Overview
Railways- poised for investment & growth
Railway system in India is ranked fourth-largest in the world, after US, Russia and China with network spread across 67,415 route km ( with 1,23,542 running track km) and about 7,300 stations. Railways in the year ending March 2019 carried 8.4 billion passengers and transported 1.2 billion tonnes of freight running 13,523 passenger trains and 9,146 freight trains daily on its network catering to the needs of sub-urban, long distance passenger and freight services.
During last five years there has been significant focus and investments in infrastructure upgradation including capacity augmentation, new lines, electrification and safety with capital expenditure of Rs 6,45,600 Cr with 13,687 rkm electrified and 1,458 Km/year of rail line doubling. In the next five years focus of Railways is to increase efficiency in operations through modernisation, increase modal share of Railways in freight , 100% electrification, capacity augmentation of track network, increase in average speed of passenger and freight trains, involvement of private sector in redevelopment of stations and private train operations along with asset monetisation of its operational infrastructure.
As per National Infrastructure Pipeline (NIP) investments of over Rs 13.67 lakh crore is envisaged upto 2025 which constitutes to 12% of overall investments planned under NIP. Projects worth Rs 1.61 lakh crore is aimed to be implemented through PPP mode. Further, Draft National Rail Plan envisages capital expenditure of Rs 38.22 Lakh crore till 2050 in the railway sector.
The contribution of Indian Railways was reflected more in the pandemic as the movement of essential commodities including foods, medicines, fertilizers, essential consumables was ensured as truck movements became restricted or delayed. With the focus of freight operations and infrastructure maintenance and upgradation works during COVID period, Railways in last few months in 2020 increased its freight loading over same period in previous year in November by 9%, October by 15% and September by 15% respectively. Railways evolved itself to convert the challenge into opportunity and completed many of the maintenance projects involving safety and capacity augmentation which were pending long.
Client issues
- Loss of modal share in Freight business. While freight is where Railways makes money to offset losses in passenger services, it is losing out modal share in freight due to higher tariff, lack of services in terms of reliability, punctuality and additional costs for last mile connectivity. In 2017-18 modal share of Railways was 26% which is aimed to increase to 45% by 2030.
- Capacity Constraint. Railways have more than 60% of routes being more than 100% utilized. This has led to loss in punctuality, lower throughput, lack of proper maintenance, route diversions and underutilisation of assets.
- Lower Operating Ratio. Lower efficiency has led to lack of internal resources for investment. In FY-19, only 3% of investments was envisaged from Internal resources while 57% from Gross Budgetary Support and 40% from Extra Budgetary Resources.
- Limited success in Private sector investments. Despite various schemes and policies for encouraging private sector participation, private sector investments have been low and limited to wagons operations, loco manufacturing, freight terminals. Recent initiatives are being undertaken for PPP in station redevelopment and Private Train operations, while PPP policy in Good-sheds have also been announced.
- Cost and Time Overruns. Railway project face significant delays in execution. Out of 1705 projects ( projects costing more than Rs 150 Cr) on the monitor of Ministry of Statistics and Programme Implementation, 310 projects belong to the Railways and more than 50% of these are delayed. Some of the reasons for delay have lack of funds, land acquisition, Forest land clearance, geographical surprises, delay in shifting of utilities and adverse law and order situation.
- Limited Integrated planning and implementation in view of lack of co-ordination while planning and execution between multi-departmental units in Railways and inter-ministerial consultations.
Our service offerings
Market strategy by undertaking feasibility assessment for entry and growth strategy, creation of business plan & operating model.
Strategic services providing strategy & planning, business development, industry intelligence & perspectives to assist in decision making.
Project structuring for ensuring best value for money analysis and PPP structure for infrastructure and services across passenger/freight operations and infrastructure.
Asset Monetisation from revenue generating infrastructure and future cash flows through various options like InVITs, Infrastructure bonds etc.
Bid Advisory services through review of agreements for risks and mitigation strategies, partner search, investment due diligence including financing options and constrains.
Traffic, Feasibility and Bankability studies including techno-commercial due diligence for freight and passenger services and production units.
Detailed Project Report for rail infrastructure including capacity augmentations, new lines, production units, freight, passenger terminals and multi modal transport hubs
Techno-commercial due diligence including Revenue Models for implementation of last mile connectivity for ports, mining and production/storage facilities, passenger stations & freight terminals, freight and passenger operations
Alternate revenue models from Non-Tariff measures through value capture financing.
Growth / revenue enhancement through analysis of revenue trends & identify new sources of growth and future customer needs in the transport and logistics sector
Program management and implementation strategy for large scale interventions for creating value for public sector in development and operations in areas such as passenger/freight terminals, rolling stocks, rail infrastructure, production units etc.
How PwC can help
- Identify opportunities and strategy for market entry, investments and expansion plans
- Review of the schemes and policies for private sector investments
- Supporting the deal cycle from initiation to due diligence, transaction support and deal closure
- Enabling framework for enabling Asset monetisation through optimum options including InVITs, Infrastructure binds, REITs etc
- Enabling bankable and investible projects through structuring, risk identification, allocation and mitigation measures, revenue and cost estimation, robust contractual framework with objective performance indicators.
- Provide bid advisory services using risk matrix, financial modeling and commercial due diligence framework.
- Prepare Detailed Project Report through robust project development studies, traffic survey/modelling, revenue and cost estimates ensuring robust techno-commercial feasibility assessment
- Preparation of Business models by applying risk mitigation frameworks, optimum asset utilisation, revenue maximisation potential and optimisation of costs.
- Using benchmarking tools and scenario in financial models undertake Revenue estimation by identifying sources of Non Fare revenue
- Suggesting Operational efficiency improvement across logistics in passenger and freight services through optimisation and business process improvements.
- Provide program management services to enable successful identification, planning and implementation of projects including financing, procurement and monitoring support
