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Rivers of Life
chandrachud04
"Look! Brahmins and chumars, bankers and tinkers, barbers and bunnias, pilgrims - and potters - all the world going and coming. It is to me as a river from which I am withdrawn like a log after a flood. And truly the Grand Trunk Road is a wonderful spectacle. It runs straight, bearing without crowding India's traffic for fifteen hundred miles - such a river of life as nowhere else exists in the world." – Rudyard Kipling, 1901

The Grand Trunk Road of which Rudyard Kipling wrote with such enthusiasm is two millennia old, traversing the northern span of the Indian subcontinent from Kabul in Afghanistan to Chittagong in the Bay of Bengal, across the Khyber Pass and the fertile plains of the Indus and the Ganges. Rebuilt in the 16th century by Sher Shah Suri, a Pashtun interloper in the Mughal dynasty, the present day Indian sections of this ancient road include the country's National Highway-1 and National Highway-2.

India’s national highways continue to be rivers of life full of character like few other in the world, but five centuries on, the time is nigh for another grand renewal, of both the highways and their closely related cousin, the sprawling British-bequeathed Indian Railways, as well as a massive expansion in transportation through the skies and on water.

In the footsteps of Kipling

The national highways span nearly 77,000 km, but comprise just 2% of the entire roadway network of the country, which includes state highways and smaller regional and rural roads. Yet, running as they do between the major cities, they account for 40% of all road traffic, but are often out-dated as just 23% are four-laned. Driving long distance on Indian roads has thus often been a slow and perilous adventure, with 130,000 people dying in road accidents every year.

The last non-Congress government, led by the BJP, back in 2000 instituted a vast, still incomplete, yet expanding highway building and renewal program called the National Highway Development Project. The NHDP was timely and necessary and focused on two major routes: the Golden Quadrilateral which connects Delhi – Mumbai – Chennai – Kolkata, touching Pune and Bangalore on the way (and includes the Grand Trunk Road), and the two diagonals of the Quadrilateral which make up the North-South and East-West corridors.

While these two phases of the NHDP are largely complete, the project has been expanded to include renewal of the regional roads, conversion of single-lane to double-lane roads, and the eventual upgrading of the Golden Quadrilateral to six-lanes. Also in the works are an ambitious Bharat Nirman (literally India or nation-building) program to connect each village of at least 1,000 people with all-weather roads and a plan to build 16,000 km of access-controlled expressways connecting major economic nerve-centres.

Building on this scale is complex and unprecedented in modern India, and involves vast sums of money, land, and the attendant problems of corruption and rent-seeking. Land acquisition has been less of a problem for these public highways than for privately owned mines, but has nevertheless meant less than the bulldozing pace of construction seen in China. The government has over time moved from building the roads by itself to EPC contracts to partnering with infrastructure companies in PPP projects.

The private sector has emerged as a major source of financing, investing ten billion euros from 2007-12, but many of these projects need government funding – either from the general budget, or through specific taxes on fuels or indeed borrowings from the likes of the World Bank. Another 80 billion euros will be spent on building and expanding roads over India’s 12th Five-Year Plan period from 2012-17, making it an interesting time for the curious to be performing a Bharat Darshan by road.

From a Railway Carriage

The average Indian long-distance traveller is more likely, however, to be familiar with the Great Indian Railways, often reckoned as one of the few good things to come from the British Empire, along with the common law legal system and English, the nation’s lingua franca. The railways ferry eight billion people every year, usually at leisurely speeds of less than 60km/hour, across 65,000 km (of which less than a third is electrified) all over the country. However, just 12,000 of these have been added since Independence in 1947.

The Indian Railways is a public sector behemoth, one of the largest employers in the world (reputed to be the largest until recently overtaken by those ubiquitous American chains – McDonald’s and Wal-Mart), and commands its own special annual railway budget, often an exercise in doling out populist hand-outs like new routes in the state of the coalition partner in charge.

With successive governments balking at raising the cheap passenger fares (one-fourth of the fares in China, 1/20th of those in Japan; in 2012 the minister was sacked by his own party chief for daring to consider even the most nominal hikes), the railways lose money to the tune of three billion euros every year in passenger services. That has meant no money available to invest in or expand the services for freight transport. Freight rates have been set high (double the levels in China and the US) to cross-subsidize passenger services, leaving a sub-optimal 2/3rd of all freight on the roads.

These problems have been studied by multiple committees, and their solutions are well-known, and include a makeover of Indian Railways into a modern business enterprise, but as always in India, there’s many a slip between the cup and the lip. Nevertheless, over the next five years, the railways will still see investments on a scale similar to those in the roadways. More than 70 billion euros, much of which will have to come from private sources, will be spent on tracks, bridges, coaches, wagons and locomotives, stations and cargo terminals, safety devices and IT systems. Particular thrust will be paid to moving freight from the roads to the railways, through higher use of containers, and establishing dedicated freight corridors. High-speed passenger rail corridors are on the anvil as well, much in the vein of the Golden Quadrilateral.

If radical organizational reforms do to take place along with all the expansion, it isn’t inconceivable that the chaotic if romantic experience of traveling by the Indian Railways will one day be transformed into something closer to the quiet efficiency of the Deutsche Bahn or the SNCF.

Up in the Air

Flying in India till as recently as eight years ago was the contrast of travelling by train: expensive, exclusive, but more often than not a plush experience with full service meals and richly liveried flight attendants of the government owned Indian Airlines. Liberalization of the entry norms saw the arrival of a number of low-cost airlines as well as the once premium but now flightless Kingfisher Airlines, making flight an affordable option for the growing middle class in the strong economy of the last decade.

The grounding of Kingfisher and the perennial losses of most other airlines has meant higher passenger fares by more than 50% over the last year. Airlines across the world are seldom profitable, but in India they face considerably tougher odds: the highly inefficient government owned flag-carrier Air India has been kept alive with endless capital infusions, keeping competitive intensity high; airport re-development investments have been recovered through fees on airlines (and hence passengers); and critically, the costs of fuel are prohibitively high due to an antiquated take on fuel subsidies.

Diesel, kerosene and petrol, the fuels for the masses, have hitherto been cross-subsidized by heavily taxing aviation turbine fuel as flying has been considered the privilege of the well-heeled. The result is ATF prices 60% higher than in nearby Singapore or Dubai, and 40-50% of airline operating expenses spent on fuel. Before being grounded last year, Kingfisher Airlines was belatedly allowed to import its own fuel and save on a variety of taxes, but that wasn’t enough to keep the airline going. Most routes in India now have only five players: Air India, Jet Airways (and its low-cost twin), IndiGo, Spice Jet and Go Air.

Reforms are now critical for an industry poised for take-off: airport capacities have been expanded significantly with 11 international airports, a total handling capacity of 220 million passengers per year, and passenger traffic expected to grow by more than 10% per year from the 106 million in 2011 (9th largest in the world). Foreign direct investment has been allowed into the industry only recently, to the extent of 49% of equity, but the response has been lukewarm at best. Asia’s largest no-frills operator, Malaysia-based Air Asia, has sought and received approval to enter the market in a partnership with the house of the Tatas. That would be one full circle for the country's aviation, as the Tatas established its first commercial airline back in 1932, before it was duly nationalized after independence.

Such a Long Journey

India plans to spend a trillion dollars on infrastructure over the next five years, and a majority of that will be on transportation infrastructure – roads, rails, airports, ports and inland waterways. It promises to be an exciting journey but one that the country critically needs to get right, to keep its rich rivers of life flowing unabatedly.

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This piece was written as an introduction to transport infrastructure in India, for investors in my ex-employer's India fund. However, it was never used, as my ex-boss deemed it was too "literary".

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