But this is not true. Fundamental changes in the structure of Indian industry will result in permanent reduction in the freight transported by the railways. Today, domestic corporates are exploring means of reducing their cost structures, and one of the options available to them is to by pass the railways and the associated bottlenecks.

So far, the key selling point for Indian Railways was faster and cheaper transportation of goods.

The development of the railways has been synonymous with the development of the economy. That situation may change.

The prospects of gloom in theeconomy have forced many corporates to consciously take decisions to get into cost structures which would be sustainable in the long run. These involve hard options such as closing down units with higher overheads and relocating themselves in places close to markets and sources of raw material. Take the steel companies--Jindal, Essar, Mukand, and Ispat--for instance. Jindal Vijaynagar is located close to iron-ore mines, and with its advantage of being the only player to manufacture hot-rolled coils in the south, it hopes to capture the south- based market. The viability of the plant hinges on the freight differentials that it would be able to get over SAIL and Tisco. With the part-commissioning of the plant, the steel traffic from the east and west to the south will receive a major jolt. The freight differentials could result in lower price to consumers, but a permanent loss of revenue to the railways.

Essar in a way succeeded in doing an identical thing by locating itself in the western market, severelyaffecting the movement of goods from the east to the west. Simultaneously, it is constructing a pipeline for transportation of pellets (iron ore) from the Vizag plant to its sponge-iron plant in Hazira. After the commencement of the pipeline, even Ispat is likely to source its pellets from the Essar-Vizag pipeline, as this would be a cheaper alternative , which would again draw business away from the railways.

Mukand has closed its furnace in Mumbai and shifted to Hospet for its proximity to iron-ore mines. After the production of blooms (semi- steel), Mukand plans to transport them from Hospet by road to Mumbai, and roll it to required dimensions. This has helped Mukand reduce its dependence on rail freight for transport of key raw materials and finished goods.

The new plants in all the various core-sector industries are located close to the sites of raw materials or ports. There has been an 85 per cent spurt in the use of imported coal. This is because transportation of coal from Indonesia to Chennaiworks out to Rs 87.76 per million Kcal, compared to Rs 133.62 per million kcal by rail from Orissa. The net result is imported coal is cheaper by 25 per cent to domestic coal, in spite of fact that cost of coal mining in India is cheaper than mining similar grades in other countries.

So far as power is concerned, the government's plan is to push for mega power projects to be built at pit heads, and transmit the power over a much longer distance. Despite all the noises made about the ash content in Indian coal being high, the fact remains that cost of production of electricity is the lowest when we use coal at the pit head. The cost of production turns out to be one-fourth of the cost of producing electricity at a power plant located 1,000 km from the pit head. In addition, even if we take 25 per cent loss in transmission (impossible in case we go for high KV lines for mega power projects), we would still get a cost structure which could reduce electricity tariff by half.

The railways would lose theirbiggest customer in coal transportation. But then they are themselves partly to blame, given the amount of theft in coal transport. Using open wagons for transporting them have seen a lot of potential customers shying away from entering into a long-term fuel-supply agreement with the railways.

Moreover, in a few years there will be development of a lot of coastal refineries, which will transmit their products through pipelines. These underground pipelines are cost-effective, as they reduce the cost of transporting petro products by one-fifth of the cost of transporting similar quantity by rail. In a deregulated scenario, none of the refineries can afford to use the rail for long-distance supplies.

Perhaps the only alternative left for the railways is to concentrate more on the short route with wagons capable of transporting smaller quantities at a cheaper rate. Instead of having a tariff structure which tapers at long distances, the railways might look at the situation in different way. Since the bulk offreight transport is going to be on shorter routes, then why not make this more attractive by giving users more options such as more discounts for greater use in a year rather than one flat rate. This would result in higher use of rail service and ensure steady revenues.