Sunday, September 4, 2011

Sub Continental Rail Freight Infrastructure May Finally Take a Step Forward

Bank Loan Will Assist Modernisation Programme
Shipping News Feature

INDIA – Like the boy who cried wolf the promises of investment that emanate from India often fall on the deaf ears of analysts tired of the seemingly endless proposals and press releases regarding Memoranda of Understanding which never seem to come to fruition. In the past Government owned Indian Railways has come under criticism, not least from ASSOCHAM which represents Chambers of Commerce, for delays and revisions. When however the Asian Development Bank (ADB) announced this week that it was to loan up to $500 million to the company for infrastructure improvement to freight and passenger services one is bound to take it seriously.

Despite all the previous grandiose plans and the 800 million tonnes of freight carried last year the Indian rail services remain somewhat stuck in the past, operating on a complex multi gauge network of track separated into seventeen zones which are further sub-divided into 68 divisions. Only around 6,500 miles of track has been added in over half a century by this, the fourth largest rail network in the world (behind the US, Russia and China) and maximum train speeds are generally restricted to around 80 miles per hour, principally due to track condition.

Indian Railways has stated that it intends to add around 15,000 miles of new lines to the network in the next decade and states that tenders are in for the new rolling stock required which, according to sources within the company, amount to thousands of new locomotives and freight wagons. With combined turnover for passenger and freight revenues up almost 12% year on year according to the latest figures the rail company must be seen to be delivering on the promises of the past and the potential upswing in all traffic of the future.

According to an ADB statement the investment program will target busy freight and passenger routes in the states of Chhattisgarh, Orissa, Maharashtra, Karnataka and Andhra Pradesh, including the critical ‘Golden Quadrilateral’ corridor that connects Chennai, Kolkata, Mumbai and New Delhi.

Funds will be released in several tranches, with an initial loan of $150 million from ADB’s ordinary capital resources. It has a 25-year term, with a grace period of 5 years, and annual interest set in accordance with ADB’s LIBOR-based lending facility. The Government of India says it will provide counterpart finance of over $644 million to cover the balance of the costs of the total program which is estimated at over $1.1 billion and all works are due for completion by the end of 2018.

Sultan Hafeez Rahman, Director General of ADB’s South Asia Department, along with many others, predicts that environmental and financial concerns will benefit from the major shift from trucks to rail which he foresees, whether this transpires to the degree many analysts anticipate however remains to be seen as bulk cargo has always traditionally used the railways and general freight obviously needs haulage to some extent at either end of a journey, plus there are additional handling costs involved. The upswing in passenger traffic however is likely to accelerate the improvements and freight viability, particularly to the poorer areas with little current rail access, is likely to benefit. Hiroaki Yamaguchi, ADB Principal Transport Specialist commented thus on the new loan:

“This program will help deliver more energy efficient, safe, reliable, and environmentally friendly rail services along key high density routes. This in turn will result in direct and indirect economic opportunities for about 21 million people in program areas who will benefit from faster travel times, lower costs and improved links to markets, production centres and social service facilities.”

One concern for the ADB must be the parlous state of the current Indian government which is currently embroiled in corruption allegations after the thirteen day hunger strike embarked on by 73- year-old activist Anna Hazare. At last count all but five government ministers had declared their net worth in a bid to stave off criticism but journalists are investigating several alleged scandals and the ruling Singh Congress party has lost much ground to its opponents according to local polls.