Tilak Raj Seth, Executive Vice President, Mobility, Siemens, feels implementation of PPP will provide a fillip to railway projects in India. However, given the size and rapid growth in the country's rail sector, availability of trained manpower will remain a primary challenge.
In what areas is Siemens engaged with the Indian Railways at this point in time?
Worldwide, Siemens has been engaging with the rail industry for long. You can basically define our rail business in two big steps of infrastructure and rolling stock. The first domain is fixed infrastructure. Siemens is engaged in electrification, automation and digitalisation solutions, in terms of signalling, interlocking and fleet management. We are also into Supervisory Control and Data Acquisition (SCADA) systems and sub-stations to back-up electrification. We are not doing civil stroke track work. The second domain is rolling stock. Starting with locomotives that hold the train, we are also into passenger coaches, self-propelled vehicles called electrical multiple units (EMUs) and light rail transit. In rail projects for urban environment, we are working on fixed infrastructure such as electrification, signalling, telecom and rolling stock.
Siemens is also doing high-speed and inter-city trains. Our footprint in high-speed trains is the widest in the world and we are available across four continents. In the Indian context, in mainline, we are doing systems and services for locomotives and also giving out auxiliary components like hotel load that substitutes power car. We are also carrying out mainline signalling and electrification, and participating in various bids of electrification and signalling for the Dedicated Freight Corridor (DF0.C). In metro rail projects, we are working on electrification and signalling for practically all cities. Apart from infrastructure and rolling stock, we are now also providing services of electronic and digital products. We have signed annual maintenance contracts (AMCs) by which we service the railways' propulsion equipment. The inverters in air-conditioned coaches are also being serviced by us. We are present in 100 locations in India.
What is the level of your participation in India's high-speed railway project?
As a part of the G2G engagement, India and Germany are in talks of high-speed railway on the Chennai-Bangalore-Mysore corridor. The Government of Germany is doing a feasibility study on this topic. It is in its very early stages though.
What are the main challenges that you encounter while servicing a network as humongous and complex as the IR?
First of all, I have to admit that the Indian Railways is a really big organisation. The challenges, however, are not very different from those faced by any big government organisation. While the capabilities are tremendous and the vision is deep, there are also constraints in public procurement and due process that take longer than a standard management judgment. But the Railways has, over the years, exhibited its willingness to overcome these challenges. One of the first steps that has been taken is decentralised procurement. Second, it has gone in for e-bidding and e-procurement, which have helped in introducing more speed and transparency. Of course, this does not mean that the desirable speeds are acquired, but I think the efforts are inching towards it. Third, it is a national service provider and is required to wear the hats of both national social responsibility as well as commercial organisation. That poses a lot of challenges. But the Railways is taking steps and the results will only be visible when the so-called regulatory authority is in place.
So, what is your overview of the public-sector rail network's evolution since 1947?
The Railways moves 8.7 billion passengers per annum, which means the whole of our planet moves at least once on Indian Railways. It has 1 billion tonne plus freight originating in India. It moves nearly 12,000 train services, which is like travelling by the Sun's rise towards Moon and by the Sun's set returning to the Earth. What has happened is that until the year 2000, the Indian Railways was working in a manner where it would do everything at home, including manufacturing, supervision and technology transfer. This was necessary as the railway sector is a large industry, but we had plenty of missing edifices. Since the private industry was not engaged in India, Railways kept the entire value chain to itself. Moreover, in 2000 there was one small metro project. Now between 2000 and present day, we have metros going on in six cities. We have also added several kilometres of track. From now on, the Railways intends to add about 1,000 locomotives per annum. It is no longer insisting on transfer of technology at all times and is willing to leave it to various value chain elements. It is also willing to employ general consultants and inspection services from outside. By and large, these efforts are helping in adding pace to its work. It has partially also gone into PPP and engineering, procurement and construction (EPC) modes, which was not there earlier. Going forward, we will find the Railways leveraging financial participation from other stakeholders like private funding and foreign direct investment (FDI). The Railways might also enter lifecycle services. That is partially already visible in contracts like Madhepura and Marhora, where 17 years of these services are engaged.
And, we also know from the Mumbai-Ahmedabad project with the Japanese that a long-term service would be a part of the so-called obligation. The reason is quite clear. The revenue of Indian Railways to the order of Rs 1,800 billion, with an operating ratio of around 90, would only leave Rs 180 billion for investment. However , its investment is in the nature of Rs 1,300 billion. This is only manageable by participation from other stakeholders. The Ministry of Railways is doing well in sounding financial institutions such as the Life Insurance Corporation (LIC) for aid, as it is a long-term investment.
But simultaneously concerns have been expressed on Railways' declining share in movement of passenger and freight traffic. What is your own view on the issue?
I believe it is really a question of market attractiveness to the end-user. A large part of this freight is bulk and commodities. And, if you want to enhance the share, you have to go beyond that. This means some white goods, brown goods and cars should be travelling by rail. That would only be possible when the industry feels confident about the services provided. The Railways is conscious of this fact and that is why you hear about the mooting of multi-modal services and terminals. If it manages to catch a significant part of this share that is currently moving on the road, then it is going to add to a really different freight regime. When you come to passengers, they have to make a choice especially in view of distances of 500 to 800 kilometres; beyond this, we all know that it is difficult to match low-cost airlines. But if it were reasonable speed inter-city services, then the Railways will reclaim that share not only from air transport but also from road. And, that's why introducing semi-high speed is really essential.
In the last budget, the Railways had announced upgrading speed on the Delhi-Howrah and Delhi-Mumbai corridors. The project is worth Rs 200 billion and I know the Railways is actively pursuing its implementation. In my view, the Railways need to quickly appoint a consultant to guide them. The moment it falls in place, there are various models by which various industry stakeholders could participate in this large endeavour.
What are your thoughts on the PPP model in the railways?
PPP is an important mode of infrastructure addition in any country, which can be highly leveraged in India. However, it needs to balance risks in an equitable manner on the side of the public and private partner. A private partner is required in a PPP to bring in the initial investment, know how and implementation capability faster than the state mechanism. A public partner is required to give state economic viability and rate of return in terms of transit-oriented development. This means that the state must own the risks involved, which are related to the accruing economic advantages. Fare box risks such as how many passengers will travel, which rate is more appropriate politically, etc., must lie with the state. Now the private entity's responsibility naturally is on the speed of infrastructure addition and, after construction, to run it during its lifecycle period. The private entity should be paid by the state in a PPP project on the availability concept. This is the model used the world over. If this model is also implanted here, infrastructure addition will get accelerated.
Analysts have been forecasting a significant growth in India's railway sector in the coming years. How well do we fare in terms of skilled manpower when it comes to servicing that increase?
This is a very important question. The Railways is a highly specialised industry. It is difficult to draw resources from other affiliated or associated industries. For example, signalling is a very specific expertise of the railway business. But there is an acute shortage of signalling engineers in the country. In fact, Indian signalling engineers find opportunities outside India because they are in short supply the world over. So, is it everywhere. That's why the Prime Minister and Railway Minister have made special calls for enhancing skills in the area of railways. By the way, we are the only country with such a large rail network that does not have a railway university. Perhaps, that is one area where the Railways will be adding more resources. There are skilling and training institutes like the National Academy of Indian Railways (NAIR) in Vadodara, a few chapters and seats in the Indian Institutes of Technology (IIT), such as in Kharagpur, and Railways' own training workshops. But the fact remains that availability of skilled manpower continues to remain a challenge as we are one of the largest rail operating countries in the world.
Please elaborate a little on your plans to outsource some of your components for the railway business from local players. What has prompted the move?
We know that in order to be adding speed and appropriate economic value, things have to come from close proximity of the customer base as much as possible. The Indian Railways has a large customer base in India and its pace of infrastructure addition is rapid. For example, the Railways' plans to manufacture 600 to 1,000 locomotives per annum, add EMUs and set up projects like Kachrapara, which are big initiatives. It is only possible if a significant part of the value chain is carried out within India.
- Manish Pant