This article also appeared in Business Line - 2002-02-25
In was in the 1980's that in a misplaced zeal to electrify its trunk routes, the Indian Railways a 1.7 million strong behemoth with annual revenue exceeding Rs.30,000 crores set about justifying a number of multicrore projects. Amongst them two which World Bank had an opportunity to review in its Implementation Completion report in March'95 has brought out classic cases of how widely off the mark, assumed data can sometimes be !
The two projects in question were Jhansi-Itarsi and Balharshah-Vijaywada for which the World Bank has found extremely wide gap between the projected ROR (Rate Of Return) and the actual ROR, though both sections were capable, of and were carrying, heavy volumes of traffic. Interestingly these two projects had been completed with negligible time and cost overruns and delay could not be trotted out as an excuse for some of the skewed performance data.
The World Bank found to their horror that against a projected ROR of 23.4 % for Jhansi-Itarsi section it had yielded a mere 9.0% while Balharshah-Vijaywada section reported an ROR of only 2.0%, almost a twentieth of a whopping projected ROR of 40.4%! While the speed of goods trains had been assumed to reach 36 kmph the post electrification scenario reported only 29 kmph. Actual maintenance costs turned out to be Rs. 7.54 /km as against Rs. 2.2/km, while the energy prices had rocketed from an assumed value of 40 p/kWh to Rs.2.5/kWh, a more than six fold increase!
C.M. Khosla, himself a former Member (Traffic) of the Railway Board, headed the last one in a series of 4 such Committees which have gone into economies of electrification. Known for his pragmatic approach he was assisted by a team of no less than 6 members, consisting of 4 retired from Railways all experts in their respective fields and one each from Policy Analyst Division of TERI, and Planning Commission.
The team went into great detail over the need for an approach adopting break-even level of traffic beyond which scales of economies would justify Electrification. This time honored concept had been given up in favour of Rate Of Return or the ROR almost a decade back, resulting in a very large number of electrification projects finding their way into the long list of unviable schemes which at the last count totaled to a whopping Rs. 36,000 crores ! Some the completed projects have stared showing up very poor financial results which in turn has been affecting financial health of this 1.7 million strong behemoth.
While commenting on the aspect of Project goals being not achieved, Khosla committee has observed that 'rail technologists the world over are unanimous that in the choice between diesel or electric traction, a clear break-even point always exists'. They have also observed that 'IR should revert back to the system when each electrification project is justified on the basis of level of traffic and financial return. More so, when the assumptions made in arriving at the different costs/savings and the propriety of including or excluding some of the costs/savings in the financial evaluation are not always clear.
Khosla committee has also noted that a percept that does not take into account traffic level is neither rational nor desirable. Critical of the past practice where justification for electrification has been based on savings in energy cost which can vary with fluctuations in international petroleum prices and foreign exchange reserves, the committee would like to link it to the quantum of traffic, increase in capacity of through put, better rolling stock utilization, higher speeds, lower maintenance costs, and energy saving as result of improved technology.
The actual standards of performance of the Diesel work horses viz. WDG4 and WDP4, and the Electric equivalents of WAG9 and WAP5 should be taken into consideration when making a comparative assessment of the two systems of traction. Continuing in the same vein the Committee felt that in making such a comparative study some pertinent issues need to be resolved while undertaking a financial evaluation of an electrification project viz. whether to exclude the cost of, electrification of siding, loco sheds for homing locomotives, replacement of overhead electric installation, rehabilitation of electric locomotives, modification of existing signalling gear on account of electrification, etc.
The Committee has found that on account of the long lead time for survey and implementation of such projects, Railways could initiate the techno-economic feasibility surveys when the traffic level of 40 to 45 gmt (gross million tones) or even lower has been achieved depending on the peculiar features of the section concerned, instead of waiting to reach the mandatory break even level of 53.64 gmt per route km. per year. In attempt to put a cap on further projects the Committee has found it necessary to ' allow the position to consolidate, for gaining more experience, and most importantly for studying the financial and operational ramifications in greater detail.'
Realising that Railways are facing an acute financial crunch, and the anticipated growth of traffic would be poor (2.5% in terms of net tonne kms) in the X th. Plan, extreme caution in both capital and revenue expenditure is called for. Committee has also observed that 'survival of Indian Railways calls for financial prudence and conservative investment decisions.†And recommended that a few of projects already in the pipe line need to be reviewed.
The Committee has found unacceptable the system of incremental planning whereby all electrification projects for a considerable time were initiated by CORE (Central Organisation for Railway Electrification) wherein consultation and discussion with others involved in the activity was totally abridged. They would like the respective Zonal Railways initiating proposals putting an end to a totally centralised planning and execution bereft of the ground realities. One of the long discussed but never seriously considered proposal is to merge the Diesel and Electric locomotive facilities into a single Traction department providing a high level of synergy in one of the most vital area of Rail Transport.
With the Railway Budget on hand only time will tell whether the well thought and well-reasoned report would be brought down from Rail Bhavan's dusty shelves!