Efforts over the last two years to turn around Indian Railways have yielded bounties of various sorts. For one, 'management' and 'Laloo' are now uttered in the same breath by students from IIM Ahmedabad to the Harvard Business School. More importantly, the measures unleashed over the last two years have unlocked revenues. Freight earnings, for example, were up 17 per cent to Rs 26,661 crore in April-November, 2006, compared to 2005-06. And therein lies an issue. "It is common practice in the Railways to set up ambitious investment targets," explains an official, "but the amounts are usually truncated by the Planning Commission." Moreover, analysts say that while a 17 per cent increase in freight is largely responsible for the Railways' reversal of fortunes, the ability of the ageing network to handle such an increase in the long term is suspect.

Also, officials argue that the Railways' efforts at attracting investments through the public private partnership (PPP) route will not account for a large infusion of cash, at least in the short term. "With the exception of port connectivity and container services, it is unlikely that Railways will generate big money from the PPP route, primarily because of the long gestation periods involved," reckons Vijaylakshmi Vishwanathan, former Finance Commissioner, Railways.

Even the much hyped dedicated freight corridor seems to have run into some rough weather with a 60 per cent rise in capital costs, from the original projection of Rs 22,000 crore to Rs 35,000 crore, largely on account of increased land requirements and technological factors.

Most stakeholders say that growth in key areas is likely to taper off in the medium term. However, some like Sankalp Shukla, CEO Inlogistics, one of the 14 players that have entered into a concession agreement with the Railways to handle container operations, feel that the main challenge for the Railways would be that of finding ways to increase its commodity base. "For the Railways to remain an efficient medium, it must diversify its commodity base while at the same time ensure that options like the proposed dedicated freight corridor remain attractive enough for players to step into," he says.

The task ahead, therefore, is two fold-sustaining the commercialisation efforts and at the same time resisting profligacy.

Port of Call

While a truant Railways loses traffic to alternate modes of transport like roads (it happened in the past), the same logic does not hold in the ports sector, since it has a natural monopoly. Not surprisingly, a good number of the country's largest exporters of manufactured good-automotive and automotive ancillary companies-don't have the nicest things to say about the ports sector.

Ports have, for long, remained largely neglected even though they handle over 95 per cent of the country's international trade by volume and 70 per cent by value. An investment programme kicked in only in 2002, through the National Maritime Development Programme (NMDP). Out of the Rs 1,00,000- crore investment envisaged under the scheme, Rs 55,000 crore would go into ports, and the rest into shipping. "Of this, Rs 35,000 crore is expected to materialise through the PPP route while the rest would be from government accruals," says A.K. Bhalla, Joint Secretary (Ports), Ministry of Shipping.

While private money has already entered the ports business, with international majors DP World, pas and Maersk having set up joint ventures with major ports, it still remains a trickle. And analysts contend that it will remain a trickle so long as ports are not allowed to function independently. "At present, all major ports, except Ennore, are Trusts, regulated by the Central government and therefore are not governed by the Companies Act," points out Krishnakant Thakur, Analyst, Edelweiss consultants. Besides over-regulation, this causes a problem of disparity vis-à-vis the non-major ports, which operate with lesser regulatory oversight.

In fact, if industry watchers are to be believed, the coming decades will largely see minor ports driving growth. "In the last few years, state governments, which control minor ports, have become aggressive," says Rajiv Ranjan Sinha, Managing Director, Maersk Shipping. He points out that as states see their hinterland industrialising, they will go all out to woo customers to build port capacities.

Another major issue facing the ports sector is that of hinterland connectivity. "The need of the hour," says Manish Sharma of KPMG, "is to unshackle the industry by weeding out systemic issues that have long plagued it." Indeed.