R. C. Acharya

Putting cargo haulage at the centre of his Budget, the Railway Minister, Mr Lalu Prasad, has proposed a dedicated freight corridors project that will usher in an era of low-cost transport.

BANKING ON freight to deliver the goods.

So what is new in the Rail Budget? Well, for one, the slogans have changed. Gone is the safety, security and punctuality mantra, chanted for almost two decades. These essentially passenger-friendly objectives have now been replaced by freight, route and rate.

The Railway Minister, Mr Lalu Prasad, has opted for a freight-friendly paradigm, which promises to usher in an era of lower tariffs, and hopefully expand the market for freight transport by rail. To realise this dream, Mr Lalu Prasad has proposed the mother of all projects — the Dedicated Freight Corridors (DFC), not one but two of them, at an estimated cost of Rs 20,000-30,000 crore!

Delhi Metro Model

Undoubtedly, the structure and the mode of funding the new dedicated freight corridors will determine the scheme's success. However, considering that this project involves mega investment and is vast in scope, which could impact the Railways' viability for years to come, it would be averse to handing the project over to any other agency to build and operate it, as it did readily when the Delhi Metro Rail Corporation was set up.

On the other hand, the benchmark set for efficiency and competence by DMRC, both during its construction and, now, in operation, will be difficult to meet. Built at Rs 250 crore per km for the underground sections, and about Rs 100 crore per km for the elevated portions, the 55-km metro now in operation has cost over Rs 10,000 crore.

Of course, this includes not only the track, station buildings, maintenance depots and other infrastructure, but also the rolling stock, signals, electric substations, automatic fare collection systems and a host of hi-tech gizmos that make DMRC the world-class metro it is!

However, what is more important is, perhaps, the total absence of even a hint of a scandal, financial or otherwise, and the very low profile that the DMRC Managing Director, Mr E. Sreedharan, maintained through all the praise heaped on him and his dedicated team of officers and staff. Of course, meeting targets and keeping the system running at peak efficiency in spite of the minor glitches has been no mean achievement.

But what, perhaps, is not well-known is that within a very short time of its operation, the earnings have been ploughed back to fund future works. The Rs 400-crore cost of the highly popular Line 3 to Dwarka, declared open by the Prime Minister recently, was met by DMRC from its own earnings!

In spite of repeated demands for concessions from various groups, including MPs, who went so far as to adopt a resolution to the effect, Mr Sreedharan has resolutely refused to buckle down. With an eye on the stringent repayment schedule, of about Rs 70 crore starting in 2007, increasing to Rs 150 crore in 2008, Rs 300 crore in 2009, and so on, he is busy building up an adequate bank balance so that he may not have to default or ever ask the Centre to bail him out.

NEW BENCHMARK

In keeping with the new benchmark set by DMRC, the Dedicated Freight

Corridors project will, undoubtedly, be required to resort to market borrowings, retain competent consultants, get the best contractors, execute the project in a time-bound manner, run it profitably and pay back the loans as per the pre-payment schedule set by its creditors! All the time, the CEO will need to be vigilant to stay the course, and not opt for the populist decisions his political masters may want to impose on him from time to time.

Being a part of the Railway Ministry would undoubtedly give the SPV some advantage in being able to share the Railways' vast resources, including land all along its right of way, and being allowed to draw freely from its vast pool of experienced engineers and managers. However, it has its pitfalls of being dictated by political and not commercial priorities, which has been the bane of the Indian Railways over the last decade and a half. In fact, the very need for the DFC arose because of the hundreds of new passenger trains introduced each year, over the last decade and a half, crowding out the freight trains. The pitiable speed of an average goods trains, with wagons moving a miserable 200 km a day, perhaps tells it all!

The Planning Commission is believed to be convinced of the need to follow the DMRC model which, of course, needs another Sreedharan to make it successful from the word go! In the meantime, RITES (Rail India Techno Economic Services), which had prepared the pre-feasibility report, has been asked to now prepare a feasibility report.

Era of cheap freight

A vast amount of financial and other resources will be required for this mega project extending over a large part of the sub-continent. Expected to usher in an era of low-cost transport of freight by rail, it should enable a quantum jump in the country's economic growth.

However, the vital decision on the exact structure of the SPV (Special Purpose Vehicle) will undoubtedly attract plenty of debate, especially when, apart from the Shipping, Coal and other Ministries, some of the major players in the field of heavy-haul and freight technology — such as track signalling, communications, rolling stock, and locomotive manufacturers — also decide to jump into the fray!

If Mr Lalu Prasad wants the Indian Railways to become a world-class freight carrier, he should be willing not only to listen to some world-class advice, but also refuse to go off the rails once the course has been set, and the project's gravy train starts to roll. A very difficult task indeed, for a true dyed-in-the-wool politician such as he is!

(The author is a Former Member (Mechanical), Railway Board. He can be reached at: acharya@bol.net.in)

© Copyright 2000 - 2009 The Hindu Business Line