Learning from the Chinese
The Financial Express
Partner & PPP Leader
Ernst & Young
Ernst & Young
Between 2000 and 2010, India added 1,200 km of route length in its railway network, whereas China added 7,580 km, apart from a high speed–bullet train line. As in all sectors, the difference between India’s performance and China's in railways is stark. China, with its financial strength, has invested at unprecedented levels in creation of infrastructure, including railways. China has also carried out fundamental structural reforms to enable the Chinese railways a vibrant and fastest growing railway in world.
Railways in India
The Indian rail network spans over 63,974 route km, making it the world’s third largest rail network in terms of size with 51,030 passenger coaches and 2,19,931 freight cars. Indian Railways is also the largest passenger carrier and the fourth-largest rail freight carrier globally. It transports 2.65 million tonnes of freight and 23 million passengers every day and 7.2 billion passengers a year. IR accounts for about 10% of passenger traffic and 30% of freight traffic in India.
IR is facing critical issues like poor growth rate of 2% over the decade, insufficient funds, deficiency of integrated functional structure, mammoth overheads, pricing structure and scanty modernisation of infrastructure. The average passenger train speed is still as low as 40-50 kmph and the average freight train speed is 20-30 kmph.
Railways in China
China has the longest railway network in Asia and the second-longest in the world after the US with a total rail length of about 99,000 km in 2011. In terms of capacity utilisation, China’s railways are one of the best utilised in the world. In 2010, on average, 40,029 tonnes of freight was transported per kilometre of rail in China. Further, 360,304 passengers were transported per kilometre of rail in China in 2010, compared to 122,136 in India.
In the last two decades, Chinese Railways has shaped up at an extraordinary pace. The ministry of railways (MOR) has introduced various reforms to scale up the investments to modernise railways. The country got its first experimental high-speed rail (HSR) in 2003, and since then there has been no looking back.
Once the rail sector in India was larger than China’s. In the early 1980s, India was leading China both in total length and length of electrified routes. Between 1992 and 2002, India's overall rail network route kilometre grew by only 1%, electrified lines by 48% and length of double track by 10%, whereas the corresponding figures for China were 24%, 50% and 69%. By 2010, China’s rail length (route kilometres) has expanded to 66,239 km. In contrast, India's route length had expanded to 63,947 km, growing at 400 km per year.
At roughly 10,000 km in 2011, China already boasts of the biggest HSR network in the world while India does not even have a plan in place for HSR network- implementation.
In the 12th Plan period (2012–17), investments of R7.35 trillion ($160.23 billion) have been envisaged for Indian Railways along with additional investments of R2 trillion ($41.6 billion) for railway infrastructure development. India plans to add 10,000 km of new lines by 2017. In contrast China has planned investments of CNY2.8 trillion ($432 billion) for its 12th five-year plan period (2011–15). It plans to add 30,000 km of new lines by the end of the plan period.
The government of China initiated reforms to loosen its grip on railways to fulfill its commitments post-WTO accession in 2001. As part of the reforms, in 2000, the MOR allowed foreign investors (including those from Hong Kong, Macau and Taiwan) to establish Sino-foreign railway freight transport joint ventures where a Chinese partner will hold at least 51% equity share.
In 2004, the MOR implemented a new reform, which called for the railway network to be divided into three divisions—passenger services, freight services and infrastructure building. The MOR also hived off its commercial arm and set up several passenger and cargo transport companies.
A wave of private investment took place in 2005 when foreign investors were allowed to construct and even own new local railway lines either through joint ventures or on their own. Foreign and private companies could invest in the design and manufacture of rail equipment. This step was taken to fulfill its ambitious plan to extend its railway network to 100,000 km (from 73,000 km in 2005) by 2020. By the end of 2005, China had established 20 joint venture railway companies, attracting investment of more than CNY44 billion ($5.5 billion), including investments of about CNY2.5 billion from the private sector.
Another important reform measure was to strengthen the cooperation with local governments in railway construction. Between 2004 and 2005, the MOR signed strategic cooperation agreements with 30 provinces to speed up construction of railway infrastructure. The MOR also signed agreements on various projects with some state-owned and private enterprises, to launch joint-stock railway companies.
In November 2005, China decided to list some of its state-run railways on domestic and overseas stock markets. The initial public offerings were a part of the broad funding plan to meet targeted railway investments till 2020.
Indian Railways require radical reforms that can rescue it from becoming an antique relic. The short-term strategies, giving solutions to the present problems, may become outdated even before they are implemented. The real strategy lies in thinking big and planning ahead for future needs.
The author’s views are personal.