RAILWAYS May 2021 For updated information, please visit www.ibef.org Table of Contents Executive Summary 3 Advantage India 4 Market Overview 6 Recent Trends and Strategies 15 Growth Drivers and Opportunities 21 Key Industry Contacts 34 Appendix 36 2 Executive summary 2. GROWING PUBLIC-PRIVATE 3. GROWTH INITIATIVES PARTNERSHIP (PPP) . To boost rail infrastructure and make the Indian Railways network future ready, Indian Railways has identified 56 projects across the country in . Private sector companies are being encouraged to participate in various zones to be completed by Feb-Mar 2021 and FY22. rail projects, which were largely in the public domain. The cabinet . The iconic project of Chenab Bridge is in progress. Its cost is estimated to approved ‘participative models for rail-connectivity and capacity be Rs. 1,486 crore (US$ 200.46 million) and the design life of the bridge is augmented projects’, which allowed private ownership of some said to be 120 years. railway lines. Under the Union Budget 2021-22, the government allocated Rs. 110,054.64 . The government has announced two key initiatives for seeking crore (US$ 15.19 billion) to the Ministry of Railways. private investments—running passenger trains by private . Indian manufacturers, under the ‘Atmanirbhar Bharat’ initiative, are being operators across the railways network and redevelopment of urged to develop an alternative to high-tech machines that are needed to railway stations across the country. According to Indian Railways, build high-speed rail speedily for the country’s first high-speed rail corridor these projects have the potential of bringing an investment of over connecting Ahmedabad and Mumbai. US$ 7.5 billion in the next five years. As part of the National Rail Plan for 2030, Indian Railways is expected to create a future-ready railway system by 2030 to bring down logistics cost 1. WORLD’S FOURTH-LARGEST and ensure 100% electrification of broad rail routes by December 2023. RAIL NETWORK . Indian Railways has >123,542 kms 4. MODERNISATION/ of total tracks over a 67,415-km TECHNOLOGY UPGRADATION route and ~7,300 stations. YAs of F 20, the Indian Railways . Indian Railways will use LiDAR (Light daily operated 13,169 passenger Detection and Ranging) technique, with and 8,479 goods trains. 2 3 laser-enabled equipment mounted on a . YIn F 20-21, Indian Railways helicopter, to survey the surface for the recorded the highest loading in Delhi-Varanasi high-speed rail corridor. freight transportation. In a bid to provide storm warnings and other weather updates to station masters and passengers, the Indian Railways 1 installed automated weather forecast 4 equipment at 19 stations under the North Western Railway zone. 3 Advantage India 4 Advantage India 1. Growing demand 2. Opportunities ► Increasing urbanisation and ► Freight traffic is set to increase rising income (both urban and significantly due to rising rural) are driving growth in the investments and private sector passenger segment. participation. ► Growing industrialisation across ► Metro rail projects are being the country has increased freight envisaged across many cities traffic in the last decade. over the next ten years. ► India is projected to account for 40% of the total global share of 1 2 rail activity by 2050. 3. Policy support 4. Higher investment ADVANTAGE ► The Government has increased ► FDI inflows in railway-related INDIA the scope of PPP beyond components stood at US$ 1.12 providing maintenance and other billion from April 2000 to 4 3 such supporting roles. PPP is September 2020. being utilised in areas such as ► Investment in Railway’s redevelopment of stations, infrastructure is estimated to building private freight terminals increase from US$ 58.96 billion and private container train in 2013-17RE to US$ 124.13 operations. billion in 2018-22E.^ ► Government has allowed 100% ► It is estimated that Railway’s FDI in the railway sector. infrastructure would need an ► In January 2021, the Ministry of investment of Rs. 50 lakh crores Railways rolled out a new iron (US$ 715 billion) between 2018- ore policy governing allocation of 30. rakes and transportation of iron Note: FDI - Foreign Direct Investment, ^As per CRISIL Infrastructure Yearbook 2017, RE - Revised Estimates, E - Estimate ore. Source: Railway Budget 2019-20, Press Information Bureau, Department for Promotion of Industry and Internal Trade in source,, The Future of Rail Opportunities for energy report by International Energy Agency 5 Market Overview MARKET OVERVIEW 6 Indian railways has two major segments . India has the fourth-largest railway system in the world, following the US, Russia and China. Indian Railway (IR) is: • a departmental undertaking of the Government of India, which owns and operates most of India's rail transport. • overseen by the Ministry of Railways. AsY of F 20, IR had a total route network of 67,956 kms. • It daily operated 13,169 passenger and 8,479 goods trains. • It has >123,542 kms of total tracks over a 67,415-km route and ~7,300 stations. • It had million 2,93,077 wagons, 76,608 coaches and 12,729 locomotives. • Introduced 153 new passenger trains. Over 23 million passengers daily travel by train in India. Passenger traffic stood Passenger at 8,086 million in FY20. Railways . About 1,232.64 million tonnes of freight was transported via trains in FY21. Freight . These include a huge variety of goods such as mineral ores, iron, steel, fertilisers, petrochemicals and agricultural produce. Source: Indian Railways Year Book 2019 - 20 7 Strong revenue growth for Indian railways . Revenue growth has been strong over the years. Indian Railways’ revenue Gross revenue trends over the years (US$ billion) reached US$ 24.78 billion in FY20. Indian Railways has undertaken various measures to boost revenues 25.80 including: • Passenger Earnings - introduction of new trains, operation of special 25.60 trains during peak seasons, running premium special trains with 25.69 25.40 dynamic pricing 25.56 • Freight Earnings - reduction in distance of mini rakes, withdrawal of port 25.20 congestion charge, rationalisation of Merry-go-Round policy • Parcel Earnings - leasing parcel space to private parties, liberalisation 25.00 of parcel policy 24.80 25.02 • Other Earnings - adoption of bulk advertising rights, vinyl wrapping of trains, right of way charges 24.60 24.78 . Indian Railways is also looking at other areas of revenue generation such 24.64 as the following: a) Change in composition of coaches so that it can push 24.40 the more profitable AC coach travel; b) Additional revenue streams by monetising traffic on its digital booking IRCTC; and c) Disinvesting IRCTC 24.20 . RailTel, a PSU under the Railway Ministry, which provides fast and free 24.00 Wi-Fi across the Indian Railways network, announced its highest-ever consolidated income of Rs. 11,660.05 million (US$ 158.48 million) for FY16 FY17 FY18 FY19 FY20 FY19-20. This income figure is a 12.3% growth over the consolidated income in FY18-19. Note: CAGR - Compound Annual Growth Rate, E - Estimates, FY - Indian Financial Year (April-March), PSU – Public Sector Undertaking Source: Ministry of Railways 8 Segment-wise revenue growth for Indian railways Passenger earnings (in US$ billion) Earnings from freight (in US$ billion) ^CAGR 1.25% ^CAGR -0.79% 18.50 7.80 18.00 7.60 17.50 18.23 7.40 18.16 7.55 17.00 7.20 16.50 7.00 7.25 16.00 6.80 16.68 15.50 16.10 6.90 6.90 6.60 16.04 6.76 15.00 15.55 6.40 14.50 6.20 14.00 FY16 FY17 FY18 FY19 FY20 FY16 FY17 FY18 FY19 FY20 FY21 . Revenue from passenger segment of Indian Railways increased at a CAGR of 1.25% to reach US$ 7.25 billion in FY20 from US$ 6.90 billion in FY16. Passenger revenue is expected to fall by ~72% YoY to ~Rs. 15,000 crore (US$ 2.0 billion) in FY21 due to COVID-19. Freight earnings stood at US$ 16.04 billion in FY21. In March 2021, Indian Railways achieved the highest freight loading of 130.38 million tonnes, which is 27.33% higher than last year’s loading of 103.05 million tonnes. Increased carrying capacity, cost effectiveness, and improved service quality will see Railways incremental share from freight movement increasing from 35% to 50% by 2020. With 637.2 km of metro rail in 13 cities and over two dozen metro projects lined up, India’s metro rail network is expanding at a fast pace. Notes: CAGR - Compound Annual Growth Rate, FY-Financial Year, Exchange Rates used are averages of the year, P - Provisional Source: Ministry of Railways, News Articles 9 Freight accounts for more than two-thirds of railway’s revenues . Freight business for Indian Railway is supported by 9 commodities, few of Revenue breakdown by segment (FY20) them being coal, iron, steel, iron ore, food grains, fertilizers, petroleum products. Indian Railways’ freight business increased nearly seven times in the last fifty years - from 167.39 million tonnes in 1970-71 to 1,159.55 million tonnes in 2.70% 2017-18. 3.40% . Freight remains the major revenue earning segment for Railways, accounting for 65% of the total revenue in FY20, followed by the passenger segment. Profit from the freight segment is used to cross-subsidise the passenger segment. 29.00% . YIn F 21, Indian Railways recorded the highest loading in freight transportation. With this, the freight revenue of Indian Railways also increased to ~Rs. 1,17,386 crore (US$ 15.84 billion) in the same period, as against Rs. 1,13,897 65.00% crore (US$ 15.36 billion) in FY20. Since August 2020, the Indian Railways has ran/operated 450 Kisan Rail services and transported >1.45 lakh tonnes of agricultural produce & perishables.