Strategic Analysis of the Growth Opportunities in the Indian Rail Industry

Indian Rail Industry Chugs Along with Increased Private Participation and Renewed Focus on Freight and Infrastructure Development

The Indian Railways, which runs more than 18,400 trains, covering 6,856 stations daily, is all set to benefit from higher private participation. The magnitude of the Indian Railways' infrastructure upgrade and modernization program has made private participation an integral component of all developments for key initiatives. The ongoing and proposed Metro Rail projects in several Indian cities, including Delhi and Mumbai, have encouraged large-scale private participation in the areas of providing engines and coaches as well as infrastructure development for both domestic and multinational companies. These projects can expand the reach of railways as a preferred mode of passenger transportation. Apart from persuading private participants, the Indian Railways is also looking to bolster its revenues through the use of technology and investment in port connectivity and rail infrastructure.

Meanwhile, the opening up of the container rail segment for private participation has given a huge boost to the cargo segment. Private investments have gone a long way in reducing the infrastructural limitations of the Indian Railways and creating opportunities in the extremely profitable freight transportation services. "Already, the 15 approved operators have gained high volumes of freight from various industries, including transportation of cars by rail, which was not done earlier by the government-owned Container Corporation of India Ltd. (CONCOR)," says the analyst of this research. "Once the ongoing project of Dedicated Freight Corridors becomes a reality, several more participants are expected to join the competition of container rail operations and fulfill the vast demand for rail freight services."

Acknowledging the business opportunity presented by the steadily growing freight segment, the Indian Railways plans to invest in connectivity for all major ports. This will allow cargo from/to the hinterlands to be transported directly from/to the port to avoid the bottlenecks of road transportation and existing rail routes. India has the second largest railway network in the world, covering over 63,600 km and carrying about 30 percent of the nation's cargo. "However, within the rail network, some key routes such as Delhi-Mumbai and Delhi-Kolkata have a utilization of more than 140 percent," notes the analyst. "To add to the congestion, there are no dedicated routes for cargo traffic and hence, the cargo traffic not only subsidizes the passenger traffic, but is also accorded lower priority."

After being written off as a financially unviable organization by industry experts, Indian Railways has made a dramatic turnaround in the last few years. There has been a paradigm shift from the tariff regime (using freight services to subsidize passenger services) to a focus on freight as a primary growth driver. Meanwhile, Indian Railways' customer-friendly approach to passenger services has ensured that both passenger as well as freight revenues will escalate, throwing open numerous opportunities for companies in diverse segments of railways. India's emergence as a manufacturing hub for various sectors has buoyed the economy and attracted investments in infrastructure as well as hiked demand and consumption. "A sharp rise is expected in the traffic flow between manufacturing centers, ports, and inland container depots (ICDs) over the next four to five years," observes the analyst. "Owing to the cost benefits of rail transportation, the Indian Railways is likely to gain significant revenues from these trends."

Market Sectors

Expert Frost & Sullivan analysts thoroughly examine the following market sectors in this research:

• Passenger rail services and coaches
• Freight rail services and wagons
• Rail infrastructure
• Locomotives and wheels
• Signaling systems and technology

Technology

The following technology is covered in this research:

• Railway signaling and communication technologies