Logistic & Supply Chain Management-Indian Perspective

Logistic & Supply Chain Management-Indian Perspective

Uday Shankar Jha

In the age of global competition Indian manufacturers, producers and suppliers have to bear an additional expenditure of 10 to 12 per cent on infrastructural issues vis-à-vis their global counterpart of the developed countries including China.  To improve their performance it is important to reduce this component to make them more competitive worldwide.  This can be achieved by ensuring appropriate logistic and supply chain management, which is virtually non-existent or present in rudimentary sense in Indian condition. To achieve competitive edge it is mandatory that all production and trading companies follow the basic tenets of supply chain management.  According to David & Edith Simichi Levi and Philip Kaminsky “Supply Chain Management is a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses and stores, so that merchandize is produced and distributed at the right quantities, to the right locations and at the right time, in order to minimize system wide costs while satisfying service level requirements” (2005: pp 1)

It means Supply Chain Management takes in to consideration every facility that has an impact on cost.  It plays a role in making the product confirm to customer requirements right from supplier and manufacturing facilities to warehouses and distribution centers and ultimately to retailers and customers.  The whole objective is to be efficient and cost effective across the entire system, total system wide costs, from transportation and distribution to inventories of raw materials, work in progress and finished goods are to be minimized.  Here, the emphasis is not only on minimizing transportation cost or reducing inventories but also on taking a system approach to Supply Chain Management.  Since Supply Chain Management revolves around efficient integration of suppliers, manufacturers, warehouses and stores, it encompasses the firms’ activities at many levels, from the strategic level through the tactical to the operational level (ibid. pp-2).  Thus Supply Chain Management is the systematic, strategic coordination of the traditional business functions and the tactics across within a particular company and across business within the supply chain for the purposes of improving the long term performance of the individual companies and the supply chain as a whole.  (Reji Ismail, 2008, PP-7).

Logistics, on the other hand, is that part of the supply chain process that plans, implements and controls the effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption, in order to meet the customers’ requirement.  Thus logistics is typically considered as a sub set of Supply Chain Management.  Logistics is involved at various stages of a supply chain; from supplier to plants, from plants to distribution centers, from distribution centers to stores, from stores to customers or any of these combinations.  In recent time, importance of logistics has become more important as transportation costs have risen, production efficiency has improved substantially and inventory is supposed to be reduced.  In the whole process computer technology has added several features at different stages.  Logistic competency is achieved by coordination network design, information, transportation, inventory, warehousing, material handling and packaging ibid, pp 10-15). 

Indian companies, even in the second decade of 21^st century are operating more in a fashion of standalone Unit than as a part of logistic management or Supply Chain Management.  Every company has to make up strategy to survive by itself.  Although companies can go for contract for different services including for developing network design, for providing different information or processing information timely, transporting product as per requirement or need, maintaining adequate inventory at the place of production or consumption or appropriate warehousing.  There is no guarantee that actual service would be delivered as per requirement or as per clause of agreement.  Any service partner can provide service as per its own sweet will or interest.  No company can rely that its service partner would be providing all services as per agreement and the judiciary system is so lax that virtually contract provisions could not be enforced timely in a meaningful manner.  In such situation every company has to make provision for extra cushion at every front and at every stage.  Such situation makes logistic management or Supply Chain Management meaningless.

Let us examine one by one.  Indian companies are relatively poor in maintaining proper information.  In any visit of any company would reveal that company managers are unable to point out how many staffs are posted and how many staffs are actually working, how many machines have been installed and how many machines are actually functional, how many hours a machine is supposed to work and how many hours these are actually functional, how many product a machine is supposed to produce and how many these have actually produced, how much raw material these machines are supposed to consume and how many these have actually consumed etc.  Thus this information is not accurately available.  All these are available on approximate level.  Due to this, there is always a big margin available at all levels leading to several distortion or mismanagement.  In such situation any information given is likely to be right or wrong.  Nobody can take responsibility that given information is correct and would not be wrong in any condition.

Next item for logistic is transportation.  In India, despite 67 years of independence basic transportation facilities are in rudimentary stage.  One of the major modes of transportation is railways and Indian Railways have done very less capacity addition since independence in terms of track kilometer, number of coaches, wagons and locomotives.  In last 60 years approximately 15 to 20 per cent capacity addition has been done whereas the population has grown four times and economy has grown almost 10 times.  In such situation the facilities available are quite inadequate looking to the quantum of market both in passenger and freight services.  The Indian Railways (IR), on its part has attempted to improve the performance by ensuring better turn round and higher loadability of freight wagon or higher number of coaches in passenger trains.  However, the capacity addition is miniscule looking to the greater demand of service.  In absence of major investment in the Indian Railways, it has not been able to break the bottleneck congestion prevailing between golden quadrilateral i.e. four metropolitan cities i.e. Delhi, Mumbai, Chennai and Kolkata or the diagonals along with all major cities of India.  Further, in freight traffic the IR has decided to concentrate on major bulk commodities like coal, iron ore, fertilizers, cement, food grain, other minerals, containers etc leaving all medium and small traffic in lurch, with no option, except to approach the road sector, which is highly unorganized.  Cross subsidy of IR is another major problem as to finance highly loss making passenger business the freight rate is increased abnormally high making even freight business highly unsustainable.  Pathetic condition of goods shed, highly uncertain loading or delivery of product with poor or no handling mechanism the entire spectrum of blue or white good commodity has moved away from the IR.

Roadways is the another mode of transportation.  Although, India is having one of the largest road networks in the world with about 41 lakh kilometers (Kms) in 2013 from approximately 4 lakh kms in 1951. The quality of such road, particularly those connecting to different villages or other inaccessible places are quite pathetic.  Many of such roads are not all season roads, particularly in monsoon season as a great part of India becomes totally inaccessible as these roads are not motorable.  The condition of national highways or Express ways which were 70,934 kms as on 2013 (India 2013, Publication Division, Delhi) were relatively better.  However, only 24% (17,194 kms) out of national Highways are having four or more lane whereas 52 %( 36,651 kms) are having double lane whereas 24% (17, 089 kms) are still single lane.  There is massive growth in the number of road vehicles.  These were 82 thousand trucks in 1950-51 which reached to 2,948 thousand trucks in 2001-02 and this is likely to be around 4,250 thousand in 2013-14.  There were 34 thousand buses in 1950-51which around 634 thousand buses in 2001-02 which are likely to be around 825 thousand in 2013-14.  Indian roads are highly congested, particularly around any medium or large city. (Jha, 2011a, pp 5).  Poor maintenance of road, poor vehicle design and poor traffic sense of vehicle users makes Indian road journey one of the worst.  Added to this is new trend of levying heavy toll tax, without any associated road maintenance service the matter becomes more complicated.  However, condition of roads are good in some of the states like Gujarat, Rajasthan, Maharashtra, Tamil Nadu, Punjab, Haryana etc are good.  As such there are 1, 54,522 kms of State Highway in India.

India has also over 1, 45,000 kms of navigable waterways.  However, these are not commercially exploited for passenger and freight transportation in a meaningful  manner as there is prevalence of unorganized sector with very poor ship design and extremely poor operating and other practices making it most dangerous mode of transportation where thousands of people get drowned every year.

For an industry dealing with gas, liquid or slurry, pipeline could be an option for transportation.  Oil companies like IOC, Bharat Petroleum etc are using pipeline to transport their products from Vadinar Coast near Kandla to Mathura and Panipat and several other locations through pipeline.  It is now almost forty per cent of POL transportation is being done through pipeline.  Pipelines have the highest fixed cost and lowest variable cost among transport modes.  High fixed costs result from the right of way, construction cost, requirement for control stations, and pumping capacity.  However, pipelines are not flexible and would remain limited to certain commodities and companies. (Reji Ismail, 2008 pp-103).

Air transport is the most costly mode of transport.  Its advantage is the speed with which a consignment can be transported.  Long distance transportation by air requires only a few hours in place of days together taken by other modes of transportation.  However, only high value items like medicine, electronic items, gold, silver, precious stones etc can afford the high transportation cost and this facility is available only in bigger cities of India.

It would be interesting to know why common carriers like Indian Railway are less compatible for logistic management or Supply Chain Management.  Common carriers have the responsibility to offer service at non-discriminatory prices to all.  At maximum they may indicate what commodity they would carry and if such service would be on a scheduled or unscheduled basis.  A common carrier is required to publish the rates it charges for transport service, supply adequate facilities, provide service to all points prescribed in its certificate of authority, deliver the goods within a reasonable time, charge reasonable rates, and refrain from discrimination against customers.  In such situation common carriers have been unable to forecast the number of customers or volume of traffic.  In contrast contract carriers provide transport services for selected customers.  They normally enter in to an agreement for a specified transportation service at a previously agreed cost for a single load or a number of loads over time.  This kind of situation becomes more compatible for logistic management or Supply Chain Management as a firm can demand and get a priority treatment over other customers if they have entered into a contract.  Further, here carriers are under no obligation to provide similar facilities to any other customers.  This helps in establishing and nurturing a long term relationship between two companies and thereby establishing a supply chain management.

These days the productivity of any company or firm is also decided by the fact that how much inventory is maintained at the time of production in the form of various raw material or unfinished product before the product is sent to the customer or in market for sale.  In the latest Japanese management of “Just in Time” (JIT) the emphasis is on maintaining lowest inventory so that different raw materials are collected at the time of production only and after production it is immediately sent to the customers.  1980s onward several Indian companies have tried to implement this system in their workplace.  But due to fragile nature of Indian supply system or transportation bottleneck, this could not be implemented successfully and Indian companies have to maintain a huge base of inventory preferably near the factory premise.  This usually adds a huge inventory cost.  Indian companies need to develop a scientific mechanism to assess the monthly consumption of different raw materials and develop a mentality of not having very big stockpile of different components, some time as long as two years or more, as it is being done presently.

Next stage is warehousing the finished product to serve the customer needs as soon as he is asking for the product in order to retain him.  Economic benefits of warehousing materialized when overall logistical costs are directly redacted by utilizing one or more facilities.  If adding a warehouse to a logistical system will reduce overall transportation cost by an amount greater than the fixed and variable cost of the warehouse than the total cost would be reduced.  The warehouse could be placed at different locations.  There could be ‘consolidation warehouse’ if customer wants a single transportation shipment for realizing lowest possible transportation rate from different production units which is consolidated at a single location before transportation.  There could be “Break Bulk” and “Cross Dock” warehouse where no storage is performed.  In break bulk operation combined customer orders are received and the transporter delivers them to different individual customers at destination without doing any storage.  For instance from a cement plant a rake of 40 railway wagons are loaded, transported for a distance of 700 kms and at destination the consignment is delivered to 8 different customers.  This reduces transportation cost for large shipment even when the customers get small size of consignment.  In Cross Dock even manufacturers are multiple along with multiple customers.  So at a common place entire commodities are consolidated on a given date, transported to destination and then distributed to different customers.  This kind of service can be provided only by an efficient logistic service provider and as the example of Western Railway in Gujarat shows only one company CTA logistics has been able to survive in the long run.

There are certain businesses where production is very long and consumption time is very short.  For instance toys are produced year round but being sold only during festive season.  On the other hand there could be certain products which can be produced in a very short time but is being consumed throughout entire year.  For instance, agricultural products are harvested at specific time with subsequent consumption occurring throughout the year.  Both situations require warehouse stockpiling at a massive scale.  Unfortunately in India this facility has not been developed properly and every year millions of tons of food grain are spoiled in open air, particularly during early monsoon.  Both central and state government, which have developed the policy of minimum support price for different crops procure huge quantity of food grains in different parts of country.  But there is no sufficient warehouse to stockpile these.  There could be warehouse in public sector, as in case of Food Corporation of India (FCI) and Central Warehousing Corporation (CWC) or in private sector which normally works out at a smaller scale.  These days in the name of food security and food subsidy FCI gets every year huge government support.  But it functions very inefficiently and is unable to handle the quantum of challenge.

Private warehousing is usually considered less costly than public warehousing.  The major benefits of private warehousing include control, flexibility, cost and other intangible benefits.  It has more control since the enterprise has absolute decision making authority over all activities and priorities in the facility.  As such there is great dearth of private warehousing as the present investment policy does not support much for such infrastructural development where the investment is very huge and rate of return is very low.  For instance CWC constructed a warehouse at Kandala Port in 2008 by making an expenditure of `. 6 crores but it could lease it out only @ ` 30lakh per annum.  At this lease change the company would be able to receive its primary investment in 20 years without any interest.  This means that such infrastructural projects are highly un-remunerative and until and unless some financial incentives are offered from the Government of India like tax benefits etc or by State Government like land at nominal rate etc no investment would come forward.  In this respect the country is on the critical juncture and until and unless, a positive decision, in favour of these investments are done the country is leading to another disaster where one will find there is “Problem of Plenty” in the season of production and “Problem of Scarcity” after few month once season passes.  The initial sign of this trend is already visible in India when during 2012 Potato was being sold @ ` 2 in the month of December and it skyrocketed to `40 by the middle of 2013.  Similarly the rate of onion which was @  ` 2 to 3 in the beginning of 2013 reached up to `80-90 per kg in several parts of the country and became a big issue for the price rise.

Material handling is another emerging challenge for logistic management in India.  Except in few modern companies where some examples of mechanized material handling is being done, as seen in the plants of ESSAR, JINDAL, TATA or few other industrial units, in most of the Indian  companies material handling is a primarily manual activity.  In the entire breadth and length of country till now manual laborers have been relatively easily available and some of the backward states like Madhya Pradesh, Orissa and Bihar have been constant sources of manual labour in the entire country.  However, with the introduction of Mahatma Gandhi National Rozgar Guarantee Yojana  (MNREGA) now flow of manual labour is almost drying up.  In a few years from now, most of the Indian companies will feel the heat of the situation and they need to develop appropriate and proper mechanized and automatic mechanisms for material handling.  For this not only machines are to be developed, installed and made functional even packaging units has to be made compatible for the mechanized handling system.  Related with this is, entre spectrum of packaging of the consignment, which is available in Indian market.  Presently the packing industry of India is at the rudimentary stage.  A large number of commodities available in the market are being made available in poorly designed packages or in loose condition.  There is requirement of change of the attitude of the Indian industries and they need to develop mentality of proper packaging so that it is easy to handle, track and store in a more appropriate manner.  This also needs proper technological development along with appropriate investment so that a proper shape takes place.

Thus here we have seen how by and large Indian industry is not in a position to sustain proper environment of logistic management or supply chain management.  But, with a greater integration of Indian economy in the world economy the call of the hour is to develop proper mechanism for logistic management and supply chain management in all spheres of life to reap the benefit of globalization of the economy.

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Dilemmas of Railways: Any solution?

Dilemmas of Railways: Any solution?

CASE-A

When the price of onion touched ` 60/kg in Azadpur wholesale mandi in Delhi during second half of 2013 Seth Dhanpatlal thought it is a proper opportunity to import onion from Pakistan and Egypt at almost one forth price and sale at Indian market at a competitive rate to capture a big portion of Indian market in the shortest time.  However, the dream to achieve this was not easy.  For importing any item for commercial purpose one need Besides 34 licenses and approval the real bottleneck was infrastructural issue of landing the commodity in any port.

Although onion was much cheaper in Egypt it was not easy to transport it by sea as ships are likely to take more than 10 days to touch the nearest port of Kandla and it was all probable that the consignment would get spoiled in the handling.  Hence Egypt was ruled out.  Now the better alternative was Pakistan.  However, fixing a port was a big issue as onion cannot be brought as coal or any other loose commodity.  Kandla was not a perfect import destination as landing cost including Berthing Cost in Kandla is much costlier than smaller port.  Further there was not much warehousing facility at Kandla.  Even the cost of keeping onion in container in open would be much higher.  In contrast, smaller port like, Navlakhi would provide much attractive feature as it is much near to Pakistan, its berthing cost is much cheaper.  Here there is not much waiting time as it happens in big port. Navlakhi is even 160 kms nearer to Delhi in comparison to Kandla.  Navlakhi Port is an all-weather non major intermediate port.  It is situated on the Southwest end of the Gulf of Kutch in Hansthal Creek.  Here draft is 12 meter.  Its outer anchorage is situated about 5 miles where water depth is 15 meter.  However, this port is primarily being used by loose commodity particularly coal.  In such situation it would not be possible to mix onion with coal.  Further there was no warehousing facility to keep imported onion at Navlakhi port as most space was open space which was being utilized for stacking coal which used to get slow burning and smoke blowing all the time.  After the experiment of Central Warehousing Corporation (CWC) at    Kandla where they have constructed one full length goods-shed along with one of 5 freight lines at the investment of ` 6 crores the response of the market was sluggish.  Initially they leased @ 40 lakh per annum and they had to pay ` 2.50 lakh to IR as land lease cost along with 8% of rented amount.  However, in subsequent year there was no taker rat the rate of previous year.  Hence subsequently it was leased @ 30 lakh per annum. In such no party has turned up to develop any warehouse in any port including Navlakhi. As such there were so many infrastructural constraints and in such situation doing business could be much riskier as one or two mistakes could totally ruin the business.  Although chance of higher profit existed any mistake on the port of party could have a disastrous affect.

Hence Dhanpatlal was still in doldrums to decide whether take all the risk and import onion from Pakistan from any port and try to make profit as much as possible or leave the issue altogether and concentrate on the trading of other commodities in Azadpur Market.  Here question is why doing business in India is so risky?  Why infrastructure of Indian ports are so lacking?  Why don’t IR takes initiatives to provide, near its goods shed warehousing facilities?  Why transporting goods from port to hinter land properly and safely is considered to be risky business affair?  How these facilities can be provided in a integrating manner.

CASE-B

Harprit Singh, a forwarding agent and established businessman of Madhya Pradesh turned bankrupt after participating in the international trade.  His traditional business of dealing with grain in his native state is in deep trouble due to heavy debt incurred in last year export commitment as he has not been to make his rake loaded with Soya bean and DOC (Deiolised Cake- a product being used in making medicines, biscuits and animal feed in developed countries) could not reach timely to the Windmill port where he was loading a medium size ship to Amsterdam.  Due to late arrival of his consignment the ship was detained for eleven hours for which he has to fork out a very heavy penalty.  To readjust his business strategy Harprit decided to shift his reliance on the Indian Railway (IR) and to make arrangement for warehousing his product well in advance near the port itself.  However, his quest for a proper warehouse turned to be another nightmare as there was complete lack of warehousing facility near the port at a reasonable rate.  Although IR has promised to coordinate for facilitating warehousing facility to develop itself in the direction of total logistic service provider, a corporate goal, not a single step was taken in that direction.  Nor ‘Central Warehousing Corporation’ (CWC) has taken any step to construct any warehouse.  There were few private warehouse keepers who have constructed a few sub-standard warehouses to reap the benefit of the situation. They were aware that how the businessman has to pay very high punitive charges for any detention of international freight liner ship.  Hence Harprit has opted to take on lease one such warehouse to overcome the problem.  However, probably his luck was against him as when Harprit got fully ready to play the role of international trader, there was a serious down-turn in American-European economy.  The sluggish market did not improve for months together.  There was no demand of soyabean and DOC in the international market whereas the warehouses hired by Harprit were fully packed.  Due to dumping practices by international players, particularly Chinese one, his company was not able to get a single order.  To make the matter worse, during rainy season heavy cyclonic rain submerged the entire area with rainy flood water.  Rainy water entered in several warehouses, destroying more than 60 per cent due to flooding.  Although Harprit has taken insurance against fire, he never imagined that such heavy rainfall would take place in Western part of country where average rainfall is around 45 cms.  But, by this time everything has gone haywire.

CASE-C

Ghanshyam Patel is a marketing executive of Patel Fieldmarshal of Rajkot which manufactures diesel engines, diesel pumps, diesel mono-pump, centrifugal water pump, diesel generator, AC alternator, submersible pump, marine diesel generator etc.  It produces nearly 60 per cent of all India production of nearly 5 lac diesel engines per annum.  Having 100 full fledge manufacturers of diesel engines with 3500 ancillary units  support  Rajkot has enhanced the production of 2,75,000 engines per annum.  Their production started around in 1963 under the name of M/S. Patel Manufacturers with initial capacity of 80 engines per annum.  They have added  to agricultural and domestic market a variety of Electrical Products like single, three phase mono block pump sets, open well and bore well  submersible pump sets, alternators and centrifugal / self-priming/mud pump.  They also manufacture light weight fuel efficient and compact diesel engines ranging from 5HP to 24HP.  Presently Fieldmarshal engines have multipurpose application in various fields such as marines construction equipment, power generation, industrial, agricultural, automotive etc.

Amit Pandya is another marketing executive of ECHJAY Industries of Rajkot which incorporates a full-fledged forge shop, machine shop equipped with CNC machine, die shop, tool room, heat treatment plant and an ultra-modern metallurgical and metrological laboratory all under one roof.  It has over 1,150 work force and total sales of US $ 75 million.  Its plant caters to the range and quality demands of core sector industries like petro chemicals, fertilizers, oil refining, automotive, railways, heavy engineering, nuclear power generation oil and natural gas.  Its client includes Mahindra & Mahindra Ltd., Tata Engineering & Locomotive Company Ltd. Tractor & Farm Equipment Ltd.  The company emphasizes strict quality at every stage and ensures appropriate production and customizes service as per the requirement of client. This has been duly acknowledged by RITES, RDSO, EIL etc.

The commonality between Ghanshyam Patel and Amit Pandya is that both of them are frequent traveler out of Rajkot to different parts of country to cater the need of different customers and rope in new clients.  For them railway is the most convenient means to cover different parts of the country.  But their journey to different cities from Rajkot is not an easy ride.  Besides non-availability of confirmed berth, the availability of train itself is very limited as except Mumbai, Jabalpur, Ahmedabad and Surat here most of the trains are weekly or bi-weekly.  Even for the capital of India there is no super-fast train daily.  Whatever trains run, these take excessive long time between Ahmedabad and Rajkot.  Hence they have to rush either Ahmedabad or Vadodara to catch the train as per their choice or requirement.

HIGH SPEED RAILWAYS

HIGH SPEED RAILWAYS

(Uday Shankar Jha)

Serious doubt on the efficacy of Railways to cater the need of passenger’s services is looming large and demand for urgent attention for policy planner and greater public.  High speed railways could be a survival   mechanism in passenger services in modern era when airways is giving tough competition and improved prosperity has increased expectations from the passengers.  Although Railway is considered to be more environment friendly and energy efficient in absence of high speed railways passenger traffic was gradually moving out and preferring airways particularly in medium and long distance segment in developed countries.  Even in developing countries like China,  India, Brazil, Russia etc. with growing prosperity more people are searching out some alternative for existing slow speed railways which is not only time consuming to travel but also very difficult to get a confirm reserved seat to different locations.  This article would evaluate the economics of high speed railways, its viability in developing countries, prevailing problems and emerging solutions world vide and would try to evaluate emerging trajectory in near future.

A high speed rail service, if implemented properly can give competitive advantage over existing fastest means of transportation-Airlines for journey around 1000 kms or above which was traditionally being catered by overnight train journey.  This sector was gradually whisking away to the air transportation which was carrying passenger in less than two hour.  Similarly, intercity traffic in the range of 250 kms to 500 kms was moving out in favour of roadways in absence of appropriate high speed railways.  With the help of high speed railways these passengers can be brought back to the railways.  However, the financial and economic viability of high speed rail view of demographic and economic condition are limited as it depends on enough people being able to pay a premium price to use them.  In absence of sufficient number of affluent people there could not be many users to use this service.  In such situation the policy planner has to target less affluent people or middle and lower income people to attract them to high speed rail by offering them some innovative scheme for longer period of time.

As per World Bank Report (2010 pp2), high speed rail line has dual advantage.  At one hand it provides valuable travel time savings to users.  On the other had it free up the capacity on existing line which gives them opportunity to use the line capacity for other transport user partially for freight services yielding higher revenue for the railways.  Despite using high energy high speed rail can earn carbon credit if it is able to win away air travel passengers to its fold.  High speed rail can bring a series of prosperity and higher industrial development in the entire area due to better connectivity leading to higher real estate price and increase in industrial production.

Definition of High Speed Train

Globally those trains which are traveling at the maximum speed of 250 kms per hour or more are defined as high speed train.  Such trains are being run on dedicated high speed lines.  This service reduces travel time substantially and improves service level in big terms.  Many a time these services provide end connection and direct route availability.  Japan was the pioneer with its Shinkansen trains followed by France with TGV & Germany with Maglev trains.  Subsequently Spain, UK, Italy, Belgium, Netherland, Taiwan & China have also developed high speed trains. China was one for the late entrants but it has developed a big scheme to cover many parts of the country and they have also successfully tested high speed train for more than 450 Kms per hour for commercial use. In the end of 2012 global length of high speed line is estimated nearly 13000 Kms.

Development of high speed train

Japan

The transportation need of 1964 Tokyo Olympics led to the development of first commercial high speed train in Japan.  The train services started in Japan in 1950.  There was conventional freight and passenger mixed use all over Japan and due to higher population and rail use many lines became heavily congested.  To meet the Olympic related transport requirements additional capacity was needed. At that time Japan decided to construct a separate 550 Kms long passenger dedicated, electrified high speed line on a new alignment with the help of World Bank. The construction work started in the year 1959.  Its service was opened well before 1964 Tokyo Olympics. This Tokiado Shinkansen popularly known as bullet train brought about quantum improvement by substantial reduction in travel time and offered much higher frequency of services between Tokyo and Osaka from 04 each day to an hourly services and ultimately to three trains per hour. This experiment was a financial success.  Within three years, its revenue exceeded operating cost including interest and depreciation. Subsequently Japanese government set out a blue print for high speed network of approximately 7000 route Kms. The average commercial speed of Tokyo – Osaka service is 200Km per hour with four intermediate halts.

Europe

Subsequently in France SNCF (French National Railway) adopted Japanese model by building a dedicated line on new alignment with electric traction in 1967.  British Railways introduced passenger services capable of operating at over 200 Km per hour from London to Bristol in 1976. In 1981 service between Paris and Lyon was started.  Between 1985 and 2007 services between France and Switzerland, Belgium and Holland & France and Germany were started with high speed network of 1700 route Kms. In 2010, high speed route Kms was 5500 spanning in countries like Spain, Germany, Belgium and Netherland (World Bank 2010 pp4-5). Thus, France was third country to have high speed railways in  1967.

Asia

After the experience of Japanese and Europe HSR train next step was taken by Taiwan, China & Korea.  The Korean line between Seoul & Busen was opened in 2004 up to Daegu and completed in 2010.  The high speed railway between Taipei and Kaohsiung was opened in 2007.  The most phenomenal growth of high speed railways has been seen by Chinese Railways.

China

Massive economic development in China increased the demand of infrastructural facility particularly the railway transportation both in freight and passenger transportation manifold. During 1990's railways in China was proving to be major bottleneck in the development of nations. Hence a deliberate attempt was made to discourage short distance travel in freight and passenger traffic. Due to this the average distance travelled by passengers doubled from 275 km in 1990 to 534 in 2008. Even the maximum speed of conventional trains was increased from 100kmph to 160 Kmph on around 13000 km of passenger routes.

The real thrust of high speed railway came with creation of Guangshen Railway company as a subsidiary of the Guangdeng Regional Rail Administration. Its first milestone was  opening of a trial section of about 60kms of high speed live in 2003 between Quinhuangdo and Shenyang. This was used to test various types of track design and EMU alternatives for even further trains. In 2004, the company introduced first train at a maximum speed of 200 Kmph between Guangzhou and Shenzhen. Following its success express electric multiple unit trains of 200kmph was introduced on 16,500 km of track. In 2007 on over 6000km of mixed use routes 140 train pair per day was launched. These were operating at a top speed of 200 to 250 kmph and were having commercial speed of over 150 Kmph by 2008 between Guangzhen and Shenzhen.  80 trains were operating at an interval of every 15 minutes. Its coaches were different from the conventional coaches, i.e. EMU coaches. These have two classes.  First class accommodation has 2 by 2 reclining seats. On the other hand second class has 2 by 3 seats combination. The price of these services was higher than the normal express trains. These services proved to be immensely popular as the general ambience and riding qualities of this trains were world class. To gain at least some return on investment the price charged on this services were higher than normal express trains. The high popularity of these trains indicated that general public of ready to pay higher service cost if these are catered in proper manner. All round advancement and evolution of in the standards and management of various railway subsystem like signalling trains, reception and dispatch, train control system, telecommunication, electrical tractions, motive power, rolling stock, track structure and track formation and train operation led to progressive enhancement to speed and performance. The growing technical competencies in all these areas further boosted the progress of high speed rail.

One unique bold decision on the part of Ministry of Chinese railway to separate rolling stock manufacturing units from its own fold in year 2000 went in a long way to speed up the process.  This facilitated international manufacturers in joint ventures with Chinese counterparts to participate in the bidding of coach procurement.  This provided Chinese rail access to modern traction technology over a relatively short period of time.  Due to this modern manufacturing plants and know-how transfer in the design and manufacturing of modern train sets became easy to increase competition.  Deliberately two or more joint ventures were established for each product to encourage multiple suppliers to prepare and compete for future high speed train business.  Ministry of Chinese railway has declared long term plan up to 2020 for high speed railway procurement of a relatively large volumes of EMUs.  Initially four major international manufactures – Bombardier, Kawasaki, Hitachi and Alstom - established joint venture with Chinese counterparts and all these were awarded contracts for 200 EMU train sets each for 250 Kmph and 350 Kmph. 

Separation of Passenger and Freight Services

Chinese government also decided for separating passenger and freight services on all congested main routes and to developed fast intercity regional passenger networks in densely populated areas.  Unlike Indian Railway which has decided to develop dedicated freight corridor the Chinese Railway decided to construct high speed passenger dedicated lines on which services are fit to operate at top speed between 250 and 350 Kmph.  In China the plan was made for four North-South and four East -West corridors.  The total length planned by the end of 2020 was for approximately by 16000 kms. at the speed of 350 kmph.  Whereas, another 20000 kms were planned for mixed traffic high speed lines with a target speed of 200 to 250 kmph.  China has planned that all provincial level capitals and cities having more than 5 lakh residents are served by high speed railways.  This will cater to the need of 90% of population of China.

New EMU Coaches  

Unlike traditional railway coaches Chinese government has decided for a set of eight car train with High speed AC drive EMUs, with high strength aluminium alloy body shells weighing 8.5 tons.  China has decided for four main EMU depots at Beijing, Shanghai, Wuhan and Guangzhou.  China was planning to procure about 1000 EMU train sets latest by 2015 to cater the growing demand.  Help of several foreign firms have been obtained to manufacture high speed trains.  Bombardier – Sifang is a joint venture company between Canadian and Chinese manufactures.  Kawasaki heavy Industries of Japan has also licensed a Chinese firm to manufacture with transfer of technology and knowhow, Simens, Alstom General Electric, Hitachi and other prominent rail coach manufacturers have also secured business.  By the end of 2012 more than 10,000 kms have been opened for high speed rails of 350 Kmph or more commercial speed has already been started.  Such services are helping not only to its passenger, but also the freight traffic is reaping its benefit as additional capacity has become available on tradition rail routes.  This has given a major boost to freight traffic.  Even now the Chinese intercity has got better connectivity increasing its economic competitiveness.

Service Performance Evaluation

Since high speed trains are running at a commercial speed of 200 kmph or more upto 350 kmph or even more, these have provided a quantum jump in service level and substantial reduction in travel time.  Initially such services are started with eight EMU coaches and at an interval of one hour.  However, if there is more demand, then number of coaches and frequency can be increased upto sixteen coaches and frequency can be increased upto five services in one hour as in Japan in Tokaido Shinkansen line where 119 pairs per day are plying. However, if number of services increases then associated passenger amenities items has to increase to match peak hour demands including improved accessibility by road or metro rail, ticketing and separating arriving and departing passengers and comfortable waiting areas and other related services. If these facilities are provided properly, then reduction of travel time becomes a greatest attraction to the public. They mentally become prepared to pay much high price in comparison to traditional rail services.  Overall, even there is tremendous boost in demand and many air travellers get attracted to it for its comparative convenience, reliability punctuality and flexibility of services. On punctuality front, high speed trains are more reliable.  It is much higher in those countries where dedicated high speed passenger lines have been constructed.  These services in Japan are at the top where average delay on the Tokaido line is of only 10 seconds.  On safety front also Japan is top performer where no death has occurred from the start of service for last 40 years.  Even in country like France, Germany etc.  it is much better particularly in comparison to road and air travel.  High speed of rail helps in keeping operating and maintenance cost much lower than the capital cost.  Speed also delivers better equipment’s and train crew turn round times.  Working ratio i.e. operating cost (excluding depreciation) to revenue of 40 percent and operating ratio i.e. operating cost (including depreciation) to revenue of 55 percent was achieved by Japanese railways.  Even TGV Sudoest  Est line in France has been able to maintain 40 percent and 60 percent respectively. 

High Speed Railway in India :

HSR in India at present is only at discussion level. Although it started appearing in the Indian Railways (IR)   wish list since 2005.  In absence of proper financing mechanism, it is still in pre-feasibility study mode. Initially Mumbai – Ahmedabad section was identified, as here density of intercity traffic was one of the highest and the paying capacity is much better than any other part of the country. However, not much progress has been there even after the lapse of almost seven years. In the meantime, one Japanese consortium – under the leadership of METI (Ministry of Economy, Trade & Industry) Japan with association of Mitsubishi, Kawasaki, Hitachi Research Institute -  has also moved a proposal to run Semi High Speed Rail (SHSR) in the Mumbai – Delhi section. Here, they have proposed to run train at commercial speed of 150 Kmph whereas the present maximum speed has been something around 87 Kmph. This is proposed to be achieved by improving existing railway line. This would entail improvement in railway points and crossing, signalling, track and bridges.

On the other hand, the IR has also selected a Japanese consortium to undertake feasibility study for running the train at 300 Kmph on the 869 Km long Chennai- Bangalore – Thiruvananthpuram   section. Five different sections have also been studied by different agencies to run the bullet trains. Systra Fran , France has studied Pune – Mumbai – Ahmedabad  (650 Kms)  section. UK based consultant – Mott McDonald has been engaged to conduct the pre-feasibility study of the longest Delhi – Agra – Lucknow – Varanasi -  Patna (991 Kms) section. Spanish consultant Eneco  has been entrusted the task of studying shortest Howrah – Haldia (130 Kms) section. Delhi – Chandigarh – Amritsar (450 Kms) is another identified section. A separate National High Speed Rail Aauthority  on the pattern of the National Highway Authority was also on the cards (The Free Press Journal, Feb 2012).  In the meantime, the Chief Minister of Maharashtra has also proposed for high speed railway between Mumbai – Nagpur (738 Kms) section at a cost of `. 1.3 lakh crore at a speed between 300 – 350 Kmph (The DNA, July, 2012). As per one estimate, the construction cost of one Km would be `.100 crore which is around 10 to 16 times higher than the conventional rate of IR.  At this level of investment ridership revenue at best would be able to cover only operating cost.  In such a situation, the state government, the sovereign bank, Planning Commission and other Financial institutions have to play a pro-active role if at all this is going to happen in India. 

Precondition for High Speed Rail

If the economy of any nation is having strong undercurrent of higher growth and existing road and rail network is congested, specially the Trunk route, then high speed rail provides an opportunity for faster development by contributing to economy in several manner.  The released capacity due to construction of high speed rail provides an opportunity for the existing rail network to cater to the freight services which otherwise could not have been provided and economy had to ultimately suffer on this account. Further, high speed rail in passenger service provides an opportunity to passenger services in a faster manner, making people’s labour more productive.  In any case, the congested network requires expansion in capacity and construction of high speed network to cater to services in speedier manner. However, this benefit is or will be achieved if the distance between two cities is more than 500 – 700  Km apart, because for lesser distance, people will always prefer road journey, particularly for distance less than 100 kms. Further, the recovery of high investment would be possible only when higher number of services are plied between such cities, at least 20 or more pairs in each direction. Such network can only sustain when the existing market has sufficient purchasing power including premium high speed services at a much higher cost. If any economy has very limited middle or higher class, high speed rail network cannot sustain. In such a situation, countries particularly BRIC countries like Brazil, Russia, India, China, and other fast developing countries including Malaysia, Taiwan and  Thailand provide a conducive situation for the development  of fast passenger rail network.

Coming back to India in this perspective, we can say the construction of Dedicated Freight Corridor is not with the above economic criteria. Indian Railways should have constructed Dedicated High Speed Passenger network and the released capacity of existing network should have been utilized for the freight traffic.

Last but not the least, any service of high speed rail system can ultimately sustain only when entire system is operationally robust. There should be higher number of services which will also maintain punctuality and safety over the ambience (World Bank 2010 – pp20).  Meeting the challenge is a complex task. This requires seamless interaction of diverse technology in the area of foundation, bridges, tunnels, track, power system, communication, signalling, train set, train management, train safety, ticketing, passenger amenities, and systematic passenger/crows movement. At present, at global scale none of the underdeveloped or developing countries is able to fulfil all these conditions.

Hence, we notice that barring few developed countries , there is hardly any high speed network. Some of the countries among these can aspire and meticulously plan for and implement high speed rail network, at least in those areas where there is high passenger movement. Since rate of returns is going to be much less in comparison to heavy investment, such projects need a long term commitment of public budgetary contribution along with commitment and discipline to implement such a gigantic infrastructure project.

Bibliography :

The World Bank Report 2010 – High Speed Rail.

Feasibility Study of Semi-High Speed Rail Development in India, July, 2011(Outline), METI, Japan