Reducing the trade deficit with China

By: RC Acharya

Updated: August 2, 2019 1:56:47 AM

After China joined the WTO, India-China trade has grown exponentially, from .49 billion in 2000-01 to billion in 2018-19, with China becoming India’s largest trading

partner. 

8/4/2019 Reducing the trade deficit with China - The Financial Express

Keeping in view huge demand for alternative sources of energy, China has developed

massive capacity and occupies a dominant position in manufacture of photosensitive

semiconductors and PV cells, capturing 34.3% of world market!

How is it that China is more competitive than India? Is it the one-party system with longterm

objectives zealously pursued, or government’s policy interventions that ensure

factors of production (land, labour, capital) are available to manufacturers at the lowest

possible cost, or perhaps both?

Setting aside ideological, political and social differences, China has promoted ‘Made in

China’ with a singular zeal. In 2016, in a survey by Deloitte, CEOs of Fortune 500

companies were asked to rank countries in terms of current and future manufacturing competitiveness, in which China was declared the numero uno. No wonder major MNCs such as Samsung, Toshiba, LG and scores of US MNCs have all set up shop in China. 

China has also cultivated its large pool of non-resident Chinese, offering them incentives to participate in socio-economic initiatives in mainland China, with a Cabinet-rank minister to look after their affairs. Belatedly, India has also set up a separate ministry to help NRIs contribute to India’s economic growth, but needs to play a proactive role.

While India’s average hourly compensation cost in manufacturing rose from $0.73 to $1.58 in 2012, in China it rose from $0.6 to $3.06. However, Chinese lending rates have remained low—from 3.3% in 2002 to only 4.4% in 2012, whereas India registered a drop from 11.9% to 9.7% for the same period. Cost of land, of course, is another story.

Apparels, electronic goods, telecom, pharma products, oilseeds, gems and jewellery, chemicals, tobacco, plastics, marine products, cotton textiles, synthetics and rayon textiles, and leather are some products that have a bright future.

To feed its billion-plus population, China is a big importer of farm products, reaching almost 10% of global trade. With exports of our agricultural products reaching almost $40 billion, India has a major stake in gaining access, which currently is mired in Chinese regulatory maze. Similarly, India is the world’s largest producer of rice, whereas China is the biggest importer of this commodity. 

And with China importing 3.4 million tonnes of raw sugar per year, which is subject to a quota system providing concessional tariff, India’s sugar industry should be able to negotiate a way in. Similarly, export of sesame seeds has not made much headway as Indian export

attracts 10% duty, whereas African countries enjoy zero duty and have captured 90% of Chinese market.

A strategy for import substitution and attracting investments in telecom, solar power, bulk drugs and drug intermediaries, auto components, industrial machinery for dairy, agriculture, food processing, textiles, paper, chemicals, etc, and, last but not the least,

electric vehicles and lithium-ion batteries needs to be pursued vigorously. Given intensive G2G and B2B negotiations, and gaining from the fallout of the China-US trade war, India should be able to substantially reduce its trade deficit with China in the years to come.

(The author is former member, Railway Board)

 

On track for privatisation? India must keep BritishRail’s privatisation disaster in mind to avoid similar pitfalls 

(Financial Express of 15.10.20)

Mega plan for privatization of passenger trains  unveiled by Railway Board a  couple of months ago  involves  a total of 151 trains in 12 clusters with  a minimum of 16 caches in each train running at 160 kmph. Eventually covering 109 routes, compared to the 9000 + passenger trains  which had been time tabled to run every day prior to the Covid19 lock down, this may not be much but is a good beginning. 

Moreover the flood of over 120 request for qualification (RFQ) received from 15 parties is perhaps an indicator of popularity of the project. According to the time line the bidders are to be short listed by  November 2020 for the final round, contracts placed by April ’21 and the first lot of private train sets to arrive by April ’23. 

Reportedly the operator may be allowed to import 3 train sets in each of the 12 clusters and rest to be  manufactured in India. The bidding is proposed to be on a revenue sharing basis and  the one that pays Railways the most will win.

However perhaps a short history lesson of British Rail would be in order.  During the Margaret Thatcher  era it went in for a massive  privatisation exercise which proved to be an unmitigated  disaster. Treating Maintenance of infrastructure, Rolling stock  maintenance, and Passenger and Freight Train Operations etc. as separate activities were all privatised as distinct business unit, and scores of private entities were created for every possible activity which British Rail had been hitherto engaged in. 

         However, a few years down the line all hell broke lose when a serious mishap took place at the Potter’s Bar station  involving human casualties. A statutory enquiry revealed that that the new company called ‘Network Rail‘ now owning Rail infrastructure had been cutting corners resulting in the mishap. 

         With stringent conditions for liability and compensation to be paid is case things going wrong,  in  the event of a train accident, the first people to reach an accident site was not the  relief train,  but the lawyers who had to find who and what went wrong to establish the liability, and  possible  compensation to be paid !

A Public interest report from the Centre for Research in Socio Cultural Change (CRESC) a Manchester, U.K.  based think tank  entitled  ‘The Great Train Robbery: rail privatization and after ’ amongst other things had raised the issue that ‘public subsidies are essentially paid out to shareholders as dividends and Network Rail’s large and unsustainable debt, which has negative consequences for physical infrastructure and likely means that rail will one day have to be bailed out by the public.’ 

Ultimately the Rail infrastructure had to be ‘bailed out’,  taken over by the government, which mercifully will  not be the case with Indian Railways, as only a few Private Train Operators (PTOs) are to be inducted, and rest of the system is not being privatized ! 

While the PTO is to introduce Coaches or Train sets with technology  superior to that existing on Indian  Railways (IR), upgrade of track to be capable to run at 160 kpmh from existing 120 kpmh, will need to be carried out by IR on top priority. 

Moreover the proposed  private trains will be sharing track space with other Passenger  and Freight trains, which could lead to disputes for according precedence. For in order that the private train is punctual it may have to be accorded a priority at the cost of other trains, to avoid a penalty for being  late  ! 

Anticipating a plethora of such problems which may arise in PPP (Public Private Partnership) initiative, post of a ‘Regulator’ is proposed to be created. With commissioning of the West and East Dedicated Freight  Corridors private sector may be get an opportunity to invest in Freight wagons  also and run them, keeping the proposed Regulator quite busy !

While  investment by private  sector is most welcome it should not end up with a lot of rolling stock being purchased, and with no matching maintenance facility being created  eventually  run into ground. The operator may simply walk away while Banks or investors who would have financed the whole project  left holding the baby !

Again an observation of  CRESC  on British Rail’s fiasco, ‘Perhaps best known is the systematic gaming of the train operating franchise system. Franchisees – as in the catastrophic case of the East Coast Line – can walk away from the franchise without serious penalties when the ludicrously unreal projections that won the contract in the first place turned out to be fantasies.’ 

Hopefully Indian Railways  will learn from the pit falls of the BR privatization,  and be able to carefully  avoid them ! 

R.C.Acharya, 

former Member Railway Board.

Email : ram34034@gmail.com

         

Uncontainable strategy: Double Stack dwarf Containers can make CWC relevant again

By: RC Acharya

Published: November 18, 2019 3:34:17 AM

FCI along with other state agencies procures wheat and paddy under price support scheme. (owned by Indian Railways and others) and 98 FCI’s own sidings. For this massive logistics exercise, it relies heavily on the storage space and other facilities provided by CWC.

CWC, after the STC shutdown has recently engaged PBK Consultants Pvt Ltd to prepare a DPR for running of DSDC (Double Stack Dwarf Containers) on Railway’s electrified sections. This is now under active consideration by FCI. ISO containers are already used by Finland, Malaysia, and Canada to exports food grains, in India rice is exported using these containers. 

DSDC offers a greater loadability as compared to an ISO container, especially on electrified sections. Apart from the elimination of manual handling, the DSDC’s competitiveness for Rail transport reduces the breakeven distance from

800 kms to 450 kms. While both the Western and Eastern Dedicated Freight corridors offer economies of scale, higher envelope is available on the Western corridor.

RDSO (Research Design and Standards Organisation) has already given a pan-India speed certificate for running DSDC containers, only 1,450 km of Jamnagar-Ludhiana via Rewari route has been cleared for actual running. Minor adjustments of OHE were made to maintain adequate gap between the top of DSDC and the Catenary. 

Indian Railways has also condoned the dimensions of 4877 mm above rail level for movement of Dwarf Container in double-stack mode, which implies that these trains will not be considered as Over Dimensional Consignment (ODC) movement although they are beyond the prescribed Maximum Moving Dimensions (MMD ) permitted for the normal rolling stock.

In addition, routes with a potential for running DSDCs have been identified as Nabha-Ahmedabad-Vapi, Nabha-Hyderabad, Nabha-Bengaluru, Nabha-Pipavav-Mundra ports, Nabha-JNPT- Taloja, Nabha-Hajira and Hazira-Hyderabad via Akola on the newly converted Broad gauge section of Bhusawal Division, on Central Railway.

For the project to take off, certain modifications to the CWC warehouse/godowns would be needed, including demolition of the warehouse and providing cement concrete paved areas for stacking DSDC containers, loading/unloading machinery and storage silos. Overhead electrification wire would also need to be removed to provide access to fork lifts for loading/unloading.

Presently CWC has no less than 38 rail sidings which have the potential for DSDC movement. Alike bulk handling and transport system for cement from its manufacturing plant at Wadi to bulk storage Silos in KalamboIi near Mumbai has saved crores of rupees in transport and handling costs over last three decades for ACC. 

This initiative by CWC/FCI could bring in a revolution in cost-effective

food grain movement all over India, and in the process save them from being consigned to history.

Author is Former member, Railway Board.

How Indian Railways can lead the the charge towards Atmanirbhar Bharat

By: RC Acharya

Published: August 25, 2020 11:23 AM

Railways is now planning to speed up electrification, resulting in reduced demand for diesel locomotives, so a scale down of production at DLW will be inevitable.

Being Atmanirbhar or self-reliant has been Bharatiya Rail’s policy for over seven decades now. Bharatiya Rail’s long list of such ‘Atmanirbhar’ initiatives includes Chittaranjan Locomotive Works, set up in 1950, which started with the manufacture of steam locomotives changing over to electric ones in 1972.

The brainchild of BC Roy, the then CM of West Bengal, it set in motion a long-term plan for creating more than half a dozen such units. The cornerstone for all such collaborative ventures has always been ‘technology transfer’. It enabled Railways to build up a technology base on which it could upgrade in years to come.

In this march for self-reliance, the RDSO, the R&D arm of Indian Railways, at Lucknow, has also played a significant role. While in 1950, North British Locomotive of the UK was the collaborator for CLW, Swiss Elevator and Coach Manufacturing Co. Ltd. helped in setting up Integral Coach Factory, Chennai in 1955. This was followed by a collaboration with American Locomotive Company (ALCO) in 1961 to

manufacture diesel locomotives at DLW (Diesel Locomotive Works), Varanasi, UP.

A second coach plant viz. RCF (Rail Coach Factory) came up at Kapurthala in 1984, to manufacture highspeed coaches in collaboration with Linke Hoffman Busch of West Germany. Forming the bulk of Shatabdi and Rajdhani rakes, these provide superior riding and passenger comfort while running at the optimum speed of 130 kmph.

In 1984, Amsted Industries, US, provided the technical know-how to manufacture wheels and axles, at Wheel Axle Factory, Yellahanka, Bengaluru. A facility to make diesel components, Diesel Maintenance Works, was set up in 1982 at Patiala, Punjab. A similar one for electric locos was commissioned at Dankuni, West Bengal.

RSK (Rail Spring Karkhana), Sithouli near Gwalior, was set up to manufacture coil springs for wagon and passenger coach bogies. It was set up in 1989 on a turnkey basis by Ernst Komrowski & Co., Germany in technical collaboration with Grueber, a leading spring manufacturer, at a cost of Rs 54.04 crore. 

Another coach manufacturing unit, Rae Bareli, UP came up in 2012, bringing the list of Production units to eight. Over the years these excellent manufacturing facilities have also given India an edge to meet international requirements of rolling stock and locomotives.

ICF exported its first 47 bogies to Thailand in 1967 and has since exported 361 bogies and 447 coaches to over 13 Afro-Asian

countries. The last order from Sri Lanka for supplying 20 rakes of six coach DEMUs earned ICF Rs 126 crore.

With a fully computerised design & development cell equipped with the state-of-the-art computer facilities, it also uses strain gauge testing and squeeze test procedures for prototypes before the commencement of series production. Armed with an ‘ISO.9001’ certificate for its quality systems from TUV, Germany, ICF has been poised to enter the export market in a big way.

DLW, which has also been in the export business, has exported in all 137 locomotives to Bangladesh, Sri Lanka, Myanmar, Tanzania, Vietnam, Malaysia, Sudan, Angola, Senegal and Mali. The last order for 16 of 3100hp cape gauge locomotives to Mozambique in 2008-09 increased its footprint in Africa.

Railways is now planning to speed up electrification, resulting in reduced demand for diesel locomotives, so a scale down of production at DLW will be inevitable.

However, ample spare capacity will be available to aggressively market DLW’s manufacturing capability and expertise to make an

impact in the exports market.

This will be in line with the PM’s recent initiative to become ‘manufacturer to the world’. Bharatiya Rail, in particular DLW, located in PM’s constituency, could successfully lead the charge.

The author is Former member, Railway Board

India's very own Superman !

Is it a bird, is it a plane,  no it is the Superman !

Very soon India could have its own Superman, that is if the Lokpal bill ever sees the light of the day and  like the famous cartoon character he will take on the nation’s criminal and crooks, banishing them from the face of the earth for ever !

Undoubtedly the hordes of  netizens  who had thronged the Jantar Mantar complex a few months back and later on   went on to hold a candle light vigil at the India Gate, and attended baba Ramdev’s rally at Ramlila maidan believe so.

With the CBI (Central Bureau of Investigation), CVC  (Chief Vigilance Commission) and a number of other agencies which are proposed to be brought under him, the Lokpal could  very well turn  out to be the best thing that happened to India.

Given sweeping powers for prosecution, he or she could put a sense of fear  in the hearts of the high & mighty of the judicial, political and bureaucratic world, acting as an Ombudsman for the 1.2 billion Indians.

Alas if only such dreams could turn into reality, for the Lokpal’s  task, if and when it comes  into being, is  going to be a pretty tough one ! Starting with the need to be strictly non-partisan, as with dozens of major political groups,  each with its own agenda, a politician being targeted would lose no time in taking to the roads, calling a attack on him as an insult to the people who elected him !

Moreover the Lokpal will not be able to  act in isolation, needing  a minimal of supporting staff. Information may not automatically flow into his office and all cases would need to be investigated in detail, and a fate worse than that of Santosh Hegde  of Karnataka may await him.

Cases of red herrings being floated to discredit other parties cannot be ruled out. God forbid if the PM and the Chief Justice of Supreme court are also brought into its orbit, for it could soon bring all activities of the judiciary and the Government   to a grinding halt. Signs are already evident in various corridors of power, where passing the buck and dawdling over simplest of decisions has become quite endemic.

What is perhaps more urgent is judicial reforms, which will ensure that all cases, from  lowest to the highest levels are completed in specific time frame, in a few weeks,  and not allowed to drag on for years on end negating the very purpose of setting up the institution of Lokpal !

We already have PAC (Public Accounts Committee) loaded with powerful Lok Sabha MPs, and the CAG (Comptroller and  Accountant General) who is the premier accounting agency to keep track of all financial misadventures indulged in  by the worthy politicians ably aided by the ‘babus’. However most of them end up being a  post-facto review well after the deed, or rather the misdeed, is done !

Very often those accused have  retired  or even died, and only their pensions can be utilized for recovery of losses. Extreme measures of attaching property, as in the recent  case of Madhu Koda , the erstwhile Chief Minister of Jharkhand etc. have to be with specific court order unless Lokpal assumes such sweeping powers.

In some cases corrective measures are ordered by PAC or CAG but  it is always a case of  closing the barn door after  the horse has bolted  !   One has to wait and see how quickly the dozen or so high profile under trials lodged in the Tihar jail are meted out justice. With each heavy weight opting to fight upto the Supreme court the battle may easy stretch for a decade.  

Proposed to be modeled on  the institution of ‘Ombudsman’, a very much ‘Norse’ (Danish Swedish and Norwegian) concept, where it is still alive and kicking, he could be  an official, appointed by the government  or the Parliament, charged with representing the interests of the ‘Aam admi’, investigating and addressing complaints reported by individual citizens.

Advantage of an Ombudsman lies mainly in the fact  that he or she examines complaints from outside the offending state institution, thus avoiding the conflicts of interest inherent in self-policing.

However effectiveness of the Lokpal will  ultimately depend on the selection of an appropriate individual for the office, and last but not the least cooperation of state officials. Anna Hazare could be the best choice, but reportedly he has already refused the crown of thorns.

Like the RTI, the Lokpal’s office  is bound to be manned at the higher levels by retired ‘babus’, not  a very promising initiative for India, where the ‘babudom’ is world renowned for its immense capability to obfuscate, and create road blocks, in any investigation or follow up action.

Unfortunately, unlike the Queen in Alice in Wonderland by Lewis Carol, the ‘Lokpal’ may not enjoy the luxury of  ordering ‘off with her head’, and people would soon get disillusioned about its effectiveness , a sad end to all this agitation and the hype created by the electronic media always  looking for the  sensational story !

Perhaps the way rioters in UK last week were dealt with needs to be studied in detail and emulated. The Police managed to identify over 1500 rioters, arrested, charged AND Jailed them within the  course of  a week, sometimes with courts sitting overnight to deal with the cases placed before them.  

Like the ‘garam chuhla rule’ of management, law enforcement agencies reaction,  to breaking a law must be swift, and unbiased so that the law breaker whosoever he or she may be is dissuaded from indulging in it again. It would also serve as an abject lesson to those who may be  contemplating to break the law including indulging in corrupt practices.  

Systems may change, but people to deliver the results are the same, and effectiveness of the Lokpal  will entirely hinge on the team he chooses to build.

R.C.Acharya,       

former Member,  Railway Board,                                                              

email acharya@bol.net.in