Rlys modifies norms for new projects,to asses economic plus social benefits
| Date :27-Jun-2022 |
By Sagar Mohod
As part of a major shift in its policy, Railway Board said henceforth economic returns along side the social benefits would guide the decision on future projects. Especially, the guiding principle on approvals for new lines, doubling or gauge conversion projects were solely guided by economic returns. The nation’s lifeline shunned projects where rate of returns was projected as negative. The baseline thinking was that it does not make sense to pour money in unremunerative projects given the heavy capital needed for any railway related projects.
However, at times, social factors need to be taken into account since railway plays an important part in community upliftment. As to rate of returns the same depends on assured possibility of huge cargo transport everytime was not possible. So Board has notified the new criteria where it has discarded age old norms governing sanctioning new railway projects.
Brijesh Kumar, Additional Member, Works, Railway Board, cited the report provided by multi-disciplinary committee that went into nitty gritty of sanctioning process, especially about new railway lines, expansion projects and gauge conversion, etc. Accepting the recommendation of the committee, now the project assessment would be done on two counts, first economic internal rate of return (EIRR) and second and most important modified economic internal rate of return (MEIRR). The justification given for switching over to new norm is that "same would effectively capture the economic and social network impact on any project interventions comprehensively," the circular mentions.
Further it is mentioned that MEIRR can be worked at different levels depending upon impact it creates at different levels, viz zonal or national level. Various attributes as to MEIRR should be considered and broad comparison on benefits according to society vis-a-vis value creation must be done while finalising a project.
Railway was forced to adopt the new policy as many a time social cost far outweighs the economic factors as it benefits accruing to society at large is immense. It is to be hoped that the new thinking would also stop the current drive in Railways to look at its vast network only from angle of profit. In past several surveys to explore possibility of new routes failed to reach the planning stage as rate of returns was found to be negative. This deprived many of the backward regions of rail connectivity that can turn around the region's fortunes, and same is well established with connecting of North East hilly region with rest of India.
A simple paper outlined the new approach to be adopted while reviewing feasibility of the railway project.
The first is financial analysis where it is to be converted to economic cost minus the taxes, subsidies, interest payment, etc. The paper outlined by Board suggest taking only project cost, overhaul&maintainance cost and capital replacement cost. It is categories under lifecycle economic cost. Second head is lifecycle economic benefits that are sub-divided into economic approach and network approach.
In economic approach the points to be considered are to be derived by comparing user benefits with project and without project scenarios. This in turn includes travel time savings (VOT), savings in vehicle operating costs (VOC), savings from improvement in safety, savings from pollution reduction, savings from reduced road stress, savings in fuel and economic impact, road infrastructure savings and direct employment, Under network approach, benefits deriving after comparison at local, zonal and national level with and without project scenarios. In it factors to be taken into account include decongestion of railway network, saving from reduction in delayed travelling time, increase in throughput of railways, environmental and social impact on network and modal shift impact, etc.
After weighing all the above factors, modified economic analysis parameters should be calculated.
For the same, modified economic internal rate of return (at local, project and national level) and modified economic net present value (at local, project and national level), would be determined. At the end the sensitivity analysis should be carried out and that would determine final decision as to sanctioning of new railway project.