Indian Railways and the Silk Route March 23, 2012Posted by Ramnath Rangaswamy in Emerging Markets, India, Logistics, Railways, Supply Chain.
Tags: Afghanistan, Armenia, Azerbijan, Caucasian Republics, Central Asia, Georgia, India, Iran, Kazhakstan, Krygzstan, Pakistan, Railways, Russia, Silk Route, Tajikistan, Trans-Caspian, Turkmenistan, Uzbekistan
It is very good to see Logistics being used as a tool for Realpolitik. After all Logistics started as being a branch of the Army and used for wars.
India is now seriously thinking about implementing the International North South Corridor linking Trans-Caspian Railway (Central Asian Railways) with Iran Railways and via sea to India.
This is a multi-modal transport corridor which will link India to Moscow and the Central Asian Republics (Caucasus Republics). The International North-South Corridor was mooted by Russia, Iran and India in 2000. The participating countries are Oman, Tajikistan, Kazhakistan, Turkmenistan, Georgia, Armenia, Turkey, Ukraine, Azerbijan and Syria. After that for 11 years there was very little progress – more words and talk than action. Now work has started again.
This corridor will opens a shorter and chaper trade connection to the Central Asian Republics -Armenia, Azerbijan, Georgia, Krygistan, Kazhakistan, Turkmenistan,Tajikistan, Ukraine and Uzbekistan – Russia and Turkey.
The reason for the renewed interest in the North-South Corridor is that the Iran-Pakistan-India oil pipeline seems to be a non-starter thanks to the deteriorating India Pakistan relations. So an alternate mode of transportation had to be created.
There does exist a direct route from India to Iran and onwards via Pakistan- Delhi-Amritsar- Lahore-Quetta-Tehran and onwards. Unfortunately, given our relations with Pakistan and the way the Pakistan Railways (which was run pretty effectively and efficiently) has been run to the ground, it is prudent, wise to have an alternate route to access the Caucasus. [ Given the way the politicians are playing with the Indian Railways, I hope and pray that the Indian Railways does not go the same way] .This also opens an alternate route to Afghanistan via Turkmenistan and Uzbekistan immediately.
The route to Moscow will be from the western ports in India to Bandar Abbas by ship. Then by rail to Astara on the Caspian Sea via Tehran, Qazvin,Rasht and Anzali. The railway line from Qazvin to Anzali and Astara (375kms) is being constructed by a Chinese company.
Till the railway line is constructed, the goods will go by truck or truck and train with transhipment at Qazvin. From Anzali by ship to the Russian caspian Sea Ports of Makhachakala (Petrovsk) or Astrakhan. [ Makhachakala is close to disturbed areas and security maybe a concern] . From Makhachakala or Astrakhan to Moscow via Volgograd. From Moscow, the whole of Europe is accessible by rail.
India plans to expand Chah Behar (Bandar Behesht), and build a railway line from there to connect to the Iranian Rail system. India plans to build a 900 kms railway line from Chah Bahar to Hajigak in Afghanistan. SAIL has landed a contract for coal mining in Hajigak in Bamiyan Province and this railway line (Chah Bahah – Zahedan- Kandahar – Hajigak) will help in the logistics. This railway line will be on the Standard Gauge 1435mm. Also, Iran is constructing a railway line from Mashhad to Herat via Khaf.
The route to Turkmenistan will be Chah Bahar–> Kerman–>Mashhad–>Serakhs and onward to Ashagabat (the capital) or Turkmenbashi (Krasnovodsk, on the Caspian Sea) or Charjew/Farab or Dashhowuz and onto Uzbekistan. There will be break of gauge here as Iranian Railways is on 1435mm while the restwhile CIS Railways are on 1520mm.
From Turkmenistan there is a short 10kms railway to Afghanistan; Gushgy to Touragondi, which the Soviets built to support their forces in Afghanistan.
The railway connection from Iran to Uzbekistan is via Turkmenistan – Mashhad–> Sarakhs–> Merv –>Charjou –> Bukhara.
The Uzbekistan Railways offers connections to Tashkent (capital), Bukhara and Samarkhand. In addition Uzbekistan offers connections to Tajikistan, Afghanistan, Kazhakistan, Krygistan and to Siberia/ Russian Far East.
From Uzbekistan to Tajikistan, the railway goes via Sariasya –> Dushanbe (the capital of Tajikistan). [ India has setup a humanitarian hospital in Tajikistan near Dushanbe.]
The story of railways in Afghanistan is very interesting. Here is a link to a well written account. http://www.irfca.org/docs/afghanistan.html If you are interested in latest information on Afghanistan Railways –> http://www.andrewgrantham.co.uk/
Contrary to popular notions, Afghanistan does have railway lines. There is a railway line to Afghanistan from Uzbekistan – Termez–>Galaba –> Mazar-e-Sharif. The Western Forces who have invaded and occupied Afghanistan, use the railways as their supply route, just like the Russians did when they invaded Afghanistan – Gushgy to Touragondi.
The Chinese are extending the railway line from Mazar-e-Sharif to Kabul To Jalalabad and onto Pakistan Railways.
Krygistan is connected to Uzbekistan via Kazakhstan Tashkent–> Taraz –> Bishkek.
Kazhakistan has a modern railway. There are regular train services from Moscow to Astana and Almaty. The link from Iran to Kazhakistan is via Turkmenistan and Uzbekistan.
Uzbekistan is connected to Kazhakistan, the largest of the Caucasus Republics. Astana and Almaty are the biggest cities and offer convenient connections to the huge Russian Railway System.
The Armenian Railways called for a tender for operating the Armenian Railways in 2007. RITES applied for the tender but withdrew. Finally the Russian Railways were awarded the rights to operate the Armenian Railways for 30 years with a further extension for 20 years.
In 2007 Iranian Railways signed an agreement to build a railway line Qazvin–>Resht–>Astara. This will connect Iran to Azerbijan.
There is a lot of railway development happening in the Caucasus Republics. The Silk Route which passed through the Caucasus Republics is thousands of years old and has a romantic and magical air about it. Hope the new railways developments will be able to match it’s ages old predecessor!
On an aside, for those of you who have a dream of travelling the Silk Route by train, the fabulous and fantastic website http://www.seat61.com/SilkRoute.htm#Tashkent%20-%20Samarkand%20-%20Bokhara gives all the information one can possibly want.
The Indian government has good plans to develop it’s railway links with Iran, Russia and the Caucasus Republics. I hope the plans fructify and become a reality.
As I write this, I am reminded of a dialogue of Amitabh Bachchan in the movie “Lakshya”, where he quotes a Marathi proverb which translates to;
अपना घर तो संभलता नहीं, दुनिया पर राज करने चले
One who cannot manage one’s own home should not go out o rule the world
[Those who have seen the movie will know the context in which this dialogue is spoken]
What will the Indian Railways Budget 2012 unveil? March 12, 2012Posted by Ramnath Rangaswamy in India, Indian Economy, Logistics, Railways, Supply Chain.
This is the Budget season. The Railway Budget will be presented on 14th March. As expected, the newspapers have published numerous articles about what ails Indian Railways and what needs to be done. Sam Pitroda’s report on how to modernize the Indian Railways, Dr. Anil Kakodkar’s report on safety, Indian Railways vision 2020 and of course numerous other editorials and in the newspapers.
The reason there is so much activity and buzz around the Railway Budget this year is because (i) Indian Railways financials are in a major mess and (ii) the Indian Railways is an important pillar of the Indian economy / GDP growth.
As per World Bank studies, rail transportation has an elasticity of 1.25 with GDP growth. Hence for an economy which would grow ~9%, rail traffic capacity should grow by 11%. Indian Railways growth is slightly more than half of that required to support the country’s growth. The Indian Railways will become (if it has not already) an impediment to the GDP growth of India. Ask anyone importing bulk commodities at our Ports on how much time, effort, follow-up it takes to evacuate the bulk commodities from the Port to the hinterland. Ask the power companies and the coal companies the issues they face with Indian Railways in coal transportation.
The Indian Railways is now seeking a bail out by asking the government for to pump in about Rs 100,000 Crores ( Rs 1000 billion = Euro 15 billion).
What are the root causes for this mess?
The immediate reason for this financial mess is that (i) Passenger fares have not increased for 8 years and (ii) Vl Pay Commission has increased cost of manpower without any concomitant increase in productivity or earnings.
Passenger traffic is subsidized at the cost of freight traffic. For cheap political popularity, the Railway Ministers have not been increased passenger fares for 8 years. Just for perspective, crude oil prices in 2004, when the last fare increase was done was US$ 35. Today it is now US$ 90. Petrol price in India in 2004 was Rs 35/litre and today it is Rs 60/litre. With economic liberalization, consumers nowadays have become market savvy and understand that prices will increase. An increase in line with input cost increase is logical and accepted by consumers.
The other fundamental and scary reason for the mess of the Indian Railways is that the Indian Railways does not seem to understand their own importance and role in the economic health and growth of the country. Don’t get me wrong; the officers and team of the Indian Railways are smart and bright. The problem is the organization structure, processes and leadership.
The Indian Railways is superbly efficient in operating and running trains. The whole organization from the Railway Board (Ministry of Railways) to the lowest rung in the railways is focussed on safe and punctual running of trains. That is great! But who does the strategic thinking, forward planning if everyone in the organization is going to focus on “daily operational issues”?
Because of this lack in strategic thinking, the Indian Railways has not been able to keep pace with the changing requirements of the liberalized and high growth rates of the Indian economy. The liberalized economy has thrown open many new opportunities for the Indian Railways, but it has been unable to capitalize on them.
Indian Railways share of the freight traffic has dropped from 80% in 1950-51 to 30% in 2000-2001. In any other private company a share drop of such magnitude would prod the organization into action – restructuring, new strategies, renewed focus. But the Indian Railways being a government organization plodded and muddled on “business as usual”.
As mentioned earlier, the committees have made myriad suggestions and inputs on what needs to be done for the Indian Railways to get back on track. These are laundry lists which list everything from unmanned railway crossings to zero discharge toilets. So one has to separate the chaff from the grain.
What is the immediate problem or issue the Indian Railways should focus on?
In my view the problem statement for the Indian Railways would be;
“How does the Indian Railways increase freight capacity at 10% per annum in a financially prudent and sustainable manner?”
The Golden Quadrilateral – 7 HDN (High Density Network) routes of the Indian Railways with 20% track length – carry 70% of the freight traffic. These lines are utilized at >=100% capacity. The Railway Board (Ministry of Railways) did a detailed and meticulous planning to increase the capacity on these 7 lines so as to accommodate a 10% per annum freight increase during the Xl 5-year plan (2006-2007 to 2011-2012). The cost of the capacity increasing works was ~ Rs 14,000 Cr (Euro 2 billion). The final increase in traffic during the Xl 5-year plan would be ~6% per annum.
But to meet the long term freight requirements of India, the Indian Railway will have to look at Dedicated Freight Corridors for all the 7 HDN lines. Work has already started on the Eastern and Western dedicated Freight Corridors. Work will have to soon start on the other 5 Dedicated Freight Corridors (HDNs) if the Indian Railways wishes to continue to support the growth of India.
Similarly, Port Connectivity and Coal Mine connectivity will have to be increased.
Alongside this, wagon design will have to be modified for better payload/tare ratio and track strengthened to 60kg/metre tracks.
But where does all the money required for this come from?
Some of the projects – Port Connectivity and Coal Mine Connectivity – can be under PPP. These are straightforward and hence would be plausible under a PPP framework.
For the Dedicated Freight Corridors , a soft loan maybe the solution.
But some “tough” decisions will also have to be made, if the Indian Railways have to be viable.
Increase Passenger Rates ahead of CPI so that in the next 5 years the subsidy on 2nd class ordinary/unreserved comes in a band of 10%. There should be no subsidy on any other class.
Non-core activities should be hived off. The Indian Railways has a very good model and examples of having separate legal entities under its ambit – RITES , IRCON , CONCOR , IRCTC . Non-core activities would mean coach manufacturing, loco manufacturing, catering, mineral water production….
The organization will have to be redesigned so that focus is on freight, passenger, infrastructure, rolling stock and support structures.
Let us see what the Railway Budget brings on March 14th.
To end, I append a quote from The Thirukural
To do that which ought not to be done will bring ruin,
And not to do that which ought to be done will also bring ruin.
Verse 466 Thirukural