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Economy

India plans to revamp its rails with foreign help

400 stations to get a modern makeover in government's 1tn rupee project

Commuters travel on an overcrowded train on the outskirts of New Delhi. (Photo by Shinya Sawai)

NEW DELHI For Neha Bhatnagar, a 36-year-old living in the Indian capital, long train trips across the country have been anything but pleasant.

In July last year, she boarded the Goa Express to visit Shirdi, located more than 1,350km away in the western state of Maharashtra, and was "horrified" to find a small dead cockroach in the vegetarian meal she had ordered. "When I complained to the pantry boy, he offered to replace my meal, but I had lost all my appetite by then," she said, adding she was shocked to learn that there was not even a complaint book to register such issues.

Bhatnagar said she no longer eats any of the food available at railway stations or inside coaches. "I first refrained from having the non-vegetarian food being supplied in trains after developing a severe intestine infection some three years ago, and now I have shunned their vegetarian meals, too," she said, adding that she recently started booking flights more often, allowing her to travel more comfortably for only slightly more money.

Poor food is not Bhatnagar's only complaint regarding rail travel. "There are several other things that can turn your journey into a nightmare," she said, citing hours-long waits for trains that are rarely on time and dirty, foul-smelling toilets at the stations and inside carriages.

These are problems that millions of passengers like her face everyday. Security concerns are also pervasive in a country whose colonial-era railway network has seen few upgrades in over a century. Most train stations in India lack baggage scanners and even functioning metal detectors.

THE FIRST 400 To overcome these pressing problems, the government of Prime Minister Narendra Modi, who came to power in May 2014, has embarked on an ambitious plan to modernize 400 of the roughly 8,000 train stations at major destinations across the country. The goal is to equip them with world-class, passenger-friendly facilities, in collaboration with private players, including those from overseas.

New Delhi Railway Station -- one of the country's busiest terminals, serving over 500,000 passengers a day -- is among those to be redeveloped, and South Korea has voiced interest in undertaking its transformation. Modernizing this station will reportedly cost about 100 billion rupees ($1.49 billion), including the construction of a multi-story building that will house a shopping complex along with separate arrival and departure areas and spacious lobbies for waiting passengers.

The New Delhi Railway Station serves over 500,000 passengers a day. (Photo by Shinya Sawai)

A South Korean transportation ministry official confirmed to the Nikkei Asian Review that three of his country's companies -- Korea Railroad, Lotte Asset Development and Korea Rail Network Authority -- are in talks with Indian officials to take part in the renovation of the New Delhi station.

The companies are planning to send a team to India to study the business, said Jeong Jae-woong, a director at the ministry. He stressed that talks are still in the early stages but said the ministry is providing its full support to help the companies win the deal.

South Korea has a long association with the Delhi transportation sector. When the Delhi Metro Rail service was launched in 2002, India imported pre-built units from South Korea. Now, however, 90% of the coaches supplied to Delhi Metro are manufactured in India, according to the International Association of Public Transport.

The 400 railway stations to be transformed are generally located in major cities, pilgrimage centers and important tourist destinations. Improvements under the redevelopment plans include, among other things, digital signage, self-ticketing counters, luggage-screening machines, escalators and elevators, executive lounges, walkways, grand and distinctive roofing and flooring, free and paid Wi-Fi, congestion-free entry and exit points, integration with other modes of transportation such as buses and metro trains, and plenty of parking.

The government says the project will be implemented under the public-private partnership model and that the entire cost will be met by leveraging commercial development of real estate available in and around the stations. With an overall scope of 1 trillion rupees, the program is one of the largest PPP projects undertaken in the country.

On Feb. 8, Railway Minister Suresh Prabhu launched the first phase of India's station redevelopment program for 23 major railway stations. The second phase will focus on a further 100 or so stations and phase three the remainder.

Officials say the stations will be redeveloped through a fair bidding system without straining the finances of Indian Railways, the state-owned organization in charge of rail travel in the country. In return, developers will be given the rights for commercial exploitation of the land at the stations for 45 years.

Ideally, this means the program will benefit more than 100 cities and 16 million passengers per day across the country, while also providing quality retail, commercial and hospitality development.

FIXING THE LOSS-MAKER India's first rail line was built in 1853, when the country was under British rule. Today, Indian Railways employs more than 1.3 million people, with 12,000 trains carrying more than 23 million passengers a day. Another 7,000 trains haul about 3 million tons of freight daily.

A government white paper issued in 2015 noted that Indian Railways -- which is managed by the Ministry of Railways rather than a listed state company -- lacked sufficient resources for improving customer satisfaction and introducing new technology. Investments in safety have also been inadequate, the report said.

The organization has reportedly been losing about 340 billion rupees a year, partly due to discounts for seniors and other passengers. Keeping potential voters in mind, the government has largely refrained from hiking fares for non-air conditioned trains for over a decade. Higher staff costs and pension payments to retired workers due to a revision of the pay structure for government employees has also impacted Indian Railways' resources.

To improve railway infrastructure and the operator's financial health, the Modi government has merged the rail budget -- which had been presented separately since 1924 -- with the general budget. On Feb. 1, it presented a combined budget for the financial year starting April 1, which included an 8% increase in spending on railways, bringing it to 1.31 trillion rupees.

The unified budget will save cash-strapped Indian Railways about 100 billion rupees in annual dividends it currently pays in return for gross budgetary support from the government. In addition to putting more of a spotlight on railway affairs, the combined budget will also help present a more holistic picture of the government's financial position and is expected to reduce paperwork, bringing into focus the aspects of delivery and good governance.

A separate rail budget was introduced during British rule because at that time, revenues from the sector "far outstripped the general revenue and had the potential of masking small yet important aberrations in the general budget ... if presented together," Vivek Sahai, former chairman of the Railway Board, wrote in The Hindu newspaper.

In 1947, when India gained independence, railway revenue was still 6% higher than general revenue, but it had shrunk to about 30% of general revenue by the 1970s. By 2015-2016, it was down to 11.5%, Sahai noted.

MODI'S MISSION Modi is keen to improve India's crumbling rail networks, and has time and again highlighted the need for modernizing the sector to turn it into an engine of economic growth. In 2015, his government unveiled plans to invest 8.5 trillion rupees in the country's railways over five years.

Accelerating infrastructure development is vital for boosting growth, and railways are at the top of the to-do list. The Japanese government has agreed to provide $12 billion in soft loans to build India's first bullet train.

Safety is another priority, as accidents are all too common on Indian railways. In January, a derailment in the southern state of Andhra Pradesh killed nearly 40 people. In November, over 140 people lost their lives in another such accident in the northern state of Uttar Pradesh.

Against this background, India and Italy signed a memorandum of understanding on Feb. 2 for technical cooperation in the rail sector, with a focus on safety-related aspects.

To modernize its railway infrastructure, including train stations, India has also inked memorandums with Slovakia's transport ministry, the U.K.'s transport department, Japan's transport ministry, China's railway ministry, Russian Railways' Joint Stock Co., Czech Railways, French state-owned railway company SNCF, Germany's DB International, and Belgium's ministry of mobility.

Reforming India's railways opens up big opportunities for foreign companies, whose investment, analysts say, can enable the loss-making sector to deliver the safer, more comfortable travel that passengers have been waiting for.

Nikkei staff writer Kim Jaewon in Seoul contributed to this report.

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