High speed trains in India – is it time?

It takes a little more than seventeen hours to cover a distance of 1,454 Km between Kolkata and Delhi, at an average speed of 85 Km/hr. This is the fastest you can travel on India’s trains. Compare this to the 310 m/hr (almost 500 Km/hr) speed of the recently unveiled bullet trains of China and we know how far behind Indian rail infrastructure is. A China style high speed train can reduce the journey time between Delhi and Kolkata to a mere three hours from the present seventeen. People will save time and can be more productive. Business and manufacturing will benefit from high speed connectivity. Goods and people will travel faster. Time advantage currently enjoyed by the civil aviation sector will be challenged and will lead to strong competition between the airlines and high speed trains, ultimately benefitting the end users, i.e. the passengers. India’s economy needs high speed surface connectivity which will boost its growth even further. Is it then time for India to jump on to the high speed train projects?

The answer to the question lies in lessons learnt from similar projects around the world, the most recent being that of our neighbour China. China embarked upon the high speed train project in the 90s with the first proposal to build a high speed train connection between Beijing and Shanghai. The line was finally opened in June 2011. The first high speed train however, was the Beijing – Tianjin section, opened on 1, August 2008. According to official Chinese media reports the country plans to build a total of 25,000 Km of high speed tracks till 2020, with a total investment of $ 300 billion. China spent $ 50 billion on its high speed network in the year 2009 alone (Indian railways earned a total of $ 20.7 billion in fiscal 2011-12). Once completed China will have the world’s largest high speed rail network. A report by CNN money in August 2009 goes a step further and says that the Chinese network will be bigger than rest of the world’s high speed networks all put together.

India in the railway budget for the year 2012-13 has announced high speed initiatives. In his budget speech the railway minister said that Indian railways have decided to construct high speed passenger train corridors, where trains will clock speed between 250 and 350 km/hr. The minister sighted feasibility studies being underway or completed for various sectors including Pune – Mumbai – Ahmedabad, Delhi – Agra – Lucknow – Varanasi – patna and Delhi – Jaipur – Ajmer – Jodhpur sections. No time frames have been promised but the government has decided to go ahead with the high speed corridors. But what does this means in realistic terms? Will there be takers for such a product? Let’s take a look at three different high speed train networks in China, Japan and Europe.

High speed train connections
Sector	Distance (Km)	Fare	Indian equivalent
Beijing – Shanghai	1,228	Yuan 555 (INR 4,476)	Delhi – Raipur 1,164 Km
Tokyo – Aomori	713	Yen 16,870 (INR 10,355)	Delhi – Bhopal 701 Km
Paris – Frankfurt	572 Km	Euro 70 (INR 4,753)	Bangalore – Hyderabad 573 Km

It’s not very difficult to compare the fares high speed trains charge elsewhere in the world to what passengers pay in India (both on trains and flights).

The idea of having high speed trains is good but its time has not arrived in India. A huge investment in a relatively shorter period of time, strong opposition to acquisition of land and high fares to get a decent return on investment are big deterrents to the idea. High speed trains have totally different technical requirements as compared to conventional trains. The tracks are put on special sleepers, which can handle carriages moving at high speed. The tracks themselves have to meet specified design standards like having long rails with virtually no curvature. Platforms might need redesigning to suit the coach design and so on. It is not possible to run high speed trains on the present tracks. New tracks will have to be built and for that more land has to be acquired. This will be an extremely expensive (if the new land acquisition bill becomes a reality) and time consuming process. Cost of capital is moving up with global economy in choppy waters. In the past year itself 70% of China’s high speed projects have either being temporarily suspended or delayed. This is not a healthy sign. A February report in the Telegraph published in the UK suggest that though freight operation made a profit of 70 billion Yuan the passenger service failed to make any money. In Europe high speed trains face stiff competition from both low cost airlines (Ryanair and EasyJet) as well as from legacy carriers. So what is that India can look for to improve its train connectivity?

Runs fast but burns a hole in the pocket faster

The ideal solution will be to upgrade the existing infrastructure to double the actual speed from 85 Km/hr to around 160 Km/hr (some sections like Delhi – Agra already have tracks suitable for this speed). Signalling is one of the major issues which stifle speed. Poor tracks condition is another problem. Ministry of railways has been dragging its feet on the issue of infrastructure upgrade for a long time. The railway ministry should take steps to completely overhaul the signalling system across the network, improve track conditions by replacing short rails with long rails and use of mono-block concrete sleepers instead of wooden sleepers. These changes would increase speed across the network.

Changes are also required in the rolling stock. Rajdhani trains have been provided with the new light weight carriages but majority of long haul and short haul trains still use heavy carriages making it difficult to achieve high speed. High power engines and shorter train length can increase the speed to a large extent (some trains like Kalka – Howrah have between 21 – 24 carriages). Given the vast size of India the train tracks criss-cross country side and big cities on most of their stretches. Protecting the tracks from trespassing is essential for safety of the people as well as for the train operations. Fatal accidents happen every year at level crossings across the country. Eliminating the level crossings and providing proper fencing around densely populated areas will ensure smooth operation and high speed at all times.

Another common dimension usually missed out while discussing high speed train is bypassing the smaller cities and communities en route. To maintain consistent high speeds the trains will have to make as few stops as possible. With most small cities ignored, the benefits from high speed infrastructure too will bypass the communities. On the other hand an overall upgrade of the network will bring benefits to entire country. 

Multi modality in India

Transportation in India is changing, albeit at a slow pace. The golden quadrilateral project started in late 90s took painfully long twelve years to complete (it was formally declared complete in January this year). The initial deadline for completion was 2003. The other ambitious project the North South East West corridor will take some more time to complete. Though the Golden Quadrilateral took almost eight extra years to complete, the project capacity might have already saturated. The corridor is four lanes with a few exceptions. The North South East West corridor too has just four lanes on most stretches. The dedicated freight corridor (DFC) is yet to see full scale construction work on both eastern and western stretches. However, with the financing of first phase of the project from Rewari to Vadodra in place (Japan International Cooperation Agency has signed an agreement to provide approximately 93 billion Japanese Yen (Rs 5,625 crore/ $ 1.1 billion) for consulting and construction); the project looks to be on the fast track.

The three projects mentioned above are the largest infrastructure projects of India in recent history. These projects once completed are expected to decongest India’s chocked highways and move freight quickly on trains. This will be a significant boost to the overall GDP and will create hundreds of thousands of jobs across the country. The DFC proposes to set up logistic centres along its eastern and western arms to help move cargo efficiently and to bring development in hitherto underdeveloped areas (mainly in Rajasthan and Uttar Pradesh). An efficient logistic system in India would mean reducing artificial inflation due to supply side constraints, better prices for both small and large scale industries and better inventory management. What is missing from the development ladder is an important yet underestimated concept, multimodality.

Off the beaten path

Multimodality has been in works for decades in Europe. The arrival of a single market and the Euro has further strengthened the concept. Europe today utilizes its sea ports, inland water ways, rail network, road network and the airports seamlessly. Inland water transport in Western Europe increased from 568,766 containers per year in 1987 to 3.2 million containers per year in 2001. Airports in Europe are increasingly getting connected to the European road and rail networks. All major airports in Europe are connected by a high speed rail link to the city. Amsterdam, Frankfurt, Milan (Malpensa), Munich, Oslo, Paris (Charles de Gaulle) and Vienna all have at least a high speed rail link from the airport to the city centre. Out of these airports, Amsterdam, Frankfurt, Paris and Milan have high speed train connections to cities in neighbouring countries. A high speed train might be a competition on short haul flights but it also increases the catchment area (surrounding area from where passengers originate) of the airport significantly.

Lufthansa has benefited immensely from the high speed rail (Inter City Express or ICE) connection at Frankfurt airport. It has stopped many short haul flights like that to Cologne and now offers train connections from Frankfurt. Convenient location of the train station (a few meters from arrivals area) makes it easy for the passenger to seamlessly shift from flight to train. A dedicated daily freight train service has been introduced between Frankfurt and Leipzig (a city in east of Germany). The connection links the East European distribution hub of DHL to Frankfurt. This is an ideal example of multimodality at its best.

There but invisible to many

Indian airports have started their very own small experiment with multimodality. Delhi airport’s new terminal has a high speed rail link to the city centre. Mumbai, Bangalore and Hyderabad too will have a rail connection in near future. However, there is a huge potential which is largely being ignored by all the major airports. Delhi, Bangalore, Hyderabad and the proposed Navi Mumbai airport all are situated next to an existing rail line. None of the airports use them. If these rail lines next to the airport are put to use they can open up a completely new avenue for the airports.

Connecting to the national railway system will throw open the airport to connectivity to a large hinterland. Out of all the airports mentioned above, Delhi and Navi Mumbai stand to benefit the most from such a link. Delhi is the national capital and has large manufacturing hubs in the vicinity. Delhi also has a large domestic consumer market for high end products like electronics, mobile devices (increasingly smart phones) and fashion. All these are extremely time critical since they become obsolete in a matter of weeks. The ideal location of Delhi also favours it be become a regional distribution hub for such time critical goods.

Ideally Delhi airport should push for a rail siding at the airport’s north western corner and develop it as an air-rail centre. It will directly connect the airport to cities like Jaipur in the south west and Chandigarh, Ambala, Jalandhar in the north. This will increase the catchment area for the airport and more passengers will take the rail link to the airport. It will similarly benefit arriving passenger who can take the train to their destinations. Tourists arriving at the airport can directly connect to Jaipur or Agra. The maximum benefit however will be to the cargo business of the airport. Seamless transfer of cargo from road and rail to air and vice-versa will increase the efficiency of the airport manifolds. The future DFC will also link the inland container depot (ICD) at Tuglakabad. This will present another opportunity for Delhi airport to add more business. With a little innovative thinking Delhi airport can become a mighty logistic node for the northern Indian region.

A four point approach

1.      Identify the potential customers (Samsung, Sony, HP, Dell, etc)

2.      Approach the customers directly to set up distribution base at Delhi

3.      Get professional integrators to the airport (DHL, TNT, FedEx, Blue Dart, etc)

4.      Provide infrastructure in cooperation with existing cargo operators

5.      Ensure internationally accepted service standards

Committing to internationally accepted service standards might be little too ambitious because state run agencies like customs still belong to the old school and lot of work is done on paper. A different approach where technology is deployed to minimise human interface together with an incentive based on turnaround time might motivate the department to get more customer friendly.

A similar case can be worked out for the proposed Navi Mumbai airport. The site is close to Jawaharlal Nehru Port Trust (JNPT), one of the largest ports in India. A rail track connecting the port to the city of Mumbai and rest of India runs close to the south eastern periphery of the proposed airport. While there is potential for the passengers to interchange from flights to train and to connect to the hinterland, the potential of the site becoming a major logistic centre for Western and Southern India is much higher. Once completed the DFC will have its terminal node at JNPT, a special economic zone next to the proposed airport will provide opportunities for the people and goods from the zone to be transported quickly around the region.

The government of India is planning to replace various state and central taxes with a uniform Goods and Service Tax (GST). The GST when introduced will change the way business is done in India, especially manufacturing and retail. The current tax advantage and disadvantage of having distribution centres in different parts of the country will disappear with GST. Companies will be able to identify strategic sites for their distribution centres and will manage large supply chain systems with greater efficiency. Multimodal transport nodes can leverage this opportunity by offering integrated facilities. The Indian market is growing fast and will continue to do so in the few decades to come. Indian airports have a unique opportunity to develop the nascent market by identifying an anchor tenant (large integrators like DHL, FedEx, TNT, Blue Dart, etc) and help create distribution networks.  

Saving the king of good times

When Kingfisher airline started in 2005 it generated widespread curiosity. The curiosity was understandable. The brand was and is extremely popular especially among young Indians due to a strong association (Kingfisher beer is extremely popular in India). Kingfisher stood for everything premium and people expected the same from the airline. Operationally the airline started off as a fully web based booking platform like Air Deccan. The airline bypassed the conventional GDS (global distribution system) an interface which helps B2B transactions between travel agents and airlines. This also meant huge savings on GDS hosting costs. However, it soon back tracked and hosted itself on major GDSs. Being absent from the GDS probably put the airline in the same league as a low cost carrier (which Kingfisher was not willing to be positioned as).

Kingfisher was soon India’s first and only five star airlines. Passengers were called “guests”, red carpet was literally rolled out for business class passengers and economy class passengers had the privilege of in-flight entertainment and got a takeaway travel kit. Operationally Kingfisher did a spectacular arrangement of tying up with then Indian Airlines for its ground handling services. This meant getting airport facilities at par with the national carrier. For example in Delhi the airline operated from terminal 1A, which was much less busier than the chaotic terminal 1B. The domestic network expanded quickly and Kingfisher was talk of the town. Industry experts predicted that Kingfisher will bleed other airlines and soon be the numero uno in Indian skies. Sadly things did not go the way they were projected.

What went wrong?

Buying out Air Deccan and the global financial crisis of 2008 together sealed the fate of Kingfisher. Air Deccan which was supposed to give access to international operations to Kingfisher proved to be a liability instead. Poorly managed and with poor service standards, Air Deccan sapped Kingfisher of its finances and energy. Kingfisher Red (rebranded Air Deccan) created confusion and brand ambiguity. Once known for its premium service Kingfisher Red was not same as flying Kingfisher. The airline started losing its five star image. It was a low cost airline after all. Kingfisher’s international network, which was supposed to grow rapidly, did not grow. Whatever international flights the airline started was on extremely competitive routes like London Heathrow, Singapore, Hong Kong, Bangkok and Colombo, resulting in low yields. The airline also ordered a large fleet from Airbus including an A380 super jumbo, which further pressured the balance sheet.

The present state of the airline can be blamed on a few bad decisions like slow network expansion, inefficient fleet utilisation and brand confusion with induction of Air Deccan. In the last couple of months the airline has been hit by serious challenges. Accounts being frozen by tax authorities, suspension by IATA (International Air Transport Authority) for non payment, cash and carry operations by airport operators and oil companies, strike by cockpit and cabin crews, mass cancellations, etc. None of these stand for a five star airlines. Reputation of the airline has taken a serious hit and market share has been lost to rivals like Indigo, SpiceJet and Go Air. It is time for the airline to do some destructive innovation.

Time for housekeeping

Its time to fill the empty seats

First of all Kingfisher has to come out of the denial. The regular press statements coming from the airline assuring passengers that everything is fine reflects a deep sense of denial. Such statements will further damage the image of the carrier. The next step should be to cut the flab. Kingfisher needs a lean top management team which can multitask efficiently. A complete overhaul of its schedule is urgently required. It should look at reducing the number of destinations offered and fly only on sectors which it has at least breakeven operations. It should also reconsider its international operations. Flying on highly competitive routes will only reduce yields and further pressure the finances. Untapped yet fast growing markets like Indonesia should be considered. Indonesia and Malaysia offer both O & D (origin and destination) traffic and huge potential of transfer passenger to the Middle East via Delhi or Mumbai. Reducing the fleet by leasing out aircraft or selling them will reduce costs in short term. This will also reduce operational and maintenance costs.

Kingfisher needs cash urgently. Reports suggest that it might get emergency funds from investors; however with current operational set up there is hardly a business case for investment in the airline. Kingfisher needs to do a lot of housekeeping to become attractive for an investor. The policy change allowing FDI (foreign direct investment) in Indian carriers by foreign carriers beyond 25% seems a distant dream, especially after a poor show by the party of current aviation minister in recent elections. Even with a quick decision on the topic it will take months for the policy to fully come into force and for an airline to make up its mind to invest in India. Kingfisher should make use of this time to tidy up and get ready for potential investors.

The fundamentals of Indian aviation industry are still strong and growth will continue in the long run. What the industry needs is efficient management and self regulation. Predatory pricing seen in the Indian aviation industry of late will not help anyone in the long run. The ministry of civil aviation should further liberalise the sector by making it easy for airlines to operate in an unconstrained environment. The king of good times is in a gloomy mood these days, cheering it up will be a long process but not impossible. 

Clearing the turbulence – Need for a contemporary civil aviation policy

The last two decades of economic growth have also lead to exponential growth in air traffic in India. In the financial year ending 2001 India counted 30 million passengers per annum (mppa) on domestic routes, which went up to 106 mppa in year ended 2011. Total passenger traffic (international and domestic traffic put together) grew from 42.5 mppa to 106 mppa during the same period. The two large aircraft manufacturers, Airbus and Boeing have both projected a demand of around 1,000 aircraft for India in a twenty year period ending 2028. Indigo, India’s largest low cost airline created history by ordering 100 Airbus A320 aircraft and recreated history by adding another 180 recently. On top of the growth in aviation, the sector creates jobs directly and in related sectors like airports, ground handling, airport retail, public transport, cargo and warehousing, etc. According to International Air Transport Association (IATA) aviation in Singapore contributes 5.4% to the national GDP and supports over 100,000 jobs. In India the figure is 0.5%. What is wrong with Indian aviation?

There is more than one leak in the tub, the biggest being absence of a comprehensive and relevant civil aviation policy. The delayed civil aviation policy along with rules like a “minimum of five years” experience of continuous operation of domestic scheduled air transport services; and at least a twenty aircraft fleet” are suffocating the growth potential of Indian carriers. Such restrictions not only stifle the competitiveness of the industry, but also give an unfair advantage to foreign carriers. A case in point is the Middle Eastern carriers. From full service carriers like Emirates to low cost carriers like FlyDubai, all started as small companies with a handful of aircraft and took their maiden flights to Indian subcontinent. Indian carriers on the other hand have to wait for a period of five years.

Second area is ground infrastructure. Barring the five private airports (Delhi, Mumbai, Bangalore, Hyderabad and Cochin) most Indian airports are struggling for better management and expansion. The government started the process of privatising thirty five non metro airports in 2008, but the process was cancelled without any explanation. The most likely reason was immense pressure from labour unions that rightly feared for job losses. A handful of Greenfield projects were awarded but progress has been slow due to land acquisition issues. The latest approach of the Airports Economic Regulatory Authority (AERA) to shift towards a single till model (where airfield operations are subsidised by commercial revenues) has made airport investments unattractive. Such arrangement will deter investors from putting their money in airports.  

The third area where the civil aviation policy can help is Maintenance Repair and Overhaul (MRO) business. The large fleet orders placed by Air India, Indigo, Jet Airways and others will need MRO facilities to service their fleets. At present Air India is the only airline to have its own MRO centre in India. All other airlines send their aircraft to neighbouring countries like UAE, Singapore and Sri Lanka for the maintenance works. This results in major loss of revenue, which could have been added to the GDP. A major reason for lack of MRO facilities in India is high tax and import duties on original equipments. The low labour cost advantage in India is offset by the high taxes and duties. This is true for both scheduled airlines like Air India, Jet Airways, Indigo and business aviation companies.

Fourth, aviation as such is not considered as a priority sector. Long standing demands like allowing Foreign Direct Investment in airline by foreign airlines, standardising aviation fuel taxes and a liberalised air service agreement regime (which allows airlines to operate flights between two countries) have not been addressed. Troubled airlines like Kingfisher can benefit from FDI and other airlines too can gain expertise and know how.

Fifth, painfully slow procedures for air freight clearance. Singapore and Hong Kong process air freight shipments within hours; In India it takes a couple of days. Countries which have a thriving aviation sector like that of Dubai or Singapore have given a priority status to aviation and accordingly framed policies. India needs to think of aviation as a sunrise sector and lay down policies to facilitate the business. The policy framework should provide a level playing field to all stakeholders and should not discriminate.