India - Third Railway Modernization Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 16149 IMPLEMENTATION COMPLETION REPORT INDIA THIRD RAILWAY MODERNIZATION PROJECT (LOAN 2935 - IN) December 2, 1996 Energy and Infrastructure Operations Division Country Department II South Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Indian Rupee (Rs) Rs. 1 = Paise 100 Exchange Rate used in StaffAppraisal Report: Rs.13.00 = US$1.00 The following were the exchange rates between the Rupee (Rs) and the US Dollar (US$) during the project's implementation period: Year Rs/US$ Official Market 1987/88 12.97 1988/89 14.48 1989/90 16.66 1990/91 17.95 1991/92 24.52 1992/93 26.41 1993/94 26.20 31.38 1994/95 31.38 December 1995 35.18 Source: IMF, International Financial Statistics (IFS), and Reserve Bank of India. WEIGHTS AND MEASURES I Centimeter (cm) = 0.39 inch (in) 1 Meter (in) 3.28 feet (ft) I Kilometer (km) 0.62 miles I Kilogram (kg) = 2.24 pounds (lb) FISCAL YEAR OF BORROWER April 1 through March 31. ABBREVIATIONS AND ACRONYMS BR British Rail IRR Internal Rate of Return BFR Bogie Flat Wagon IRS/T Indian Railways Specification for Track CIF Cost, Insurance and Freight MGT Million Gross Tons CRIS Centre for Railway Information Systems NTKM Net Ton Kilometers DEA Department of Economic Affairs RDSO Research, Design and Standards Ministry of Finance Organization, Indian Railways GOI Government of India TRC Track Recording Car ICR Implementation Completion Report TMS Track Management System IR Indian Railways, Ministry of Railways UTS Ultimate Tensile Strength (kg/sq.m) Vice President : D. Joseph Wood Director : R. Drysdale Division Chief/Manager : J. F. Bauer Staff Member : H. Hansen, Sr. Transport Economist  FOR OFFICIAL USE ONLY IMPLEMENTATION COMPLETION REPORT INDIA THIRD RAILWAY MODERNIZATION PROJECT (LOAN 2935 - IN) Table of Contents Preface .........................................................i Evaluation Summary ........................................................1ii Project Objectives ........................................................1ii Implementation Experience and Results .. ........................................................i Overall Assessment ........................................................ iv Summary of Findings, Future Operations, and Key Lessons Learned ............... .................. iv PART I: PROJECT IMPLEMENTATION ASSESSMENT A. Project Objectives .. B. Achievement of Project Objectives .. Renewal/Upgrading of Track on Arterial (A Routes) and Other Heavy Density Routes 1 Equipment for Track Laying and Maintenance ..2 Locomotives and Wagons for Transport of Track Materials . . 2 Technical Assistance and Training ..2 C. Implementation Record and Major Factors Affecting the Project . . 3 Project Cost and Financing ..4 Economic Analysis 5 Indian Railways' Financial and Economic Performance ..5 D. Project Sustainability ..5 E. Bank Performance ..6 F. Borrower/Beneficiary Performance ..6 G. Assessment of Outcome ..7 H. Future Operations ..7 I. Key Lessons Learned ..8 This document has a restricted distribution and may be used by recipients only in the performance of their officia] duties. Its contents may not otherwise be disclosed wiLhout World Banrk authorization. l  PART II: STATISTICAL TABLES Table 1 Summary of Assessments ........................... 10 Table 2 Related Bank Loans/Credits ...........................11 Table 3 : Project Timetable ................... .12 Table 4 : Loan/Credit Disbursements: Cumulative Estimated and Actual .12 Table 5 Key Indicators for Project Implementation .13 Table 6: Project Costs .. 14 Table 7 Status of Legal Covenants .15 Table 8 Compliance with Operational Manual Statements .16 Table 9 Bank Resources: Staff Inputs .16 Table 10: Bank Resources: Missions ..17 ANNEXES A. ICR Mission's Aide-Memoire .18 B. Borrower/Beneficiary Contribution to the ICR .20 C. Project Results .22 Table 1: Summary of Track Renewal Planned and Actually Carried Out .22 Table 2: Track Equipment .23 Table 3: Traffic Growth by Major Commodity .24 Table 4: Rail Freight Traffic .25 D. Economic Analysis .26 E. Project Implementation Schedule and Actual period of Implementation .30 F. Indian Railways' Financial Statement .31  IMPLEMENTATION COMPLETION REPORT INDIA THIRD RAILWAY MODERNIZATION PROJECT (LOAN 2935 - IN) Preface This is the Implementation Completion Report (ICR) for the Third Railway Modernization Project in India, for which a loan in the amount of US$390 million equivalent was approved on May 5, 1988 to the Government of India with Indian Railways (IR) as the Beneficiary. The loan became effective on August 10, 1988. The loan amount was later revised at the request of the Borrower to US$248.94 million. The final disbursement was made on June 20, 1995 and the loan was closed on December 31, 1995, compared with the original closing date of December 31, 1993. The Special Account balance was refunded on June 11, 1996 and the loan uncommitted balance was canceled on the same date, reducing the loan amount to US$245.40 million. The ICR was prepared by Harald Hansen (Task Manager) of the Energy and Infrastructure Operations Division (SA2EI) of South Asia Country Department II, with the assistance of Jitendra Sondhi and J.S. Mundrey, independent consultants retained by the Bank. It was reviewed by Francois Bauer, Division Chief, SA2EI, and Kazuko Uchimura, Project Adviser, SA2DR. The preparation of this ICR was begun in December 1995 and carried through the Bank's final supervision mission in February 1996. It is based on project files, field visits and analysis carried out by independent consultants and data furnished by the Borrower and Beneficiary. The Beneficiary contributed by preparing its own evaluation and commenting on the draft ICR. The borrower provided comments that are included as appendixes to the ICR.   -ii - IMPLEMENTATION COMPLETION REPORT INDIA THIRD RAILWAY MODERNIZATION PROJECT (LOAN 2935 - IN) Evaluation Summary Project Objectives 1. The project focused on track renewal and modernization with the objective of improving the planning and execution of Indian Railways' (IR) track renewal/upgrading and maintenance program, enhancing the quality and capacity of track and thus promoting efficient train operation and improving IR's financial performance. The above project objectives were pursued by: (i) renewal/upgrading of track on arterial (A routes) and other heavy density routes; (ii) acquiring equipment for track relaying and maintenance; (iii) acquiring locomotives and wagons for transport of track material; and (iv) technical assistance and training. Implementation Experience and Results 2. By September 1995, 3,881 km out of 4,000 km of track had been renewed. The remaining 119 km oftrack renewal were completed by March 31, 1996. Indian Railways' main heavy density routes, covering 16,568 km, were included in this project. At project closing, 1,052 km of track renewal on these routes were overdue (6.3 percent). One hundred thirty-seven track machines were purchased and have been received and commissioned. 3. The Beneficiary was to fund procurement of Hopper and BFR wagons and locomotives but did not procure any for the exclusive use of track renewal or maintenance. The training sub- component was successfully completed, and in all, about 275 man months of training was arranged. However, there has been considerable delay in the development and implementation of the computer-based, track maintenance planning system and it has so far been implemented only on a pilot section. 4. The total cost of the project was estimated at US$1,206 million (Rs. 16,875 million). The actual cost of the project is estimated at US$1,050 million (Rs. 23,503 million) with a foreign exchange component of US$247 million and local component of Rs. 18,481 million. The Bank financed the full foreign cost of the project and local costs were financed by IR. 5. Post-project economic evaluation shows that for the track relay, the revised IRR is 14, 17 and 25 percent, respectively, for the three typical initial traffic levels, as against the original SAR estimates which had an IRR of 16, 20 and 29 percent for traffic levels of 13, 20 and 35 million gross tonnes, respectively. The investment evaluation of track machines for maintenance shows an IRR of 25 percent. A sensitivity analysis showed that the return on investment for track  - ijj - machines is very sensitive to a reduction in maintenance cost and this should therefore be monitored closely. 6. The project was planned for full implementation by the middle of 1993. However, due to long delays in procurement as well as installation, the track relay component was only completed by March 1996, almost three years behind schedule. Track machines, which were planned for delivery and commissioning by March 1992, were actually commissioned in the last quarter of 1995, resulting in a delay of over 30 months. The delays were caused mainly by the lengthy interval between bid opening and award recommendations to the Bank. Some delay to project implementation was also due to resource pressures resulting from external factors such as a change in GOI policy, which reduced the budgetary support to IR in the post economic reform period. 7. The annual traffic growth, in terms of net tonne km, peaked during the period from 1981 to 1986 at 5.5 percent and has been declining in subsequent years; 3.3 and 1.2 percent in the periods from 1985/86 to 1990/91 and from 1990/91 to 1994/95, respectively. Thus, the traffic growth was lower than the 4 percent anticipated at appraisal. 8. Key indicators for project implementation during FY1990, 1992 and 1994 show that freight and passenger traffic were below targets, but traffic units per employee, locomotive availability, wagon utilization and gross trailing load per freight train exceeded the targets. By and large, the key indicators met the targets for FY1990 to 1994. 9. From FY1987 to FY1995, the operating ratio and the net revenue receipts, as a percentage of capital-at-charge, have shown a healthy trend. The dividends to general revenues have been maintained at satisfactory levels. In all these years, railways generated a post dividend surplus. Indian Railways was, however, not able to increase the total freight traffic output in terms of net tonne km in line with demand, and in the period from FY1991 through 1995, it grew by an annual average of 1.2 percent (Annex C: Table 4), although the overall transport demand increased at an average estimated rate of 7-8 percent per annum. Thus, IR lost market share and long-distance traffic continued to move by road at a higher economic cost to the country. 10. The project objectives, components and broad implementation schedule were included in the SAR. However, a detailed procurement schedule for various items was not defined. The Borrower purchased rails and track equipment through more than 25 separate tenders. In the absence of a detailed procurement schedule, delays in initiating procurement action were not easily monitorable by IR management. 11. Long intervals between bid opening and award recommendation to the Bank (six to twelve months) were a common feature for several tenders. This necessitated repeated extensions of bid validity. 12. During project preparation and loan negotiations, a framework for review and evaluation of benefits from specific components was not developed. The key indicators for Project Implementation included in the SAR and monitored during project supervision relate to macro vt  - iv - level efficiency. It would have been useful to include some indicator with targets specifically related to project components for monitoring during project supervision and after project implementation. 13. During project implementation the economic scenario underwent a change due to the reform of the Indian economy. Indian Railways' budgetary support was progressively reduced. This, coupled with deployment of significant resources for gauge conversion, had a negative impact on resources that could be allocated for this project. Furthermore, as a result of a weakening Indian Rupee, the landed cost of imports more than doubled during project implementation. Due to these factors and slow procurement of rails and machines, the implementation of the project slowed and its completion was delayed by two to three years. 14. Indian Railways' performance in managing the procurement was not satisfactory as evaluations and recommendations for awards took much longer than planned. The long time taken to secure approval of award proposals at Minister's level contributed to the long delays in finalization of procurement contracts. Overall Assessment 15. The outcome of the project is assessed as 'satisfactory' since most of the major project objectives have been achieved. 16. With a heavier track structure in place on main corridors and improved quality of track maintenance, IR will be in a stronger position to meet the challenge of increasing transport demand and competition from road transport, as the Indian economy continues to grow at an expected rate more than 5 percent per annum. Summary of Findings, Future Operations, and Key Lessons Learned 17. This project has demonstrated that the mechanization of certain manual operations is inescapable. As a new generation of infrastructure is introduced, higher standards of maintenance are called for and utilization becomes more intensive. Furthermore, even in a low wage economy such as India, the unit cost of maintenance is lower with the mechanization of selected activities. 18. In future operations, it would, in line with the new policy, be useful to insist that procurement procedures be modified to ensure that tenders are finalized within the original bid validity of 90 or 120 days. Consideration should be given to the possibility of IR obtaining Ministerial approval of projects as a whole so that the requirement of individual approval of each bid evaluation at this level, with attendant delays, is eliminated. 19. Project monitoring must place the same emphasis on the realization of perceived benefits as it does on procurement and physical implementation. Future projects should have specific project component related indicators and targets, in addition to overall and macro-level indicators and targets, which are indicative of project costs and benefits. The Borrower/Beneficiary should have appropriate costing systems in place to facilitate monitoring such indicators.   IMPLEMENTATION COMPLETION REPORT INDIA THIRD RAILWAY MODERNIZATION PROJECT (LOAN 2935 - IN) PART I: PROJECT IMPLEMENTATION ASSESSMENT A. PROJECT OBJECTIVES 1. This project was the last of a series of four interrelated technology transfer projects launched between 1978 and 1988. The rationale for the project was to support the implementation of the key elements of IR's Corporate Plan (1985-2000), especially: (i) improved utilization of assets; (ii) improved planning and investment in key areas; and (iii) increased internal generation of funds for asset renewal and new investment. The project focused on track with the objective of improving the planning and execution of IR's track renewal/ upgrading and maintenance program, enhancing the quality and capacity of track and thus promoting efficient train operation and improving IR's financial performance. The above project objectives were pursued by: (i) renewal/upgrading of track on arterial (A routes) and other heavy density routes; (ii) acquiring equipment for track relaying and maintenance; (iii) acquiring locomotives and wagons for transport of track material; and (iv) technical assistance and training. 2. The project was expected to substantially reduce track maintenance costs. By reducing speed restrictions and the track occupancy time required for renewal and maintenance work, it would increase track capacity in critical corridors as well as improve the utilization of rolling stock. B. ACHIEVEMENT OF PROJECT OBJECTIVES (i) RenewaWUpgrading of Track on Arterial (A Routes) and Other Heavy Density Routes 3. The status of track renewal carried out until September 1995, is summarized in Annex C. By September 1995, 3,881 km, out of the planned 4,000 km of track had been renewed. The remaining 119 km track renewal was completed by end of March 1996. 4. Against the original plan for the procurement of 480,000 tonnes of 60 kg, 90 UTS rail, 259,000 tonnes of 60 kg, 90 UTS rail was imported. Over 190,000 tonnes of rail (mostly 60 kg, 90 UTS) was purchased locally. A large proportion (about 85 percent) of track has been relayed with 60 kg, 90 UTS rail, while the balance (about 15 percent) has been relayed with 52 kg rail, due to the non-availability of 60 kg rail. The renewed track has been laid on concrete sleepers  - 2 - (1,660 per km) with elastic fastenings and standard ballast cushion of 30 cm. All renewed track has welded joints, mostly in long continuous lengths of 2 to 3 kms. 5. Group A and heavy density routes covering 16,568 km were included in this project. At project closing, 1,052 km of track renewal on these routes were overdue (6.3 percent). It is expected that Indian Railways would continue with track renewal with 60 kg, 90 UTS rails on these routes at 2,000 - 2,500 km per year and all arrears of track renewal would probably be cleared over the next year. (ii) Equipment for Track Laying and Maintenance 6. Originally, procurement of 141 units of track equipment was planned. During project implementation, IR, with the agreement of the Bank, reduced the track equipment to 137 machines plus two contactless sensors for track recording cars. Annex C (Table 2) shows the status of machines originally planned, a modified plan and the quantity actually purchased. All machines have been received and commissioned. (iii) Locomotives and Wagons for Transport of Track Materials 7. To assist in the transport of track materials, the project included the procurement of 204 Hopper and BFR wagons and 4 locomotives. These were to be funded by the Borrower/ Beneficiary. Indian Railways did not procure any wagons or locomotives for the exclusive use of track renewal or maintenance. However, 700 hopper wagons were included in its rolling stock procurement program. These wagons have not been procured so far. Wagons were made available for track work from the general wagon pool as and when required. A similar procedure was applied to the deployment of locomotives for track renewal and maintenance work. As IR is currently facing a shortage of wagons as well as locomotives, in the absence of dedicated rolling stock for track work, it is likely that sufficient rolling stock may not be available for track work for some time. (iv) Technical Assistance and Training 8. This project component included: (a) manpower planning; (b) planning of track renewal and maintenance programs; and (c) technical training in the operation and maintenance of the track equipment to be procured under the project. 9. Training: The training sub-component has been successfully completed, and in all, about 275 person months of training was arranged. Specific training modules were designed for track renewal planning, track maintenance and track machine operation and maintenance. Trained personnel were debriefed and were utilized in the development of revised track maintenance systems and utilization of track machines. The re-organization of track maintenance field units has been recommended by a committee. The recommendations include a significant reduction in track maintenance manpower and an increased use of track machines. These recommendations  -3 - are currently under review by top JR management. The manpower norm for high density routes has already been reduced from 2.2 to 1.1 men/track km for track under mechanized maintenance. 10. Track Monitoring and Management System: Development and installation of a computer based track maintenance planning system was a sub-component of the project. This required software development and availability of a high speed track recording car, All the software modules except two have been developed and are expected to be completed by mid- 1996. An existing high speed track recording car has been retro-fitted with contactiess sensors and is undergoing test and validation runs. Considerable field testing of a maintenance planning system is, however, required before it will be ready for general application. 11. The computer-based, track maintenance planning system has been introduced in one division of IR as a pilot and is being used for need-based maintenance with track machines and monitoring the deployment of resources. It is proposed to extend this system to 27 of the 59 divisions of IR, covering the high density routes on the quadrilateral and diagonals which connect the four metropolitan cities and carry 80 percent of IR's traffic. 12. There has been considerable delay in the development and implementation of the computer-based, track maintenance planning system. It is expected that the system will be fully developed and installed on track, covering high density routes, over the next two years provided the high speed track recording car has satisfactory data acquisition integrity. C. IMPLEMENTATION RECORD AND MAJOR FACTORS AFFECTING THE PROJECT 13. On February 24, 1993, the Bank canceled US$120 million of the loan at the request of the Borrower from the loan amount of US$390 million. Indian Railways stated that: (a) It was forced to reduce investments due to pressure on resources; (b) The indigenous capacity for 60 kg, 90 UTS rails had improved; and (c) The landed cost of imported rails (including import duties) was higher and this import was not cost effective. 14. It was suggested that procurement of imported rails be curtailed and rails required for the project be acquired from Indian sources. There were three further cancellations to the tune of US$21.06 million due to a decision not to purchase six track machines and favorable exchange rate movements that reduced the US dollar cost of some of the rail and track machines. After various cancellations requested by the borrower, and agreed by the Bank, the loan amount was revised to US$248.94 million. Following the refund of the uncommitted balance in the Special Account and cancellation of that amount, the final loan amount was US$245.40 million. 15. The project was planned for full implementation by the middle of 1993. However, due to long delays in procurement as well as installation, the track relay component was only completed by end of March 1996, about three years behind schedule. Track machines which were planned for delivery and commissioning by March 1992 were actually commissioned in the last quarter of  1995, resulting in a delay of over 30 months. The delays were primarily the result of lengthy time intervals between bid opening and award recommendations to the Bank. This cause for delay in project implementation was within the control of IR. However, some delay to project implementation was also due to resource pressures caused by external factors such as GOI policy changes, which reduced the budgetary support to IR in the post-economic reform period. As a result, implementation of this project slowed. 16. Traffic growth is indicated in Annex C and selected performance indicators for the IR's broad gauge system are shown in Table 5. It is noted (Annex C: Table 4) that annual traffic growth in terms of net tonne km peaked in the period from 1981 to 1986 at 5.5 percent and has been declining in subsequent years; 3.3 and 1.2 percent in the periods from FY1986 to FY1991 and from FY1991 to FY1995, respectively. Thus, the traffic growth was lower than the 4 percent anticipated at appraisal. 17. Key indicators for project implementation (Table 5) for FY1990, 1992 and 1994 show that freight and passenger traffic were below targets, but traffic units per employee, locomotive availability, wagon utilization and gross trailing load per freight train exceeded the targets. The locomotive utilization for passenger services and load in net tonnes per freight train was below targets. 18. By and large, the key indicators met the targets during FY 1990 to FY 1994. (i) Project Cost and Financing 19. The total cost of the project was estimated at US$1,206 million (Rs. 16,875 million), with a foreign exchange component of US$390 million and a local component of Rs. 11,805 million. The actual cost of the project is estimated at US$1,050 million (Rs. 23,503 million) with a foreign exchange component of US$247 million and a local component of Rs. 18,481 million. The estimated and actual project costs are shown in Table 6 of Part II: Statistical Tables. 20. The actual cost details for track relay costs were made available by IR for 1,247 km of the Northern and Western Railways. The total actual relaying cost for 1,247 km was Rs. 5,506 million giving an average track relay cost of Rs. 4,415 million/km. The total relay cost for 4,000 km was thus estimated at Rs. 17,660 million, out of which the cost of imported rail was US$121.86 million (equivalent to Rs. 2,803 million). For this review, where actual data were not available for converting local cost to US$ cost and vice versa, an average conversion rate of Rs. 23 = 1 US$ has been adopted since the exchange rate ranged from Rs. 14.48 to Rs. 35.00 over the project implementation period from FY1989 to FY1996. The total project cost, net of taxes, is thus estimated at Rs. 18,690 million (US$812.6 million). 21. Originally, the Bank Loan was to finance 100 percent of the foreign cost estimated at US$390 million. Later, due to mutually agreed cancellations, the Bank financed US$248.94 million of project cost. This amount was disbursed. However, the unused balance in the Special Account was subsequently refunded and the uncommitted balance canceled. This reduced the loan amount to US$245.40 million. The Bank financed the foreign cost of the project and Rs. 18,481 million in local cost was financed by IR.  -5 - (ii) Economic Analysis 22. Retrospective economic analysis of the track renewal project has been carried out along lines similar to those used for the economic analysis at project appraisal, but actual data were used for parameters such as traffic growth, cost of track renewal, operating cost, track maintenance cost, etc. 23. The details of the economic analysis are described in Annex D. It is seen that against the original SAR estimates which had an IRR of 16, 20 and 29 percent for the typical base traffic levels of 13, 20 and 35 million gross tonnes, respectively, the revised IRR is 14, 17 and 25 percent, respectively. 24. The economic evaluation for investments made for track machines employed for mechanized maintenance of track has also been carried out and is discussed in Annex D. It shows that this sub-component of the project has an IRR of 25 percent. A sensitivity analysis showed that the return on investment is very sensitive to a reduction in maintenance cost and therefore, this aspect should be monitored closely. The economic evaluation for investment in track machines for mechanization of track maintenance was not undertaken at appraisal. (iii) Indian Railways' Financial and Economic Performance 25. The financial results of IR are summarized in Annex F. Over the period (from FYI 987 to FYI 995), the operating ratio and the net revenue receipts as a percentage of capital- at-charge have shown a healthy trend. The dividends to general revenues have been maintained at satisfactory levels. In all these years, IR generated a post dividend surplus. 26. Indian Railways was, however, not able to increase the total freight traffic output in terms of net tonne km in line with demand. In the period from 1990/91 to 1994/95, it grew by an annual average of 1.2 percent (Annex C: Table 4), although the overall transport demand increased at an average estimated rate of 7-8 percent per annum. Thus, IR lost market share and long distance traffic continued to move by road at a higher economic cost to the country. D. PROJECT SUSTAINABELITY 27. Indian Railways, with this project, has covered almost all but about 1,000 track km of arrears of track renewal on its group A and heavy density routes. The annual new need for track renewal is estimated at about 2,000 km per year and IR plans to undertake track renewal at the rate of 2,000 - 2,500 km per year in the forthcoming years and remain current with track renewals. About 24,000 km of track are already laid on concrete sleepers and have mechanized maintenance in place. Indian Railways proposes to continue extending mechanized maintenance progressively. Activities initiated during this project are, thus, likely to be sustained in the future.  - 6 - E. BANK PERFORMANCE 28. The project objectives, components and broad implementation schedule were included in the SAR. However, a detailed procurement schedule for various items was not defined. Indian Railways purchased rails and track equipment through more than 25 separate tenders. In the absence of a detailed procurement schedule, delays in initiating procurement action did not stand out and attract the attention of IR management. 29. Bank staff participating in supervision missions repeatedly pointed out to the Borrower and IR that procurement action and installation work were behind schedule and needed to be speeded up. The Bank responded to requests for approval of various award proposals promptly. Long intervals between bid opening and award recommendation to the Bank (six - twelve months) were a common occurrence during several tenders. This necessitated repeated extensions of bid validity. It may be noted that the Bank and the Region has since introduced much more stringent guidelines for the approval of bid validity extensions. 30. During project preparation and loan negotiations, a framework for review and evaluation of benefits from specific components was not developed. During the preparation of the ICR, it was discovered that IR did not have a costing system capable of generating costs for specific activities over selected sections of track. It would have been useful, if during project preparation or at loan negotiation, IR's agreement had been secured for the maintenance of accounts so that data such as total cost of relay for each section, track maintenance costs prior to and after relay, operating and maintenance costs of specific groups of track machines, etc., would be available. The key indicators for Project Implementation included in the SAR and monitored during project supervision relate to macro-level efficiency. It would have been useful to include some indicator with targets specifically related to project components (e.g., planned and actual start and finish dates for relay of specific sections, manpower ratio and cost of track maintenance on selected sections laid with 52 kg and 60 kg rails having manual and mechanized maintenance, track occupancy time for maintenance, track capacity, utilization of rolling stock, frequency of accidents, etc.) for monitoring during project supervision and after project implementation. F. BORROWER/BENEFICIARY PERFORMANCE 31. This loan enabled IR to fund the purchase of imported 60 kg, 90 UTS rails and track machines. Except for the loan, it was very difficult for IR to secure foreign exchange for import of rails and machines. During project implementation, the economic scenario underwent a change due to the reform of the Indian economy. Firstly, IR could now access foreign exchange provided it had matching Indian funds to purchase it. Secondly, budgetary support was progressively reduced and IR had to depend increasingly on internal generation of funds and market borrowing for capital investments. These factors, including the deployment of significant resources for gauge conversion, had a negative impact on resources that could be allocated for this project. Thirdly, as a result of the weakening of the Indian Rupee, the landed cost of imports more than doubled during the period of project implementation (1988/89 - 1995/96). Due to the above factors, and slow procurement of rails and machines, the implementation of the project slowed and its completion was delayed by two to three years.  - 7 - 32. Indian Railways' performance in managing the procurement was not satisfactory as evaluations and recommendations for awards took much longer than planned. The long time taken to secure approval of award proposals at the Minister's level contributed to long delays in finalization of procurement contracts. For example, in one case of the procurement of track machines, the Tender Committee took seven months to finalize its evaluation report. Another five months were taken to secure approval of the Minister and the Competent Authority. 33. An important element of the technical assistance component of the project was to improve the planning and execution of IR's track renewal and maintenance program. The progress on the development and implementation of the track maintenance planning system has been slow and it has so far resulted in only a pilot application. It was determined during the field visit that the long delay in system development, which includes a track monitoring system that provides periodic reports on track condition computer hardware and software, including degradation models for track geometry and components to forecast track maintenance and track renewal requirements, has affected the morale of field staff adversely. Unless the system development and implementation are completed quickly and the new system is extended to other divisions rapidly, the objective of developing a more cost effective, need-based track maintenance system may not be realized. One of the reasons for the delay was IR's decision to modify an existing track recording car rather than procure a new high speed car for measuring current track condition. Procurement of contactless sensors and testing and validation of the modified car has taken considerably longer than anticipated. Since reliable data on current track condition is an essential input for the track maintenance system, the overall system development and application on a large scale have been delayed. The satisfactory functioning of the system will depend on the data acquisition integrity of the car that has been modified by [R. Since this sub-project has the potential of generating major technical and financial benefits for IR, it is important that the implementation of the new track management systems on all major routes of IR receives support of management at the highest level and its progress is monitored closely. G. ASSESSMENT OF OUTCOME 34. The outcome of the project is assessed as 'satisfactory' since most of the major project objectives have been achieved as indicated in more detail in the evaluation in Table 1. Physical objectives of track renewal and procurement of track machines were met. Sector policy, financial and public sector management objectives were, however, only partially achieved. Project sustainability has been rated as "likely" since IR is expected to continue track renewal and expand mechanized track maintenance. Borrower's performance in preparation, covenant compliance and operation was also satisfactory. However, Borrower's performance in implementation was somewhat deficient since project implementation was delayed by two to three years, mainly due to delays in finalization of procurements. H. FUTURE OPERATIONS 35. Indian Railways proposes to continue with a track relay program as an ongoing activity to clear the current arrears of track relay of about 1,000 track km within a year and to ensure that  - 8 - such arrears do not accumulate in the future. Indian Railways proposes to mainly utilize 60 kg, 90 UTS long-welded rail and laid on concrete sleepers and 30 cm ballast cushion on it's main high density corridors. 36. Similarly, the change from manual to mechanized track maintenance is being expanded as more track is being relaid on concrete sleepers. This change should also be sustained since mechanized maintenance leads to improved quality of track and reduced cost of track maintenance. 37. At the time of project preparation, rail meeting IRS/T-12-88 specification was not available in India. In 1990, IR asked the Indian manufacturer to upgrade its manufacturing and treatment process so that local rails met the IRS/T-12-88 specification fully. Indian Railways gave the local manufacturer a special relaxation with respect to some requirements of the technical specification for a limited period up to March 1993 and the manufacturer was required to fully meet the specifications thereafter. In order to do so, the manufacturer was required to manufacture fully-killed steel by concast process, set up in-line ultrasonic testing and improve upon dimensional and straightness tolerances for rails. An investigation by an autonomous research center based in Ranchi for RDSO had indicated residual stresses as high as 20 kg/sq. mm in rail manufactured locally, calling for an improvement in the cooling and straightening process. Very little progress has taken place in the quality improvement of the rails manufactured locally and indications are that IR continues to buy rails with special relaxation which relate to quality of steel, ultrasonic testing and dimensional and straightness tolerances. Indian Railways runs the risk of lower than expected levels of performance from such rails in the long run. (The Indian supplier did not bid for any of the global tenders under this project for procurement of rails to IRS/T-12- 88.) Indian Railways will be well advised to insist that only those rails that fully meet the technical specifications be procured in future. Alternatively, consideration should be given to opening up competition through the import of high quality rails. In commenting on the draft report, Indian Railways has indicated that the rail specifications have recently been revised, and as a result, the quality of rails from the local supplier will improve. I. KEY LESSONS LEARNED 38. The main corridors on IR have a high traffic density and some of them are working near full capacity, permitting little time for track maintenance. Heavier long-welded rails are being laid on concrete sleepers to cater to higher traffic density and that in turn calls for mechanized track maintenance, which is not only appropriate but also more cost effective in comparison to manual maintenance. This project, which facilitated renewal of track with 60 kg/m, 90 UTS rail (which has three times the life of 52 kg/m 72 UTS rail in use earlier) and mechanization of track maintenance was, therefore, appropriately designed and timed to serve the current and future needs of IR. 39. With a heavier track structure in place on main corridors and the improved quality of track maintenance, IR will be in a stronger position to meet the challenge of increasing transport demand and competition in road transport, as the Indian economy continues to grow at an expected rate of more than 5 percent per annum.  9- 40. This project has demonstrated that the mechanization of certain manual operations is inescapable. As a new generation of infrastructure is introduced, higher standards of maintenance is called for and utilization becomes more intensive. Furthermore, even in a low wage economy such as India, the unit cost of maintenance is lower with mechanization of selected activities. 41. Indian Railways followed its traditional procurement procedures for project implementation which slowed down procurement. In future operations, it will be useful to insist that procurement procedure be modified to ensure that tenders are finalized within the original bid validity of 90 or 120 days. The Bank has already informed India that, as a general policy, extension of bid validity will, in the future, only be agreed to as an exception and that too only once. Indian Railways could perhaps try to obtain Ministerial approval of projects as a whole so that the requirement of individual approval of each bid evaluation at this level, with attendant delays, is eliminated. 42. The project monitoring must place the same emphasis on the realization of perceived benefits as it does on procurement and physical implementation. Future projects may, in addition to overall and macro-level indicators and targets, have project-specific component-related indicators and targets which are indicative of project costs and benefits. In case of projects such as track relay and mechanization of track maintenance, it is essential that costing systems, which can generate cost data for specific activities, be in place so that it is possible to monitor overall and unit costs, as well as the benefits that arise as a result of project implementation. Where such cost systems and indicators are not available, their establishment should precede the start of the project.  - 10- PART II: Statistical Tables Table 1: Summary of Assessments A. Achievement of Objectives" Substantial Partial Ne,eligible Not Applicable Macroeconomic policies O O [ Sector policies O * O 0 Financial objectives O * L O Institutional Development O * O El Physical objectives * O [ O Poverty reduction O O O Gender concerns El O O Other social objectives O O [ D Environmental objectives O El Ol Public sector management [ * O O Private Sector Development O O O D B. Project Sustainabilitv2' Likely Unlikelv Uncertain I El El C. Bank Performance3' Hi2hly satisfactory Satisfactorv Deficient Identification * El O Preparation assistance E * O Appraisal E * O Supervision E * E D. Borrower Performance4' Highly satisfacton Satisfactory Deficient Preparation l * E hIplementation E E Covenant compliance E * E Operation E * E E. Assessment of Outcome5 Highly satisfactorv Satisfactor Unsatisfactorv Hiihlv Unsatisfactorv 11 Paras. 3, 6, 7, 9 and 11 2/ Paras. 27, 35 and 36 3' Paras. 29, 30 and 38 4/ Paras. 21, 24, 32 and 33 51 Para. 34  - 11 - Table 2: Related Bank Loans/Credits Loan/Credit Title Purpose Year of Status Approval Preceding operations 1. Cr. 844-IN Workshop modernization and construction 1978 Completed Railway Modernization of wheel and axle plant. & Maintenance 2. Cr. 1033-lN Improve urban transport in Bombay. 1980 Completed Urban Transport 3. Cr. 1072-IN Improve rural connectivity and planning 1980 Completed Bihar Rural Roads and maintenance management of rural roads. 4. Ln. 2210-IN/Cr. 1299-IN Modernize diesel electric locomotive 1982 Completed 2nd Railway Modernization & maintenance and improve technology of AC Maintenance electric locomotive. 5. Ln. 2387-IN Accommodate expected growth in maritime 1984 Completed Nhava Sheva Port traffic in the Bombay area through specialized facilities for containerized and bulk cargo. 6. Ln. 2417-IN Electrification of key routes and 1984 Completed Railway Electrification modernization of additional workshops. 7. Ln. 2534-IN Modernize key sections of national 1985 Completed National Highway highways, promote improvements in engineering and construction, network management and contract management and assist Orissa reconstruct damaged bridges. 8. Cr. 1757-IN Provide all-weather rural roads and 1987 Completed Gujarat Rural Roads improve their construction, maintenance and planning. Following Operations 1. Ln. 2994-IN Promote modern maintenance management 1989 Active State Roads I systems and improved construction methods. 2. Ln. 3753-IN Establish enabling environment for 1995 Active Container Transport container transport and increase the capacity and efficiency of long-haul transport of high-value general cargo.  - 12 - Table 3: Project Timetable Steps in Project Cycle Date Planned Actual Date Identification (Executive Project Summary) May 1986 Preparation May 86-August 87 Appraisal May 87 September 87 Negotiations November 87 March 88-April 88 Board Presentation January 88 May 88 Signing - May 88 First Tranche release (if applicable) Effectiveness - August 88 Mid-term review (if applicable) Second (and third) tranche release (if applicable) Project Completion Loan Closing December 93 December 95 Table 4: Loan/Credit Disbursements: Cumulative Estimated and Actual (US$ millions) FY89 FY90 FY91 FY92 FY93 FY94 FY95 FY96 Appraisal estimate 10.0 40.0 125.0 250.0 350.0 390.0 - Actual 30.0 88.0 126.0 178.0 229.0 243.0 249.0 (4.0)1" Actual as percent of estimate 300% 220% 101% 71% 65% 62% 64% Date of final disbursement June 20, 1995 l/ No actual disbursements, just recovery from Special Account Advance.  - 13 - Table 5: Key Indicators for Project Implementation (Broad Gauge System) Key Implementation Indicators in SAR ----------Estimated ----------- -----------------Actual-------" Traffic FY90 FY92 FY94 FY90 FY92 FY94 FY95 Freight Revenue (btkm) 236 260 284 230 250 252 250 Suburban pass (btkm) 59 63 66 55 63 63 68 Non-sub pass (bpkm) 215 240 256 226 231 233 251 Traffic Units/Employee 285 295 310 333 367 362 380 (000) Availability (percent) Locomotive-diesel 82 83 84 90 90 90 91 Locomotives-electric 80 81 82 93 93 93 93 Wagons 96 96 96 96 96 96 96 Coaches 88 89 90 90 91 91 91 Locomotive Utilization (kms/available loco/day) Passenger-diesel 725 700 650 702 633 594 585 Passenger-electric 480 510 530 513 488 507 504 Freight-diesel 400 400 380 454 436 407 413 Freight-electric 420 430 440 395 395 423 423 Wagon Utilization 1,450 1,475 1,500 1,420 1,439 1,506 1,590 (ntkmiwagonlday) Gross Trailing Load per 2,000 2,050 2,100 2,094 2,191 2,264 2,273 freight train (tonne) Net-tonneLoadperfreight 1,106 1,125 1,150 1,060 1,119 1,142 1,100 train FY90 represents April 89-March 90 and so on. Source: IR data and Year Book  - 14 - Table 6: Project Costs Appraisal Estimate ----------Rs Million ----------- ------------US$ Million---------- Local Foreign Total Local Foreign Total 1. Track Renewal 10,185 3,579 13,764 708 274 982 2. Track Equipment 1,437 1,460 2,897 94 114 208 3. Locomotives and 173 1 174 13 - 13 Rolling Stock 4. Training and 10 30 40 1 2 3 Technical Assistance 5. Total Cost 11,805 5,070 16,875 816 390 1,206 Source: SAR Actual = Rs Million US$ Million- Local Foreign Total Local Foreign Total 1. Track Renewal 14,857 *2,803 17,660 *645.96 121.86 767.82 2. Track Equipment 3,624 2,179 5,803 *157.56 123.33 280.89 3. Locomotive and - - - - - - Rollng Stock 4. Training and - *40 40 - 1.73 1.73 Technical Assistant 5. Total 18,481 5,022 23,503 803.52 246.92 1050.44 *Based on average exchange rate Rs. 23 = 1 US$ About US$2 million of the total loan sanction and disbursed amount has remained unutilized and is lying in the loan special account. This amount is being refunded to the Bank.  - 15 - Table 7: Status of Legal Covenants Agreement Section Description of Covenant Comments LOAN 4.01 Have records and accounts of Audit report for 1993/91 departments or agencies of Borrower of has been received. each fiscal year audited in accordance with appropriate auditing principles and furnished to Bank not later than eleven months after end of year. 4.02 Have Special Account of each fiscal year Audit report for 1993/94 audited in accordance with appropriate received, that for auditing principle and furnished to Bank 1994/95 is outstanding. not later than six months after end of year. 4.03 Maintain passenger fares and freight In compliance. rates and take all other action necessary or appropriate to enable Railways to meet annually out of internally generated resources all operating expenses and divided payments on capital-at-charge. 4.04 Ensure that provisions to Depreciation In compliance. Reserve Fund during any given fiscal year 1990 through 1994 shall be not less than the budgetary provision of fiscal year 1989. 4.05 Review each year the implementation of In compliance. Railways' annual plan and achievements relative to objectives in Corporate Plan. Minutes para. 5 Inform Bank of conclusions reached and In compliance. decisions taken regarding depreciation provisions and policy.  - 16 - Table 8: Compliance with Operational Manual Statements There is no OMS relevant to the project that have not been complied with and/or been acted against. Table 9: Bank Resources: Staff Inputs Planned2' Revised2' Actual Stage of Project Cycle Weeks 1000 US$ Weeks 1000 US$ Weeks 1000 US$ Through appraisal - - - - 146.9 336.2 Appraisal-Board - - - - 29.9 73.2 Board-effectiveness - - - - l Supervision - - - - 102.1 197.5 Completion - - - - 0.2 0.7 TOTAL - - - - 279.1 607.6 11 Included in supervision 2/ Not available  - 17 - Table 10: Bank Resources: Missions Performance Rating Stage of Month/ year No. of Days Specialized stafe Implmt Dev't Types of project cycle persons in skills represented status Impact problems' field Through April 86 4 14 FA, TE, RE appraisal Sept.-Oct. 86 2 9 FA,TE Feb. 87 4 11 DC,TE,RE,TEL May-June 87 6 21 FA,TE, RE,TEL,TC,OIS (Appraisal) Sept. 87 3 16 FA, TE, RE Appraisal through Board approval Board approval through effectiveness Supervision Oct. 88 5 10 DC, FA, TE, RE 1 1 Jan.-Feb. 89 2 22 RE 1 1 July 89 3 8 TE, FA 1 1 Oct.89 2 15 FA,RE 1 1 April 90 4 24 FA, RE, RS, EC 1 1 P Nov.-Dec. 90 2 16 FA, RS, EC 1 1 P Nov. 91 4 14 FA, RS, EC, ME 2 1 P Feb. 92 4 7 FA, RS, EC, ME 2 1 P Sept.-Oct. 92 3 14 RS, CE, ME 2 1 P Feb.-Mar. 93 3 22 RS, CE, ME 1 1 P Oct. 93 2 5 RS, ME 1 1 T Dec. 93 2 2 RS, ME 1 1 T Aug. 94 3 15 EC, CE, ME HS HS T Mar.-April 95 2 18 EC, ME HS HS T Sept.95 2 8 EC, ME HS HS T Completion Jan. 96 2 5 ME, CE ' Specialized Staff: DC (Division Chief), CE (Civil Engineering Consultant), EC (Economist), FA (Financial Analyst), ME (Mechanical Engineering Consultant), OIS (Operations Information Systems Consultant), RE Railway Engineer), RS (Railway Specialist), TC (Telecom Consultant), TEL (Telecom Engineer), TE (Transport Economist) 2' P=Procurement; T=Teclhnical  - 18 - Annex A IMPLEMENTATION COMPLETION REPORT INDIA THIRD RAILWAY MODERNIZATION PROJECT (LOAN 2935-IN) Aide Memoire 1. This aide memoire presents the findings of the supervision mission for the Railway Modernization III Project (Loan 293 5-IN). The mission included Messrs. H. Hansen, Task Manager and J. Sondhi (Consultant) and held meetings with IR officials between September 11 and 18, 1995. The mission appreciates the help of Mr. C. S. Sharma, Executive Director (L&F), Mr. Rakesh Chopra, Executive Director (TM) and Mr. Gaurav Dave Director (Plng.) and other staff of Indian Railways. 2. The original loan amount of US$390 million was earlier revised to US$252.50 million due to cancellations requested and agreed. Recently another US$3.56 million has been canceled thus reducing the loan amount to US$248.94 million. 3. The status at the end of September 1995 for various components of the loan was: Item Allocation Disbursed (US$ Million) (US$ Million) Rails 117.50 121.86 Track Machines 129.44 120.97 Consultancy 2.00 0.83 Total 248.94 243.66 4. Rails: All contracts for the supply of rails have been completed and materials supplied and paid for. No further disbursement is to be made. 5. Track Machines and Consultancy: All contracts have been placed for track machines. A commitment for US$781,156 has recently been made for consultancy related with training of civil engineers. It is anticipated that between October and December 1995, payments for most of the remaining amount will be made against pending contracts for track machines and consultancy. A small amount, not disbursed till project closing, is expected to be disbursed in the first quarter of 1996.  - 19 - 6. Cancellation: Indian Railways' request for further cancellation has been agreed to and US$3.56 million was canceled. This cancellation is due to savings as a result of favorable currency fluctuation in some of the contracts. 7. Closing Date: The closing date has been extended to December 31, 1995. Most pending disbursements are expected to be made before the closing date. 8. The mission once again requested IR to furnish detailed information on actual cost and physical progress for various elements of the project since the same will be required for the Project Implementation Completion Report (ICR). The cost information should indicate cost for total imports, local taxes and duties separately. It was requested that the cost data and physical progress be furnished latest by November 15, 1995. Indian Railways and DEA were reminded that the Special Account Audit report for 1994/95 was due by September 30, 1995. 9. Indian Railways' officials were requested to furnish an update on the following. These may also be furnished latest by November 15, 1995: (i) Measures taken to improve the quality of rails supplied to IR by Bhilai Steel Plant. (ii) Status for the acquisition of high speed Track Recording Cars using contactless sensors. (iii) Setting up of an effective Track management System with the help of a modern Track Recording Car. (iv) Fixing of "Thresh hold Values" for track maintenance and renewal with the assistance of Derby Research Center and results of validation trials. (v) Selected Operational Statistics for the year 1994. 8. The audit report of the project accounts for the year 1993-94 has now been submitted. The next report (for 1994-95) was due in February 1996. The audit report for the special account for 1994-95 is now overdue (September 1995). This may be expedited.  - 20 - Annex B IMPLEMENTATION COMPLETION REPORT INDIA THIRD RAILWAY MODERNIZATION PROJECT (LOAN 2935-IN) A. Borrower/Beneficiary Contribution The performance of the project was generally satisfactory. However, the following observations may be considered by the World Bank in formulating subsequent project, as these have arisen out of the experience gained on this project: (1) The World Bank procurement procedure requires very frequent consultation with the Bank. World Bank could consider standardizing document sectorwise particularly for the rail sector where considerable data is to be provided. (2) At the time of formulating the project, the evaluation criteria for the success of the project and the format in which the data should be collected and maintained were not specified. In several cases, these may be at variance with the set norms and procedures of the organization. World Bank may consider formulating after discussion with the organizations, a suitable success criteria which should be reviewed periodically, instead of leaving it for a final review at the end of the project. Together with this, the above mentioned format for data collection should also be finalized. (3) The criteria for mid course changes in the procurement of the items and mid course proportionate reduction and increase in the fund resources should be made more liberal by the World Bank to allow flexibility in the project as also unnecessary expenditure of commitment charges before surrender of excess funds. B. Indian Railways' Comments of Draft ICR The following are the comments on the above ICR. The relevant paragraphs of the draft may be modified keeping these comments in view: (1) Improvement of quality of indigenously manufactured rails - The specifications for the rails have been revised recently in consultation with the Steel Authority of India Ltd. These revised specifications will result in the manufacture of improved quality of rails indigenously. (This point has been reflected in para. 37 of the report.) (2) Track Maintenance Planning System - The system envisaged: (i) development/procurement of a high speed Track Recording System for IR  - 21 - (ii) development of computer based track management system for need based track maintenance and monitoring of resources including on-line track machines; and (iii) development of threshold value of track maintenance. The status of the above is as follows: Item (i): Global bids were called for procuring a Track Recording Car (TRC) because final bidder with whom negotiations were going on resiled from the original conditions; the offer was closed. Simultaneously, IR had upgraded two of its own TRCs for broad gauge for recording at a high speed with the capability of attachment with fast mail/express trains. Board, therefore, decided to upgrade under Phase-HI its own two TRCs by providing contactless sensors to measure alignment and gauge since most of the other measuring devices have been upgraded to meet all other above requirements, instead of going in for an imported TRC. Contactless sensors for both TRCs have been procured. These have been provided on one TRC and tested. First run with mail-express attachment is done on 17th July. Thus, IR had achieved the objective up to 130 kmph. Item (ii): Board decided to entrust task of development TMS to CRIS after foreign firms were found to charge very high. Phase-I of the TMS was successfully developed in 1990-92 and implemented. Under Phase-I of development one sub-division of each zonal railway was provided with TMS. Under Phase-I1 in 1992 this was provided on the whole of Allahabad division of Northern Railway besides above sub-divisions. As a next step, 27 divisions of the golden quadrilateral and its two diagonals were located and identified. It is being provided under the 9th Plan for a modular composite for computerization in the civil engineering department of IR. Item (iii): A project was made by RDSO and consultancy awarded to Transmark with the approval of World Bank and Railway Board. The contract was signed in 1991. The modules to be developed including revised track geometry for IR for a range of speeds and traffic categories and study of TRC on IR and BR to work out methodology for generating corrections with input to 'roll' and 'Yaw'. The penultimate phase report of Transmark was available only in December 1995. The same is under consideration of RDSO and Board for further action.  - 22 - Annex C Table 1 IMPLEMENTATION COMPLETION REPORT INDIA THIRD RAILWAY MODERNIZATION PROJECT (LOAN 2935-IN) Proiect Results Table 1: Summary of Track Renewal Planned and Actually Carried Out Track Renewal Average Renewal Average Annual kms Programme Traffic Carried Traffic Growth in km 1986 MGT out km 1994-95 Traffic MGT * Percent Group A Routes Howrah-Mughalsarai 1,333 400 32 401 35.2 1.0 Mughalsarai-Delhi 1,622 450 31 487 40.7 3.2 Howrah-Nagpur 2,623 400 17 755 Ballarshah-Gudur 1,493 150 15 150 26.4 6.5 Gudur-Madras 272 - 13 Mathura-Bombay 2,471 600 16 600 Delhi-Ballarshah 2,301 400 17 375 21.6 2.2 Wardha-Bombay 1,516 400 19 585 20.3 0.7 Total 13,631 2,800 21 3,353 Other Heavy Density Freight Routes Katni-Bina and Itarsi- 1,126 475 16 220 Bhusawal Delhi-Ambala-Sirhind 428 100 18 37 Bilaspur-Anuppur Katni and Kottavalasa- 1,082 475 12 144 Kirandul Nagda-Bhopal 301 150 17 127 Total 2,937 1,200 15 528 Grand Total 16,568 4,000 19 3,881 *Traffic Density for a few representatives sections was obtained from IR. Source: IR data  - 23 - Annex C Table 2 Table 2: Track Equipment Machine Unit Quantity Quantity Procured Original Plan Modified Plan Track Relaying Train No 2 2 2 Ballast Cleaning Machine No 7 7 7 Ballast Cleaning Machines for No 2 2 2 Turnouts Ballast Regulator No 7 7 7 Continuous Tamping Machine No 30 30 30 Points and Crossing Tamper No 10 10 10 Dynamic Track Stabilizer No 1 1 1 Crane for Points and Crossings No 8 8 8 Flash Butt Welding Plant Stationary No 3 - - Flash Butt Welding Plant Mobile No 3 - - Grinding Machine No 1 1 1 Wheel Flaw Detector No 4 - - Track Recording Car No I - - Sleeper Exchange Machine No 8 8 8 Shoulder Ballast Cleaner No 4 4 High Output Tamper No 15 15 Point and Crossing Tamper No 10 10 Ballast Cleaning Machines No 5 5 Ballast Regulator No 15 15' Dynamic Track Stabilizer No 3 3 Dynamic Track Stabilizer No 3 3 High Output Tampers No 6 6 Contactless Sensors No 2 2 Source: JR data.  - 24 - Annex C Table 3 Table 3: Traffic Growth by Major Commodity (Billion NTKM) Year Ending March 31 ---------------Project* --------------- --------------Actual-------------- 1988 1990 1995 1988 1990 1995 Coal 74.1 88.2 118.4 78.67 85.11 105.26 Cement 15.2 15.5 23.0 14.54 17.74 19.06 Fertilizers 15.2 15.7 18.9 14.36 17.38 19.30 Petroleum Products 10.9 13.9 15.0 13.78 15.70 18.17 Foodgrains 39.2 39.7 42.4 41.67 31.68 27.08 Pig Iron & Steel (Finished 10.9 12.5 16.8 11.54 11.79 13.65 Products) Total Rev. Traffic 217.8 230.9 294.6 222.53 229.63 202.52 *As per SAR, World Bank projections of total traffic, but based on proportionate commodity composition in IR Corporate Plan. Source: IR data and Year Book.  - 25 - Annex C Table 4 Table 4: Rail Freight Traffic (Net Tonne Km. Million) Year Ending March 31 1971 1981 1986 1991 1994 1995 Total Rev. Traffic 110,700 147,652 196,601 235,700 252,410 249,564 Non-Rev. Traffic 16,662 10,822 9,303 6,920 4,720 5,000 Total All Traffic 127,362 158,474 205,904 242,620 257,130 254,564 Freight Traffic Lifted (Million Tonnes) 1971 1981 1986 1991 1994 1995 Total traffic 196.50 220.20 286.30 341.40 377.47 381.55 Average Annual Growth of Traffic (%) Period Net Tonne Km Tonnes Lifted 1971-81 2.2 1.1 1981-86 5.5 5.5 1986-91 3.3 3.5 1991-95 1.2 2.8 1986-95 2.4 3.2 Source: I R Year Books  - 26 - ANNEX D IMPLEMENTATION COMPLETION REPORT INDIA THIRD RAILWAY MODERNIZATION PROJECT (LOAN 2935-IN) Economic Analysis Track Renewal The evaluation of this project component was originally based on the economic analysis of complete renewal, comprising re-ballasting, new sleepers/fasteners and new 60 kg/m 90 UTS rail for different levels of traffic (13, 20 and 35 Million Gross Tonnes) expected to be experienced on various selected routes for track renewal. The costs and benefits were converted to economic prices by expressing the imported content c.i.f. prices and applying the factor of 0.8 to local costs. Costs in this analysis were netted out for the value of released materials in subsequent renewal cycles in the 'without project' case, but not for the first renewal since the value of released material was the same. The analysis period taken was the period required to exhaust the service life of 60 kg/90 UTS rail. Assumptions made at the project appraisal and for post-project analysis are: At Appraisal For Post Project Analysis (1991/92) Ratio of Net/Gross traffic % 60 60 Growth per annum % 5 3 Est. Cost of track renewal Rs.000 52 kg/72 UTS 1665 2720 60 kg/90 UTS 1900 3125 Value of materials released Rs.000 45 kg/72 UTS 150 52 kg/72 UTS 200 339 60 kg/90 UTS 310 469 Operating Costs per 000 NTKM Rs. without project -initially 200 265 -after renewal with 52 kg 196 260 with project 190 252 Track maint. costs per km Rs.000 without project -initially 48 22 -increasing at annual rate 2 1 -years 1-3 after renewed with 52 kg 10 22 -thereafter 36 22 with project -years 1-5 5 22 inyear 1, thereafter 24 10 in year 2 and so on. Service life of rail MGT 52kg/72 UTS 250 250 60 kg/90 UTS 800 800  - 27 - The rationale for these assumptions are discussed below: Traffic Growth: The actual traffic growth for IR for the period 1985/86 to 1994/95 in terms of net tonne km was 2.4 percent per year against an anticipated growth rate of 4 percent (Annex C: Table 4). At appraisal it was estimated that on the main rail corridors the traffic density in terms of million gross tonnes (MGT) will grow at a rate of 5 percent per year, a rate somewhat higher than the average traffic growth for the entire railway. For IR, the traffic density grew at about 2 percent per annum during the period 1985/86 - 1994/95. It is seen that on specific group A routes the annual growth rate of MGT varied from 0.7 percent (Wardha- Bombay) to 3.2 percent (Mughalsarai-Delhi) except that on one corridor Balharshah-Gudur, it grew at an annual average of 6.5 percent. The average traffic growth rate on the main corridors for re-evaluation has been assumed at 3.0 percent per year, i.e., a little higher than the national average. Cost of Track Renewal: This project has been carried out over the period 1988/89 - 1995/96. Year 1991/92 was chosen as the reference year for cost of track renewal. Year 1991/92 has also been chosen as the first year for economic re-evaluation. Cost of track renewal for 1991/92 with 60 kg, 90 UTS rails was estimated from the actual project costs less taxes and duties. The local costs were converted to economic cost by applying a factor of 0.8. The economic cost of track renewal with 60 kg, 90 UTS rails came to Rs. 3,125 rnillion per km. The cost of relay of 52 kg, 72 UTS was estimated in the same proportion as at appraisal (87 percent). The residual value released assist was estimated at 15 percent of cost of relay. Operating Cost Saving: The approach undertaken at appraisal was retained except that the actual operating cost as in 1991/92 of Rs. 265 per thousand NTKM was adopted. A saving of 2 and 5 percent after renewal with 52 kg and 60 kg rails, respectively has been assumed as at appraisal. Track Maintenance Cost: At the time of appraisal (1988) track maintenance was largely undertaken by manual means. In the meantime, track maintenance has been mechanized for 52 kg as well as 60 kg track laid on concrete sleepers. In the re-evaluation, the cost of mechanized maintenance has been used. On the mechanized maintenance section laid with 52 kg rails, there are two elements of cost. As per IR data, these are firstly, the tamping cost (undertaken once a year) which is estimated at Rs. 12,000 per km and secondly, the non-tamping cost estimated at Rs. 10,000 per km per year, giving a track maintenance cost of Rs. 22,000 per year. This does not include the cost of patrolling, drainage and other maintenance activities on and along the track. It has been the experience that on 60 kg rail track, tamping is required once every two years. Therefore, the track maintenance cost is Rs. 22,000 in the first year and Rs. 10,000 in the second year and so on. Indian Railways has had the same maintenance system and cost, even in the early years after relay, and the reduced cost of maintenance assumed in year one to five after track relay in the SAR did not materialize.  -28 - Service Life of Rails: Assumptions as at appraisal of 250 MGT for 52 kg, 72 UTS and 800 MGT for 60 kg, 90 UTS were retained for re-appraisal also. Investment for Mechanization of Track Maintenance: Since similar investments have been made for mechanized track maintenance for 52 kg and 60 kg rail track, these investments were not considered for re-evaluation. An economic cost-benefit analysis was undertaken and shows an economic rate of return of 14, 17 and 25 percent for track relay component on sections having traffic density of 13, 20 and 35 MGT, respectively. Somewhat lower IRR than the estimate at appraisal is perhaps due to a lower rate of growth in traffic density. There was no change in IRR when it was assumed that the frequency of tamping for track laid with 60 and 52 kg rails would be the same. Track Mechanization The appraisal report did not evaluate the investments proposed for track machines. A little over half (US$23 million) of the Bank loan has been utilized for the procurement of track machines for track relaying and mechanized maintenance. As a result of the introduction of a large number of track machines, it has been possible for IR to mechanize track maintenance on 24,000 track km of track laid on concrete sleepers. The mechanization has helped IR reduce the cost of track maintenance substantially. These cost savings are achieved mainly through a reduction in cost of maintenance staff. As a result of mechanization, the staff deployment is reduced from 2.2 to 1.1 men per track km for main high density corridors. Over 10,000 staff reduction has already taken place, mainly through non- replacement of retiring staff. It is estimated that every 500 track km requires one high output tamper, one point and crossing tamper and half ballast regulator. These machines were imported and their economic cost on c.i.f basis was US$2 million, equivalent to Rs. 46 million, for each section of 500 track km. Thus the investment for track mechanization was Rs. 92,000 per track km. As per IR data the operating and maintenance and overhaul cost of track machines per track km is estimated at Rs. 4,416 and Rs. 13,948, respectively. The overhaul cost is incurred at mid life, that is, after seven years as these machines have an economic life of 14 years. Using a factor of 0.8, the economic costs for operation and maintenance and overhaul come to Rs. 3,530 and Rs. 11, 150, respectively. The economic cost of manual track maintenance for A routes and heavy density corridors for 1991/92 was estimated at Rs. 58,000 per year (mainly cost of labor) which includes all costs such as patrolling, drainage and other maintenance activities. Since after mechanization the labor strength is reduced to half, the track maintenance cost has been assumed at Rs. 34,800 per track km for track after maintenance is mechanized (60 percent of original cost). An economic evaluation was undertaken for a period of 14 years (life of machines). The residual value of machines was taken at 10 percent. This analysis shows an economic rate of return of 25 percent for investments for the mechanization of track maintenance. With post-project maintenance cost of 70 and 50 percent, the IRR changes to 17 and 37 percent indicating that the  -29 - return on investment is very sensitive to a reduction in maintenance cost and the same should be monitored closely.  -30 - ANNEX E IMPLEMENTATION COMPLETION REPORT INDIA THIRD RAILWAY MODERNIZATION PROJECT (LOAN 2935-IN) Proiect Implementation Schedule and Actual Period of Implementation IR Fiscal Year 1988 1989 1990 1991 1992 1993 1994 1995 1996 Quarter 1234 1234 1234 1234 1234 1234 1234 1234 1234 1. Track Renewal Preparation of tender ___ _ documents Tendering _ __ __ Bid evaluation and award _ _ Delivery _ _ ------- Installation _ _ ___ ------- xxxx xx xxx x_x xoooc xx xoooc 2. Track Machinery Specification and __ _ ------- tendering Bid evaluation and award -_ _ _ -_- Delivery _ _ ------- XXX XKXXX )DXX X XOCXXX XXXXX XXX Commissioning __ _ ------- ___ ___ xx xx xxx m xx xxxxx I xwcx xxxoo 3. Locomotives and Wagons Manufacturing _ Delivery ----_-- 4. Training and technical assistance Studies and training _ _ _ _ ------- x xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx Planned Schedule---------- Actual Implementation xxxxxxxxxxx Fiscal Year: 1988, Year ending March 31, 1988 and so on.  -31 - ANNEX F IMPLEMENTATION COMPLETION REPORT INDIA THIRD RAILWAY MODERNIZATION PROJECT (LOAN 2935-IN) Indian Railways Financial Statement (In Current Rupee-Million) Year Ending March 31 1982 1987 1992 1994 1995 Total Revenue 35,379 75,057 141,137 179,460 201,001 Total Working Expenses 27,193 69,006 125,728 151,345 165,901 Appropriation to Pension Fund 1,129 3,500 11,800 15,000 20,050 Appropriation to DRF 3,500 12,500 20,000 18,750 18,850 OperatingIncome 3,557 6,051 15,409 28,115 35,109 Other operating Income 474 757 3,024 2,906 2,972 Dividend Payment 3,565 5,788 11,059 12,960 13,617 Net Income 466 1,019 4,350 18,061 24,464 Operating Ratio (percent) 89.92 92.2 89.5 82.9 82.6 Ratio of Net Rev. to Capital-at- charge 6.0% 6.6% 8.7 13.7 15.3 1995: 1994-95 i.e., year ending March 1995 and so on. Source: IR Year Books.    IMAGING Report No: 16149 Type: ICR