Strengthening the Logistics Backbone under Make in India

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The Indian Railways network spans more than 66,030 km, making it the world’s third-largest Rail network. India is the fourth-largest rail freight carrier in the world and is the largest passenger carrier. Indian Railways carry around 3.04 million tonnes of freight and 22.4 million passengers every day. It employs 1.3 million people.

Reasons to Invest

100% Foreign Direct Investment (FDI) in the Railway Infrastructure segment has opened up opportunities for participation in infrastructure projects such as high-speed railway, railway lines to and from coal mines and ports, projects relating to electrification, high-speed tracks and suburban corridors, which is something that the foreign companies didn’t have access to.

Indian Railways aims to involve private equity through individuals, NGOs, trusts, charitable initiations and corporates, etc. to provide passengers amenities such as battery-operated carts to facilitate movement for senior citizens and ‘differently-abled’ at stations. Certain measures taken in this regard include setting up of a standard ramp for barrier-free entry at 2,350 stations and a non-slippery walk away from the parking lot to the building at 1,410 stations.

The sector aims to boost passenger amenities by involving Public Private Partnership (PPP) investments in the provision of foot-over bridges, escalators and lifts at all major stations. A few steps have already been taken in this regard, such as online ticket booking along with cashless payment methods, provision of Automatic Ticket Vending Machines (ATVMs) at railway stations for the dispensation of tickets, the establishment of computerized Passenger Reservation System (PRS) and the introduction of alternate train accommodation scheme, “VIKALP”. And, various other premium services like Humsafar, Tejas and Antyodaya and coaches like DeenDayalu and Anubhuti.

The last-mile connectivity to boost business activity in and around ports and mines has been proposed through the formation of Special Purpose Vehicle (SPV) companies under the PPP model.

The National High-Speed Rail Corporation Limited (NHSRCL) was incorporated as a Special Purpose Vehicle for the Mumbai-Ahmedabad High-Speed Rail (MAHSR) project with technical and financial underpinnings from the Government of Japan. The Mumbai-Ahmedabad High-Speed Bullet train has a length of 508 km, with a maximum design speed of 350 kmph and operating speed of 320 kmph. The total project cost is estimated to be USD 15.02 billion, with 81% of the project cost funded by a loan from Japan for 50 years at 0.1% annual interest with 15 years moratorium period.

The Eastern Dedicated Freight Corridor of 1,856 km length and the Western Dedicated Freight Corridor of 1,504 km length are under construction. It is projected that by 2020-21 about 92 million tons of traffic would move through the Eastern Dedicated Freight Corridor. The development of some identified stations to international standards having modern facilities and passenger amenities in lines with that of newly developed airports through PPP mode has begun.

A proposal is in place to harness solar energy by utilizing rooftop spaces of railway stations and other railway buildings and land through the PPP mode. Indian Railways aims to achieve 5 GW of its energy requirements through solar energy, with 1.1 GW coming from rooftop projects and 3.9 GW from utility-scale projects. This would result in 25% of railway’s electricity mix derived from renewable energy by 2025.

Under Project Swarn, 14 Rajdhanis and 15 Shatabdi trains are identified to improve the passenger experience.

The Speed Enhancement projects to increase the speed of the train to 160/200 kmph were rolled out at a cost of USD 2.76 billion for two routes: New Delhi-Mumbai Central (including Vadodara- Ahmadabad) and New Delhi-Howrah (including Kanpur- Lucknow).

Under the “Mission Raftaar”, six routes have been identified for doubling the average speed of freight trains and increasing the average speed of all non-suburban passenger trains by 25 kmph in 5 years. During the year 2017-18, 51 train services have been sped up by more than one hour.

To strengthen security, Indian Railways undertook installation of CCTV cameras at major railway stations, operationalized security helpline number 182 and developed the Security app. The State-level Security committee for Railways has also been constituted for all states/UTs.

Digital initiatives such as Smart Freight Operation Optimization & Real Time Information (SFOORTI) to monitor freight operations through Geographic Information System (GIS) have started. As an add-on benefit, passenger trains can also be tracked by this app.

During the last three years (2014-15 to 2016-17), 5,186 route kilometres of railway lines have been electrified. Additionally, Indian Railways has prepared an action plan to electrify 24,400 route kilometres in five years (2016-17 to 2020-21).

Statistics

Increasing urbanization coupled with rising incomes (both urban and rural) is driving growth in the passenger segment. Growing industrialization across the country has increased freight traffic over the last decade.

Both passenger and freight traffic volumes have increased steadily in the recent years. While freight traffic witnessed a CAGR of 2.63% during 2010-2017, passenger traffic has registered a marginally lower CAGR of 0.85% during the same period.

The sector runs 13,329 trains carrying approximately 22.4 million passengers daily and connecting more than 7,349 stations. Indian Railways runs more than 9,221 freight trains, carrying about 3.04 million tonnes of freight every day.

The Railway sector total track length is 1,21,407 km. It also comprises 70,937 coaches; 2,77,987 wagons; and 1.3 million employees.During the year 2017-18, 48 trains sped up to the category of superfast trains with an average speed of 55 kmph and above. A total of 3,675 bridges have been repaired/rebuilt over the period 2012-13 to 2016-17.

FDI policy

100% FDI under automatic route is permitted for the following:

construction, operation and maintenance of suburban corridor projects through PPP; high-speed train projects; dedicated freight corridors; railway electrification; signalling systems; freight terminals; passenger terminals; infrastructure in industrial parks pertaining to railway line/siding including electrified railways lines and connectivity to main railway line; Mass Rapid Transport Systems (MRTS).

Sector policy

The Ministry of Railways inaugurated the National Rail Plan -2030 to provide a long-term perspective on planning for augmenting the Railway network. It also envisages integrating the rail network with other modes of transport to achieve a multi-modal transportation network across the country.

The Foreign Rail Technology Cooperation Scheme was launched to attract private sector investment in railways under the PPP mode.

Policy on Participative models for Rail Connectivity & Capacity Augmentation projects:

Indian Railways are operating in the core sector of the economy. To strengthen, modernise and expand the railway network, the investment requirement is huge. Private sector participation would be required for accelerated construction of fixed rail infrastructure. For this purpose, railways have formulated participative investment models for its existing shelf of projects and also for new projects. These models have only general provisions, while the specific issues are decided on a case-to-case basis. Depending on the model of private investment, the Ministry of Railways will either grant direct permission or go in for competitive bidding for an award of concession. Under this policy, the following can participate in the development of the railway infrastructure: 

State Governments, Local bodies, Beneficiary industries, Ports, Large import and export companies, Co-operative Societies and other body corporate, Infrastructure and Logistics providers, Person of Indian Origin (PIO), Overseas Corporate Bodies (OCB) (After foreign investment promotion board clearance), Foreign Direct Investor (After foreign investment promotion board clearance).

Financial support (For Manufacturing activity)

State incentives:

State governments offer additional incentives for industrial projects. Incentives are in areas such as rebates in land cost, relaxation in stamp duty on the sale or lease of land, power tariff incentives, concessional rates of interest on loans, investment subsidies/tax incentives, backward areas subsidies and special incentive packages for mega projects.

The Ministry of Railways is in a continuous process to sign joint ventures with the states to expedite the process of the Railway network. The government of Jharkhand is the 9th state to form a joint venture with the Ministry of Railways to construct a rail line of 222 km at a cost of USD 0.33 billion.

Export incentives:

Various kinds of incentives on exports are available under the foreign trade policy.

Area-based incentives:

Incentives for units in Special Economic Zones (SEZ)/National Investment & Manufacturing Zones (NIMZ) as specified in respective acts or setup of projects in special areas such as the North-East, Jammu & Kashmir, Himachal Pradesh & Uttarakhand.

Key points in the Rail budget 2018-19:

For the year 2018-19, the capital expenditure on railways has been pegged at USD 22.85 billion, with a focus on capacity creation. This includes:

Wide procurement of rolling stock: 12,000 wagons; 5160 coaches; 700 locomotives; redevelopment of 600 major railway stations; electrification of 4,000 kilometres of railway lines; renewal of 3,600 kilometres of track lines; gearing up construction of Eastern and Western Dedicated Freight Corridors; Mumbai’s local trains deemed to have 90 kilometres of double-line tracks, entailing a cost of over 11,000 crores; building of 150 kilometres of additional suburban network at a cost of over USD 6.15 billion, including elevated corridors on some stations; building of 160 kilometres of suburban network in Bengaluru at a cost of USD 2.61 billion.

Investment opportunities

Components manufacturing, Infrastructure projects, High-speed train projects, Railway lines to and from coal mines and ports, Projects relating to electrification, high-speed tracks and suburban corridors, Dedicated freight corridors, the re-development of railway stations, Power generation and energy-saving projects, Freight terminals operations, Gauge conversion, Network expansion and Setup of wagons and coaches and locomotive units,.

Foreign investors

EMD (USA), Bombardier Transportation (Canada), GE (USA), Siemens (Germany), Alstom (France).

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