~~RESTRICTED ~FL COPY \% cOPYRESTRICTEDCReportNo. PTR-29a

This report was prepared for use within the Bank and its affiliated organizations. Public Disclosure Authorized They do not accept responsibility for its accuracy or completeness.The report may not be published nor may it be quoted as representing their views.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized

APPRAISAL OF

TENTH RAILWAY PROJECT

INDIA Public Disclosure Authorized

September 9, 1969 Public Disclosure Authorized

Transportation Projects Department Currency Equivalents

Currency Unit - Indian lRupee (Rs) Rs 1 = Baise 100 US$ 1.00 - Rs 7.5 Rs 1.00 - US$ 0.13 Rs 1,000,9000 - US$ 133,333

Fiscal Year

April 1 to March 31

Units of Weights and Measures

Tons are metric tons (2,205 lb)

1 kilometer (kma) = 0.621 nile

Acronyms

EMU - Electric Multiple Unit BG = Broad Gauge MG = Meter Gauge IIIDIAN RAIIWAYS

APPRAISAL OF TEINTHHAILWAY PROJECT

TABLE OF COINTENTS

Pa,ge

SUMJ'¶IARYAITD CONCLUSIOTS i

1. INTRODUCTION 1

2. THE TRANSPORTSECTOR 1

3. TPE INDIAII RAIUiAYS 4

A. Organization and Management 4 B. Staff 4 C. Property 5 D. Traffic 6 E. Operations 6 F. ManufacturingUnits 10

4. THE PLAN A1NDTHE PROJECT 11

A. The Plan 11 B. The Project 11 C. Financing of the Project 13 D. Execution of the Project and Procurement 14

5. FINANCES AND EARINIIHGS 16

A. Introduction 16 B. Rates and Fares 17 C. Earnings 17 D. Present Financial Position 19 E. Future Earnings 20 F. Source and Dispositionof Funds 21 G. Audit 22

6. ECONO0iiICEVALUATION 22

A. Traffic Forecasts 22 B. Investm.entEvaluation 23

7. RECOii'IEDATIOL'S 25

This report is based on the findings of a mission in February/March1969 to India composed of IMJessrs.Y. Abe, economist;HiI. Karcher, economist; R. Sharood, engineer; and J. Spencer, financial analyst. INDIAN RAILWAYS

APPRAISAL OF TENTHRAILWAY PROJECT

TABLES1/

1. Public and Private Sector Outlay on Transport 2. Revenue from Road Transport and Expenditure on Roads 3. Staff Statistics and Costs 1. Route Length (km) 5. Route-km and km of Maintained Track 6. Inventory of Motive Power by Types and Gauges 7. Inventory of Freight Cars by Types and Gauges 8. Inventory of Passenger Cars by Types and Gauges 9. Freight Traffic Tons and Ton-km 10. Change in the Compositionof Traffic a1. Passenger Traffic 12. Comparisonof Suburban and Non-SuburbanPassenger Traffic 13. Operations 14. Inventory of Motive Power by Class and Age 15. Inventory of Equipment by Type and Age 76. Activities of Manufacturing Units 17. InvestmentExpenditures .L8. Sources of Funds for InvestmentProgram 1969-1974 19. Foreign Exchange Required During the Project Period, 1969/70 and 1970/71 20. ReconstructedSummary Balance Sheet on March 31, 1968 Annex 1 - Notes on ReconstructedBalance Sheet Amnex 2 - Assessmentof Results for 1967/68 in Relationshipto Fixed Assets 21. Resultsof Operations1963/64 to 1968/69 22. ForecastRevenue Account 1968/69 to 1973/74 Annex - Notes on Forecast Revenue Account 23. Forecast Balance Sheets, 1969-1974 (Reconstructed) 24. Sourceand Applicationof Funds1969/70 to 1973/74 25. Freight Traffic, Past Performance - Future Prospects

1/ Source: Miristry of Railways unless otherwise indicated. INDIAN RAILIWJAYS

APPRAISAL OF TENTH RAILWAYPROJECT

ANNEXES

1. Notes on Transport Coordination 2. OrganizationChart 3. Notes on the Adequacy of Services 4. Notes on the Problems in the Movement of Foodgrains 5. Notes on the Fourth Five-Year Plan

Appendix A - Rolling Stock ProcurementProgram Appendix B - Freight Cars on Order as of January 1, 1969 Appendix C - Workshops and Sheds Program Appendix D - Track Renewal Program, 1969-1974 Appendix E - Works Involving Improvementof Track Structure in 1969/70 Appendix F - Works Involving Improvementof Track Structure in 1970/71 AppendixG - Bridge Works Appendix H - New Line Construction

6. Initial Work Program of the Economic Unit, accordingto Supplemental Letter No. 7, Credit 88-IN 7. Proposed Work Program of tlheEconomic Unit

NAP

Indian Railways - IBRD-2593 IrDIAN RAILWAYS

APPRAISAL OF TENTHRAILWAY PROJECT

SU1LNARYAND CONCLUSIONS i. Transport is one of the most important sectors of the Indian econony with investments since 1951 amounting to about one-third of the total public outlay. The railways dominate the scene with investment in the 1960's representingabout half of the total outlay on transport and with freight traffic amounting to over three times as much as that handled by road. Road transport, although developing, suffers unduly from restrictive regulations and heavy taxation. Measures for securing more balanced development between road and rail and better transport coordination have been advocated by the Associationfor some time, but progress has been slow and continuing effort is necessary. ii. Previous Bank Group lending for the transport sector amounts to US$ 724 million, of which about US$ 576 million has been to the railways, US$ 82 million to the ports, US$ 60 million to the highways and US$ 6 million to civil aviation. The last railways credit, 88-IN, was made in 1966 for US$ 68 million equivalent; funds were fully disbursed by July 1968. This operation, as well as previous Bank Group financed railway projects, has been satisfactorilycompleted. iii. The Railways, investment program for the Fourth Five-Year Plan (1969/70-1973/74) is estimated at Rs 15.1 billion (US$ 2.0 billion equivalent)with a foreign exchange component of 12%, US$ 241 million equivalent. The planned allocation of expenditures is reasonably related to requirementsand traffic forecasts. The proposed project consists of the first two years of the program with an estimated cost of Rs 5,316 million (US$ 709 million equivalent) including US$ 95 million equivalent in foreign exchange to be financed as follows: US$ 35 million from available and expected bilateral aid, US$ 5 million from India's free resources of exchange and US$ 55 million from the proposed credit, Local currency expenditures will be financed by the Government and from the Railways' own funds. iv. The proposed project provides mainly for rolling stock (44%), line capacity works and signalling (19%), track renewals and bridge works (140.) and electrification (6%). The proposed credit would finance, as from Sep- tember 1, 1969, specific imported goods which will be procured through internationalcompetvtive bidding. Exception to this procedure is made for components of equipment imported under licensing arrangements(entered into as a result of broad internationalenquiry under previous Bank Group operations) or to conform with standardizationpolicies necessary for economic and efficient operation. Procurementfor these purposes under the proposed credit is estimated at US$ 16 million equivalent. Disburse- ment of credit funds is expected to be completed by March 1971. - ii -

V. Indian Railways is one of the largest railways in the world. It operates nearly 60,000 route-km with a staff of 1.36 million. In 1967/68 it provided 2.26 billion passenger journeys and carried about 200 million tons of freight (comparedwith 1.28 billion passenger journeys and about 93 million tons of freight in 1950/51). Fast growing passenger traffic is confrontingthe Railways with urgent problems, particularly in urban areas. Mlanagement is competent and operating performance is generally satisfactory. vi. A setback in the general economy of India, following two years of drought, has adversely affected rail traffic in recent years. Consequently the earning position of Indian Railways has weakened; the operating ratio increased from 79% in 1965/66 to 85% in 1967/68, and since 1966/67 the Rail- ways has shown a deficit (after payment of dividend on capital-at-charge). However, there is now a return to the former upward trend and, if traffic develops as anticipated, the operating ratio should improve from 83% in 1968/69 to 77% in 1973/74. Mleasures to strengthen the earning position of the Indian Railways are provided for under the proposed project. vii. The major items of the proposed project have been evaluatedby the Railways on the basis of technical and financial criteria. Orders of magnitude of the economic benefits resulting from the proposed project have been assessed conservativelyand suggest returns ranging between 10 and 15%. viii. The proposed project provides a suitable basis for an IDA credit of US$ 55 million equivalent. INDIAN RAILWAYS

APPRAISALOF TENTHRAILWAY PROJECT

I. INTRODUCTION

.1.01 The Government of India and the Indian Railways have asked the Association for a credit of US$ 55 million equivalent to finance part of the Railways' investments (excluding inventories) during the first two years of the Fourth Five-Year Plan (1969/70 - 1973/74). Railways investments during these two years are estimated at Rs 5,316 million (US$ 709 million equivalent) with a foreign exchange content of US$ 95 million equivalent. As in previous Bank Group lending operations for the Indian Railways, the proposed credit would finance specific imported goods; other foreign requirements would be covered by various bilateral arrangements and from the Government's free resources of exchange.

1.02 Since 1949 the Bank Group has made six loans and three credits for railways investments in India, a gross total of about US$ 576 million equivalent. This-is the largest participation of the Bank Group in any single enterprise. The last lending operation, Credit 88-IN, was made in 1966 for US$ 68 million equivalent; funds were fully disbursed by July 1968. Bank Group financed railway projects have been satisfactorily completed. In these past 20 years, Indian Railways has more than doubled its traffic, improved its operations and maintained a high degree of efficiency.

1.03 Other Bank Group lending for transportation in India comprises three loans and one credit for the ports of Calcutta, Madras and Bombay (a total of US$ 82 million equivalent), one credit for roads (US$ 60 million equivalent) and one loan for civil aviation (us$ 5.6 million equivalent). The Association has also financed the purchase of commercial vehicle components as part of the five Industrial Imports credits, made between 1964 and 1969. The Bank Group is currently considering financing a highway operation in four separate states of India.

1.04 This appraisal is based on information supplied by the Government of India and the Indian Railways and on the findings of a Bank mission in Febraary/March 1969 comprisingMessrs. Abe and Karcher (economists),Sharood (engineer)and Spencer (financialanalyst).

2. THE TRANSPORT SECTOR

2.01 Transport is absorbing a sizeable proportion of India's investment resources. In the 15 years covered by the first three Five-Year Plans (1951- 66), investments in transport amounted to over one-fifth of total public and private investments and about one-third of public investments. With the emphasis on the developmentof heavy industries, the highest priority was given to rail transport for the movement of bulk commodities. During the Third Plan (1961-66), the Railways' new investments accounted for as much as 56% of the private and public sector outlay on transport (Table 1). - 2 -

2.02 The Railways dominates the transport scene of India in terms both of traffic carried and of its influence on the Government's transport policies. It carries over three times as much freight as its only major competitor, motorized road transport, and more passengers The respective shares of rail and road transport in 1968/69 were as followsl/: Railways Road Trans n Total Freight (billion ton-km) 122 40 162 Passengers (billion pass-km) 111 92 203

In comparison, inland water transport, pipelines, coastal shipping and domestic air transport play only minor roles.

2.03 Despite the higher priority accorded to rail transport, road trans- port has grown considerably. Between 1951 and 1969, the length of surfaced roads more than doubled from 157,000 km to 317,000 kmi, and the fleet of commercialvehicles increased from 116,000to about380,000. Though impres- sive,this recordreflects no more than the growthof an infantroad transport industry. Less than 10% of the highwaynetwork has more than single-lane width, and the growth of the commercial vehicle fleet has been achieved large- ly by retaining in service a high proportion of over-age vehicles.

2.04 Available evidence does not suggest that the emphasis on rail trans- port has resulted in any gross misallocation of traffic to the Railways, which carries mainly bulk commodities generally not suited for road transport. For example,in 1967/68,nine commoditygroups -- coal, ores, stones, cement, mineraloils, foodgrains, fertilizers, fodder and salt -- accountedfor over 75% of comercial traffic on the Railways,and the-averagelead (lengthof haul) of the remaining traffic was about 730 km, i.e., a distance for which road transport would normally not be economical.However, there has probably been unsatisfied demand for road transport resulting from the limited alloca- tion of funds for road improvement and vehicle production, combined with restrictive licensing and heavy taxation (see below), which has stifled the normaldevelopment of road transport.

2.05 The allocation of investment funds for transport during the Fourth Five-Year Plan attempts to reduce somewhat the imbalance between rail and road transport development. As original rail traffic targets set for 1965/66 and subsequent years did not materialize, the proportion of new investment on the Railwaysout of total outlayon transporthas been reducedfrom 56% in the Third Plan, 1961-66,to 41% in the three subsequent years and to about 30% in the Fourth Plan. Conversely, the proportion allotted to roads and road transport would increase from 36% in the Third Plan to 54% in the Fourth Plan assuming that the rather high targets of commercial vehicle production are met (Table 1).

V/ Fourth Five-Year Plan, 1969-7h, Draft, Planning Commission, Government of India.

/ Estimatesbased on broadassumptions of vehicleutilization; includes urban transport services. - 3 -

2.06 Ports, shipping and civil air transport also receive a larger share of planned investment funds than in the past, as a main thrust of the Fourth Plan is to increase foreign exchange availability through additional exports and tourism.

2.07 Increased expenditureson roads will not necessarily result in a significantdevelopment of road transport,unless there is also an easing of the tax burden and the restrictiveregulations and licensing presently saddling the road transport industry. Table 2 shows that total revenue collected from road transport increased from Rs 1,347 million in 1960 to Rs 4,324 million in 1967 (during which period the number of taxable road motor vehicles nearly doubled), while expenditures for road construction and maintenance increased from Rs 907 million to Rs 1,659 million only, with the proportion of expend- iture to revenue declining steadily from 67% to 38%.

2.08 At the time of the last credit, it was understood that the Government would work towards a plan of action for better transport coordination,to be agreed with the Association,and that future Bank Group lending for railways would depend on the plan's initiation. While the dialogue between the Govern- ment and the Bank Group on measures for securing balanced developmentand effective transport coordinationin India has been continuing,action so far taken is less than expected.

2.09 The trend towards more balanced investment allocationhas already been noted and some progress is being made towards transport coordination (see Annex 1). Specifically(a) there is a growing awareness, at responsible Government levels.thatroad transport should have a more important role to play and that the obstructing of the free flow of road traffic has cumulative adverse effects; (b) the Committee on Transport Policy and Coordination, supplementedby a number of other high level committees(e.g. the Road Trans- port Taxation Enquiry Committee)and study groups, has provided the basis for sound Government action; and (c) there has been some relaxationon road licensing restrictions - 14 States out of 16 now grant permits for Statewide movements of trucks as compared with 9 States in 1966. As against this, little actual progress has been made towards eliminatingoctrois (municipaltolls) and reducing the number of checkpostsestablished for purposes other than traffic control; and the tax burden on road transport has continued at its relatively high level.

2.10 The Road Transport Taxation EInquiryCommittee, appointed in 1965 by the Government "to undertake a detailed examinationof all the aspects of tax- ation on motor vehicles" reached certain conclusions,among them that octrois (and numerous checkposts)are among "the greatest hindrances in the way of commerce and economic development of the country." It recommended that "octrois should be abolished as quickly as possible" and that "the system of checkposts should be completely reorganized and the number of checks reduced to a minimum." It also reached the "inescapable conclusion that the tax element in the cost of operation has become a definite dis-incentiveto the healthy development of road transport (and) strongly urged that some relief should be given. If this is not possible, the least that should be done is that no further changes should be made in the existing level of taxation." -4-

2.11 The Transport DevelopmentCouncili/, which met in 1968, generally agreed wita the above conclusions and recommendations and requested Ministries concerned in the Central and State Governments to implement such recommenda- tions expeditiously. The Central and State Governments are presently examin- ing concrete measures for replacing octrois by other suitable sources of revenue for the local bodies and reducing the number of checkposts. Regard- ing taxation on the road transport industry, while Central customs and excise duties on diesel fuel have not been raised since 1966, the Governmentwas un- able to commit itself to freeze or reduce such taxes. The Government will continue to consult with the Association to (a) identify specific areas of mutual concern, (b) undertake further studies and research as may be neces- sary, and (c) keep the Association informed on the formulationand implemen- tation of the Government'stransport policies.

3. THE INDIAN RAIIWAYS

A. Organization and 1Ianagement

3.01 Formal jurisdictionover Indian Railways vests in a Minister of Railways who is a member of the Cabinet. Administration and management are the responsibility of a statutory Railway Board under the overall policy super- intendence of the ifinister. The Board, wlhich consists of five members assisted by five "additional"members, exercises the full power of the Government with regard to railway expenditure and finances generally, subject to parliamentary approval. It also exercises administrative and technical direction and super- vision of the Railways through functional Directorates which are organized and operate on commercial lines free from interferencein day-to-day decisions.

3.02 The Railways' network is divided into nine zonal systems (see Map). There are also three production units (the Chittaranjan Locomotive Works, the lIadras Integral Coach Factory and the Varanasi Diesel Locomotive Works). Each zonal railway and each production unit is headed by a general manager with budgeted capital expenditure and almost complete autonomy of operation. An organizationchart is given in Annex 2.

3.03 The Board, Directoratesand managementare competent.

B. Staff

3.04 The staff is well trained and efficient. Relations between labor and management are generally satisfactory. Details of staff and staff costs are given in Table 3. For the first time in iary years the staff, which numbers 1.36 million, did not increase in 1967/68.n/ During that year staff costs in- creased by about 9% due mainly to increasesin dearness (cost-of-living) allowances and annual increments; this is reflected in increases in total staff costs per man. However, total staff cost expressed as a percent-. age o:? operating expenditure vlas held at 50%,Owhich is reasonable. Staff

/ The Council is chaired by the HIinisterof Transport and Shipping and is composed of representativesof the Planning Commission and of the State Ministries in charge of transport.

2/ All statistics in this chapter and in related tables are as of March 31, 1968, unless otherwise stated. - 5 - productivity continues to improve in relation to revenue train-kim, revenue- earning net ton-km and pass-km but the figures per man employed are low compared with those achieved on many other large railway systems. In total the number employed by Indian Railways is excessive and this problem and the threat to the Railways' financial viability if - as is likely - increases in staff costs continue, was discussed during negotiations. A slight-reduction of 2,000 staff in 1967/68 was followed by a further reduction of 8,000 in 1968/69 and the Railway Board is to continue its policy of controlling the numbers employed and improving productivity.

C. Property

1. Permanent Way

3.05 The Railways operates 58,877 route-km of track and maintains 96,269 track-km. A total of 2,837 route-km (7,399 track-km) are electrifiedand work on electrifyingan additional 1,122 route-km is in progress. Four gauges of track are in use: broad (BG) which is 51 6"; meter (MG) which is 3'3-3/8"; and narrow (NG) which is two gauges (2' 6" and 2' 0"'). Details of route-km according to gauge, zonal regions, maintained track and means of traction provided are in Tables 4 and 5. To cope with the running of heavier and more frequent trains at higher speeds, track is being strengthened by laying heavier rail, welding rail ends and increasing the number of cross-ties and the depth of ballast. Mechanization of track maintenance is proceeding slowly because of a policy which takes into account the plentiful supply of low cost labor. Marshallingyards are being expanded and signalling and telecommunications are being modernized.

2. Rolling Stock

3.06 Details of-locomotivesand of freight and passenger cars are given in Tables 6, 7 and 8. Compared with the previow years, features to be noted are (a) that the retirement of 202 steam locomotives and the addition of 173 diesel-electric and straight electric locomotives increased the total tractive effort of the fleet by some 2 million kg, making it better equipped to start and move heavier trains or to operate faster; (b) that a net in- crease of 1,872 special-type bogie units and a net decrease of 1,105 open high-side four-wheel units reflect the Railways' continuing policy of replac- ing old four-wheelers with higher capacity bogie units; and (c) that passenger- carrying capacity increased by 49,000 places (3.1%) to a total of-1.64 million places, including standing room in electric multiple units (EMIJs).

3. Buildings and Structures 3.07 Buildings and other miscellaneous property are generally well main- tained; bridges are strengthened for heavier loads; channel changes and flood protectionworks are carriedout to preventwashouts and disruptionof traffic; and changesin workshopsand-sheds are relatedto the conversionfrom steam to dieseland electrictraction. -6-

D. Traffic

3.08 In the 15 years to 1966, freighttraffic rose steadilyfrom 93 to 203 million tons at an average annual rate of 5.3% (Table9). As the average lead increasedby about 22% during the same period, the yearly growth rate of ton-km was 6.7%, and closely paralleled the growth of industrial production of about 7%. Then came two years of drought accompanied by an economic re- cession and, for the first time since 1950/51, traffic declined in 1966/67 to 202 million tons and again in 1967/68 to 197 million tons. However,-traf- fic in ton-km progressed slightly becauseof furtherincreases in leads. With the improvement in the economic situation in 1968/69, the tonnage of-traffic is again increasing and the figure for that year is 205 million tons.

3.09 A feature of rail freight co,nmercial traffic has been the increas- ing proportion of low-rated bulk commodities.1lver the seven-year period from 1961 to 1968, traffic in low-rated commodities-J increased by about 48%, while traffic in other commoditiesincreased by only some 17% (Table10). Competi- tion from othermodes of transport,particularly road transport,has resulted in a marked decrease of the proportion of rail movement to total production of- some commodities such as sugar, raw and manufactured cotton, tea and oil seeds.

3.10 After a period of fluctuations during the First Plan period (1951/52- 1955/56),passenger traffic (Tables11 and 12), which accounts for some 50% of all train-kim, has been steadily increasing at an overall rate of 6% up to 1967/68. There was a slight drop of about 1% in 1968/69 because of the com- bined effectsof the recessionand tariff increases. As shown in Table 12, suburban traffic in the main cities has been growing at rates of about 7%, noticeably higher than those of other traffic (about VWi). However, while the average lead of suburban traffic has remained constant since 1961 at 17 km, the average lead of other traffic has increased from 72.4 km to 76.5 kmn,pos- sibly indicating some shift of short-haul travel to road. E. Operations

3.11 In recent years indices of operating efficiency given in Table 13 show a mixed pattern, partly as a result of the economic recession, from which the country is only now recovering. On the negative side, average net tonnage per freight car decreased, turn-around time per freight car increased and the car-km per freight car day is low. On the plus side, net and gross tonnage per freight train, average lead and the average speed of freight trains increased.

3,12 The application of work study techniques has widened and continu- ing efforts are being made to improve the quality of services, especially transit times and the regular dispatch and on-time arrival of freight trains. Container services are being expanded and faster schedules are now in effect for long-distance trains. Faster schedules have also been introduced for passenger trains. Some details of improved services are given in Annex 3.

21Coal, ores, stone, cement, foodgrains, fertilizers, fodder and salt. - 7 -

3.13 On balance, operating performanceis good. There are, however, certain critical areas of operation which require special mention. These are dealt with in the following paragraphs.

3.14 The operation of steam locomotives: a total of 10,226 steam loco- motives remains in service, of which 2,177 are over 40 years of age (Table 14). Between 1963/64 and 1967/68 diesel and electric locomotivesincreased their share of net ton-km of freight on the BG and MG lines from 37% and 19% to 614%and 31%, respectively,and the-numberof steam locomotives de- creased only from 10,810 to 10,226 (5.3%). Engine-km per steam engine day in use declined slightly and it seems that there is a tendency toward remain- ing steam locomotives to be under-utilized. Critical factors in the phasing out of steam locomotives are the rate of local production of electric and - diesel units and the training of staff for diesel maintenance and operation. Declining performance by steam is related, to some extent, to a comparative increase in service/secondary duties. The Railways is now preparing a com- prehensive, long-term plan for the optimum rate of phasing out of steam loco- motives and dealing with the complex related activities of workshops, running sheds, staff and fuel.

3.15 Freight car ut3lisation; the following figures for BG lines (MG line figures are similar) show that the capacity of the freight car fleet over the years 1963/64 to 1967/68 has grown faster than the traffic (ex- pressed in ton-km) and that the utilization of freight cars has decreased.

% Increase (Decrease) BroadGauge 1963/64 1965/66 1967/68 1963/64-1967/68 Net ton-km carried (million) 89,130 97,251 99,977 12.2% Average freight cars for public service (000) 262.5 301.1 316.1 20.4%

Net ton-km/freight car day 987 940 895 ( 9.3%)

Average freight - - car load (ton) 18.8 18.6 18.1 ( 3.7%) Percentage of loaded freight car km to total freight car-km 68.7 68.6 68.4

Average turn-around (days) 11.0 11.8 12.6 (14.5%) - 8 -

The main reasons for this position are (a) that the utilization achieved in 1963/64 was to some extent at the expense of quality of service and (b) that at the end of the Third Plan period traffic forecasts did not come up to ex- pectations and this resulted in some excess of wagon capacity. Other factors adversely affecting car utilization in recent years have been an increase in the provision of specialized freight cars (requiring more empty haulage) and changes in the pattern of traffic. However, the position now is that mea- sured in net ton-km per freight car day there was an improvement in utiliza- tion in 1968/69 (on BG 921 against 895 in 1967/68) and this improvement is being sustained in 1969/70 (1024 in the first quarter against 1003 in the same quarter of 1968/69). These figures of freight car utilization related to per ton of carrying capacity are better than for most other major railways. The intention in the Fourth Plan period is to provide only a 30% increase in freight car capacity against a forecast-40% increase in net ton-km., the balance to be met by improved operation. The position will also be kept under close annual review by the Railways taking account of traffic trends.

3.16 Passenger requirements: passenger services, both non-suburban and suburban, have not kept pace with increasing demand. One reason is "the priority accorded to good transport in the interest of overall economic/ industrial development."V There is a shortage of both passenger cars/rail cars which carry the non-suburban traffic and EMUswhich presently carry about 85% of the suburban traffic in Bombay, Calcutta and Madras.

3.17 With regard to the number of passenger cars/rail cars in service, the following figures illustrate the position:

(% Increase) 1960/61 1965/66 1967/68 1960/61-1967/68 Pass-km (million) 69,510 83,748 92,013 32.h% Passenger cars in service at the end of each year 20,166 23,009 23,577 16.9% Number of seats (000) 1,281 1,427 1,456 13.7% The proportion of over-age cars in service is over 20% and could be reduced with benefit to the services provided (Table 15). The loading of cars, par- ticularly third class which carry 98% of all passengers, is often over 100%. The utilization of cars, which is 272 km per car per day (on BG lines), may not lend itself to much ihprovement. The pricing of services, on the whole, is reasonable; prices may need some upward adjustment, but not to the extent of greatly reducing demand (see Chapter 5).

I/ "A Review of the Performance of the Indian Government Railways," February 1969, page 47. - 9 -

3.18 W4ithregard to ELUs, the demand for suburban transport services has outstripped the provision of services: tcommuters are forced to travel on foot boards, hanging from window bars, standg in between coaches and even on carriage roofs, which is most dangerous.1' Occupancy rates of up to 440% have been quoted and up to 200% are conmona/ During the Third Five-Year Plan period only about 5oo EMUunits out of 1,000 planned were placed in service (due largely to limitations of production to one privately-owned factory; the Railways has now initiated action to manufacture EMU stock in its own coach factory to augment production). Consequently, over-age stock has had to be kept in operation resulting in high maintenance costs, frequent breakdowns and considerable losses in working hours to commuters.

3.19 As the mobilityof people can contribute as much to economic/ industrialdevelopment as the movementof freight, actionis being taken, or is plannedto be taken,to improvethe presentposition by (a) expanding both passengercar and EMU production;(b) improvingmaintenance/availabilitY (hopefullyfrom 86% in 1968/69to about 90%); (c) reducingthe proportionof slow passenger trains; and (d) carryingout variousengineering works, in particular the lengthening of platforms to take 17 cars (with diesel) as against the present 12 cars (with steam).

3.20 In view of the continuous concentration of population and economic activities in the major cities of India, metropolitan transportation prob- lems are fast reaching crisis dimensions. In 1968, the Metropolitan Trans- port Team of the Planning Commission initiated comprehensive traffic surveys in Bombay, Delhi and Madras, taking into account the current and future land- use patterns within the metropolitan areas. In Calcutta, detailed traffic studies have already been made. The Team concluded that grade-separated mass transit systems were essential in all the four cities, and that priority shouldbe given to Calcuttaand Bombay. For the short run, the Team recom- mendedthe implementationduring the FourthPlan of urgentschemes relating to road development, bridges, replacement of level crossings by grade- separated crossings, etc., as well as the preparation of techno-economic feasibility studies for rapid transit systems in all four cities.

3.21 The Team held the view that it was not advisableat this stageto appointa foreignconsulting firm to undertakethe studies,but that a sub- stantial portion of the technicalwork could be done by the Railways.Y The Railways has agreed to make available the services of its personnel for conducting the engineering studies and also for executing and operating the metropolitantransport system, if required,provided the Government will allocate funds outside the normal budget of the Railways for conducting the studies and executing the project and also-foroffsetting losses which the Railwaysmay incur in operating the system.

g Report on ExistingMass Transportation System; BombayMetropolitan Transport Team, Planning Commission, August 1968. Interim Report of Metropolitan Transport Team, 1967. The Railways has recently completed the preliminary feasibility and traffic studies for a suburban dispersal line in Calcutta (Dum Dum to Princep Ghat) in association with the Calcutta Metropolitan Planning Organization. - 10 -

3.22 Foodgrainsby rail: this traffic--covering wheat, rice, grain and pulses--has averaged in the past three years about 15 million tons or some 17% of total production/imports and 7% of total originating railway tonnage. The low percentage of movement comparative to total production/imports is caused by the-fact that the bulk of foodgrains produced indigenously is con- sumed locally. The movement of this traffic by rail has produced problems for the Railways disproportionate to its volume. Drought conditions meant railing more from the ports with long empty haulage to the ports, but recent bumper harvests, following the development of better seed and farming methods, have caused changes in the pattern of traffic and even dislocation during seasonal peaks. The Railways, in conjunction with the Ministries of Food and Agriculture, Transport and Shipping, and Finance have prepared a rationalization scheme for the movement of imported foodgrains (and fertili- zers) and taken or planned other measures including the movement of food- grains by train loads, the provision of storage facilities at origin and destination points and the carrying out of various line and terminal capacity works (see Annex 4). With the taking of these measures and continued close liaison with all other parties concerned, the Railways anticipates being able to deal effectively with all future foodgrain traffic, both imported and indigenous. F. Manufacturing Units

3.23 In order to avoid the heavy foreign exchange expenditure required for the procurement of locomotives from abroad, the Railways manufactures electric locomotives at Chittaranjan and diesel locomotives at Varanasi under licenses from a group of European manufacturers and from an American firm, respectively. The production of these plants is given in Table 16. Steam locomotiveproduction will be phasedout completely by 1971/72, by which time Chittaranjanwill be totallyconverted to the manufactureof electric locomotives.Both workshopsare well laid out and equippedand efficientlyoperated with competentmanagement and staff. Informationon productioncosts in these workshops-indicatesthat locomotivesbuilt in India cost somewhatless than the c.i.f,landed cost of similarlocomotives if imported.

3.24 The electriclocomotive licensing agreement with the European Group is to expirein November1970 and (exceptfor an agreement,effective until 1975, to manufacturea new 50-cycleAC tractionmotor) is not to be renewed. The Railwaysnow has sufficientcompetence to completethe full manufactureof electriclocomotives independently. For the manufactureof diesel-electriclocomotives the Railwayshas a collaborationagreement with Alco Products,U.S.A. Alco Productshas recentlydecided to shut down its locomotivechassis manufacture, but to continuewith locomotiveengines. The cessationof the manufactureof locomotivechassis by Alco presentsno problemsto the IndianRailways which is fully competentto carry out this manufacture. So far as the engineis concerned,the agreementwill continue until the normal expiry date (February 1972) and then will not be renewed. In the meantime, the Railways will be working on a program to complete in- digenization of the manufacture of diesel-electric engines (see also para. 4.16). - 11 -

4. THE.PLAN AND THE PROWJECT

A. The Plan

4.01 The IndianRailways' investment program for the Fourth Five-Year Plan (1969/70-1973/74), estimated to cost Rs 15.1 billion (US$ 2.0 billion equivalent), is summnarized in Table 17 with details in Annex 5. The program is less than the Third Five-Year Plan (1961/62-1965/66) investment program, the actu,al expenditure on which was Rs 16.9 billion (Us$ 3.5 billion equiva- lent).i/ -Yearly expenditures under the program are estimated to increase from Rs 2.55 billionin 1969/70 to Rs 3*144billion in 1973/74 and to average Rs 3.02 billion. This averagecompares with yearlyexpenditures of about Rs 3.4 billionduring the Third Five-YearPlan periodand of about Rs 2.63 billionin the three years betweenthe two Plans. The total foreignexchange componentin the FourthFive-Year Plan is Rs 1,808-million(12% of total ex- penditure)or US$ 241 millionequivalent (Table 18). This compareswith a corresponding foreign exchange component in the Third Five-YearPlan of Rs 2,,420 million (15% of total expenditure) or US$ 508 million equivalent.

4.02 Compared with the Third Five-Year Plan investment program, the main difference in the current program is the sharp reduction in expenditures on new line constructionfrom Rs 2.11 billionto Rs 0.83 billion. Otherwise continuedemphasis is placedon the procurementof motivepower and rolling stock (Rs 6.2 billionor 41.1% of the program),line capacity and signalling works (Rs 3.55 billionor 23.5%),track renewaland bridgeworks (Rs 2.28 billion or 15.1%), and electrification (Rs 0.94 billion or 6.2%) with the remaining Rs 2.13 billion (14.1%) being for new lines, workshops, machinery and othermiscellaneous plants and works. The plannedallocation of expendi- ture seems reasonablywell relatedto the Railways'requirements and the traffic forecasts. Revisions will be made annually in the program by the Railways to take account of traffic trends.

B. The Project

4.03 The Project consists of the first two years of the Railways' Fourth Five-YearPlan, subjectto possiblerevision as indicatedabove. The total estimatedcost of the Project is Rs 5 316 million (US$ 709 millionequivalent) with a foreign exchange content of US. 95 million equivalent; a breakdown of the Project is given below and details are given in Annex 5.

I/ At Rs 4.762 = US$ 1.00 - 12 -

% of Rs millions US$ millions Total / ~~~~~~Expen- Local Foreign TotalI/ Local Foreign Total diture

Rolling Stock 1,739.8 587.2 2,327.0 232.0 78.3 310.3 43.8 Workshops and Sheds 105.0 105.0 14.0 14.0 2.0 Machineryand Plant 35.0 23.2 58.2 4.7 3.1 7.8 1.1 Track Renewals 670.0 670.0 89.3 89.3 12.6 Bridge Works 98.1 98.1 13.1 13.1 1.8 Line Capacity Works 832.0 18.0 850.o 110.9 2.4 113.3 16.0 Signalling and Telecommunica- tions 140.5 40.5 181.0 18.7 5.4 24.1 3.4 Electrification 278.4 46.6 325.0 37.1 6.2 43.3 6.2 OtherElectrical Works 47.7 47.7 6.4 6.4 .9 New Lines 305.0 305.0 40.7 40.7 5.7 StaffWVelfare and Quarters 169.4 169.4 22.6 22.6 3.2 Users'Amenities 80.0 80.0 10.7 10.7 1.5 Other Works 45.0 45.0 6.o 6.o 0.8 Road Services 55.0 55.0 7.3 7.3 1.0

4,600.9 715.5 5,316.4 613.5 95.4 708.9 100.0

4.04 Rollingstock (Rs 2,327 millionor 43.80) covers535 locomotives (122 steam,298 dieselsand 115 electric);39,600 freightcars (in termsof four-wheelers);337 EMUs, 10 railcarsand 2,644 other type passengercars. The productionof steamlocomotives is being phasedout and the 122 units are likelyto be the last of theirkind to be builtby the IndianRailways (or by anyone else in the world). Duringthe Projectperiod some 320 steam locomotivesare scheduledto be retired. The freight-carsrepresent planned productionof 19,60C in 1969/70 and 20,000 in 1970/71. Obsolescencedue to age and technological advances requires that in general, out of a total fleet of some 480,000cars in terms of four-wheelers,some 12,000cars shouldbe replaced each year; the balance will be for additional traffic. The total EMU fleet is 1,580 and the passenger car fleet is 32,731. Normal obsoles- cence etc, requiresthe retirementof some 50 EMUsand about 1,000passenger cars a year. Additionally,however, as indicatedearlier (paras. 3.14 through-3.17),there is a backlogof over-ageequipment which shouldbe reduced.

] Includescustoms duties averaging 27.5/. - 13 -

4.o5 Track renewals and bridge works (Rs 768 million or 14.4%) include renewal and strengthening of 1,262 track-kn in 1969/70 and 1,751 track-km in 1970/71. Apart from the need for track replacement on a regular cycle related to age and wear, higher axle loads and densities of traffic, at higher average speeds, justify these expenditures.

4.o6 Line capacity works and signalling (Rs 1,031 million or 19.4%) in- clude doubling 273 track-km in 1969/70 and 440 track-km in 1970/71. Other line capacity works include yard remodelling and the conversion of meter gauge lines to broad gauge (47 km in 1969/70). The proposals are based on technical and financial examination by the Railways and are generally reason- able.

4.07 Electrification (Rs 325 million or 6.2%) will complete the work on 1,122 route-km of line, the technical, financial and economic case for which has been established by the Railways.

4.o8 New lines (Rs 305 million or 5.7%) consist mainly of the comple- tion of construction works on 1,144km of line started in previous years. The only new work to be initiated will be a line on the-Farraka Dam across the Ganges replacing a slow and uncertain ferry service.

h.09 The remaining expenditure of Rs 560 million or 10.5%will cover workshops, machinery, plant, etc. requirements.

C. Financing of the Project

4.10 Table 19 shows for the two-year Project period 1969/70 and 1970/71 (a) the allocation of foreign exchange to the classes of material to be pur- chased, (b) sources of aid and loans already available and (c) the balance requirement amounting to US$ 66.1 million. This information is summarized below: US$ millions Equivalent

Total foreign exchange requirement 95.4 Available from existing bilateral loans and credits: 1969/70 22.2 1970/71 7.1 29.3 Balance requirement 61

Expected to be available from future bilateral loans and credits 5.8 From India'sfree resourcesof ex- change (covering the period April- August 1969) 5.3

The proposed IDA credit 55.0

66.1 - 14 -

The foreign exchange required from India's free resources, Us$ 5.3 million, has already been made available. The amount of US$ 5.8 million to be found from future bilateral loans and credits is still to be finally negotiated, but it has been agreed during negotiations that in the event of a shortfall any differencewould be compensatedby an allocation from free resources of exchange. Local currency expenditurewill be financed by the Government, through capital-at-charge and from the Railways' own funds.

4.11 The Project items, the foreign exchange costs of which would be financed by IDA, are as follows:

US$ millions

1. Componentsand materials required for the manufacture of:

Electric locomotives 10.2 Diesel locomotives 13.1 Electric multiple units and railcars 4.5 Coaches 5 Freight cars 5.0

37.8

2. Equipment material for line capacity works, electricalworks, etc. 2.4 3. Equipment for signalling and telecom- munication schemes 4.2 4. Equipment and materials for electri- fication schemes 6.2

5. Plant and machinery 1.2

6. Sundry railway equipment and material 3.2

55.0

4.12 It is proposed that the IDA contributionto the financing of the Project should cover payments made from September 1, 1969, foreign exchange payments made before that date being covered from other sources.

D. Execution of the Project and Procurement

4.13 Indian Railways is competent to carry out the Project. Local cost estimates,-based on experience of recent similar works carried out, are reasonable. Prices of imported material contain a built-in contingency allowanceof 5% to cover possible price increases,which is adequate.

4.14 All items to be financed by IDA will be procured through inter- national competitivebidding, other than (a) componentsof railway equipment manufactured under license and (b) equipment required to conform with stand- ardizationpolicies accepted by IDA as necessary for economic and efficient - 15 - operation(see also para.4.16). The totalvalue of procurementfor these purposes is estimatedat aboutUS$ 16 millionequivalent. Allocation under the credit for these items will be limited to this amount and reallocation of the remainder of the credit to these items will not be permitted.

4.15 Details of proposed procurement under licensing agremewnts and standardization policies are as follows: US$ millions

(a) Diesel locomotive components including rectifiers, control equipment, crankshafts, cylinder head castings, turbochargers, com- pressors, fuel booster pumps and pistons 8.2 (b) Electric locomotive components including air-blast circuit breakers, tap-changers, traction motor components, switchgear, transformers, rectifiers, gears, pinions and brake equipment 6.2 (c) Electric multiple units, mainly traction and brake equipment 1.6

4.16 During negotiations the question of the Railways attempting to cover all its requirements for this class of procurement from non-IDA sources was discussed. Considerableprogress has already been made by the Railwaysin this direction: out of the total foreign exchange cost of the project, US$ 95 million, some US$ 45 million is for procurement under licensing agree- ments and standardization policies and of this amount US$ 29 million is being provided from non-IDA sources, the balance of US$ 16 million being part of the proposed credit. Additionally, the Railways has now undertaken to study how far specifications for future requirements of this nature could be pre- pared so as to allow international competitive bidding and how far bilateral finance might be obtained for the remaining items which could not be so treated. This study will requiresome time and is not expectedto be applicablewith respectto the proposedcredit. 4.17 The greaterpart of the expendituresunder the Projectis for the completionof ongoingworks in progresson April 1, 1969 which shouldbe com- pletedby March 1971. Disbursementsfrom the proposedcredit would cover pay- ments from September1, 1969 as follows: US$ millions Equivalent

September-December1969 6 January-June 1970 19 July-December 1970 21 January-March 1971 9 . 7 Disbursementwould be made on the basis of approved c.i.f. foreign exchange expenditures. 4.18 Subject to review and agreement with the Association, savings in any categoryof the allocationof the proceedsof the proposedcredit will be availableto coverincreases in any other categorywith the exceptionof that referredto in paragraph4.14. - 16 -

5. FINAITCESAND EARIENGS A. Introduction

5.01 The Railways' accounts are those of a Government department and are designed to show the origin and use of public funds. The Government authorizes all the capital and operating funds required by the Railways in accordancewith budgets approved by Parliament and acts as the Railways' treasurer. Bank loans and IDA credits are channeled through Government to the Railways and, insofar as they relate to additions, they appear in the Railways' accounts as interest-bearing permanent capital known as capital- at-charge and become part of the Government'sinvestment. The portion of foreign loans obtained to finance replacements is reimbursed in local currency to Government by the Railways as expenditures are incurred.

5.02 Capital expenditures on fixed assets are financed as follows. Additions are financed entirely by an increase in Government'scapital-at- charge provided they can be shown to produce a financial return of not less than 6.75%. Additions which do not meet this requirement,mainly new minor works, are financed from the Railways' own resources and are either charged to revenue if less than Rs 300,000 or are met from net earnings channeled through the Development Fund which also finances user amenities and welfare works. Replacementsare financed from Railways1 own resourcesthrough the DepreciationReserve Fund&'1at full replacementcost; the amounts set aside to this fund as a charge to revenue are determined quinquennially(subject to annual review) on the basis of an estimate of replacement costs during thaefollowing five years.

5.03 The financial arrangementsbetween Government and the Railways as approved by Parliament are fixed by a Convention Committeewhich is constitutedat five-year intervals. Under these arrangements,dividend on capital-at-chargehas been increased several times, and with effect from April 1, 1966 has been fixed at 5.5pon capital provided to March 31, 1964 and 6.0o% on capital provided thereafter. (Fwor the three years 1963/4 to 1965/66, the corresponding rates were 4.5p and 5.5%,respectively.) These dividends are payable to Government even though in a gi-venyear the net earnings are insufficientto cover the dividend. In the last three years (1966/67-1968/69),in order to meet thLedividend payments, the Railways had to draw on its own reserves (i.e., Developmentand Revenue Reserve Funds) and when these were fully used it had to obtain temporary loans from Govern- ment to the amount of Rs 271 million.

1/ The Depreciation Reserve Fund (DIFP) functions as a reserve for renewals of capital assets. Appropriations are made annually to the Fund, the corresponding charge being described as Appropriation to Depreciation Reserve Fund under the heading of Operating Expenses. In this report the term "depreciation"should be construed accordingly and operating ratios are calculated after taking into account this appropriation. - 17 -

As shown in Table 20, the net assets of the Railways on March 31, 1968 amounted to Rs 44 billion (US$ 5.8 billion equivalent). Almost 70% of the net assets has been financed by Government contributionsand 30% by railway earnings. Details of the reconstructedbalance sheet are given in Annex 1 of Table 20.

B. Rates and Fares

5.05 The Railways has a costing system which is used for periodic review and for adjustment of rates and the rate structure. Cost studies have already led to a number of rate changes, such as increases on less-than- carload shipments and long-distancecoal haul, and the levy of a trans- shipmentcharge to compensatefor higheroperating costs on meter gaugelines. In 1967/68receipts per ton-kmaveraged USX 0.66 equivalent,which is low when comparedwith most railwaysin the world. In additionto the periodic adjustmentof individualrates, a comprehensivereview of the overallrate structureis being undertaken.

5.06 Cost studiesmade by IndianRailways for passengerservices have shown that receipts- averagingin 1967/68US¢ 0.32 equivalentper pass-km which is also low - fell short by about12% of the fully distributedcosts (includingdividend on capital-at-charge).Passenger fares have been increaeed in 1967/68and again in 1968/69. It was agreedduring negotiations that the Railwayswould carry out furthercosting studies with a view to determining the extentto which the fares for individualservices cover the costsof such servicesand would reportto the Associationperiodically on the statusof these studies. 5.07 A major reasonfor the shortfallof passengerreceipts in relationto costs is ticketlesstravel. The Railwaysestimates that the annualloss on this accountmay run to as much as Rs 250 million,nearly 10% of the annualgross receiptsfrom passengers.A recentnew ordinanceraising fines for ticketless travelto a deterrentlevel seemsto be provingeffective.

5.08 lWhile substantialprogress has been made in costinganalysis, some procedures require to be reviewed. The Bank Group is currently providing to the Railways the services of two (British) experts who are to report on costing problems. The study, which is expected to be completed before the end of 1969,will be the subjectof discussionsbetween the Associationand the Railwayswith a view to definingand agreeingon furthercourses of action. C. Earnings

5.09 Table 21 showsthe financialresults from operationsfor the years 1963/64to 1968/69which are summarizedbelow: - 18 -

,.smillions ------Actual------1963/64 1964/65 1965166 1966/67 1967/68 1968/69 Gross Operating Revenue 63L2 6,608 7,336 7,688 8,181 8,987 WJorkingExpenses 3,921 4,334 4,859 5,256 5,882 6,368 Appropriationto DepreciationReserve Fund 800 830 850 1,000 950 950

Appropriationto PensionFund 115 120 135 99 99

4,721 5,279 5,829 6391 6,931 7,417

Net Revenuefrom Operation 1,601 1,329 1,507 1,297 1,250 1,570

Non-operatingExpenses 149 148 159 156 150 144

NletRevenue i,452 1,181 1,348 1,141 1,100 1,426

Dividendon Capital- at-Charge 960 l09 1,162 1,324 1,1415 1,506 Surplus/(Deficit) 492 132 186 (183) (315) (80)

OperatingRatio 5O 7h.7 79.9 79.5 83.1 8h.7 82.5

5.10 Net revenueearned for each year to 1965/66was sufficientto cover the dividend on capital-at-charge and to leave a surplus for appropriation to the DevelopmentFund. In 1966/67net revenuefor the first time in 18 years fell shortof the dividendpayment by Rs 183 millionand in 1967/68the shortfallincreased to Rs 315 million. These resultswere partlydue to the higherrate of dividlendon capital-at-charge(para. 5.03) but the principal factorswere a lower level of trafficthan had been anticipatedand substantial increasesin workingcosts, chiefly for personneland fuel.Both of these factorswere responsiblefor the increasein operatingratio in 1966/67and 1967/68.

5.11 Comparedwiith the previousyear, gross receipts in 1967/68 increased by Rs 493 million(6%) but workingexpenses increased by Rs 626 million(12%). The increasein expenditurewas causedby enhancementin the rates of dearness allomance,annual increments to staff and increasesin the price of coal and other stores. - 19 -

5.12 The amiounts chargedf annually "or depreciation have been calculated to be sufficient to meet the current cost of replacement assets and to main- tain a reasonable balance for future needs. Although there was a small reduction in the depreciation charge in 1967/68, the unspent balance in the Depreciation Reserve Fund has grown from Rs 518 million in 1966 to Rs 797 million in 1968. Furthermore, the charge for depreciation in 1967/68, Rs 950 million, was equivalent to 11.6% of gross operating revenue and, as shown in Annex 2 to Table 20, paragraph 2, depreciation charged in 1967/68 was equivalent to 2.7% of the cost of depreciableassets. These figures indicate that the depreciationcharge, while not calculated on commercial accounting lines, is neverthelessreasonable.

5.13 For the year 1968/69, revenue-earningtonnage loaded was 9.4 million tons greater than for the previous year, an increase of nearly 6%, and the average haul has also increased. The combined effect of tlleaddition- al freight traffic and increased rates and fares (paras. 5.06 and 5.07) produced gross operating revenue Rs 806 million higher than in the previous year, an increase of 10%. On the other hand, working expenses in 1968/69 were Rs 486 million higher than in the previous year, an increase of 7%; increases in the dividend payment, open line works and miscellaneoustransactions account for a further Rs 85 million. The net effect of these increases in reve- nue and expenditureis expected to result in a shortfall in the amount available for the dividend payment for 1968/69 of Rs 80 million compared with Rs 315 million in the previous year.

D. Present Financial Position

5.14 The reconstructed balance sheet of IHarch 31, 1968 summarized in Table 20 has been designed to show the historical cost of all fixed assets including those financed from the DepreciationReserve Fund, Development Fund and from revenue. The balance sheet also shows the total investment by Government,Rs 29,892 million, and investment generated from the Railways' own resources, Rs 13,139 million.

5.15 Annex 2 to Table 20 shows results from operations in 1967/68, excluding the losses on strategic lines which are met by Government. This Annex also shows the net value of fixed assets in use after deducting con- tributions to DepreciationReserve Fund; the net value so ascertainedis Rs 26,680 million and the net revenue attributableto these assets in 1967/68 is Rs 1,231 million, equivalent to a financial rate of return of 4.8%.

5.16 The balance of cash, investments and savings accounts with Govern- ment (Rs 1,682 million) is substantialbecause it includes the investmentof the Depreciation,Development, Revenue Reserve and Pension Funds as well as a working cash balance of Rs 234 million. Under the heading of capital provided by Government is shown an item of tem,lporaryloans amounting to Rs 112 million made in 1967/68 (para. 5.03). - 20 -

E. Future Earnings

5.17 The Railways' forecast of operating revenue and expenditure to 1973/74 is shown in Table 22, supportedby notes appearing in the annex. Receipts from passenger traffic are based on an assumed annual growth of 3%. Freight receipts, based on present rates, are expected to increase annually by 6.6% as a result of an average annual growth of 5.8% in traffic in terms of net ton-km and a shift in the commoditymix of traffic, producing a slight increase in the average receipt per net ton-km. The operating ratio is expected to improve steadily from an estimated 82.6% in 1968/69 to 76.8% in 1973/7h.

5.18 The estimates generally and the bases on which they are prepared are reasonable. Having regard to the increase in capital assets, it has been agreed during negotiationsthat the annual appropriationto DRF will be not less than the amounts shown in the forecast revenue and expenditure statements prepared by the Railways and on which this appraisal is based, viz:

Rs Millions

1970/71 1000 1971/72 1050 1972/73 1100 1973/74 1150

These amounts are approximateto 10% of the estimated gross operating revenue of each fiscal year.

5.19 The Railways has produced figures demonstratingthat the amounts presently charged for depreciationare approximatelythe same as they would be if calculatedby reference to the replacementcost of depreciableassets and their respectiveuseful lives. The Railways accepts that its method of assessingdepreciation does not conform to generally accepted commercial accountingprinciples and has agreed to:

(a) continue to study the possibilityof revision,par- ticularlyin the light of any recommendationsfrom the cost consultantsnow appointed;

(b) continue to prepare annually its estimates of de- preciation on a replace-ment cost basis and to make the figures available to the Association;

(c) consider the possibility of incorporating the re- valued fixed assets and depreciationfigures in a statement supplementing the annual accounts.

5.20 Forecast balance sheets to 1974 are shown in Table 23. Net revenue from operations in 1973/74 (Table 22) is estimated at Rs 2,710 million which is equivalent to a return of 6.8% on Government capital-at- charge. The return on net fixed assets (after deducting cumulative appro- - 21 - priations to Depreciation Reserve Fund and amounts charged to revenue) would be 7.4%.

5.21 The broad financialpolicy of the Railways in the past has been to ensure that sufficient revenues are earned to meet its operating expenses including depreciationand dividend on capital-at-charge, and to leave a sur- plus for allocation to DevelopmentFund. In recent years the Railways has been confrontedwith unforeseen increasesin costs which have not been prompt- ly or fully compensatedby economiesor additional revenue. This has been a contributingfactor to the comparativelypoor results for the three years 1966/67 to 1968/69. To avoid further shortfalls in the dividend payment and to allow for partial self-financingof capital expenditure,it has been agreed that rates and fares will be set to produce sufficient revenue (a) to maintain an operating ratio not higher than 80% and (b) to meet all work- ing expenses, depreciation and pension fund allocations, expenditure charged as open line works and miscellaneoustransactions, dividend on capital-at- charge and a contributionto the Development Fund amounting to not less than 1% of the capital-at-chargeat the end of fiscal year. This covenant will be applicable from fiscal year 1970/71 except for the contributionto the DevelopmentFund which will become fully operative from 1972/73. In 1970/71 and 1971/72 the contributionto this fund will be not less than is and 3/4% respectivelyof the capital-at-chargeat the end of those years. Based on the present rate of dividend, the implementationof the above covenant is expected to give the equivalent of a return of about 7% on capital-at-charge.

F. Source andApplication of Funds

5.22 Table 24 shows the detailed source and application of funds fore- cast for the Fourth Five-Year Plan. The figures may be summarized for the whole period as follows:

Rs millions

Railways Sources

Cash generation by Railways after meeting dividend on capital-at-charge 8,031 Less Incrc-asein fund balances 1,054 Repayment of temporaryloans (net) 271 Amortizationof capital 6 1,331 Balance allocated to capital investment 6,700 GovernmentSources

Increase in capital-at-charge 8,550 Less required for inventories 150 Total capital spending15~8,h00 Total capitalspending 15,100 - 22 -

5.23 During the Project period 1969-1971, total capital investment amounts to Rs 5,316 million, of which the Railways would provide Rs 2_,514 million (47%). The balance of Rs 2,802 million would be provided by an increase in Government capital-at-charge.

G. Audit

5.24 The Railways' accounts are audited by the Director of Railway Audit. The emphasis of this audit is on ensuring that funds have been applied in accordancewith budgetary allocationsapproved annually by Parliament. The Director of Audit prepares each year a detailed report drawing attentionto a wide variety of matters which are reviewed and in- vestigatedby the Public Accounts Committeewhich in turn publishes a report of its discussions,recommendations and findings. The detailed auditor's report and the proceedingsof the Public Accounts Committee are exhaustiveand satisfactory.

6. ECONOMICEVALUATION

A. Traffic Forecasts

Frei,ght

6.01 Despite the almost uninterruptedrecord of traffic growth since 1950/51 (para. 3.08), a feature in the 1960s has been the sizeable short- falls of traffic in relation to the Railways' forecasts,which were based on demand/production estimates made by other Ministries and approved by the Planning Commission. Against the original target of about 250 million tons for 1965/66, the last year of the Third Plan, actual traffic was only 203 million tons. Targets set beyond 1965/66 - e.g. 296 million tons for 1970/71 - can be seen now to be even more unrealistic against actual traffic of about 205 million tons in 1968/69. As the Railways plans investment on the basis of long-term requirements,more accurate forecastingis required. The Railways accepts the need for this and for the curtailmentof investments in the light of actual traffic. An Inter-MinisterialWorking Group has been set up, composed of representativesof the Planning Commission,the Ministry of Railways and various Economic Ministries concerned, to review quarterly railway traffic projectionsin relation to productiontargets of major commoditiesand past trends in productionand rail movements.

6.02 The Railways Planning Directorate traffic forecasts for the Fourth Five-Year Plan period, 1969/70 - 1973/7h, show that, by 1973/74, the Rail- ways should be carrying some 265 million tons of freight traffic, an increase of about 30% over the 1968/69 level (Table 25). These estimates are con- firmed by the Economic Unit of the Railways, establishedin 1966 under the last IDA Credit, which devoted a major part of its efforts during the past year to forecasting traffic for the Fourth Plan period. The forecasts cover seven major commodity groups - coal, steel, iron ore, cement, mineral oils, fertilizers and foodgrains - as well as raw jute and miscellaneous goods. The seven major commoditieswould account for nearly 83% of the fore- cast traffic increase, the largest increases being in coal traffic (other - 23 - than railway coal), raw materials for steel plants, iron ore for export and fertilizers. Foodgrain traffic would increase only marginally, but the pattern of movement would change (para. 3.22).

Passengers

6.03 The Railways estimates that ron-suburbanpassenger trafficwill grow at a compoundrate of 3% up to 1973/74and at a simplerate of 3% thereafter. This projectionis based on an extrapolationof past trends (para.3.10) and seems realistic. No specialattempt has been made to fore- cast suburban traffic growth, but in the financial projections the same rate of growthas that of non-suburbantraffic was used. In the light of past growthand the continuedheavy demand despite overcrowding, this rate may have to be revisedupward as suburbanservices improve.

B. InvestmentEvaluation 6.o4 The EconomicUnit, set up in 1966,was to conducteconomic analysis of selectedinvestments and to advisethe Board on relevantmatters. Because of initialstaffing difficulties and concentrationon trafficforecasting and other studiesrequested by the Board,progress on the Unit'swork program as agreedwith the Associationwas slowerthan expected(Annex 6). The few studiescarried out so far have been generally satisfactory. 6.05 The EconomicUnit now proposesto completethe studieslisted in a revisedwork programshown in Annex 7 which givespriority to continuous trafficforecasting and focuseson importantfuture investments. The new work programis satisfactory. Duringnegotiations, target dates for com- pletingthe studieswere agreedand copiesof the studieswill be made avail- able to the Association.

6.o6 In the new work programno specificprovision is made to studyun- economicbranch lines. In total some 77 lineshave been identifiedas incurring financial losses of about Rs 80 million (about 1% of gross receipts in 1967/68), but the closing of these lines is strongly opposedby the State Governmentsand the politicaldifficulties involved would appearto be out of proportionto any financialgain to the Railways. However,this matter is currentlyunder reviewby a high levelGovernment committee.

6.07 The amountof economicwork done so far by the Railwaysis limited. The Railwaysassesses the priorityand timingof new investmentson the basis mainly of financial criteria which requirea minimumannual return of 6.75%. However, although the financial studies are detailed and thorough, the criteria are not consistentlyapplied, which may resultin distortionof priorities and/orunjustified investments. The Railwayshas reviewedits existing techniqueof financialappraisal and the RailwayBoard has decidedto adopt the discountedcash flow methodand to requirea minimumrate of returnof 10% for new investmentsto be financedout of capital-at-charge.This techniquewill be adoptedfor the analysisof selectedindividual works - 24 - costing Rs 2 million or more as of 1971/72. After gaining experience, the Railways will consider if this technique and rate of return should be extend- ed to other works costing less than Rs 2 million.

6.08 The requirement of a mainimum.financial return guarantees to some extent that investments are also justified on economic grounds. For example, if an investment results in reducing recurrent costs of moving a given traffic for which rail is the most economical mode of transport, the financial benefits to the Railways may be assimilatedwith economic benefits to the country, leaving aside the difficultproblem of estimatinginputs (capital,labor, imports, etc.) at their proper economic value. Similarly, in the case of line capacityworks to increase the flow of traffic over a given line, the additional net revenue to the Railways may also represent benefits to the economy. Nevertheless,an economic evaluation of the Project, as part of an appraisalby the Association,is hardly possible because the Project comprises a great number and wide variety of works in various stages of completion and an item-by-itemanalysis has not been attemptedby the Railways Economic Unit. However, rates of return, assessed by analogy with other railway projects under broadly comparable conditions, suggest that:

- dieselizationof motive power may be expected to yield an economic return of 12 to 15%;

- replacementof over-age passenger and freight cars, to- gether with replacing and servicing of additional units to cope with increased traffic, giving reduced maintenance costs and increased earning capacity, should result in a return of about 15%;

- investments in track and structures giving a longer ser- viceable life and reductions in maLntenance for rolling stock as well as track should result in an economic rate of return of 10%; and

- line capacity works, resulting in the removal of bottle- necks and improved services and turn-around of rolling stock, may be estimated to yield a return of not less than 12%.

6.09 These rates of return can be accepted as an indicationof order of magnitudebenefits resulting from the proposed Project. However, for many years the Bank Group has expressed concern at the need for adequate economic measurementfor major railway investmentsin India and this matter was discussed during negotiations; with the Economic Unit now better establishedthere is a clear understandingthat future Bank Group lending for the Railways will depend on proper economic assessmentsof the major railway investments. - 25 -

7. RECOIOHENDATIONS

7.01 During credit negotiations,agreement was reached with the Govern- ment of India and the Indian Railways on the following principal points:

(a) the early preparationof a plan for the phased retire- ment of steam locomotivesand related facilities (para. 3.14);

(b) the obtaining of further suitable bilateral aid for items (i) required under licensing arrangementsand (ii) purchased for standardizationpurposes; or the widening of specificationsfor such items to allow internationalcompetitive bidding (para. 4.16);

(c) an operating ratio and financial covenant providing for coverage of dividend on capital-at-chargeand con- tribution to investments (para. 5.21);

(d) the studies to be carried out by the Railwayst Economic Unit by agreeddates (para.6.05);

(e) the methodologyto be followedand the financialreturn to be obtainedfor futuremajor investments(para. 6.07).

7.02 In addition,clarification was obtainedand assuranceswere receivedthat the Governmentis progressivelyincreasing investment in, and lesseningconstraints on, the road transportindustry and arrangements have been made for closercooperation between the Governmentand the Associa- tion on thesematters.

7.03 The Projectprovides a suitablebasis for an IDA Creditof US$ 55 millionequivalent to the Governmentof India.

September9, 1969 INDIAN RAILWAYS Public and Private Sector Outlay on Transport V/ (Rs millions)

Forecast Third Plan 1961-65 Annual Plans 1966-69 Fourth Plan 1969-74 Public Private Public Private Public Private Sector Sector Total % Sector Sector Total % Sector Sector Total %

Railways 13,255 13,255 56 5,258 - 5,258 41 10,500 - 10,500 30

Roads / 4,400 4-,400 19 3,o80 - 3,080 24 8,290 - 8,290 24

Road Transport 270 3,610 3,880 17 540 2 ,4 0 0 3/ 2,940 23 850 9;800 1o,65C4/ 30

Ports 930 - 930 4 550 - 550 4 1,950 - 1,950 6

Shipping 400 100lo 500 2 250 6 C0 310 2 1,310 3o0/ 1,610 5 Inland Water Transport 40 40 - 60 - 60 * 90 - 90 * Civil Air

Transport 490 _90 2 700 - 700 6 2,020 - 2,020 5

19,785 3,710 23,495 100 10,438 2,460 12,898 loo 25,010 10,100 35,110 100

/ Excluding expendituresfor replacement 2/ Including expendituresfor road reconstruction 3 Provisional This assumes an increase in the yearly productionof commercialvehicles -rom about 35,000 in 1968/69 to 85,000 in 1973/74, which, in the light of past experience,may be difficult to achieve -5/Estimated -iF Less than 1% Source: Fourth Five-Year Plan, Planning Commission,Government of India, March 1969 September 8, 1969

H INDIAN RAILWAYS

Revenue from Road Transport and Expenditure on Roads

(Rs millions)

CENTRALGOVERNMENT STATES TOTAL % of Expenditure % of Expenditure % of Expenditure Year Revenue Expenditure2/ to Revenue Revenue Expenditure to Revenue Revenue Expenditure to Revenue L959/60 795.2 219.4 27.6 551.5 687.1 124.6 1,346.7 906.5 67.3

L960/61 1,116.9 241I.t 21.6 552.4 856.2 155.0 1,669.3 1,097.6 65.7

L961/62 1,273.5 234.1 18.4 670.9 959.3 143.0 1,944.4 1,193.4 61.5 L962/63 1,441.8 317.3 21.9 800.0 1,002.9 121.0 2,241.8 1,320.2 58.0

963/64 2,046.9 485.1 24.0 1,062.5 965.7 90.3 3,109.4 1,450.8 46.9

L964/65 2,360.6 516.6 22.2 1,145.3 1,016.1 88.7 3,475.9 1,532.7 44.2 L965/66 2,681.4 599.0 22.3 1,267.3 1,197.1 94.5 3,948.7 1,796.1 45.5

966/67 2,876.7 511.3 17.8 1,447.5 1,147.3 79.3 4,324.2 1,658.6 38.4

1/ This includes expenditureon road constructionand maintenance

Source: India Transport Statistics,Ministry of Shipping and Transport, Transport Research Division, Government of India, 1969

July 23, 1969

tzI DO TNiJ1AN RAIL;>.

St,,ff SaLtsLnLNs

1957/58 1956/59 1,59/60 1960/61 1961/(2 196 2/63 196/ 64 196h4/' 1965/ 1 9 6q6 7 1967/68 Staff employed(thousands) Open lines 1,089 1,116 1,124 1,128 1,139 1.372 1.226 1,267 1.296 1,312 1,312 Construction 8 10 12 12 14 16 19 23 24 20 17 Manufacturing 12 14 14 16 17 19 21 23 26 27 28 RailwayBoard 4 4 4 4 4 5 5 5 6 6 6 Total: 1,113 1,144 1,154 1,160 1,17 4 1,212 1,27 1,31 1,352 1,363

SteSf costs, open lines only TRupees inomillions Salariesand wages 862 895 919 1,445 * 1,493 1,594 1,667 1,758 1,836 1,901 1,920 Dearnesspay 598 631 646 183 * 166 224 271 410 602 777 987 Overtime,running, travelling 115 122 124 185 207 222 262 288 311 328 348 and other allowances Total pay 1,575 1,648 1,689 1,813 1,866 2,040 2,200 2,456 2,749 3,006 3,255 Pensions and Provident Fund 112 126 135 160 176 182 163 164 177 195 245 Total staff costs 7,67 1,774 1,o24 1,973 2207S =5 : I 3,500

Average pay per man employedopen lines (Rupees) 1,446 1,477 1,503 1,607 1,638 1,741 1,794 1,938 2,121 2,291 2,481

Averagetotal staff costs Per man employedopen lines (Rupees) 1,549 1,590 1,623 1,749 1,793 1,896 1,927 2,068 2,258 2,440 2,668

Revenuetrain-km (thousands) (includingelectric multiple unit trains and rail-cars) 342,803 347,327 358,442 366,318 274,840 385,805 397,368 406,427 423,862 426,733 434,634

Number of men employed, open lines per 1,000 train-km 3.18 3,21 3,14 3,08 3.o4 3.04 3.09 3.12 3.05 3.07 3.02

Total staff costs per public train-km (Rupees) 14.92 5.11 5.09 5.39 5.45 5.76 5.95 6.45 6.90 7.50 8.05

Total staff costs expressedas a a percentageof:

(a) Operatingexpenses, excluding depreciation 63.9 64.2 63.0 63.0 62.8 61.3 60.1 60.4 60.2 60.7 59.4

(b) Operatingexpenses, including depreciation 54.6 55.2 54.5 55.1 52.3 51.7 50.0 49.6 50.2 50.0 50.4

(c) Operatingrevenue 44.4 45.5 43.2 43.2 40.8 39.2 37.4 39.6 39.9 41.3 42.6

Indices (1957-58 - 100) Number of men, open lines 100 102 103 104 105 108 113 116 119 121 121 Revenuetrain-km 100 101 105 107 109 113 116 119 124 124 127 Net ton-km, revenue-earning 100 102 110 114 119 132 140 141 157 157 160 Passenger-kn 100 98 107 112 118 121 128 135 139 147 155

* Dearnesspay consolidatedin salariesand wages

May 2, 1969 TABLE 4

INDIAN RAILWAYS

Route Length (Ikm)

f' .l qva, Broad Gauge Meter-5auge Narrow Gauge Total 1967 1968 1967 1968 1967 1968 1967 1968

Centr':I 4,662 4,591 383 383 796 796 5,841 5,770

-3astern 4,013 4,013 - - 80 131 4,093 4,144

NoLhern 6,880 6,890 3,298 3,433 260 260 10,438 10,583

'T2rth Eastern 52 52 4,900 4,914 - - 4,952 4,966

I.VrthnleastFrontier 639 639 2,898 2,898 87 87 3,624 3,624

:Southern 2,321 2,321 4,739 4,806 157 157 7,217 7,284

*oiith Central 2,535 2,606 3&183 3,183 370 370 6,088 6,159

soiuh ,astern 4,864 4,879 - - 1,381 1,479 6,2445 6,358

,?storn 2,623 2,681 6,137 6,106 1,202 1,202 9,967 9,989

PotAt.f 28,594 28,672 25,538 25,723 4,333 4,482 58,465 58,877

,Genta7e of Total 48.91 48.70 43,68 43.69 7.41 7.61 100.00 100.00

Hlay 2, 1969 INDIAN RAILWAYS

Route-kma and km o; Maintained Track

Route-km Maintained Track-Im Two or Single more Main Yards and Track Tracks Total _ Track Sidings Total

Broad Gauge - Non-electrified 18,474 7,527 26,001 44.2 33,600 16,007 49,607 51.5 - Electrified 472 2,199 2,671 4.5 5,424 1,694 7,118 7.4

- Sub-total 18,9 4 6 9,726 28,672 48.7 39,024 17,701 56,725 58.9

Meter Gauge- Non-electrified 25,137 420 25,557 43.4 25,990 8,165 34,155 35.5 - Electrified 137 29 166 0.3 221 60 281 0.3

- Sub-total 25,274 449 25,723 43.7 26,211 8,225 34,436 35.8

NarrowGauge - Non-electrified 4,482 - 4,482 7.6 4,489 619 5,108 5.3

- Electrified _ - _- _ _ _

- Sub-total 4,482 - 4,482 7.6 4,489 619 5,108 5.3

Totals - Non-electrified 48,093 7,947 56,o40 95.2 64,079 24,791 88,879 92.3

- Electrified 609 2,228 2,837 4.8 5,645 1,754 7,399 7.7

- Total 48,702 10,175 58,877 * 100.0 69,724 26,545 96,269 100.0

1F This is an increase of 412 km over the previous year.

Msy 2, 1969 TI%JTN RA!I LW' YD

Inv112 2 of Motlve Power by Types and Gauges

Broad Gcauge MetIer Gauge Narrow Gauge Total Increase 1967 19685g,7)7 1968 1?67 1968 1967 1968 (Decrease)

Steam6 6,425 6,238 3,603 3,597 430 391 1D,1428 110,226 (202)

Diesel 569 653 174 206 33 33 776 892 116

Elec tric 1402 Jt59 2.0 20 - - 422 479 57

7,396 7,350 3,797 3,823 433 424 11,626 11,597 ( 29)

May 2, 1969 I JINR-TIJAYS

Tnv3ntor,r of Freight Cars by Tyoes and 3auZes

Brake Railway Covered Open-lowf Open-high Special Vans Service Total

Broad G-auge on March 31, 1967 135,501 1,880 85,480 39,073 6,030 4,035 271,999

t' "1 :' March 31, 1068 136,837 2,1950 84,093 40,404 6,021 3,964 273,499

Increase (decrease) 1,336 300 ( 1,387) 1,331 ( 9) ( 71) 1,500

Meter Gauge on March 31, 1967 60,591 3,778 15,783 11,570 2,336 2,272 96,330

II "t " March 31, 1968 60,640 3,545 16,065 12,111 2,478 2,218 97,057

Increase (decrease) 49 ( 233) 282 541 142 ( 54) 727

Narrow Gauge on March 31, 1967 3,991 628 1,312 - - - 5,931

it J~" " March 31, 1968 3,991 654 1,312 - 37 - 5,994

Increase (decrease) - 26 - 37 63

Total on March 31, 1967 200,083 6,286 102,575 50,643 8,366 6,307 374,260

Total on March 31, 1968 201,468 6,379 101,470 52,515 8,536 6,182 376,550

Total increase (decrease) 1,385 93 ( 1,105) 1,872 170 ( 125) 2,290

May 2, 1969 TABLE 8

INDIAN RAILWAYS

Inventory of Passenger Cars by Types and Gauges

Other Rail Passenger EMUs* Cars Stock** Total Broad gauge - 1967 1,287 27 15,196 16,510

Broadgauge - 1968 1,306 27 15,579 16,912

Increase 19 - 383 402

Metergauge - 1967 96 37 13,429 13,562

Meter gauge - 1968 119 37 13,534 13,690 Increase 23 - 105 128

Narrowgauge - 1967 - 18 1,475 1,493

Narrowgauge - 1968 - 18 1,714 1,732

Increase - - 239 239

Total - 1967 1,383 82 30,100 31,565

Total- 1968 1,425 82 30,827 32,334

Total increase 42 - 727 769

Motor and trailer coaches used exclusivelyin suburban service.

~* Includes dining cars, saloons, postal vans, guard vans, etc.

May 2, 1969 TABLE 9

INDIAN RAIIAYS

Freight Traffic Tons and Ton-km

(a) Revenue Earning and Railway Service

TONS NiETTON-KM

Revenue '-Revenue YEAR Earning Service Total Earning Service Total ------Million------______1950/51 n.a. n.a. 93.0 n.a. n.a. 44t,117

1960/61 119.4 36.5 155.9 72,338 15,416 87,754 1961/62 125.6 34.9 160.5 75,353 15,865 91,218 1962/63 139.4 39.h 178.8 83,140 17,553 100,693 1963/64 147.6 43.5 191.1 88,62h 18,217 106,841 1964/65 148.8 45.0 193.8 88,752 17,818 106,570 1965/66 162.1 41.0 203.1 98,827 17,957 116,784 i966/67 164.o 37.6 201.6 99,284 17,323 116,607 !967/68 162.4 34.2 196.6 101,121 17,739 118,860 1968/69 171.8 33.2 205.0 108,000 17,000 125,000

(b) Broad Gauge and Other Gau es

TONS NET TON-KI

TIeter and Meter and fi,A:D, 'Broad Gauge Narrow Gauges Total Broad Gauge Narrow G.u s Total ------Million------160/61 120.3 35.6 155.9 73,740 14,014 &7,754 1961/62 125.b 35.1 160.5 76,023 15,195 91,218 1962/63 140.8 36.0 178.8 84,328 16,365 100,693 1963/64 151.9 39.2 191.1 89,130 17,711 1o6,841 1964/65 153.8 40.0 193.8 88,569 18,001 106,570 1965/66 162.4 40.7 203.1 97,251 19,533 116,784 1966/67 163.8 37.8 201.6 97,599 19,008 116,607 1967/"8 161.1 35.5 196.6 99,977 18,883 116,860 1966,'16: 169.2 35.8 205.0 104,700 20,300 125,000

September 5, 1969 TABLE 10

INDIAN RA.IIWAYS

Change in the Composition of Traffic: Low-rated* and Other Commodities

Low-rated Total Revenue Commodities Other Commodities Earning Commodities

Year Million Tons Index Million Tons Index Million Tons Index 1960/61 78.8 100.0 41.0 100.0 119.8 100.0 1961/62 84.7 107.5 40.9 99.8 125.6 104.8 1962/63 95.1 120.7 44.3 108.0 139.4 116.4 1963/64 100.8 127.9 46.8 114.1 147.6 123.2 1964/65 100.2 127.2 48.6 118.5 148.8 124.2 1965/66 111.9 142.0 50.1 122.2 162.0 135.2 1966/67 115.9 147.1 48.1 117.3 164.0 136.9 1967/68 117.1 148.6 45.2 110.2 162.4 135.6

* Coal, ores, marble and stone, cement, foodgrains, fertilizers, fodder and salt.

Source: A Review of the Performance of the Indian Government Railways, February 1969

May 2, 1969 INDIAN RAIVdAYS

lassenger Trstffic

1961/61 1961/62 196R2/63 1963/64 1964/65 1965/66 1966/67 1967/66

Pass-km(millions)

First class, air-conditioned 110 117 130 138 143 146 151 153 First class, ordinary 1,931 2,110 2,293 2,496 2.693 2,976 3,137 3,070 Second class, mail 1,110 1,111 1,103 1,216 1,276 1,278 1,082 1,097 Second class, ordinary 687 697 659 665 689 701 708 677 Third class, air-conditioned 108 113 130 139 142 140 168 231 Third class, mal 22,278 23,337 25,204 26,976 28,083 29,062 29,085 32,612 Third class, ordinary 51,1441 540 54.472 56,958 60,463 61,991 67,814 69,323

Total 77,665 81,885 83,991 88,588 93,489 96,294 102,145 107,163

Train-lkm,passenger and passenger proportion of mixed (thousands)

Conventional trains 189,963 192,278 196,033 198,809 206,697 214,394 218,776 220,509 Electric multiple units 13,978 14,443 14,793 15,120 15,763 15,980 17,992 19,306 Rail-cars 3,505 4,491 4,o82 3,570 2,902 2,954 3,192 3,129

Total 207,446 211,21 21L,,900 217,499 225,362 233,328 239,960 242,944 Vehicle-kms,.passenger and passengr proportion Of fixe (thousands)

Conventional trains 3,594,474 3,692,768 3,825,325 3,909,281 4,072,009 4,276,661 4,350,332 4,353,628 Electric maltiple units 98,380 105,033 216,860 230,646 245,640 263,528 274,593 287,805 Rail-carsa 4,6 5,286 9,240 7,999 6,577 6,647 7,252 7,027

Total 3,696,860 3,803,087 4,051,425 4,147,926 4,324,226 4,546,836 4,632,177 4,647,660

Passenger revenue (Rupees in thousands)

First class, air-conditioned 11,808 13,815 16,124 17,325 18,048 19,905 20,590 23,319 First class, ordinary 83,269 98,049 117,836 133,971 146,956 168,656 172,049 181,511 Secondclass, mail 36,820 40,724 43,982 51,286 55,335 59,720 50,406 55,278 Second class, ordinary 20,532 22,869 23,457 24,404 25,689 28,094 28,155 28,060 Third class, air-conditioned 3,367 3,874 4,688 5,209 5,294 5,550 6,802 10,008 Third class, mail 411,717 480,257 558,765 639,205 690,745 779,488 780,524 917,249 Third class, ordinary 759,198 852,358 927,004 980,092 1,050,714 1,130,305 1,234,882 1,311,013 Total 1,326,711 1,511,946 1,691,856 1,851i492 1,992,781 2,191,718 2,293,408 2,526,438

Revenue per pass-Ion(in Paise)

First class, air-conditioned 1l. 7 0 11.80 12.30 12.50 12.60 13.60 13.67 15.29 First class, ordinary 4.31 4.65 5.14 5.37 5.46 5.67 5.48 5.91 Second class,mail 3.32 3.66 3.99 4.21 4.33 4.67 4.66 5.04 Second class, ordinary 2.99 3.28 3.56 3.67 3.73 4.01 3.97 4.15 Third class, air-conditioned 3.13 3.43 3.62 3.74 3.74 3.77 4.05 4.32 Third class, mail 1.85 2.06 2.22 2.37 2.46 2.68 2.68 2.82 Thirdclass, ordinary 1.48 1.57 1.70 1.72 1.74 1.82 1.82 1.89

Average all clamses 1.71 1.85 2.01 2.09 2.13 2.28 2.25 2.36

PIay 2, 1909 TABLE 12

INDIAN RAILWAYS

Comparison of Suburban and Non-Suburban Passenger Traffic

Average Annual Growth Rate 1955/56 1960/61 1966/67 1967/68 1960/61-1967/68 Passengers ori *nating (milIlion) Suburban1/ 499 685 1,081 1,105 7.1% Non-Suburban 776 909 1,111 1,153 3.4%

Total 1,275 1,594 2,192 2,258 5.1%

Pass-km (million)

Suburban 8,165 11,818 18,469 18,975 7.0% Non-Suburban 54,235 65,847 83,676 88,188 4.3%

Total 62,400 77,665 102,145 107,163 4.7%

Aver-ageaead (kilometers)

Suburban 16.4 17.3 17.1 17.2 0 d Non-Suburban 69.9 72.4 75.3 76.5 0.8%

1/ The figures refer to passengers booked between stations ,ithin the suburban areas of Bombay, Calcutta, Madras and Secunderabad (Hyderabad).

July 23, 1969 INDIAN RAILWAYS

Operations

Broad Gauge Meter Gauge 1950/51 1955/56 1960/61 1965/66 1966/67 1967/68 1968/69 1950/51 1955/56 1960/61 1965/66 1966/67 1967/68 1968/69 1. Percentageof service- able locomotives 81.05 83.24 85.48 86.72 85.54 85.71 85.90 82.26 84.56 86.19 87.20 85.70 86.35 87.68 2. Percentageof service- able passenger cars 85.83 89.81 91.77 91.58 91.43 88.79 85.70 91.00 93.08 92.41 93.41 92.96 91.67 88.17 3. Percentageof service- able freight cars 92.72 95.32 96.68 96.01 95.79 95.91 96.05 91.36 92.66 95.48 96.63 96.440 96.44 95.97

4. Engine-kmper day per engine in use (passenger)

Steam n.a. 264 274 260 260 257 256 n.a. 206 220 222 223 225 227 Diesel n.a. - 250 449 592 623 660 n.a. 97 274 249 267 416 485 Electric n.a. 368 363 331 339 348 381 n.a. 227 177 237 298 379 394 5. Engine-km per day per engine in use (freight)

Steam n.a. 151 155 125 125 124 121 n.a. 137 1140 138 137 135 137 Diesel n.a. 87 300 353 357 361 361 n.a. 225 273 283 276 282 281 Electric n.a. 206 156 327 339 341 349 n.a. - - - 181 197 233

6. Gross tons per freight train 1,068 1,2146 1,354 1,470 1,484 1,484 1,507 435 537 648 716 712 718 728

7. Net tons per freight train 489 537 656 725 735 734 Tj8 185 246 298 347 346 348 353

8. Car-kmper freight car day 62.3 74.5 76.9 73.2 70.3 72.2 73.6 50.2 45.9 51.6 60.1 58.8 57.6 59.6

9. Net ton-km per freight car day 710 885 998 940 899 895 921 304 332 405 510 485 474 498 10. Gross ton-km per freight train hour 16,409 16,034 19,640 22,252 22,556 22,968 n.a. 5,677 6,451 7,908 9,036 8,883 8,979 n.a. 11. Net ton-km per freight train hour 8,590 8,570 10,808 12,202 12,400 12,434 n.a. 2,884 3,437 4,232 5,047 4,949 4,985 n.a. 12. Punctualityof passenger trains W%) 79.79 77.99 85.75 87.99 85.31 84.76 83.3 71.43 75.14 82.58 87.60 83.50 86.90 85.5 13. Average lead of a ton of freight (km) n.a. 521 570 556 555 581 583 n.a. 277 316 368 379 395 410

11. Wagon turn-around (days) n.a. 10.5 11.2 11.8 12.3 12.6 12.8 n.a. n.a. 7.34 8.41 9.03 9.54 9.77 15. Average speed of through freighttrains (km/h) n.a. 16.7 19.2 20.J 20.1 20.2 21.0 n.a. 15.3 16.9 16.7 16.7 16.6 17.0 16. Average speed of all goods trains (km/h) n.a. 15.9 16.1 16.4 16.5 16.8 17.5 n.a. 13.6 13.7 14.0 13.8 13.9 14.5

September 4, 1'69 TABLE 14 Page 1

INDIAN RAILWAYS

Inventory of Motive Power by Class and Age

40 and under 41 through 45 46 and over Total

BG - Steam - Passenger 1,131 110 163 1,404 - Main Goods 3,441 171 493 4,105 - Light Goods 10 67 325 402 - Tanks 201 59 37 297 - Garretts 30 - - 30

Sub-total 4,813 407 1,018 6,238,

MG - Steam- Passenger 1,102 91 172 1,365 - Main Goods 1,453 47 21 1,521 - Light Goods 378 20 150 548 -Tanks 89 28 29 146 -Garretts 13 _4 - 17

Sub-total 3,035 190 372 3,597

NG - Steam - Passenger 34 2 29 65 -Main Goods 134 21 37 192 -Light Goods 12 1 25 38 - Tanks 21 19 56 96

Sub-total 201 43 147 391

TOTAL STE5M 8,049 640 1,537 10,226

BG - Diesel - Road 588 - - 588 - Switch 65 - - 65

Sub-total 653 - - 653

MG - Diesel - Road 179 - - 179 - Switch 27 - - 27

- Sub-total 206 - - 206

NG - Diesel -Road 30 - - 30

-Switch 3 - - 3

Sub-total 33 - - 33

TOTALDIESEL 892 - - 892 TABLE 14 Page 2

40 and under 41 through 45 46 and over Total

BG - Electric - Pass/Mixed 210 - - 210 - Freight 249 - - 249

Sub-total 459 - - 459

MG- Electric - Pass/Mixed 20 - - 20 Freight - - - -

Sub-total 20 - - 20

TOTAL ELECTRIC 479 - 2. - 479

GRAND TOTAL 9,420 640 1,537 11,597

D 81.2 5.5 13.3 100.0

May 2, 1969 TABLE 15

INDIAN FTILWAYS

Inventory of Equipment by Type and Age

30 & 41 & Passenger Cars under 31-35 36-40 over Total

BG - Bogies 11,907 327 832 1106 14,172

-BG- Four-wheelers 1,288 288 305 859 2,740

A4G- Bogies 9,9914 507 374 604 11,479 iG - Four-wheelers 958 320 204 729 2,211

NG - Bogies 756 99 192 502 1,549

NG - Four-wheelers 33 8 1 141 183

TOTPL 24,936 1,549 1,908 3,941 3-2,334

% 77.12 4.79 5.90 12.19 100.00

Freight Cars 40 Et 46 & under 41-45 over Total

BG - Bo-ies 45,073 943 1,100 4?,116

BG - Four-wheelers 210,421 9,104 6,858 226,383

MG - Bogies 19,249 753 893 20,895

MG- Four-wheelers 64,259 6,849 5,o054 76,162

NG - Bo es 2, 071 523 1,812 4,406

NG - 7our-wheelers 450 237 901 1,588

TOT;,L (units) 341,523 18,409 16,618 376,550

90.70 4.89 4.41 100.00 May 2, 1969 TABLE 16

INDIAN RAILWAYS

Activities of ManufacturingUnits

List of Items Produced

Total to Previous 31 March Years 1966/67 1967/68 1968/69 1968

Chittaran,janLoco Works

Steam Locos 1,981 112 93 68 2,254 D.C. Electrics 21 21

A.C. Electrics 61 57 30 48 196

Diesel Hydraulics 2 17 19

Boilers 1,877 130 111 9 2,127

Varanasi Diesel Loco Works

Diesel Electrics 61 55 831 74 273

Madras Integral Coach Factory Passenger Cars 4,808 634 642 635 6,719

Shells only 2,876 539 700 640 4,755

1/ Including 17 shunters assembled from imported components.

2/ Including 4 shunters assembled from imported components.

September5, 1969 INDIAN RAILWAYS

Inrvestmert Expenditures SPRs millions)

A c t u a Eatimated Forcs Total 3rd Total 4th

Itema 1ar 1966/67 1967/68 1968/69 1969/70 1970/71 197172 1972/731973/74 P/ %

Rolling stock 5,423.6 1,021 1,132 1,111 1,120.3 1,206.7 1,215.0 1,283.0 1,375.0 6,200.0 41.1

Workshops and sheds 475.9 64 42 52 49.8 55.2 63.5 62.5 69.0 300.0 2.0

Machinery and plant no. 1 27 33 50 28.2 30.0 30.0 31.8 30.0 150.0 1.0

Track renewals 2,152.8 286 313 382 335.6 334.4 400.0 460.0 470.0 2,000.0 13.2

Bridge torkB 278.7 74 49 49 48.1 50.0 60.0 61.9 60.0 280.0 1.9

Line capacity uorks 3,204.9 543 391 376 345.3 5C4.7 650.0 810.0 840.0 3,150.0 20.9

Signals ad telecornmunications 377.7 107 117 109 107.3 73.7 80.2 70.8 68.0 400.0 2.6

llectrif c aticn 807.1 I12 114 155 161.1 163.9 165.0 165.0 165.0 820.0 5.4

Other electrical works 43.6 14 18 18 27.7 20.0 22.3 25.0 25.0 120.0 0.8

New lines 2,119.5 245 169 161 139.7 165.3 170.0 180.0 175.0 830.0 5.5

Staff tielf re and quarters 610.3 114 76 73 80.4 89.0 90.6 100.0 90.0 450.0 3.0

Users' ananities 146.3 37 31 40 40.0 40.0 40.0 40.0 40.0 200.0 1.3

Other specified wwks 274.2 85 27 36 27.7 17.3 15.0 20.0 20.0 100.0 o.6

Road services 76.5 18 13 18 35.2 19.8 17.0 17.0 11.0 100.0 0.7

Total 16,101.2 2,756 2,525 2,630 2,546.4 2,770.0 3,018.6 3,327.0 3,438.0 15,100.0 100.0

&/ Includes fiscal years 1961/62 through 1965/66

2/ Includes fiscal years1969/70 through 1973/74

July 114, 1969 TABLE 18

INDIAN RAILWAYS

Sources of Funds for Investment Program 1969-1974

Rs millions Year ended March 31: 1970 971 1972 1973 1274 Total Railways cash generation as shown in Table 19 1,169 1,445 1,610 1,782 2,025 8,031

Temporary loans drawn and (repaid) 187 26 (86) (181) (217) (271)

1,356 1,471 1,524 1,601 1,808 7,760

Less Increases in balances of Funds 129 180 183 210 352 1,054

Amortizationof capital 3 1 1 1 - 6

132 181 184 211 352 1,o60

Balance of Railways' resources, available for investment program 1,224 1,290 1,340 1,390 1,456 6,700

Increase in Government's Capital-at-charge 1,322 1,480 1,679 1,937 1,982 8,400

Total investmentProgram 2,546 2,770 3,019 3,327 3,438 15,100 IncludlingForeign Exchange 334 382 379 352 361 1,808

$ equivalent of Foreign Exchange requirement;(US$ millions) 44,5 51.0 50.5 47.0 48.o 241.0

September5, 1969 TABLE 19

1969/70 and 1970171L

1969/7o 1970/71 Total Balance Total Balance j ed/ LAvailable ISA/Reouired fnro &2dDbp12d 23LiL Reouired

Com=onentsfor:

Electriclocomotives 8.3 2.8 5.5 8-P 1.7 6.3 Diesel electriclocomotives 15.4 6.8 8.6 14.0 1.6 12.4 Diesel hydrauliclocomotives 3.1 3.1 - 1.1 0.4 0.7 Electric miltiple units 1.2 - 1.2 3.3 - 3.3 Coaches 1.1 - 1.1 3.9 3 9 Wagons o.6 - 0.6 4.4 -44

Purchase of diesel electricand hydrauliclocomotives 3.8 3.8 - - Line capacity works including other electrical works 0.3 - 0.3 2.1 - 2.1 Signallingand telecommunica- tion equipment 3.0 o.6 2.4 2.4 o.6 1.8 Electrification equipment 1.44 1.4 4.8 -4.8 Plant and machinery 1.3 1.1 0.2 1.8 0.2 1.6 Sundry railway equipment and materials 5.0 4.0 1.0 5.1 2.6 2.5

44.5 22.2 22.3 50.9 7.1 43.8

from 1969/77D 22.3

Total Balance Requirement 66.1

Sources of Available Aid and Loans

USAID and Eximbank 4.3 0.2 Canada 3.7 1.4 Germany 7.4 1.6 Japan 0.8 - France 1.7 1.5 Austria 0.2 - Switzerland 1.1 o.6 Netherlands 0.3 - Italy - 0.4 United Kingdom 0.5 0.2 Belgium - o.6 Bilateral Trade Agreements 2.2 o.6

22.2 7.1

As of March 31, 1969

September 4, 1969 TABLE 20

INDIAN RAILWAYS

ReconstructedSummary Balance Sheet cm March 31, 1968

Hef. to Rs Millions lNotes

1. Fixed Assets at Cost 41,091 2. Less Balance of DepreciationReserve Fund _72 4o,294

Current Assets

3. Inventories 1,992 aeceivables 1,378

4. Cash, Investments,Savings account with Government 1,682 5, 052 Less Current Liabilities 1,612 3,44o

Total Net Assets 43.734

5. Capital provided by Government

Capital-at-Charge 29,780 Temporary loans 112 29,892

6. Capital provided from Railway Resources

DepreciationReserve Fund (Improvements) 1,838 DcnreciationReserve Fund (Inflation) 6,691 Development Fund 3,o65 Atevenue (Open Line wiorks) 1,545 13,139

'/ * Reserve Auids

Developmient Fund 5 Aevenue Reserve Fund 122 Pension Fund 524 651

Caoital LnuiDment received free of charge 52

Total Capital and leserves 43.734

See .ot-es in following Annex.

i;riI28, 1969 ANNEX1 to TABLE 20

INDIAN RAILWAYS Page 1

Notes on Reconstructed Balance Sb.eet

1. Fixed Assets

The value of fixed assets shown in the balance sheet is arrived at as follows:

iRsmillions

Total as in published balance sheet (includingimprovement) 34,400 Add Inflationaryelement charged to DepreciationReserve Fund (1936 to date) 6,691 41,09

2. DepreciationReserve Fund

This bal-lzcerepresents cuxmlative contributionsto date less (a) assets withdrawn from service and (b) the full cost of re- placements.

3. Inventories

These are financed from capital-at-charge(see 5 belowi)

4. Cash and Investments

JThisrepresents the investmentof fund balances and the railways working cash balance:

Rs millions

DepreciationReserve tund 797 3evelopment Fund 5 XievenueReserve Fund 122 Pension Fund 524 ?iorking cash balance 234

1,682

5. 92!GcLLlProvided by Government

The amount of Rs 29,892 million is represented by:

Rs will;ioLa

Total cost of fixed assets 41,091 Less financed from Railways' resources 13,139 Balance - financed by Government 27,952 Inventories 1 992

Less capital equipmentreceived free of charge 52

29,892

April 28, 1969 ANNEX1 to TABLE 20 Page 2

6. Capital Provided from Railway Resources

(a) All expenditure on replacement of fixed assets is charged to Deprecia- tion Reserve Fund. The excess over original cost representing either the improvement or inflationary element has been included in the value of fixed assets and is shown here as representing capital found by the Railways from its own resources.

(b) Development Fund finances expenditure of a capital nature for:

(i) Operating improvements costing over Rs 300,000 each (ii) Users amenities irrespective of their cost (iii) Staff amenities costing more than Rs 25,000 each,

(c) Open Line Works of a capital nature charged to revenue are:

(i) Operating improvementscosting up to Rs 300,000 each (ii) Staff amenities costing less than Rs 25,000 each.

The expendituresunder (b) and (c) are so treated because they do not meet the test for financingthrough capital-at-charge.

7. Reserve Funds

These are the unexpendedbalances on the three named funds. Corresponding cash or investments are deposited with Government.

September 8, 1969 ANNEX 2 to TA-BL-E2-0 Page 1

INDIAN RAILWAYS

Assessment of Results for 1967/68 in Relationship to Fixed Assets

1. The results from operations,shown in Table 21,include losses on strategic lines which are reimbursedby Government. Results for 1967/68, excluding strategiclines were as follows:

Rs millions

Gross receipts 8,,164 Operating expenses, includingpension fund alloc§tion 5,958 Depreciationkal 925 6a88 Net revenue from operations (a) Depreciationon strategic lines estimated at Rs 25 million

Operating ratio - 84.3

2. The cost of depreciableassets has been ascertained as follows:

Rs millions As shown in March 1968 balance sheet (see Table 20) 41,091 Less Preliminaryexpenses 54 Land 466 Investmentin road services 209 Telco sh.ires 20 Strategic lines 671 Intangible assets 1,198 Works in progress 4,414 7,032

Cost of Depreciable assets 34,059

The depreciation charge of Rs 925 million in 1967/68 is equivalent to 2.7% on the cost of depreciable assets as stated above.

3. The balance sheet value of net fixed assets in use at March 31, 1968 is as follows: Rs millions Total, as in 2 above 41,091 Less Strategic lines 671 Work in progress 4,414 5,o85

36,006 Less Contributionsto depreciation Reserve Fund: (a) Improvements 1,838 H Inflation 6,691 c Unused balance 797 9,326 April 28, 1969 26 680 ANNEX 2 to TABLE 20 Page 2

4. On the basis of the net value of fixed assets shown in 3 above, the net revenue from operations of the non-strategic lines (Rs 1,281 million) is equivalent to a returnof 4.8%. A similarcalculation shows that the returnon the average net fixed assetsin use during1967/68 was 4.9%.

April 28, 1969 INDIAN RAILWAYS

Results of Operations 1963/64to 1968/69 ( Rs million)

1963/64 1964/65 ,965/66 1966/67 1967/68 1968/69 Actuals Actuals Actuals Actuals Actuals Actuals GrossOperating Revenue

Passenger 1,851.5 1,992.8 2,191.7 2,293.4 2,526.4 2,65l.0 OtherCoaching 341.2 346.5 394.0 390.3 394.6 450.7 Goods 3,953.0 4,098.2 4,654.9 4,816.2 5,027.9 5,628.0 Sundries 176.4 171.0 95. 187.9 232.5 aS Total Receipts 6.322. 1 7__7.6 8,181.4 OperatingExpenses

Administration 439.8 492.8 556.0 604.6 664.1 711.6 Repairs and Maintenance 1,225.5 1,393.8 1,575.8 1,699.5 1,901.4 2,091.0 OperatingStaff 766.5 894.8 1,025.4 1,120.0 1,238.5 1,335.8 Fuel 866.1 920.8 1,010.5 1,101.7 1,278.3 1,391.2 Operating Other than Staff and FWel 222.2 236.9 259.8 264.8 317.5 357.5 Miscellaneous Expenses 265.5 233.6 244.8 264.4 262.1 255.6 Labor Welfare 135.7 161.8 186.2 201.1 220.32 Wbrking Expenses 3,921.3 ,3347.5 5,5862.2 Appropriation to Depreciation Reserve Fund 800.0 830.0 850.0 1,000.0 950.0 9s4.0 Appropriation to Pension Fund - 115.0 120.0 135.0 99.3 9.0

Total Operating Xzpenses 4.721.3 5.279.5 5.828.5 6.391.1 6,931.5- 7l4?5

Net Revenue from Operations 1,600.8 1,329.0 1,507.2 1,296.7 1,249.9 1,569.7 Charges to Revenue of a CapitalNature; Open Line Works 114.4 106.2 107.4 100.3 93.2 76.8 MiscellaneousTransactions 34.5 41.7 51.4 55. 56.7 66.6

Net Revenue 1,451.9 1,181.1 1,348.4 1,141.2 1,100.0 1,h26.3 Dividend on Capital-at-Charge 959.5 1.49.3 1.162.8 1.323.9 1.415.3 1.50.3 Net Surplus/(Deficit) transferredto DevelopmentFund 492.4 131.8 185.6 ( 182.7) ( 315.3) ( 80.0) Operating Ratio % 74.7 79- 79.5 83.1 84.7 U.S Rate of Dividend on Capital-at-Charge

On Capital provided by Governnent '-3 (a) (b) AfterMarch 11. 964 1963/64 - 1965/66 4i5 k *7 1966/67 and 1967/68 5.5% 6.0% H

September 4, 1969 INDIAN RAILh4AYS

Forecast Revenue Account 1068/69to 1973/74

(Rs millions)

Actual Forecast for Fourth Plan 1968/69 19i3q75T 1970/71 1971/72 1972/73 1973/74

Gross Opera-tingRevene

1. Passengers 2,651 2,730 2,810 2,900 2,980 3,070 2. Other Coaching .tevenue 451 475 485 495 505 515 3. Freight 5,628 5,958 6,460 6,830 7,210 7,690 4. Sundries 27 305 325 345 365 3 6,987 9,468 10,080 10,570 11,060 11,660

Operating Expenses

5. Working Expenses 6,369 6,654 6,890 7,120 7,340 7,600 6. Appropriationto Depreciation Reserve Fund 950 950 1,000 1,050 1,100 1,150 7. Appropriation to Pension Fund 99 100 150 150 175 200 7,4L8 7,704 8,o40 8,320 8,615 8,950

Net Revenue from Operations 1,569 1,764 2,040 2,250 2,l445 2,710

6. Minor Capital i-Iorksand Other Non-operationExpenses 143 155 160 160 160 166 9. Net Revenue 1,426 1,609 1,880 2,090 2,285 2,544 10. Dividend on Capital-at-Charge 1,506 1,590 1,685 1,785 1,890 2,005 11. Net Surplus (+)/Deficit(-) -80 +19 +195 +305 +395 +539

12. Operating Ratio 82.5% 81.4% 79.8% 78.7% 77.9% 76.8%

See notes in the following Annex

September 4, 1969 ANNEX TO TABLE22

INDIAN RAILWAYS

Notes on Forecast Revenue Account 1968/69 - 1973/74

1. Receipts from passenger traffic are based on fares in effect on April 1, 1969. Annual growth has been estimated at 3%. 2. ReceiDts from freight traffic are based on rates,in effect on April 1, 1969. Growth in traffic has been estimated as follows:

Average Annual 1969/70 1973/74 Growth

Revenue earning tons (millions) 179.4 231.7 6.5%

Net ton-km (millions) 114,392 143,696 5.8%

Revenue (Rs millions) 5,958 7,690 6.6%

3. Operating expenses are estimated at current prices after allowing for addi- tional expenses from the expected higher level of traffic. Expenses relat- ing to goods and passenger traffic have been calculated separately on the basis of the estimated growth in each class of traffic. Additional provi- sion has been made for maintenance of new lines expected to come into serv- ice. Provision has also been made for a 5% annual increase in the cost of imported stores.

4. The appropriations to pension fund represent the minimum contributions required from revenue to cover higher pension payments due to Government's decision to consolidatedearness allowance with basic pay. The proposed appropriationswill be subject to further revision on the basis of actuarial valuations of the fund's liability.

5. Dividend on capital-at-chargeis calculated at existing rates, 5.5% on capital provided to March 31, 1964 and 6.0% on capital provided thereafter. Rates of dividend are being reviewed by the 1968 Convention Committee.

April 28, 1969 INDIANIRA3AILYS

Porecast Balance Sheeta. 1969-197L (Reconstructed) (Rs millions)

1965 1970 1971 1972 i2z9 12LL

Fixed Assets at_Gost z43,487 45,764 18,251 50,973 53,988 57,100 kesA Depreciation Reserve Fund 860 923 989 1.063 1.161 1.227

42,627 44,841 47,262 49,910 52,847 55,873

Current Asset Inventories 1,933 1,937 1,957 2,o48 2,161 2,083 Receivables 1,481 1,554 1,594 1,629 1,659 1,684 Dash, lnvestments, Savings Accounts with Ooverunent 1.819 1.9L8 2.128 2.311 2-521 2.873 5,233 5,439 5,679 5,988 6,341 6,640 Less Current Liabilities 1.781 1E81i 1.8916 1.929 1.959 1.986 3,452 3,585 3,765 4,059 4,382 4,656

Total Net Assets 46,079 48,426 51,047 53,969 57,229 60,529

Cagital Frrovided byr Oovernment

Capital-at-Oarge 31,159 32,485 33,985 35,755 37,805 39,709 Temporary Loxns 271 458 483 397 217 -

Capital Fro&eW from Hailvav Resourcea

Depreciation Reserve hmd (Improveunte) 1,966 2,109 2,2S9 2,417 2,582 2,755 Depreciation ReserveFund (Inflation) 7,235 7,773 8,340 8,935 9,558 10,209 DevelopmenxtAund 3,102 3,105 3,280 3,566 3,946 4,373 Revenue (Open Line Works) 1,635 1,719 1,809 1,899 1,909 2,085

Reserve Fun ds

Oerlopment Fund - - - - 110 Revenue Reserve Fund 33 31 31 31 31 31 Pension Fund 626 694 808 917 1,049 1,205

Capital Eauinment Received Free or Charge 52 52 52 52 52 52

Total Capital and Reserves 46,079 48,426 51,047 53,969 57,229 60,529

NDTE: i/ Fund Balances: Depreciation 860 923 989 1,063 1,141 1,227 Revenue Reserve 33 31 31 31 31 31 Pensions 626 694 808 917 1,049 1,205 Development - - - - - 110

Cash 300 300 30 300 300 300 1,019 1,940 2,120 2,311 2,521 2,673

September 4, 1969 INDIAN RAILWAYS

Source and Application of Funds 1969/70 to 1973/74

( Rs millions )

1969/70 1970/71 1971/72 1972/73 1973/74 Total

Source of Funds

Surplus after meeting Dividend on Capitalpt-charge l/ 19 195 305 395 539 1,453 Contribution to Depreciation Reserve Fund= 975 1,025 1,080 1,130 1,185 5,395 Capital works charged to Revenue 84 90 90 90 96 450 Increase in Pension Fund 40 82 72 90 107 391 Interest on Fund Balances 51 53 63 77 98 342

Railways' cash generation 1,169 1,445 1,610 1,782 2,025 8,031

Capital funds to be received from Government 1,326 1,500 1,770 2,050 1,904 8,550 Temporary loans from Government 187 26 213

2,682 2,971 3,380 3.832 3,929 16.794

Application of Funds

Capital works charged to Revenue 84 90 90 90 96 450 Replacement works (DRF) 950 1,000 1,050 1,100 1,150 5,250 Works charged to Development Fund 190 200 200 200 210 1,000 Additions charged to Capital 1,322 1,480 1,679 1,937 1.982 8.400

Total capital expenditure 2,546 2,770 3,019 3,327 3,438 15,100 Increase (Decrease) in inventories 4 20 91 113 (78) 150 Repayment of temporary loans 86 181 217 484 Amortization of unproductive capital 3 1 1 1 6

2,553 2,791 3,197 3,622 3,577 1

Increase in balances of funds 129 180 183 210 352 1,054

Opening cash and investnents balances 1,819 1,948 2,128 2,311 2,521 1.819

Closing cash and investments balances 1,948 2,128 2,311 2,521 2,873 2,873

NOTE: Allocated to Developmnt Fund. 2/ Includes Depreciation charged to capital.

September 4, 1969 INDIAN RAILWAYS

Freight Traffic Past Performance -Future Prospects (tons-millions)

1965/66 1966/67 1967/66 1969 1970/71 Ml /a 1973/74

Steel Plants

Raw materials for (iron cre, dolomite, limestnue, etc.) 17.4 16.5 17.4 18.5 20.3 21.6 23.0 24.3 27.7 Finished products frao 6.3 6.3 6.4 7.1 7.5 8.0 8.5 9.0 10.0

Coal

For steel plant 12.1 12.1 11.6 22.5 13.2 14.5 15.5 16.4 17.3 For power plants and other uses 34.4 34.1 36.0 38.5 39.9 42.8 46.o 49.0 52.1

Iron Ore for Export 5.2 6.3 6.8 8.0 9.7 11.8 13.6 14.6 16.0

Cement 8.6 8.9 9.4 9.8 10.0 10.5 11.0 11.6 12.6

P.O.L 7.5 7.8 8.3 8.3 9.5 10.0 10.6 11.3 12.0

Food Grairm 14.5 I6.5 14.7 15.5 15.2 15.4 15.6 15.7 16.0

Fertilizers 2.5 3.5 4.4 ) ) 53.6 54.6 57.6 60.6 64.2 68.0 General Cargo 53.5 52.0 47.4

Total Commercial Traffic 162.0 164.0 162.4 171.8 179.9 192.2 204.4 216.1 231.7

Railway Service Traffic

Coal 20.3 19.6 18.8 17.6 16.9 16.4 16.0 15.5 15.0

Other 20.7 18.0 15.4 15.6 15.6 16.0 16.8 17.4 18.0

Total Service Traffic 41.0 37.6 34.2 33.2 32.5 32.4 32.8 32.9 33.0

Grand Total - All Traffic 203.0 201.6 196.6 205.0 212.4 224.6 237.2 249.0 264.7

September 4, 1969 ANNEX1 Page 1

INDIANRAILWAYS

Notes on Transport Coordination

1. Problems of transport coordination in India have came to refer essentially to the numerous obstacles that have been hampering the growth of a healthy road transport industry, that would supplement, more than corpete with, rail transport. In 1959, the Government appointed a committee to under- take a comprehensive examination of transport policies and coordination. This Committee on Transport Policy and Coordination (CTPC) submitted its final report in 1966. In view of the Bank Group's extensive involvement in the-- transport sector, the CTPC's recommendations were discussed by the Govern- ment and the Bank/IDAin connectionwith Credit88-IN (NinthRailwiay Project) with a view to securing more balanced development and effective transport coordination. As indicated below, there has been slight progress in some directions,and movementbackward in others.

2. The Governmenthas becomeincreasingly aw-are of the plightof road transport. At a meeting of the Transport Development Council in 1968, the then Union Minister of Transport and Shipping noted: "Regulations of vaiyine kinds, innumerable checkposts, collection of octroi, inter-State sales tax, etc., have had the cumulativeeffect of obstructingthe free flow of traffic. It has been estimatedthat due to this factoralone, vehicle utilisation has come down to half of what it would be, therebyincreasing the cost of road transportto the economyas a whole. If theseobstructions could be done away with and the potentialof vehicleutilisation fully realised,the sav- ings to the econonywould be considerableboth in the quantumof vehicles requiredand the investmentthereon. This, to my mind, is one of the most criticalfactors which adverselyaffect the profitabilityof the road trans- port industry". vth

3. A numberof committeeshave been appointedto go furtherinto the important recommendations of the CTPC. These are the Road TransportTaxati.cn Enquiry Committee, a Study Group on Road Transport Financing, a Study Group on Viable Units, a Conmuittee on Rural Roads, and a Central Road Advisory Planning Committee. The various reports submitted by these committees in 1968 are now under studyby the Government.Furthermore, a smallgroup wuas establishedcomposed of the Secretaries,MAinistry of Transportand Shippir.g and Ministryof Tourismand Civil Aviationand of the Chairman, Railwzay Board, for the specific purpose of reviewing the progress made in the implementation of the CTPC'srecommendations.

J/ SeventhMeeting of the TransportDevelopment Council held on the 24th and 25 June 1968 at Itysore. ANNEX 1 Page 2

4. Some actual progress has been achieved in the relaxation of licensing. In July 1966 the State Governzmentsunanimously accepted the recommendationthat Statewise permits should be issued for intra-Statemovements of trucks; 14 states are now granting such permits, as compared to 9 in 1966. Five states in Southern India have reached an agreementw.hich entitles each participatingState to issue permits for 200 vehicles to ply with1intheir five territorieson pay- ment of a fixed charge in addition to taxes normally payable within the home State. The States in the Northern,Western and Eastern Regions are considering similar agreements.

5. Little progress has been made towards eliminatingoctroi (municipal tolls)>- and reducing the number of checkposts. The Road Transport Taxation Enquiry Committee reported that in spite of "many Committees ... having recom- mended the abolition of octroi in no uncertain terms, ... there has been a trend towards its expansion. Even village panchayatshave recently started collecting octroi from transit vehi2,ces. If this trend is not checked, motor transport will virtually be paralysed."- Similarly, the proliferation of checkposts set up by various authorities in an uncoordinated fashion has led to frequent delays, harassment and payments of "gratifications" which slow down traffic and increase the cost of transport.

6. At a meeting of the Transport Development Council in 1968, there was a general agreement among the Central and State Government representativesthat octrois and similar levies should be abolished as soon as possible, that the number of checkposts should be reduced and that, as far as possible, one consoli- dated checkpost under a single organizptionshould be created to serve the needs of the several Departments concerned.2- Three States have now constitutedstudy groups to consider what alternativesource of finance could be tapped in order to facilitate abolition of octrois; three other States have indicated to the Central Government that they are making a study on this question. All State Governments concerned have been requested by the Central Government to work out alternative proposals before March 1970. The Central Government is also pursuing with the State Governments the rationalization of checkposts.

1/ As in 1966, there are still only six States without octrois.

2/ Report of the Road Transport Taxation Enquiry Committee on Octroi and Other Check Posts,June 1967.

3/ Ibid, page 1 of Annex I.

September 8, 1969 INDLAN RAILWAYS

ORGANIZATION CHART

DIRECTORS Accounts GENERALMANAGERS Central Railway, Bombay Civil Engineering Eastern Railway, Calcutta

ELectrical Engineering Northern Railway, Delhi

Minister for Railways Establishmnt North Estern Railway, Orakhpur Minister of State for Railways Finance Zonal Railways Northeast Frontier Railwa, Pandu Deputy Minister for Railways Health Southern Railways, Madras

Mechanical Engineerinyg South Central Railway, Secuiderabad

Mechanical Engineering (Prod & Dev) South Eastern Railway, Cacutta

Planning Western Railway, Bomay

Railway Electrification

RAIlWAY BOARD Safety and Coaching Chairman Security

Financial Commissioner Signalling and Telecommunication GENERAL MANAGERS

Member Engineering Statistics and Economics Chittaranjan Locomotive Works, Chittaranjan

Metber Mechanical Stores Manufacturing Units Diesel Locomotive Works, Varanasi

Member Staff Traffic Transportation Integral Coach Factory, Madras

Member Finance (Accounts)

Director General Vigilance

Additional Member Commercial

Additional Member Mechanical

Additional MEmber Staff

Additional Member Works

O.S.D. (Freight Structure) ADVISER DIRECTOR GENERAL

_ Economics (Economic llnit) _ Research, Designs and Standards Organization, Lucknow

Secretary

September 5, 1969 ANNEX3 Page I

INDIAN RAILWJAYS

Notes on the Adequacy of Services

The Railwqaysis improving the quality of its services in several ways, among which are the following:

Transit Time

The overall speed of through goods trains is being improved with increased dieselization/electrification on the main trunk routes. The average speed of through goods trains has improved from 16.7 km/h in 1957-58 to 20.2 ki/h in 1967-68 on the broad gauge and from 15.3 km/h in 1957-58 to 16.6 km/h in 1967-68 on the meter gauge.

The Quick Transit Service Scheme, which was introducedin April, 1956,is now operative between more than 400 pairs of points. Quick Transit Service wagons are being cleared by nominated trains on the routes t'heresuch trains are running. Transit cells have also been created on Railways especiallyto watch the movement of these wagons and to eliminate avoidable delays en route.

The Railways has laid down the following targets for transit of goods consignments in wagon loads:

All BG routes 250 km per day or part thereof, plus one day for loading.

All MG routes 160 km per day or part thereof, plus one day for loading.

Routes involving 250 km per day or part thereof, plus break-of-gauge two days for each transshipmentpoint points and one day for loading.

To provide accelerated goods services to different industrial centers, Super Goods trains have been introduced on various railways to run on advertised timings and with scheduled halts only at a few focal points en route for detaching and attaching of loads. At present five pairs of routes are covered by these services.

1. New Delhi - Bombay (via Western Railway) 2. Bombay - Calcutta 3. Calcutta - New Delhi 4. Calcutta - Madras 5. M4adras- Bombay AkNMEX3 Page 2 The data listed belou indicate the average distance covered per day by these trains: Transit Distance Service Time Distance (km) per day (kn) Bombay-NewDelhi. 50110" 1386 655 Calcutta-New Delhi 72f20" l14i 480 Bombay-Shalimar 75'35$" 1968 625 Shalimar-Madras 92'25" 1656 432 Bombay-Madras 88t30"f 1278 3145

Container Service

The first service between Bombay and Ahmedabad on the Western Railway was followed by the first long distance trunk route service inaugurated in December, 1967 between Bormbayand Delhi. Later, in iNovem- ber 1968, a service wras introduced between Bombay and Anand on the Wlestern Railwcy.

On these services containers of 14.5-ton carrying capacity are used. They are m-oved on the rail portion by rail Riats and on the road portion at the terminLal towns on the Railways' on-mroad vehicles. The RailwaM3thus seelks to provide a total, door-to-door, fast, damage-free and time-guaranteed service at competitive rates.

Encouraged by thie very favorable response :2rom the trade and consumer goods industries, further expansion of these services has been planned. No damage, loss or breakage nas been reported so far and no claims for comTpensation Ilave been made. The first service using 5-ton containers was inaugura-ted between Bangalore and Hadras on January 114, 1969. Another service between Delhi and Calcutta was introduced in March 1969. This was followed byJ another trunk route service between Bombay and Madras in April 1969; still another between Secunderabad and Bombay in June 1969. The first trunik route 'oreak-of-gauge container service has been prograruimed for introduction between Bomlbay and Bangalore later this year, at wuhichl time it is expected that a service between Delhi, Secunderabad and HMadras w.ill also be in-,roduced. Tto important trunc route services progranmmed for introduction toward the end of the current year or early next year will be between Madras and Calcutta and Calcutta and Bombay.

Considerable progress has been made in soliciting traffic and orders are bein, placed 'or the fabrication of additional containers and the procure.ent on necessary road vehicles. The ?ailways has indicated its readiness to transport international-size cont,iners on its BG and PIXGlines.

Improved Passen:er Service

-aster schedules have been introduced andr more cars have been added to trains as a result of increased locomotive horsepower. Addition- al amenities are being provided. NIay 2, 1969 lafflEx 1,1 Page 1

IflDIYU RaJILWAYS

NTotes on the Problems in the 'iovement of Foodgrains

Imported Foodgrains

The amount of imported food-rains moved by rail (in millions of tons) during the last five years haas ranged from 3.37 million tons in 1965 to 4.77 million tons in 1968. The movement during 1966-67 not only put additional strain on transport capacity but presented the problem of long-lead movements from the ports of Madras and Kandla to distant consuming areas in the States of Bihlar and Uttar Pradesh, as natural ports like Calcutta and Vizagapatnan could not handle all tlhe traffic. This also resulted in long haulage of empty freight cars from consuming centers back to the ports.

Plan for Future Hovement from Ports

'The Rinistry of Railways and thae Ministry of Food and Agricul- ture h.ave developed a rationalizat-ion scheme for movement of imported f^oodgrains and fertilizers during the coming years through different ports in such a wray as to facilitate thie movements from each port to a contiguous hinterland. Under the scheme, the various ports have 'oeen divided inato four groups and each group is to serve the contiguous region o' the country so that long-lead movements and cross movements are kept to the 7iinimum. Movements from ports served 'oymeter gauge system are confined as much as possible to the meter gauge to reduce the anount of break-of-gaugetranssaipment.

Indigenous Foodgrains

The bumper crop during 1967-63 just about doubled thierail movement of foodgrains produced in the country to some 10 million tons. The principal aspects of rail transport o- indigenous foodgrains are as followJs:

(a) Seasonal peaks put a severe strain on rail transport capacity. There are t-ro main crop seasons in the year - Hay/June and lNovei-Wber/December.Since the demand for transport durin- those ie-iodsfluctuwtes '!nd is concen- tra-teO over a siio:'t duration, there is great pressure for rail movement of foodgrains immediately after h1arvesting w'ile during the rest of the year the demand for wagons tapers off.

(b) In certain parts of the country, tilepeak demands Lor covered wagons arise because sufficient storage capacity Q'MEX It Page 2

is not immediately available at the producing and consuming centers to spread the movement evenly throughout the year.

(c) The Northern States in thle Punjab and HIaryana areas are heavily surplus areas while some of the States in Eastern, tlestern and Southern India are deficit areas, causing higher lead cross-countrymovements over the heavily used trunk routes.

(d) Empty wagons have to be hauled over long distances to be available for loading. leasuresTalcen/Proposed

1, A working group corprisingrepresentatives of the 1Ministry of Railways, Food and Agriculture,Transport and Shipping, and Finance has been set up, with the Planning Commission as the convener, to take a fonrard view on all the likely changes in the pattern of movement of bothi indigenous and imported foodgrains as well as fertilizers.

2, The Zonal Railways have been directed to study, wJithin tlleir respective regions, the problems arising out of demands for movement of increasing quantities of domestically produced foodgrains and other agri- cultural products.

3. Close liaison is being maintained oy the Railways writh the Linistry of Food and the Food Corporation of India to plan and review movements of foodgrains. A movement plan is being dratrn up for the next crop in advance on the basis of anticipatedproduction and distribution.

'.. Planned movement oI foodgrains in train loads has also been arranged in conjunction with the ilinistry of Food and tne Food Corporation of India so that quicker transit can be ensured through bypassing intermediate marshalling yards.

5. Bulk movement of foodgrains in this manner requires the matching of handling and suitable storage facilities at destination stations. To ensure thnisand to spread the movement of indigenous food- grains evenly, and also to eliminate the peak demands, the Ministry of Food is developing storage accommodations at the producing and procure- ment centers. Storage capacity for about 8.4 million tons is available in the country and an additionalcapacity for about one million tons is being progra,mmedduring 1969.

6. It has also been proposed that the Ilinistry of Food should create storage depots at break-of-gauge transshipment points so as not to overstrain transshipment capacity. AliEX I

7. While open wagons are used for moving foodgrains, to the extent feasible after providing protective covering, procurement of additional covered wagons for this purpose has also been planred.

8. Line capacityworks are being undertaken on the con- gested trunk routes, particularlythose from the Punjab and Delhi to the South, and additional terminal capacity works have been programmed at stations which will be required to cope with traffic in foodgrains, particularlythe stations in the States of Punjab and Haryana.

May 2, 1969 ANNEX 5 Page I

INDIANRAILWAYS

Notes on the Fourth Five-Year Plan

RollingStock (includingLocomotives)

The procurementof locomotivesand rollingstock constitutesthe largestsingle item, Rs 6,200 million,or 41% of the planned expenditure.

With the exceptionof eight diesel-hydrauliclocomotives already contractedfor in the FederalRepublic of Germany,all locomotiveswill be assembledin Railwaysshops. The diesel-hydrauliclocomotives will incorporatea transmissionsystem designed by an Indianengineer (Mr. Suri) and will serve as prototypesfor possiblefuture additions to the fleet. Broad gaugesteam locomotive construction will ceasein 1969/70,and narrow gaugelocomotive construction will come to an end in 1971/72. Freightcar productionwill be fairlyuniform during the five years of the Plan. Productionwill be by privately-ownedplants. The exact types of cars to be constructedhave not yet been determined.

The constructionprogram for all rollingstock is given in Appendix A to this Annex and, as an indicationof planning,a representativelist of freightcars on orderas of January1, 1969 is shown in AppendixB.

Workshopsand Sheds

The expendituresare to providefor increaseddiesel locomotive manufacturing and repair facilities and to improve the efficiency of loco- motive and car inspection. Details of expenditures during the first two years are shown in Appendix C to this Annex. Machinery and Plant

The procurement would be for repair and inspection sheds, Chittaranjan and Varanasi Locomotive Works and the Madras Integral Coach Factory. All are small individual items. Track Renewals

The program is listed in Appendix D to this Annex and the locations at which work will be done in 1969/70and 1970/71are statedin Appendices E and F to this Annex. ASNI\X5 Page 2

Bridge forks

hlis is rnainly for doubling existing single-track bridges and rebuilding or strengthening existing weak bridges. Locations at which the work will be performed are listed in Appendix G to this Annex.

Line Capacity -Iorks

The total provision made in the Fourth Five-Year Plan for line capacity wrorksis Rs 3,150 million. This includes Rs 1,600 million for doubling of track. The main doubling proposals cover a portion of the 724 km of the northl-southtrunk route between Delhi and Madras, which is still oxorkingas a single line. A total of 100 km of this route has been Drogrammed for doubling during 1969/70 and another 100 km will be programmed during 1970/71. The total doubling proposals during 1969/70 cover 273 lkmand, in addition to the north-southtrunk route, include the kluri-Hatiasection of the Eastern Region coal-steel belt for the transport of iron ore to the proposed Bokaro Steel I:Torks and to serve the new industrial complex at Hatia. During 1970/71, total doubling is expected to be stepped up to about 4h0 km.

It is also proposed to undertake certain conversionsfrom meter to broad gauge in heavily worked areas. During 1969/70, h7 km of meter gauge route from Iilrajto Kolhapur have been planned for such conversion. Studies relating to the feasibilityof conversion of other meter gauge sections are in progress.

Rs 950 mnillionhave been provided for yard remodelling,construc- tion of crossinagstations, provision of new loops, extensionof existing loops, provision oi additional goods slhed facilities, etc.

Signalling Works

"Jork involved consists of replacement of mechanical inter- locking by route relay interlockingat major terminals and junctions, mechanization of marshalling yards, provision of automatic signals, tokenless line working and the extension o_ the microwave communica- tions netwTork. The work will be performed at over 100 locations on the entire system.

Electri fication

WlTorlon 1Rourkela-Durg (453 route-km), Kanpur-Tundla (227 route- kin), and Virar-Sabarmati (442 route-kin) sections is already in progress. ANNEX5 Page 3 Thesethree sectionsare expectedto be energizedduring the FourthPlan.

Other sectionsfrom which work will probablybe taken up on the basis of economic studies during the Fourth Plan are as follows:

Madras-Vijayawada 429 km Bailadilla-Vizag 500 km Tundla-Delhi 204 km Panchkura-Haldia 67 km Durg-Nagpur 365 km Madras-Arkonam 69 km Electrification is taken up when:

a) conventional methods of increasing line capacityare uneconomic,and the through- put has to be augmentedby runningheavier trains;

b) the sectionis heavily graded and the required outputcannot be obtainedby steam traction;

c) a sufficientsupply of electricityat low cost is available;

d) the section considered is preferably contiguous to one already electrified so that the benefits of the existing electric traction could be maximized. Other Electrical Works

The main items of work comprise the provision of additional traction substations, replacement of rotary converters by rectifiers, increased period overhaul facilities for EMU stockand the provisionof additionalrepair facilities in electriclocomotive shops.

New Lines

During the years 1969 to 1974, an expenditure of Rs 830 million is proposed for new line construction, of which Rs 550 million will be for the completion of works now in progress. With the balanceof Rs 280 million the Railways proposes to initiate the construction of approx- imately 800 km of new lines which, in themselves, will cost ANNEX5 Page 1.

Rs 750 rm:illion. Engineering and trafVic surveys on those lines apnear- ing to have thie greatest potential are under way, and after these re- ports are received and studied, and the financial implications analyzed, those withatthe maxi-mumdevelopmental value iill be considered. ^ list of works nowj in progress and the estimated expenditures on them is given in Appendix 11 to his Annex. Outline justification of these works is given belou:

1. Singrauli-KMatni

This new line construction is intended to serve development of the Sin3rauli coalfields bJy the INational Coal Development Corpora- tion, estimated to produce 2.5 million tons p.a. initially and to go up to 1i;Umillion tons. 2. Delhi Avoiding Lines

This line wuill facilitate movement of through goods traffic avoiding the 'Lheavily worked terminals in the Delhi and New Dellhi areas.

3. i-lindumaiLkot-Sriganrana,ar

ThQis line is being built to connect the two rmain grain trading centers of' Ilindfmalkot and Sri.g;an7,anag.ar on the _iajasthan/Punjab) bordel-. This would also c void thLe present transshipment at Bhatinda.

)Aa t;oua-Jarihmu 'ThLlisline is intended to provide rail communication f'acilities to thie Jalmmuand Kashr,iir Stat,,e on the nortih-.Testern border.

p. anga lore-Hassan

This line is beiag constructed to develop thle hinterland for the newi l1angalore Port, and also export about 2 million tons of iron ore per a-num frort, the neighIaboring- areas served by thIle mneter -au-e lines. The porogress on the line is being synchlronized wAitl tlhe schedule o'L construction of the rmiaini?ort a' :iangalore.

u. Rail LinLk to H-TaldiaPort

This line is intended tro serve tie new Nlaldia Port tarou,': whI-iichcoal e:nort o- 2 million to,ls from the Dengal and Bihar coal- -ields and iron ore export of about¢ 2/3 iillion tons fromi Barajamda/ Bansnani areas o^ BiLlar -re enviSa,&'c%. The progress on tae line is being s7yinchronized wvith thie schedule of construction of tVhae;m.ain Pagae 7

port. The line has alreadybeen commissionedfor goods trafficbe- tween PanchLkura on the main line and DLurgachak, about 10 km short ofl-ialdia Port.

7. Cuttac!k-Paradeep Port Link

Thle miiain justification is for movement o-firon ore from Daitari area for e:v0ort via Paradeep Port. Hoverient is expect-,ed to reach about 3 million tons at the end of -the Fourth Five-Year Plan.

S. Jhund-Kandla

This new line is intended to provide a through broad gauge link to 'Kandla Port from its hinterland.

9. Guna-iHaksi

This new line is being constructedto providean alternative route for thle movement of increased coal traffic from the Central India coa.!fields in W4estern India, and also to open up a new area in the State of Hadlhya Pradesh.

User Amenities

Tlhese are mainly a number of minor works having the purpose of improvin- thle quality of service rendered to thle users of the Railways.

Other Specified Jorks

These expenditures have for their purpose the provision of faci- lities Lor the Post Office and other Government departments whnich are re- quired to maintain offices in Railways buildings, training schools of the Railiays and other works not possible to classify under other headings.

Load Services

The -,iajor portion of the ex-endittire is for investment in the States' passen-5er transport undertakin-s. Under the Road Transport Cor- poration Act, the Central Government is required to contribute apopro:ci- ,2,te_y one-thiird of the total invest,nent in these undertakings. These contribuuions are channeled throug,h the Railuays. Interest is co.lect,ed at the sa_,me rate thlat the Railways pays on capital-at-charge. Thie Rail- urays 'has two representatives on teie Board of each-i State Road Transport Org-anization.

May 2, 1969 APPENDIX A to ANNEX 5

INDIAN ?5AILWAYS

Rolling Stock Procurement Program

Item 1969/70 1970/71 1971/74 Total

A. Locomotives

(BG) Steam 34 - - 34 Diesel (Main Line) 65 80 285 430 Diesel (Shunter) 44 44 112 200 Electric 53 62 225 340

(MG) Steam 42 46 39* 127 Diesel (Gen. Purpose) 25 30 163 218

(NG) Diesel - 10 - 10

Total Locomotives 263 272 824 1,359

B. Freight Cars**

(BG) Various 16,184 163515 51,134 83,033

(MG) Various 2,962 3,021 9,354 15,337

(NG) Various 454 464 1,444 2.362

Total Freight Cars 19,600 20,000 61,932 101,532

c. Passenger Cars__*_

(BG) EMUs 197 1140 359 696 Rail - 10 40 50 Other 750 750 20625 4,125

(MG) EHUs - - 72 72 Other 577 510 1,038 2,125

(NG) Other 20 37 111 168

Total Passenger Cars 1,544 1,447 4,245 7,236

* Proposal for cancellationof these locomotives scheduledfor pro- curement in 1971/72 is under consideration. ** In terms of 4-wheelers,expressed in terms of standard carrying capacity, i.e., BG=22.0 tons, MG=114.6tons, NG-10.9 tons per 4-wheeler. *** Various measures for the expanded production of the items listed are under consideration, APPE3DIX B TO ANNEX5

INDIAff RAILWAYS Freight Oars on Order as of January 1, 1969

BG IMG NG Total

Bogie Open 1,268 1,O804 50 2,402

Bogie covered (general service) 5,662 4,684 50 10,396

Bogie open (hopper) 175 175 Bogie open (well type) 52 52 Bogie open (welltype) (6w) 15 15 Bogie cattle 284 284

4-w cattle 463 463

4-w covered(general service) 5,403 5,403

4-wi petroltank 227 227 4-w HCL tank 21 21

4-w crude oil tank 947 947 4-w LPG tank 15 15 4-w causticsoda tank 160 160

4-w molassestank 8 8

4-w asphalttank 7 7

4-w brake vans 541 154 695

TOTAL 14,964 6,206 100 21,270

Deliveries will begin July 1, 1969

1/ iquals33,247 in terms of 4-wheelers. APPENDIXC TO ANNEX5 Page 1 INDIAN RAILTJAYS

WTorkshops and Sheds Program

Estimated -peent Total to Cost 3/31/69 1969/70 1970/71

Location and Type of Work Rs (millions)

A. NE1S RI(S

Kurla (CR). Modify inspection shop for cranes in car sheds 3.30 .05 1.00

Kurla (CR). Increase EaG3stabling capacity 5.12 .05 0.44

Kanchrapara (CR). Traction motor re-winding shop 8.20 0.10 1.50

New Bonaigaon (CR). Expand C&W shops for POH 100 more coaches 11.29 3.00

New Katni (CR). Additional diesel POH facilities 5.50 1.50

Khanalamnpura(Mt). New shed for 40 diesellocos 9.00 1.50

Silliguri (NEFR). Expand diesel loco shed to capacity of 91 3.00 1.00

Guntakal (SE). Expand diesel loco shed to capacity of 99 7.00 1.50

Gooty (SR). Expand diesel loco shed to capacity of 100 7.00 1.50

Neempura (SER). New diesel shed for 40 locos 4.00 0.50 Kazipet(SCR). Same as above 9.00 2.00

Abu Road (M4R).Expand diesel loco shed to capacityof 99 5.50 1.50

Ratlam(!1R). Expand diesel loco shed to capacityof 90 7.00 1.50

.20 18.ti APPENDIX C TO ANNEX 5 Page 2

Estimated Spent total to cost 3/31/69 1969/70 1970/71

Location of Work ------Rs (millions)------

B. WORK IN PROGRESS

Itarsi (CR). New diesel shed for 40 locos 11.20 10.60 .50 .10

Harsi (CR). Expand existing shed to capacityof 80 locos 5.50 0.20 4.00 1.00

Kirla (CR).Increase car shed POH facilities 2.90 0.50 2.00 0.40

Jagadhari(NR). Increase repair facilitiesin C&W shops 32.80 31.30 1.40 0.10

Tuglakabad(NR). New diesel shed for 48 locos 8.73 0.53 3.20 5.00 Raipur (SER).New wagon shop 63.70 51.50 11.10 1.10

Bongaigamn(NEFR).New C&W shop 65.10 61.80 2.90 0.40

Varanasi- completionof shops 196.57 191.50 2.45 2.50

Varanasi - facilities for loco- motivemanufacture 3.30 0.80 1.30 1.00

Waltaor - completion of diesel shed 16.89 16.69 0.20 29.05 11.60

New works from page 1 .20 18.44

Miscellaneousminor works 20.55 25.16 TOTAL 49.80 55.20 A:PPEDIXD TO AiE5

IMlDTARAILUi-YS

Track Lonezal Proran - 1974

ITE.i Rs (millions)

Primary Pail Renewals

BG 5450 kn Rs 0.10 million per kom 545 14G1'20 Im 0 Rs 0.065million per km 105 PrimagySlee,,-er RenewTals

BG 653o kmn- Rs 0.12 million per kma 790 HIG3500 Im 'DRs 0.06'rnillion per km 210 Secondary'ail Renewals

BG lL450 klm3 Rs O.C45 million per kmu 65 IhG715 -m _ Rs 0.035 million per km 25

Sec onLda.r Sleeper Renewals

BG 1200 1--m -LS 0.05 million per km G0 IIG 1l45 1I_n' Rs 0.035 million per km 40 Casual Reneiwals 1O0

TOTAL 2,000. APPEMDIXE TO ANNEX5 Page 1

INDIAN RAILIWAYS

Works Involving Improvement of Track Structure in 1969/70

SECTION Length (km) Rs (millions)

(CR) .4alyan-Ifasara 23.19 5.62 Kalyan-Karjat 32.99 9.55 Itarsi-Anla 12.51 4.15 Bhopal-Bina 50.17 18.36 Jhansi-Gwalior 18.40 6.94 Jhansi-Agra Cantt 51.20 17.70 Bina-Jhansi 28.20 9.34 Bhusawal-.tarsi 58.66 17.37 f " 17.64 4.95 Itarsi-Jabalpur 11.47 3.80 Itarsi-Allahabad 26.71 7.49 Itarsi-Bhopal 39.75 13.17 Kalyan-Poona 58.34 5.96 Igatpuri-Bhusawal 22.23 3.37 Bhusawal-Itarsi 40.56 8.91 IKalyan-Kasara 52.17 2.91

(ER) Howrah-Burdwan 14.70 4.23 Grand-Chord 12.00 3.45

(NR) Moghalsarai-Allahabad 21.00 7.56 " " 11.00 4.16 Delhi-Rewari 20.35 3.46 Raikabag Palace-Pokran 10.31 3.83

(INER) Katihar-Barauni 24.00 4.52 Gorakhpur-Gonda 18.00 3.35 Barauni-Hajipur 49.o0 9.13

(NEFR) rakiragram-Rangiya 24.00 4.49 Lumding-Farkating 30.76 5.40 Simalguri-Tinsukhia 32.00 5.56 "i "t 33.00 3.10

(SR) Arkonan-Jalarpet 38.00 9.25 Shoranur-Cochin Harbour Terminus 11.50 2.70 Quilon-Travandrum 33.80 6.10 Madras-Arkonam 31.40 4.36 IlPPEiIX E To AIrnL 5

Page 2

SECTION Length (iZm) Rs (millions)

(SCR) Poona-Sholapur 49.75 12.74 Slolanur- Iadi 11.9h 3.02

Tazipe -Ba3llarshah 37.05 9.39 Guntalal-Droonachelam 20.00 2.97 Droonachelam-Donaklonda 22.30 3.15 UijayauTada-Bhimavaram 25.57 3.00

(SER) Chakardcliarpur- Jharsuguda 25.76 S 1" 11.10 2.86 T2ajKarsuran- Chakl rdharpur 20.33 6.98 Viziana!aram-Raipur 19.25 4.23 Hlowraha-Kharagpur 24..6Q 2.96

(XTR) Jaipur-Bandikui 16.90 3.07 )i-ra Fort-Bandikui 13.00 3.31

TOTAL 1,261.74 233.93

6 Iiinor `-Jorks -- 13 .j.Z 425* 0

Credit I'or re- leased materials 90.00

TOTAL (net) 335.60 APPENDIXF TO ANLEX5

INDIAN RAIDT.AYS

!WTorksInvolving Improvement of Track Structurein 19701 )

Railway Length (km) Rs (millions)

Central 345.19 110.38

Eastern 218.25 52.20

Northern 147.57 28.32

North Eastern 140.00 24.13

Northeast Frontier 114.67 20.72

Southern 133.30 39.15

South Central 436.55 49.29

South Eastern 20.65 3.20

W.estern 144.85 23.02

Total 1,751.03 350.41

Ninor W4orks 83.99

Grand Total (Gross) 434.40

Credit for released materials 100.00

TOTAL (net) 334.40

(*) The totals for the various railways are as given above. The detailed locations for that year have yet to be determined; this wTill be done on the basis of tonnage carried. APPENDIXG TO ANNEX5

INDIAN RAILWAYS

Bridge Works

Estimated Spent to Location Total Cost 3/31/69 1969/70 1970/71

Rs (millions)

A. NEW TWORKS

(NR) Regirder Br. 1125 across Kosi River 2.20 0.10 0.50

(NER) Regirder bridge across Kosi River 13.80 0.20 0.50

(SR) Regirder Br. 1274 across Netravati River 5.90 0.10 0.50

B. WORK1\ PROCESS

(GR) Regirder Jamuna Bridge between kmi1276-1278 11.60 8.20 2.50 0.90

Regirder Girna Bridge 3.90 3.80 0.10

(NR) New bridge over Ramganga River nr. Moradabad 12.60 11.10 1.50

Regirderingminor bridges 2.90 1.70 0.20 1.0U

(NER) Replace various pile bridges 5.00 0.20 0.50 0.50

(SER) Double-trackDemodar Bridge 14.30 12.40 0.10 0.50

Regirder existing Demodar Bridge 3.90 3.30 0o40 0.20

Double-track Demodar Bridge between Bhojudih and Sudamih 6.30 3.30 0.30 0.70

(SCR) Double-track Godavari River Bridge 69.10 42.90 17.30 8.90

MiscellaneousWorks 24.80 35.80 48.1o 50.oo APPENDIXH TO ANNEX5

INDIANRAIlIAYS

New Line Construction

Esti:mate c Total Cost 1969/70 1970/71

Rs (tmilions) A. NEt WORK

(ER) Substitutionof bridge on Farakka Barrage for car ferryservice 11.90 8.94

B, WORKS IN PROGRESS

(CR) Singrauli-Katni (BG 256 km) 228.90 4.00 4.00 (ER) Permanentdiversion of Tildanga-Farakkaline up to the South abutment of the FarakkaBarrage with a bridgeover the feedercanal 18.50 7.50 8.CO

(NR) Delhi Avoiding Line (BG 17.67km) 63.50 2.00 3.00 Hindumalkot-Sriganganagar (BG27.36 km) 11.50 2.40 0.30 Kathua-Jammu(BG 75.31km) 109.90 20.00 30.00

(SR) Mangalore-Hassan (MG 189.21 km) 237.00 40.80 50.00 (SER) Rail Link to Haldia Port (BG 69.70 km) 82.10 10.80 15.00 Cuttack-Paradeep (BG 86.00km) 100.20 15.00 20.00

(WR) Jhund-Kandla(BG 192.22km)1 63.00 15.10 15.00

Guna-Maksi(BG 230.84km) 96.10 1.00 1.00

Other Works 9.20 10.06

TOTAL 139.70 165.30 ANMEXC

INDIAN RAILWAYS

Initial Work Program of the Economic Unit, accorring to Stplemental Le4tz >'c.7, Credit so-IN

A. (i) Economics of a rail link to Paradeep Port. (Alternative possibilities for the rail link to be studied as well as the desirable timing. Traffic studies to include cri cal assessmentof export prospects of iron ore deposits.)-

(ii) Dehri-on-SoneAmjhore rail link - and alternatives.2/

(iii) Electrificationversus dieselizatiof/ofselected sections of relativelyhigh traffic density_

(iv) Other studies consideredto be of special value.

B. Study of alternativesfor achieving increases needed over periods of time in the capacity on Erode-CochinHarbour section.

C. Economics of steam locomotive operation. A series of studies will be made of different categoriesof services.

D. (i) Review of cost/benefitsof electrificationof Gaya-1Nloghul Sarai section.

(ii) Review of cost/benefitsof Godhra-Ratlamdoubling.

E. Changes in effective traffic demand for selected commoditiesof economic importance resulting from rate changes made in 1965 and 1966 and other economic implications of railway rate and fare policies. _

F. Optimum timing of freight car replacement. 1/

I/ TWorl completed or in progress

June 24!,1969 ANNEX7

INDIANRAILWAYS

ProposedWork Programof the EconomicUnit

A. TrafficForecasting

Annual review and refinement of traffic projections, including major commoditytraffic leads.

B. EconomicEvaluation of Dieselizationand Electrificationof Selected Lines, Including Study of Optimum Timing for Phasing out Steam Locomotives

Panchkura - Haldia November 30, 1969 Madras - Vijayawada December 31, 1969 Tundla - Delhi March 1970 Durg - Nagpur September 1970 Nagpur- Bhusaval November 1970 Bhusaval - Itarsi December 1970 C. Economicsof SelectedLine CapacityWorks

(i) Studyof gauge conversionschemes:

(a) Viramgam - Okha - Porbandar September 30, 1970 (b) Varanasi - Bhatni - Gorakhpur - Gonda - Barabanki December 30, 1970 (ii) The line capacityworks to be studiedand the scopeand timing of these studiesshall be determinedby the RailwayBoard not later than December 31, 1969.

D. Economic Evaluation of New Line Constructions

(i) Morwa - Katni June 30, 1970 (ii) Talcher - Bimlagarh March 1971 E. OptimumTiming of FreightCar Replacement

This study shall be undertakenon the basis of the resultsof a survey of wvagonrepair costs by age: June 30, 1970 F. Study of National Foodgrain Movement: April 30, 1970

September8, 1969 FX t\

¢" "o ' \ X

I-

.

wt C1_'