World Bank Document · Report No. 16149 IMPLEMENTATION ... DEA Department of Economic Affairs RDSO Research, Design and Standards ... Technical Assistance and Training .. 2

Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 16149

IMPLEMENTATION COMPLETION REPORT

INDIA

THIRD RAILWAY MODERNIZATION PROJECT(LOAN 2935 - IN)

December 2, 1996

Energy and Infrastructure Operations DivisionCountry Department IISouth Asia Region

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTSCurrency Unit = Indian Rupee (Rs)

Rs. 1 = Paise 100Exchange Rate used in StaffAppraisal Report: Rs.13.00 = US$1.00

The following were the exchange rates between the Rupee (Rs) and the US Dollar (US$) during theproject's implementation period:

Year Rs/US$Official Market

1987/88 12.971988/89 14.481989/90 16.661990/91 17.951991/92 24.521992/93 26.411993/94 26.20 31.381994/95 31.38December 1995 35.18

Source: IMF, International Financial Statistics (IFS), and Reserve Bank of India.

WEIGHTS AND MEASURES

I Centimeter (cm) = 0.39 inch (in)1 Meter (in) 3.28 feet (ft)I Kilometer (km) 0.62 milesI Kilogram (kg) = 2.24 pounds (lb)

FISCAL YEAR OF BORROWERApril 1 through March 31.

ABBREVIATIONS AND ACRONYMS

BR British Rail IRR Internal Rate of ReturnBFR Bogie Flat Wagon IRS/T Indian Railways Specification for TrackCIF Cost, Insurance and Freight MGT Million Gross TonsCRIS Centre for Railway Information Systems NTKM Net Ton KilometersDEA Department of Economic Affairs RDSO Research, Design and Standards

Ministry of Finance Organization, Indian RailwaysGOI Government of India TRC Track Recording CarICR Implementation Completion Report TMS Track Management SystemIR Indian Railways, Ministry of Railways UTS Ultimate Tensile Strength (kg/sq.m)

Vice President : D. Joseph WoodDirector : R. DrysdaleDivision Chief/Manager : J. F. BauerStaff Member : H. Hansen, Sr. Transport Economist

FOR OFFICIAL USE ONLY


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Table of Contents

Preface ......................................................... i

Evaluation Summary ........................................................ 1ii

Project Objectives ........................................................ 1ii

Implementation Experience and Results .. ........................................................ iOverall Assessment ........................................................ ivSummary of Findings, Future Operations, and Key Lessons Learned ............... .................. iv

PART I: PROJECT IMPLEMENTATION ASSESSMENT

A. Project Objectives ..B. Achievement of Project Objectives ..

Renewal/Upgrading of Track on Arterial (A Routes) and Other HeavyDensity Routes 1

Equipment for Track Laying and Maintenance .. 2Locomotives and Wagons for Transport of Track Materials . . 2Technical Assistance and Training .. 2

C. Implementation Record and Major Factors Affecting the Project . . 3Project Cost and Financing .. 4Economic Analysis 5Indian Railways' Financial and Economic Performance .. 5

D. Project Sustainability .. 5E. Bank Performance .. 6F. Borrower/Beneficiary Performance .. 6G. Assessment of Outcome .. 7H. Future Operations .. 7I. Key Lessons Learned .. 8

This document has a restricted distribution and may be used by recipients only in the performance of theirofficia] duties. Its contents may not otherwise be disclosed wiLhout World Banrk authorization. l

PART II: STATISTICAL TABLES

Table 1 Summary of Assessments ........................... 10Table 2 Related Bank Loans/Credits ........................... 11Table 3 : Project Timetable ................... .12Table 4 : Loan/Credit Disbursements: Cumulative Estimated and Actual .12Table 5 Key Indicators for Project Implementation .13Table 6: Project Costs .. 14Table 7 Status of Legal Covenants .15Table 8 Compliance with Operational Manual Statements .16Table 9 Bank Resources: Staff Inputs .16Table 10: Bank Resources: Missions .. 17

ANNEXES

A. ICR Mission's Aide-Memoire .18B. Borrower/Beneficiary Contribution to the ICR .20C. Project Results .22

Table 1: Summary of Track Renewal Planned and Actually Carried Out .22Table 2: Track Equipment .23Table 3: Traffic Growth by Major Commodity .24Table 4: Rail Freight Traffic .25

D. Economic Analysis .26E. Project Implementation Schedule and Actual period of Implementation .30F. Indian Railways' Financial Statement .31


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Preface

This is the Implementation Completion Report (ICR) for the Third Railway ModernizationProject in India, for which a loan in the amount of US$390 million equivalent was approved onMay 5, 1988 to the Government of India with Indian Railways (IR) as the Beneficiary. The loanbecame effective on August 10, 1988. The loan amount was later revised at the request of theBorrower to US$248.94 million.

The final disbursement was made on June 20, 1995 and the loan was closed on December31, 1995, compared with the original closing date of December 31, 1993. The Special Accountbalance was refunded on June 11, 1996 and the loan uncommitted balance was canceled on thesame date, reducing the loan amount to US$245.40 million.

The ICR was prepared by Harald Hansen (Task Manager) of the Energy andInfrastructure Operations Division (SA2EI) of South Asia Country Department II, with theassistance of Jitendra Sondhi and J.S. Mundrey, independent consultants retained by the Bank. Itwas reviewed by Francois Bauer, Division Chief, SA2EI, and Kazuko Uchimura, Project Adviser,SA2DR.

The preparation of this ICR was begun in December 1995 and carried through the Bank'sfinal supervision mission in February 1996. It is based on project files, field visits and analysiscarried out by independent consultants and data furnished by the Borrower and Beneficiary. TheBeneficiary contributed by preparing its own evaluation and commenting on the draft ICR. Theborrower provided comments that are included as appendixes to the ICR.

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Evaluation Summary

Project Objectives

1. The project focused on track renewal and modernization with the objective of improvingthe planning and execution of Indian Railways' (IR) track renewal/upgrading and maintenanceprogram, enhancing the quality and capacity of track and thus promoting efficient train operationand improving IR's financial performance. The above project objectives were pursued by: (i)renewal/upgrading of track on arterial (A routes) and other heavy density routes; (ii) acquiringequipment for track relaying and maintenance; (iii) acquiring locomotives and wagons fortransport of track material; and (iv) technical assistance and training.

Implementation Experience and Results

2. By September 1995, 3,881 km out of 4,000 km of track had been renewed. Theremaining 119 km oftrack renewal were completed by March 31, 1996. Indian Railways' mainheavy density routes, covering 16,568 km, were included in this project. At project closing, 1,052km of track renewal on these routes were overdue (6.3 percent). One hundred thirty-seven trackmachines were purchased and have been received and commissioned.

3. The Beneficiary was to fund procurement of Hopper and BFR wagons and locomotivesbut did not procure any for the exclusive use of track renewal or maintenance. The training sub-component was successfully completed, and in all, about 275 man months of training wasarranged. However, there has been considerable delay in the development and implementation ofthe computer-based, track maintenance planning system and it has so far been implemented onlyon a pilot section.

4. The total cost of the project was estimated at US$1,206 million (Rs. 16,875 million). Theactual cost of the project is estimated at US$1,050 million (Rs. 23,503 million) with a foreignexchange component of US$247 million and local component of Rs. 18,481 million. The Bankfinanced the full foreign cost of the project and local costs were financed by IR.

5. Post-project economic evaluation shows that for the track relay, the revised IRR is 14, 17and 25 percent, respectively, for the three typical initial traffic levels, as against the original SARestimates which had an IRR of 16, 20 and 29 percent for traffic levels of 13, 20 and 35 milliongross tonnes, respectively. The investment evaluation of track machines for maintenance showsan IRR of 25 percent. A sensitivity analysis showed that the return on investment for track

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machines is very sensitive to a reduction in maintenance cost and this should therefore bemonitored closely.

6. The project was planned for full implementation by the middle of 1993. However, due tolong delays in procurement as well as installation, the track relay component was only completedby March 1996, almost three years behind schedule. Track machines, which were planned fordelivery and commissioning by March 1992, were actually commissioned in the last quarter of1995, resulting in a delay of over 30 months. The delays were caused mainly by the lengthyinterval between bid opening and award recommendations to the Bank. Some delay to projectimplementation was also due to resource pressures resulting from external factors such as achange in GOI policy, which reduced the budgetary support to IR in the post economic reformperiod.

7. The annual traffic growth, in terms of net tonne km, peaked during the period from 1981to 1986 at 5.5 percent and has been declining in subsequent years; 3.3 and 1.2 percent in theperiods from 1985/86 to 1990/91 and from 1990/91 to 1994/95, respectively. Thus, the trafficgrowth was lower than the 4 percent anticipated at appraisal.

8. Key indicators for project implementation during FY1990, 1992 and 1994 show thatfreight and passenger traffic were below targets, but traffic units per employee, locomotiveavailability, wagon utilization and gross trailing load per freight train exceeded the targets. Byand large, the key indicators met the targets for FY1990 to 1994.

9. From FY1987 to FY1995, the operating ratio and the net revenue receipts, as apercentage of capital-at-charge, have shown a healthy trend. The dividends to general revenueshave been maintained at satisfactory levels. In all these years, railways generated a post dividendsurplus. Indian Railways was, however, not able to increase the total freight traffic output interms of net tonne km in line with demand, and in the period from FY1991 through 1995, it grewby an annual average of 1.2 percent (Annex C: Table 4), although the overall transport demandincreased at an average estimated rate of 7-8 percent per annum. Thus, IR lost market share andlong-distance traffic continued to move by road at a higher economic cost to the country.

10. The project objectives, components and broad implementation schedule were included inthe SAR. However, a detailed procurement schedule for various items was not defined. TheBorrower purchased rails and track equipment through more than 25 separate tenders. In theabsence of a detailed procurement schedule, delays in initiating procurement action were noteasily monitorable by IR management.

11. Long intervals between bid opening and award recommendation to the Bank (six to twelvemonths) were a common feature for several tenders. This necessitated repeated extensions of bidvalidity.

12. During project preparation and loan negotiations, a framework for review and evaluationof benefits from specific components was not developed. The key indicators for ProjectImplementation included in the SAR and monitored during project supervision relate to macro

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level efficiency. It would have been useful to include some indicator with targets specificallyrelated to project components for monitoring during project supervision and after projectimplementation.

13. During project implementation the economic scenario underwent a change due to thereform of the Indian economy. Indian Railways' budgetary support was progressively reduced.This, coupled with deployment of significant resources for gauge conversion, had a negativeimpact on resources that could be allocated for this project. Furthermore, as a result of aweakening Indian Rupee, the landed cost of imports more than doubled during projectimplementation. Due to these factors and slow procurement of rails and machines, theimplementation of the project slowed and its completion was delayed by two to three years.

14. Indian Railways' performance in managing the procurement was not satisfactory asevaluations and recommendations for awards took much longer than planned. The long timetaken to secure approval of award proposals at Minister's level contributed to the long delays infinalization of procurement contracts.

Overall Assessment

15. The outcome of the project is assessed as 'satisfactory' since most of the major projectobjectives have been achieved.

16. With a heavier track structure in place on main corridors and improved quality of trackmaintenance, IR will be in a stronger position to meet the challenge of increasing transportdemand and competition from road transport, as the Indian economy continues to grow at anexpected rate more than 5 percent per annum.

Summary of Findings, Future Operations, and Key Lessons Learned

17. This project has demonstrated that the mechanization of certain manual operations isinescapable. As a new generation of infrastructure is introduced, higher standards of maintenanceare called for and utilization becomes more intensive. Furthermore, even in a low wage economysuch as India, the unit cost of maintenance is lower with the mechanization of selected activities.

18. In future operations, it would, in line with the new policy, be useful to insist thatprocurement procedures be modified to ensure that tenders are finalized within the original bidvalidity of 90 or 120 days. Consideration should be given to the possibility of IR obtainingMinisterial approval of projects as a whole so that the requirement of individual approval of eachbid evaluation at this level, with attendant delays, is eliminated.

19. Project monitoring must place the same emphasis on the realization of perceived benefitsas it does on procurement and physical implementation. Future projects should have specificproject component related indicators and targets, in addition to overall and macro-level indicatorsand targets, which are indicative of project costs and benefits. The Borrower/Beneficiary shouldhave appropriate costing systems in place to facilitate monitoring such indicators.


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PART I: PROJECT IMPLEMENTATION ASSESSMENT

A. PROJECT OBJECTIVES

1. This project was the last of a series of four interrelated technology transfer projectslaunched between 1978 and 1988. The rationale for the project was to support theimplementation of the key elements of IR's Corporate Plan (1985-2000), especially: (i) improvedutilization of assets; (ii) improved planning and investment in key areas; and (iii) increased internalgeneration of funds for asset renewal and new investment. The project focused on track with theobjective of improving the planning and execution of IR's track renewal/ upgrading andmaintenance program, enhancing the quality and capacity of track and thus promoting efficienttrain operation and improving IR's financial performance. The above project objectives werepursued by: (i) renewal/upgrading of track on arterial (A routes) and other heavy density routes;(ii) acquiring equipment for track relaying and maintenance; (iii) acquiring locomotives andwagons for transport of track material; and (iv) technical assistance and training.

2. The project was expected to substantially reduce track maintenance costs. By reducingspeed restrictions and the track occupancy time required for renewal and maintenance work, itwould increase track capacity in critical corridors as well as improve the utilization of rollingstock.

B. ACHIEVEMENT OF PROJECT OBJECTIVES

(i) RenewaWUpgrading of Track on Arterial (A Routes) and Other HeavyDensity Routes

3. The status of track renewal carried out until September 1995, is summarized in Annex C.By September 1995, 3,881 km, out of the planned 4,000 km of track had been renewed. Theremaining 119 km track renewal was completed by end of March 1996.

4. Against the original plan for the procurement of 480,000 tonnes of 60 kg, 90 UTS rail,259,000 tonnes of 60 kg, 90 UTS rail was imported. Over 190,000 tonnes of rail (mostly 60 kg,90 UTS) was purchased locally. A large proportion (about 85 percent) of track has been relayedwith 60 kg, 90 UTS rail, while the balance (about 15 percent) has been relayed with 52 kg rail,due to the non-availability of 60 kg rail. The renewed track has been laid on concrete sleepers

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(1,660 per km) with elastic fastenings and standard ballast cushion of 30 cm. All renewed trackhas welded joints, mostly in long continuous lengths of 2 to 3 kms.

5. Group A and heavy density routes covering 16,568 km were included in this project. Atproject closing, 1,052 km of track renewal on these routes were overdue (6.3 percent). It isexpected that Indian Railways would continue with track renewal with 60 kg, 90 UTS rails onthese routes at 2,000 - 2,500 km per year and all arrears of track renewal would probably becleared over the next year.

(ii) Equipment for Track Laying and Maintenance

6. Originally, procurement of 141 units of track equipment was planned. During projectimplementation, IR, with the agreement of the Bank, reduced the track equipment to 137machines plus two contactless sensors for track recording cars. Annex C (Table 2) shows thestatus of machines originally planned, a modified plan and the quantity actually purchased. Allmachines have been received and commissioned.

(iii) Locomotives and Wagons for Transport of Track Materials

7. To assist in the transport of track materials, the project included the procurement of 204Hopper and BFR wagons and 4 locomotives. These were to be funded by the Borrower/Beneficiary. Indian Railways did not procure any wagons or locomotives for the exclusive use oftrack renewal or maintenance. However, 700 hopper wagons were included in its rolling stockprocurement program. These wagons have not been procured so far. Wagons were madeavailable for track work from the general wagon pool as and when required. A similar procedurewas applied to the deployment of locomotives for track renewal and maintenance work. As IR iscurrently facing a shortage of wagons as well as locomotives, in the absence of dedicated rollingstock for track work, it is likely that sufficient rolling stock may not be available for track workfor some time.

(iv) Technical Assistance and Training

8. This project component included:

(a) manpower planning;(b) planning of track renewal and maintenance programs; and(c) technical training in the operation and maintenance of the track equipment to

be procured under the project.

9. Training: The training sub-component has been successfully completed, and in all, about275 person months of training was arranged. Specific training modules were designed for trackrenewal planning, track maintenance and track machine operation and maintenance. Trainedpersonnel were debriefed and were utilized in the development of revised track maintenancesystems and utilization of track machines. The re-organization of track maintenance field unitshas been recommended by a committee. The recommendations include a significant reduction intrack maintenance manpower and an increased use of track machines. These recommendations

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are currently under review by top JR management. The manpower norm for high density routeshas already been reduced from 2.2 to 1.1 men/track km for track under mechanized maintenance.

10. Track Monitoring and Management System: Development and installation of acomputer based track maintenance planning system was a sub-component of the project. Thisrequired software development and availability of a high speed track recording car, All thesoftware modules except two have been developed and are expected to be completed by mid-1996. An existing high speed track recording car has been retro-fitted with contactiess sensorsand is undergoing test and validation runs. Considerable field testing of a maintenance planningsystem is, however, required before it will be ready for general application.

11. The computer-based, track maintenance planning system has been introduced in onedivision of IR as a pilot and is being used for need-based maintenance with track machines andmonitoring the deployment of resources. It is proposed to extend this system to 27 of the 59divisions of IR, covering the high density routes on the quadrilateral and diagonals which connectthe four metropolitan cities and carry 80 percent of IR's traffic.

12. There has been considerable delay in the development and implementation of thecomputer-based, track maintenance planning system. It is expected that the system will be fullydeveloped and installed on track, covering high density routes, over the next two years providedthe high speed track recording car has satisfactory data acquisition integrity.

C. IMPLEMENTATION RECORD AND MAJOR FACTORS AFFECTINGTHE PROJECT

13. On February 24, 1993, the Bank canceled US$120 million of the loan at the request of theBorrower from the loan amount of US$390 million. Indian Railways stated that:

(a) It was forced to reduce investments due to pressure on resources;(b) The indigenous capacity for 60 kg, 90 UTS rails had improved; and(c) The landed cost of imported rails (including import duties) was higher and

this import was not cost effective.

14. It was suggested that procurement of imported rails be curtailed and rails required for theproject be acquired from Indian sources. There were three further cancellations to the tune ofUS$21.06 million due to a decision not to purchase six track machines and favorable exchangerate movements that reduced the US dollar cost of some of the rail and track machines. Aftervarious cancellations requested by the borrower, and agreed by the Bank, the loan amount wasrevised to US$248.94 million. Following the refund of the uncommitted balance in the SpecialAccount and cancellation of that amount, the final loan amount was US$245.40 million.

15. The project was planned for full implementation by the middle of 1993. However, due tolong delays in procurement as well as installation, the track relay component was only completedby end of March 1996, about three years behind schedule. Track machines which were plannedfor delivery and commissioning by March 1992 were actually commissioned in the last quarter of

1995, resulting in a delay of over 30 months. The delays were primarily the result of lengthy timeintervals between bid opening and award recommendations to the Bank. This cause for delay inproject implementation was within the control of IR. However, some delay to projectimplementation was also due to resource pressures caused by external factors such as GOI policychanges, which reduced the budgetary support to IR in the post-economic reform period. As aresult, implementation of this project slowed.

16. Traffic growth is indicated in Annex C and selected performance indicators for the IR'sbroad gauge system are shown in Table 5. It is noted (Annex C: Table 4) that annual trafficgrowth in terms of net tonne km peaked in the period from 1981 to 1986 at 5.5 percent and hasbeen declining in subsequent years; 3.3 and 1.2 percent in the periods from FY1986 to FY1991and from FY1991 to FY1995, respectively. Thus, the traffic growth was lower than the 4 percentanticipated at appraisal.

17. Key indicators for project implementation (Table 5) for FY1990, 1992 and 1994 showthat freight and passenger traffic were below targets, but traffic units per employee, locomotiveavailability, wagon utilization and gross trailing load per freight train exceeded the targets. Thelocomotive utilization for passenger services and load in net tonnes per freight train was belowtargets.

18. By and large, the key indicators met the targets during FY 1990 to FY 1994.

(i) Project Cost and Financing

19. The total cost of the project was estimated at US$1,206 million (Rs. 16,875 million), witha foreign exchange component of US$390 million and a local component of Rs. 11,805 million.The actual cost of the project is estimated at US$1,050 million (Rs. 23,503 million) with a foreignexchange component of US$247 million and a local component of Rs. 18,481 million. Theestimated and actual project costs are shown in Table 6 of Part II: Statistical Tables.

20. The actual cost details for track relay costs were made available by IR for 1,247 km of theNorthern and Western Railways. The total actual relaying cost for 1,247 km was Rs. 5,506million giving an average track relay cost of Rs. 4,415 million/km. The total relay cost for 4,000km was thus estimated at Rs. 17,660 million, out of which the cost of imported rail wasUS$121.86 million (equivalent to Rs. 2,803 million). For this review, where actual data were notavailable for converting local cost to US$ cost and vice versa, an average conversion rate of Rs.23 = 1 US$ has been adopted since the exchange rate ranged from Rs. 14.48 to Rs. 35.00 overthe project implementation period from FY1989 to FY1996. The total project cost, net of taxes,is thus estimated at Rs. 18,690 million (US$812.6 million).

21. Originally, the Bank Loan was to finance 100 percent of the foreign cost estimated atUS$390 million. Later, due to mutually agreed cancellations, the Bank financed US$248.94million of project cost. This amount was disbursed. However, the unused balance in the SpecialAccount was subsequently refunded and the uncommitted balance canceled. This reduced theloan amount to US$245.40 million. The Bank financed the foreign cost of the project and Rs.18,481 million in local cost was financed by IR.

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(ii) Economic Analysis

22. Retrospective economic analysis of the track renewal project has been carried out alonglines similar to those used for the economic analysis at project appraisal, but actual data were usedfor parameters such as traffic growth, cost of track renewal, operating cost, track maintenancecost, etc.

23. The details of the economic analysis are described in Annex D. It is seen that against theoriginal SAR estimates which had an IRR of 16, 20 and 29 percent for the typical base trafficlevels of 13, 20 and 35 million gross tonnes, respectively, the revised IRR is 14, 17 and 25percent, respectively.

24. The economic evaluation for investments made for track machines employed formechanized maintenance of track has also been carried out and is discussed in Annex D. It showsthat this sub-component of the project has an IRR of 25 percent. A sensitivity analysis showedthat the return on investment is very sensitive to a reduction in maintenance cost and therefore,this aspect should be monitored closely. The economic evaluation for investment in trackmachines for mechanization of track maintenance was not undertaken at appraisal.

(iii) Indian Railways' Financial and Economic Performance

25. The financial results of IR are summarized in Annex F. Over the period (fromFYI 987 to FYI 995), the operating ratio and the net revenue receipts as a percentage of capital-at-charge have shown a healthy trend. The dividends to general revenues have been maintainedat satisfactory levels. In all these years, IR generated a post dividend surplus.

26. Indian Railways was, however, not able to increase the total freight traffic output in termsof net tonne km in line with demand. In the period from 1990/91 to 1994/95, it grew by anannual average of 1.2 percent (Annex C: Table 4), although the overall transport demandincreased at an average estimated rate of 7-8 percent per annum. Thus, IR lost market share andlong distance traffic continued to move by road at a higher economic cost to the country.

D. PROJECT SUSTAINABELITY

27. Indian Railways, with this project, has covered almost all but about 1,000 track km ofarrears of track renewal on its group A and heavy density routes. The annual new need for trackrenewal is estimated at about 2,000 km per year and IR plans to undertake track renewal at therate of 2,000 - 2,500 km per year in the forthcoming years and remain current with trackrenewals. About 24,000 km of track are already laid on concrete sleepers and have mechanizedmaintenance in place. Indian Railways proposes to continue extending mechanized maintenanceprogressively. Activities initiated during this project are, thus, likely to be sustained in the future.

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E. BANK PERFORMANCE

28. The project objectives, components and broad implementation schedule were included inthe SAR. However, a detailed procurement schedule for various items was not defined. IndianRailways purchased rails and track equipment through more than 25 separate tenders. In theabsence of a detailed procurement schedule, delays in initiating procurement action did not standout and attract the attention of IR management.

29. Bank staff participating in supervision missions repeatedly pointed out to the Borrowerand IR that procurement action and installation work were behind schedule and needed to bespeeded up. The Bank responded to requests for approval of various award proposals promptly.Long intervals between bid opening and award recommendation to the Bank (six - twelve months)were a common occurrence during several tenders. This necessitated repeated extensions of bidvalidity. It may be noted that the Bank and the Region has since introduced much more stringentguidelines for the approval of bid validity extensions.

30. During project preparation and loan negotiations, a framework for review and evaluationof benefits from specific components was not developed. During the preparation of the ICR, itwas discovered that IR did not have a costing system capable of generating costs for specificactivities over selected sections of track. It would have been useful, if during project preparationor at loan negotiation, IR's agreement had been secured for the maintenance of accounts so thatdata such as total cost of relay for each section, track maintenance costs prior to and after relay,operating and maintenance costs of specific groups of track machines, etc., would be available.The key indicators for Project Implementation included in the SAR and monitored during projectsupervision relate to macro-level efficiency. It would have been useful to include some indicatorwith targets specifically related to project components (e.g., planned and actual start and finishdates for relay of specific sections, manpower ratio and cost of track maintenance on selectedsections laid with 52 kg and 60 kg rails having manual and mechanized maintenance, trackoccupancy time for maintenance, track capacity, utilization of rolling stock, frequency ofaccidents, etc.) for monitoring during project supervision and after project implementation.

F. BORROWER/BENEFICIARY PERFORMANCE

31. This loan enabled IR to fund the purchase of imported 60 kg, 90 UTS rails and trackmachines. Except for the loan, it was very difficult for IR to secure foreign exchange for importof rails and machines. During project implementation, the economic scenario underwent a changedue to the reform of the Indian economy. Firstly, IR could now access foreign exchange providedit had matching Indian funds to purchase it. Secondly, budgetary support was progressivelyreduced and IR had to depend increasingly on internal generation of funds and market borrowingfor capital investments. These factors, including the deployment of significant resources forgauge conversion, had a negative impact on resources that could be allocated for this project.Thirdly, as a result of the weakening of the Indian Rupee, the landed cost of imports more thandoubled during the period of project implementation (1988/89 - 1995/96). Due to the abovefactors, and slow procurement of rails and machines, the implementation of the project slowedand its completion was delayed by two to three years.

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32. Indian Railways' performance in managing the procurement was not satisfactory asevaluations and recommendations for awards took much longer than planned. The long timetaken to secure approval of award proposals at the Minister's level contributed to long delays infinalization of procurement contracts. For example, in one case of the procurement of trackmachines, the Tender Committee took seven months to finalize its evaluation report. Another fivemonths were taken to secure approval of the Minister and the Competent Authority.

33. An important element of the technical assistance component of the project was to improvethe planning and execution of IR's track renewal and maintenance program. The progress on thedevelopment and implementation of the track maintenance planning system has been slow and ithas so far resulted in only a pilot application. It was determined during the field visit that the longdelay in system development, which includes a track monitoring system that provides periodicreports on track condition computer hardware and software, including degradation models fortrack geometry and components to forecast track maintenance and track renewal requirements,has affected the morale of field staff adversely. Unless the system development andimplementation are completed quickly and the new system is extended to other divisions rapidly,the objective of developing a more cost effective, need-based track maintenance system may notbe realized. One of the reasons for the delay was IR's decision to modify an existing trackrecording car rather than procure a new high speed car for measuring current track condition.Procurement of contactless sensors and testing and validation of the modified car has takenconsiderably longer than anticipated. Since reliable data on current track condition is an essentialinput for the track maintenance system, the overall system development and application on a largescale have been delayed. The satisfactory functioning of the system will depend on the dataacquisition integrity of the car that has been modified by [R. Since this sub-project has thepotential of generating major technical and financial benefits for IR, it is important that theimplementation of the new track management systems on all major routes of IR receives supportof management at the highest level and its progress is monitored closely.

G. ASSESSMENT OF OUTCOME

34. The outcome of the project is assessed as 'satisfactory' since most of the major projectobjectives have been achieved as indicated in more detail in the evaluation in Table 1. Physicalobjectives of track renewal and procurement of track machines were met. Sector policy, financialand public sector management objectives were, however, only partially achieved. Projectsustainability has been rated as "likely" since IR is expected to continue track renewal and expandmechanized track maintenance. Borrower's performance in preparation, covenant compliance andoperation was also satisfactory. However, Borrower's performance in implementation wassomewhat deficient since project implementation was delayed by two to three years, mainly due todelays in finalization of procurements.

H. FUTURE OPERATIONS

35. Indian Railways proposes to continue with a track relay program as an ongoing activity toclear the current arrears of track relay of about 1,000 track km within a year and to ensure that

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such arrears do not accumulate in the future. Indian Railways proposes to mainly utilize 60 kg,90 UTS long-welded rail and laid on concrete sleepers and 30 cm ballast cushion on it's main highdensity corridors.

36. Similarly, the change from manual to mechanized track maintenance is being expanded asmore track is being relaid on concrete sleepers. This change should also be sustained sincemechanized maintenance leads to improved quality of track and reduced cost of trackmaintenance.

37. At the time of project preparation, rail meeting IRS/T-12-88 specification was notavailable in India. In 1990, IR asked the Indian manufacturer to upgrade its manufacturing andtreatment process so that local rails met the IRS/T-12-88 specification fully. Indian Railwaysgave the local manufacturer a special relaxation with respect to some requirements of thetechnical specification for a limited period up to March 1993 and the manufacturer was requiredto fully meet the specifications thereafter. In order to do so, the manufacturer was required tomanufacture fully-killed steel by concast process, set up in-line ultrasonic testing and improveupon dimensional and straightness tolerances for rails. An investigation by an autonomousresearch center based in Ranchi for RDSO had indicated residual stresses as high as 20 kg/sq. mmin rail manufactured locally, calling for an improvement in the cooling and straightening process.Very little progress has taken place in the quality improvement of the rails manufactured locallyand indications are that IR continues to buy rails with special relaxation which relate to quality ofsteel, ultrasonic testing and dimensional and straightness tolerances. Indian Railways runs the riskof lower than expected levels of performance from such rails in the long run. (The Indian supplierdid not bid for any of the global tenders under this project for procurement of rails to IRS/T-12-88.) Indian Railways will be well advised to insist that only those rails that fully meet thetechnical specifications be procured in future. Alternatively, consideration should be given toopening up competition through the import of high quality rails. In commenting on the draftreport, Indian Railways has indicated that the rail specifications have recently been revised, and asa result, the quality of rails from the local supplier will improve.

I. KEY LESSONS LEARNED

38. The main corridors on IR have a high traffic density and some of them are working nearfull capacity, permitting little time for track maintenance. Heavier long-welded rails are being laidon concrete sleepers to cater to higher traffic density and that in turn calls for mechanized trackmaintenance, which is not only appropriate but also more cost effective in comparison to manualmaintenance. This project, which facilitated renewal of track with 60 kg/m, 90 UTS rail (whichhas three times the life of 52 kg/m 72 UTS rail in use earlier) and mechanization of trackmaintenance was, therefore, appropriately designed and timed to serve the current and futureneeds of IR.

39. With a heavier track structure in place on main corridors and the improved quality of trackmaintenance, IR will be in a stronger position to meet the challenge of increasing transportdemand and competition in road transport, as the Indian economy continues to grow at anexpected rate of more than 5 percent per annum.

9-

40. This project has demonstrated that the mechanization of certain manual operations isinescapable. As a new generation of infrastructure is introduced, higher standards of maintenanceis called for and utilization becomes more intensive. Furthermore, even in a low wage economysuch as India, the unit cost of maintenance is lower with mechanization of selected activities.

41. Indian Railways followed its traditional procurement procedures for projectimplementation which slowed down procurement. In future operations, it will be useful to insistthat procurement procedure be modified to ensure that tenders are finalized within the original bidvalidity of 90 or 120 days. The Bank has already informed India that, as a general policy,extension of bid validity will, in the future, only be agreed to as an exception and that too onlyonce. Indian Railways could perhaps try to obtain Ministerial approval of projects as a whole sothat the requirement of individual approval of each bid evaluation at this level, with attendantdelays, is eliminated.

42. The project monitoring must place the same emphasis on the realization of perceivedbenefits as it does on procurement and physical implementation. Future projects may, in additionto overall and macro-level indicators and targets, have project-specific component-relatedindicators and targets which are indicative of project costs and benefits. In case of projects suchas track relay and mechanization of track maintenance, it is essential that costing systems, whichcan generate cost data for specific activities, be in place so that it is possible to monitor overalland unit costs, as well as the benefits that arise as a result of project implementation. Where suchcost systems and indicators are not available, their establishment should precede the start of theproject.

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PART II: Statistical Tables

Table 1: Summary of Assessments

A. Achievement of Objectives" Substantial Partial Ne,eligible Not Applicable

Macroeconomic policies O O [Sector policies O * O 0Financial objectives O * L OInstitutional Development O * O ElPhysical objectives * O [ OPoverty reduction O O OGender concerns El O O Other social objectives O O [ D

Environmental objectives O El OlPublic sector management [ * O OPrivate Sector Development O O O D

B. Project Sustainabilitv2' Likely Unlikelv Uncertain

I El El

C. Bank Performance3 ' Hi2hly satisfactory Satisfactorv Deficient

Identification * El OPreparation assistance E * OAppraisal E * OSupervision E * E

D. Borrower Performance4' Highly satisfacton Satisfactory Deficient

Preparation l * EhIplementation E ECovenant compliance E * EOperation E * E

E. Assessment of Outcome5 Highly satisfactorv Satisfactor Unsatisfactorv HiihlvUnsatisfactorv

11 Paras. 3, 6, 7, 9 and 112/ Paras. 27, 35 and 363' Paras. 29, 30 and 384/ Paras. 21, 24, 32 and 3351 Para. 34

-11 -

Table 2: Related Bank Loans/Credits

Loan/Credit Title Purpose Year of StatusApproval

Preceding operations

1. Cr. 844-IN Workshop modernization and construction 1978 CompletedRailway Modernization of wheel and axle plant.& Maintenance

2. Cr. 1033-lN Improve urban transport in Bombay. 1980 CompletedUrban Transport

3. Cr. 1072-IN Improve rural connectivity and planning 1980 CompletedBihar Rural Roads and maintenance management of rural

roads.

4. Ln. 2210-IN/Cr. 1299-IN Modernize diesel electric locomotive 1982 Completed2nd Railway Modernization & maintenance and improve technology of ACMaintenance electric locomotive.

5. Ln. 2387-IN Accommodate expected growth in maritime 1984 CompletedNhava Sheva Port traffic in the Bombay area through

specialized facilities for containerized andbulk cargo.

6. Ln. 2417-IN Electrification of key routes and 1984 CompletedRailway Electrification modernization of additional workshops.

7. Ln. 2534-IN Modernize key sections of national 1985 CompletedNational Highway highways, promote improvements in

engineering and construction, networkmanagement and contract management andassist Orissa reconstruct damaged bridges.

8. Cr. 1757-IN Provide all-weather rural roads and 1987 CompletedGujarat Rural Roads improve their construction, maintenance

and planning.

Following Operations

1. Ln. 2994-IN Promote modern maintenance management 1989 ActiveState Roads I systems and improved construction

methods.

2. Ln. 3753-IN Establish enabling environment for 1995 ActiveContainer Transport container transport and increase the

capacity and efficiency of long-haultransport of high-value general cargo.

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Table 3: Project Timetable

Steps in Project Cycle Date Planned Actual Date

Identification (Executive Project Summary) May 1986Preparation May 86-August 87Appraisal May 87 September 87Negotiations November 87 March 88-April 88Board Presentation January 88 May 88Signing - May 88First Tranche release (if applicable)Effectiveness - August 88Mid-term review (if applicable)Second (and third) tranche release (ifapplicable)Project CompletionLoan Closing December 93 December 95

Table 4: Loan/Credit Disbursements: Cumulative Estimated and Actual(US$ millions)

FY89 FY90 FY91 FY92 FY93 FY94 FY95 FY96

Appraisal estimate 10.0 40.0 125.0 250.0 350.0 390.0 -

Actual 30.0 88.0 126.0 178.0 229.0 243.0 249.0 (4.0)1"

Actual as percent of estimate 300% 220% 101% 71% 65% 62% 64%

Date of final disbursement June 20, 1995

l/ No actual disbursements, just recovery from Special Account Advance.

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Table 5: Key Indicators for Project Implementation(Broad Gauge System)

Key ImplementationIndicators in SAR ----------Estimated ----------- -----------------Actual-------"

Traffic FY90 FY92 FY94 FY90 FY92 FY94 FY95

Freight Revenue (btkm) 236 260 284 230 250 252 250Suburban pass (btkm) 59 63 66 55 63 63 68Non-sub pass (bpkm) 215 240 256 226 231 233 251

Traffic Units/Employee 285 295 310 333 367 362 380(000)

Availability (percent)Locomotive-diesel 82 83 84 90 90 90 91Locomotives-electric 80 81 82 93 93 93 93Wagons 96 96 96 96 96 96 96Coaches 88 89 90 90 91 91 91

Locomotive Utilization (kms/available loco/day)Passenger-diesel 725 700 650 702 633 594 585Passenger-electric 480 510 530 513 488 507 504Freight-diesel 400 400 380 454 436 407 413Freight-electric 420 430 440 395 395 423 423

Wagon Utilization 1,450 1,475 1,500 1,420 1,439 1,506 1,590(ntkmiwagonlday)

Gross Trailing Load per 2,000 2,050 2,100 2,094 2,191 2,264 2,273freight train (tonne)

Net-tonneLoadperfreight 1,106 1,125 1,150 1,060 1,119 1,142 1,100train

FY90 represents April 89-March 90 and so on.Source: IR data and Year Book

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Table 6: Project Costs

Appraisal Estimate

----------Rs Million ----------- ------------US$ Million----------

Local Foreign Total Local Foreign Total1. Track Renewal 10,185 3,579 13,764 708 274 9822. Track Equipment 1,437 1,460 2,897 94 114 2083. Locomotives and 173 1 174 13 - 13

Rolling Stock4. Training and 10 30 40 1 2 3

Technical Assistance

5. Total Cost 11,805 5,070 16,875 816 390 1,206

Source: SAR

Actual

= Rs Million US$ Million-

Local Foreign Total Local Foreign Total1. Track Renewal 14,857 *2,803 17,660 *645.96 121.86 767.822. Track Equipment 3,624 2,179 5,803 *157.56 123.33 280.893. Locomotive and - - - - - -

Rollng Stock4. Training and - *40 40 - 1.73 1.73

Technical Assistant5. Total 18,481 5,022 23,503 803.52 246.92 1050.44

*Based on average exchange rate Rs. 23 = 1 US$About US$2 million of the total loan sanction and disbursed amount has remained unutilized and is lying in theloan special account. This amount is being refunded to the Bank.

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Table 7: Status of Legal Covenants

Agreement Section Description of Covenant Comments

LOAN 4.01 Have records and accounts of Audit report for 1993/91departments or agencies of Borrower of has been received.each fiscal year audited in accordancewith appropriate auditing principles andfurnished to Bank not later than elevenmonths after end of year.

4.02 Have Special Account of each fiscal year Audit report for 1993/94audited in accordance with appropriate received, that forauditing principle and furnished to Bank 1994/95 is outstanding.not later than six months after end ofyear.

4.03 Maintain passenger fares and freight In compliance.rates and take all other action necessaryor appropriate to enable Railways to meetannually out of internally generatedresources all operating expenses anddivided payments on capital-at-charge.

4.04 Ensure that provisions to Depreciation In compliance.Reserve Fund during any given fiscalyear 1990 through 1994 shall be not lessthan the budgetary provision of fiscalyear 1989.

4.05 Review each year the implementation of In compliance.Railways' annual plan and achievementsrelative to objectives in Corporate Plan.

Minutes para. 5 Inform Bank of conclusions reached and In compliance.decisions taken regarding depreciationprovisions and policy.

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Table 8: Compliance with Operational Manual Statements

There is no OMS relevant to the project that have not been complied with and/or beenacted against.

Table 9: Bank Resources: Staff Inputs

Planned2' Revised2' ActualStage of Project Cycle Weeks 1000 US$ Weeks 1000 US$ Weeks 1000 US$

Through appraisal - - - - 146.9 336.2

Appraisal-Board - - - - 29.9 73.2

Board-effectiveness - - - - l

Supervision - - - - 102.1 197.5

Completion - - - - 0.2 0.7

TOTAL - - - - 279.1 607.6

11Included in supervision2/ Not available

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Table 10: Bank Resources: Missions

PerformanceRating

Stage of Month/ year No. of Days Specialized stafe Implmt Dev't Types ofproject cycle persons in skills represented status Impact problems'

field

Through April 86 4 14 FA, TE, REappraisal Sept.-Oct. 86 2 9 FA,TE

Feb. 87 4 11 DC,TE,RE,TELMay-June 87 6 21 FA,TE,

RE,TEL,TC,OIS(Appraisal) Sept. 87 3 16

FA, TE, RE

Appraisalthrough Boardapproval

Boardapprovalthrougheffectiveness

Supervision Oct. 88 5 10 DC, FA, TE, RE 1 1Jan.-Feb. 89 2 22 RE 1 1July 89 3 8 TE, FA 1 1Oct.89 2 15 FA,RE 1 1April 90 4 24 FA, RE, RS, EC 1 1 PNov.-Dec. 90 2 16 FA, RS, EC 1 1 PNov. 91 4 14 FA, RS, EC, ME 2 1 PFeb. 92 4 7 FA, RS, EC, ME 2 1 PSept.-Oct. 92 3 14 RS, CE, ME 2 1 PFeb.-Mar. 93 3 22 RS, CE, ME 1 1 POct. 93 2 5 RS, ME 1 1 TDec. 93 2 2 RS, ME 1 1 TAug. 94 3 15 EC, CE, ME HS HS TMar.-April 95 2 18 EC, ME HS HS TSept.95 2 8 EC, ME HS HS T

Completion Jan. 96 2 5 ME, CE

' Specialized Staff: DC (Division Chief), CE (Civil Engineering Consultant), EC (Economist), FA (FinancialAnalyst), ME (Mechanical Engineering Consultant), OIS (Operations Information Systems Consultant), RERailway Engineer), RS (Railway Specialist), TC (Telecom Consultant), TEL (Telecom Engineer), TE(Transport Economist)

2' P=Procurement; T=Teclhnical

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Annex A


INDIATHIRD RAILWAY MODERNIZATION PROJECT

(LOAN 2935-IN)

Aide Memoire

1. This aide memoire presents the findings of the supervision mission for the RailwayModernization III Project (Loan 293 5-IN). The mission included Messrs. H. Hansen, TaskManager and J. Sondhi (Consultant) and held meetings with IR officials between September 11and 18, 1995. The mission appreciates the help of Mr. C. S. Sharma, Executive Director (L&F),Mr. Rakesh Chopra, Executive Director (TM) and Mr. Gaurav Dave Director (Plng.) and otherstaff of Indian Railways.

2. The original loan amount of US$390 million was earlier revised to US$252.50 million dueto cancellations requested and agreed. Recently another US$3.56 million has been canceled thusreducing the loan amount to US$248.94 million.

3. The status at the end of September 1995 for various components of the loan was:

Item Allocation Disbursed(US$ Million) (US$ Million)

Rails 117.50 121.86Track Machines 129.44 120.97Consultancy 2.00 0.83

Total 248.94 243.66

4. Rails: All contracts for the supply of rails have been completed and materials suppliedand paid for. No further disbursement is to be made.

5. Track Machines and Consultancy: All contracts have been placed for trackmachines. A commitment for US$781,156 has recently been made for consultancy relatedwith training of civil engineers. It is anticipated that between October and December 1995,payments for most of the remaining amount will be made against pending contracts for trackmachines and consultancy. A small amount, not disbursed till project closing, is expected tobe disbursed in the first quarter of 1996.

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6. Cancellation: Indian Railways' request for further cancellation has been agreed to andUS$3.56 million was canceled. This cancellation is due to savings as a result of favorablecurrency fluctuation in some of the contracts.

7. Closing Date: The closing date has been extended to December 31, 1995. Most pendingdisbursements are expected to be made before the closing date.

8. The mission once again requested IR to furnish detailed information on actual cost andphysical progress for various elements of the project since the same will be required for theProject Implementation Completion Report (ICR). The cost information should indicate cost fortotal imports, local taxes and duties separately. It was requested that the cost data and physicalprogress be furnished latest by November 15, 1995. Indian Railways and DEA were remindedthat the Special Account Audit report for 1994/95 was due by September 30, 1995.

9. Indian Railways' officials were requested to furnish an update on the following. Thesemay also be furnished latest by November 15, 1995:

(i) Measures taken to improve the quality of rails supplied to IR by Bhilai Steel Plant.

(ii) Status for the acquisition of high speed Track Recording Cars using contactlesssensors.

(iii) Setting up of an effective Track management System with the help of a modernTrack Recording Car.

(iv) Fixing of "Thresh hold Values" for track maintenance and renewal with theassistance of Derby Research Center and results of validation trials.

(v) Selected Operational Statistics for the year 1994.

8. The audit report of the project accounts for the year 1993-94 has now been submitted.The next report (for 1994-95) was due in February 1996. The audit report for the specialaccount for 1994-95 is now overdue (September 1995). This may be expedited.

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Annex B



(LOAN 2935-IN)

A. Borrower/Beneficiary Contribution

The performance of the project was generally satisfactory. However, the followingobservations may be considered by the World Bank in formulating subsequent project, as thesehave arisen out of the experience gained on this project:

(1) The World Bank procurement procedure requires very frequent consultation with theBank. World Bank could consider standardizing document sectorwise particularly forthe rail sector where considerable data is to be provided.

(2) At the time of formulating the project, the evaluation criteria for the success of theproject and the format in which the data should be collected and maintained were notspecified. In several cases, these may be at variance with the set norms andprocedures of the organization. World Bank may consider formulating afterdiscussion with the organizations, a suitable success criteria which should bereviewed periodically, instead of leaving it for a final review at the end of the project.Together with this, the above mentioned format for data collection should also befinalized.

(3) The criteria for mid course changes in the procurement of the items and mid courseproportionate reduction and increase in the fund resources should be made moreliberal by the World Bank to allow flexibility in the project as also unnecessaryexpenditure of commitment charges before surrender of excess funds.

B. Indian Railways' Comments of Draft ICR

The following are the comments on the above ICR. The relevant paragraphs of the draftmay be modified keeping these comments in view:

(1) Improvement of quality of indigenously manufactured rails - The specificationsfor the rails have been revised recently in consultation with the Steel Authority ofIndia Ltd. These revised specifications will result in the manufacture of improvedquality of rails indigenously. (This point has been reflected in para. 37 of the report.)

(2) Track Maintenance Planning System - The system envisaged:

(i) development/procurement of a high speed Track Recording System for IR

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(ii) development of computer based track management system for need basedtrack maintenance and monitoring of resources including on-line trackmachines; and

(iii) development of threshold value of track maintenance.

The status of the above is as follows:

Item (i): Global bids were called for procuring a Track Recording Car (TRC) becausefinal bidder with whom negotiations were going on resiled from the original conditions; the offerwas closed.

Simultaneously, IR had upgraded two of its own TRCs for broad gauge for recording at ahigh speed with the capability of attachment with fast mail/express trains. Board, therefore,decided to upgrade under Phase-HI its own two TRCs by providing contactless sensors tomeasure alignment and gauge since most of the other measuring devices have been upgraded tomeet all other above requirements, instead of going in for an imported TRC.

Contactless sensors for both TRCs have been procured. These have been provided on oneTRC and tested. First run with mail-express attachment is done on 17th July. Thus, IR hadachieved the objective up to 130 kmph.

Item (ii): Board decided to entrust task of development TMS to CRIS after foreignfirms were found to charge very high. Phase-I of the TMS was successfully developed in 1990-92and implemented. Under Phase-I of development one sub-division of each zonal railway wasprovided with TMS. Under Phase-I1 in 1992 this was provided on the whole of Allahabaddivision of Northern Railway besides above sub-divisions. As a next step, 27 divisions of thegolden quadrilateral and its two diagonals were located and identified. It is being provided underthe 9th Plan for a modular composite for computerization in the civil engineering department ofIR.

Item (iii): A project was made by RDSO and consultancy awarded to Transmark withthe approval of World Bank and Railway Board. The contract was signed in 1991. The modulesto be developed including revised track geometry for IR for a range of speeds and trafficcategories and study of TRC on IR and BR to work out methodology for generating correctionswith input to 'roll' and 'Yaw'. The penultimate phase report of Transmark was available only inDecember 1995. The same is under consideration of RDSO and Board for further action.

- 22 -

Annex CTable 1



(LOAN 2935-IN)

Proiect Results

Table 1: Summary of Track Renewal Planned and Actually Carried Out

Track Renewal Average Renewal Average Annualkms Programme Traffic Carried Traffic Growth in

km 1986 MGT out km 1994-95 TrafficMGT * Percent

Group A RoutesHowrah-Mughalsarai 1,333 400 32 401 35.2 1.0Mughalsarai-Delhi 1,622 450 31 487 40.7 3.2Howrah-Nagpur 2,623 400 17 755Ballarshah-Gudur 1,493 150 15 150 26.4 6.5Gudur-Madras 272 - 13Mathura-Bombay 2,471 600 16 600Delhi-Ballarshah 2,301 400 17 375 21.6 2.2Wardha-Bombay 1,516 400 19 585 20.3 0.7

Total 13,631 2,800 21 3,353

Other Heavy Density Freight Routes

Katni-Bina and Itarsi- 1,126 475 16 220Bhusawal

Delhi-Ambala-Sirhind 428 100 18 37Bilaspur-Anuppur Katni

and Kottavalasa- 1,082 475 12 144Kirandul

Nagda-Bhopal 301 150 17 127

Total 2,937 1,200 15 528Grand Total 16,568 4,000 19 3,881

*Traffic Density for a few representatives sections was obtained from IR.Source: IR data

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Annex CTable 2

Table 2: Track Equipment

Machine Unit Quantity Quantity ProcuredOriginal Plan Modified Plan

Track Relaying Train No 2 2 2Ballast Cleaning Machine No 7 7 7Ballast Cleaning Machines for No 2 2 2TurnoutsBallast Regulator No 7 7 7Continuous Tamping Machine No 30 30 30Points and Crossing Tamper No 10 10 10Dynamic Track Stabilizer No 1 1 1Crane for Points and Crossings No 8 8 8Flash Butt Welding Plant Stationary No 3 - -

Flash Butt Welding Plant Mobile No 3 - -

Grinding Machine No 1 1 1Wheel Flaw Detector No 4 - -

Track Recording Car No I - -

Sleeper Exchange Machine No 8 8 8Shoulder Ballast Cleaner No 4 4High Output Tamper No 15 15Point and Crossing Tamper No 10 10Ballast Cleaning Machines No 5 5Ballast Regulator No 15 15'Dynamic Track Stabilizer No 3 3Dynamic Track Stabilizer No 3 3High Output Tampers No 6 6Contactless Sensors No 2 2

Source: JR data.

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Annex CTable 3

Table 3: Traffic Growth by Major Commodity(Billion NTKM)

Year Ending March 31---------------Project* --------------- --------------Actual--------------

1988 1990 1995 1988 1990 1995

Coal 74.1 88.2 118.4 78.67 85.11 105.26Cement 15.2 15.5 23.0 14.54 17.74 19.06Fertilizers 15.2 15.7 18.9 14.36 17.38 19.30Petroleum Products 10.9 13.9 15.0 13.78 15.70 18.17Foodgrains 39.2 39.7 42.4 41.67 31.68 27.08Pig Iron & Steel (Finished 10.9 12.5 16.8 11.54 11.79 13.65Products)Total Rev. Traffic 217.8 230.9 294.6 222.53 229.63 202.52

*As per SAR, World Bank projections of total traffic, but based on proportionate commodity composition inIR Corporate Plan.

Source: IR data and Year Book.

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Annex CTable 4

Table 4: Rail Freight Traffic(Net Tonne Km. Million)

Year Ending March 311971 1981 1986 1991 1994 1995

Total Rev. Traffic 110,700 147,652 196,601 235,700 252,410 249,564Non-Rev. Traffic 16,662 10,822 9,303 6,920 4,720 5,000

Total All Traffic 127,362 158,474 205,904 242,620 257,130 254,564

Freight Traffic Lifted(Million Tonnes)

1971 1981 1986 1991 1994 1995

Total traffic 196.50 220.20 286.30 341.40 377.47 381.55

Average Annual Growth of Traffic(%)

Period Net Tonne Km Tonnes Lifted

1971-81 2.2 1.11981-86 5.5 5.51986-91 3.3 3.51991-95 1.2 2.81986-95 2.4 3.2

Source: I R Year Books

- 26 -

ANNEX D

IMPLEMENTATION COMPLETION REPORTINDIA

THIRD RAILWAY MODERNIZATION PROJECT(LOAN 2935-IN)

Economic Analysis

Track Renewal

The evaluation of this project component was originally based on the economic analysis ofcomplete renewal, comprising re-ballasting, new sleepers/fasteners and new 60 kg/m 90 UTS rail fordifferent levels of traffic (13, 20 and 35 Million Gross Tonnes) expected to be experienced on variousselected routes for track renewal. The costs and benefits were converted to economic prices by expressingthe imported content c.i.f. prices and applying the factor of 0.8 to local costs. Costs in this analysis werenetted out for the value of released materials in subsequent renewal cycles in the 'without project' case, butnot for the first renewal since the value of released material was the same. The analysis period taken wasthe period required to exhaust the service life of 60 kg/90 UTS rail. Assumptions made at the projectappraisal and for post-project analysis are:

At Appraisal For Post ProjectAnalysis (1991/92)

Ratio of Net/Gross traffic % 60 60Growth per annum % 5 3Est. Cost of track renewal Rs.00052 kg/72 UTS 1665 272060 kg/90 UTS 1900 3125Value of materials released Rs.00045 kg/72 UTS 15052 kg/72 UTS 200 33960 kg/90 UTS 310 469Operating Costs per 000 NTKM Rs.without project-initially 200 265-after renewal with 52 kg 196 260with project 190 252Track maint. costs per km Rs.000without project-initially 48 22-increasing at annual rate 2 1-years 1-3 after renewed with 52 kg 10 22-thereafter 36 22with project-years 1-5 5 22 inyear 1,thereafter 24 10 in year 2 and soon.Service life of rail MGT52kg/72 UTS 250 25060 kg/90 UTS 800 800

- 27 -

The rationale for these assumptions are discussed below:

Traffic Growth: The actual traffic growth for IR for the period 1985/86 to 1994/95 interms of net tonne km was 2.4 percent per year against an anticipated growth rate of 4 percent(Annex C: Table 4). At appraisal it was estimated that on the main rail corridors the trafficdensity in terms of million gross tonnes (MGT) will grow at a rate of 5 percent per year, a ratesomewhat higher than the average traffic growth for the entire railway. For IR, the traffic densitygrew at about 2 percent per annum during the period 1985/86 - 1994/95. It is seen that onspecific group A routes the annual growth rate of MGT varied from 0.7 percent (Wardha-Bombay) to 3.2 percent (Mughalsarai-Delhi) except that on one corridor Balharshah-Gudur, itgrew at an annual average of 6.5 percent. The average traffic growth rate on the main corridorsfor re-evaluation has been assumed at 3.0 percent per year, i.e., a little higher than the nationalaverage.

Cost of Track Renewal: This project has been carried out over the period 1988/89 -1995/96. Year 1991/92 was chosen as the reference year for cost of track renewal. Year1991/92 has also been chosen as the first year for economic re-evaluation. Cost of track renewalfor 1991/92 with 60 kg, 90 UTS rails was estimated from the actual project costs less taxes andduties. The local costs were converted to economic cost by applying a factor of 0.8. Theeconomic cost of track renewal with 60 kg, 90 UTS rails came to Rs. 3,125 rnillion per km. Thecost of relay of 52 kg, 72 UTS was estimated in the same proportion as at appraisal (87 percent).The residual value released assist was estimated at 15 percent of cost of relay.

Operating Cost Saving: The approach undertaken at appraisal was retained except thatthe actual operating cost as in 1991/92 of Rs. 265 per thousand NTKM was adopted. A saving of2 and 5 percent after renewal with 52 kg and 60 kg rails, respectively has been assumed as atappraisal.

Track Maintenance Cost: At the time of appraisal (1988) track maintenance was largelyundertaken by manual means. In the meantime, track maintenance has been mechanized for52 kg as well as 60 kg track laid on concrete sleepers. In the re-evaluation, the cost ofmechanized maintenance has been used.

On the mechanized maintenance section laid with 52 kg rails, there are two elements ofcost. As per IR data, these are firstly, the tamping cost (undertaken once a year) which isestimated at Rs. 12,000 per km and secondly, the non-tamping cost estimated at Rs. 10,000 perkm per year, giving a track maintenance cost of Rs. 22,000 per year. This does not include thecost of patrolling, drainage and other maintenance activities on and along the track.

It has been the experience that on 60 kg rail track, tamping is required once every twoyears. Therefore, the track maintenance cost is Rs. 22,000 in the first year and Rs. 10,000 in thesecond year and so on. Indian Railways has had the same maintenance system and cost, even inthe early years after relay, and the reduced cost of maintenance assumed in year one to five aftertrack relay in the SAR did not materialize.

-28 -

Service Life of Rails: Assumptions as at appraisal of 250 MGT for 52 kg, 72 UTS and800 MGT for 60 kg, 90 UTS were retained for re-appraisal also.

Investment for Mechanization of Track Maintenance: Since similar investments havebeen made for mechanized track maintenance for 52 kg and 60 kg rail track, these investmentswere not considered for re-evaluation.

An economic cost-benefit analysis was undertaken and shows an economic rate of returnof 14, 17 and 25 percent for track relay component on sections having traffic density of 13, 20and 35 MGT, respectively. Somewhat lower IRR than the estimate at appraisal is perhaps due to alower rate of growth in traffic density.

There was no change in IRR when it was assumed that the frequency of tamping for tracklaid with 60 and 52 kg rails would be the same.

Track Mechanization

The appraisal report did not evaluate the investments proposed for track machines. Alittle over half (US$23 million) of the Bank loan has been utilized for the procurement of trackmachines for track relaying and mechanized maintenance.

As a result of the introduction of a large number of track machines, it has been possible forIR to mechanize track maintenance on 24,000 track km of track laid on concrete sleepers. Themechanization has helped IR reduce the cost of track maintenance substantially. These costsavings are achieved mainly through a reduction in cost of maintenance staff. As a result ofmechanization, the staff deployment is reduced from 2.2 to 1.1 men per track km for main highdensity corridors. Over 10,000 staff reduction has already taken place, mainly through non-replacement of retiring staff.

It is estimated that every 500 track km requires one high output tamper, one point andcrossing tamper and half ballast regulator. These machines were imported and their economic coston c.i.f basis was US$2 million, equivalent to Rs. 46 million, for each section of 500 track km.Thus the investment for track mechanization was Rs. 92,000 per track km. As per IR data theoperating and maintenance and overhaul cost of track machines per track km is estimated atRs. 4,416 and Rs. 13,948, respectively. The overhaul cost is incurred at mid life, that is, afterseven years as these machines have an economic life of 14 years. Using a factor of 0.8, theeconomic costs for operation and maintenance and overhaul come to Rs. 3,530 and Rs. 11, 150,respectively. The economic cost of manual track maintenance for A routes and heavy densitycorridors for 1991/92 was estimated at Rs. 58,000 per year (mainly cost of labor) which includesall costs such as patrolling, drainage and other maintenance activities. Since after mechanizationthe labor strength is reduced to half, the track maintenance cost has been assumed at Rs. 34,800per track km for track after maintenance is mechanized (60 percent of original cost). Aneconomic evaluation was undertaken for a period of 14 years (life of machines). The residualvalue of machines was taken at 10 percent. This analysis shows an economic rate of return of 25percent for investments for the mechanization of track maintenance. With post-projectmaintenance cost of 70 and 50 percent, the IRR changes to 17 and 37 percent indicating that the

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return on investment is very sensitive to a reduction in maintenance cost and the same should bemonitored closely.

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ANNEX E



(LOAN 2935-IN)

Proiect Implementation Schedule and Actual Period of Implementation

IR Fiscal Year 1988 1989 1990 1991 1992 1993 1994 1995 1996

Quarter 1234 1234 1234 1234 1234 1234 1234 1234 1234

1. Track RenewalPreparation of tender ___ _documentsTendering _ __ __

Bid evaluation and award _ _

Delivery _ _ -------Installation _ _ ___ -------

xxxx xx xxx x_x xoooc xx xoooc2. Track MachinerySpecification and __ _ -------tenderingBid evaluation and award -_ _ _ -_-

Delivery _ _ -------

XXX XKXXX )DXX X XOCXXX XXXXX XXXCommissioning __ _ -------

___ ___ xx xx xxx m xx xxxxx I xwcx xxxoo

3. Locomotives andWagonsManufacturing _Delivery ----_--

4. Training and technicalassistanceStudies and training _ _ _ _ -------

x xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx

Planned Schedule----------Actual Implementation xxxxxxxxxxxFiscal Year: 1988, Year ending March 31, 1988 and so on.

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ANNEX F



(LOAN 2935-IN)

Indian Railways Financial Statement

(In Current Rupee-Million)Year Ending March 31

1982 1987 1992 1994 1995

Total Revenue 35,379 75,057 141,137 179,460 201,001Total Working Expenses 27,193 69,006 125,728 151,345 165,901Appropriation to Pension Fund 1,129 3,500 11,800 15,000 20,050Appropriation to DRF 3,500 12,500 20,000 18,750 18,850OperatingIncome 3,557 6,051 15,409 28,115 35,109Other operating Income 474 757 3,024 2,906 2,972Dividend Payment 3,565 5,788 11,059 12,960 13,617Net Income 466 1,019 4,350 18,061 24,464

Operating Ratio (percent) 89.92 92.2 89.5 82.9 82.6Ratio of Net Rev. to Capital-at-charge 6.0% 6.6% 8.7 13.7 15.3

1995: 1994-95 i.e., year ending March 1995 and so on.Source: IR Year Books.

IMAGING

Report No: 16149Type: ICR

Documents

World Bank Document · Report No. 16149 IMPLEMENTATION ... DEA Department of Economic Affairs RDSO Research, Design and Standards ... Technical Assistance and Training .. 2