So far, IRCON has executed 121 projects worth Rs.11,848 crore in different countries and is currently executing eight projects in Bangladesh, South Africa, Algeria, Bhutan and Nepal. The projects undertaken by IRCON have been a major project export product from India. It has been balancing the foreign trade deficit with a few of these countries as well.

The government also offers lines of credit to help us execute foreign railway infrastructure projects and thus supports the efforts towards furthering foreign trade. This has led us to project a target of Rs.4,000 crore worth of exports over the next five years.

"Rites Exports and Leases Locomotives to neighbouring Countries"

 

TDB: How do you plan to remove the logistical bottlenecks that have been hurting India's exports?

SPP: The Railways has traditionally suffered on account of meagre investment in logistics, particularly with respect to doubling of railway lines, laying of new lines, improvement of railway stations and de-bottlenecking. The already sanctioned projects amounting to over Rs.3 lakh crore and an annual investment of Rs.10,000-15,000 crore have not been sufficient even to cover cost-escalation of these ongoing projects. At the same time, there has been a continuous demand to sanction new projects leading to a lack of adequate financial support in many projects. Investments have been largely dependent upon public money or raised through gross budgetary support. Now, multiple avenues have been identified for increasing such investments including ‘Mission 100', which will undertake the commissioning of at least 100 sidings in the next two years. It will also entail revising of the current siding policy to elicit greater private participation.

We are also looking at developing goods sheds through PPP mode and promoting RORO (roll-on/roll-off) logistics and time-tabled freight services. It will be followed by a substantial increase in gross financial support by almost doubling the outlays. We will also invite state governments to participate in the development of new areas alongside finding stakeholders for financing railway projects in power, coal, mineral extraction and port companies. We are also partnering with institutional financers for assured funding of projects that have a positive rate of return above certain threshold limits so that the projects can be completed in a time-bound manner.

TDB: How much FDI is Railways expecting during the next financial year?

SPP: The government, in August 2014, reviewed its policy for private investment in rail infrastructure and amended the list of industries reserved for the public sector. It has been decided to permit FDI in the railway transport sector for construction, operation and maintenance of various projects. This includes suburban corridor projects through public–private partnership (PPP), high-speed train projects, dedicated freight lines, railway electrification, signaling systems, freight terminals, passenger terminals, infrastructure in industrial parks including electrified railway lines and connectivity to the main railway line, and Mass Rapid Transport Systems (MRTS).

So far, Indian Railways has successfully attracted FDI in the locomotive manufacturing projects of Madhepura (800 electric locomotives) and Marhowra (1,000 diesel locomotives), which account for a combined investment of Rs.2,600 crore. We are also finalising bids for the Dankuni Electric Locomotive Factory in Bengal as a part of the Western Dedicated Freight Corridor project. It involves procurement and manufacturing of 200 Japanese locomotives with an investment of Rs.12,000 crore.