Making India – A World Leader In Railway Technologies

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Making India – A World Leader In Railway Technologies


General Manager, East Central Railway

1.0 Indian Railway is one of the largest buyers of Railway equipment in the world. The country has the necessary Industrial, Technological and knowledge base to design, develop and manufacture Railway equipment at competitive prices. It is, therefore, surprising that India is not yet a World Leader in Railway technology, but is a net borrower of technology in this world. We go to Western World repeatedly for Transfers-of-Technology at huge cost, but fail to sustain the technological progression.

1.1 As brought out further in this paper, one of the indirect constraints was lack of growth in traffic and marketing share in transportation for the Indian Railways. Therefore, the volumes of procurement of Railway equipment were not viable for the Indian Railways equipment industry to become Net-Generator of technology rather than a Net-Borrower of technology.

1.2 With the present upsurge in increase in traffic and increase in the market share in transportation as well as with the proposed creation of dedicated freight corridor, India is on the threshold where the volumes of requirement of Railway equipment will be such that we can become a World Leader in Railway technology, if appropriate policies are adopted at this juncture. If we become successful in this mission, it will feed further growth of Railway traffic since we will be able to obtain Railway equipment at the fraction of the cost as compared to import cost of these equipments.

1.3 Another constraint has been the nature of our procurements. Imagine a buyer of TV, laying down complete circuit, components including fixing screws to buy the TV. If this were done year after year, there would not be any influx or growth of technology of TV. Unfortunately, this is how we procure hi-tech Railway technology items. No wonder that there is a lack of world class manufacturers of Railway components in India. Similarly, the present structure of Railway Production Units and present business models for Transfer of Technology are also not the best suited for taking India towards leadership in Railway Technology.

1.3 This paper looks at the technology up gradation of Railway equipment in past and examines strategies needed for India to become a World Class Leader in Railway technology.

2.0 Business Models for Transfer of Technology

There are many different business models for transfer technologies:

2.1 Direct indigenisation by Railway production units

This model was one of the two permitted policies under pre-liberalization scene. Therefore, ICF Coaches, ALCO locomotives and electric locomotives were largely indigenised in-house in the Railway Production Units, with minimum supply of major assemblies from public sector/private sector. This model is still being followed as far as indigenisation of cranes from Gottwald and Cowans Sheldon are concerned, in View of small volume of requirements.

2.2 Direct indigenisation through public sector

This model was the second permissible policy in the License / Permit Raj before liberalization. An example is the electrics of ALCO locomotives which were indigenised by M/s. BHEL a public sector undertakings. This was done, because Railway did not have requisite capability in the area of heavy electricals, at that time (in early sixties).

2.3 TOT transfer to third party

This model is the first step towards liberalized economy and is currently being implemented for ABB electric loco, GM Diesel loco and LHB coaches. Under this scheme TOT is bought from the OEM by Railway along with equipment. Thereafter in association with OEM, TOT is transferred to selected third parties. Thus major assemblies would be procured from private and public sector units by Railway production units.

2.4 Joint Ventures/ PPP

Another possible model could be for FDI (Foreign Direct Investment) by the foreign technology owner to set up its own unit or a joint venture (with an Indian business partner - Private, Public or Railway unit) in India for manufacturing various assemblies for supply to Railways. Although in automotive sector this is the major route followed for indigenisation yet this has not been tried out for Railway equipment.

3.0 Generator of New-Technologies not just Borrower of Technology

While Transfer of Technology is in line with the corporate strategies of technological up gradation, but the cost of importing new technology is very high which goes against the corporate objective to reduce the cost of transportation and to achieve sufficient return on capital investment. Railway cannot, therefore, afford to - continue reliance on imported Railway Technologies. It is necessary to become a generator/developer of new technologies to become a really modern and cost -effective source for Railway Technology.

4.0 Volumes of Procurement and Market Share of Traffic

Indigensiation does bring down the costs, but further reductions in costs are needed to fulfill the corporate objectives. Volumes of production have a large effect on cost reduction after indigenisation. The volumes of procurement can go up further if costs come down. Therefore volumes and cost reductions feed on each other. Indian Railway is the second largest Railway network under single owner. Considering the rate of growth of Indian economy, vast geography of the Indian subcontinent and the inherent advantages of Railway in bulk transportation, - there is a large scope for growth of traffic on Indian Railway network. Although, volume of procurement of rolling stock and materials by Indian Railway even today is huge as compared to European or other Asian Railways. Yet the future increase in procurement by Indian Railways holds a great promise for the industry. This can come about by aggressive expansion of traffic carrying capacities and by determined approach in increasing our Market share. Increasing the Market share and volumes of procurement of Rolling Stock - feed on each other.

5.0 Suggestions for achieving above goals

Steps required to be taken to achieve this are suggested as follows:

(i) National Railway Equipment Mission

Most important is setting up of a national railway equipment mission involving relevant government and private/public agencies to suggest policies and strategies with the objective of making Indian Railway equipment industry leaders in their fields. Active involvement of Academic and Research Institutes would also be required.

(ii) Developing a joint R&D facility of world standard.

The corporate plan of Indian Railway recognizes the role of R&D in achieving corporate objective. The corporate plan lays down the need to participate in development of new Railway technology and keeping abreast of latest changes taking place in other countries. It also calls for adoption of an integrated approach to development of new technology with industry and academic instructions as partners. Railway equipment industry has not been able to play an active role or to contribute significantly in this direction. Railways corporate objectives in this area cannot be achieved without active participation of industry and academic institutions. It is necessary to develop world standard R&D facility and organization as a joint venture between Indian Railway, Indian Government and the Railway equipment Industry.

iii) Discarding present treatment of Railway Equipment Industry as Job-work Contractors.

Railways would have to give up its present approach of dictating detailed Specifications and drawing and expecting the Railway Equipment Industry to be only job-work contractors. We should free this industry from this shackle so that they can develop, bring and update the latest technologies with support from Indian Railways. This approach alone can make Indian Railway Equipment Industry a world leader.

iv) Development of niche materials and manufacturing Processes

There are many areas of Railway equipment, which require specially developed materials, which are required in small volumes. Similarly, there are certain manufacturing processes, which are not much used in other industries. These need to be developed. It is necessary to encourage development of niche vendors with excellence in these areas.

v) Participation of Industry in Maintenance and services

In advanced countries, out sourcing of certain maintenance and services to the OEM Railway Equipment industry, is an important factor in making them world leaders. The feedback available from this area to the equipment manufacturers is of immense advantage in improving quality and reliability of their equipment. This also cross subsidizes high cost of development of new technologies for these firms. If we want Indian Railway equipment industry to match the standards of world leaders their entry into the area of maintenance and services will be necessary.

vi) The future of Railway PSUs and business models of Transfer of Technology

To achieve above objectives, Indian Railways would have to re-think about a self-sustaining business model of Transfer of Technology and about the structure of Production Units like Production Units like, DLW, CLW, ICF & RCF. While this structure can be revised but it is clear that Indian Railway may have to retain a significant share in ownership of these units to safeguard its own interests. Indian Railway equipment manufacturers should get more closely involved with these units to obtain necessary toehold for becoming eventual leaders in areas of specific assemblies. When appropriate time comes, there should be sufficient Indian Railway equipment manufacturers with financial and technical resources to step into the shoes of Indian Railways as far as Railway Equipment Technologies are concerned.

6.0 Conclusions:

Indian Railways' Corporate Mission is to be Modem Railway System with sufficient capacity to meet country's transportation needs, at least cost to society while maintaining financial viability. Technology Up gradation and making Indian Railway Equipment Industry a world Leader in its field - a net generator of new technologies, instead of a constant borrower - can go a long way in ensuring this corporate mission.

Aggressive creation and marketing of traffic capacities and viable technology Up gradation feed on each other.

Other suggested strategies to make Indian Railway Equipment industry world leaders are: ­

I. Creation of a National railway Equipment Mission.

Il. Developing a World Class jointly owned R&D and Testing facility.

Ill. Not treating Railway Equipment Industry as a job-work contractor

IV. Encouraging Niche Vendors in certain high-tech materials and processes where volumes are not high.

V. Participation of OEM Railway Equipment Manufacturers in Maintenance and Services

VI Rethinking on business models of Transfer of Technology structure of Railway

Production Units allowing closer involvement of Railway Equipment Manufacturers, while retaining significant ownership by Indian Railway.

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