CHAPTER 6

RAIL AND ROAD: RELATIVE FINANCIAL COSTS

We shall now make a comparative analysis of the rail and road modes in

terms of the financial costs of transport. As in the previous chapter on energy

consumption and environmental pollution, the current analysis is based on the

equivalent volumes of traffic on both modes worked out earlier. The running of the

equivalent volumes of traffic on both modes involves demands on financial

resources. We have looked at financial costs from the point of view of the transport

operator as well as that of the transport user. In the case of the latter, such items of

transport cost as are not reflected in market transactions are considered, namely, the

value of passenger time and the inventory cost of commodity. In addition, the cost of

the use of infrastructure is included in the financial cost of transport, as will be

described later.

Financial costs are estimated for both modes on the basis of relationships

involving prevailing either traffic density or prevailing speeds, both of which influence

the components of operating costs. These relationships will be described in detail in

the subsequent sections. In making a comparative assessment of financial costs on

both modes, we have, in the case of passenger movement, considered three options

on road as in the previous chapter- a combination of car and bus, car only, and bus

only. The effects of road improvement on the financial cost of road transport have

also been considered. We shall briefly discuss developments in cost analysis of the

transport sector before proceeding to the detailed estimation of the financial costs of

rail and road in our selected sections of study.

Cost analysis has been a central feature of transport economics since its

inception (Oum and Waters II, 1997}. The early principal concern was rail transport,

which raised issues of costs of pricing of various services and the problem of pricing

them. In the first two decades of the twentieth century, it was widely believed that at

least half of rail costs did not vary with traffic volumes. Since in such a situation

ma•·ginal cost pricing would not be financially viable, the question arose how to price

multiple products in the presence of unallocable costs. Further analysis of costs,

however, revealed closer links between volumes of rail activity and levels of costs.

Most academic research on transport cost analysis has focused on aggregate

costing (Oum and Waters II, 1997). Transport researchers normally use firm-specific

158

aggregate data on costs, output measures and other variables in order to derive

aggregate cost functions. Since the industry as a whole does not make optimal

choices, the validity of estimating models from industry-wide data is questionable.

However, most transport cost functions have been estimated on firm-specific data.

The origins of empirical cost functions lie in rail-cost analysis. The particular feature

of the rail industry is that it is a multi-product industry, prompting researchers to -·

devise ways of measuring cost-output relationships and to inquire into possible scale

economies. Early formulations related unit cost of rail operations to output per mile of

track. The rail industry itself largely adopted linear functions applied on a

disaggregate basis to portions of rail operations, although there were other

formulations of aggregate cost functions for railways as well as for other modes. The

introduction of so-called flexible functional forms in cost function research was a ·'

major breakthrough in the early seventies of the iast century. Empirical papers began

to be published using such forms as the generalized Leontief function, the translog

function, and the generalized Cobb-Douglas function. The translog function proved to

be the most popular since it is easier to estimate and interpret, being a quadratic

function with all arguments in natural logarithms. However, all flexible forms can only

handle a few categories of output and other variables since there are a large number

of coefficients to estimate.

The most long-standing reason for estimating aggregate cost functions has

been to test for economies of scale (Oum and Waters II, 1997). These exist when

unit cost decreases with size of firm (in terms of both output and network size). In

addition, economies of traffic density exist when unit cost decreases as traffic density

increases or output increases on a given network size. Economies of scope have

also been identified: these exist when it is cheaper to produce two or more services

jointly by a single firm than producing each of them separately by an independent

firm.

A recent development is the frontier cost function. Traditional econometric

methods of estimating cost and production functions assume that all firms are

successful in reaching the efficient frontier. However, this may not be the case

always. Researchers now estimate frontier production or cost functions which allow

for the possibility that some firms may not be on the efficient frontier. This is done by

specifying an inefficiency term in the cost or production function which may have

deterministic or stochastic value. The deterministic frontier function can be estimated

by a variety of methods such as the corrected ordinary least squares method and the

159

inclusion of firm dummy and/or firm-specific time trend variables in the cost

(production) function. The stochastic frontier cost/production function is

computationally complex and time-consuming to estimate. Improvements in the

formulation of transport cost functions have come about through better specification

of output and output attributes which recognizes differential costs among

heterogeneous services. Methods of decomposing unit cost changes into potential

sources have advanced rapidly in recent years, allowing researchers to identify

correctly changes in productive efficiency (Oum and Waters II, 1997).

Although cost functions play a central role in most analyses of transport costs,

they require extensive and good-quality data spread over time and space. Even

though it may be possible to obtain some data on the costs of rail operations in India,

it is difficult to obtain time-series and cross-sectional data on the costs of running

road transport. (An attempt has, however, been made recently to apply the stochastic

frontier method in order to understand the cost efficiency of state-owned bus

undertakings in India [Bhattacharya, A., S.C. Kumbhakar and A. Bhattacharya

(1995), 'Ownership Structure and Cost Efficiency: A Study of Public Owned

Passenger-Bus Transportation Companies in India', The Journal of Productivity

Analysis, Vol. 6, No. 1] Reliance on the accounting data and financial reports of

transport firms may lead to seriously biased results since such data, especially

published data, is designed to serve the firm's interests of tax savings and public

relations with shareholders, creditors, stock markets, and the regulatory authority

(Oum and Waters II, 1997). The book value of capital stock is very different from the

economic value of capital stock, and interest payments and depreciation reported in

books are very different from the opportunity costs of using existing capital stock.

Another limitation of cost function analysis is that it is not practical to estimate a full

cost function; researchers often estimate a function for a specific variable component

of cost.

As mentioned earlier, in this chapter we make a comparison between the rail

and road modes of the financial costs of transport across the identified sections of

study. Cost functions play a role in our analysis only so far as the various items of rail

cost are derived on the basis of cost coefficients expressed in terms of rail output

such as a thousand gross tonne kilometres (GTKMS). Such cost coefficients are

published yearly by the Indian Railways. In the case of the road mode, the operating

costs of vehicles are estimated by applying time-related and distance-related

congestion factors to costs in uncongested conditions as presented in the manual of

160

the Indian Roads Congress (IRC, 1993). We are concerned with the ranking of the

two modes in terms of the use of financial resources such that in planning for the

expansion of transport capacity, the policy-maker may concentrate on the particular

transport mode that shows greater cost efficiency. There is a distinction between the

direct costs influencing the transporter and those influencing the customer. In this

study, however, we integrate the financial costs of transport from the point of view of

the transport supplier and from the point of view of the transport user in order to

make comprehensive estimates of the demand on financial resources for the

operation of the rail and road modes of transport.

One major problem in making an intermodal cost comparison estimates

arises from the fact that the Indian Railways' cost estimates include both operating

and infrastructure expenses, while the data available to work out road vehicle

operating costs does not include any share of the cost of maintenance, expansion

and construction of road infrastructure. Unlike the user of the rail mode, the

consumer of transport services cannot be excluded from the use of fixed

infrastructure on road; at best, the exclusion principle may be weakly enforceable.

The structure of road tax in the country has a weak and indistinct relationship with the

true marginal cost of supply or marginal social benefit of road service. In our study,

we have therefore made separate estimates of costs of road infrastructure service

and added them to the operating costs in order to arrive at the integrated costs of

road transport, which would be comparable with the costs of rail transport. Strictly

speaking, however, the charge for road infrastructure provision and maintenance is

an external cost that does not influence the decisions of the road transport operator

·or user.

There is also a second order of problem in any comparison of costs between

rail and road. The costs of the railways are inclusive of all taxes and subsidies. On a

large number of items, the railways are not required to pay duties whereas for an

item such as electricity it is obliged to pay a higher rate than other consumers. Since

the railways' cost items are grouped under such broad heads as traction cost and

cost of maintenance and provision of track, it is not possible to separate out each

material and examine its tax or subsidy component. Hence our comparison of costs

between the two modes is strictly in financial terms (i.e., inclusive of taxes and

subsidies) rather than in economic terms. The latest railway cost data available was

for the year 1997 -98; all our estimates of costs of transport are in terms of prices

prevailing in this particular year.

161

We describe in the following sections assumptions and the methods behind

the estimation of vehicle operating costs, road infrastructure costs and the costs of

railway operations. This is followed by the comparison of financial costs of transport

of the rail and road modes over the period 2000-01 to 2010-11 in the selected

sections.

Vehicle Operating Costs on Road

Vehicle operating costs (VOCs) in financial terms for uncongested conditions

are available in the manual of the Indian Roads Congress (IRC) on the economic

evaluation of highJv'ay projects in India (IRC, 1993). The means of working out

adjustment factors to allow for the effects of increasing congestion are provided. The

components of VOC are the following: fuel cost, tyre cost, engine oil cost, other oil

cost, grease cost, spare cost, maintenance cost, fixed cost (including overheads,

administration and interest on borrowed capital), depreciation cost, crew cost (in the

cases of bus and truck), passenger cost (i.e. value of passenger time), and cost of

commodity in transit. Adjustment factors to work out VOCs in congested conditions

are derived by using certain relationships involving traffic density and speed. Traffic

density is measured by the ratio of current traffic volume to the road capacity, both of

which are denoted in passenger car units (PCUs).

Tables 6.1 and 6.2 present vehicle operating costs in financial terms per

kilometre for different vehicles on a two-lane and a four-lane road in uncongested

conditions in financial terms. These costs are expressed in 1997-98 prices by using

the deflator of road transport product. The costs as given in the tables go up with

increasing congestion levels on account of such factors as increase in fuel

consumption, time loss and wear and tear of vehicles. To adjust the costs for

congestion, the IRC manual breaks down the components of VOC into distance­

related and time-related components. The distance-related components are the costs

of fuel, lubricants, tyre, spare parts and maintenance labour. The time-related

components are the cost of depreciation, fixed costs, and wages of crew. The values

of passenger-time and commodity in transit are items of user cost that are not

reflected in market transactions. They are adjusted for congestion in the same way

as the time-related components of operating cost.

162

Table 6.1 VOCs in Uncongested Conditions at 1997-98 Prices for a Two-lane Road (Rs per km)

Fuel OOL Grease Spares Maintenance Depn. ~rew Cost Vehicle Terrain Cost Tyre Cost EOL Cost Cost Cost Cost Cost Fixed Cost Cost

New-Tech Level 1.25 0.14 0.17 0.04 0.03 0.55 0.3C 0.79 0.14 o.oc Car Rolling 1.27 0.14 0.21 0.06 0.04 0.55 0.3C 0.94 0.15 o.oc

Old-Tech Level 1.8_3 0.22 0.17 0.04 0.03 0.60 0.3j 1.00 0.20 o.oc Car Rolling 1.82 0.23 0.21 0.06 0.04 0.60 0.33 1.19 0.24 0.00

Bus Level 1.54 1.59 0.55 0.0? 0.01 0.57 0.23 2.29 0.41 1.78

Rolling 1.66 1.90 0.57 0.07 0.01 0.63 0.2!: 2.58 0.47 2.01

LCV Level 1.2_0 0.69 0.09 0.03 0.00 0.36 0.13 3.93 0.66 1.22 Rolling 1.43 0.80 0.11 0.03 0.00 0.36 0.1_3 4.44 0.74 1.38

HCV Level 1.64 1.67 0.21 0.09 0.03 0.49 0.19 2.71 0.50 1.32

Rolling 1.77 1.94 0.27 0.09 0.03 0.49 0.1_9 3.06 0.56 1.48

MAV Level 3.07 2.79 0.21 0.09 0.03 0.96 0.36 4.65 1.10 1.94 Rolling 3.86 3.23 0.27 0.09 0.03 0.96 0.36 5.20 1.23 2.16

Table 6.2 VOCs in Uncongested Conditions at 1997-98 Prices for a Four-lane Road _(Rs ~er km)

Fuel OOL Grease Spares Maintenance Depn. Vehicle Terrain Cost Tyre Cost EOL Cost Cost Cost Cost Cost Fixed Cost Cost Crew Cost

New-Tech Level 1.31 0.14 0.17 0.04 0.03 0.55 0.30 0.73 0.11 0.00 Car Rolling 1.31 0.14 0.21 0.06 0.04 0.55 0.30 0.88 0.14 0.00

Old-Tech Level 1.84 0.22 0.17 0.04 0.03 0.60 0.33 0.99 0.20 o.oc Car Rolling 1.82 0.23 0.21 0.06 0.04 0.60 0.33 1.18 0.22 o.oc

Bus Level 1.57 1.59 0.5!: 0.07 0.01 0.57 0.23 1.92 0.35 1.5(

Rolling 1.65 1.90 0.57 0.07 0.01 0.63 0.25 2.17 0.40 1.69

LCV Level 1.2_8 0.69 0.09 0.03 o.oc 0.36 0.13 3.64 0.61 1.13 Rolling 1.48 o.8c 0.11 0.03 0.00 0.36 0.13 4.13 0.69 1.28

HCV Level 1.64 1.67 0.21 0.09 0.03 0.49 0.19 2.56 0.47 1.24

Rolling 1.7!: 1.94 0.27 0.09 0.03 0.49 0.19 2.89 0.53 1.40

MAV Level 3.10 2.79 0.21 0.09 0.03 0.96 0.36 4.40 1.04 1.83

Rolling 3.87 3.23 0.27 0.09 0.03 0.96 0.36 4.93 1.17 2.0!: Note: (1) F1xed costs mclude overheads, adm1mstrat1on, mterest on borrowed capital, etc.

(2) EOL- engine oil, OOL- other oil, Depn. -depreciation

163

Total Passenger/

Cost Commodity Grand Total Cost

3.41 3.10 6.51 3.66 3.7_Q 7.3_§ 4.41 4.43 8.84 4.72 5.28 10.00 9.04 39.28 48.32

10.16 44.31 54.47 8.31 0.48 8.78 9.42 0.5~ 9.95 8.84 0.58 9.42 9.87 0.6J5 10.52

15.19 1.55 16.73 17.38 1.74 19.12

Total Passenger/

Cost Commodity Grand Total Cost

3.38 2.9C 6.28 3.63 3.~ 7.09 4.41 4.38 8.8C 4.69 5.23 9.9~

8.37 32.96 41.33 9.35 37.21 46.55 7.96 0.44 8.40 9.00 0.5C 9.5C 8.57 0.55 9.12 9.56 0.62 10.18

14.80 1.47 16.27 16.94 1.64 18.59

The relationships given in table 6.3 below give the cost-adjustment factors

[denoted in the IRC manual as congestion factors (CF) for application to the

distance-related components of VOC in order to adjust for congestion. We have used

these factors for all the distance-related components. For the sake of consistency

with the results on energy consumption of road derived in the earlier chapter, we

have directly used the oil consumption figures derived in that chapter for the base

year and other years to work out the fuel cost in each of the selected eight sections.

The price of fuel (petrol or diesel) for a particular road section is taken from the prices

prevailing in 1997-98 at the nearest metros- Delhi, Mumbai and Chennai. It may be

noted, however, that if the energy consumption figures were derived from the VOC

tables and relationships discussed in this chapter, they would be found not to differ

significantly from the estimates made in the earlier chapter with the help of speed­

flow and fuel consumption equations.

Table 6.3 Congestion Factors for working out distance-related Costs

as given in the IRC Manual

New-technology car Two lane Four lane divided

Old-technology car Two lane Four lane divided

LCV Two lane Four lane divided

HCVandBus Two lane Four lane divided

MAV Two lane Four lane divided

Key: CF - congestion factor

CF = 0.70 + 0.90 VCR CF = 0.90 + 0.90 VCR

CF = 0.90 + 0.50 VCR CF = 0.90 + 0.80 VCR

CF = 0.90 + 1.00 VCR CF = 0.90 + 0.70 VCR

CF = 0.80 + 1.10 VCR CF = 1.00 + 0.75 VCR

CF = 0.90 + 1.40 VCR CF = 0.90 + 0.70 VCR

VCR - volume to capacity ratio (both volume and capacity are measured in PC Us/hour)

Note : The maximum capacity (in PCUs/hour) for a two-lane road is 3000 for both directions, while that for a four-lane road is 4300 in the major direction. The IRC manual states that 10% of daily traffic volume may be taken to represent peak hourly traffic volume. To derive the average hourly traffic volume from this peak volume, an empirically tested scaling down factor of 0.8 may be applied.

The factors of adjustment for determining the time-related VOC components

under congested conditions are worked out in the following manner. First, the

intercept of the relevant linear speed-flow equation (see table 5.4 of chapter 5) is

1(...1

taken. This gives us the speed prevailing in free-flow conditions. Next, the actual

speed is determined from the equation. The adjustment factor is then the ratio of the

speed in free conditions to the determined speed. As the latter diminishes owing to

increased traffic density, the adjustment factor will increase and hence the time­

related components of VOC will go up. In the case of four-lane roads, we have

assumed that 55% of the traffic is in the major direction. In the absence of congestion

factors and speed-flow equations for traffic in the minor direction of such a road, the

further assumption is made that costs derived for the major direction of traffic can

hold by and large for vehicles moving in the other direction. In the absence of data,

the operating costs of the three-axle rigid MAV are assumed to hold for other types of

MAV. In addition, the estimates in chapter 4 of packing, handling and local cartage

costs in the case of freight shippers and of porterage and local transport costs in the

case of bus passengers have been included in the estimates of the financial costs of

road transport in this chapter.

We have estimated vehicle operating costs of road traffic in financial terms

over a ten-year period for three different conditions of development of road ground

infrastructure: (i) no improvement in infrastructure; (ii) road widening with provision of

paved shoulders (in the Jalandhar-Pathankot and Agra-Mughal Sarai sub-sections of

the Jalandhar-Jammu and New Delhi-Mughal Sarai sections respectively); and (iii)

provision of pavement overlay and paved shoulders (in the other six sections). The

road improvements considered are discussed below.

Road Infrastructure Costs

As already mentioned above, the road vehicle operating costs (VOCs) do not

include any share of costs of maintenance and improvement of road infrastructure. In

the current study, road improvement is expected to take place through widening,

pavement overlay and provision of paved shoulders. The true cost of vehicle

operation on road should include a charge levied on road vehicles for defraying the

costs of both road maintenance and improvements of this nature. Estimates of the

cost of widening and providing paved shoulders on an existing two-lane road section

to four-lanes, namely, the Jalandhar-Pathankot sub-section of the selected

Jalandhar-Jammu section, were available for use in the present study. This particular

sub-section is expected to become four-lane in 2005-06. The estimates made for this

section are assumed to be applicable (on a per kilometre basis) to the other section

due for widening, namely, the Agra-Mughal Sarai sub-section of the New Delhi-

lfi5

Mughal Sarai section. In the case of this sub-section, four-laning is expected to

become complete in 2006-07. It is recognized that parts of this latter sub-section are

likely to have a cement concrete surface after widening in contrast to the entirely

bituminous surface on the Jalandhar-Pathankot stretch. The cost estimate per

kilometre for the Agra-Mughal Sarai sub-section may therefore be regarded as an

approximation. It is assumed that three years are required for the completion of the

project of widening and provision of paved shoulders in these sub-sections. The total

cost of the project is allocated among the three years in the following manner: first

year, 20%; second year, 40%; and third year, 40%. On the other roads, four-laning is

not considered a necessity as in the other two sections within the time-horizon

considered, since the traffic densities are smaller. Instead, pavement overlay along

with the provision of paved shoulders is assumed to take place in the year 2005-06.

Estimates of the cost of this kind of road upgradation have been made on a per

kilometre basis for the Pathankot-Jammu sub-section, the Lucknow-Gorakhpur

section and the Bhopai-Ujjain section. These estimates are applied to other road

sections according to similarity in soil quality. Half of the Bhopai-Ujjain section lies in

black cotton soil area and the other half in red soil area. The estimate of the cost of

pavement overlay (with provision of paved shoulders) on the stretch falling in the red

soil area of the Bhopai-Ujjain section is applied to the other road sections where

) pavement overlay (with provision of paved shoulders) is considered. For the

Jabalpur-AIIahabad section, the estimate for the black cotton soil area of the Bhopai­

Ujjain section is applied to the Jabalpur-Rewa sub-section while the remainder of this

section is taken as ordinary soil area, to which the estimate relating to the red soil

area of the Bhopai-Ujjain section is applied.

The benefits of road investment are defined in terms of daily passenger car

units (PCUs) on the road from 2000-01 to 2010-11. The costs of road improvement

are annual fund requirements (converted to a daily basis) for road maintenance,

renewal and improvement, if any, in the various sections. The details of the

components of such fund requirements are given in table 6.4 for the condition of

maintenance and renewal on road with no improvement. Table 6.5 further gives

additional annual fund requirement for road imiJrovement in the form of road

widening and pavement overlay (along with provision of paved shoulders). These

benefits and costs are discounted over the period to arrive at an amortized

cost per PCU of the use of road infrastructure. The discount factor is taken to be 12%

166

Table 6.4 Maintenance and Renewal (M&R) Costs (at 1997-98 prices)

(in Rs per km per year) Between Between Between Between Between More than More than 450-1500 1500-3000 1500-3000 3000-4500 3000-4500

Type of CVD CVD CVD CVD CVD 4500 CVD 4500 CVD

M&R B.T. B.T. B.T. B.T. B.T. B.T. B.T. surface surface surface surface surface surface surface

SH SH NH SH NH SH NH 2-L Road

OR non-urban}_ 95895.74 103410.83 117497.68 110058.65 125806.75 116706.47 134116.7§

PR non-urban) 121101.24 121101.24 121101.24 125593.42 125593.42 247220.59 247220.59

M&R non-urban) 265821.86 275026.97 292283.28 288673.22 307965.53 445810.15 467137.53

OR urban) 137264.90 144779.98 191702.44 151427.80 199640.49 158075.62 207950.50

PR urban) 121101.24 121101.24 121101.24 125593.42 125593.42 247220.59 247220.59

M&R urban) 316499.08 325704.18 382729.61 339350.44 398411.86 496487.31 557583.8§

4-L Road OR non-urbanl n.a. n.a. n.a. n.a. n.a. n.a. 241410.1_1

PR non-urbanl n.a. n.a. n.a. n.a. n.a. n.a. 600392.8F

M&R non-urban) n.a. n.a. n.a. n.a. n.a. n.a. 1013405.24

OR urban) n.a. n.a. n.a. n.a. n.a. n.a. 374310.90

PR urban) n.a. n.a. n.a. n.a. n.a. n.a. 600392.85

M&R (urban) n.a. n.a. n.a. n.a. n.a. n.a. 1179531.15

Note: (1) n.a. - not applicable in our study, CVD - commercial vehicle density, B.T. - bituminous, c.c. - cement concrete, OR - ordinary repairs, PR - periodic renewals, SH - state highway, NH - national highway, 2-L - two-lane, 4-L --four-lane "

(2) The values are taken from the data for the relevant rainfall area in Zone-IV, which is considered to be the most representative zone.

Source: GOI/MOST (1999), 'Report of the Sub-Committee for Fixation of Norms for Maintenance of National Highways and State Highways'

Table 6.5 Costs of Road Improvement (Rs million per km) at 1997-98 Prices

Road stretch Cost

Jalandhar-Pathankot- four-laning with _provision of _Q_aved shoulders 22.21

Pathankot-Jammu - pavement overlay with provision of paved shoulders 8.82

Lucknow-Gorakhpur- pavement overlay with _provision of _Q_aved shoulders 10.24 Bhopai-Ujjain (black cotton soil area) - pavement overlay with provision of paved !shoulders 7.70

Bhopai-Ujjain (red soil area) - pavement overlay with _provision of paved shoulders 8.05

167

c.c. surface

139885.25

166033.16

374749.82

185892.21

166033.1E

431108.34

251793.45

403223.38

792679.65

334605.97

403223.38

896195.30

··-

in accordance with the recommendation in IRC (1993). In tables 6.6 and 6.7, the

amortized cost per vehicle per day for the entire stretch of a road section as well as

for each kilometre are presented under both the cases of no road improvement and

road improvement All cost figures have been brought to 1997-981evels by the use of

the appropriate deflator.

Table 6.6 Cost per Vehicle of Normal Maintenance Operations from 2000-201 0*

(Rs)

Section/ Normal scenario of Scenario of shift from

traffic growth road to rail Vehicle type

Entire stretch Perkm Entire stretch Perkm New Delhi-Mughal Sarai Car 32.4~ 0.041 37.84] O.Ofi Busrrruck 97.4~ 0.12 113.5]! 0.14 Ja/andhar-Jammu

Car 11.61 0.05 13.15/ 0.05 Busrrruck 34.8~ 0.15 39.4~ 0.16

Jaba/Q_ur-AIIahabad

Car 22.70 0.06 30.81 0.09

Busrrruck 68.11 0.19 92.44 0.2€

Lucknow-Gorakhpur Car 14.381 0.06 30.81 0.09 Busrrruck 43.1~ 0.19 92.4:41 0.2€ Secunderabad-Wadi Car 13.771 0.071 19.04] 0.1!] Busrrruck 41.321 0.21 57.11 0.29 Gudur-Renigunta Car 5.021 o.o?l 6.7al 0.09 Busrrruck 15.061 0.2ol 20.351 0.27 Bhopai-Ujjain Car 10.471 0.06 11.821 0.06 Busrrruck 31.41 0.171 35.461 0.19 Ratlam-Godhra Car 26.661 0.09 44.:Ml 0.16 Busrrruck 79.9al 0.28 133.0~ 0.47

* at 1997-98 prices

The amortized costs of road maintenance and improvement per vehicle are

added to the road vehicle operating costs as estimated above to arrive at the total

financial costs of transport for each vehicular mode, and ultimately at the costs of

passenger and freight service on road. In these total costs are also included the cost

of porterage and local transport, the cost of packing, handling and local cartage, and

other expenses incurred by trucks en route. For the precise estimates of these items

of cost, please refer to chapter 4.

168

Table 6.7 Cost per Vehicle of Road Improvement between 2000 & 201 0'*

(Rs

Section/ BAU scenario of Scenario of shift from

Vehicle type traffic growth road to rail Entire stretch Perkm Entire stretch Perkm

New Delhi-MuJJhal Sarai Car 130.43 0.161 151.oj_ 0.18 Busrrruck 391.30! 0.471 453.1ol 0.55 Jalandhar-Jammu Car 42.261 0.1~ 50.98 0.21 Bus!fruck 126.771 0.5~ 152.931 0.64 Jabalpur-AIIahabad

Car 59.14 0.17 88.54 0.25

Busrrruck 177.42 0.5C 265.61 0.75

Lucknow-Gorakhpur Car 36.74 0.14j 50.58 0.19 Busrrruck 110.21 0.421 151.741 0.57

Secunderabad-Wadi Car 42.751 0.21 58.46 0.29 Busrrruck 128.25/ 0.641 175.39 0.8_§ Gudur-Renigunta Car 15.441 0.21 21.26 0.28 Busrrruck 46.31 0.621 63.771 0.85 Bhopai-Ujjain Car 28.79 0.15/ 35.21 0.19 Busrrruck 86.371 0.45/ 105.63 0.56

Ratlam-Godhra Car 83.771 0.29) 142.041 0.50 Busrrruck 251.31 o.8al 426.121 1.50

* at 1997-98 prices

Costs of rail transport

The computation of rail costs has been done on the basis of the railways'

estimates of cost of coaching and freight services in 1997-98 (tables 6.8 and 6.9).

We have used the cost figures for mail/express trains rather than for ordinary trains in

the case of coaching services since the share of ordinary trains in the chosen train

compositions representing the selected volumes of traffic in our selected eight

sections is small. The Railways' cost estimates do not include users' cost in terms of

the value of passenger time or the cost of inventory of commodities in transit. It may

be noted here that the road vehicle operating costs include the value of passenger

time in the case of passenger traffic arid value of commodity in transit in the case of

freight traffic. Estimates of such users' cost have been included in the costs of rail

transport in order to make a valid cost comparison between the two modes. As

discussed in chapter 4, we have taken the values of passenger time and commodity

in transit for rail from the work by GOI/Pianning Commission/RITES (1987-88), and

brought them to 1997-98 levels using commodity price indices and the GOP deflator.

A modification is made with respect to the component of marshalling costs in total

freight costs. Given changes in the pattern of train examination as a result of block

rake and close circuit movements, we worked out, on the basis of discussions with

former Railway officials, the cost of marshalling of an empty train at Rs 1500. As the

incidence of marshalling of loaded trains is negligible, this cost figure is applied to

each train in only 10% of loaded trains.

Table 6.8 Costs of Coaching Services (for mail/express trains)- 1997-98

(Figures in Rupees) Cost items Central Northern N. Eastern S. Cent~al Western Overall

1 (i) lrraction Cost per Vehicle Km Diesel 0.92 3.59 1.69 3.10 2.48 2.83 Electric 3.02 4.53 3.23 3.28 3.57

(ii Traction Cost per 1 000 GTKMS Diesel 34.27 138.87 57.61 107.5_7 88.83 107.06 Electric 112.9!i 210.0!i 110.78 117.90 136.40

Provision and Maintenance of 2 (i) Track per 1000 GTKMS 28.52 36.59 34.22 21.98 25.72 32.40

Provision and Maintenance of (ii Track per Vehicle Km 0.76 0.94 1.0C 0.64 0.72 0.85

Provision and Maintenance of 3 Signalling per Engine Km 2.47 6.43 9.52 3.34 7.48 5.61

Other Transportation Cost per 4 (i) Train Km 17.64 21.47 17.97 13.63 20.94 21.69

Other Transportation Cost per (ii Vehicle Km 0.5€ 0.91 0.77 0.4C 0.71 0.77

Terminal Cost of Coaching 5 (i) Services per passenger carried 9.8S 9.41 5.41 11.48 3.18 5.97

Terminal Cost of Coaching (ii Services per Vehicle Km 0.8E 1.52 0.86 0.97 1.05 1.25

!Overheads (as percentage of 6 ~irect costs) 17.21 21.51 20.70 15.22 16.72 21.62

Central Charges (as percentage 7 Qf direct costs) 0.62 0.54 0.37 0.63 1.10 0.62

Source: GOI/Ministry of Railways (1999), 'Summary of the End Results: Coaching Services Profitability/Unit Costs tor 1997-98', Directorate of Statistics and Economics.

To make a valid intermodal cost comparison, we need to take account of

congestion on rail as in the case of road. Unfortunately, no congestion factors for

scaling up base-year costs are available for the rail mode. For each of the selected

sections, it would have been ideal to work out the increases in the cost of rail

transport for our selected volumes of traffic as the total number of trains grows yearly

170

Table 6.9 Rail Freight Costs (1997-98)

(FiJures in Rupees) __

Cost items Central Northern N.Eastern S. Central Western Overall

Cost of traction per 1 000 1 (i) GTKMS (diesel) 117.90 67.49 42.86 81.99 76.04 80.59

Cost of traction per 1 000 (ii) GTKMS (electric) 86.58 73.07 0.00 54.53 56.85 76.61

Cost of track & signalling per ~ 1000 GTKMS 32.76 40.59 44.70 31.33 25.65 36.94

Cost of Other Transportation ~ Services per 1 000 GTKMS 20.39 21.2€ 26.65 16.48 21.44 22.41

~ Marshalling Cost Taken as Rs 1500 for each empty rake and the same amount

for each loaded rake in 10% of total loaded rakes. ·--

General overheads as percentage of direct

5 expenses 18.94 25.74 31.23 18.52 18.18 21.77 Central charges as percentage of direct

6 ex_penses 0.64 0.54 0.36 0.53 1.10 0.:§§

Source: GOI/Ministry of Railways (1999), 'Summary of the End Results: Freight Services Unit Costs for 1997-98', Directorate of Statistics and Economics

in accordance with the normal growth of traffic. Information for such an exercise is

not available and we have to rely on some data available for other sections. The

Long Range Distance Simulation Study (LRDSS) unit of the Ministry of Railways

carried out a study in the past on seventeen rail sections of the country with the

primary focus on increase in transit times as a result of an increase in the number of

trains. We have used part of the database of this study to derive some factors which

could be reasonably used to adjust the costs of the base-year 2000-01 in order to

incorporate the effects of congestion in each of the selected sections of study. The

LRDSS data included fixed and variable cost estimates for particular train types

running in the seventeen sections in a base period with a given total number of

trains. As the total number of trains is increased, the total cost of transport per 1 000

gross tonne kilometres (GTKMS) for any particular train type is assumed to go up

according to a linear relationship. Of the seventeen sections, we have chosen two as

corresponding closest to our own selected eight sections. We have applied the

results derived for the level and electrified Somnagar-Mughal Sarai section to the

trains running in our selected sections with plain terrain, while the results for the

gradient and diieselised Pune-Miraj section are applied to trains running in gradient

terrain. The implicit assumption is made that the cost equation for an electric (diesel)

train is valid for a diesel (electric) train if the type of terrain is the same. Given the

normal traffic in a particular section in our study and the increase in the number of

171

trains if our selected trains were added to the existing number, we use the linear

relationships of the Somnagar- Mughal Sarai and Pune-Miraj sections to work out the

adjustment factors to the base year costs of trains for each of the selected sections in

our study. These relationships are given below. (C1 and Cp are the costs per 1 000

GTKMS of freight and passenger trains respectively, while X is the current number of

trains.)

Level section:

C, = 91.01207 + 0.05252 (X- 113)

Cp = 151.728 + 0.14017 (X- 113)

Gradient section:

C, = 176.1944 + 0.55014 (X- 25)

Cp = 173.9443 + 0.19082 (X- 25)

On the basis of these equations, we show diagrammatically (in figures 6.1

and 6.2) the cost profiles for a typical passenger and a typical freight train on the

Somnagar-Mughal Sarai and Pune-Miraj sections.

In scaling up the base-year costs to account for congestion, we neglect the

investments that may be made to enhance rail capacity. The capacity utilisation

statements for the selected sections indicate that in most cases some kind of

investment in capacity enhancement will be needed. The precise nature of this

investment would vary from section to section, depending on local factors. Owing to

the complexity of specifying these investments and working out their costs, we have

not concerned ourselves with improvements in infrastructure on the rail mode. The

intermodal cost comparison is, therefore, valid only for the case of no improvement in

infrastructure on both modes. The results obtained for the case of road improvement

are contrasted below with those of no road upgradation in order to highlight the

benefits, if any, of improvement in infrastructure for this particular mode. The financial

costs of transport estimated for the rail mode include the cost of porterage and local

transport for passengers and the cost of packing, handling and local cartage for

users of freight service, as well as unofficial payments and other expenses. The

estimates of these items of cost given in chapter 4 are used in the present analysis.

172

Figure 6.1: Son nagar- Mughal Sarai Section

170

Ul 160

~ 150 U)

::111 140 ~

l--Freight 1- 130 C) 0 120 --Passenger 0 0 ... ... 110 CD c. 100 ... U)

90 0 0

80

113 123 133 143 153 163 173 183 187

Daily number of trains

Figure 6.2: Pune- Miraj Section 182

180

Ul ~ 178 U)

::111 ~ 176 1-C)

0 0 174 0 ... 8. i

172

0 0

170

25 27 29 31 33

Daily number of trains

173

Comparison of Rail and Road Transport Costs

We shall now discuss the relative intermodal costs of transport. As in the

previous chapter, it is found that there are savings in the overall financial cost of

transport with an intermodal shift from road to rail rather than a shift in the opposite

direction. These absolute daily overall savings in each of the selected sections are

presented later. The integrated financial costs of transport (including the cost of

infrastructure value of passenger time and cost of commodity in transport) are

worked out per PKM and per NTKM for passenger and freight traffic respectively. In

the case of the former category of traffic, we have looked at three options of

movement of passengers on road -car and bus, car only, and bus only. The results

for each of these options are derived by inputting the relevant number of daily

passenger per units for each option and marking out the various congestion factors

for the distance and time related components of vehicle operating costs, as well as

the final requirements for normal maintenance and renewal. In the case of the option

involving a combination of car and bus, the costs of transport with road

improvements of the kind mentioned in the previous paragraph are discussed later.

Turning first to the results for passenger traffic - with passengers on road

moving by a combination of car and bus- we find that in the base year 2000-01, the

rail mode generally has lower costs of transport than the road mode. The cost

advantage of rail is noticeably lower in the sections with state highways, especially

the Gudur-Renigunta and Ratlam-Godhra sections- where traffic congestion on road

is the lowest. This shows that the lower the congestion on the road mode, the better

is its relative cost position. In the base year, the cost of road transport varies from Rs

2.10 to Rs 3.09 per PKM in the sections with national highways, while the cost of rail

transport in the same sections lies between Rs 1.16 and Rs 1.31 per PKM. The rail

mode is 45-55% more cost efficient than the road mode. This cost efficiency

increases over the years as congestion pushes up costs more on the road mode.

Thus, in the year 2010-11, the cost of road transport in the sections with national

highways goes up to as much as Rs 12.37 per PKM (New Delhi-Mughal Sarai

section), whiie the highest cost shown for the rail mode is Rs 1.46 (in the same

section). The rail mode is now 78-88% more cost efficient. In the sections with state

highways, the financial cost of rail transport in 2000-01 falls within a range Re 1 .26-

1.61 per PKM, while the corresponding range of the road cost is Rs 1 .43-2.17 per

PKM. The rail mode is 2-42% more cost efficient. Subsequently, this cost efficiency

increases as road costs go up at an exponential rate with increasing congestion. In

174

2010-11, the rail mode is found to be 14-64% more cost efficient. While the costs on

road in the same year vary from Rs 1.77 to Rs 3.53, those on road lie between

Rs 1.28 and Rs 1.64.

Table 6.10 Transport Financial Costs for Equivalent Volumes of

Passenger Traffic on Road and Rail (in Rs per PKM) *

Road Rail Road Rail Road Rail Section

2000-01 2005-06/2006-07

New Delhi-Mughal Sarai 2.59 1.31 4.90 1.4C

Jalandhar-Jammu 3.09 1.38 4.81 1.42

Jabalpur-AIIahabad 2.10 1.16 3.27 1.18

Lucknow-Gorakhpur 2.41 1.20 3.32 1.23

Secunderabad-Wadi 2.16 1.35 2.50 1.39

Gudur-Renigunta 1.7C 1.61 1.97 1.63

Bhopai-Ujjain 2.17 1.2€ 2.64 1.27

Ratlam-Godhra 1.43 1.39 1.56 1.44

* at 1997-98 prices

Table 6.11 Transport Financial Costs for Equivalent Volumes of

Freight Traffic on Road and Rail .

2010-11

12.37 1.4€

10.81 1.45

7.35 1.19

5.61 1.25

3.0€ 1.43

2.43 1.64

3.53 1.28

1.77 1.49

(in Rs per NTKM) * Road Rail Road Rail Road Rail

Section 2000-01 2005-06/2006-07 2010-11

New Delhi-Mughal Sarai 2.09 0.48 3.13 0.5C 5.3E 0.52

Jalandhar-Jammu 2.76 0.91 3.33 0.97 4.6€ 1.04

~abalpur-AIIahabad 1.83 0.66 2.22 0.68 3.12 0.70

Lucknow-Gorakhpur 2.17 0.76 2.68 0.77 3.66 0.78

Secunderabad-Wadi 2.96 1.12 3.19 1.20 3.53 1.30

Gudur-Renigunta 3.81 1.95 4.04 2.01 4.4C 2.07

Bhopai-Ujjain 3.04 1.04 3.4C 1.04 3.96 1.05

Ratlam-Godhra 2.76 0.95 2.9C 1.03 3.11 1.11

* at 1997-98 prices

With respect to freight traffic, we find that rail has a more significant

advantage over road than in the case of passenger movement. In 2000-01, the

financial cost of rail transport is as low as 23% of the corresponding cost of road

transport. The rail mode is 49-77% more cost efficient than road in the same year

across all the sections, with the cost advantage being greater in the sections with

175

national highways, as in the case of passenger movement. Again, where road

congestion is lower, the cost advantage of rail is correspondingly less. The financial

cost of freight transport on road ranges from Rs 1.83 to Rs 3.81 in the base year,

while the corresponding cost on rail lies within a range of Re 0.48-1.95 per NTKM. In

the year 2010-11, we find that the cost efficiency of rail has increased significantly to

a range of 53-90%. The road cost of freight movement has gone up to as much as

Rs 5.38 per NTKM (New Delhi-Mughal Sarai section) while the highest cost figure

recorded on the rail mode is Rs 2.07 per NTKM (Gudur-Renigunta section). The cost

advantage of rail in the sections with national highway increases at a faster rate than

in sections with state highways. This again highlights the importance of road

congestion in determining, the relative position of the two modes in terms of the

financial cost of transport.

The above results are depicted diagrammatically in figures 6.3 and 6.4.

Before discussing the savings in the overall financial cost of transport resulting from

intermodal substitution, we shall look at the results when passenger movement on

road is restricted either to car or to bus. In comparison with the results obtained for a

combination of car and bus, it is seen that the financial cost of passenger movement

on road is higher with the 'car only' option (table 6.12 below). Under this option, the

cost of passenger movement is as much as Rs 3.73 per PKM in the base year and

Rs 13.78 per PKM in the terminal year. Consequently, the cost efficiency of the rail is

significantly greater than under the option of 'car and bus' - as much as 73% in the

base year and 89% in the final year. These figures may be compared with those for

transport costs per kilometre in selected South American countries (quoted in Button,

1993a). The cost efficiency of commuter rail vis-a-vis car turns out to be 89% for

Brazil and 75% for Argentina. Movement of a fixed number of passengers by car only

is relatively more expensive since a greater number of passenger car units are

involved, thus increasing the congestion on road. On the other hand, if the fixed

number of passengers is carried by bus only, the financial costs of road passenger

transport reduce considerably. Under the 'bus only' option, the range of cost across

all the sections is Rs 1.03-2.88 per PKM in the base year (table 6.13 below).

It is seen that in the sections with the lowest road congestion (Gudur-Renigunta and

Ratlan-Godhra), the financial cost of transport on road is even lower than the

corresponding cost on the rail mode. Data for South American countries also shows

that the transport costs per kilometre for bus and commuter rail are not significantly

176

Rs 1 1 Rs.

0 0 ~ ~ N N W W g~bt;;~~~~b b (.n b (.n b 0, b 0,

:u~~~~~:·a ••if{•~!;•; L•,~•-..,•l•~~~•t•i ·>I l I J .!~:,?,:. " .,.. !!

~ ~ c:

Jalandhar· - - ·:1 \ "I ~t_ l «g Jalandhar· !:a Jamml . "· . \ .' . .. . ., . •' . "' : ,y . iii Jamml en

~ ' ~ ~ " . ,

Jabalpur· --·1·· .• I .. I •.•·· I ~· ·1 ::!! Jabalpur· ~ Allahabac ~; ·• ;· ' ' · . . · ·L' ~ Allahabac ::1

:I ' !:!. ~ ~ ~ n

t/1 Lucknow· - n Lucknow· .-. 0 ID Gorakhpul ~ Olt Gorakhpua ::0 ~

~ 10 t/1 ~ ~ g: ,., i ~ -ca

:I '" ... 0 ::::!: ~ "C z: g ,~ Secunderabad· . . ·. -1 (il Secunderabad- ,;; 1!1

IJad " -· \-lad !!!:: ~ ~~ -::1 -~ ~ - ~ ~ ~

Gudur· j ~ Gudur· ~ Reniguntc ... c ~ Renigunt< ·· ~

~ 0 :I ~

Bhopai-Ujjalr I • I § Bhopai-Ujjair ~

~ .. ~ Ratlam· "'. """ Godhr< ;?'c-. ··;:-~·> Ratlam-Godhr<

.L....-..~L--.J~:........L.;.,.._.;.,, ~· ·.~-::.......~~ ·~ J I .I .I ..

~ [i]

different for a country like Brazil, whereas the rail cost is as much as 1.7 times

greater than the bus cost in a country like Argentina (Button, 1993). With increasing

congestion, however, the cost of passenger transport by road even in these sections

eventually surpasses that of transport by rail. In 2010-11, the road cost ranges

between Rs 1. 78 and Rs 11.07 per PKM, while the rail cost varies from Rs 1.19 to

Rs 1.49 per PKM.

Table 6.12 Transport Financial Costs for Equivalent Volumes of Passenger Traffic on

Road and Rail - 'Car only' Option (in Rs per PKM

Section Road Raii Road Rail Road Rail 2000-01 2005-06/2006-07 2010-11

New Delhi-Mughal Sarai 3.01 1.31 5.52 1.4C 13.7E 1.46 Jalandhar-Jammu 3.73 1.38 5.65 1.42 12.45 1.45 Jabal pur-Allahabad 1.16 1.32 1.1 E 2.41 1.19 Lucknow-Gorakhpur 2.94 1.20 3.99 1.23 6.63 1.25 Secunderabad-W adi 2.7€ 1.35 3.69 1.39 5.1E 1.43 Gudur-Renigunta 2.8~ 1.61 3.67 1.63 5.02 1.64 Bhopai-Ujjain 2.5E 1.26 4.19 1.27 6.87 1.28 Ratlam-Godhra 1.39 2.70 1.44 3.18 1.49

Table 6.13 Transport Financial Costs for Equivalent Volumes of Passenger Traffic on

Road and Rail - 'Bus only' Option . (in Rs per PKM

Section Road Rail Road Rail Road Rail 2000-01 2005-06/2006-07 2010-11

New Delhi-Mughal Sarai 2.25 1.31 4.35 1.40 11.07 1.46 Jalandhar-Jammu 2.88 1.38 4.51 1.42 10.22 1.45 Jabalpur-AIIahabad 2.35 1.16 2.95 1.18 4.19 1.19 Lucknow-Gorakhpur 2.20 1.20 3.06 1.23 5.20 1.25 Secunderabad-Wadi 1.92 1.35 2.90 1.39 4.36 1.43 Gudur-Renigunta 1.36 1.61 2.25 1.63 3.56 1.64 Bhopai-Ujjain 1.88 1.26 3.55 1.27 6.21 1.28 Ratlam-Godhra 1.03 1.39 1.33 1.44 1.78 1.49

Based on two previous studies of economic costs of individual modes of

transport in China, the World Bank has made a cost comparison of the rail and road

modes in that country. Three cost concepts are used that include (a) perceived cost,

mainly consisting of tariffs charged to users; (b) financial cost, or cost sustained by

transport operators; and (c) economic cost, which incorporates adjustments to

financial cost for taxes and subsidies. If we sum up the Bank's estimates of

"perceived cost" and ''financial cost" for both modes to arrive at the closest

approximation to the financial costs of transport as defined in our own study, then it is

found that the financial cost of the road mode in China is 0.671 yuan per NTKM

178

whereas the financial cost of the rail mode is 0.0523 yuan per NTKM (at 1992

prices). In other words, the financial cost of shipment by rail in China was only 8% of

the corresponding road cost. In contrast, our study finds that across the eight

selected sections of study, the rail cost is no lower than 23% of the road cost in

2000-01, 16% in 2006-07, and 10% in 2010-11. The differences in relative financial

cost between India and China may be attributed, among other factors, to varying

price distortions for freight service.

We now come to the savings in financial costs of transport resulting from the

substitution of road by rail in our selected eight sections. In the case of passenger

traffic, these savings are relatively small in the sections where operating costs of

road are low on accoLfnt of less congestion and therefore the cost advantage of rail is

not so great. If the base year 2000-01 is considered, then in the Gudur-Renigunta

and Ratlam-Godhra sections the savings per PKM due to the intermodal substitution

are only Re 0.09 and Re 0.03 respectively, the percentage savings being 5.20% and

2.38%. In the other sections, the savings are as much as Re 0.81 to Rs 1.71 per

PKM, representing savings of 37.6% to 55.3%. In respect of freight traffic, the

intermodal substitution results in significant savings in all sections in the base year.

These vary from Rs 1.17 to Rs 2.00 per NTKM, and in percentage terms range from

48.7% to 76.9%

We turn next to the absolute daily overall charges in financial cost as a result

of substitution of road by rail involving the selected volumes of passenger and freight

traffic with passengers on road moving by a combination of car and bus (table 6.14).

The absolute magnitude of these savings depends on such factors as section length,

type of terrain, volume of traffic shifted, etc. In the Gudur-Renigunta and Ratlam­

Godhra sections, the savings are noticeably smaller for passenger traffic. The greater

cost advantage of rail in other sections leads to significant overall daily decreases in

financial cost. The savings concerning passenger traffic in the base year range from

Rs 0.03 million to Rs 10.56 million, and they go up to as much as Rs 89.99 million in

the year 2010-11. The savings following from the substitution of freight traffic are

larger than those for passenger traffic in the base year. They vary from Rs 0.67

million to Rs 14.07 million across all the eight sections. However, these savings do

not increase so rapidly over the time period as is the case with savings involving

passenger traffic. This is because operating costs of road vehicles go up at a faster

rate than those of freight carriers with increasing congestion on road. We see that in

179

the terminal year 2010-11, the savings in respect of freight traffic range between Rs

0.87 million and Rs 42.15 million.

Table 6.14 Daily Overall Savings in Financial Cost of Transport due to

Substitution of Road by Rail (in Rs Million)

Section Pass. Freight Pass. Freight Pass. Freight

2000-01 2005-6/2006-07 2010-11 New Delhi-MuQhal Sarai 10.56 14.07 28.9C 22.86 89.99 42.15 Jalandhar-Jammu 4.12 4.61 8.15 5.88 22.47 9.02 ..J_abaiQ_ur-AIIahabad 3.33 4.24 7.39 5.59 21.73 8.~

Lucknow-Gorakhpur 3.26 3.9~ 5.61 5.3C 11.61 7.97 Secunderabad-Wadi 0.81 2.01 1.11 2.17 1.63 2.44 Gudur-Renigunta 0.04 0.68 0.14 0.75 0.31 o.8Z Bhopai-Ujjain 0.89 2.07 1.32 2.42 2.15 2.97 Ratlam-Godhra 0.03 2.70 0.15 2.81 0.37 2.99 rrotal savings (electrified ~ections) 11.44 19.52 30.50 28.83 92.82 48.98 rrotal savings (dieselised sections) 11.52 14.79 22.26 18.93 57.44 28.27 Iotal savings 22.97 34.32 52.76 47.77 150.26 77.25

We turn now to the effects of road improvement on the financial cost of

transport. As mentioned above, we have considered, on the one hand, widening of

carriageway from two-lanes to four-lanes and, on the other hand, pavement overlay

along with provision of paved shoulders as the types of road upgradation to be

undertaken in our selected sections. Four-laning is confined to the New Delhi-Mughal

Sarai and Jalandhar-Jammu section, where traffic densities are the greatest. Both for

passenger and freight movement (the former involving a combination of car and bus),

it is seen that road improvement leads to significant falls in the financial cost of

transport, with greater reductions being observed on the national highways (tables

6.15 and 6.16). With the completion of four-laning in the New Delhi-Mughal Sarai

section in 2006-07, the financial cost of transport for passenger traffic is only Rs 1.59

per PKM, as contrasted with a figure of Rs 4.90 per PKM in the same year without

any road improvement (table 6.8 above). On the other national highways, the cost of

passenger movement is Rs 1 .25 to Rs 1 .84 per PKM upon the termination of road

improving works in 2005-06, whereas the same cost without any road improvement is

Rs 3.32 to Rs 4.81 per PKM in the same year. On the state highway, pavement

overlay (with provision of paved shoulder) leads to falls in the cost of passenger

transport. In the year of completion of these works (2005-06), the financial cost in

these sections ranges from Rs 1.33 to Rs 1 .91 per PKM, while there corresponding

180

costs in the same year without road improvement lie between Rs 1.56 and Rs 2.50

per PKM. In all the sections, it is observed that although costs go up with increasing

congestion on road once road improvement has taken place (in 2005-06/2006-07),

they are still lower than the base year cost even in the terminal year.

The results for the effects of road improvement on the cost of freight traffic

again show significant reductions in cost with road improvement (table 6.16}. These

falls are greater on national highways, where, with road improvement in 2005-06/

2006-07, the cost of freight movement varies from Rs 1.56 to Rs 2.55 per NTKM.

This range may be contrasted with the financial costs per NTKM in the same year(s)

when no road improvement of any kind takes place - Rs 2.22 to Rs 3.33 (table 6.9

above). On the state highways, the cost of freight movement in 2005-06 without road

upgradation is Rs 3.19-4.04 per NTKM. If upgradation takes place, the financial cost

in the same sections ranges from Rs 2.87 to Rs 3.95 per NTKM. These costs go up

subsequently on account of increasing road congestion.

Table 6.15 Financial Costs of Transport for Road Passenger Traffic - with Road Improvement

(in Rs per PKM) Section 2000-01 2005-06/2006-07** 2010-11

New Delhi-Mughal Sarai 2.59 1.59 1.72 ~_alandhar-Jammu 3.09 1.84 2.04 ~abalpur-AIIahabad 2.10 1.25 1.39 Lucknow-Gorakhpur 1.92 1.45 1.62

Secunderabad-W adi 2.16 1.91 2.04 Gudur-Renigunta 1.69 1.52 1.62 Bhopai-Ujjain 2.17 1.90 2.09 Ratlam-Godhra 1.42 1.33 1.37

** 2006-07 in the case of New Delhi-Mughal Sarai

Table 6.16 Financial Costs of Transport for Road Freight Traffic- with Road Improvement

(in Rs per NTKM) Section 2000-01 2005-06/2006-07** 2010-11

New Delhi-Mughal Sarai 2.10 1.56 1.67 Jalandhar-Jammu 2.77 2.55 2.80

Jabalpur-AIIahabad 1.83 1.68 1.85 Lucknow-Gorakhpur 1.85 2.02 2.39

Secunderabad-Wadi 3.00 3.10 3.34 Gudur-Renigunta 3.84 3.95 4.19 Bhopai-Ujjain 3.06 3.22 3.58 Ratlam-Godhra 2.83 2.87 2.98

** 2006-07 in the case of New Delhi-Mughal Sarai

181

The analysis of the comparative costs of rail and road transport brings out the

general cost efficiency of the rail mode. However, the relative intermodal cost

position is influenced by a number of factors, the chief of which is road congestion.

Where congestion is less - such as on state highways - the relative position of rail is

not so strong as in the sections with national highways. It is found that if passenger

movement on road is confined to bus only, then the cost of passenger transport on

road goes down significantly, and is even lower than rail costs in the sections with the

least congestion in the base year. The option of passenger movement by car only is

found to be the most expensive form of travel on road. Increasing levels of traffic on

road tend to have an upward influence on the costs of transport, which exceeds that

of the effect of rail track congestion on the costs of operation of the rail mode. In the

terminal year of the period 2000-01 to 2010-11, the costs of passenger and freight

movement on road (including the three options of 'car and bus', 'car only' and 'bus

only' in the former) exceed those of rail in all cases. When it comes to freight

movement, the relative cost advantage of rail is significantly greater than in the case

of passenger traffic owing to a lower deadweight of rolling stock for the carriage of

freight on rail.

In the next chapter, we shall deal with the external costs of transport and add

them to the financial costs derived in this chapter to arrive at the social costs of

transport for both the rail and road modes.

182