Title - India may have to start thinking about privatising heavy-haul rail movement

Natural gas may emerge as a
potential fuel (for locomotives) —
to augment diesel fuel usage, if
not replace it.
As the Indian Railways embarks
on the Rs 95,000-crore dedicated
rail freight corridor project to
carry heavy loads with 25 tonne
an axle, it is also preparing its
feeder lines to handle heavy
trains. In this context, Business
Line caught up with Semih Kalay,
Vice-Chairman, International
Heavy Haul Association , who was
recently visiting India to catch up
with the global trends in the
sector. The Association is a body
of global railways engaged in
world’s heavy-haul rail
operations and its members
comprise stakeholders from
Australia, Brazil, Canada, China,
India, Russia, South Africa and
the US. Edited excerpts:
What are the business prospects
of heavy-haul railroads globally?
Future prospects of railroads are
good. We will see the railroads
grow across countries — the US
railroads are expected to grow
by 40 per cent by 2040, 30 per
cent in Europe. Australia is
expected to see good business
from iron ore mining, driven
partly by the Chinese moving iron
ore to increase their steel
production. Other countries
where the railroads are expected
to see good growth would be
Brazil and South Africa.
Can you share some trends
where railroads had to find new
business, as traditional cargo
disappeared?
One trend in the West was that
of the coal business (which has
been a traditional mainstay for
railways) going down, as there is
a larger shift to natural gas. But
even shift to natural has led to a
surge in transportation of frack
oil. (Fracking is a process
through which oil is extracted
from large deposits of shale gas,
by flooding those deposits with
water.) The only thing that is
stymieing the growth of such oil
transportation is unavailability of
tanker cars or wagons.
Moreover, in the US, domestic
coal consumption may be going
down, but there is also an
increase in coal exports. So, even
as traditional cargoes dip,
railroads have been flexible
enough to find new avenues of
business. As populations in the
West increase, the highways are
bound to get into gridlock and
movement will have to shift to
railroads. US railroads are
making a lot of capital
investments in the infrastructure
to increase capacity of the
network.
How are railroads being flexible?
The railroads are being
innovative. For instance, as the
natural gas usage grows — a
commodity which is actually
hitting the coal traffic —
railroads are looking to use
natural gas in their locomotives.
They go after what they find cost
effective. At one time, North
American railroads were on the
verge of bankruptcy. After the
Staggers Act in 1980, they were
economically deregulated, and
productivity increased,
investments increased, volumes
went up, the railway rates came
down.
Any data on the kinds of fuel
used to move freight locomotives
globally?
Most of the US railways, Western
Australia, Brazil use diesel
locomotives for heavy haul.
Sweden and South Africa use
electrification. Now,
electrification is desirable in the
US, but who is going to pay for
the electrification of over
150,000 miles of track? So,
electrification is not cost effective
till the Government or some
other entity pays for the
electrification of tracks.
What would be the new sources
of fuel for powering locos?
Natural gas may emerge as a
potential fuel — to augment
diesel fuel usage, if not replace it.
Suppliers are working with the
railroads in the US today on this
issue. In Brazil, railroads use
biofuel products, sourced from
sugarcane. They are blending
(high-speed diesel) up to even 50
per cent levels. The problem is
many manufacturers do not
provide warranty for locomotives
using blended fuel, as they feel
biofuel corrodes some parts of
the locomotive.
Any instances of the
organisational structure of
heavy-haul railroads that prevail
globally?
In the US, heavy-haul railroads
are privately owned and publicly
traded. The railroads own
infrastructure and equipment,
although 50 per cent of wagons
are owned by shippers and
leasers. The broad trend is
towards privatisation. Even the
Chinese Railways is encouraging
privatised or semi-privatised
heavy-haul movement. In
European countries, the
Government owns infrastructure
and operations are handled by
private firms. Transnet in South
Africa is a private company. In
India, perhaps that is not the
case yet. But you may have to
start thinking about it.
What kind of private investors do
you expect?
Well, one of the most interesting
trends is Warren Buffet investing
in railroads — Burlington
Northern Santa Fe. An individual
investing in a railroad is a big
thing! So, private investors are
expecting tremendous growth in
this business, which is why they
are investing.
Tell us about the Heavy Haul
Association.
IHHA looks to capture best
practices in heavy-haul
railroading. We are a not-for-
profit organisation, we captures
experiences that can help
countries looking to increase
axle loads. We also provide
funding for students to come
those conferences so they can
specialise and find employment
in the sector.
What is happening on inter-
country railway movement, given
that that could boost the overall
business?
We do see the European Union
driving interoperability, although
they do complain that border
regulations hamper the
movement. In the US — where
railroads are owned by different
private companies and have
different systems — we see
flawless interchanges, driven by
American Association of
Railroads. In the Nordic, we see
that happen between Sweden,
Norway, and to a certain extent
Finland.
India has a mixed-traffic railway
system. What is happening in the
US where freight railway firms
are resisting the Government
move to allow passenger trains
on their system?
It is a win-win situation for
railroads. But the costs and
benefits have to be shared.
Freight railroads are not
designed for speeds higher than
90-100 miles per hour. If
somebody wants to run trains at
125 miles an hour, they have to
pay for the infrastructure
upgrade. Moreover, railroads are
already facing capacity crunch.
They would not want to allow
some other operations creating
major problems. Moreover,
somebody will have to pay for
the liabilities of passenger
services.
There is only one line where
passenger services are
connecting Chicago, but for that
Government provided TIGER
(Transportation Investments
Generating Economic Recovery
programme) funds for improving
the infrastructure.