THE ECONOMIC WEEKLY
M a y 23. 1959
Letter to the Editor
Road vs Rail Transport
' T H E purpose o f m y a r t i c l e was t o
refute the contention t h a t the
capital cost of c a r r y i n g a m i l l i o n t o n
of goods over 300 miles by road, is
twice t h a t required by the r a i l w a y s .
T h i s was the basic premise of the
Member, T r a n s p o r t a t i o n , the R a i l -
w a y B o a r d . The same figures were
advanced by S h r i Neogi, Member,
T r a n s p o r t a t i o n , P l a n n i n g Commis-
sion, in J u l y 1957, and presumably t h i s
was a f u n d a m e n t a l premise in the
a r g u m e n t t h a t finally gave the K a i l -
ways Rs 1,125 crores out of a t o t a l
P l a n expenditure of Rs 4,800 crores.
M y i n t e n t i o n i n choosing the
example of a large q u a n t i t y of a
heavy c o m m o d i t y such as i r o n ore,
a n d a l o n g haul, was not to demon-
strate the a l l r o u n d superiority of
r o a d t r a n s p o r t under a l l c i r c u m -
stances, but to show t h a t even under
conditions most favourable to the
r a i l w a y s , the converse of the pre-
mise advanced by the Member,
T r a n s p o r t a t i o n , the R a i l w a y B o a r d ,
and supported by the Member,
Transportation, Planning Commis-
sion, is l i k e l y to be true.
1 am of course a w a r e t h a t there
are conditions under w h i c h trans-
p o r t by r a i l offers m a n y significant
advantages - b u t my concern was
only w i t h relative c a p i t a l costs.
Since Mr B e c k m a n does n o t disagree
w i t h me on this point, a n d as I have
satisfied m y s e l f about the correct-
ness of his a r i t h m e t i c , I w i l l m e r e l y
refer to certain p r a c t i c a l a n d tech-
nological considerations t h a t w i l l
affect his conclusions.
M r B e c k m a n i s o f course v e r y
correct when he m a i n t a i n s t h a t l i k e l y
p r o f i t a b i l i t y is an excellent guide to
investment. However, calculations of
l i k e l y r e t u r n are a great deal m o r e
complicated t h a n he seems to i m a -
gine. R a i l w a y returns cannot be
created by s i m p l y r a i s i n g charges.
In fact there is h a r d l y a r a i l w a y
system in the w o r l d w h i c h earns the
7-9 per cent r e t u r n , in t h e expecta-
t i o n o f w h i c h M r B e c k m a n sug-
gests i n v e s t m e n t in r a i l w a y s . On
the other h a n d m o s t successful r o a d
operators m a k e c o n s i d e r a b l y m o r e
t h a n 8 per cent, even a f t e r p a y i n g
heavy taxes.
T h e n it can happen t h a t there is
Reply
v e r y l i t t l e capital available, a n d
t h a t to concentrate w h a t is available
o n the r a i l w a y s m i g h t mean aban-
d o n i n g other w o r t h w h i l e projects.
I t m i g h t be, t h a t r a t h e r t h a n spend
Rs 11.05 crores on the R a i l w a y s , it
is preferable to spend Rs 4.89 on
r o a d transport, a n d use the Rs 6.16
crores thus saved on other projects.
T h i s possibility i s w h a t s t i m u l a t e d
m y interest i n the t r a n s p o r t alloca-
t i o n . My studies suggest t h a t by eco-
n o m i s i n g on the r a i l w a y s it should
be possible to find funds f o r a d a i r y
i n d u s t r y in K e r a l a , f o r a s h i p y a r d
in Cochin, a t y r e f a c t o r y in K o t t a -
y a m , a n d f o r the innumerable other
excellent projects t h a t have been
sacrificed to expand the r a i l w a y s .
I n a n y case M r Beckman's " f i n a n -
cial analysis" is incomplete. He has
shown t h a t g i v e n the alternatives—
r o a d t r a n s p o r t at a capital cost of
Rs 4.89 crores, w i t h a t o n mile cost
of 11.6 nP on the one hand, a n d the
r a i l w a y s w i t h a c a p i t a l cost of 11.05
crores of Rupees, a n d a t o r mile
cost of 9 nP on the other—and
assuming t h a t the q u a n t u m o f r a i l -
w a y traffic w i l l not change i f the
r a i l w a y s raise t h e i r charge to the
r o a d levels, there are advantages in
choosing the r a i l w a y s .
B u t there is another course of
a c t i o n w h i c h M r B e c k m a n has not
considered. Suppose one could spend
Rs 11.05 crores on r o a d t r a n s p o r t ?
T h i s w o u l d p e r m i t the use of the
most powerful a n d modern t r u c k s ,
a n d the most advanced t r a i l e r tech-
niques, a n d the construction of such
h i g h q u a l i t y roads a s w o u l d g r e a t l y
p r o i o n g vehicle a n d t y r e life, a n d
s i g n i f i c a n t l y reduce repair b i l l s . (The
f i g u r e s quoted i n m y a r t i c l e o f A p r i l
25 were, as specifically stated, f o r
t r u c k operation over l o w q u a l i t y
g r a v e l roads.) T h i s w o u l d lead to a
sharp f a l l In t o n mile costs, to levels
close to a n d perhaps lower t h a n the
r a i l w a y cost ! T h i s w o u l d seriously
undermine M r B e c k m a n ' s conclu-
sions.
I n c i d e n t a l l y , the cost figures used
in my a r t i c l e of A p r i l 25 refer to a
truck trailer combination in actual
use. w i t h a c a r r y i n g capacity of 24.5
tons. Development w o r k has been
done on vehicle combinations w i t h
684
c a r r y i n g capacities in the region of
60 tons. (Proceedings of the Salts-
jobads Conference. The T r a n s p o r t
Technology Association. Stock-
h o l m . ) A g r a p h s h o w i n g the f a l l in
t o n mile costs, as t o t a l laden vehi-
cle w e i g h t increases appeared in my
a r t i c l e i n the 'Economic W e e k l y o f
January 3rd,
T h e essence o f M r B e c k m a n ' s
a r g u m e n t is t h a t the difference in
ton m i l e cost between the t w o forms
of t r a n s p o r t compensate the i n i t i a l l y
higher o u t l a y required by the r a i l -
ways. T h i s is o n l y a p a r t i a l l y v a l i d
approach. Road t r a n s p o r t a n d the
r a i l w a y s do not provide precisely the
same service. Road rates h o l d a
contribution to greater speed,
promptness, r e l i a b i l i t y , security, con-
venience, f l e x i b i l i t y a n d cleanliness.
If the r a i l w a y s were to charge ex-
a c t l y the same rate as road opera-
tors, in the case of the great m a j o -
r i t y of commodities they w o u l d lose
traffic heavily.
As the purpose of my a r t i c l e was
to question the v a l i d i t y of a set of
figures advanced by the Member,
T r a n s p o r t a t i o n , the R a i l w a y B o a r d ,
I am reluctant to enter upon Mr
Beckman's f i n a l argument, w h i c h
assumes the correctness of another
set of flrures f r o m the same source.
Mr B e c k m a n notes a difference of
17 nP between the t o n miIe costs of
r o a d t r a n s p o r t a n d r a i l w a y move-
m e n t In I n d i a . T h i s is based on
figures quoted by the Member T r a n s -
p o r t a t i o n , the R a i l w a y B o a r d E a s t -
ern R a i l w a y Magazine,' A p r i l 1956) I n
w h i c h he indicated t h a t the cost f o r
road t r a n s p o r t i n I n d i a a t 3 7 n P
w h i l e c l a i m i n g the r a i l w a y s a b i l i t y
to c a r r y goods at between 20 a n d
I I n P per t o n mile.
However, the I n d i a n R o a d T r a n s -
p o r t Development Association has
claimed t h a t the cost of experienced
p r i v a t e r o a d operators in I n d i a Is as
l o w as 18 nP per t o n m i l e , a n d t h a t
even this can be reduced if the pre-
sent restrictions on vehicle u t i l i z a -
t i o n , a n d the use of t r a i l e r s were
removed.
The f i n a l c o m m e n t o n M r Beck-
man's " f i n a n c i a l analysis" Is p r o v i d -
e d b y actual trends i n Sweden. U n -
impressed b y the m a n y advantages