Government of India

Report of the Task Force

The Delhi-Mumbai & Delhi-Howrah

Freight Corridors

Published by
The Secretariat for the Committee on Infrastructure
Planning Commission, Government of India
Yojana Bhawan, Parliament Street
New Delhi - 110 001

www.infrastructure.gov.in
Contents
Preface

1 Introduction 4
2 Summary of Recommendations 5
3 Concept of Dedicated Freight Corridors 6
4 Organisational Structure 9
5 Separation of Infrastructure from Operation 11
6 Market Contestability 18
7 Whether the New Corridors Should
be for Freight or Passenger Trains 19
 Secretariat for the Committee on Infrastructure

Preface
This Report responds to the direction of the A quantum jump in capacity is, therefore,
Committee on Infrastructure, chaired by the necessary for meeting the rising freight demand
Prime Minister, to prepare a concept paper on on account of robust domestic growth as well
the Delhi-Mumbai (Western) and Delhi-Howrah as the rapid increase in international trade.
(Eastern) dedicated freight corridor projects,
and to suggest a new organisational structure The Report suggests an institutional roadmap
for planning, financing, construction and for the construction and operation of the
operation of these corridors. The Task Force, dedicated freight corridors. These corridors
constituted for this purpose, was chaired by Shri would be constructed, operated and maintained
Anwarul Hoda, Member, Planning Commission by a corporate entity on commercial principles,
and included experts and representatives from and relying on efficient technological solutions.
the Railway Board, Planning Commission and Scarce budgetary resources would be leveraged
Ministry of Finance. The recommendations for raising debt from the markets, based
made in this Report were approved by the on a sound business plan.
Committee on Infrastructure on February 16,
2006 and their implementation has commenced. The proposed corporate entity would provide
the rail infrastructure, but would not itself
The Indian Railways constitute a critical engage in freight business, thus providing
component of India’s transport network, non-discriminatory track access on payment
both for passenger as well as freight of haulage charges by train operators.
services. Railways are cost effective and This approach would herald large scale
also environment friendly. Yet, capacity and private investment and competition in freight
efficiency constraints in the freight segment operations. This underlying separation of rail
have, over the years, led to a significant shift from wheels would also mark a paradigm
from railways to road transport. A renewed shift in the functioning of Indian Railways
focus of the Railway Ministry on efficiency, who have already introduced private
customer care, and commercial principles participation and competition in the
is aimed at reversing this trend. The recent movement of container trains.
turn around in railway operations suggests that
Indian Railways are poised for rapid growth
in capacity expansion.

The high density Eastern and Western corridors (Gajendra Haldea)

are already saturated in terms of line capacity
utilisation. Accelerated growth of the economy
is only adding to the congestion on these routes.
Introduction

1.1 Pursuant to the decision taken in (vi) Shri B.N. Puri,

Committee on Infrastructure, on 30 June 2005, Adviser (Transport), Planning Commission
the Planning Commission established a Task Member
Force with the following terms of reference:
1.3 After the retirement of Shri Chak w.e.f.
a) Preparation of a concept paper on Delhi- 31 August 2005 Shri V.K. Raina, Additional
Mumbai, Delhi-Howrah dedicated Freight Member Railway Board served on the
Corridor Projects with special focus Committee on behalf of the Ministry of
on a new organizational structure for Railways. The Task Force also had the benefit
freight corridors. of consultations with Shri E. Sreedharan,
MD, DMRC, who attended one of the meetings.
b) Examination of the issue whether a new
dedicated freight corridor should be
constructed or whether the existing corridor
should be dedicated to freight movement
and a new corridor be constructed for
passenger trains.

1.2 The constitution of the Task Force

is given below:

(i) Shri Anwarul Hoda,

Member, Planning Commission
Chairman
(ii) Shri Shanti Narain,
former Member (Traffic), Railway Board
Member
(iii) Shri S. Chak,
Additional Member, Railway Board
Member
(iv) Shri Ashok Chawla,
Additional Secretary,
Deptt. of Economic Affairs
Member
(v) Shri Gajendra Haldea,
Adviser to Dy. Chairman,
Planning Commission
Member

4 • Report of the Task Force

Summary of Recommendations

2.1 A New Organizational Structure disadvantage is that it does not allow above rail
competition. The separated model allows above
2.1.1 The mechanism of SPV, owned jointly rail competition but suffers from the absence
by the Indian Railways and the users of bulk of synergy and also higher costs.
freight services (e.g. port operators, shipping
companies, oil companies, coal, iron ore and 2.1.5 The Task Force recommends the
steel companies as well power companies, adoption of a model, which captures the
largely in the public sector) should be entrusted benefits of both the models. The SPV, which
with the task of planning, construction and would own and maintain the track and other
maintenance of infrastructure. The SPV will infrastructure, would also move the trains
also be responsible for movement of trains within the corridor on its system, but would
on its system and operation of the dedicated not own or lease any rolling stock nor do any
freight corridors. freight business other than haulage of freight
trains. The Indian Railways and other qualified
2.1.2 The Ministry of Railways should be the operators would run goods trains on the tracks
administrative Ministry for the SPV. In order to of the corridors and would be given non-
ensure that the SPV has effective independence discriminatory access for this purpose.
in decision-making and is able to function
with a market focus and business orientation 2.2 Whether the existing corridor
it should have sufficient autonomy, delegation should be used for the dedicated freight
and flexibility in conducting its business. corridor and a new one constructed
for the passenger corridor
2.1.3 The coming together of the Railways and
mainly public sector undertakings that are bulk 2.2.1 Due to the major constraining factors
users of freight services, with some topping on the existing high-density routes of Indian
up by the Central Government, would ensure railways, which limit throughput, the dedicated
an adequate equity base, which could be freight corridors need to be constructed on
leveraged for market borrowings for raising new alignments. Augmenting freight capacity
enough capital for investment in the dedicated on existing network would involve significantly
freight corridor. heavier investments. Furthermore the
investment in dedicated high-speed passenger
2.1.4 The Task Force considered the two corridor would give relatively lower returns
broad models that are in existence in the world on capital.
today and weighed the pros and cons of both
vertically integrated and completely separated
models. The vertically integrated model has
its own advantage by way of synergy between
infrastructure and operation but the

The Delhi-Mumbai & Delhi-Howrah Freight Corridors • 5

Concept of Dedicated Freight Corridors

3.1 It is widely recognized that in order Railways across-the-board is a formidable task.

to improve the performance of the Indian However, the dedicated freight corridors present
Railways it must be run on business lines and a good opportunity to make a beginning by
must become customer-oriented and market- setting up an independent organization for
driven. At present the Indian Railways is not its establishment and operation.
in a position to run purely on a commercial
basis because it has social responsibilities. 3.3 In India the railways have been losing
The Indian Railway system has a dual role: freight business to roadways, although less
it provides commercial services while at the rapidly than in advanced countries. Railways
same time it performs a number of useful retain their relative advantage mainly in natural
social functions. Activities such as movement resource and intermediary goods markets in
of freight in general and of some classes which there are large volume movements and
of passengers are carried out on a commercial relatively low value-to-weight ratios and tend
basis, but the Indian Railways also run suburban to lose it as the value-to-weight ratios of
and other passenger services below cost, manufactured commodities increases unless
transport essential commodities at a loss, they can provide high quality container services
run branch lines that are not remunerative and particularly on medium and long hauls. In order
are expected to provide increasing employment to retain and even increase market share the
opportunities to the population. While the Railways need to be repositioning itself all the
Railways cannot be absolved of these time in order to meet the challenge of
responsibilities, it is necessary for its efficient competition from the road sector. For that
functioning, that the two roles are separated it needs a market focus in its operation. In the
to the extent possible. new organization for the dedicated freight
corridor it should be possible to undertake
3.2 As observed by the Expert Group on periodic performance-review and problem
Railways (Rakesh Mohan Committee), since solving sessions with major clients to improve
the objectives of commercial activities are the service. Information may need to be
different from those for social activities, collected on the enterprise’s competitive
separate parameters are needed to assess position vis-à-vis the roadways sector, and
performance. Commonly accepted financial improvements undertaken.
parameters like revenues, profits, return
on capital employed etc. are appropriate to 3.4 The competitive pressure on Indian
assess performance of the commercial projects. Railways will increase with the further up-
For social projects, operational parameters gradation of the National Highways on the
such as improvement in connectivity and Golden Quadrilateral, which is now being taken
punctuality, increase in traffic etc. could up for six-laning. In order to compete with
be used. Segregation of these two categories the roadways it would be necessary not only
of activities and functions over the Indian to lower price but also to improve performance

6 • Report of the Task Force

generally in accordance with the requirement down and keep pace with the imperatives
of the clientele. According to a nation-wide of just-in-time manufacturing. All that is not
survey of users of rail freight services possible if a reliable transporter does not back
conducted in 1997, the results of which are the supply chain of industrial goods. Unless its
mentioned in the Rakesh Mohan Committee performance is improved through the adoption
Report, the Indian Railways was rated below of a customs-oriented approach, in providing
roadways on all parameters viz., reliability, particularly on-time services, the Indian
availability, price, time, connectivity, suitability, Railways cannot provide that type of service.
damages, information sharing, adaptability,
cost-friendliness, negotiability, access to 3.6 In recent years, the Indian Railways has
officials, ease of payment and claim time. taken a number of steps to improve its services,
These aspects can be addressed more efficiently with the result that its physical and financial
in an independent organization operating performance has shown marked improvement.
services in the dedicated freight corridors than This is a welcome development. However,
in a very large organization like the Indian the Railways has to do much more to improve
Railways. the quality of its services. A separate new
organization, which is not burdened with the
3.5 Following the initiation of economic task of balancing the conflicting objectives,
reforms in 1991, India has been gradually would be in a much better position to follow
increasing its integration into the world a market savvy approach and lift the standard
economy. With the abolition of import licensing of service significantly.
and the gradual reduction in customs duties,
Indian manufactures have to compete with 3.7 The Task Force noted that the development
foreign manufactures not only in foreign of a dedicated freight corridor is highly capital
markets but in the domestic market as well. intensive. The provision of such a corridor and
Unless the Indian industry has the benefit its operation must be on commercial principles if
of world-class services at internationally quality services are to be provided on a sustainable
competitive prices, it would not be able basis. This would require setting up of higher
to compete with its foreign counterparts. productivity standards, entailing the adoption
In India many production centers are situated of norms, benchmarks, policies and practices,
away from the ports and production and which may be significantly different from what
consumption centres are also far apart. are being followed by the Indian Railways.
In this situation it is not simply the cost
of transport that matters. Equally important 3.8 Finally, the investment requirement of the
is the quality and reliability of service. freight corridors is currently estimated to
In an increasingly competitive environment be at least about Rupees 22,500 crore, although
the Indian industry has to keep its inventories the RITES study now under way might well
of raw materials and intermediate products result in a higher estimate. The project would

The Delhi-Mumbai & Delhi-Howrah Freight Corridors • 7

take at least five years for implementation (after also take up infrastructure development, have
the new organizational structure is established, generally not been able to run as profit-making
project report finalized, approval obtained commercial enterprises. Recovery of capital
and funding firmed up) and assuming that the spent on the infrastructure has not been
current estimates are correct, the average annual accomplished and capital grants from the
requirement would work out to more than Government have been the general practice.
Rupees 4500 crore. This requirement would
be over and above the normal requirements
of the Railways for renewal and replacement,
acquisition of rolling stock, multiplexing,
modernization, projects for new lines and
conversion into broad gauge etc. There are
constraints in the Central Government
allocating and in the Railways generating funds
of this magnitude. The prospect of the Japanese
Government providing assistance for the
dedicated freight corridors is being explored.
A final picture in this regard will emerge only
after a study commissioned by the Japanese
International Co-operation Agency (JICA)
is completed. The current assessment is that
the aid, if forthcoming, will be available in two
to three years.

3.9 In light of the above an independent

commercial organization, capable of raising
funds from the domestic capital market appears
to be the only feasible option. Such an
organization would be able to leverage equity
of say about Rupees 7,500 crore to raise a debt
for the remaining requirement of Rupees 15,000
crore and finance the project. A departmental
enterprise of the Ministry of Railways may not
be able to raise loan from the domestic capital
market, but a separate corporate entity will,
if it inspires confidence in its ability to run as
a commercially viable undertaking. Worldwide
railway undertakings, particularly those that

8 • Report of the Task Force

Organisational Structure

4.1 Having regard to the factors considered outset it would generate interest among private
above, a Special Purpose Vehicle (SPV) would sector investors, except a few entities already
seem to be best suited to carry out the task of in transport business. The investment would
planning, construction and operation of the have to be made principally by the Railways
dedicated freight corridor. Should the SPV be and the public sector companies named above.
owned fully by the Indian Railways or should The Task Force recommends that the equity
it have a more diversified ownership? The Task be shared between the Railways (including
Force believes that a more diversified ownership its subsidiaries) and the other stakeholders,
with other stakeholders, mainly from the public mainly the bulk users of freight services
sector, as investors in equity would be in the among the PSUs. The Central Government
best interest of efficient management of the could come in for meeting any shortfall in equity
freight corridor, besides generating the requisite that might arise.
equity fund. Some of the stakeholders identified
for the purpose are the port operators including 4.4 Participation of the above-mentioned
Port Trusts, shipping and shipping-related stakeholders would serve two ends. First,
companies, oil companies, coal, iron ore the burden on the Railways for making a large
and steel companies, such as CCL and SAIL equity investment would be reduced and the
and NMDC, and power companies such funds available with public sector undertakings
as the NTPC. would be utilized. Second, financial
participation by users of freight services would
4.2 It would be recalled that the Department bring to the boardroom the much needed
of Shipping had at one time indicated that port customer orientation and help to bring a market
operators/ shipping companies were interested focus in the working of the organization.
in constructing and operating the freight
corridor between Delhi and Mumbai. The oil 4.5 It will be ensured that the SPV functions
companies are likely to continue as one of the fully as an independent commercial enterprise.
main users of the railway system even as they The Ministry of Railways should be the
make increasing investments in pipelines. administrative Ministry for the SPV. The
CCL, SAIL, NMDC and NTPC would have appointment and number of functional Directors
a major stake in the development of many should adhere to PESB guidelines. Further,
segments of the Eastern Corridor, but to the Ministry of Railways should nominate
motivate them to make investments, it would one part-time Director as stipulated in the
be necessary to take their requirements into PESB guidelines. Similarly, appointment
consideration while deciding on the alignment. of independent Directors should also be
governed by PESB guidelines.
4.3 Even though the Task Force believes
that the SPV could be viable as a commercial 4.6 The Task Force recommends that in order
undertaking, it does not consider that at the to help ensure the requisite volume of financing

The Delhi-Mumbai & Delhi-Howrah Freight Corridors • 9

as well as to provide adequate representation
of other stakeholder interests, the Board should
have a nominee each from the Finance Ministry
and Planning Commission. However, the
representative of Railways Ministry expressed
reservations.

10 • Report of the Task Force

Separation of Infrastructure from Operation

5.1 The Task Force considered the option of vertically integrated freight railway without
separation of control and management of the much difficulty. Further the Amtrak under
railway track and associated infrastructure public ownership runs its passenger trains
on the one hand and above-rail operators over the tracks of the privately owned freight
(i.e. operators of rolling stock) which have been railways. In Japan, the Japan Rail Freight
provided access, on the other. Such separation Corporation runs as a Government undertaking
is considered by some as ideal for unleashing on infrastructure owned by privatized regional
above-rail competition for greater efficiency. undertakings, which carry passengers.
A situation in which no rail operator controls This model has also been adopted in Canada,
the infrastructure can ensure equality of access. Mexico and other countries.

5.2 The Task Force reviewed the international 5.2.3 Third is the model in which the
experience in this regard. There are three basic infrastructure is separated from the users
models in existence. but remains accessible to all under an access
regime. We are familiar with this model in
5.2.1 First is the vertically integrated structure, the roadways and airports, but in recent times
as in China, Russia, India, Brazil, Mexico, and it has been advocated as one of the ways of
Argentina, to name a few countries with large restructuring railways. The European Union has
railway systems. Where publicly owned some adopted this model progressively since 1991,
of the railway systems are run either directly but infrastructure and operations were genuinely
by Ministries or by corporate units or split in a number of other countries even earlier.
organizations owned by Government. In Russia, In all these countries both the infrastructure and
China and India the State-owned companies are operations remained mainly under public
horizontally integrated, while in Brazil, Mexico ownership. The British Government, although
and Argentina there are many privately owned a member of the European Union, went far
regional companies. In other instances, the beyond others in establishing a separate
integrated railways are run by the private sector infrastructure enterprise in conjunction with
on the basis of concessions or franchises one or more freight companies, intercity
awarded by the government owner. In yet other passenger companies, and a number of regional
cases, the integrated structure is owned and or suburban passenger companies, which were
managed by the private sector. all privatized. The British experiment was
unique in that the infrastructure company was
5.2.2 Second is the structure in which the also privatized. However, the experiment for
dominant user is integrated with infrastructure privatization of the infrastructure was not
while incremental users have access for which successful and the privatized infrastructure
they pay access fees. The best example of this company became bankrupt and had to be
is in the US, in which one vertically integrated renationalized. It should be noted that even
freight railway uses the infrastructure of another when the infrastructure company in Britain was

The Delhi-Mumbai & Delhi-Howrah Freight Corridors • 11

privatized more than a third of its income came “Article I
from state subsidies to train operators, which The aim of this Directive is to facilitate the
were passed through. The bankruptcy was a adoption of the Community railways to the
direct consequence of the Government turning needs of the Single Market and to increase
off the tap. their efficiency;

5.3 The experience of separation in Australia • by ensuring the management independence

also has a similar lesson. A World Bank Report of railway undertakings;
(TP-7 OF September 2005) on the experience
of restructuring in the Australia and New • by separating the management of railway
Zealand, has come to the following conclusion operation and infrastructure from the
on the operation of the Australian Rail Track provision of railway transport services,
Corporation (ARTC), which was established separation of accounts being compulsory
in 1998 to manage access and infrastructure and organizational or institutional separation
development on the interstate track: being optional,

“The publicly owned ARTC, which manages • by improving the financial structure of
many of the higher density interstate rail undertakings, -by ensuring access to the
corridors in Australia, has been cash positive network of Member states for international
but earns significantly less than the replacement groupings of railway undertakings and
cost of its assets, and over the longer term for railway undertakings engaged in the
will require some public funding to sustain international combined transport of goods.
and enhance its network. The Australian
Government has already committed to Article 6 of the Directive mandated Member
significant grants to uplift the quality and States to ensure that ‘the accounts for business
performance of the interstate rail network, relating to the provision of transport services
including improving access into the congested and those for business relating to the
Sydney network. However, as volumes increase management of railway infrastructure are kept
the commercial performance of the ARTC, separate. Article 10 directed that international
which has spare capacity and largely fixed groupings must be granted access and transit
costs, will improve.” rights in all Member states in respect of
international services.”
5.4 The European Union has been moving
towards separation since 1991. Article I of the 5.5 Member States implemented the Directive
Council Directive of 29 July 1991 on the in various ways. We have seen that the British
development of the Community’s railways Government not only brought about a total
(91/440/EEC) explains both the aim and the separation but also broke up the two segments
content of the directive. into multiple private companies. Sweden had

12 • Report of the Task Force

initiated action for setting up separate public 5.7 A communication from the Executive
sector undertakings for infrastructure Director of the Community of European
(Banverket) and operations (SJ) even before Railway and Infrastructure Companies (CER) in
it acceded to the European Union in 1995. Brussels addressed to the Chairman of the Task
On 29 April 2004 the European Union moved Force states:
further for bringing about enhanced access.
By the Council Directive 2004/51/EEC the “There is no empirical evidence in Europe that
European Parliament and the Council of the separation between infrastructure and operating
European Union required not only that railway services leads to real improvements in the
undertaking must continue to be granted access railway system: just the other way around.”
to the Trans-European Rail Freight Network but
also they must be given access for the purpose The same communication brings out the
of operating all types of rail freight services. following facts:
• The CEO of the most successful railway
5.6 While the European Union is committed to company in Europe (in terms of capacity
forge ahead with the separation model, reviews utilization, customer satisfaction, quality,
of the implementation of the policy seem etc.)- the Swiss railway company SBB
to indicate that in railway circles there is believes that the high quality of SBB rail
considerable doubt on the acceptability of services is only possible because he can
the separation model as the superior option. optimize simultaneously the synergy of
A recent publication states that “no clear view infrastructure and operation within one
emerges on the ‘best’ model (integrated or company under one management.
separated)” (Community of European Railway
and Infrastructure Companies 2005, Reforming • Despite the EU move towards separation
European Railways- An assessment of progress, almost all countries in the centre of Europe -
Eurorail Press, Hamburg). Another publication, i.e. those companies experiencing a high
of which the author was Director of the Public density of rail traffic - have retained the
Transport Union in Switzerland from 1969 model of integrated holding companies
to 2000, is more forthright in his assessment. (Germany, Poland, Switzerland, Austria, Italy,
“As does the generally known situation in Great Belgium, Luxembourg) in order to maintain
Britain, also this analysis of the seven countries a high efficiency and productivity of the
with institutional separation gives proof of the railway system as a whole. Separation has
fact that separation has no benefits. It only been effected mainly in countries at the
brings serious problems” (Pfund, Carlo, periphery of Europe, i.e. without transit traffic
Separation Philosophy of the European Union- and with considerably lower traffic intensity.
Blessing or Curse, Service D’Information
Pour Les Transports Publics). • The experience in quite a number of
European countries (Germany, Switzerland,

The Delhi-Mumbai & Delhi-Howrah Freight Corridors • 13

 Austria, Italy, Poland, etc.) has shown • Studies by scholars show that an integrated
however that the objective of competition structure produces a cost saving of 27 per
can be achieved without giving up the model cent over a separated system (Ivaldi, M. and
of an integrated company. The Deutsche McCullough, G., 2002, Subadditivity tests
Bahn has the full responsibility for the rail for network separation, mimeo Toulouse and
infrastructure, but shares the offering of Northwestern University, cited in Reforming
railway services today with 290 other rail Europe’s Railways –An assessment of
companies having a railway company licence progress, Eurail Press, 2005)
for the German network. A well functioning
regulatory framework defines the general 5.9 The concept of synergy between
rules for the access to the rail infrastructure - infrastructure and operation is also referred
rules to be applied by Deutsche Bahn, which to by experts as rail-wheel interaction and has
is supervised in this respect by a German been explained at length as follows:
public rail authority.
Optimization of train operation on the network
5.8 In order to get over the handicaps of
separation, efforts are underway to reinforce 5.9.1 The railway functions as a system of
again cooperation and links between the vehicles, infrastructure, and operation control
separated units in order to regain the technology, like a machine. Only through
interdependencies and synergies of the a combined working of all the elements of the
railway system. Publications on the subject technical system, operational reliability and
of railway organization have also brought safety can be guaranteed. This is where the
up some other relevant facts: railway differs from other transport modes.
By means of permanent central coordination,
• Even where separation has taken place including the use of modern telematics, the
sometimes it is more in form and less system can be optimized and can thus guarantee
in substance. In France the infrastructure maximal efficiency and punctuality. By way
company, RFF, owns the infrastructure assets of central coordination, headways of trains can
but maintenance of the infrastructure as well be shortened until braking distance, timetables
as operations is handled fully by SNCF, can be harmonized, and efficient measures
the National Railway System. RFF defines can be taken in the event of incidents. Modern
the principles and objectives of traffic technology and traffic control systems make
management and direction, and SNCF is the it possible to reduce headways between trains,
delegated infrastructure operator contracted to speed up vehicle turn-round cycles and
for operation and maintenance. Thus SNCF to reduce the vehicles fleet held in reserve.
is formally separate but materially integrated The optimal run of operations is only
(Pfund, Carlo, Separation Philosophy of the guaranteed by the integration of operations
European Union- Blessing or Curse). and infrastructure. Only a technically integrated

14 • Report of the Task Force

enterprise can assume full responsibility technology. Also, if high safety standards
towards the customers for its run of operations. can be defined or be monitored by a political
authority, a clear responsibility for safety must
Further technical development of the in the final analysis be discernable. If one
comprehensive railway system considers the implication in the case of
accidents, a fragmentation of responsibility
5.9.2 Until technical innovations and adaptions between operations and infrastructure must be
in the railway world can finally be put into doubly rejected. Overall responsibility for train
practice, they are subject to an onerous operations can only be assumed by the manager
harmonization process. Different groups are or managing body who can control and
involved in the elaboration of the service supervise all safety-relevant influence factors.
product, groups whose interests are not (Pfund, Carlo, Separation Philosophy of the
necessarily quite the same. An integrated European Union - Blessing or Curse, Service
enterprise, in its decision oriented towards the D’Information Pour Les Transports Publics).
technical and economical overall optimum, can
implement necessary innovations quickly and 5.10 The experience of British Rail in
can assume responsibility for the investment separation also has some lessons. A World
risk. Railway offers that are competitive for Bank Report drew inter alia the following
a long time presuppose a permanent further conclusion on this:
development of the compound system railway
as a homogenous whole. The other transport “Separation of infrastructure from operations
modes are developing themselves further did cause problems of complexity and cost
at breakneck speed. In this innovation race, (transaction costs). It did not cause increased
the railway can only stand its ground if accidents and it did not support an increase
technologies in the infrastructure, as well as in in demand. Whether it yielded benefits in the
the vehicles, are developed further at the same British context worth the added costs is still
speed and in a concerted way. High-speed lines debatable. Alternative approaches, such as
and trains, the safety system ETCS, and the creation and sale of a limited number of market-
digital GSM-R radio communication system defined, integrated franchises might have
connected with it, all have been planned and worked equally well if not better (Thompson,
developed by integrated railway enterprises. Louis S., Privatizing British Railways Are there
lessons for the World Bank and its Borrowers?
Guaranteeing a high safety standard in the use Transport Papers, World Bank, TP-2
of the latest technology September 2004).”

5.9.3 Train traffic puts special demands on 5.11 One of the lessons that the above World
observance of safety standards in the system- Bank paper draws from the UK experience
specific interplay of wheel, rail and control is the following:

The Delhi-Mumbai & Delhi-Howrah Freight Corridors • 15

“Bank clients that are not compelled to adopt entrusted with the ownership and maintenance
the EU mandates to separate infrastructure of rail infrastructure is unlikely to be financially
from operations should carefully explore self-sufficient. Financial self-sustenance is even
the alternatives before adopting the UK more unlikely in the case of a new entity, which
or EU approach. The vertically integrated is asked to undertake heavy investment at a time
(infrastructure and operations) freight and at which the market price of several inputs such
passenger concessions in Latin America furnish as steel and cement are running at historically
a very valuable alternative model where traffic high levels
is heavily freight or heavily passenger oriented,
and where on-rail, intramodal competition is not 5.14 The Task Force considered the main
an important objective. The model in which the models that are in existence in the world today
dominant user is integrated with infrastructure, and weighed the pros and cons of both
but other, sometimes competing, sometimes vertically integrated and completely separated
complementary, users are permitted access as models. The vertically integrated model
tenants, also deserves strong consideration has its own advantage by way of synergy
where there is a strongly dominant user and an between infrastructure and operation but the
effective regime of independent economic disadvantage is that it does not allow above-rail
regulation to assure fair access for the tenants”. competition. The separated model allows above-
rail competition but suffers from the absence
5.12 On the question of independent of synergy and also higher costs. The separated
infrastructure companies operating on a model encouraged by the EU has not been fully
commercial basis and earning returns on the adopted by the major railway systems in the
investment we have seen that the Australian EU itself, as the only mandatory requirement
Rail Track Corporation, while making cash is that the accounts be separated. Some of the
profits is dependent on substantial grants from leading and successful railway systems such
the government for sustaining its network. as Japan and the USA have not gone in for
In the Member states of the EU the position institutional separation between infrastructure
is no different. Where separation has taken place and operations.
the infrastructure is owned and maintained by
public sector undertakings, and available evidence 5.15 The Task Force also considered a number
indicates that although they are not incurring cash of variants of the organizational structure in
loss, they are not generating enough revenue to order to capture the benefits of different models
give a return on the assets transferred to them and in existence in the world today, including one
some of them continue to need periodic injection in which the SPV would not only own the
of capital from government. infrastructure but would also be the dominant
operator, allowing the Indian Railways and
5.13 There is overwhelming evidence from other qualified operators to conduct business
international experience that an undertaking of freight movement and run trains in

16 • Report of the Task Force

competition with it. However, the consensus PSUs would have sufficient stake in developing
in the end was that the SPV would be an efficient railway system for freight
responsible only for the infrastructure and movement to be encouraged to contribute
for the movement of trains on its system, to the equity of the SPV.
while the Indian Railways and other qualified
private and public operators would run trains
on the tracks owned by the SPV. Thus the
SPV would plan, build, own and maintain the
infrastructure and move the trains on its system,
but would not own or lease any rolling stock
nor do any freight business other than haulage
of freight trains.

5.16 The Task Force, therefore, recommends

the adoption of the organizational model in
which the SPV builds, owns and maintains
the infrastructure and moves the train within
the corridors on its system, while allowing
non-discriminatory access to Indian Railways
and other qualified private and public sector
operators of goods trains within a regulatory
framework.

5.17 The SPV would not own or lease any

rolling stock nor do any freight business
directly with clients. The ability of the SPV
to run as a profit making commercial enterprise
giving some returns on equity can be judged
only after a feasibility report is received from
RITES. However, having regard to international
experience, it is likely that with this
organizational structure, the SPV would require
periodically to be granted substantial funds
for capital improvements in its assets though
such need for support would be mitigated
by the density of traffic on these corridors.
Despite the lack of assurance of a return on
capital, the Task Force believes that the user

The Delhi-Mumbai & Delhi-Howrah Freight Corridors • 17

Market Contestability

6.1 In some countries roadways and

waterways offer adequate inter-modal
competition. While the extent of inter-modal
in the Delhi-Howrah segment can be assessed
only after the exact alignments of the corridor
are known, the Task Force believes that on the
Mumbai-Delhi segment trucks moving on the
National Highways would offer enough
competition to the dedicated freight corridor.
With the broadening of the highways into six-
lane recently announced by Government the
competition would intensify.

6.2 The dedicated freight corridor could still

manage to retain and even increase its share
of the freight business if it can offer the
reliability that the manufacturing industry
would want in particular. The service could
improve further if trucking and railway services
complement each other in the transport of
containers, for instance. Even if inter-modal
competition can be expected to keep the
dedicated freight corridor on its toes, allowing
the Indian Railways and other players to operate
on these tracks would increase market
contestability further.

18 • Report of the Task Force

Whether the New Corridors Should
be for Freight or Passenger Trains

7.1 The Task Force examined the question envelope. Increasing clearances will mean
whether the existing infrastructure could be large-scale investment in raising bridges,
used for the dedicated freight corridor and new increasing width in platform areas, increasing
railway tracks constructed for passenger trains. height in platform areas, increasing height
It was pointed out that the existing of electrical OHE, tunnel sizes etc.
infrastructure imposed significant technical
constraints limiting the payload carrying 7.3 The technical constraints indicated above
capacity of freight trains. Axle Load permitted limit the payload, which can be cleared in one
on the tracks is 20.3- 22.9 tonnes against 25 train and consequently the throughput of the
to 37.5 tonnes per axle carried by major freight section. One train in Australia clears the same
carrying systems. The length of loops provided payload as would require 6-7 trains in India.
in yards and in stations is 686 metres, limiting Thus the sectional capacity gets vitiated on the
the length of trains to 58 BOX ‘N’ wagons. Indian Railways due to extra trains being run.
Against this, heavy haul freight systems Making the existing tracks fit for high axle
internationally carry more than 100 wagons, load, increasing loop length and clearing
with the Australian system carrying over physical impediments on existing structures
300 wagons per train. The moving dimensions, would not only be very difficult but extremely
which is the space envelope in which the costly, and a big challenge in built-up
locomotives, coaches or wagons have to be urban/semi-urban areas. A dedicated freight
designed is restricted on the Indian railways. corridor free from the technical limitations
enumerated above and fit for high axle load,
7.2 The envelop in other countries is larger longer trains and larger clearances can be
allowing use of wagons with higher cross- constructed afresh with little extra investment
sectional area permitting increased pay load compared to normal track construction.
in the same wagon. Payload to tare ratio i.e.
the payload compared to empty weight of 7.4 To summarize, the following are the major
wagon is in the range of 4-7 internationally constraining factors on the existing high-density
against 2.5 prevailing in India. The envelope routes of Indian railways, which limit throughput,
cannot be increased as structures on the track and which necessitate the construction of freight
like stations, platforms, roofs, bridges, tunnels, corridors on new alignments:
road over-bridges etc. have been constructed
with clearances according to the current space • The axle load limitation on the existing
envelope. The Railways may not be able to network is 20.3-22.9 tonnes against 30 tonnes
cope with the growth in container traffic of and above in major freight carrying systems.
around 15% annually without double stack
movement. Double stack container movement • The length of loops in yards and stations is
would not be possible due to the physical limited to 686 metres against nearly double
limitation imposed by the restrictive space the figure in other freight carrying systems.

The Delhi-Mumbai & Delhi-Howrah Freight Corridors • 19

• The maximum moving dimensions allowed 7.6 To summarize, the dedicated freight
by the existing structures along the tracks, corridors have to be preferred over high speed
which determines the space envelope for passenger corridors for the following reasons:
the design of locomotives and wagons, is
restricted and less than what is available • The investment requirement to build
even on the narrower standard gauge passenger corridors is five times that required
in other countries. for freight corridors

• Payload-to-tare ratio internationally is much • Simultaneously significantly heavy

higher than the existing 2.5 prevailing in the investments would be required to augment
Indian railways. capacity on existing networks to cater to the
freight business.
7.5 The Task Force was of the view that
establishing a new passenger corridor instead • Even after these investments physical
of a freight corridor was not tenable for a limitations imposed by the restrictive space
number of reasons. A high-speed passenger envelope would remain
corridor needs a higher level of technology
to provide the necessary safeguards towards • Investment for the dedicated high-speed
safety, and other systems including coaches, passenger corridors would have relatively
locos and signaling etc. The high-speed train lower returns on capital, which the country
system between Mumbai and Ahmedabad that can ill-afford.
was proposed in the past was estimated to cost
around Rupees 70 crores per km. For the Delhi-
Mumbai and Delhi-Howrah passenger corridors,
a total distance of 2800 kms, even at 50 % of
the earlier estimate the project cost would be
around Rs 100,000 crores. Against this the
corresponding freight corridors are estimated
to cost Rs 22500 crores. Given the magnitude
of funds required for the passenger corridors,
the project cannot be given priority over the
freight corridors. As a matter of fact the Task
Force was informed that at a meeting taken
by the Finance Minister on 22 August 2005
the view had been taken that the decision
on not taking up the dedicated passenger
corridor was a settled issue.

20 • Report of the Task Force