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Political Economy of Reinventing Bangladesh Railway

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Political Economy of Reinventing Bangladesh Railway

Dr. Jamaluddin Ahmed



Roadmap for Railway Technology

Capacity augmentation…..

Between now and 2031, the passenger and freight traffic in Bangladesh is expected to grow by another 40% and 37% respectively. However, while both passenger and freight traffic has shown phenomenal growth, the inputs have not grown at this rate. Though railways have evolved from steam to diesel to electric traction, and also adopted a uniform gauge policy (broad gauge), technological intervention has been rather slow and also out of pace with the global standard of development.

Technology intervention….is needed in the following key areas– maximum speed and average speeds of passenger trains, average speeds of freight trains and load carrying capacity of wagons. The above three key enablers will need further technology intervention in many associated disciplines, including, high speed trains with tilting technology, higher axle load wagons, tracks suitable for higher axle load, better payload to tare weight ratio, signalling and communication systems for safe operation, use of energy efficient systems, other passenger amenities and facilities. One of the following options can be adopted in increasing the throughput of passenger and freight trains: Developing an exclusive freight network, connecting major centres of business, originating points of minerals, ores and ports.

This will ease out the freight traffic from the existing mixed lines. Augment the existing network for higher speed, which must be used for passenger traffic and freight feeder service only. Alternative to the above could be developing exclusive high speed passenger network connecting state capitals, existing major railway junctions, centres of business, and airports. In this scenario, existing network must be used predominantly for freight traffic and for passenger feeder services.

Passenger traffic has to be dealt under the three categories mentioned as ……

(i) Long distance travel involving a night or part of a night requiring sleeper facilities; (ii) Medium distance involving four to five hours of travel (example business travel); (iii) Short distance commuting, involving less than two hours of travel and including suburban and urban transport like metro rail.

For passenger capacity increment under category ….

(i) and (ii) above, following options are possible: Dedicated high-speed passenger corridor, similar to ICE, TGV and 1 SHINKANSEN connecting state capitals, national capital, import- ant business centres and towns; Feeder services to this high-speed network using the existing rail connectivity or by way of incremental additions; Raising the maximum operating speed to 350 km/h and establish  an average speed of at least 300 km/h. Please note that many countries, including China, have already developed this capability; Make the passenger fare different for long distance and medium distance travel to discourage medium distance travellers from using long distance trains. Such variable fare can be linked with availability of seats. During lean periods, if there is excess capacity in long distance travel, the same can be given at a subsidised rate. As a natural consequence of the above two aspects, a stream of associated technologies are to be developed. Metro network is already in place for quite some time now, but high-speed operation is totally a new area.


Implementation Strategy

Key Enabling Technologies……

Out of various requirements discussed in the foregoing chapters, only key enabling technologies are discussed in this chapter, along with the strategy for development, with suggested time frame. These include, high speed operation, heavy haul operation, signalling and traffic management system, and passenger amenities.

High Speed Operation…….

The high speed operation is highly multi- disciplinary, involving various technologies involving track, rolling stock, signalling, safety and security. In some select areas, technology may have to be acquired from developed railways initially. Making a pilot high speed operation in the medium term will provide opportunity to understand and assimilate various complex issues of high speed. The success will depend upon the synergy with which various departments of railways (electrical, mechanical, civil, signal, etc.) will work and involve proper industries. The role of RDSO is also very important in synergising these agencies.

Heavy Haul Operation……

Heavy haul operation is a method to drastically improve the throughput with minimal input. A long train is operated using a single crew by distributing the locomotives along the train and controlled through radio signal. Australia, China, USA and South Africa are the countries operating heavy haul trains; with trains of length up to 7.3 km being in operation. This technology can be indigenously developed and implemented in potential routes, especially in dedicated freight lines, in the medium-term. This scheme with limited scope is already indigenously developed and is in commercial use. This can be extended for developing heavy haul trains at par with developed countries.

Signaling and Traffic Management System……

Implementation of systems like ERTMS (European Rail Traffic Management System) is inevitable for safe and efficient running of trains at high speed. Being in vogue in developed countries, adequate literature and knowledge can be acquired for its indigenous development. Suitable industrial partners are to be brought in for successful development and implementation.

Predictive Maintenance Technologies……

Predictive maintenance technologies involve identification of a possible defect (which can cause huge loss or accident) in advance. This can consist of various technologies like Wheel impact load detector installed by the side of the track, to identify the defective wheels of a train and send message to the maintenance depot instantly to isolate such defective coaches or wagons. Acoustic based bearing health check. Infrared based axle detection, remote diagnostic of locomotives and coaches, real time monitoring of bridges and structures, etc. All these can be developed indigenously and deployed in the short-term.

Blue Sky Research……

Moving platforms at railway stations, wherein, there is no need to stop the trains for getting in and getting out. This is something similar to Arial fuelling of aircrafts or a cab getting attached to a cable car. Hotline maintenance of traction overhead equipment at 25 kV without the need for taking power block and traffic blocks. Though hotline maintenance techniques are available in normal high voltage transmission lines, this is unheard of in railways due to lower creep distances and railway track below. If hot line maintenance technique is adopted, there is no need to switch off the power.

Current State of Bangladesh Railway…..

Districts Route and Stations Bangladesh railway has 2877.10 KM (2015) network connecting 44 districts out of 64 districts. Explore the possibilities of reopening the closed Branch Connection/Lines. Carry out a study to reassess the need of opening a new Railway connection considering the changed economic activities in the different locations of Bangladesh. We should also emphasize the 100 Special Economic Zones contemplating foreign and Local Companies Investment participation in Export Led Industrialization, where the Railway Infrastructure can be cost effective and provide reliable service on a long-term basis. In particular, with the expansion and automation of Land and Sea-ports and ever-increasing Export and Imports, Railway Cargos can play a role for smooth and reliable support services. Bangladesh Railway System started its journey centering Kolkata as the capital city of British India and thus developed the Railway System placing emphasis on Kolkata. From 1912 onwards, the British rulers relocated capital city to Delhi so Kolkata lost its gravity from the political, economic and administrative context. It shifted to Delhi, Bombay and other commercially important areas. The attention of the British rulers shifted to those areas after Muslim led Sepoy Revolution of 1856-57. During the British period, the Railway system was developed in East Bengal (currently Bangladesh) and it had connectivity with West Bengal (currently a part of India), Assam, Tripura, Meghalaya and the rest of the Northeast of India. Many of these states enjoyed Rail connectivity until they were closed after 1947. Only a few of them are getting reopened. For inter-country trade, these routes should be re-examined for possible connectivity. Compared to Passenger and Material Carrying Vehicles, Railroads are safer in terms of Road Accidents.  Lord Dalhousie came to India in 1848 to serve as Governor General of India. He annexed many states like Satara, Sambhalgarh, Nagpur and Jhansi under ‘Doctrine of Lapse’. He introduced railways in India and the first railway line from Mumbai to Thane was opened in 1853. In the same year, Calcutta and Agra were connected by Telegraph.

Building BR’s Future : Three Growth Scenarios……

Now that we have obtained a restructured capital base of BR and have to be transformed its accounts into a company format, it is possible to simulate different growth scenarios to assess the financial feasibility of different strategies. We have reported the kind of traffic growth that can be seen to be possible, with three possible investment scenarios to be worked out. These different revenue and investment projections can now be brought together within the framework of a consistent financial model that can be projected into the future. The model framework allows us to assess the different financing strategies implied by the different scenarios projected. Each investment scenario implies the raising of corresponding resources and their servicing over the time from revenues. We examine the feasibility of three different scenarios.

Among many ways to evaluate viability of an on-going concern, we have chosen a broad definition of ‘viability’ to be used in project financing. The rationale behind that is the immediate investment need of railways that it needs to finance. Hence, in this article suggests the need of net present value (NPV) technique to be used to evaluate different financial scenarios. The NPV of cash-flows before financing of existing liabilities is computed for each scenario. After deducting the NPV of existing liabilities (which is the book value of liabilities in the base year) the amount, in present value terms, is utilized to finance investments (capital expenditure plus working capital). The difference between the NPV of cash-flows after financing of existing liabilities and the NPV of investment flows is the figure which reflects the first stage of viability or unviability of the business. A negative figure implies a funding gap which needs to be financed. A non-negative NPV would mean that the business is viable – in the sense that the future cash-flows generated by the business can support the existing liabilities and the projected investments. The advantage in using this approach lies in the fact that the viability is established without any reference to financing. If the NPV analysis indicates viability the financing could be tailor-made to suit the cash-flow profile. Any number of financing strategies can then be used to do the actual financing. Therefore, in this article, suggest a ‘viable’ scenario implies that it is workable. The viability is evaluated on the following three ascending stages. (a) Given the assumptions embedded in the simulation, is Net Present Value (NPV) of the enterprise (BR) positive or negative; (b) Is there any liquidity risk for a lender is cash-flow sufficiently strong to meet current liabilities. (c) Will it provide sufficient comfort to government who is giving large amount of subsidies, directly or indirectly, and implicit guarantees on market borrowing.

Choice of the discount rate determines the viability of the NPV method. The discount rate used for the financial model is the weighted average cost of capital for IR in line with our assumptions of cost of capital IR is to pay on government and market borrowings, and of general rate of increase in prices. In building the financial model of IR, it was decided to use nominal prices for future projections but report the results in today’s money. All the results have been converted into money of today where the effect of inflation is removed from nominal forecast numbers. The rationale behind this working is to give decision-makers a sense of what the BR would cost, and the benefits it would bring over the fifteen-year horizon in today’s prices.

Grid search….

In building a model of BR there are three critical parameters – government support, capital expenditure and provision for unfunded liabilities i.e. pensions. For building scenarios some estimates of these parameters were taken, but before arriving at these estimates the Expert Group had extensive discussions–at times energetic ones–on these issues and it is our endeavor to encapsulate these discussions and quantify these in a grid search.

Railways have clearly defined user groups and user charges. But politicisation of setting of user charges and spreading of services has led to delinking of user charges with the cost of providing the services and inefficient investments. During the restructuring process, as railways finances are put back in order it will neither be politically feasible to increase user charges to reflect economic cost immediately, nor would the customers be willing to pay. Moreover, a substantial increase in user charges will lead to substitution of transportation modes which may not be optimal for the economy as a whole. Keeping this in view the Expert Group has proposed a gradual tariff rebalancing exercise (see chapter 3). Keeping such difficulties in mind and central government budget constraints the Expert Group decided that the government should provide a part of financing gap as preference capital at the same cost as the government provides assistance to railways today. The Expert Group decided that 40 per cent of the financing gap would be an appropriate support for the following reasons. First, it would show the commitment of the government to the railways and second, it would help in keeping the debt service under control. The latter is essential if railways are to achieve turn-around from a loss making organisation into a profit-making one.

For the other two critical parameters namely, capital expenditure and devolvement of pension liability, a grid search was carried out. For capital expenditure two alternatives were suggested–first, capital expenditure with unremunerative investments and second, without the unremunerative investments. The unremunerative investments include money spent on new lines, gauge conversion, Metropolitan Transport Projects and a proportion of investments on doubling of lines and Railway Electrification. In the latest BR budget. Assuming that investments under these heads will remain at the same level over the model horizon, as much as 23 per cent of total investments under Business as Usual Low Growth scenario (total investments Rs 129,000 crore) and 18 per cent of total investments under Business as Usual Medium Growth scenario (total investments Rs 161,000 crore) could get crowded out by the outlays on unremunerative projects. Under the Strategic High Growth Scenario it is assumed that unremunerative investments, if any, will be provided for from the central or state government budget.

For devolvement of pension liability three alternatives can be chosen. The numbers adopted here therefore on the safe side in estimating likely future liabilities under proposed projection. Of the three alternatives the first alternative was zero devolvement i.e. the railways continue to meet pension liability as they do now from their internal accrual. A diametrically opposite view to this was that 60 per cent of all pension liability devolves on the government in perpetuity. The reason put forward is that in the next 30-40 years approximately 60 per cent of the pension out go will be due to unfunded but contingent liability of the present organisation and this is the maximum amount government can be asked to provide for. The third alternative is between these two extremes, and the number chosen is 20 per cent of the pension liability.

Given the reality of overall fiscal situation of the country, we discarded the scenarios where capital expenditure included unremuneartive investments in all the scenarios. Under the Business as Usual Low Growth scenario, the alternative with zero devolvement of pension was taken for further analysis, the reason being that under the Business as Usual case government cannot shy a way from his contingent liability. In the Business as Usual Medium Growth case 60 percent of pension devolvement on government was chosen as this is the only alternative which has positive NPV, implying that the project with generous government support and large cuts in capital expenditure can be viable. In the Strategic High Growth case 20 per cent of pension devolvement on government was taken as this alternative is not too burdensome on the exchequer and yet the model remains viable. BR should examine the three scenarios: (i) Business as Usual-Low Growth, (ii) Business as Usual-Medium Growth, and (iii) Strategic High Growth under plausible assumptions regarding revenue streams, operating costs and capital expenditure.

To summarize…..Bangladesh was never an independent country before the surrender of Pakistani Occupation on 16 December1971. At the end of the rule of European companies and the British for 190 years and then so-called Pakistan for 23 years the Railway infrastructures, were only constructed in the Colonial interest of Economic, Commercial, Administrative and Militarily not for the integrated development for the general people of Bengal who suffered deprivation, discrimination and exploitation to the region in every aspect developmental issue including the Railway Network. As can be seen, technology progress in the railways sector has been rather stagnant, in the last decade. The pace of growth inputs has not been able to keep up with the increase in freight and passenger traffic. The running route km and track km, the maximum and average speeds of both passenger and freight trains, signalling and communication system, safety measures for operation, maximum axle loads, payload to tare ratio, etc. have almost remained static. In order to catch up with global standards, a leap forward is needed over the next two decades.

A totally new mechanism of technology management and monitoring is required for implementing the identified technologies within the proposed time frame. Unfortunately, the structure of the Bangladesh Railways is not conducive for fast technology development. The positive aspect, nonetheless, is the availability of all these technologies for purchase at a price. In the years to come, only an indigenous development approach is deemed sustainable. For successful development, one has to blend indigenous technology along with acquired global technology in select critical areas. This will speed up the implementation and milestones can be maintained. Key enabling technologies like high speed passenger operation, heavy haul operation, higher axle load, lighter wagons, crashworthy coaches, communication-based train operation, and driver less operation, among others, will pave the way for developing many associated technologies. This will boost the rail industry in Bangladesh, and at some point in time, the country can reach at par with developed countries. The success of the identified technologies and development milestones will become realistic if adequate funds are made available in time and the work entrusted to appropriate agencies, both government and industry and monitored properly. To translate the desired goal of current government, make Bangladesh to graduate as middle income, developing and developed country in bigger picture by the year 2041 the country needs to emphasis on the economics of Railway Transportation. This task begins with remaking of BR will need government decision transform through, first: creation of Railway Regulation Authority; second: Corporatization of BR; Formation of Limited Company; third: separation of BR operation and form new company with PPP facilitating to go IPO. To perform all the functions addressed in the article we need to prepare a financial statement of BR following commercial principals adhering to Generally Accepted Accounting Principles as adopted by the Institute of Chartered Accountants of Bangladesh. There should be attempt to reopen already closed rail lines within different parts of Bangladesh considering the current economic progress of Bangladesh, the closed lines connecting with neighboring countries in the commercial interest be explored and reopened. For international connectivity with the economic corridors to turn the country into Economic Hub of the South Asia and Trans-Asian countries, the Bangladesh Railway must get ready in terms of compatible management, corporate structure, technology, high speed, line construction, fuel efficiency, automation of passenger services, security from all sides, and capable improve maintenance and services. The leadership at the top of BR should initiate necessary step. Government may form a multi-disciplinary task force with the contents of terms of reference. This may be done with experts from, relevant professionals, Railway Technologist, ICT expert, Infrastructure economist, Chartered Accountant, Sociologist, and Security expert at the earliest.  

The first passenger railway train in eastern India (at the time under the rule of the British East India Company) steamed out of the present-day city of Howrah at 8:30 a.m. for the city of Hooghly. The trip took a total of 91 minutes. This segment of the East Indian Railway Company–ultimately known as only the East Indian Railway–covered approximately 24 miles.

The segment was officially opened about 16 months after India’s first passenger train, in the service of the Great Indian Peninsular Railway, had made its inaugural run between the cities of Bombay (present-day Mumbai) and Tannah (now called Thane) in the western region of the subcontinent. The Company’s first train to run between Howrah and Hooghly included three first-class and two second-class coaches as well as three trucks for third-class passengers. All of these cars had been built there in India. This was because the ship transporting the original cars from England had sunk en route to India. The train’s locomotive was successfully imported to India, but only after undergoing its own unique set of challenges; due to a navigational error, the ship carrying the locomotive initially sailed to Australia instead and had to be redirected to India.

The train was filled to capacity for the inaugural trip from Howrah to Hooghly, with more than 3,000 people having applied for the honor of riding in the first passenger train to travel in eastern India. Scottish-born George Turnbull was the chief engineer responsible for the construction of the East Indian Railway Company line. His efforts on behalf of the Company and other railways in that part of the world earned him acclaim as the First Railway Engineer of India. [August 15, 2017, Asia, Today in Transportation History]


Jamaluddin Ahmed PhD FCA is the General Secretary of Bangladesh Economic Association, Former member of Board of Directors of Bangladesh Bank, Former Chairman of the Board of Directors of Janata Bank Limited and Former President of the Institute of Chartered Accountants of Bangladesh.