Revving up in low gear: The paradoxes in India’s transport sector

Source: The post is based on an article “Reviving up in low gear: The paradoxes in India’s transport sector” published in the Business Standard on 8^th July 2022.

Syllabus: GS 3 Infrastructure; Transportation Sector

Relevance: Transportation Sector; Logistics

News: The transport sector is growing leaps and bounds in terms of infrastructure, with huge investments. However, the sector is not producing enough sustainable revenue.

Various measures are taken by the government to improve the transportation sector

Indian Railways (IR)

IR is investing close to 1% of GDP annually. It is a better investment than ever before. Introduction of “semi-high speed” passenger trains, Vista dome coaches on scenic routes, and other major programs are being taken up for upgrading railway stations.

Airways

In the recent past, it has been noticed that no Indian airline is making money. This will create further pressure on fares and therefore more losses

There have been a lot of “incidents” in the aircrafts which has raised concerns about safety.

Further, the staff of Indian airlines is facing pay cuts. In addition, the airline sector is also facing the wrath of high oil prices and high taxes.

Railway Sector

The dedicated freight corridors have made slow progress. There has been a massive overshot in the initial cost estimates.

Annual railway investment is now as much as revenue. Almost none of the investment is from operational surpluses. The bulk will come as budgetary support. Therefore, it could translate into mounting debt.

Roadways

The government is aggressively promoting expressways, inter-modal traffic nodes, and port linkages to address India’s perennial infrastructure deficit.

As per data, truck traffic is reported to have speeded up on the new highways. The introduction of GST has speeded up the process.

Its annual investment is about half what it is for the railways (or 0.5% of GDP).

There is an imbalance between revenue and investment, the latter being about nine times earnings.

The distance moved in a day by the average truck remains well below what it is elsewhere.

The investment is being done out of the Budget, and that too without taking into consideration the primary metric of return on investments.

What are the issues in India’s transport sector?

It has been witnessing stagnant traffic trends vis-a-vis passenger traffic & freight traffic and poor or negative returns.

Further, the sector demands unprecedented levels of investment in the coming future. But there is an imbalance between revenue generation and expenditure.

What should be done?

The government has been investing in all forms of transport. The results of that investment would be visible in the next two-three years in the form of transformational change in the air, on highways and expressways, and on the railways.

Substantial private funding is required for the transport infrastructure.

Further, the traffic growth should justify the investment. Otherwise, the government’s asset monetization program will not deliver the expected outcomes.