Why Roadways Outperforms Railways In Executing Infrastructure Projects

Of the two heavy-duty infrastructure programmes being steered by the government of India, roads and railways, it is the former that is generating more interest. Last Tuesday’s announcement of the Bharatmala Pariyojana of Rs 5.35 lakh crore by the government has consequently created a buzz.

Between them, the National Highway Authority of India (NHAI) and its Ministry of Roads and Surface Transport have developed a demonstrated ability to implement large-scale projects over the years. The same is not true of the Indian Railways. This cuts excitement, though the railways too has comparable numbers. It plans to spend Rs 8.56 lakh crore in 10 years.

The difference is created by the huge bureaucracy the railways brings to its job, versus the lean one in roads. The road sector makes far better use of its lean arms. With NHAI, there is NHDCL, there is Border Roads Organisations and several very effective state-level construction companies. The Railways has only now begun to create those like the Rail Vikas Nigam, the Dedicated Freight Corridor Corporation of India and the recent National High Speed Railway Corporation Limited.

For a long time, the members at the Railway boards and the divisional railway managers have mostly tossed and diced policies, effectively delaying execution. It has made a direct impact on the pace of spending and the assurance private investors could derive over the continuity of those policies. The lack of continuity is not recent but has been building up over the past decade and more. These impact the results created on the ground.

In the five-year period till March 2022, the road sector targets to add more than 48,000 kilometres of highways or about 26 km per day — roughly the pace at which they are laying roads now. The railways in the same period plans to add 7,000 km. Compared to the current pace of Rail Bhawan that will be almost a 40 per cent increase in pace of execution from its best effort in more than 20 years, which was 2016-17 at 2,855 km.

The reasons why the investors would be less sure this can happen, lies in the quality of the numbers. Of the projected capital expenditure by the railways, only Rs 1.3 lakh crore is expected from public private partnerships or just 15 per cent. In roads, there is an advantage though. The ministry has access to the sequestered Central Road Fund. About Rs 97,000 crore is expected from there for the Bharatmala Pariyojana. Even with that cushion, the percentage expected from the private sector investment is over 21 per cent.

The differences are already building up even as the railways despite its gargantuan bureaucracy (1.3 million) has entrusted the World Bank to make the detailed plans for its makeover. In FY18 Budget for instance, Finance Minister Arun Jaitley has announced a capital expenditure support of Rs 55,000 crore ($ 8.25 billion) for an overall annual spend of Rs 1.31 lakh crore for the railways. The rest is to come from the Railways’ internal resource and the rest from the private sector.

Yet by October this year, the Finance Ministry finds the spending has been Rs 50,762 crore or less than 40 per cent. Of this, the money spent on partnerships with the private sector has been Rs 11,504.29 crore. It is far better than what it has managed to achieve in the past. In the roads sector again, of the Rs 59,000 crore budget support provided, most of it has been tied up. As on 31 March 2001, the total length of national highways was 57,737 km. It will cross over 100,000 km by March 2017, a CAGR of 3.85 per cent. The railways has added less than 5,000 km in the same period to reach 115,000 km of track, till now.

One of the examples of what excessive or overlapping layers of administration can do is in the metro rail projects. As Vinayak Chatterjee, chairman, Feedback Infra writes, it is the Ministry of Urban Development which decides on policies for the sector, while the Railways Ministry decides on their execution. State and local governments, both have roles to play in policies and maintenance. India is building 517 km of these rail, and another 595 km is in the works.

Building of highways hardly faces these hurdles. Myriad private construction companies have gotten in the sector since late 1990s to support the road building programme. Hardly any new private contractor has entered the railway sector in this period. The difference in the pace of execution has thus become stark. The targets seem more credible for the road sector.