GAUGE CONVERSION

FINANCIAL JUSTIFICATION

DINDIGUL – POLLACHI – PALGHAT

AND

POLLACHI – COIMBATORE

FOR GAUGE CONVERSION

Introduction:

The project line runs as a single MG line from Dindigul upto Pollachi. From there, it splits into Coimbatore and Palakkad sides. The jurisdiction over the area is by the Madurai Division. The beneficiary districts are Dindigul and Coimbatore of TN state and Palakkad District of Kerala State.

Need:

The existing MG section is a passenger oriented section. The present MG network links the north Kerala and the business/industrial towns of Coimbatore, Salem, Erode and other towns in the south Tamil Nadu. The project section will be a shorter and faster route. Due to non-availability of through BG network, through passengers from north Malabar area are to be transshipped at Palghat, Coimbatore and Dindigul.

On conversion it would provide a direct rail link from south Tamil Nadu to west coast, Goa , Mumbai, Gujarat via KRCL.

Side by side the existing MG line would continue to cater to the needs of the local area.

Length of the project:

The project section of Dindigul-Pollachi-Palghat is for a distance of 224.88 KMs. (Dindigul-Pollachi = 121.20 KMs + Pollachi- Coimbatore = 45.81 KMs + Pollachi-Palghat -Palghat = 57.87 KMs) Railway Board ordered for a survey in the year 1997 and report was submitted in the year 2000.

Gauge:

The proposed line is BG

Permanent Way:

52 KG Class I rail on PSC sleepers with M+7 density on Ballast cushion of 250 mm 

Signaling:

The signaling arrangements will be Standard III MACL Panel Interlocking and mode of traction is Diesel.

Curvature:

The existing degree of curvature in the MG shall be adopted.

Bridges:

There are 195 LCs (155 + 40) proposed.

Earnings:

Coachng:                                     1555.236 Lakhs

Coaching working expenses       1907.037 Lakhs

Net earnings                                (-) 351.801 Lakhs

Operational savings                    3375.367 Lakhs

Investment on Rolling Stock      6135.550 Lakhs

Civil engineering                        29763.105 Lakhs        

Signal and Telecommunication  3859.260 Lakhs

Electrical (General)                    1767.000 Lakhs

Capital cost of construction is  35389.365 Lakhs +  6135.550 Lakhs Rolling Stock

Credit for released material  6345.450 Lakhs

The internal rate of return works out to 6.788 %

Alternative 1: Earnings arising out of additional accommodation on BG system plus earning on account of introduction of new express train between Madurai and Mangalore and operational savings between MG and BG systems for both coaching and freight traffic at IRR of 9.21 %

Alternative 2: Crediting only the operational savings between MG and BG systems for both coaching and freight traffic at IRR of 10.037 %

Revised construction cost  229.842 Crores

The period of construction envisaged was 7 years

The internal rate of return for the Madurai-Dindigul-Pollachi-Coimbatore worked out to 16.261% for an estimated cost of   304.803 Crores.

Another financial appraisal for part conversion of Madurai-Dindigul MG line alone into BG was prepared with an IRR of 20.718 % on an estimated cost of construction of  96.14 Crores

Consideration:

1. Pilgrimage traffic: The famous Lord Murugam temple is located atop the Palani hills.
2. The hitherto neglected peace-meal consignments can be brought to rail roads as the ever increasing prices of fuel oils such as diesel and petrol, the road traffic is likely to lose heavy traffic.
3. The coir manufacturing industries in the sections, soya extraction units, cotton mills and other agriculture oriented industrial units are likely to be benefited as the inconvenience of transshipment is to be eliminated.
4. inward traffic includes cement, coal-Lieco, soya, fertilizers, iron and steel, food grains, cotton etc are already benefiting by the MG
5. Outward traffic coconut, soya products, coconut products, coir and coir products, tea and coffee, textile yarns from Pollachi to Northern destinations have been projected by the chamber of commerce and industries.
6. Important inward freight traffic to the project is the Food Grain Traffic from the delta regions of Thanjavur District to Pollachi region.

Accounts observation:

“The project is NOT financially viable at the IRR of (+) 6.788 %. However, the project section would become isolated MG section since the MG section between Dindigul and Madurai section being converted as BG (doubling) and also at PGT and CBE end terminated with BG. Hence to avail the benefit of contiguous section and availability of alternate route the project is considered”

NEW BG LINE PROJECT

FINANCIAL JUSTIFICATION

NIDAMANGALAM – PATTUKOTTAI via MANNARGUID

FOR A NEW BG LINE

Introduction:

Nidamangalam is an existing intermediate (IMS) station on the Thanjavur – Thiruvarur section. Patttukkotai is also an existing IMS on the Thiruvarur – Tiruthuraipundi – Karaikudi section. Both the stations are under the jurisdiction of Thiruchchirappalli Divison.

Need:

There has been popular demand for connecting Mannargudi to the existing Nidamangalam and Pattukkottai. In fact a MG branch line existed between Nidamangalam and Mannargudi till 1975. due to popular demand and members from Parliament and the state legislature, ministry of railways has sanctioned  New Survey during 2007-08.

Proposed stations:

Rajappayyanchavadi, Haridranadi, Mannargudi, Serangulam, Paravakkottai and Madukkur.  The road distance is 48 KMs and the rail distance is 54.30 KMs.  There are four crossing stations and two halt stations.

Gauge:

It is proposed to be a BG line

Permanent Way:

52 KG Class I rail on PSC sleepers with M+7 density on Ballast cushion of 250 mm  for the mainline and 52 KG Class II rail on PSC sleepers with M+4 density on Ballast cushion of 200 mm  for loop and other lines.

Signaling:

The signaling arrangements will be Standard II MACL Panel Interlocking and mode of traction is Diesel.

Curvature:

The maximum degree of curvature will be 4 °. All curves are transitioned for the Maximum Permissible Speed of 100 KMPH. The proposed ruling gradient is 1 in 200 © duly compensated.

Bridges:

There are seven major 103 minor bridges. There are four ROBs and 35 RUBs and no level crossings are proposed.

Earnings:

Passenger earnings per year are estimated at  41.210 Lakhs and  55.074 Lakhs for local and interchanged passengers.

Freight:

Nidamangalm is an existing rail head generating paddy traffic for the TNCSC. Paddy, coconut, groundnut are grown in abundance for outward traffic and rice, grains, pulses, fertilizer, cement and wheat for inward traffic.  Further, M/s Pamani Fertilizer is the only industry in the area. The estimated annual outward and inward fright earnings are  2092.474 Lakhs and  4568.081 Lakhs. Net annual earnings anticipated are  2175.263

Investment on Rolling Stock  7944.700 Lakhs

Civil engineering                   23366.829 Lakhs             

Signal and Telecommunication  2325.246 Lakhs

Electrical (General)                  1459.890 Lakhs

The internal rate of return works out to 4.586 %

Consideration:

1.       Mannargudi is one of the important pilgrim centers of the ITDC, Lord Rajagopalaswany temple is located here. It is also known as Dhakshina Dwaraka, Mannai or Raja Mannargudi.

2.       socio- economic uplifting of the people can be achieved due to the changed scenario. Trade and industry of the area also has developed.

PROJECT APPRAISAL

with due acknowledgement to Shri Nagarajan Sr SO/CN/MAS

Project Appraisal

1)      Introduction:

i)        Project appraisals are highly necessary at the present financial position of IR where resources are becoming scarce and demand from various sections of the society are more.

ii)      Any commercial undertaking will attempt project evaluation methods to budget their capital expenditure for the following:

(a)    Expansion of operation

(b)   Diversification of operations

(c)    Replacement/Renewals

(d)   Research and Development

2)      Need for project appraisal:

i)        Involvement of large sums of money

ii)      Involvement of greater amount of risk on account of unforeseen situations

iii)    Irreversibility once investment Decision is made

iv)    Appraisals facilitate the identification of relatively superior proposals.

3)      Project report:

i)        Project report not only projects financial data related to outflows and inflows but also a meticulous traffic survey exercise for a New line, GC and Doubling/Augmentation of line capacity works to enhance the rly working

ii)      Traffic potential, existing and anticipated

iii)    Traffic Density present and future volumes

iv)    Technical feasibility

v)      Financial viability

4)      Definition

i)        Detailed study of traffic conditions of an area

ii)      Assessment of Traffic prospects

iii)    Financial implication

5)      Objective of Traffic survey

i)        Estimate of total traffic likely to be generated in the foreseeable future with special reference to the catchments area

ii)      Inter-0model allocation of total streams of Traffic between rail and other modes of Transport

iii)    Computation of earnings and working expenses for each year of the economic life of the project which is taken as 30 years

iv)    Appraisal based on annual cash flows and application of Discounted cash flow method (DCF)

v)      Minimum yield of rate of return of 10%

6)      Filed work

i)        Fixing of most suitable alignment for the proposed rail line in close collaboration with Engineering team

ii)      Collection of data from various sources like local bodies, prominent citizens, business community, Transport authorities, Industrialists, chamber of commerce of the alignment region and catchment areas.

7)      Data to be collected

i)        No. of bus trips (from Transport sector), plying on the alignment and its catchment area, occupancy, running time, fare structure and other road vehicles

ii)      Bus traffic during festival days and national Holidays

iii)    Assessment of passenger preference for Rail mode

iv)    Tourism and tourist prospects

v)      Local area profile from Panchayat/Municipal bodies

vi)    Educational institutions, banking and hospital facilities

vii)  Agricultural/mineral resources generated from the alignment section

viii)            Existing industrial scenario and anticipated development of industries on the alignment and catchment area

ix)    Plans for economic development of the area by the local/central Govt.            

8)      Estimate of passenger traffic & earnings

i)        Diversion from road to rail mode based on existing trends and pattern

ii)      Propensity of the traveling public for rail mode due to competitive rail fare

iii)    Travel time, comfort and safety

iv)    Travel pattern based on importance of places of travel

v)      Travel pattern based on importance of places of travel

vi)    Earnings at current rail tariff level

9)      Estimate of freight traffic and earnings

i)        Existing goods traffic pattern both inwards and outwards on the alignment region

ii)      Requirement of specific commodities for specific needs

iii)    Trading & commercial centers on the alignment

iv)    Industries on the alignment

v)      Incremental traffic from existing rail goods shed due to increasing trend in traffic volumes over years

vi)    Addl. new goods traffic for existing/coming up industries

vii)  Addl. Traffic  in foreseeable future as diversion from existing road net work

viii)            Mineral wealth and additional traffic from mines if any

ix)    Port development, if any, on the alignment region

x)      Rail transport clearance from Railway Board

xi)    Earnings estimated from origination to destination point of movement of goods tfc. Using latest freight tariff

10)  Passenger traffic Working expenses

i)        Based on the traffic assessed running of passenger/express trains are determined for rake composition, trips

ii)      A check list is prepared to arrive at facets like train km, vehicle km, vehicle days and gross tonne km

iii)    Based on the checklist and applying the various cost elements from unit cost, working expenses is worked out.  General OH charges, central charges are added to the working as a percentage.  The total working expenses is further escalated to the present level by applying escalation factor given by the Board

11)  Assessment of goods traffic working expenses

i)        Terminal services cost

(a)    Cost of documentation and cost of other terminal expenses per wagon (in terms of units)

(b)   Cost of marshalling per wagon per yard handled (in terms of units

(c)    Cost of provision and maintenance of carrying units per wagon day(based on wagon turn round)

ii)      Line haul services cost

(a)    Cost of traction per 1000GTKM (depending on traction)

(b)   Cost of other transportation services including cost for train passing staff per 1000 GTKM

(c)    Cost of provision and maintenance of track & signaling per 1000GTKM

iii)    After computing total working expenses, general OH and central charges as a % of cost is added

iv)    78.5% of operations and maintenance and cost over existing rail system is also added to the project working expenses

v)      The total cost of working expenses is escalated to the current level of survey with escalation factor furnished by the board.

12)  Estimate of net earnings

i)        Gross working expenses arrived both for coaching and goods traffic assessed is deducted from gross earning to compute net earnings

13)  Assessment of Rolling stock and investment

i)        Requirement of rolling stock like coaches, VPUs and locos for running the proposed passenger/express trains is assessed utilizing train km., trips/rakes,

ii)      Rly. Bd. Statistical elements pertaining to Zonal Rly is made use of.  The current cost of rolling stock from Pink Book (Rolling stock Programme) is used for working out investment.

iii)    Requirement of Rolling stock like wagons and locos for running the proposed goods tfc. is assessed utilizing net tonne km., train km., Engine km., and engine usage.  Railway Board statistical elements pertaining to Zonal Rly is made use of the current cost of rolling stock from Pink Book (Rolling stock programme) is used for working out investment.

14)  Savings

i)        On GC Surveys, in addition to addl. tfc. Assessed, savings in the different operational & maintenance cost between MG & BG systems is to be reckoned

ii)      Savings due to avoidance of transshipment cost on GC works also computed

iii)    Savings in operations cost due to shorter lead of the project section, if any will also be credited duly debiting the loss in earnings if any

iv)    Savings on engine hours and wagon hours due to elimination of detention enroute on single line section is also reckoned while working out financial appraisals for Dlg/Augmentation surveys.

15)  Engineering estimate

i)        Engineering estimate includes civil, signal telecommunication and electrical (g) , OHE cost, wherever proposed is also debited.

ii)      Credit on released railway material is credited wherever applicable

16)  Terminal value of assets

i)        The life of any rail project is reckoned as 30 years for financial appraisal purpose.  The value of physical assets of different categories outliving the project life of 30 years is also computed and credited at appropriate years.  Replacement cost for the assets which expires before the life of the project is debited at appropriate years.

17)  Financial appraisal

i)        Fin. Appraisal on Rly. Projects are undertaken using the DCF method

ii)      This method is more scientific since it takes into account the real time value of money

iii)    It also takes into a/c realistic earnings, cash expenditure and accurable savings

iv)    IRR is done under DCF technique which gives max. ROR possible from a project a given cash flow wherein the rate of discount is located by interpolation for bringing NPV (Net present value) = Zero

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