         • As of FY14, had 12,617 passenger trains carrying over 23 million World’s third-largest rail passengers daily. On the commercial front, 1010 million tonnes of freight was transported network via trains in FY13 and 1,050.2 million tonnes in FY14

• Private sector companies are being encouraged to participate in rail projects, which were Growing public-private largely in the public domain. In December 2012, the Cabinet approved ‘participative partnership models for rail-connectivity and capacity augmented projects’, which allows private ownership of some railway lines

• Indian Railways is constructing dedicated freight lines along the country’s Eastern and Western corridors; this would increase productivity and reduce transportation cost. A special purpose vehicle has been set up for the same. Moreover, in March 2013, the Growth initiatives Cabinet approved the Automobile Freight Train Operator Scheme to encourage automobile transport through railways • Budget 2015 anticipates a diamond quadrilateral network of high speed trains connecting major cities and growth centres

• Indian Railways launched mobile ticketing services, which enable customers to receive tickets on Short Message Service (SMS). Additionally, it plans to upgrade its current Modernisation/ systems to support bookings of 7,200 tickets per minute compared with the current Technology upgradation capacity of 2,000 tickets • Funds amounting to USD82.5 billion are expected to be spent on projects in next 10 years

Source: Aranca Research, Press Information Bureau

FY14 GrowingGrowing demanddemand Attractive opportunities 2020F • Increasing urbanisation and rising • Freight traffic is set to increase Gross incomes (both urban and rural) are significantly due to investments and Gross revenue driving growth in the passenger private sector participation revenue segment • Metro rail projects are being USD44.5 USD23.2 • Growing industrialisation across the billion envisaged across many cities over the billion country has increased freight traffic next ten years over the last decade

Advantage Higher investments Policy support

• The government has been investing • The government has increased the heavily to upgrade railway infrastructure scope of PPP to beyond providing • The sector has been witnessing maintenance and other such increasing level of FDI participation over supporting roles FY08–12 • The government is providing new lines • Cumulative FDI Inflows from April 2000 and increasing the rolling stock to to November 2014 stood at USD634.1 build up capacity million • Private Investment in MRTS is expected to increase from 13 per cent to 42 per cent during 2012-17

Source: Railway Budget 2014-15, Planning Commission, Press Information Bureau, Department of Industrial Policy & Promotion; Aranca Research Notes: 2017F – MRTS - Mass Rapid Transit System, Forecast 2017, MT - Million Tonnes, FDI - Foreign Direct Investment, FY is Indian Financial Year (April–March), F - Forecast

Indian Railways (IR) is:

A departmental undertaking of the Government of India (GOI), which owns and operates most of India's rail transport

Overseen by the Ministry of Railways

As on March 2013, IR has a total route network of about 65,436 kilometres (of which 20,884 were electrified) spread across 7,172 stations

It operates more than 19,000 trains daily

It has 2.4 lakh wagons, 63,870 coaches and 9,549 locomotives

IR’s total assets at the end of FY12 amounted to USD53.8 billion

• As on March 2014, 12,617 passenger trains were in operation Passenger • Over 23 million passengers travel by trains daily in India. The number of passengers stood at 8535 million in FY14

Railways

• Around 1,050.2 million tonnes of freight was transported via trains in FY14 and 1,101.3 million tonnes is expected in FY15 Freight • These include a huge variety of goods such as mineral ores, iron and steel, fertilisers, petrochemicals and agricultural produce

Source: Ministry of Railways, Press release, Railway Budget FY14 – 15, Aranca Research India has the world's third-largest railway network under single management

Total revenues (USD million) 59 23,305

FY14

Passenger revenue earnings (USD million) 22 6,217

Freight traffic (million tonnes) 73.2 1,050.2

Number of stations 5,976 7,172

Running track (kilometres) 59,315 FY1951 116,000

Source: Ministry of Railways, Times of India, Press Information Bureau, Railway Budget 2014-15, Aranca Research Revenue growth has been strong over the years; during Gross revenue trends over the years FY07–14, revenues increased at a CAGR of 7.1 per cent to (USD billion) USD23.2 billion in FY14

44.50 Revenues would expand at a CAGR of 8.1 per cent during FY07–15

CAGR: 11.5% The revision in fare effective June 2014 is expected to increase Railway revenues by USD1.3 billion in FY15 23.20 20.75 21.72 21.70 18.25 17.77 18.83 Indian Railway sector aims to boost passenger amenities 14.31

With the improvement in the economy and increasing industrial activity, it is expected that Indian Railway will touch the revenue of USD44.5 billion by 2020 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY20E

Source: Vision 2020, Ministry of Railways, Aranca Research Notes: CAGR – Compound Annual Growth Rate, E – Estimates, FY14 and FY15 are Budget Estimates, FY – Indian Financial Year (April–March), * In Terms In the last eight years, revenues from the passenger segment expanded at a CAGR of 7.3 per cent. In FY14, the total passenger revenue earnings were USD6.2 billion

Indian Railways generated USD15.5 billion in earnings from commodity freight traffic during FY14. Earnings growth of 4.9 per cent is anticipated for FY15

Increasing carrying capacity, cost effectiveness, improving quality of service will support the increment in the share of Railway in the freight movement from 35 per cent to 50 per cent by 2020

Passenger earnings (in USD billion) Earnings from freight (in USD billion)

7.4 17.5 6.2 15.8 15.5 5.6 5.9 5.9 14.1 13.3 4.9 4.9 12.0 4.8 11.5 11.3 3.8 9.1

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15F FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15F

Source: Vision 2020, Ministry of Railways, Aranca Research Notes: CAGR – Compound Annual Growth Rate, FY – Indian Financial Year (April–March), * In Indian Rupee Terms, F - Forecast Freight business for Indian Railway is supported by nine Revenue break-up by segment (FY14) commodities: coal, iron and steel, iron ore, food grains, fertilizers, petroleum products etc

Freight remains the major revenue earning segment for the 7% railways, accounting for 67 per cent of total revenues in Freight FY14, followed by the passenger segment 27% Passenger Profits from the freight segment are used to cross-subsidise the passenger segment Other Coaching 67% To achieve targets of Vision 2020, two dedicated freight corridors, Eastern and Western, would be operation by FY20

Source: Vision 2020, Ministry of Railways, Aranca Research Note: Other Coaching includes service coaches such as pantry cars, parcel vans, mail vans, etc Train travel remains the preferred means of long-distance Trends in passenger volumes (in billions) travel for majority of Indians, a fact reflected by volume and growth of passengers over the years 15.18

Increase in the demand for passenger trains is supported by urbanisation, improving income standards, etc CAGR: 10.1%

By 2020, Indian Railway plans to achieve speed of 160 to 8.20 8.60 8.50 200 kmph from current level of 130 kmph or 110 kmph to 7.20 7.65 6.90 reduce the journey hours between important stations 6.20 6.50

Passenger volumes would expand at a CAGR of 6.6 per cent to 11.7 million by FY17 from 6.2 million in FY07

The total number of passengers during FY14 reached 8535 million compared with 8602.1 million FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY20E during 2012–13

Source: Vision 2020, Ministry of Railways, Planning Commission, Passenger traffic is expected to increase to 15.18 Press Information Bureau, Aranca Research billion by FY20 Notes: CAGR – Compound Annual Growth Rate, F – Forecast, E – Estimated, FY – Indian Financial Year (April–March) Annual passenger volumes increased at a CAGR of 4.6 per cent during FY07–14. According to the 12th Five-Year Plan, passenger volumes would expand at a CAGR of 8.3 per cent during FY13–17 Suburban passenger booking during FY14 grew to 4,550 million from 4,473 million in FY13

Non-suburban passenger volumes during FY14 declined marginally to 3,985.1 million

The 12th Five-Year Plan estimates suburban and non-suburban passenger volumes to increase to 5.9 billion and 5.8 billion, respectively, by FY17

Indian Railways aims to increase passenger boarding at a CAGR of 8 per cent from 8,224 million in FY12 to 15,180 million in FY20

Number of suburban passengers originating Number of non-suburban passengers originating (in millions) (in millions)

5,540 5,917 5,793 5,186 5,385 4,473 4,550 5,005 4,061 4,377 4,129 3,802 3,876 3,590 3,847 3,985

3,118 3,370

FY09 FY10 FY11 FY12 FY13 FY14

FY09 FY10 FY11 FY12 FY13 FY14

FY15F FY16F FY17F

FY15F FY16F FY17F Source: Vision 2020, Ministry of Railways, Planning Commission, Press Information Bureau, Aranca Research Notes: CAGR – Compound Annual Growth Rate, F – Forecast, FY – Indian Financial Year (April–March) As of FY12, railways accounted for 31 per cent of India’s Freight traffic (million tonnes) freight traffic

Indian Railways carried 1,050 million tonnes of revenue- 2,165 earning freight traffic in FY14, a 4.0 per cent increase from 1,010 million tonnes in FY13 CAGR: 12.8%

Freight traffic is expected to expand at a CAGR of 6.5 per 926 1,010 1,050 cent by FY17 from FY07 837 892 975 804 745 Indian Railway estimates originating loading for freight business segment would increase to 2,165 MT by FY20

Coal is the leading commodity for the freight business FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY20F segment (47.1 per cent of the total freight in March 2014) Source: Ministry of Railways, Vision 2020, Planning Commission, Press Information Bureau, Aranca Research Notes: CAGR – Compound Annual Growth Rate, F – Forecast FY – Indian Financial Year (April–March) Company Business description

• Navratna PSU under India’s Ministry of Railways • Carrier, terminal operator and warehouse operator

• SPV set up under the Ministry of Railways • Undertakes planning and development; mobilisation of financial resources; and construction, maintenance and operation of the Dedicated Freight Corridor (DFC)

• SPV created by the Government of India • Builds engineering works required by Indian Railways

• Mini Ratna PSU with one of the largest neutral telecom infrastructure providers in the country • Strives to modernise train control operation and safety system of Indian Railways

Source: Relevant Company Annual Reports and websites, Aranca Research Notes: PSU – Public Sector Undertaking, DFC – Dedicated Freight Corridor, SPV – Special Purpose Vehicle Railway projects in India have typically been in the public sector domain

Private players were involved in allied activities such as track laying and maintenance, maintenance of coaches and wagons, construction of bridges, stations, signalling and telecommunications works

Company Project details

• Construction of eight metro stations in Bengaluru • Construction of two elevated Metro stations at MG Road and Trinity Circle in Reach-1 (inaugurated in September 2011)

• Gauge conversion of VilluPuram-Mayiladuthurai section • Installation and commissioning of signalling and telecommunications facilities at NTPC

• Won an order worth USD535.8* million in 2008 in consortium with Scomi Engineering to execute the country’s first system in • Executing an order for development of railway siding, involving engineering, procurement and construction work for a dedicated railway line of 38 km

Source: Relevant Company Annual Reports and websites, Aranca Research Notes: NTPC – National Thermal Power Corporation, km – Kilometres; * - Exchange rate as of 2008 In December 2012, the Cabinet approved the new policy of ‘participative models for rail-connectivity and capacity augmented projects’. The policy addressed private investors’ concerns, which included ownership of the railway line and repayment of investment

The policy led to renewed investor interest in the rail sector. Since then, railway authorities have received various proposals from private investors and have already given approval (can now acquire land and begin construction) for four port connectivity projects, which would ease congestion

This is in line with the government’s 12th Five-Year Plan. It intends to raise investments worth USD14.8 billion through PPP route

Areas proposed for private investment during this period would include elevated rail corridor in Mumbai, some parts of dedicated freight corridor, freight terminals, redevelopment of stations and power generation/energy saving projects

Other measures taken/proposed include:

Setting up of a modern signalling equipment facility at Chandigarh through the PPP route

Construction of new lines – Bhupdeopur-Raigarh (Mand Colliery) and Gevra Road-Pendara Road – and doubling of Palanpur-Samakhiali section through the PPP route

Approval provided by the Union Cabinet in January 2014 to construct two new locomotive factories at Madhepura and Marhowrah in Bihar

Approval has been obtained to establish seven ports connectivity through railway for USD0.7 billion

The Railways Ministry has already proposed the development of 50 world-class stations in the PPP mode to improve and enhance rail infrastructure in the country

IR aims to award projects worth USD1,000 billion through PPP route

Source: Ministry of Railways, Make in India, Aranca Research Note: PPP – Public Private Partnership Demand for urban • There is a rapid increase in demand for urban mass transportation systems in the country • Several metro rail projects are in progress to improve connectivity within cities; the transport has emerged as an internationally acclaimed venture

• Indian Railways (IR) launched mobile ticketing services in August 2011, enabling users to use mobiles to directly buy tickets, which would be delivered to them through a non-transferable M-ticketing and SMS e-ticketing • The government plans to upgrade the e-ticketing system by 2014 to support 7,200 tickets per minute from the current capacity of 2,000

• IR has attracted increasing foreign investments through strategic alliances with various International investment countries over the last few years • Subsidiaries of foreign companies are being set up to cater to the huge demand offered by IR

• IR plans to build seven high-speed rail corridors to provide faster rail connectivity across the country. A provision of USD17 million is made for High Speed project High-speed trains • A joint feasibility study for Mumbai–Ahmedabad High Speed Corridor co-financed by IR and Japan International Cooperation Agency was started in 2013 and will be completed by 2015. projects • The trains will be capable to run at a speed upto 350 kilometer per hour • Budget 2015, targets a diamond quadrilateral network of high speed trains connecting major metro cities and growth centres

Semi high-speed trains • IR intends to look for cost effective options to increase speed to 160–200 km per hour on projects existing routes such as Delhi–Chandigarh and Delhi–Agra

Source: Ministry of Railways, Railway Budget 2014–15, Aranca Research

Competitive Rivalry

• Competitive rivalry is low as any other mode of transportation is significantly expensive • Rail connectivity is available in remote areas, unlike other transport Threat of New facilities Entrants (Low)

Threat of New Entrants Substitute Products

• Enormous capital requirements • Substitutes include road and air to set up a network, acts as an transport; however, railways is Bargaining Competitive Substitute entry barrier the cheapest mode of travel Power of Rivalry Products Customers (Low) (Low) (Low)

Bargaining Power of Suppliers Bargaining Power of Customers Bargaining • Has monopoly and can buy • Lower bargaining power as no Power of products from any supplier other cheap mode of transport Suppliers • Usually contracts are large- available (Low) sized, which gives suppliers less bargaining power

• Provision of online rail bookings, hotel reservations and retiring rooms by IRCTC adds to revenues of Indian Railways Revenue-based • Indian Railways are focusing on internal tourists and have also come up with many tour strategies packages for foreigners • Fare revision in 2014 is expected to bring additional revenue of USD1.3 billion per year

• Fare for premium classes were reduced so as to compete with the airlines, luxury buses, and personal transport vehicles • The length of popular trains was increased from 16–18 coaches to 24–26 coaches Turnaround strategies • Private participation is encouraged and information technology was used to make ticket for passenger traffic reservation more feasible to passengers • An airline-style upgradation from lower class to higher class has been introduced for passengers • Increasing speed of the trains to 200 kmph in the coming years

• Axle load was increased from 20.3 tonnes to 22.9 tonnes and 25 tonnes for selected routes Turnaround strategies • At present, the time line for wagon turnaround is five days from seven days for freight traffic • Tariffs for coal and steel, which face competition from road transport were reduced • Freight discounts are allowed to customers offering high tariffs • Construction of dedicated freight corridors to be commissioned in 2019

Source: Ministry of Finance, Budget 2015, Aranca Research, News articles Note: IRCTC – Indian Railway Catering & Tourism Corporation

Government focus on infrastructure building

Increasing Growth of freight private sector traffic due to participation industrialisation

Improved safety Rising demand and for urban mass modernisation transportation Passenger traffic increased more than 15 times over FY1951–2012

Increasing incomes in urban and rural areas have made rail travel affordable to a large number of Indians

Urban population in India grew from 17.3 per cent of total population in 1951 to 31.2 per cent in 2011, leading to increase in traffic between urban and rural areas in the country

Improvement of urban-rural connectivity by railways has been another major contributor to passenger growth

Freight traffic is expected to grow by 4.9 per cent during FY15

Source: Ministry of Railways; Budget 2015, Aranca Research Passenger traffic growth index India’s per capita income at current prices (USD) (1950–51 taken as the base year) 2,500 30%

2011-12 25% 1,505 2,000 2010-11 1,403 20% 2009-10 1,288 1,500 15% 2008-09 1,189 1,000 10% 2007-08 1,084 5% 2003-04 728 500 0% 2000-01 614 0 -5%

1990-91 394

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

1980-81 279 2000

2014F 2015F 2016F 2017F 2018F 1950-51 100 Per Capita Income, USD, LHS Annual Growth Rate

Source: Ministry of Railways, IMF WEO 2014, Aranca Research FY – Indian Financial Year (April–March) Notes: F – Forecast Train Description

• Non-stop point-to-point rail services Duronto Express • Connects metros and major state capitals of India

• Air-conditioned trains linking major cities to Rajdhani Express • One of the fastest trains in India with very few station stops

Shatabdi, Jan Shatabdi Express • Intercity seater-type trains for travel during day

• Fully air-conditioned trains designed for those who cannot afford to travel in Garib Rath expensive trains such as Rajdhani and Shatabdi

• Trains that have an average speed greater than 55 km per hour Superfast Mail/Express • Additional super-fast surcharge

• More stops than their superfast counterparts Mail/Express • Stops only at relatively important intermediate stations

• Slow trains that stop at most stations along the route Passenger, Fast Passenger • Low-cost alternative

• Operate in urban areas Suburban trains • Usually stops at all stations and have unreserved seating accommodation • Premium trains are a type of express trains that connect metros with other important cities. Premium trains In the Railway Budget 2014–15, five new Premium Trains were announced

• Express trains or fast trains make small number of stops unlike other trains. Thirty-three Express trains new Express trains were announced in 2014–15, of which six trains would be AC express trains

Passenger trains • Eight new Passenger trains were declared in 2014–15

MEMU trains • In 2014-15, two new Mainline Electric Multiple Unit (MEMU) trains were announced

DEMU trains • Five new Diesel Electric Multiple Unit (DEMU) trains are to be introduced

Extension of trains • Route of 11 existing trains are to be extended

Source: Railway Budget 2014–15 The Tatkal Seva Scheme was introduced by Railway Minister Nitish Kumar in December 1997. This scheme benefits those passengers who plan their journeys at a very short notice and to save such passengers from touts

The scheme was revised in August 2004 and in 2009, 2011 and 2012. At present, tatkal bookings start one day in advance of the journey. As per the Railway Budget FY14, tatkal charges have been revised

Tatkal charges have been fixed as a percentage of fare, at 10 per cent of basic fare for second class and 30 per cent for all other classes subject to minimum and maximum levels provided below

Classes of travel Minimum tatkal charges (USD) Maximum tatkal charges (USD)

Second (sitting) 0.17 0.25 Sleeper 1.50 2.92 AC Chair Car 1.67 3.33 AC 3 Tier 4.17 5.83

AC 2 Tier 5.00 6.67

Executive 5.00 6.67

Source: Ministry of Railways Freight traffic increased more than 15 times over FY1951–2012

The rise in traffic is due to increasing levels of industrialisation across the country, as is evident from the growth in the Index of Industrial Production (IIP) over the last decade

Indian Railway estimates originating loading for freight business segment would increase to 2,165 MT by FY20

Coal freight, which accounted 47.1 per cent of the freight business in March 2014, is expected to increase supported by increasing electrification and per capita usage of electricity

According to Ministry of Coal’s vision 2025, coal production is expected to increase to 1,060 MT from 470 MT in FY09

Increasing freight traffic is generated from these industries spread out across India

Source: Ministry of Railways, Ministry of Coal, Aranca Research Note: MT - Million Tonnes Freight traffic growth index Growth (YoY) in the Index of Industrial Production (1950–51 taken as the base year) (IIP)

20% 2011-12 1,516 16% 2010-11 1,420 12% 2009-10 1,363 2008-09 1,251 8% 2007-08 1,185 4% 2003-04 871 0%

2000-01 715 -4% 1990-91 550 -8%

1980-81 359

Nov'13 Nov'14

1950-51 100 May'14

30-Nov-07 30-Nov-08 30-Nov-09 30-Nov-10 30-Nov-11 30-Nov-12

31-May-13 31-May-07 31-May-08 31-May-09 31-May-10 31-May-11 31-May-12

Source: Ministry of Railways, Ministry of Statistics and Programme Implementation, Aranca Research • DFCCIL, a special purpose vehicle, was set up for implementing the DFC project under the administrative control of the Ministry of Railways • The plan is to construct dedicated freight lines along the Eastern and Western parts of India • Total length: 3,300 kilometres; total estimated cost: USD16.7 billion; project scheduled for completion in FY17 • According to the 12th Five-Year Plan, the government allocated USD5 million for the 2,700-km Dedicated Rail Freight Corridor Project • Total Capital Expenditure incurred was USD700 million during FY14 • World Bank granted loan of USD1,100 million for EDFC-2

Western corridor Eastern corridor

Haryana -> Rajasthan -> Punjab -> Haryana -> Uttar Gujarat -> Maharashtra Pradesh -> Bihar -> West Bengal/Jharkhand

Source: Ministry of Railways, Planning Commission, KPMG, Aranca Research Notes: DFC – Dedicated Freight Corridor, DFCCIL – Dedicated Freight Corridor, Corporation of India Limited, JV – Joint Venture, EDFC – Eastern Dedicated Freight Corridor Increase rail freight share through customised logistic services Segregate Reduce unit freight and cost of passenger transportation lines for and increase focused productivity approach

Objectives

Adopt high- Create end additional technology freight for real-time capacity to data analysis meet demand Introduce time-tabled freight services to ensure better services

Source: Ministry of Railways, Aranca Research Freight traffic via DFC would increase at a CAGR of 5.4 per Freight traffic projections on DFC (in MT) cent to 182 MT in 2021–22 from 140 MT in 2016–17

Container traffic would probably be an important constituent CAGR: 5.4% of the WDFC and is expected to grow to 5.3 million TEUs in 2021–22 from 3.8 million TEUs in 2016–17 91

64 According to the operational strategy as mentioned in the Vision 2020, dedicated freight corridors and speed raising projects would be completed in time bound manner 91 76 By 2020, 30,000 km of route would be double/multiple lines against 19,843 km as on FY13 2016-17 2017-22 EDFC WDFC

Source: KPMG Notes: CAGR – Compound Annual Growth Rate, DFC – Dedicated Freight Corridor, EDFC – Eastern Dedicated Freight Corridor, WDFC – Western Dedicated Freight Corridor, MT – Million Tonnes Due to the DFC project, added capacity and efficiency of new infrastructure would result in an increased share of railway network to 87 per cent in 2021–22 from 84 per cent projected in 2016–17

Dedicated Freight Corridors are expected to come on route of Delhi-Kolkata, Mumbai-Delhi, Kolkata-Mumbai, Delhi-

DFC model mix (2016–17) DFC model mix (2017–22)

16% 13%

Road Share Road Share

Rail Share Rail Share

84% 87%

Source: KPMG, Aranca Research • An outlay of USD95.6 billion has been approved by the Planning Commission for railways. The Railway Ministry proposed an outlay of USD100.9 billion • Details of the outlay are as under: (i) Gross budgetary support USD35.8 billion 12th Five-Year Plan (ii) Internal generation USD19.3 billion (iii) Extra budgetary resources USD40.5 billion • In the Railway Budget 2014-15, there is a proposal to increase the plan outlay under budgetary sources by USD7.9 billion

• This policy supersedes the R3i and R2CI policies notified earlier Participative models • The policy provides for supplementing government’s investment in rail infrastructure for rail connectivity and projects by private capital flows capacity augmented • The policy contains the following models: non-government railway; joint venture with projects equity participation by railways; capacity augmentation through funding by customers; capacity augmentation – annuity model applicability; and BOT

Source: Ministry of Railways, Aranca Research Notes: R3i – Railways' Infrastructure for Industry Initiative, R2CI – Railways Policy for Connectivity to Coal and Iron Ore Mines, BOT – Build Operate and Transfer • To increase its share in automobiles transportation, Indian Railways notified a new scheme in March 2013, Automobile Freight Train Operator (AFTO). The scheme provides logistic service providers and road transporters an opportunity to introduce their own special wagons to run on the railways’ network and avail of freight rebates in return. The requirements for the scheme are laid down as under: • Companies with minimum net worth of USD3.7 million or annual turnover of USD5.5 million are eligible to participate in this scheme • A registration fee of USD0.9 million is required to be paid to the Railway Ministry on approval as AFTOs Automobile Freight • Companies are required to introduce at least three rakes and make them operational Train Operator Scheme within six months from the commissioning of the first rake 2013 • The freight rates would be notified from time to time for specific stock to be moved by AFTOs • The freight rebate would be incorporated in the freight rates specified for transport of automobiles • Special wagons would be designed and developed by Research, Design and Standards Organisation (RDSO) for induction by third-party logistics providers and road transporters • Each rake is to have a capacity to carry 318 small cars. The rake should be tested by RDSO • Maruti Suzuki, the railways’ biggest automotive client, is the only automaker to have placed orders for rakes under this scheme in 2013

Source: Times of India, Ministry of Railways, Aranca Research • The policy aims to attract private sector participation in rail connectivity projects to create additional rail transport capacity R3i policy • The policy allows for four models: (a) Cost Sharing-Freight Rebate, (b) Full Contribution- Apportioned Earnings, (c) Special Purpose Vehicle (SPV), and (d) Private Line

• This new policy was initiated to improve rail connectivity to coal and iron ore mines • The policy offers the developer involved in the construction of the line to levy a surcharge on the freight over a period of 10–25 years R2CI • The policy has two models: Capital Cost and SPV Models. The Capital Cost Model is relevant when there are two players, whereas the SPV Model is intended for a large number of players

• Connectivity to the major ports through PPP funding Public Private • Approval has been granted for seven ports amounting to USD0.7 billion Partnership (PPP) • Development of the major stations to equip them with international level of amenities and services

Foreign Direct • 100 per cent FDI under automatic route is permitted for approved list of projects Investment

Source: Ministry of Railways, Make in India website, Aranca Research Notes: R3i – Railways' Infrastructure for Industry Initiative, SPV – Special Purpose Vehicle, R2CI – Railways Policy for Connectivity to Coal and Iron Ore Mines • For FY14, the budget reserves an outlay of USD11.7 billion, of which 40.9 per cent would be funded through gross budgetary support and internal resources, and 23.8 per cent through borrowings. Moreover, USD1.1 billion would be mobilised through the PPP route • The Ministry expects a 4.9 per cent increase in freight earnings to USD17.5 billion in FY15. Passenger earnings would rise to USD7.4 billion during the same period • A large portion of the increased plan outlay of USD7.9 billion announced in the 2014-15 Railway Budget budget is kept for the safety and security related works. Measures taken up for improvising 2014–15 safety and security include: • No unmanned level crossing; 5,400 unmanned level crossings to be eliminated (2310 by manning and 3090 by closure/merger) • Induction of Train Collision Avoidance System and development of ‘crashworthy’ coaches • Provision of Vigilance Control Device in all locomotives • Provision of USD296 million for Road-over- bridges and Road-under-bridges

• Indian Railways launched the Wagon Investment Scheme in 2005 to offer freight rebates and supply a guaranteed number of rakes for a period of seven to fifteen years for different Wagon investment types of wagons scheme • The Ministry of Railways proposed to set up five wagon factories in Secunderabad, Bardhaman, Bhubaneswar/Kalahandi, Guwahati and Haldia under the JV/PPP model. • The Ministry plans to procure 18,000 wagons during FY12

Source: Ministry of Railways, Railway Budget 2014-15, Press Information Bureau, Aranca Research • Indian Railways introduced a more user-friendly system, with internet ticketing timings increased to 23 hours a day from 0030 hrs to 2330 hrs • A new e-ticketing system, which would support 120,000 users simultaneously at any point in time compared with the existing 40,000 capacity, will be put in place by the end of this year end. The system would be able to support the booking of 7,200 tickets per minute as against the current capacity of 2,000 • Indian Railways launched mobile ticketing services in August 2011 and SMS if e-ticket not accepted as valid proof of reservation • With the successful completion of initial testing, the Train Collision Avoidance System (TCAS) will be put to rigorous trials to validate its safety under complex operational Key modernisation conditions initiatives • Self-Propelled Accident Relief Trains (SPART) were introduced on trial basis with a view to establish a fast and reliable disaster management system • A modern signalling system, train-protection warning system, and a special railway safety fund have been initiated to ensure passengers’ security • Railway Budget FY14 focuses on improving passenger amenities such as free Wi-Fi access and pilot projects to help passengers contact onboard staff regarding coach cleanliness • Around 1,532 kilometres of new lines, doubling and gauge conversion commissioned during 2013–14 • Specially designed coaches for adverse weather conditions for the rail travel in Kashmir were introduced

Source: Ministry of Railways, Press Information Bureau, Aranca Research Investments during the 11th Plan (USD billion)

Approved 2011– Total 11th Excess/ 2007–08 2008–09 2009–10 2010–11 2012–13** outlay 12* plan shortfall

Gross Budgetary 15.8 2.2 2.2 3.7 4.3 4.4 17.0 3.0 4.4 Support Internal 22.4 3.7 4.1 2.6 2.5 1.9 14.7 (5.1) 3.5 Generation Extra Budgetary 19.8 1.3 1.6 2.1 2.1 3.4 10.7 (6.9) 3.0 Resources

Total 58.0 7.2 7.9 8.4 8.9 9.7 42.3 9.1 11.1

Source: Planning Commission, Aranca Research Notes: * - Revised expenditure, ** - Budgetary expenditure Since FY08, cumulative FDI inflows into the sector has Cumulative FDI inflows increased five-fold (April 2000 to November 2014) (USD million)

From April 2000 to November 2014, FDI in Railways related 634.1 components stood at USD634.1 million 507.3 Indian Railways has started process of PPP mode of funding and plans to award projects totalling to USD1,000 billion 270.3 247.8

109.6 132.8 57.3 75.3

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15*

Source: Department of Industrial Policy & Promotion, Aranca Research Notes: FDI – Foreign Direct Investment, * Till November 2014 Key focus areas To modernise Indian Railways, the focus is on two fundamental drivers, Safety and Growth, and along Core Track and Rolling Stations and Signalling with a five-pronged strategy: assets bridges stock terminals • Modernise core assets – They are key revenue Dedicated generating assets Revenue High-speed PPPs Land freight models trains • Explore new revenue models – To meet the corridors funding needs for modernisation and growth • Review projects – To ensure financial viability, Projects Review of existing and proposed projects social benefits and timely implementation Indigenous • Focus on enablers – For a holistic and long-term Enablers ICT Safety approach to modernisation and execution development • Mobilise resources – To capitalise on an Human Resources Funding Organisation opportunity resource • Information Technology – To improve operational efficiency Source: Ministry of Railways, Aranca Research Notes: ICT – Information and Communication Technology, PPP – Public Private Partnership Track upgradation and welded rails Sleepers and bridges

• Sleepers have been upgraded from • Adequate capacity for production of wooden, steel and CST-9 to PSC concrete sleepers to meet IR’s present sleepers. requirement has been developed • Heavier section and high tensile • During FY12, 6.9 million broad-gauge strength rails are being used (52 kg/60 mono-block concrete sleepers and kg 90 UTS rails are being used in place 10,359 sets of PSC turnout sleepers of 90 R/52 kg 72 UTS rails) were manufactured • As of FY13, total length of welded • In FY13, 806 bridges, including 8 tracks on IR’s main lines was 80,015 distressed bridges, were rehabilitated or km, of which 68,542 km included long- rebuilt welded rails and the rest short-welded • Modern bridge inspection and rails management system has been • There is a progressive shift to flash butt adopted, which includes non- welding, which is superior in quality to destructive testing techniques, under Aluminothermic (AT) welding water inspections, fibre composite wrapping and integrity testing

Source: Ministry of Railways, Aranca Research Notes: Km – Kilometres, IR – Indian Railways, UTS – Ultimate Tensile Strength, CST9 – Central Standard Trial-9, PSC – Pre Stressed Concrete Increasing operational Unreserved Ticketing Terminal Management efficiency Services (UTS) System (TMS)

• Design and development of • UTS was made functional at • TMS generates online 5500 HP WDG5 diesel 5,690 locations with 10,508 railway receipts and has locomotive for faster, longer terminals, as of April 2013 been deployed at 631 field and heavier trains • More than 90 per cent of locations in FY11 • Development of high- unreserved tickets are now • During FY11, USD6.9 billion sensitivity thermal imaging generated through UTS of freight payment was camera with online scanning • A total of 6.7 billion realised through e-payment facility to improve the passengers were served mode, which accounts for 58 reliability of electric traction (total earnings of USD2.2 per cent of total freight system billion) in FY11 compared collected • Development of 25 KV HV with 5.88 billion passengers connector for multiple (total earnings of USD199.86 operation of WAP5 million) in FY10 locomotives with one pantograph in raised condition

Source: Ministry of Railways, Aranca Research Notes: WDG5 (W – Wide/broad gauge, D – Diesel-powered, G – Made for hauling goods, 5 – above 5000hp) Salient features Need and importance

• The corporation was created with the view of making • To meet with the aspirations of rail users and to Indian Railways’ stations world class as a Public– facilitate them with better facilities Private Partnership venture (PPP) • To augment and improve passenger related amenities • A Memorandum of Understanding (MoU) for the SPV at stations to high standards was signed between two railway PSUs, the Ircon • To have modern stations that would be functional, international Limited (IRCON) and the Rail Land customer-oriented and well equipped with proper Development Authority (RLDA) circulation area and railway operation facilities • The SPV had an initial corpus of USD20.8 billion, with • Designed to provide well-designed concourses, high- 51:49 equity between IRCON and RLDA quality waiting spaces, easy access to the platforms, • Total revenues for FY13 earned by the Indian Railway congestion-free platforms, modern catering facilities, Station Development Corporation Limited stood at hotels and other facilities USD15.8 billion • At present, six projects for new development and redevelopment are under progress • Furthermore, master plan for the development/ redevelopment of five stations have been submitted to Indian Railways

Source: Press information Bureau, Annual Report 2012–13, GOI and News websites Notes: SPV – Special Purpose Vehicle, PSU – Public Sector Undertaking

Freight traffic (million tonnes)

• The government is investing heavily in building rail infrastructure in the country. The government 2,165 plans to invest USD153 billion during the 12th Five- Year Plan CAGR: 12.8% • With increasing participation expected from private players, both domestic and foreign, due to 975 1,010 1,050 favourable policy measures, freight traffic is 837 892 926 745 expected to grow rapidly over the medium to long 804 term • Railways has set a target of having a freight market share of 50 per cent by 2020 from 35 per cent in FY09 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY20E

• With rapid economic growth and increasing industrialisation, freight traffic would reach 1,405 million tonnes by FY17 and 2,165 million tonnes by FY20 • This indicates a CAGR of 10.2 per cent over FY14– 17

Source: Railway Budget 2014-15, Press Information Bureau

• Investments expected in metro rail networks in India: USD42 billion by 2020 • Amount invested so far: USD16.7 billion • The Government of India gave ‘in principle’ approval for taking up the Phase – 1A of the Rail Project in 2013 • Budget 2015, anticipating diamond shaped metro projects connecting major metro cities and growth centres

Estimated cost Length of project (Estimated) Date Name of project Undertaking (USD billion) (kilometres) of completion

Delhi Mass Rapid Transit System Government of India, Delhi 2.2 65.1 November 2006 Phase I Metro Rail Corporation

Delhi Mass Rapid Transit System Government of India, Delhi 1.1 124.6 August 2011 Phase II Metro Rail Corporation

Government of India; Metro Rail Project 1.1 14.7 2014–15 Railway, Kolkata

Government of India and Bengaluru Metro Rail Project 2.4 42.3 September 2012 Karnataka

Government of India- Project 2.5 71.2 2013 Hyderabad Metro Rail Limited

Jaipur Metro Phase I 0.5 12.1 2014-21 Rail Corporation

Source: Ministry of Urban Development, Concor, Aranca Research Estimated cost Length of project (Estimated) Date Name of project Undertaking (USD billion) (kilometres) of completion Delhi Metro Rail Corporation Rail Project 2.3 45.1 2014–15 Limited, Chennai Metro Rail Limited

Reliance Energy Ltd, Veolia Project Phase I 0.5 11.07 2015 Transport co.& MMRDA

Mumbai Metro Project Phase II 1.7 40 2016 PPP, MMRDA

Delhi Metro Rail Corporation Chennai Metro Rail Project 2.3 45.1 2014–15 Limited

Infrastructure Leasing & Rapid Metro (Gurgaon) Phase I 0.2 5.1 2012 Financial Services Ltd

Infrastructure Leasing & Rapid Metro (Gurgaon) Phase II - 7.0 2015 Financial Services Ltd

Government of India & Metro Project 0.7 25.6 2016 Government of

Source: Ministry of Urban Development, Concor, Aranca Research Note: MMRDA - Mumbai Metropolitan Region Development Authority

Freight Number of Passengers Passenger Freight Number of Network carried Number of Number of Country employees carried distances distance wagons length (km) (million locomotives coaches (000s) (million) (billion km) (billion km) (000s) tonnes)

USA 226,706 187 26 9 1,775 2,820 23,990 1,186 475

Russia 84,158 1,128 1,280 173 1,344 2,090 12,063 33,955 567

China 63,637 2,067 1,287 690 2,624 2,211 17,222 42,471 571

India 63,327 1,406 6,219 695 728 4,810 8,110 43,124 208

Canada 57,042 34 4 1 313 353 2,947 595 98

Germany 33,897 231 1,835 75 273 91 4,128 17,537 96

France 29,488 166 1,097 84 106 42 4,289 15,973 33

South Africa 24,487 36 533 15 181 109 3,301 1,723 112

Japan 20,050 132 8,907 253 36 23 1,170 25,244 9

Australia 9,639 13 54 1 177 46 509 663 11

Source: Ministry of Railways, Aranca Research Note: Figures are as of December 2009 Freight revenue accounts for major share of total railway revenues in India (67 per cent share in FY14)

Major freight railways such as the US, China and Russia have one-fourth the freight rate compared with India

Indian Railways charges higher freight tariff to cross-subsidise passenger fares and make them affordable to the public. Thus, passenger fares were not increased in tandem with the rising costs over the years; in fact, fares have declined in some cases

Average rate per passenger kilometre (in rupees) Average rate per tonne kilometre (in rupees)

0.6 2.2 2.2 0.6 0.6 0.6 0.5 0.5 0.5 2.1 2.1 2.0 2.0

1.9

FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY13 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY13

Source: Ministry of Railways, Aranca Research Revenues from traffic operations increased at a CAGR of Revenues from traffic operations (USD million) 49.6 per cent during FY08–13 to USD495.0 million 600.0 Average ridership rose to 1.9 million in June 2012 from 0.9 495.0 million in FY10, an increase of more than 100 per cent 500.0

The total ridership in 2012–13 was 703 million 400.0

CAGR: 49.6% During 2012–13, Delhi Metro registered its highest daily 300.0 ridership of over 2.3 million. In 2013, it carried more than 2.6 236.0 195.6 million passengers on a single day 200.0 109.8 66.0 91.8 On 08 August, 2014, Delhi metro created a record of 100.0 highest number of commuters a day (2.76 million) 0.0 Total operational network across Phase I and Phase II FY08 FY09 FY10 FY11 FY12 FY13 spans 190 kilometres and covers 143 stations

Phase III of the project was approved in August 2011 and Source: Delhi Metro website, Annual Report 2012-13, Aranca Research covers a route length of 103.1 km and 67 stations

Finalised Phase IV of the project would cover an area of more than 115 km Key success factors Salient features

• Coordinated and well-collaborated effort from various • The capital cost of completion of Phase I was government agencies for timely completion of the estimated at USD2.2 billion, saving about USD125.0 project million from the budgeted expenditure

• Availed overseas financing to cover 60 per cent of the • The phase was completed three years ahead of costs to ensure expedition of the project’s execution schedule

• Involvement of consultants from across the world with • Average duration of major tenders was 19 days extensive experience – both technological and compared with the three to nine months, which is the managerial – in the field norm

• Rapid development of the city, demographic translations such as changing of land use with commercialisation of residential areas and increasing suburbanisation are all crucial factors for the system’s success

Source: Press information Bureau, Delhi Metro Rail Corporation, GOI and News websites

Manufacturers Association for Information Technology (MAIT) 4th Floor, PHD House, Opp. Asian Games Village, New Delhi 110 016, India Tel: 91 11 26855487 Fax: 91 11 26851321 E-mail: [email protected] Website: www.mait.com

Consumer Electronics and Appliances Manufacturers Association (CEAMA) 5th Floor, PHD House 4/2, Siri Institutional Area, August Kranti Marg New Delhi –110 016 Telefax: 91-11-46070335, 46070336 E-mail: [email protected] Website: www.ceama.in CAGR: Compound Annual Growth Rate

FDI: Foreign Direct Investment

FY: Indian Financial Year (April–March)

FY12 implies April 2011 to March 2012

DFC: Dedicated Freight Corridor

DFCCIL: Dedicated Freight Corridor Corporation of India Limited

PPP: Public-Private Partnership

IIP: Index of Industrial Production

R2CI: Railways Policy for Connectivity to Coal and Iron Ore Mines

R3i: Railways' Infrastructure for Industry Initiative

CST – 9: Central Standard Trial-9,

SPV: Special Purpose Vehicle

USD: US Dollar

Wherever applicable, numbers have been rounded off to the nearest whole number Exchange rates (Fiscal Year) Exchange rates (Calendar Year)

Year INR equivalent of one USD Year INR equivalent of one USD

2005 43.98 2004–05 44.81 2006 45.18 2005–06 44.14 2007 41.34

2006–07 45.14 2008 43.62

2007–08 40.27 2009 48.42

2008–09 46.14 2010 45.72

2009–10 47.42 2011 46.85

2010–11 45.62 2012 53.46

2011–12 46.88 2013 58.44 Q12014 61.58 2012–13 54.31 Q22014 59.74 2013–14 60.28 Q32014 60.53

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