RETURN TO R E S T R I C T E D REPORTS DESK RESTrCTE WITHIN COP b Y Report No. TO-299b This report was prepard for use within the Bank. it may not be published nor may it be quoted as representing the Bank's views. The Bank accepts no responsibility for the accuracy or completeness of the contents of the report. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT APPRAISAL OF THE SIXTH INDIAN RAILWAYS PROJECT INDIA October 2, 1961 Department of Technical Operations CURRENCY EQUIVALENTS 1 U.S. Dollar = Rs. 4.762 1 Indian Rupee = US $0. 21 Rs. 1,000,000 = US$210,000 APPRAISAL OF THE SIXTH INDIAN RAILUTAYS' PROJECT Table of Contents Page No. SMUTHARY I. INTRODUC TION 1 II. INDI.AJ RAILTAYS 1 A. Organization and I1anagement 1-2 B. Ianpower and Labor Relations 2 C. Property 2-3 D. Traffic 3-4 E. Adequacy of Services to Basic Industry 4-5 F. Operating Efficiency 5 G. Road Transport and Coastal Shipping 6 H. Finances and Earnings 7-9 III. THE RAILJTAYS' PROGRAv IN TH3 SECOND FIVE YfDAR PLAN 9 A. Plan Targets and Accomplishments 9 B. Physical Progress 10-13 C. Financing of the Program 13-15 IV. THE RAIL7T.AYS1 THIRD FIVE YE'AR PROGRAHI 15 A. General Background 15 B. The RailTayst Tentative Program 15-17 C. Physical Elements of the Program 17-20 D. Financing of the Third Five Year Program 20-24 V. THM PROJECT 24 IXI. CONCLUSIONS AND RECO IiNDATIOJS 2 Table 1 - Route Iiileage by Railway Systems and Gauges Table 2 - Freight Traffic, Tons Originating Table 3 - Basic Statistics of Broad Gauge Lines, Second Plan Period Table 4 - Analysis of Railwayst Property Accounts as of -I'arch 31, 1961 Table 5 - Results of Operations Through Second Plan Period Table 6 - Restated Revenue and FExpense Account Table 7 - Rolling Stock Table 8 - Railwayst Second Five Year Program Table 9 - Actual Phasing - Second Five Year Program Table 10 - Transactions of Capital-at-Charge, Depreciation Reserve Fund and Development Fund During Second Plan Period (April 1956- March 1961) Table of Contents - Continued Table 11 - Details of Rolling Stock Proposed for Third Plan Table 12 - Projection of Income Account Through Third Five Year Plan Annex 1 itap APPRAISAL OF THE SIXTH INDIAN RAILWAYS PROJECT SUTHHARY i. The Government of India has asked the Bank to finance part of the foreign exchange costs, totaling US hOO million equivalent, of the Indian Railwaysl Program in the Third Five Year Plan. This Program calls for an aggregate capital expenditure of about Rs 13 billion (US$2.7 billion equiva- lent). Previous Bank loans for the Indian Railways total US$327.8 million equivalent, including US$295 million for the Second Five Year Program. ii. Bank Consultants visited India in vlarch/April 1961 to study the Railwayst organization, operations, finances and investment programing. They have reported that the Railways are well organized and managed, that opera- tions are efficient, finances sound and investment programing well conceived. They find the Railways to be a profitable enterprise, earning an investment return of approximately 6S, on the basis of the accounting concept which would apply to commercial railroad enterprises. They also find an urgent need to increase the transport capacity of the RailwFays. They consider that the Railways' Third Five Year Program as now formulated within the limits of allocated funds, would barely suffice to meet expected traffic demand. iii. The Railways' freight traffic has increased by 50,Ti over the last five years as a result of industrial, agricultural and commercial development, and passenger traffic has increased by 25'. Notw^rithstanding good progress in improving the efficiency of operations and the utilization of equipment, and despite the new facilities brought into service, the growth of traffic has im- posed a great strain on the Railways' transport capacity. In order to meet the traffic needs of basic industries and the foodstuffs' distribution, the Railways have to impose a system of freight traffic priorities. iv. On the whole, the Railways have carried out the Second Five Year Program on schedule and have kept capital expenditure just within the Plan allocation of Rs 11 billion (US$2.3 billion equivalent), of which about US3 686 million equivalent was in foreign currency. Close to 45% of the in- vestment was financed from the Railways' own resources. v. If the production targets of the Third Five Year Plan are realized,the Rdilways' freight traff'ic in ton riles would incre-se by 75?o and passenger trafLic- by 151 with a larger increase in suburban traffic. In order to cope with this great increase the Railways plan to procure motive power and rolling stock, re- new and improve track, electrify and double track various line sections and modernize yards, signaling and shops. The planned works and equipment are es- sential, - ii - vi. Of the Rs 13 billion required for the Program as now planned, about 40 would be raised from revenues generated by the Railwayst operations during the period. On a conservative forecast of revenue and expense, which allows for depreciation on commercial principles, the Railways would earn 5iS to 6% on their greatly increased properties during the next five years. vii. Hitherto road competition has not been a serious problem for the Indian Railways, but will grow as motor transport develops. Their present rate structure makes the Railways particularly vulnerable to such competition inasmuch as they depend for most of their profit on the high rates charged to the high value merchandise which is most likely to be attracted to the roads. There is therefore,besides the Oeneral econoi.ic reasons, a stroig cas for revi- sion of tile preseinb rate structiift in order to protect the Railwaysl financial position. The TZailiways have such --evision in mind but are deferring action pelld- ing the final raconnenGasions of a CTovernaent-CoLmission on Transport Cocxdin3-ti viii. If a loan is made it would be used to meet part of the payments due from October 1961 to September 1962 to foreign suppliers of locomotives, spare parts, other railway materials, equipment and services. The goods to be im- ported are being acquired through international competitive bidding in accord- ance with the normal practice of the Railways. ix. The Project is the Indian Railwayst Program in the Third Five Year Plan and provides a suitable basis for a Bank loan of US$50 million equiva- lent. A term of 20 years including 32- years' grace would be appropriate. I. INTRODUCTION 1. Bank loans to the Government of India to assist the Indian Railways in the execution of their rehabilitation and expansion programs were made in August 1947, July 1957, September 1958, July 1959 and July 1960, aggregating US3327.8 million equivalent. The loans made from 1957 to 1960, in a total amount of USe295.0 million, have been used to finance part of the Railways' Program in Indiats Second Five Year Plan which ended Harch 31, 1961. The Bank has been asked to provide financial assistance for the Railways' Program in the Third Five Year Plan (April 1, 1961 to March 31, 1966). 2. The Railways' Second Five Year Program was aimed at further reducing arrears of replacement and provision of the additional facilities required by the increasing traffic, particularly that arising from the development of heavy industries during the Plan period. The Program also included projects to make the Railways increasingly self-sufficient by developing indigenous sources of equipment manufacture. These objectives will be pursued further in the Third Five Year Program. 3. This report is an appraisal of the Indian Railways, of the results achieved during the Second Five Year Plan period, and of the Railways' Third Five Year Program. The information on which it is based has been obtained by Bank missions to India during execution of the Second Five Year Program, from the Railways directly, and in great part from the findings of the Bank's Con- sultants, a team of Canadian Railway experts. 4. The Consultants' team, jointly headed by 1-br. L. B. Unwin, Vice Presi- dent, Finance, of the Canadian Pacific Railway until retirement in 'May 1960, and 11r. S. F. Dingle, Vice President, Operation, 1950 to 1960, and now System Vice President of the Canadian National Railways, included five other members, all railway officials in the above mentioned Railways, and was in India from March 12 to April 21, 1961. Their general terms of reference are given in Annex 1. The Bank has considered the Consultants' report and is in general agreement with the findings. II. INDIAN RAILUTAYS A. Organization and Management 5. The Indian Railways are owned by the Central Government. They are a Ministry as regards budget, finance and funds but management is on commer- cial lines free from interference in day-to-day decisions. Formal jurisdic- tion vests in the Minister for Railways, who is a member of the Cabinet. The administrative responsibility lies with a statutory Railway Board, Wtich exer- cises all powers of the Central Government in respect of regulation, construc- tion, maintenance and operation of the Railways; it has the authority for capital and operating expenditures within budget totals as approved by Parlia- ment. - 2 - 6. The Board consists of five members appointed by the ,inister, Tho have ex officio status of Secretary in the Ministry of Railways. The Railway Board is assisted in its work by five Additional llembers The Board's staff is organized functionally under directors responsible for specific phases of operation, The Board and Directorate keep in touch with every aspect of the Railways' operations. 7. The Indian Railways are divided into eight zonal systems (see attach- ed map), a separate organization for electrification, a locomotive manufactur- ing works (Chittaranjan), and a coach manufacturing works (Perambur). Each zonal railway and each of the other units mentioned is headed by a general man- ager with almost complete autonomy for operation and budgeted capital expendi- ture. 8. The Board, the Directorate and the Management are capable and compe- tent. The executive staff is well trained and efficient. The high level officers have many years of railway e-perience and are promoted by selection on merit, The Board and Management are competent to plan and execute the Railways' development programs. B. Mlanpower and Labor Relations 9. The number of employees (excluding construction and manufacturing plant employees) was about 1,150,000 on March 31, 1960. Although traffic units per worker have increased 15 percent or miore since the start of -Ghe Second Five Year Plan (April 1956) labor productivity is still low compared with U.S. and European standards. However, wages are so low in India that the management has found no economic reason for heavy capital investment in labor saving equipment. 10. Railwayst personnel have civil service status; they are organized in a number of unions which belong to one of two Railway Federations. These labor organizations discuss with management conditions of employment; however wages and hours are set by Government decisions, and there are no collective con- tracts. 11. In July 1960 some railway employees joined a one-week outlaw strike, following which the Board withdrew the recognition from one of the Railway Federations. On the Twhole relations between management and labor are satis- factory. 12. The Pay Conmission was appointed by the Government in August 1957 to study and recommend changes in the emoluments and conditions of service of all Government employees, incluLding Railway personnel. Its report submitted in 1959 has resulted in decisions that raise the minim:m basic wages and related retirement benefits and provide for other concessions, the total cost of which for the Railways will be about Rs 170 million annually. C. Property 13. The route mileage as of ;Iarch 31, 1960 was 34,769, of which about 330 miles were electrified and about 4,000 miles were double-track or more. - 3 - About 47% of the mileage is broad gauge, wlich carries about 85' of total freight traffic. Motive power and rolling stock as of iIarch 31, 1961 was es- timated at 10,600 locomotives (mainly coal burning, steam), 29,100 coaching vehicles and 341,000 freightcars. A breakdown of route mileage by railway sys- temns and gauges is shown in Table 1, which also includes the figures for loco- motives and rolling stock. 14. In addition to permanent way, buildings, bridges, workshops, loco- motives and rolling stock, the Railways operate and maintain a vast complex of other railway facilities and also provide staff quarters, hospitals, schools and training centers for their employees. The Railwayst property is well main- tained. D. Traffic 15. The Indian Railways are the fourth largest railway system in the world after the U.S.A., the U.S.S.R. and Canada. The development of the Rail- ways' traffic during the Second Five Year Plan period is indicated below. Fig- ures for 1960/61 are approximate and are based on the latest available data: Volume of Freight & Passenger Traffic Originated Tons of Freight Passenger- Freight Ton-IIiles Passengers lHiles - Mtillions - 1955/56 Amount 114 36,43L4 1,275 38,774 1956/57 Amount 124 40,186 1,360 41,878 Increase (>f) 8.8 10.3 6.7 8.0 1957/58 Amount 132 45,610 1,L10 43,0%3 Increase (?) 6.5 13.5 3.7 2.8 1958/59 Amiount 135 46,709 1,1X22 42,259 Increase (,) 2.3 2.4 0.85 -1.82 1959/60 Amount 144 50,149 1,515 46,o66 Increase (%) 6.7 7.4 6.5 9.0 1960/61 Amount 154 54,720 1,624 48,600 Increase (,) 6,9 9.1 7.2 5.5 Increase (,) in the Second Plan 35.1 50.2 27.4 25.3 - 4 - 16. Freight traffic is predominantly coal, ores, iron and steel, food grains and other bulk commodities. The average length of haul is 355 miles. Passenger traffic is predominantly long-haul, but includes large numbers of suburban travelers, particularly in Calcutta, Bombay and Madras (see Table 2). 17. The goals of the Second Five Year Plan were the carriage of 162 mil- lion tons of freight for a total of 51.8 billion ton-miles and a 15% increase in passenger-miles. Freight traffic in 1960/61 was 154 million tons, 8 million tons short, but the ton-mile workload was 54.7 billion, about 6' above the tar- get. Passenger traffic increased 25%. 18. W4hile it can be said that the Railways succeeded in providing some- what more than the increased ton-mile capacity which was asked of them in the Plan, it is nevertheless true that the freight carrying capacity provided was not sufficient to meet total traffic demand and at least in the case of the coal industry this appears to have placed a limitation oni production. In Jan- uary 1961 carloading figures indicated that the Railwayst capacity had reached 162 million tons a year, but the Railways were still unable to meet ail current tr,=fc demands. Ftm the outset of the Plan it was clear that avilable funds would not enable the Railways to provide capacity for all traffic demands as tlley would aEise. 19. The existence of a genuine shortage of carrying capacity is shown lby the continuation of a priority system for freight traffic throughout the year. E. Adequacy of Services to Basic Industry 20. The Railways have handled 11 percent more than the planned ton-miles of coal traffic. However, the protracted delays in completing coal washeries equipped with bulk loading facilities prevented the Railways from using 65-ton capacity cars in train loads of over 2,000 tons. They have been compelled in- stead to move coal to the steel plants in 22-ton cars in train loads of 1,200 tons. Furthermore, unwashed coal contains a high percentage of ash. Delays in bringing into production mines located near consumption centers substantially increased the distances over which the Railways were compelled to carry the coal. Another difficulty was a backlog in delivery of bogie freight cars to the RailwJays. 21. Mainly because of the transportation difficulties mentioned above, the Railways were short of capacity to move coal and other raw materials to the steel plants in the summer of 1960. This situation has been relieved by the Coal Control organization according priority to deliveries to steel mills to the disadvantag,e of other consumers. 22. The Railways: planning had been based on specific movements calling for specific transportation requirements. Actual movements in some cases have had to deviate appreciably from the planned movements owing to circumstances beyond the Railways' control. In terms of total ton-miles of coal traffic for all users and of raw raaterials for steel plants, the Railways have handled in the past year a total of 23.1 billion against the planned objective of 20.0 billion. Furthermore, in order not to lose production, steel plants in many cases started functioning without the fully mechanized equipment for material handling both at the mines and at the plants. This resulted in increased turn- around time of wagons and put considerable strain on the Railways. - 5 - 23. The traffic backlog for other goods on the broad gauge system was 138,000 carloads in February 1961, and waiting tinie for placement was 12.5 days. However, February is the busiest month of the year and the entire backlog con- sisted of low priority goods; foods and high priority goods were moving cur- rently. F. Operating Efficiency 24. The operating efficiency of the Railways is good. Taking into con- sideration the nature of the traffic, the length of haul and physical charac- teristics, the RailwTays use their facilities as productively and intensively as the W;Jestern European and North American railroads. 25. Efficiency of the broad gauge lines has improved during the past few years as indicated in Table 3. In the period 1956/57 - 1960/1 freight train speeds increased by 13,. and train loads by 20%. The annual work done by an av- erage freight train locomotive was 20S more, and the ton-miles per freight- train hour increased 28%. Traffic units per route mile rose by 26%. 26. As mentioned in earlier appraisal reports there are certain physical characteristics of the Railways which limit capacity and hamper operations, es- pecially: (i) a maximum axle load on broad gauge branch lines lower than the 22.5 tons of the main lines; (ii) the existence of link couplers on freight and passenger cars instead of automatic center coupler; and (iii) differences of track gau7e. 27. The branch lines wzith less than 22.5 tons-axle loads are being strengthened as traffic requires. The Railways have in service some 2,500 four-axled bogie freight cars of 80 -90 gross tons, which have automatic center buffer couplers; orders have been placed for another 10,000 which will enable the Railways to haul bulk commodities in heavy trains up to a gross weighcit of 3,600 tons, and trial runs are being made with 7,000 ton trains. Unification of track gauges would be desirable but the cost would be prohibitive; sections of the meter gauge line are being widened to broad gauge where traffic justi- fies conversion. 28. Despite the efficient use of the Railwayst facilities, the continuing traffic growth makes it imperative that the Railways be equipped to run heavier trains at higher speeds than now obtainable. The most effective means would be further dieselization, rmore line electrification, more large capacity freight cars and heavier track. The Railways' i4anagement is pursuing these ends to the extent of available foreign exchange resources. - 6 - G. Road Transport and Coastal Shipping 29. Theu'gh India's road systen still suffers from serious deficiencies, road transport is developing at a very fast pace. It is estimated by the Plan- ning Commission that truck registration will reach 285,000 in 1965166 as against about 160,000 in 1960/61 and that freight moving by road will increase from about 11.0 billion to 23.0 billion ton-miles. The ratio of road to rail freight traffic would thereby rise from 20,~ at present to 24% in 1965/66. 30, For the time being there is ample traffic in sight for both road carriers and the Railways. The Railways' present freight traffic is predomi- nantly low-value bulk commodities moving over long distances, while road traf- fic is mainly high-value goods moving much shorter distances. This is a sound economic division. 31. However, there is evidence that road transport is attracting a grow- ing volume of long-distance traffic suitable for rail transport. Reasons are the shortage of railway capacity which necessitates a traffic priority system and the Railways' tariff structure which has a wide spread between the rates for low-value bulk commodities and high-value manufactured goods. 32. For some years about 1.0 million tons of coal have moved through Calcutta by ship to southern India, principally for railway use and on which the Railways have paid a freight in excess of rail freight cost in order to relieve pressure on their lines. To further relieve this pressure and provide coal to consuuers in southern and western India, as of June 1961,sea movement of coal is being increased to 2.0 million tons at the same freight cost to con- sumers as would be obtainable by rail. 2vIeasures necessary to equalize the higher sea freight rates have been taken. 33. A Committee on Transport Policy and Coordination, known as the ^ieogy Committee,. established by the Government in July 1959 is entrusted with the followring task: (i) to recommend a long-term transport policy; (ii) against the background of the long-term policy, to define the role of the various means of transport in the next five to ten years, and (iii) to suggest suitable mechanism for the coordination of the various means of transport. 34. In February 1961 the Committee submitted an interim report in which it has analyzed the problem and brought out the policy issues for considera- tion in the shape of a number of questions. The Cormittee is now collecting opinions expressed by members of Parliament, Charnbers of Commerce and other public bodies as well as those of shippers. In addition it plans to obtain the services of railway and transport economists to make further studies. The Committee's final report is expected to be ready early in 1962. Pending this report the Railways are deferring action on a revision of the freight rate structure designed to improve their competitive position with regard to road transport. -7- H. Finances and Earnings a. Finances 35. The Railwayst accounts are those of a government department and are designed to show the origin and use of public funds. The Government provides all the capital and operating funds required by the Railways in accordance with budgets approved by Parliament; therefore, the Government is the Rail- wayst treasurer. The Bankts loans are channeled through the Government and appear in the Railwayst accounts as part of the Government's investment. The financial arrangements between the Government and the Railways are fixed by a Convention approved by Parliament acting on the recommendation of a special parliamentary committee which is constituted at five year intervals. 36. Fixed assets are financed by contributions from the Government in the form of interest bearing permanent capital, known as Capital-at-Charge, and by the Railways'internal generation of funds which are credited to various ac- counts known as Open Line Works - Revenue, Depreciation Reserve Fund and Devel- opment Fund. 37. Original assets are financed through the Capital-at-Charge. They must be remunerative, i.e., the estimated additional revenue produced by the asset must cover operating costs, depreciation, maintenance and a return on capital of not less than 55. Capital expenditures that do not meet this test must be financed by the Railways as Open Line Works charged to revenue and from the Development Fund which is fed from the Railways' net earnings. The Capital-at-Charge (including original stores) has been drawing 4% interest per annum since 1949 but henceforth will draw 4hS in accordance with the Convention of 1960. 38. Renewals of fixed assets at full replacement cost are financed from the Depreciation Reserve Fund. The annual amount to be credited to this Fund as a charge to revenue is determined by the Convention on the basis of an esti mate of replacement costs during the next five years. 39. A statement analyzing the Railways' property accounts is produced in Table 4. It shows as of March 31, 1961, fixed plant and equipment at an origi- nal cost of Rs 22,0h3 million, stocks of stores in the amount of Rs 1,260 mil- lion and balances in the Railwayst funds totaling Rs 676 million. Cumulative appropriations to the Depreciation Reserve Fund amounted to Rs 5,179 million. After deduction of this amount, total Railways' properties are sho-im to have an estimated value of Rs 18,800 million (equivalent US$3,950 million), of which Rs 18,124 million is net fixed assets in the form of plant and equipment and stores necessary for operations. An amount of Rs 15,888 million has beenmnanc- ed by the Government, almost entirely through Capital-at-Charge. The Railways have contributed from their own resources Rs 2,912 million. b. Earnings 4o. The Railways continue to have good earnings and to maintain a sound financial position. The Railways' oTwn statement of operating revenue and ex- pense is given in Table 5. This shows that net revenues after Depreciation, -8- Open Line Works and other capital expenditures charged to revenue increased from Rs 584 million in 1956/57 to Rs 707 million in 1960/61. Payments to the Govermnent of interest on Capital-at-Charge rose steadily from Rs 382 million to Rs 567 million in the same period; the amount of surplus transferred to the Development Fund fluctuated from year to year but for the full period to- taled Rs 766 million. 41. The Railways' operating revenue and expense account has been recast in Table 6 to conform with the presentation of such accounts by commercial railroads. The main differences are that in Table 6, the depreciation charge is based on a service-life of 40 years for fixed assets at cost, and capital expenditure has been eliminated as a charge to revenue. Accordingly, the Rail- wayst operating ratio is about 80%ao and the rate of return has averaged 6.5%a during the past five years. In the same period the Railways, from an aggre- gate operating revenue of Rs 20.0 billion generated Rs 3.8 billion for rein- vestment, or 19%, and paid Rs 2.44 billion, or 12,: of operating revenue, as interest on the Capital-at-Charge. 42. The rate of return has tended to decline during the period moving from 8.9% in 1956/57 to 5.1% in 1960/61. This reflects heavy and continuous commissioning costs for new facilities which have added 855 to the gross in- vestment in only five years, the lag in tirme of new facilities in reaching their full earning capacity, and some delay in tariff adjustments to cornpen- sate for increasing prices. However, since the operating ratio has remained constant it is evident that there has been no real erosion of earning power. 43. There is no reason to modify the Railwayst accounting practices, according to the Bank's Consultants. Their finding, with wlhich the Bank con- curs, is: "As long as the Indian Railways administer their system in a finan- cially sound manner, the present procedures are satisfactory and no change is recommended." However, the Consultants suggest that the Railways would be well advised to use a succinct form in the presentation of their financial position. 44. In regard to depreciation the Consultants find that no recommenda- tion to change depreciation and renewal methods is warranted. The deprecia- tion charge has been adequate and will be increased for the next five years consistently with the growth of investment. The charges for depreciation (about Rs 2.3 billion) in the past five years have been about 15% greater than would have been charged on a 40 year service-life depreciation at origin- al cost. 45. The RailwTays are not subject to income or property taxes (but do pay excise taxes), so that the calculated investrment return: is not strictly com- parable to that of commercial railways. However, the Railways are obliged to pay for all or part of the expenditure arising from certain unprofitable lines operated for public policy reasons, and social welfare facilities such as schools, hospitals, housing, water supply, etc., in many communities through- out India. They are also required by the Government to carry coal and grain at low rates and to grant rebates on a number of commodities in order to stimu- late exports. It is impossible to assess the total value of these imposed costs and withheld revenues. However, they come to large amounts which would go far to offset the Railways' freedom from income and property taxes. -9- c. Rates 46. It is the policy of the Railw;ay Board that rates should at all times be sufficient to create adequate total revenues to meet its working costs, de- preciation and financial charges and to yield substantial funds for investment. Rates have been frequently adjusted to meet those objectives. 47. The present freight rate structure dates from October 1, 1958. It provides a total of 45 class ratings which are expressed as percentages of twTo basic class rate scales. Ratings for both full and partial car loadings exist for practically all commodities. Ton-mile charges decrease with distance. The average revenue per ton-mile on the broad gauge is 5.86 n.p. (equivalent 1.2 US) as compared with an average cost per ton-mile of 4.44 n.p. (0.93 USq). There is a wide spread from coal carried at an average charge of 3.33 n.p. (0.7 USO) to gasoline at 17.13 n.p. (3.6US) per ton-mile. The general prin- ciple is to charge what the traffic will bear; particularly low rates apply to coal and food grains for reasons of public policy, and very high rates to manufactured goods. According to the Consultants, all rates cover average costs, including interest, except coal for public use. 48. The Railway Board is in favor of reducing the spread between the ex- tremes of the present rate structure by increasing charges for coal and other bulk goods which move over longer distances and by diminishing charges for high value manufactures. This would meet the desirability on economic grounds of relating freight charges more closely to cost. In particular, the presernt less-than-cost tariff for long haul coal movement stimulates the transport of coal and discourages the substitution of alternate sources of energy in places distant from the coal fields, However, as mentioned earlier, revision of the rate structure is being deferred until the Committee on Transport Policy and Coordination submits its final recommendations. 49. There are four basic passenger classes (more than 97% travel third. class); passenger fares per mile decrease with increasing distance and spe- cial rates apply to season tickets, suburban services, etc. The fares, which average 2.76 n.p. (0.-8 USO) per passenger-mile, are generally low compared iLth other countries. 50. Passenger traffic on the Railways as a whole is carried at a small loss. There is no intention at the present time to increase fares, but as of April 1961 the passenger fare tac of 5% to 151 in force since 1957 for payment to the States, was incorporated in the passenger fare on condition that the Railways would pay a lump sum of Rs 125 million per annum thereafter. As a result, the Railways would benefit by the increase in net revenue from growing passenger traffic. III. THE RAILWAYS1 PRCOMh'TH IN THE SECOIND FIVES YEAR PLAN A. Plan Ta;gets and Accomplishments 51. The Program included the acquisition of locomotives, rolling stock and other equipment, construction of new lines as well as track doubling, rail and tie renewals, electrification of certain lines, bridge works and yard re- modeling and other works, as described in more detail below. The main objec- tives were to make up part of the arrears in renewals and to increase - 10 - transportation capacity. On the whole the Program has been executed as sched- uled although there have been some shortfalls as detailed below. 52. The Bank's loans totaling US$295 million equivalent during the Plan period, have been used for the purchase abroad of locomotives, rolling stock and component parts thereof, track materials and other railway equipment for the implementation of the Program, and services related thereto. 53. As compared with the originally planned target of 162 million tons of originating freight traffic the Railways estimate that they will have lifted 154 million tons, i.e., an increase of 40 million tons over the tonnage at the end of the First Plan (1955/56). 54. The reasons for the shortfall of 8 million tons of originating freight traffic have been given earlier and it was mentioned that the Railways had exceeded by 5.6/ the ton-mile goal for 1960/61. As to passenger traffic, total passenger-miles increased by 25,:a against the planned target of 15;. B. Physical Progress Rolling Stock (Rs 3,834 million) 55. Total expJenditure is ostimated at Rs 3,834 million or about Rs 83 mil- lion (2;') less than the 1larch 1960 estimate; an increase of unit prices is apparent as the overall shortfall in delivery under this heading is about 9.5%. The procurement targets were revised during the Plan period in the light of conditions prevailing at the time. Detailed figures of planned and actual pro- curement are shown in Table 7; a summary is given below: Planned Delivered Locomotives 2,261 2,201 Passenger cars 8,836 7,813 Freight cars 105,739 98,261 The deficiency in locomotives is of diesel units only; 25 mainline diesels are on order and the procurement of switchers has been deferred because of a de- cision to start manufacturing such locomotives in India. The passenger car de- liveries suffered from the priority given to other items in the Program, but a large number of the deferred units will be delivered this year. Deliveries of freight cars were affected by difficulties in obtaining imported steel, a situation wihich has largely been overcome. 56. There has been a decline in the percentage of overage stock during the period except in the case of broad and narrow gauge passenger cars (see Table 7). The slight increase in the percentage of broad gauge passeng;er cars is due to the decision to retain in service, through intensive maintenance, a number of overage cars to relieve overcrowding. As for the increase in the percentage of overage passenger cars on the narrow gauge, this is due to the Railwayst policy of restricting the procurement to the barest minimum. - 11 - Track Renewals (Rs 1,551 million) 57. The Program provided for the renewal of 8,000 miles of rail and of 8,000 miles of sleepers. Actual renewals were 6,200 miles of rails and 7,100 miles of sleepers. These shortfalls are primarily attributed to arrears in the indigenous rail production. The necessity of obtaining a larger proportion of imported track material than was originally anticipated, has contributed to- wards delays in the prosecution of the work and resulted in a larger cost than was originally provided for. Total cost for the Plan period is estimated at Rs 1,551.3 million or Rs 147.4 million less than the lHarch 1960 estimate. Bridge Works (Rs 259 million) 58. The Program included the construction of bridges across three major rivers to replace ferry services. The combined broad gauge railway and high- way bridge across the Ganga River was completed in April 1959, eight months ahead of schedule; the double track meter gauge bridge across the Gandak River was completed last year and the combined meter gauge railway and highway bridge across the Brahmaputra River is expected to be completed by the middle of 1962. In addition, several new bridges were constructed on new lines and on lines be- ing doubled, and a large number of existing low capacity bridges were strength- ened. Total expenditure is estimated at Rs 258.4 million which is Rs 7.0 mil- lion less than the previous estimate. NJew Line Construction (Rs 798 million) 59. Program targets contemplated the opening of about 800 miles of new lines. As of MIarch 31, 1961, a total of 790 miles had been opened to traffic consisting of 410 miles of broad gauge and 380 miles of meter gauge lines. Among the latter was the 187 mile long Khandwha-Hingoli line linking the north- ern and southern meter gauge systems for the first time. The expenditure under this heading is estimated at Rs 798.1 million or Rs 125.4 million short of the previous estimate. Line Capacity Works (Rs 1,800 million) 60. Of a target of 1,300 miles of track doubling, 855 miles have been completed. Work is now in progress on 905 miles. New yards for the steel mills and coal fields, totaling over 200 miles of track, have been brought into op- eration. During the Plan period passing loops wsere constructed or extended to the increased standard length of 2,200 feet at 985 stations, while 344 new crossing stations were constructed. These works have contributed to the in- crease in train speed,increase in average gross weight of freight trains from 990 tons to 1,154 tons, and an increase in train-miles per day per running track-mile, all of which have enlarged rail transport capacity. Total cost is estimated at Rs 1,800.3 million, which is Rs 40.5 million less than the previous estimate. Signaling and Safety Works (Rs 191 million) 61. During the period 570 stations have been interlocked and at 225 sta- tions interlocking standards have been raised. Route relay interlocking has been installed at three important stations to handle intense suburban traffic - 12 - of over 600 train and engine movements per day. About 500 level crossings have been interlocked as a safety measure for rail and road traffic and more than 40 underpasses and overpasses have been completed. The total anticipated cost is Rs 191.4 or Rs 2.9 million less than the previous estimate. Workshops, Plant and Machinery (Rs 496 million) 62. The Program envisaged a substantial expenditure on additions and re- modeling of main equipment repair shops. The expenditure under this heading was somewhat reduced from the original estimate of Rs 650 million, due partly to slow material deliveries and partly to a reduction in sorme of the planned additions. This reduction became possible as the result of the growing use of the incentive payment system which increased productivity. Total cost is esti- mated at Rs 496.3 million, being Rs 42.9 million less than the March 1960 esti- mate. Electrification (Rs 571 million) 63. Originally the Program provided for the electrification under a 3,000 volts DC system of 826 route-miles, of which the first step - E6 miles be- twcen Howrah and Burdwan - was already under construction. In 1957, following recent technological developments, it was decided to make 25 kv AC the standard for future line electrification, except for the IHowrah-Burdwan line which would be converted at a later date. 64. The restudy and new planning required for the change in voltage de- layed the completion of the various projects considerably, but good progress is now being made. As of March 31, 1961, 224 route-miles had been electrified and it was expected that 323 more route-miles would be completed by June 1961. Work is in progress on another 209 miles with a scheduled completion date of March 1962. If this target is met, the electrification of 756 out of 826 route- miles will have been completed within one year after the end of the Second Plan. The Railwayst direct expenditure at March 31, 1961, was approximately Rs 571 million, about 2% more than the lMarch 1960 estimate. 65. On the Howrah-Burdwan line ten 3,000 IT locomotives and 47 three-car multiple units are in service. On the 140 miles of electrified Calcutta sub- urban lines, which include the above mentioned section, the number of passen- gerssince electrification has increased by 51,J from the year 1958/59 to 1959/60 and gross earnings by 62,. For operation on the 25 kv system, 110 locomotives of 2,840 hp have been delivered and are being put into operation as new elec- trified sections are energized. 66. Completion of present electrification projects has been somewhat de- layed by the Posts and Telegraph Departrment of the Government falling behind in laying underground cable for communication circuits, and by the powJer sup- ply authorities falling behind in cornpleting the installation of feeder equip- ment., - :13 - 67. The electrification project is being handled by a separate adminis- tration headed by a General M4anager. A sound, well staffed, organization has been built with competent men capable of planning and executing the future works. 68. The Railways have decided to obtain all future electric locomotives and electric multiple units from indigenous sources. The mechanical parts of the electric locomotives will be manufactured at the Chittaranjan Locomotive Works where capacity for the manufacture of 60 locomotives per year is being installed. The DC multiple units will be manufactured by the private industry, the AC units in the Railwayst Coach Works at Perambur. All electrical equip- ment is intend6d to be manufactured at Bhopal. Dieselization 69. The present diesel locomotive fleet consists of 188 units, of whlich 153 are broad gauge, 27 meter gauge, and 8 narrow gauge. On order are 40 broad gauge and 60 meter gauge, which are expected to be received during the first quarter of 1962. 70. Dieselization has been used as a forerunner to electrification and has contributed largely to relieving traffic congestion. As sections are electrified, the diesels move on to lines where traffic is becoming too heavy for the existing steam locomotives. 71. The Railways have decided to establish tiaeir otn works for the manu- facturing of diesel locomotives. Planning of the facilities has started. C. Financing of the Program i) Expenditure Under the Program 72. The Planning Commission originally estimated that the Railwayst Five Year Program would cost Rs ll,250 million, and accordingly authorized expend- iture of that amount. The authorization was never changed. However, the Rs 35 million for the Vishakhapatnam Port was transferred to the iEinistry of Transport when it took over the Port, and Rs 150 million was set aside for work to be done by the Post and Telegraph and Power Supply Authorities in con- nection with the electrification of Railway lines. Therefore, the amount au- thorized for direct expenditure by the Railways became Rs 11,065 million. It is estimated that actual expenditure amounted to Rs 10,928 million, or 98.8,' of the authorization. Estimated expenditure based on near complete. returns is compared with the Planning Commission's original authorization and the lat- est revision of Miarch 1960, in Table 8. Actual investment generally conformed with expectations. 73. The original Rs 11,250 million Program wffas expected to entail for- eign currency expenditure of Rs 4,250 million (US$893 million equivalent), or about 38% of the total. Due to greatly increased local production of railway equipment the need for foreign currency was progressively reduced to Rs 3,266 million (US$;686 million equivalent), or less than 30% of the total expenditure, - 14 - and US$207 million equivalent less than originally expected. A statement show- ing the expenditure phasing by years for local and foreign currencies, with a breakdown of the latter by main categories of goods is given in Table 9. It shows that reliance on foreign procurement decreased sharply in the last two years of the Plan. ii) Sources of Funds 74. Of the total Program expenditures of Rs. 10,928 million, Rs. 4k800.1 million (44%) was financed by Railwaysl funds and Rs. 6,128.2 million (56%) with Government's capital, as follows: (Rs. 000,000) A. Railway Funds Surplus transferred to Development Fund 766,8 Depreciation Provisions 2,294.8 Open Line Works - Revenue 558.7 Interest on Fund Balances: Depreciation Reserve Fund 119.5 Development Fund 2.6 374h2.4 Drawing on Balances of Earlier Years: Depreciation Reserve Fund 849.1 Development Fund (after deducting interest on borrowed funds) 208.6 Total Railway Funds 4,800.1 B. Government Funds Increase of Capital-at-Charge 5,834.1 Loans to Development Fund 294.1 Total advanced by Government 6,12t..2 Total Investment 10,928.3 Further details on the increase of Capital-at-Charge and on the movement of balances in the Depreciation Reserve Fund and in the Development Fund during the Second Plan period, are shown in Table 10. 75. The local currency funds were provided by the Railways and the Gov- ernment in the following proportions: (R?S. ooo,ooo) Railways 4s800.1 Government 2,862,0 Total 7,662.1 76. The Government provided the foreign exchange requirements of Rs. 3,266.2 million (US$686 million equivalent). This sum, which is reflected in Railwayst accounts as part of Capital-at-Charge, was obtained by the Govern- ment in the following manner (estimate based on near complete returns): - 15 - (Us',Ooo>000 equivalent) IBRD Loans 167-17-, 207 and 233 225.0 IBRD Loan 262 30.7 1/ Development Loan Fund 81n5 Technical Cooperation Htiission (ICA) 53.8 Colombo Plan 10.9 U.K. Credit 1.0 Barter Agreement with Burma 6.5 Rupee payment orders 10.4 Total aid utilized 419.8 Government's own sources 266.2 Total provided 686.0 1/ Including US16.25 million pending reimbursement by Bank at Mlarch 31, 1961. IV. THE RAILTAYSt THIRD FIVE YEAR PROGRAM A. General Background 77. The rapid industrialization of the Indian economyj, the steady growth of its population, and the country's effort to produce more raw materials and foodstuffs have induced a large, continuing growth of the volume of railway freight and passenger traffic. Industrial production has increased 50,' in the past five years; population has been growing about 2?O annually; large multi- purpose irrigation, land clearance, and housing projects are being carried out; credit and marketing facilities are being devised to stimulate more interchange of goods. 78. India's Third Five Year Plan (1961/62-1965/66) calls, among other things, for a 32% increase in food grains production tolD0 miWlion Gons annualyby 1966; a 1631 increase in steel production, raising it to 9.2 million tons a7- nually; production of 9.9 million tons a year of petroleum products, an in- crease of 745 over present output; the supply of 17.2 yards of cloth per per- son a year; and a 47/ increase in the student population to reach an approxi- mate total of 64 million. It also envisages creating 14 million new jobs and providing 2,300 calories of food daily for each person of an expected popula- tion of 492 million in 1966. 79. Though the general aim of the Plan is to increase na-tional income about 61 annually, the effects onindustry would be very much greater. As a result the full realization of Plan goals would increase the Railways' freight traiiic load by 75%. B. The Railways' Tentative Program 80. The Third Five Year Plan puts the probable volume of originating traffic at 245 million tons and 96 billion ton-miles in 1966. For passenger traLfic the Raili!ays have planned for an increase of 15-> in tihe number of seats over wThat was required at the end of the Second Plan; the shortfall in the Second Plan period has been added to the requirements of the Third Plan. - 16 - 81. Instead of giving the general index of proposed increase of indus- trial production, the Planning Commission furnished to the Railways forecasts of volumes of individual commodities in the last year of the Plan. The Rail- way Board used these specific tonnages to develop its traffic forecasts. In the case of each commodity the proportion of national production that had mov- ed by rail in the past was applied to the Third Plan period and the increase was distributed over this period. 82. The breakdonm in main commodity groups of the freight traffic fore- cast is as follows: Freight Traffic Forecast (000,000 tons) Finished steel and raw materials for steel other than coal 34 Coal 90 Cement 12 I4iscellaneous goods (including 11 million tons of iron ore for export) 109 Total 24 Istimated ton-miles 96,000 millions 83. The Railways were advised by the Government to plan for a gross capi- tal expenditure of Rs 13,250 million though the official allocation now has been put at Rs 12,750 million. During the first three years the Railways will execute their Program on the basis of the Rs 13.25 billion expenditure, after which the Program and the allocation of funds will be reviewed in the light of traffic trends and other circumstances prevailing at that time. 84. The Railways have informed the Planning Commission that in their opinion the traffic in 1966 would be 255 million tons and 99 billion ton-miles, requiring an allocation of Rs 13,810 million. 85. The following figures compare the increase in the Rail aysl carrying capacity and investment during the Second Plan with the programed increases for the Third Plan: Second Plan Third Plan Percentage of Third Period Period to Second Plan _Period Increase in freight carrying capacity in billions of ton-miles 18.3 41.3 226 Increase in millions of originating tons h0.0 91.0 228 Increase in billions of passenger miles 9.6 7.3 76 Investment expenditure in billions of rupees 11.0 13.0 118 - 17 - 86. The above figures clearly show the much larger size of the Railwayst task in the Third Plan as compared with the Second Plan. Ihey also indicate that for about 20% greater capital expenditures the increase in capacity would be twice as much. The explanation of the difference is, (i) improving effi- ciency of operation e d (ii) the benefits from line capacity works executed during the Second Plan. 87. As in the Second Plan it is expected that the necessity to limit funds allocated to the Rai)ways will place restriction on its ability to increase capacity and therefore there will continue to be a heavy strain on its traffic facilities. The system of priorities for freight movement will be maintained during the Third Plan period; essential goods are expected to be transported in amounts and according to movements as planned; other high priority commodities ahould be moved currently while waiting time for low priority goods might remain of the same order as during the Second Plan. 88. The Railways' Program is well conceived, within the financial limita- tions placed upon it, to meet the needs of the Indian economy and the operation- al requirements of the Railways. The Railways' Board and Nanagement are quali- fied and capable to execute the Program. C. Physical Elements of the Program 89. The following review is based on the program for 245 million tons of freight traffic and a 15% increase in passenler traffic by 1965/66. Rolling Stock (Rs 5,1C0 million) 90. The Railways have determined their replacement reeds on the assump- tion of a service life of 45 years for locomotives and freight cars and 37-45 years for passenger cars, depending on gauges. Furthermore, the percentage of overage locomotives and freight ca:rs to be retained in service at the end of the Third Plan will be slightly higher than at the end of the Second Plan. All overage locomotives will be stean units; the retention of these units is in line with the Rail ays' long term policy to speed up the rate of dieselization. Additions to rolling stock have been calculj ted on the assumptions that utili- zation of motive power and rolling stock will be substantially increased. 91. The methods used in calculating the rolling stock requirements indi- cate that the Rai]ways are setting fairly stiff targets. also there seems to be no reserve for contingencies, to provide for extra ton-miles which might have to be handled due to arrears in other development projects as has happened in the Second Plan. Therefore, it appears that the amount of stock planned to be acquired might be on the low side for the volume of traffic to be handled. 92. Details of the planned procurement are given in Table 11 and are summarized below: _ 18 - B.G, M.G. N..G. Total Locomotives Steam 840 351 - 1,191 Diesel 313 147 60 520 Electric 138 - - 138 Total -10Y 27 60 Passenger Cars Passenger 2,329 2,540 276 5,145 Other vehicles 1,058 949 84 2,091 Electric multiple units 370 76 - 446 Railcars 67 120 10 197 Total 3,665 370 -7777 Freight Cars In terms of 4-wheelers 92,602 21,116 3,426 117,144 In addition to the above the following units are provided for under Electrifi- cation: B.G. -i.G. Total Mrlectric locomotives 106 16 122 Electric multiple units 581 - 581 93. In view of the urgent need to increase the line capacity of the Rail- ways, the proportion of steam, diesel and electric units requires comment. An obvious method of increasing line capacity is to haul heavier trains. *hile electrification is the long-term solution for sections of heavy density traffic, the quickest possible way would be the use of diesel locomotives. This is re- tarded by the Government's desire to conserve foreign exchange that would have to be expended for imports of diesel fuel and for the locomotives until indig- enous manufacture starts. 94. A balance must be struck between the necessity to expand transport capacity quickly and the need to save foreign exchange; given these restric- tions, the number of diesel locomotives the Railways plan to acquire seems reasonable. Workshops, Plant and Machinery (Rs 620 million) 95. There is a substantial carry-over of works from the Second Plan, in- cluding expansion of manufacturing capacity in existing plants, e.g., Chitta- ranjan Locomotive Works and the Coach Factory at Perambur. A major item of new construction is the planned diesel locomotive manufacturing plant. Track Renewals (Rs 1,700 million) 96. In spite of the large track renewals of the past five years, there are still arrears wfhich it is planned to make good under the Third Plan. The Program includes some 7,500 miles of rail replacements by new material and about 2,000 miles by secondhand serviceable rail; in addition, approximately 7,250 track miles of sleepers will be replaced, and welding of rail joints will be on a more extensive scale than previously. - 19 - Bridge Works (Rs 250 million) 97. The main item under this head is the coanpletion of the Brahmaputra bridge. Other work is the construction of new bridges, mostly for track dou_ bling. Traffic Facilities (Rs 1,830 million) 98. Provision is made for doubling about 1,600 miles of track, building and remodeling of yards, opening of crossing stations, building of crossing loops, etc. The main purpose of these works will be to increase transport capacity of the transcontinental routes and of lines leading out of the coal fields. The Program is based on introduction of bogie wagons for bulk move- ment of coal from major collieries to large consu.ing centers wfhere distribu- tion dumps would be opened. The program for doubling of lines takes into ac- count the conservation of line capacity resulting from the running of heavy coal trains up to 3,600 tons of Cross weight and 2,400 tons of net weight. Signaling, Telecommunication and Safety WHorks (Rs 250 million) 99. Road-rail grade separations would be provided at level crossings with heavy rail traffic. Centralized Traffic Control is to be installed on 157 miles of the Assam line. Autormatic signaling will be extended on the suburban lines and on busy sections of main lines. Signaling installations on the trunk routes will be improved to permit higher speeds. Yard operations will be mechanized and automatic car retarders will be introduced. Telecommunications will be improved on important trunk routes, at switching yards and at main sta- tions and headquarters. This will ecpedite exchange of information regarding train movements and wagon supplies and demands. Electrification (Rs 780 million) 100. About 1,300 route-miles are to be electrified during the Third Plan; a larger mileage might be desirable, but could not be achieved because of limitations set by availability of power, equipment and capacity for execution of works under traffic. Work is already in progress on about 900 miles, of which 560 miles should be completed by ilarch 1962. The Bombay electrified sys- tem will be extended by some 200 miles from Igatpuri to Bhusaval. The i'Ioghalsarai-Kanpur section of the Calcutta-Delhi line will also be electrified. 101. Ten DC locomotives for the Bombay electrified system are under con- struction at Chittaranjan and 16 AC locomotives for the iladras-Villupuram meter gauge line are on order at the same locomotive works. An order for 42 AC broad gauge freight locomotives was awarded in February 1961 to an international group of European manufacturers, who will produce in Europe 10 cormplete units and the electrical equipment for the other 32. The mechanical parts of these 30 units will be made at Chittaranian. New Lines (Rs 1,470 million) 102. About 1,200 miles of new lines will be opened to traffic including 240 miles carried over from the Second Plan. Of this, a 310 mile section will serve the export of iron ore via the port of Vishakhapatnan; 200 miles have - 20 - been allocated for the development of new coal fields, 100 miles for the steel plants, and 50 miles for serving the new port of Haldia near Calcutta. The balance of 540 miles will help to develop mineral and other resources and will serve the operational needs of the Railways, such as bypass lines to alle- viate traffic congestion in Delhi and i/loghalsarai. Staff Quarters, Staff VTelfare and Users Amenities (Rs 650 million) 103. Provision is made for 54,000 additional units to house staff, to im- prove existing quarters, water and electrical supply, aevorage,drainag, etc. and to expand medical, educational and recreational facilities for railway staff and their families. Waiting rooms, platform coverings and similar amen- ities for railway passengers will be built. Other Structural Works (Rs 150 million) 104. Training schools will be built and expanded. Provision is made for miscellaneous works at stores depots, headquarters, sidings, etc. Remaining Items (Rs 450 million) 105. Equipment will be bought for the Railwayst road transport undertak- ings (Rs 100 million) and stores (Rs 350 million) will be increased to conform with the larger facilities and traffic. Phasing of Procurement and Construction 106. The Railways intend to phase the procurement of freight cars, diesel locomotives and electric locomotives in the next five years in such a way as to avert any general shortage of transport capacity. Replacement units will be procured in approximately equal annual amounts. Units to accommodate ex- pected traffic growth over the next five years will be put into service during the first four years of the Plan. For the same reason the Railways plan to carry out in the first two years about 50,' of the traffic facilities (line capacity works). D. Financing of Third Five Year Program a) Estimated Expenditures Under the Program 107. As mentioned earlier, the Government has authorized the Railways to plan for a total program expenditure of Rs 13,250 million, corresponding to an increase in the Railways' carrying capacity of 245 million tons of freight and a 15,1 increase in passenger traffic by 1965/66. On this basis, the Railways have made the following breakdowuYn of the expected gross capital e:xpenditure: - 21 - (Rs 000,000) 1. Rolling stock 5,100 2. Workshops, plant and machinery 620 3. Track renewals 1,700 4. Bridge works 250 5. Traffic facilities 1,830 6. Signaling and safety 250 7. Electrification 700 8. Other electrical works, e.g. traction renewals 80 9. New lines 1,h70 10. Staff quarters 500 11. Passenger amenities 150 12. Other structural works 10 13. Road services 100 1l. Stores suspense 350 Total 13,250 b) Sources of Funds 108. As already explained, the allocation in the Plan for the Railwayst Program is Rs 12,750 million, or 3.3,) less than the programed expenditure of Rs 13,250 million. Expenditure would D)e met from the following sources: (Rs 000,000) Government Capital-at-Charge 7,700( 8,200) Depreciation Reserve Fund 3,300 Development Fund 1,150 Open Line TWTorks-Revenue 600 Total 12,750(13,250) On the basis of the present allocation Capital-at-Charge would increase by Rs 7.7 billion from Rs 15e6 billion at iarch 31, 1961 to Rs 23.3 billion at larch 31, 1966. If the Government ultimately agrees to the financing of the Lull Program (Rs 13.25 billion) wiithin thie five year period, Capital-at-Charge would increase by a furtlher Rs 500 million to Rs 23.8 billion. 109. The Railwzays' projection of their income account through the Plan period is given in Table 12. The Table is based on the traffic target of 245 million tons and rates and fares in effect since July 1, 1961, when coal freight rates were revised. On this basis there should be generated from reve- nues in the Plan period a total of Rs 4.6 billion available for capital expend- iture, including Rs 3.5 billion credited to the Depreciation Reserve Fund, Rs 600 million of Open Line Works charges and Rs 523 million of surplus allo- cated to the Development Fund. - 22 - 110. The above figures indicate that the Depreciation Reserve Fund would be credited with Rs 3.5 billion and charged RS 3.3 billion, resulting in an in- crease of Rs 200 million of the Fund's balance. On the other hand, the Develop- ment Fund would be charged with Rs 1,150 million and credited with Rs 523 mil- lion. This would indicate a deficit in the Fund of Rs 627 million, which fol- lowing past practice would be covered by General Revenue loans of that amount to the Fund. Howrever, the Railways anticipate that rate revisions expected to be made during the Plan period would generate an additional Rs 1.3 billion and that the resulting additional credits to the Development Fund would eliminate the necessity of borrowing. 111. About 40', of the investment funds would be provided by the Railways from their own operation revenues and 60;' would come from Government sources. c) Requirements and Sources of Foreign Exchange 112. The foreign exchange requirements of the Program are estimated at Rs 1,900 million (equivalent US$399 rrillion), only about 58;! of the foreign exchange expended during the Second Plan. Foreign procurement would comprise the following items: (Rs 000,000) 1. Diesel locomotives and parts 524.6 2. Electric locomotives and parts 49.1 3. Electrification - electric locomotives 125.4 ) - electric multiple unit coaches (ElIU) 75.0 ) 265.0 - overhead equipment, etc. 64.6 ) 4. Components for: steam locomotives 28.6 ) -EIU coaches 34.4 ) railcars 7.9 ) 206.1 - passenger coaches 15. ) - freight cars 106.5 ) - cranes 13.3 ) - steel sheets and plates for rolling stock 310.2 5. Plant and machinery 125.0 6. Signaling equipment - C.T.C. 25.0 - other equipment 60.0 7. IM1iscellaneous and replacements 335.0 Total 1,900.0 (Equivalent US$399 million) The abovTe total includes an overflowu of Rs 472.9 million (US$100 million) of payments for commitments made during the Second Plan period. As previously, the Government wuill obtain whatever foreign exchange is required for the - 23 - Progran and male it available to the Railways as part of the Capital-at-Charge. The following funds are available to the Government under existing arrangements: Total Phasing of Utilization Source Amount 1961/62 1962/63 (US$ 000,00 eq2ivalent IBRD Loan 262 39.3 1/ 39.3 1/ - DLF Loan 151 38.1 28.0 10.1 Technical Co-operation Mission (ICL) 6.8 6.3 0.5 Barter Agreement with Burma 3.7 3.7 Rupee payments 20.3 18.6 1.7 108.2 95.9 12.3 Equiv. Rs 000,000 515.0 456.6 58.4 1/ After deduction of US,$16.25 million pending reimbursement by Bank as of March 31, 1961. 113. The following table indicates the distribution bCy years of the foreign exchange commitments under the Progran and shows those amounts which are covered by existing loans and the balances forwhich other financing is to be provided. Commitments for 1961/62 are high because of the throwforward of commitments entered into during the Second Pla-i and a speeding un of the dieselization pro- gram. The foreign exchange requirements of dieselization will be progressively reduced with the development of local production of diesel locomotives. Taking account of the accumulation of commitments in the first year of the Plan, the table indicates a continuation of the trend of decreasing foreign exchange needs, already observed during the Second Plan. Foreign Exchange Needs of Program Already To be Total covered covered (US$ OOO,OCO equivalent 1961/62 160 95.9 64.1 1962/63 91.4 12.3 79.1 1963/64 77.7 - 77.7 1964/65 54 54 1965/66 16 - 16 399.1 108.2 290.9 114. Foreign exchange requirements not covered by existing arrangements amount to Rs 1,385 million (US$291 million). The Government has submitted to the Bank a request for the financing of US$50 million for payments to be made from October 1, 1961 to September 30, 1962 for the procurement of locomotives, spare parts, other railway materials and equipment, and for services connected there- with. If a Bank loan of US$50 million is granted and a proposed DLF loan of $043 mill ion is made, there would remain a balance of $198 million for which fi- nancing would eventually be required. - 24 - 115. The amount of foreign currency required for the Program (US,399 mil- lion) is substantially more than the US$300 million mentioned in Report TO-254a of July 20, 1960. Since the lower tentative estima-&e was made nearly two years ago, there has been a shortfall in the development of local steel production, which has itself retarded local production of railway stores. There has also been some delay in the development of manufacture of diesel locomotives in India and an increase in the number of diesel locomotives which it is planned to procure. Therefore, the greater part of the increase of some `100 million in the estimated foreign currency requirements stems from the greater need for imports of steel, railway stores and diesel locomotives. 116. In accordance with the normal practice of the Railwaysr , all of the items would be procured tharough international competitive bidding except in the case of imported components required for manufacture in India of railway equipment under licensing agreements. d) Effect of Program on Railways' Profitability 117. During the next five years, thie Railways will procure or install new facilities, the investment of which Till be some Rs 13 billion or about 607 of the value at original cost of all the plant and equipment nou in service. Rail- way properties net of depreciation would increase by more than 50-f from Rs 18.8 billion at March 31, 1961 to Rs 28.8 billion at iarch 31, 1966. Despite this huge outlay, the Railways would maintain an average return on properties of more than 5i on the basis of current tariffs and would earn more than 6,- if rates are revised as contemplated. The earning power of the Railways would thus be fully maintained. V. THE PROJECT 118. The Project is the Indian Railways' Program in the Third Five Year Plan as described in this report. The proceeds of a proposed Bank loan would supply the foreign exchange corponent for the procurement of locomotives, spare parts, other railway materials, equipment and services for payments falling due between October 1, 1961 and September 30, 1962. VI. COI,CLUSIO.MS AND REC0ThC{i-\DATIOTTS 119. The Program is techmically and economically sound and is essential to the development of the country. The Railwayst Board and Ianagement are cap- able of executing the Program. 120. The Project provides a suitable basis for a Bank loan of US']150 mil- lion. A term of 20 years including a 31 year period of grace would be appro- priate. INDIAN RAILITAYS Table 1 ROUTE MIIEAGE BY RAILW4AY SYSTEMS AMD GAUGES Narrow Broad Mleter Gauge Gauge Gauge (2t-0" & Railwav (5t-6") (j3t3.3/8n) 2'-6") Total Central 3,798 887 725 5,410 Eastern 2,364 - 17 2,381 Northern 4,220 2,048 162 6,430 North Eastern 1 3,077 - 3,078 Northeast Frontier 2 1,695 52 1,749 Southern 1,859 4,207 96 6,162 South Eastern 2,570 - 925 3,495 Western 1,636 3,66 760 6,Q6A Total 16.450 15.582_ 2.73 34,769 Percentage of Total 47.3 44.8 7.9 100.0 ROLLING STOCK AS OF MARCH 31. 1961 Broad M4eter Narrow Gauge Gauze Gauge Total Locomotives: Steam 6,191 3,573 401 10,165 Diesel 153 27 8 188 Electric 204 4- 208 Total 6,548 3,604 409 10,561 Frei-ht cars (7In terms of 4-Wheelers) 231.268 99196 10577 34l.OL1 Coaches: Electric M.U. 757 96 - 853 Railcars 34 64 21 119 Other 14,605 12,027 1.539 28,171 Total 15,396 12, 87 1,560 29.LU * Bogie type wagons have been converted to terms of 4-wheelers by multiplying factors varying from 2 to 3. Table 2 INDIAN RAILNTAYS Freight TraY'fic, 'Tons Originating (Rigures in thousands) 1960-61 Groups 1957-58 1958-59 1959-60 (Provisional) 1. Products of Agriculture 19,878 19,714 20,810 22,000 2. " " Animals 476 440 448 450 3. " " Mines 40,617 433,189 46,834 53,000 4. Ifineral Oils 3,841 4,158 4,688 5,000 5. Products of Forests 4,296 4,320 4,267 4a40 6. 1ianufacturers 17,064 17,626 19,910 21,500 7. ^iscellaneous 14,330 12,283 11,947 11,350 8. Total aevenue 100,552 101,730 108,904 117,700 9. Total Hon-Revenue 31,885 33,494 35,283 36,300 10. Total Revenue & Non-Revenue 132,437 135,224 144,187 154,000 PASSENGER TRAFFIC Sub- iNion-Sub- Third Other than urban urban Total Class third class 1956-57 Number (millions) 520 840 1,360 1,321 39 Increase (') 4.2 8.2 6.7 6.5 11.4 1957-58 Number (millions) 555 855 1,41o 1,373 37 Increase (,) 6.7 1.8 3.7 3.9 - 5.1 1958-59 Number (millions) 588 834 1,422 1,385 37 Increase 0) 5.9 - 2.5 0.9 0.9 - 1959-60 Number (millions) 639 876 1,515 1,473 42 Increase (o) 8.7 5.0 6.5 6.4 13.5 1960-61 Number (millions) 705 919 1,624 1,578 46 (Estimated & Approximate) Increase (7G) 10.3 4.9 7.2 7.1 9.5 Increase (%) in 5 years 41.3 18.4 27.4 27.3 31.4 INDIAN _,AILiJAYS BASIC STATISTICS OF BROAD GAUGE LINES SECOND PLAN PERIOD 1960-61 Particulars 1956-57 1957-58 1958-59 1959-60 (Approximates) 1. Route miles of open lines 16,169 16,246 16,392 16,450 16,580 2. Train miles (thousands) - Goods (including prop. of mixed) 60,945 63,436 64:215 67,901 68,950 Passenger excluding E.M.U. (including prop. of mixed) 67,817 69,378 69,656 70,186 71,220 E.M.U. (as the trains are run) 5,708 5,928 6,501 7,395 7,390 Departmental 5,665 6,777 6,821 6,492 6,h50 3. Locomotive miles (thousands) - (i) Goods (including prop. of mixed) 67,589 70,527 71,367 75,981 77,280 (ii) Passenger ( " " ) 69,574 71,179 71,54l 72,162 73,190 (iii) Shunting - *(a) by shunting engines 25,575 27,1414 28,061 28,683 28,420 >(b) by train engines 2,288 2,135 2,027 2,107 2,160 /(c) in sidings 4,102 4,601 4,777 4.,747 5,Coho (iv) Departmental 9,284 10,391 10,598 10,420 10,o6o 4. Freightcar milos (millions) - Goods (including prop. of mixed) Loaded 2,042 2,228 2,253 2,382 2,44o Empty 808 814 895 1,020 1,060 Total 2,850 3,0o42 3,1148 3,402 3,500 5. Coaching vehicle miles (millions) (Passenger including prop. of mixed) 1,144 1,191 1,215 1,253 1,295 6. Tons originating (millions) - Revenue 74-3 75.8 78.2 84.3 92.2 None-revenue 20.8 24.6 24.9 25.6 26.6 Total 95.1 100.4 103.1 109.9 118.8 7. Ton miles (millions) - Revenue 28,466 32,144 33,146 35,117 39,200 m Non-revenue 5,535 6,312 6,341 6,895 7,300 w Total 34,001 38,1456 39,487 142,312 46,500 H 8. Passengers originating (millions) 944 996 993 1,066 1,160 9. Passenger miles (millions) 28,092 29,511 28,668 31,743 33,900 10. Train hours (thousands) - Goods (including prop. of mixed) 6,307 6,789 6,863 6,751 6,728 1960-61 Particulars 1956-57 1957-58 1958-59 1959-60 (Anprodimats) 11. Shunting hours (both of shunting and train engines) (thousands) - (a) Goods (including prop. of mixed) 4,733 5,007 5,o86 5,199 5,150 (b) Passenger (including prop. of mixed) 877 906 933 960 980 (c) Siding engine hours f 587 659 684 680 720 12.Gross ton miles including weight of engine and departmental (excluding E.M.U.) (millions) - Passenger & prop. of mixed 33,411 35,287 35,766 37,115 38,640 Goods & prop. of mixed 72,946 80,143 82,823 89,173 92,580 13. Pounds of fuel per 1000 gross ton miles - Passenger (including prop. of mixed) 185.2 183.1 185.6 186.6 189 Goods (including prop. of mixed) 152.4 149.2 147.0 114.9 145 E.M.U. - Electric Multiple Units * The mileage is calculated @ 5 miles per shunting hour given against items 11(a) and 11(b), the small variations being due to rounding off. f Coal and other traffic sidings half a mile or over in length; the mileage being calculated 0 7 miles per siding engine hour - the small variations being due to rounding off. CD h) Table No. 4 I?MIAIaJ RAILWAYS Analysis of Railwayst Property Accounts As of March 31, 1961 (Rs. 000,000) Properties Plant and equipment 22,043 Less: accrued depreciation 1/ 5,179 Net plant and equipment 16,864 Stocks of stores 2/ 1 260 Net fixed assets Balances in funds: Depreciation Reserve Fund 141 Rev-nue Reserve Fund 535 Total properties 18,800 Financed by: Government: Capital-at-Charge 15,594 Government loan to Development Pund 294 Total Government 15,888 Self-generated: Open Line Works (direct charge to Revenue) 912 Development Fund (exclusive of Government loans) 1,465 Credited to Revenue Reserve Fund 535 2,912 Total financed 18,800 1/ Cumulative investment met from Depreciation Reserve plus balance of Fund. 2 Equivalent to permanent working capital (financed by Government) INDIAN RAILWAYS RESULTS OF OPERATIONS THROUGH SECOND PLAN PERIOD (R s. 000,0-00 1956/57 1957/58 1958/59 1959/60 1960/61 Actuals Actuals Actuals Actuals Approximate Gross Receipts Passengers 1,163.2 1,191.0 1,167.4 1,256.1 1,309.7 Other coaching 210.9 242.3 235.9 254.1 271.1 Goods 2,039.6 2,296.7 2,408.2 2,605.0 2,895.9 Sundries 62.0 67.8 90.6 108.1 103.3 Total Rieceipts 3 475,7 3297.8 3,902.1 4.223.3 4,580.0 WorkinF Expenses Administration 3/47.4 321.7 343.0 348.6 389.4 Repairs and Maintenance 860.0 906.2 915.9 941.4 1,042.7 Operating Staff 528.0 538.2 571e4 579.1 664.8 Fuel 272.8 480.4 524.7 579.8 628.2 Operation other than staff and fuel 106.5 152.0 159.1 179.0 184.1 iPdscellaneous Expenses 166.4 173.7 169.8 183.7 247.6 Labor Wjelfare 58.3 69.6 79.4 83.6 106.4 Ordinary Working Expenses 2,339.4 2,641.8 2,763.3 2,895.2 3,263.2 Appropriation to Depreciation RLeserve Fund __ 450.0 450.0 450.0 450.0 450.0 Total Working Expenses 2,789.4 3.091.8 3,213.3 3.345.2 34713.2 Net Traffic Receipts 686.3 706.0 688.8 878.1 866.8 iiiscellaneous Transactions - net 18.7 21.4 - 13.1 13.4 10.8 Open Line Works - Revenue 80.5 104.2 107.6 118.2 148.2 Payments to Worked Lines 3.3 2.6 1.1 1.0 0.9 Charges to Revenue of Capital Nature 102.5 128.2 95.6 132.6 159.9 Net Revenue 583.8 577.8 593.2 745.5 706.9 < Dividend on Capital at Charge 381.6 44A.0 503.9 544.3 566.6Q Surplus transferred to Development Fund 202.2 13308 89.3 201.2 140.3 Vi TABLE 6 INDIAN RAILWAYS Restated Revenue and Fxpense Account (Rs. 000,000) 1956/57 1957/58 1958/59 1959/60 1960/61 Operating revenue 3,476 3,798 3,902 4,223 4.,580 Working expenses 2,339 2,642 2,763 2,895 3,263 Balance 19137 1,156 1,139 1,328 1,317 Depreciationg/ 307 349 398 448 496 Net operating revenue 830 807 741 880 821 Add interest on fund balances 52 50 42 28 30 Available for financial charges 882 857 783 908 851 Interest on capital at charge 382 444 504 544 567 Net earnings 500 413 279 364 284 Add back depreciation 307 349 398 h48 496 Available for reinvestment 807 762 677 812 780 Operating ratio2/ 76% 79% 81% 79% 82% Return on investment3 809% 7.3% 5.7% 6.0% 5.1% _ .-, J On basis of 40 years service life, i.e. 24% on plant and equipment (at cost) minus allowance for estimated value of works in progress. 2/ Working expenses plus depreciation as percent of operating revenue. J Net operating revenue as percent of depreciated value of plant and equip- ment in service plus investment in stores. INDIAN RAIDJTAYS Table 7 ROLLING STOCK Acquired during the Second Five-Year Plan BROAD GAUGE IMEffTRE GAUGE _ NARROW GAUGE Revised Anticipat- rlevised Anticipat- Revised Anticipat- procure- ed receipts procure- ed receipts procure- ed receipts ment en- from 1st ment en- from 1st ment en- from 1st visaged April/56 visaged April/56 visaged April/56 during to 31st during to 31st during to 31st the 5 March/61 the 5 March/61 the 5 TvIarch/61 Rolling Stock years years _ years Steam Locos 1,018 1,019 934 94324 Electric Locos 7 7 - - - - Diesel Locos 178 108 - - - Passenger & other coaching cars 4,650 4,108 3,509 3,286 463 205 Electric Multiple Units 174 174 16 16 - - Rail Cars 24 24 - - - _ Freight Cars(in terms of 4-wheelers) 78,476 70,158 26,oo5 26,413 1,258 1,690 Percentage of Overage Stock to Total Stock on Line Locomotives Coaches Freih_t Cars B u.G. IIO .G. B.G. MI.G. N.G. B.G. 1I. G. NJ.G._ As on 31.3.56 33.2 25.8 33.7 32.3 32.7 53.1 18.0 21.0 52.1 As on 31.3.61 26.7 17.9 32.6 34.4 28.06 63.4 10.2 11.7 48.5 Table 8 INDIAN RAILWAYS Railwayst Second Five-Year Program (Rupees millions) Expenditures As auth- Railways': Actuals orized estimate : 1956/57 by, the as of : through Estimate Planning March : 1959/60 1960/61 Total Item Commission 1960 Rolling Stock 3,800 : 3,917.0 3,104.3 729.3 3,833.6 Track Renewals 1,000 1,698.7 : l,23h.3 317.0 1,551.3 Bridge Works 2h0 26504 1 l78,o 8004 258,8 Ganga Bridge 90 74.0 73.2 1.6 7h.8 Workshops Plant & Machinery 650 : 539.2 : 363.2 133.1 496c3 Line Capacity Works including Goods sheds 1,860 1 840.8 : 1,319.8 480.5 1,800.3 Signalling and Safety Works 250 19h.3 118.6 72.8 191.4 Electrification 650Vi 561.11/: 352.9 217,7 570.6 New Construction 660 923.5 : 522.5 275.6 798.1 Staff Welfare & Staff Quarters 500 : 47h.9 375.5 115.2 490.7 Passenger amenities 150 1h6.7 122.4 29.1 151.5 Road Transport Undertakings 100 58.6 38.3 17.0 55.3 Stores Suspense 500 270.2 4 [36.3 -60.2 376.1 Stores Depot, Training Schools / 2/: & Other Projects 215- : 335.3- : 267.6 48.5 316.1 Provision for Steel imports 400 This amount has been distributed : among various Plan Heads. Adjustments in manufacturing, Suspense, Misc. Advances and other Credits - : -35h.7 : 46.6 -82.8 -36.2 Total 11,065 :l0,9k5.0 . 8,553.5 2,374.8 10,928.33/ 1/ Excludes Rs. 150 million transferred to Post and Telegraph and Power Supply Authorities. 2/ Excludes Rs. 35 million for Vishakhapatnam Port transferred to Ministry of Transport. 3/ Does not include Third Plan schemes for which nominal expenditure incurred during Second Plan. Table 9 INDIAN RAILWiAYS I. Actual Phasing - Second Five-Year Program (Rupees Millions) 1956/57 1957/58 1958/59 1959/60 1960/61 Total A. Foreign Exchange Locomotives 155.9 122.1 140.5 33,8 43.2 495.5 Carriages and wagons 278.4 253.8 153.7 63.5 48.4 797.7 Other equipment 54.8 119.5 85.2 67.7 120.3 447.6 Steel (including wooden sleepers in lieu of steel sleepers) 160.8 437.1 527.6 126.3 273.6 1,525.4 649.9 932.5 907.0 291.3 485.5 3,266.2 B. Local Currency 1,139.6 1,582.2 1,254.7 1,506.2 1,889.3 7,662.1 C. Total Cost 1,789.5 2,514.7 2,451.7 1,797.5 2,374.8 10,928.3 D. Foreign Exchange in percent of Total Cost 36.3% 37.1% 37.0Q 16.2% 20.h% 29.9% Table 10 INDIAN RAIL'TAYS Transactions of Capital-at-Charge, Depreciation Reserve Fund and Development Fund During Second Plan Period (April 1956-MIarch 1961) (Rs. 000,000) I. Capital-at-Charge Initial Balance 9,689.8 Capital Expenditure 5,834.1 Adjustments: Transfer from Development Fund 119.5 Other (49.8) 69.7 Net Change for Period 5,903.8 Final Balance 15,593.6 II. Depreciation Reserve Fund Initial Balance 1,034.7 Appropriation from: Railway systems 2,250.0 Manufacturing units 44.8 Interest on balances 119.5 2 ,414.3 Capital Expenditure (3,263.4) Adjustments (44.3) Net Change for Period _ (893.4) Final Balance 141.3 III, Development Fund Initial Balance 129.7 Appropriation from: Revenue Surplus 766.8 Interest on balances 2.6 769.4 Disbursements: Capital Expenditure 1,272.1 Interest on Fund borrowings 18.3 1,290.4 Adjustments: Settlements due to Partition (22-3) Charges transferred to Capital- at-Charge 119.5 97.2 Government Loans: 294.1 Net Change for Period (129-7) Final Balance 0 Tabl.e I I INDIAN RAILWAYS Page 1. DETAILS OF ROLLING STOCK PROPOSED FOR ITI-I7D PLAN Number of Units Type of Rolling Stock Additional Replacement Total Locomotives Broad Gauge Steam 445 395 840 Diesel road 263 - 263 Diesel switcher 50 - 50 Electric 128 - 138 Total B.G. 896 395 1291 Metre Gauge Steam 165 186 351 Diesel road 147 - 147 Electric _ Total M.G. 312 186 498 Narrow Gauge Diesel general purpose 27 33 60 Total Locomotives 1,235 614 1,849 Coaches Broad Gauge Passenger carrying vehicles 1,663 666 2,329 Other coaching vehicles 431 627 1,058 E.M.U. Stock 270 100 370 Rail Cars 60 7 67 Total B.G. 2.424 1.400 3.824 Metre Gauge Passenger carrying vehicles 1,654 886 2,540 Other coaching vehicles 641 308 949 E.M.U. Stock 76 - 76 Rail Cars 80 40 120 Total M.G. 2,451 1,234 3,685 Narrow Gauge Passen>;er carrying vehicles 120 156 276 Other coaching vehicles 20 64 84 Rail Cars 10 . 10 Total N.G. 150 220 370 Total Coaches 5,025 2,854 7,879 Table ll Page 2. Number of Units Additional Replacement Total Wagons Broad Gauge Bogie Hoppers for Steel Plants-BOBS 378 76 454 Bogie rail cum end falling trucks for Steel Plants-BRH 1,242 470 1,712 Bogie open for Steel Plants and coal etc.-BOX 20,522 1,542 22,0h4 Bogie open Gondola for export of ore - BCX mark IV 1,242 - 1,242 F.W. Covereds - CR ( 14978 10,266 25 445 Tank Wagons - TPR etc. ( ,' 201 ( Brake vans - BVG 1,482 175 1,657 Miscellaneous stock 461 763 1,224 Total (in units) 4h0305 13,493 53,798 Total (in 4-wheelers) 75.788 16.814 926 Metre Gauge Bogie open MBO8 2,665 323 2,988 Bogie covered - MBC 1,668 1,503 3,171 F.W. covered - YE 2,754 2,884 5,638 Brake vans - MBVG 383 56 439 Miscellaneous stock 1,204 524 1,728 Total (in units) 8,674 5,290 13,964 Total (in 4-wheelers) 13.719 7.397 21.116 .Narrow Gauze Bogie covered/open including Brake vans 485 1.243 1.728 Total N.G. (in units) 485 1,243 1,728 (in 4-wheelers) 90 2.486 34?6 Total Wagons in 4-wheelers 9Oj447 26,697 117,144 Cranes Broad Gauge 92 57 149 Metre Gauge 71 49 120 Narrow Gauge - 5 5 163 111 274 Table 11 Page 3. ROLLING STOCK PROVIDED DURING TIE. THIRD PLUN FOR RAILJ1TAY ELECTRIFICATION PROJECTS Number of Units Additional Replacement Total Locomotives B.G. Electric 106 - 106 M.G. Electric 16 - 16 Total Locomotives 122 _ 122 E.M.U. Stock B.G. E.M.U. Stock 581 - 531 Total E.M.U. Stock 581 581 TPacle 12 IINDIAN RAILWAYS Projection of Income Account Through Third Five Year Plan (Ris 000,000) 1961-62 1962-63 1963-64 1964-65 1965-66 Total Gross traffic receipts 5,017.9 5,334.2 55597.2 6,031.7 6,573.7. 28,554.7 Working expenses 3,355.4 3,6h1.5 3,818.l4 4,106.9 4,468.7 19,390.9 Depreciation provision 650.0 670.0 700.0 730.0 75o.0 3,500.0 Total Operating 4xpenses 4,00o5. 4,311.5 h4,518.lh 4,836.9 5,218.7 22,390.9 Balance 1,012.5 1,022.7 1,078.8 1,194.8 1,355.0 ,663.8 Open Line Works 120.0 120.0 120.0 120.0 120.0 600.0 Net revenue 892.5 902.7 958.8 1,074.8 1,235.0 5,o63.8 Dividend to Government: Interest 4+-% 653.4 708.5 775.6 859.1 918.8 3,915.4 Special contri- bution to States 125.0 12 5.0 125.0 125.0 125.0 625.0 Total dividend 778.4 o33.5 900.6 98h.1 1,043.6 4,540.h Surplus allocated to Development Fund 114.1 69.2 58.2 90.7 191.2 523.4 Note: The above is based on a traffic target of 2Ll5 million tons and rates and fares in force as of September 1, 1961. Annex 1 Page 1 IDIAT R;d3 TY5>rs General Terms of Reference for the Consultants In view of the possibility of further lending by the Bank for the Railways$ program in the Third Five-Year Plan, the terms of reference that follow are designed to elicit all the information that would be required for the Bank to reach a decision on a loan operation. The Consultants' investiga- tion should therefore cover, but not necessarily exclusively, the following matters: 1. The responsibilities, functions and powers of the Indian Railway Board and its effectiveness in policy-making snd administration. 2. The organization and efficiency of the Railways' manage- ment, the quality of the executive and technical personnel, and their ability to plan and execute the Railways' part of the Third Five-Year Plan. 3. Thae economic, technical and financial soundness of the Railways' program included in the Plan. 4. The Railways' operational efficiency as regards (i) use of equipment, permanent way and labor force, (ii) freight haulage and passenger transport. 5. The adequacy of services rendered by the Railways to industry, particularly in supplying the steel plants with raw materials, and in moving products from the plants. Cooperation between the Railways and the plants in plan- ning and organizing this traffic. 6. The condition of track, railway stock and other railway facilities; present maintenance standards and procedures; proposed improvements under the Plan. 7. Broad principles and main features of the present rate structure and acceptability of present rates from service and revenue viewpoints; and desirability of increasing or decreasing particular rates. In this connection, and insofar as it may be possible to do so, estimate the Railways' cost of transporting principal commodities, e.g., coal, grains, ores, and interpret the result for the Railways, assuming that there is increasing competition for high value high rate goods. Annex 1 Page 2 8. The accounting procedures for depreciation and the adequacy of the depreciation charge. 9. The financial situation of the Railways, the sound- ness of their financial plans, and expected financial results over the next five years. iteL A ~~~~~~~~~~~~~~ IR /~~~~~~~~~~~~~~~~~~~~~~~~~V / | 0 ;0 tX R A B A D gIsA G A P A T ATAAt 4/~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 00~~~~~~~~~~~____ OTHE bAIJGE t00: RAILWAYSMPO . t ( i ': 0 50 100 150 200 Z50 30 350 MILES .JUNE t9O BRD- 501 RI