Railway's uneconomic branch lines potential and possibilities

Abstract

Indian Railways is saddled with many railway branch lines that were constructed either by British on military/strategic considerations or by the Princely states as a symbol of status. Today these lines do not carry much traffic and the expenditure on the staff and maintenance of these lines is higher than the revenue generated. Uneconomic branch lines by definition are the line that does not yield a return equal to or more than the opportunity cost of capital employed in the stock of similar risk. In Railways, the return can be considered as equal to the rate of dividend payable to the central government. Considering the importance for public, development of area, capital for line being generated through taxpayer's money and the consent of central government to forgo the dividend on these lines, one can assume return to be zero. However if the line continues to have operational losses, it becomes a constant drain on revenues. It thus necessitates a holistic evaluation to find whether it is serving any other purposes or not. Due to network characteristics of railway system, a viability evaluation of an isolated section is complex. The need of section is not only from financial viability point of view but also from service, connectivity and economic point of view. So far the studies on IR have been done with the view of finding ways and means to reduce losses i.e. the viability gap and the net loss is to be bridged through state or central government funds. Else the option is to close the line. Discontinuation of the services on branch line is an issue having wide social and political ramification. Therefore it is generally difficult, especially in the Indian political environment. Internationally, this issue has been handled differently. In USA through the elaborate government regulation namely Staggers Act, many innovative schemes of merger and acquisition of rail lines apart from closure of isolated sections among various class I,II and new rail road carriers have been followed to bring in efficiency in customer service, maintenance practice and the financial performance. Looking to the advantage of having private players, UK has also gone ahead with full-scale privatization but ended with limited success. This has happened because of capacity constraint among private players but has still provided valuable lessons to UK. Now they had modified their concepts and plans of management of rail services differently for different regions. The philosophy for London is totally different from that of isolated section. The Community rail concept allows greater participation of local bodies, industries and individuals in the day today management of rail line serving their area. In India, a similar experiment on Darjeeling Himalayan railways have shown the way forward with initial success in bringing the local community and state government together in the management of rail service. Where such potential do not exist, a better utilization of assets needs to be thought of before the closure of line as demonstrated by the successful case of Sanganer-Todaraisingh section of Jaipur. In absence of abetter alternative utilization of the released assets, any closer will results into a failure like re-opening of inoperative NG sections of Vadodara division. The fact remains that the fate of the line is always decided by popular sentiments. Therefore the management of these lines should be delinked from IR to facilitate an increased local participation, allowing them to set their own technical standards for maintenance, flexibility in deciding the fare and service level and harnessing of all kind of support including finance from all possible sources. This will ensure transparency among all stakeholders. Despite this, if line remains non-viable, it can be closed without the political resentment and assets can be put to alternative usage.