The 2019-20 to 2021-22 target, which accelerates each year, is more than double the NDA's track record and is slated to cost $6-7 billion.
So, the obvious question is whether this is a doable target. A senior official told Business Standard the reason electrification gathered pace over the last five years was that the government had made funds easily available. “Minister Piyush Goyal had instructed us that no infrastructure project should be on slow track due to dearth of funds,” he said. In place of internal funding only, the transporter started accessing external agencies as well.
But funds are only part of the solution. The national transporter is close to signing a deal with the Asian Development Bank (ADB) to finance the electrification of 3,378 km, covering 16 sub-projects over 13 states. Interestingly, the agency’s own documents has cited the risk of a steadily decreasing share of freight and passenger traffic, power supply and possible changes in the regulatory environment.
These are not minor risks either. Based on a NITI Aayog report, the railways share in transportation of surface freight has declined from 86.2 per cent in 1950-51 to 33 per cent in 2015, owing to shortfall in carrying capacity and lack of price competitiveness. The freight segment is the major revenue earner for the national transporter, and the passenger segment is heavily subsidised.
On power availability, an industry source admits that it is unclear whether the existing power infrastructure will be able to cater to the increased demand from the railways by 2021-22. Till January 2019, the Railways claims to have commissioned 32,245 RKM of lines on electric traction, which is 52.27 per cent of total broad gauge network. But electric traction accounts for only 36 per cent of the total energy bill, with diesel accounting for the balance. According to an internal analysis by the Railways, 64.5 per cent of freight traffic and 53.7 per cent of passenger traffic were running on electrified routes by 2017-18.
Major initiatives to speed up the pace of electrification include introducing new agencies, such as RITES, IRCON and Powergrid Corporation, to execute railway electrification works, adopting an engineering, procurement and construction (EPC)-based contracting system and an emphasis on mechanised execution. Currently, over 55 gauge conversion projects with total length of 8033 km are in different stages of execution and planning.
Railway officials claims that electrification will enable the transporter to make major savings on the fuel bill. “We expect to save about Rs 13,000 crore on our diesel fuel bill per year due to 100 per cent electrification plans,” he added. R Sivadasan, former finance commissioner with the railways, points out that electrification also makes sense because of the volatile nature of oil prices, a factor that will grow in importance as the embargo on importing Iranian oil kicks in from May 2. Besides, the electricity cost has also come down to around Rs 4 per unit, from around Rs 7 a unit few years ago.
But it is the changes in regulatory and policy environment that could impact the dynamics of the electrification project. A case in point being the 2017 controversy surrounding a showcase $2.6 billion diesel locomotive factory that GE set up in Bihar.
GE faced considerable uncertainty over the plant, for which it had signed a deal in 2015, after the railway minister suggested a 100 per cent electrification programme and a possible change in the deal.
After the issue threatened to blow up into an international controversy, the government clarified that the 1,000 locomotives that GE would supply would be used as back-up and also in border areas where electrification was a security issue. “The locomotives taken from GE can be used in strategic routes and border, as any enemy disruption may halt the service and supply for the military too, if we depend on electrified tracks in the region,” Sivadasan pointed out.
In the event, the controversy concentrated minds on the railway electrification programme and its merits. Apart from savings on fuel cost, the railways claims that electrification will also generate about 5,50,000 man-years employment during the execution period, and improve India’s record on climate change.