Indian Rail Budget 2016-2017

Pankaj Walia

India Desk| Mazars [Paris, France]

India Railways: The Engine of Indian Businesses

All you need to know about the Rail Budget 2016-2017

Aligned to the objectives and mission statements emanating from the Rail budget 2016-2017 presented by Mr. Suresh Prabhu, the HonorableMinister of Railways, I have tried to compile and present my analysis just like we do in any institutionalized and properly governed corporateenvironment, covering the following aspects:

1. Visions, Mission Statement and goals clearly identified2. Categories (‘Railways Ecosystem’ and ‘Railways passengers, Railways upkeep and related quest for modernization’) for better understanding3. Parameters defined4. Measures to instigate Transparency highlighted5. Facts and Figures segregated from promises6. Good governance measures highlighted7. Business opportunities

Vision:

Mr. Prabhu quoted what Prime Minister Shri Narendra Modi once said, that the vision is to make railways the backbone India's progress andeconomic development” and cited that the core objective is to become an engine of employment generation and economic growth at national level.

Mission Statement:

Railways, must provide to the citizens of this country a rail system that they can be proud of – a system free from capacity constraints, a system thatis efficient and predictable, a system that is sparkling and pristine, where the people of my country feel at ease, where there is plenty of choice inevery sphere of activity, and the ease of doing business pervades the entire railway ecosystem. In short, a system that is capable of taking care ofits own needs financially and otherwise.

Mission to Goals:

By 2020:

Ø Reserved accommodation on trains being available on demand.Ø Time tabled freight trains with credible service commitments.Ø High end technology to significantly improve safety record.Ø Elimination of all unmanned level crossings.Ø Punctuality increased to almost 95%.Ø Mail/Express trains to 80 kmph.Ø Semi high speed trains running along the golden quadrilateral.Ø Zero direct discharge of human waste.

Seven defined Missions:

1. Mission 25 Tonne–To augment carrying capacity. Making infrastructure suitable to carry 25-tonne axle load.

2. Mission Zero Accident:(a) Elimination of unmanned level crossings: to eliminate all unmanned level crossings on Broad Gauge in the next 3-4 years using innovative

financing mechanisms.(b) TCAS (Train Collision Avoidance System): Already developed an indigenous technology which will be equipped to 100% of the High Density

Network in the next 3 years.

3. Mission PACE (Procurement and Consumption Efficiency): To bring procurement practices in line with international best practices. Aim tosave more than Rs. 1,500 crores in 2016-2017.

4. Mission Raftaar: Target to double average speeds of freights trains and increasing the average speed of superfast mail/express trains by 25kmph in the next 5 years. Efforts will be made to replace loco hauled passenger trains by DEMU/MEMU over the next five years.

5. Mission Hundred: There are more than 400 proposals under various stages of approvals. Plan to commission at least 100 sidings in the next2 years.

6. Mission beyond book-keeping: Intended use of accounting which can aid detailed assessment of unit costs.

7. Mission Capacity Utilization: The two Dedicated Freight Corridors are scheduled to be commissioned by 2019 which would create hugecapacity for carrying freight traffic between Delhi-Mumbai and Delhi-Kolkata. Proposal to prepare a blueprint for making full use of this hugenew capacity no sooner than it is commissioned.

Perfect example of Transparency: For the first time, an implementation report is included for the actions initiated on 139 budget announcementsmade last year.

Categories Parameters Achievements supported by Factsand Figures

Promised achievements for future Remarks

Railwaysecosystem

FinancialPerformance

90% Operating ratio for 2015-2016.

Ordinary Working Expenses grew by32.5% in2008-09 due to the impact of the 6thPay Commission.

92% Operating ratio for 2016-2017, (financial ratio used for largeindustries to define operating expenses asa percentage of revenue) after includingthe impact of 7th Pay commission.

Investment Ramped up capital investments. Thisyear, investments would be closeto double the average of previousyears.

Capital plan of 1.21 Lacs crore for2016-2017

Works, Machinery andRolling stock (proposedthrough Jointventures/SPV’s/Partnershipwith state government andstake holders) for:

New Lines-Rs. 7,051croresNew Coaches: Rs. 4,543Doubling: Rs. 4,782Gauge ConversionsElectrification-Rs. 2,120CroresTraffic Facility-Rs. 120Crores

Projectexecution

Ø Institutional financingintroduced for funding theprojects. LIC to invest Rs. 1.5lakh crore over five years onextremely favorable terms.

Ø Commissioning of 2,500 kmBroad Gauge lines which willbe almost 30% higher thanlast year.

Ø Setting up a fund withmultilateral assistance forfinancing railways projects.

Ø Commissioning of 2,800 Km oftrack in 2016-2017.

Ø Commissioning of tracks willincrease to about 13 kms perday in 2017-18 and 19 kmsper day in 2018-19 and will

Ø Railways is eyeingjoint venture withstates, developingnew frameworks forPPP, scoutinginternationalmarkets for rupeebonds anddeepeningengagement withmultilateral and



Ø Poised to commission BroadGauge lines at the rate of over7 km per day against anaverage of about 4.3 Km perday in the last 6 years.

Ø Opened long awaited BroadGauge Lumding-Silchar sectionin Assam, connecting BarakValley with rest of country

generate employment of about9 crore man days in 2017-18and 14 crore man days in2018-19.

Ø Finalized the standarddocument for undertakingworks through the EPC modeand will implement at least 20projects through this mode in2016-17. By 2017-18,endeavour to award all worksvaluing above Rs. 300 crorethrough EPC contracts.

Ø North-East India, especiallyMizoram and Manipur, to beconnected through broadgauge soon

Ø Drones to be used for remotemonitoring of ongoing projects

bilateral agencies tofund its capex.

Ø Monetisation of thePSUs will lessen theburden of thefinances to bearranged by theMinistry of Railwaysbecause arrangingthe finances fromeither the LIC orsome othergovernmentagencies or throughthe private sectorhas a big costbecause there is arequirement for theMinistry of Railwaysto service thesedebts also.

Ø EPC contracts toget a push

Ø Clear tenderpipeline of about Rs20,000 crore to bequoted in the nexttwo to threemonths-time. Goodnews for Infra



Electrification Electrical traction is more economicalbesides being environment friendly.

Current year’s intention tocommission 1,600 kms, which is thehighest ever.

Next year’s plan to electrify 2,000kms.

50 per cent increase inoutlay on the railway lineelectrification is a goodnews

Dedicatedfreightcorridor

Almost all the contracts for civilengineering works would have beenawarded. Since new governmentassumed office, contracts worth Rs.24,000 crore have been awardedagainst Rs. 13,000 crores worth ofcontracts in the last 6 years.

3 freight corridors: North-Southconnecting Delhi to Chennai, East-West connecting Kharagpur toMumbai & East Coast connectingKharagpur to Vijayawada have beenproposed to be on high priority

Positive news for Freightand forwarding carriers.Signify that signal thefocus on infrastructureremains intact

PortConnectivity

Tuna port was commissioned this yearand rail connectivity projects to portsof Jaigarh, Dighi, Rewas and Paradipare under implementation.

To undertake implementation of railconnectivity for the ports of Nargoland Hazira under PPP. To positivelyconsider to undertake any offer ofpartnership.

Again, infra push seems tobe a big plus

Make in India Finalised the bids for setting up twoloco factories with an order book ofabout Rs. 40,000 crore which willcreate an ecosystem of manyflourishing small and medium ancillaryunits which will get connected to theglobal supply chain. They will boostemployment potential of the entireEastern region.

Ø Initiated a similar bid processfor manufacture, supply andmaintenance of train sets tobe used for Rajdhani andShatabdi services. To increasethe current procurement by30%

Ø Along with Transport LogisticsCompany of India(TRANSLOC), Aim to becomeNational Logistics Provider

In order to complete the chainof transportation, it isproposed to develop Rail sidelogistics parks and

Good news for HeavyEngineering andlocomotives manufacturingcompanies like BHEL,BEML etc.



warehousing. These logisticparks and warehouses wouldbe created in PPP mode tobring the required efficiencyand investment but also helpattract greater traffic to theRailways.

Ø India’s first rail auto hub inChennai.

Ø Cold Storage

Development of cold storagefacilities on vacant land nearfreight terminals. Localfarmers and fisherman to getpreferential usage of thefacility. A policy will be issuedin next 3 months.

Ø Solar Power: Targetedcommissioning of installedcapacity of 1000 MW in next 5years. Policy guidelines andtender documents for 50MWsolar plants at rooftop issuedand facility for another 100MW is being set up.Commissioned a 25 MW windmill power plant at Jaisalmerand working towardscommissioning 132.5 MW inthe next year.



Ø Automatic coach washingplants to be commissioned inmajor coaching depots with aholding of more than 500coaches for improved cleaningwith reduced waterconsumption. Further, 32stations and 10 coachingdepots to have water recyclingplants in the coming years.

Transparency Online recruitments

E-procurement

Social media used heavily

Paperless contract managementsystem where bids are invited online,and the entire process leading toaward of a tender is also doneelectronically. Trial run has beencompleted. Pan-India roll out in nextfinancial year.

Governance Better delegation of powers to Zonalrailways has ensured that projects getsanctioned within a period of of 6-8months, a process, which earlier,used to take more than 2 years.

Key result areas (KRAs) have beendefined for General Managers andDivisional Railway Managers.

Signed MoUs with Zonal Railways,where quantifiable targets onperformance parameters are laid out.

Ø Organisationalrestructuring:To reorganize the RailwayBoard along business lines andsuitably empower Chairman.Cross functional directorateswill be set up within theRailway Board to focus onareas like non-fare revenues,speed enhancement, motivepower and informationtechnology. We will alsostrengthen the PPP cell toimprove ease of doingbusiness with us.

Corporate Like approach,way to go



Ø Railway Planning &Investment Organisationfor drafting medium (5 years)and long (10 years) termcorporate plans and basedthereupon, identify projectswhich fulfill the corporate goal.

Ø ‘National Rail Plan’ (NRP-2030) in consultation with allthe stakeholders includingState Governments, publicrepresentatives and otherrelevant Central Ministries.NRP-2030 will endeavour toharmonise and integrate therail network with other modesof transport and createsynergy for achievingseamless multi-modaltransportation network acrossthe country.

Ø R&D Department (SpecialRailway Establishment forStrategic Technology &Holistic Advancement,“SRESTHA”) to beestablished which would beheaded by an eminentscientist who would report toChairman.

Ø A dedicated, cross functionalteam called Special Unit forTransportation Research



and Analytics (SUTRA)would be set up for carryingout detailed analytics leadingto optimized investmentdecisions and operations.

Ø Setting aside a sum of Rs. 50crore for providing innovationgrants to employees, startupsand growth oriented smallbusinesses to support internaland external innovation.

Ø Development of first testtruck.

Ø A full-fledged RailwayUniversity soon

Internal audit Specialized teams mandated to screenRailway operations in specificareas, to detect inefficiencies andprevent wastages.

All Zonal Railways have been asked toprepare two such reports in thecurrent year.

Specialized training courses on IT-based internal audit mechanism havebeen initiated.



NewPartnerships

Cabinet has allowed for the creationof Joint Ventures with StateGovernments for undertaking railbased projects.

Received in principle approvalsfrom 17 states, out of which 6 MOUshave already been signed.

Non farerevenues

We earn less than 5% of our revenuesthrough non-tariff sources. Many ofthe world railway systems generate10% to 20% of their revenues fromnon-tariff sources.

Over a period of the next five years,efforts to reach world average by:Station redevelopment:commercial exploitation of vacantland and space rights over stationbuildings.

Monetizing land along tracks:Lease of land alongside tracks topromote horticulture and treeplantation.Monetizing soft assets: Exploringthe possibility of monetizing our data,software and some of the freeservices provided by IR such as PNRenquiry. The IRCTC website alsooffers opportunities for exploiting e-commerce activities on account of thelarge number of hits that it receives.

Advertising

Parcel business overhaul: openingthe sector to container trainoperators.

This would be donethrough a mix ofmeasures, one of whichcould be bringing all itsassets under one holdingcompany to "leverage itsresources and have themuch needed flexibility inutilising the strength ofeach of the subsidiaries".



Revenues from manufacturingactivities: By 2020, aim to generateannualised revenues of about Rs.4,000 crore.

Railwayspassengers,Railwaysupkeep andrelated questformodernization

Interactionand feedback

Social media into a feedback andcomplaint redressal mechanism.

Dedicated IVRS System to seek directfeedback from passengers.

Making travelcomfortable

Generated over 65,000 additionalberths by augmenting 884coaches on patronized routes onpermanent basis

Installed 2,500 water vendingmachines at stations, providedmobile charging points in generalclass coaches, placed dustbins in allnew non-AC coaches, enabled onlinebooking of retiring rooms.

Set up mechanized laundries toprovide clean and hygienic bedrolls. Disposable bed rolls are nowavailable at select stations toall classes of passengers.

Introduced a new train betweenVaranasi and Delhi, ‘MahamanaExpress’ with modern refurbishedcoaches.

Ø Skilling front-end staff

Ø Installation of informationboards in trains and GPSbased digital displays insidecoaches will be providedthrough private sectorengagement.

Ø Work underway on theinstallation of a high-techcentralized network of 20,000screens across 2000 stationsknown as Rail DisplayNetwork. This will enable realtime flow of information topassengers and also unlockhuge advertising potential.

Ø Porters (Coolies) to be calledas Sahayaks and be trained insoftskills.

Ø High speed train betweenAhmedabad and Delhi with



assistance of Japangovernment.

Ø Working towards achieving thefinancial closure and an earlyaward of tenders for twoelevated suburban corridorsbetween Churchgate-Virar andCSTM-Panvel. The CSTM-Panvel corridor will beintegrated with metro linesbeing planned by the StateGovernment for connectingexisting Chhatrapati ShivajiInternational Airport andproposed Navi MumbaiInternational Airport.

Ø Phase I of Kolkata Metro wouldbe completed by June 2018.

Ø Delhi might get Ring railwaysystem comprising 21stations.

Ø Intend to partner with theState Governments of Gujarat,Telengana and Tamil Nadu fordeveloping suburban sectionsin Ahmedabad, Hyderabad andChennai, respectively bydeploying innovative financingmechanisms.



Cleanliness Ø 17,000 bio-toilets in trains andadditional toilets at 475stations will be provided beforethe close of this financial year.

Ø World’s first Bio-Vacuum toiletwas developed by IR and isbeing used in DibrugarhRajdhani Express.

Ø 74 more trains have beenadded under On-boardHousekeeping Service andanother 400 are to be coveredsoon, leading to a total numberof almost 1000 trains underthe scheme.

Ø Clean my coach service-cleaning request through SMS

Ø Ranking of stations based onpassengers feedback and thirdparty audits

Ø Setting up waste segregationand recycling centres at A1category stations

Ø Installing additional 30,000bio-toilets and portablestructures with bio-toilets atselect stations

Improvingpunctuality

Initiated the audit of operations onthis section to improve ourperformance.

95% punctuality by 2020

Ticketing Ø Introduced 1,780 AutomaticTicket Vending Machines and225 cash-coin & smart cardoperated ticket vendingmachines.

Ø Enhanced capacity of e-ticketing system from 2000tickets per minute to 7,200tickets per minute and tosupport 1,20,000 concurrentusers as against only 40,000earlier.

Ø Introduced mobile based appsfor purchasing unreserved and

Ø Sale of tickets through handheld terminals

Ø Sale of platform ticketsthrough ticket vendingmachines

Ø In 3 months, open the e-ticketing facility to foreigndebit/credit cards Page

Ø Bar coded tickets, scannersand access control on a pilotbasis on major stations totackle the menace of ticketless

Bar code ticketing andhand held ticketingsystems: brighter signs ofnew businesses to flourish



platform tickets and GoIndiasmart card scheme forcashless purchase of UTS andPRS tickets.

travel and ensure hassle freetravel for passengers.

Socialobligations

Added more escalators and lifts

Increased quote for lower births forsenior citizens

Ø Rail Mitra sewa: Bookbattery operated cars, porterservices, etc. on a paid basisin addition to the existing pickup and drop, and wheel chairservices.

Ø Making available children’smenu items on trains. Hot milkand hot water on stations andchanging boards for babieswould be provided in traintoilets.

Wifi 100 stations in current year 400 stations in 2 years. Partnershipwith Google

Further partnerships arealso being explored/invited

Stations Cabinet approved redevelopment of400 stations through PPP.

All new light provisions will be LEDluminaire only and all Railwaystations will be covered with LEDluminaire in next 2 to 3 years.

Security All India, 24/7 helpline number 182.

CCTV surveillance provided at 311stations.

Ø All major stations will bebrought under CCTVsurveillance in a phasedmanner

Ø CCTV coverage at Tatkalcounters

Ø Third party audits andcertifications of securityfeatures

Insurance: Much-needsecurity for railpassengers. Insurersexpect the premium, forboth accident and loss ofbaggage, to be fixed at anominal price.



Ø Working with insurancecompanies to offer optionaltravel insurance for railjourneys at the time ofbooking.

Catering Ø Adding 10 more IRCTCoperated, mechanized,sophisticated base kitchens toensure fresh and hygienicsupply of food on trains.

Ø Mandating third party audit inorder to ensure desired levelof quality in catering services.

Safety Safety record is better at 20% loweraccidents compared to the previousyear.

R&D partnership with leading Railwayinstitutions of the world, RailwayTechnical Research Institute, Japanand Korean Rail Research Institute.

Closed 350 manned level crossingsand eliminated 1000 unmanned levelcrossings. 820 ROB/RUB have beencompleted in the current year andwork is going on in 1350 of them.

Ø Mission to eliminate allunmanned level crossings onBroad Gauge in the next 3-4years using innovativefinancing mechanisms.

Ø TCAS (Train CollisionAvoidance System): Alreadydeveloped an indigenoustechnology which will beequipped to 100% of the HighDensity Network in the next 3years.

Forunreservedpassengers

Proposal to introduce the AntyodayaExpress, a long-distance, fullyunreserved, superfast train service,for the common man to be operatedon dense routes.

To add two to four Deen Dayalucoaches in some long distance trains



for unreserved travel to enhancecarrying capacity for the masses.These coaches will also have facilityfor potable drinking water and ahigher number of mobile chargingpoints.

For reservedpassengers

3 select train services:Ø Humsafar: Fully air-

conditioned third AC servicewith an optional service formeals,

Ø Tejas: speed of 130 kmph andabove, it will offer onboardservices such asentertainment, local cuisine,Wi-Fi, etc. through one serviceprovider for ensuringaccountability and improvedcustomer satisfaction, and

Ø Uday: night double-deckerAir-conditioned Express on thebusiest routes, which has thepotential to increase carryingcapacity by almost 40%.

Industry and experts views:

Harshavardhan Neotia, president, Federation of Indian Chambers of Commerce and Industry: It is an extremely pragmatic rail budgetbased on the three critical strategy pillars, aimed at making railways the backbone of India's overall development. The rationalization of freightpolicy and review of public-private-partnership policy framework would help to attract private players for transforming rail transportation andincreasing the revenue.

Sumit Mazumder, president, Confederation of Indian Industry: Reliance on technology through introduction of train sets, power savinginitiatives and enhancement of passenger amenities will go a long way in improving the customer experience from Indian railways. Measures suchas expanding of freight basket, building terminal capacity, among others would help augment revenues.

Sunil Kanoria, president, Associated Chambers of Commerce of India: Railway minister has given a no-tariff-hike budget withoutcompromising on the capital expenditure for increasing carrying capacity, both passengers and freight even in a challenging economic environmentmarked by a severe slowdown in the commodity sectors, which are lifeline of railways' earnings.

Mahesh Gupta, president, PHD Chamber of Commerce and Industry: The employment focus of the budget is highly encouraging as railwaysshall generate 23 crore many days by 2018-19 of which 9 crore man-days are envisaged in 2017-18 and 14 crore in 2018-19. The rail budget2016-17 rightly focuses on socio-economic upliftment of masses as the introduction of Antyodya Express and addition of coaches in Deen Dayalufor unreserved travel rightly asserts it.

Analysis and conclusion

The rail budget seems a corporate like budget, easily understandable, clearly defined targets and wherever possible, showing ways to achieve thosetargets, innovative yet pragmatic. Now, the implementation should ensure the promises which has been made. Nothing would be better than to seethe Indian Railways rising to its full potential and giving world class experience to the passengers.

Lot many business opportunities seems to be in store for the industries related to railways or even those who are not directly related. While majorpush to capex budget is giving hope to the Companies like Titagarh Wagons, BEML, BHEL, ALSTOM and others, the coming days are also luminairefor businesses involved in providing following goods and services:

1. Security equipment2. Point of sales ticketing solutions3. Wifi4. Consultants for stations modernisation5. Consultants for other services (Certifications, Internal audits and Third party process auditors)6. Bio-toilets7. Cold storages8. Develop multi-modal logistics park

Pankaj Walia

Head India Desk-Mazars

61, rue Henri Regnault

92075 Paris - La Défense Cedex FRANCE

Tel. +33 1 49 97 37 78

Mob. + 33 6 61 00 18 98

Indian Rail Budget 2016-2017

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Transcript of Indian Rail Budget 2016-2017