Indian and Chinese Railways
Uday Shankar Jha, IRTS, Sr.DSO/RJT
Uday Shankar Jha, IRTS, Sr.DSO/RJT
Two important emerging economies of the BRICS (Brazil, Russia,
India, China and South Africa) countries probably indicate how the infrastructural
development can be given priority to achieve high economic growth. This should
be not only sustainable but also provide much robust economic enabling
environment to provide sound base to industry and trade to grow further and
compete worldwide. Up to 1990s India’s railway infrastructure was much ahead of
those in China in terms of total route km, route km/square km and route km/head
of population and many other parameters. India started its first train in April
1953 between Boribandar and Thane for a distance of 33 km. China started its
first train for a stretch of 24 km. between Shanghai and Woosang in 1876. By
1945 China had only 27,000 km of rail track where as in India in 1947 there was
53,596-route km of track. In 1950 Indian
Railways carried 44 billion freight tons km against 39 billion of Chinese
Railways. The Chinese Railways trailed Indian Railways technologically until
1980. In fact, even in 1990 its 24,800
km are network with an annual density of 30 million gross tones has largely 50
kg/m and 43 kg/m rails, as many as 55 % of the wagons were with plain bearing.
Until 1980, steam locomotives continued to remain its main power source,
carrying 76% of its traffic. (Business Standard 2010: pp1).
In such situation the Railway in China was proving to be main
bottleneck leading to a major problem of congestion. Lack of transportation
facility was proving to be major stumbling block. Hence it caught the attention
of policy planner of China. They
realized that until unless proper facility for transportation is provided,
which is a part of overall logistic management, it would not be possible to
achiever higher rate of economic growth. After suffering the transport
constraints impinging on its economic growth for about two decades, since the
start of the economic reform and liberalization in 1978, China decided in the
early 1990s to the address the problem head on. (World Bank2005:pp2). An attempt
was made to build capacity not merely to alleviate the most serious immediate
bottleneck on its existing, largely outmoded transport infrastructure but to
look beyond and build a high capacity system of modern railways that would
provide for future growth and their needs.
This facilitated the path for sustainable future growth for the rapidly
growing coastal provinces and extends improved economic opportunity to vast
populations residing in the distant impoverished hinterlands. Rapid capacity
expansion of railways has contributed significantly to the high economic growth
in China. It could have hardly sustained its rapid growth without addressing
the serious constraints in its transport system. Relatively autocratic system, where one
partly rules over the country and where dissent is generally not permitted, has
probably facilitated this transition easily.
Modus Operandi
- Institutional Factor
Although China’s national railways were still part of the
government, it placed increasing emphasis on commercial focus and financial
performance. In contrast Indian Railways
(IR) could never achieve this. Although
it was proclaimed that the IR should adopt commercial orientation it was more a
lip service than imbibed policy. When one Railway Minister tried to move the IR
on commercial principle, it costs his job.
On the other hand the Chinese Railway (CR) has successfully achieved
financial viability of passenger services.
Passenger fares were substantially increased. Companies were allowed to cover cost plus an element
of profit. Short distance passenger
services were actively discouraged. Many uneconomic branch lines were either closed
or separated from mainline working on accounting basis. The IR could never achieve
these measures. Only some minor increase
in passenger fare was made in 2013 after gap of 10 years. IR’s loss from passenger services was more
than Rs. 30,000 crores in 2013-14. Despite having a list of more than 105
uneconomic branch line the IR could hardly close any service. In fact few more
services were started to cater the populist demand of political parties.
Since 1999 Chinese Railways introduced an Assets Operation Liability
System (AOLS) where 14 Regional Railways Administration (RRA) were given
management contract with closely monitored competition with clear benchmark
performance indicators, management incentives, both positive and negative to
encourage profitability, rather than physical targets. The best performing
managers were given significant financial and other incentives, while poor performers
were identified and removed. A major restructuring was done by adopting vertical
disintegration. Non-core activities were
separated which reduced CR’s staff holding from 3.4 million to 1.7 million
employees. Education & health
services were divested along with 38 construction units, four railway design units,
different extensive manufacturing facilities for locomotives, coaches, wagons,
signaling and communications equipment, track components etc. To handle (a) containers,
(b) over sized and perishable cargo, (c) post and parcel, three special purpose
companies were created to maintain their own income and expenditure. In contrast,
the IR would not be able to achieve any of these measures. In fact the IR has
started several new factories to provide various coaching stocks, loco repair
activities etc.
The CR also permitted for the formation of local and joint venture
railways under separate management who were permitted to compete with CR in
railways operations. A new law has been passed to permit foreign investment in
China’s Railways sector in accordance with the World Trade Organization (WTO)
conditions. The IR could never achieve
these measures. Although, initially IR has permitted 14 private container
operators (PCO) number reduced more than half due to number of restrictive laws. Similarly some Special Purpose Vehicles (SPVs)
were initially permitted to connect different ports railways. Their terms and conditions
were subsequently revised to reduce their profitability.
Physical Factors
In China there has been rapid growth in railways in recent time.
Hence much of its system is new. These incorporate higher design standards. These
have high service reliability and less maintenance and low downtime. On the above pattern they have also amended
maintenance patterns of older assets. These maintenance activities are performed
in a time bound manner to high standards, so that equipment down time is low
and full productivity is utilized. (World Bank 2005: pp-6). On the other had Indian
Railways has relatively older assets with old maintenance practice code framed
in late 19th century or early 20th century. These manuals and codes have been rarely
updated and these have very long down time with shorter utilization time. Despite this reliability of these assets are
very low. In such situation even new
assets did not incorporate performance standards that have since become
industry standards worldwide. Due to extreme
departmentalism prevailing within IR, every department is trying to maintain
its high manpower base with low performance liability and responsibility and
very poor work culture. Due to this most of its assets including locomotive,
wagons, coaches, permanent way and structure, signal etc. are not always in a
satisfactory state. Speed restrictions, failures of rolling stock and
infrastructure affect the productivity and reliability of the particular
assets. Since the railway operation is
intricately interwoven, failure of one asset affect entire spectrum of action and
activities and propagate shock waves reducing the throughput capacity of broader
network segments.
Financial Investment
Massive investment was the hallmark the CR’s development. China has
a system levying construction surcharge on freight. This amount was exclusively
utilized for investments in construction of new lines with the approval of the
planning commission and the state council. Between 1992 and 2002 China invested
about US$ 85 billion whereas India invested US$ 17.3 billion only. India has
hardly any system of raising fund to improve network, especially for freight
services. Even though some funds are collected in the name of development
charge and port charge or busy seasons surcharge these proceeds goes to general
exchequer and not necessarily to the development of freight service. After acceptance of 6th pay
commission salary more than 55.41% railway earning is being disbursed for staff
salary (Year Book 2011-12: pp8). During the above ensuing period Chinese
Railways was able to reduce the number of staff from 3.41 to 1.76 million (51%)
whereas IR could reduce only from 1.65 to 1.5 million (91%). The CR’s operating ratio is much healthier
than that of IR. The CR was also able to curb the losses which was incurring in
passenger services where as the IR was not able to do anything to curb the losses.
Rather it kept increasing year after year. The CR was able to separate on
accounting bases all uneconomic branch line, whereas the IR could do nothing to
separate or close such services. Thus, the CR was able to generate sufficient
surplus and as much as 57% of investment were funded by internal accrual,
whereas in IR it was limited to 35%.
Both CR and IR depended for borrowing around 32% and 31% respectively. The CR depended on government funding for 11%
whereas, IR depended up to 34%. (World
Bank 2005: pp6). Over the years CR
become more or less self-dependent for its future development whereas IR could
not develop the strategy for future development and was forced to remain
totally dependent on the government support.
In the era of coalition politics such government support was coming at a
very heavy price affecting its financial and operational cost including capacity
cost where additional capacity was being created in uneconomic branch line in
the name of social welfare when golden quadrilateral was almost chocking to
death.
By the year 2002 the CR was able to post itself much ahead of IR in
terms of network length and standards, realized throughput capacity, labour and
equipment (locomotives, wagons, coaches) productivity, maintenance of assets,
financial profitability, self financing capacity through rail construction
surcharge and restructuring including separation of non core business and
introduction of incentives for manager.
During this time Indian railway remained a government department which was
not free to decide its destiny and was forced to remain non responsive to the
market demand and peoples’ expectation of future development and growth. The IR was running maximum number of ordinary
stopping trains where the cost recovery is estimated to be less than 30%. These
consume scare line capacity. Even on
golden quadrilateral and diagonals no body could close such slow passenger services
when a few long distance passenger services were introduced or kept free path
for port traffic being generated at different ports and leading to hinterland.
It is interesting to evaluate the trajectory of Chinese Railways to
bring about revolutionary change. In
1991 the Chinese government enacted Railway law which gave the Ministry of Railways,
overall control of policy, technical standards, planning, investment and
finance, leaving just the day to day management and delivery of rail transport
services and infrastructure to the Regional Railway Administration (RRAs). In a further major stroke, a whole tier of
the Chinese Railway management structure - the sub-administration level of RRA
was abolished, leaving RRAs with a direct line of management to depot, stations
and yards. Sub-administration level was similar to Divisional Railways in Indian
Railways. During this time, against
world trend, the IR has increased the number of Zonal Railways from 9 to 17 and
number of divisions from 59 to 67, there by increasing substantially the
establishment cost particularly the building and infrastructure of new Zonal
and Divisional offices.
For improving the financial condition of the CR a few innovative methods
were adopted. For raising capital for
new constructions a surcharge was applied to all freight traffic in 1990. A second surcharge was introduced in 1993 for
freight moving on electrified lines and was used for extending electrification
over the network. Since 2005 China has encouraged for public private
partnership (PPP) for new constructions, including the passenger dedicated
lines. Joint Venture Railways established first in 1990 in coordination with
local railways monitoring feeder lines financed by respective local government
are constructing more than 50 percent of the new infrastructure. (Business
Standard June 21.2010:pp2). At a broader
level superior financial management practices have been adopted. The government has shown willingness to
accept market based pricing principles and output decision for passenger and
freight traffic. Unlike Indian Railways,
where old financial system prevails and where no meaningful Cost and Benefit
Analysis or Profit Center/Cost Center analysis is being done, Chinese Railways implemented
modern accounting information system on costs and profit/loss of specific lines
of business, services and facilities. Most productive use of available
investment fund was made and the government ensured that larger investment
budget is available with the CR to ensure faster growth. Privatization was
introduced through local railway joint ventures and corporatization with sale
of shares in existing railway units, including listing in the New York and Hong
Kong exchange (World Bank 2005: pp-7).
In the whole process senior management appeared to have strong
commitment to reform to achieve efficiency and profitability backed by strong
individual and collective incentives. This was helped by better focused less
conflicted objective of the government owner, which was seeking a market based
commercial determination of price and outputs, relatively free of unprofitable
public service obligation and employment generation demands. The government was willing to grant railway
management related autonomy to achieve the agreed objectives, together with the
associated accountability. The CR could achieve higher success as whole
process has been pragmatic coupled with bold initiatives, clarity and
continuity. Major rationalization measures initiated by Chines Railway have
entailed massive investment as well as drastic disinvestment. Many railway
stations with low volume of freight have been closed; short distance passenger
traffic has actively been discouraged to release capacity for long distance
rail travel. Following a productivity lay out adjustment locomotive depots,
passenger car depot vehicle depots, passenger transportation section and train
crew districts (like Running Room in IR) were all reduced. By 2005 CR transferred some 900 schools and
colleges and 400 hospitals to local governments. Surplus staffs, not directly
involved in railway operations were transferred to diversified economy
companies, (Business Standard Jun 21,2010: pp. 2). Now the Chinese Railways are
organized in a more modern and business like manner. Five major railway
corporations one each for (a) rolling stock, (b) railway construction, (c) goods
and material (d) civil engineering, (e) signaling and telecommunicate have been
separated from rail transportation. These enterprises have been made autonomous,
although state owned. A number of
passenger and freight transport companies have been created to operate on a
competitive basis. To attract foreign capital Chinese rail enterprises were
encouraged to issue stocks on overseas stock markets. In 2001, even foreign
participation in rail freight transportation was permitted (Ramnath Rangaswamy
2008; Emerging Markets: pp2).
Technology transfer from Japanese and European companies have
enabled China’s railway supply industry to acquire the know how to build
rolling stock ranging from 350 KMPH EMUs to heavy haul locomotives. Matching advancements
have been made in track and signaling technologies. China has emerged as a strong manufacturer of
railway equipment as much as an increasing market for it. At the present rate
of growth China would potentially be the global leader in rail related
technology and production. Presently Chinese railway is busy developing its
capacity and quality for freight and passenger traffic in line with the outstanding
economic growth. By 2007 Chinese railways moved 3300MT of freight. The Indian Railways could achieve million ton
marks only in 2012-13 by loading1007 million MT. On a global basis China’s rail
transport volume is one of the world’s largest having six percent of the
world’s operating railways and carrying 25% of the world’s total railways
workload (Rangaswamy 2008: pp1). Chinese Railways already operates 2700-meter
long 20,000-ton heavy haul coal trains at the speed of 120KMPH. Its containerized freight traffic is slated
to reach 400 million tones by 2020 from 64.5million tons in 2006. Presently Chinese Railways’ development plan
have centered on high technology and a judicious mix of traffic routes for
passenger trains running at 200 KMPH and freight trains at 120 KMPH.
To achieve the above target Chinese Railways track structure is
being constantly upgraded. Passenger
dedicated lines have ballast less track and the heavy haul high density lines,
originally laid with jointed 60 kg/m rail in 25m length on the east bound loaded
track is being replaced by continuously welded 75 kg/m rail on 2600-2700 mm long
sleepers laid at 1840 per km. Four large equipment bases at Beijing, Shanghai,
Wuhan and Guangzhou have been constructed which are aided by 35 modern
satellite depots across the network. On
dedicated heavy haul corridors wagons of aluminum or stainless steel body with
25 tones axle load, fitted with rotary couplers, and for up to 120 KMPH
operations are being provided progressively (Business Standard 2010: pp1). By
2007 Chinese Railway owned 578,000 freight wagons 44,000 coaches and 18,300
locomotives. Indian Railway has 239,321
wagons, 46,722 conventional coaches (61,899 all coaches) and 9549
locomotives. Its route length is 64,600
km. On the number of passenger front
Indian Railways is much ahead than that of Chinese Railways as it carried 8,224 million passenger in 2011-12 against
1400 million passengers by the Chinese Railway in 2008. However, in India 4,377 million passengers travels
only short distance suburban services making just 6 % of total passenger
revenue. In terms of passenger km, in 2011-12 suburban services makes 144,057
million km and non-suburban services contributes 902,465 million km traveling
average lead of 32.9km and 234.6 km respectively. In terms of number of passenger proportion,
suburban contributes 53.23% whereas non-suburban constitutes 46.77%. Average speed of Indian mail express train
has been 50.2 KMPH and suburban trains 40.5KMPH. (Indian Railway Year Book, 2013: pp3, 48 to
53). However the quality of passenger
travel in the Chinese is far superior.
China has express trains with speed of 300 KMPH whereas maximum speed of
a passenger train in India is around 130 KMPH.
China has recently provided rail connection up to Tibet. India has,
hardly constructed any rail connection to Ladhak and Arunachal Pradesh. It may
be noted that China is the world leader for running high-speed train in the
world. In fact China may be treated as a role model, for what should be done to
rationalize the passenger traffic and how passenger services can be made a
sustainable business to run for overall benefit of passengers
Thus, Indian railway started much earlier than Chinese Railway and
was much better till 1980. During 1990s the major policy decision initiated by
Chinese government and strongly supported by Chinese political party on the
principal of efficiency and performance brought about total transformation in
the Chinese Railway. Such policy
initiative was never taken in the Indian Railways. During first half of first decade of 21st
century some reforms were initiated bringing some sort of turnaround. However,
those processes were never continued and proved to be a short lived affair. The
IR started facing the bitter pinch of financial crises. To overcome this situation, probably a major
policy decision is required infusing huge financial investment in critical sector
affecting major capacity problem, particularly the golden quadrilateral and
diagonals along with all major and emerging ports to make it competitive not only
with the emerging road sector capturing greater share of freight traffic of
India, but also to make it a major player of the global railway system.
Bibliography
Business Standard June 2010. What India Can Learn form Chinese
Amazing Railway System. On
http://business.rediff.com/slide-show/2010/jun/21/slide-show-1-what-india-can-learn-from-chinese-railway.htm#1
Railway Board New Delhi. 2012. Indian Railways, Facts & Figure
2010-11
Railway Board New Delhi. 2013. Indian Railways, Year book 2011-12
Ramanath Rangaswamy. 2008. Chinese Railway versus Indian Railways in
Emerging Market On http://streamlinesupplychain.wordpress.com/2008/12/14/chinese-railways-versus
Indian Railways.
World Bank, Washington DC, 2005: Highway and Railway Development in
India and China -1992-2002 (Transport Note 62609).
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