Private Fund Raising for Rail

So you guys who say, "rail never supports itself", "passenger services can't operate at profit", "people just don't value it enough", "blahg blagh, rail is so great but we MUST beg for money for operations and capitol" are going to hate me pointing this out.  It's just such crude basic math.

Over in India, Indian Railways is working to raise what equates to $345 million from IPOs from three (ok, stop the presses, here it comes, OH @*#&$) profitable Indian Railways.  Provided of course the Government releases (because it still lays claim over most businesses in the country - they haven't quit got the "freedom" and "liberty" part of individuals running businesses down yet) 10% of the equity in the company.  They only want to get an IPO against 10% of the company!!!   Oh my god... imagine the prospects for growth in these up and coming countries where the companies - these "railroads" - are free operate profitably!  It could be the guilded age of increased standards of living with the modern technology we have today.  The limits are unknown.

I see things like this, and it comes as no surprise as I hear about one after another industry, technology, or other "thing" we Americans don't lead the world in anymore.  The sad part is unless we get the train back on the tracks we're screwed.  We're on our way to become a second rate, has been economy within my lifetime if someone doesn't take the helm and start making REAL strides against putting some power behind this country again.

Will it be Obama?  Will it be McCain?  I won't even mention the other one still in the running.  I've heard her spiel, she seemed to try diligently to completely ignore any relevant historical or modern argument that she would know what to do with America's crumbling infrastructure.  Let alone the fact that the Government didn't built it in the first place.

This makes me think - what would I do if I was given the helm of Amtrak to fix in this country?

Stay tuned, I got something coming along for that, and the interesting observations I made while in the north east corridor.  (Anybody realize that the burying of the 42nd street tracks, the building of Grand Central Station was done all with private monies?  Yup, by one of those mythical non-existent profitable passenger & freight carrying railroads.  Gasp!)

The article I found relating to the Indian Railways can be found at International Railway Journal under Latest News.

Also if one hits the Indian Railways home page and check out the budget highlights, they'll find the following points:

• Operating Ratio likely to improve from the budgeted 79.6 to 76.3 per cent –best in
last four decades.
• Return on Capital – an all time high of 21 per cent.
• Cash Surplus before dividend expected to be a record Rs 25,000 cr.
• Net Revenue expected at Rs 18,416 cr and surplus after payment of dividend expected
at Rs 13,534 cr.
• Likely year end fund balances Rs 20,483 cr – 27% more than budgeted target.

...and also of note....

Check out the railway budget speech.

"However, we take pride in the fact that our
achievement, on the benchmark of net surplus before Dividend, makes us
better than most of the Fortune 500 companies in the world."

There is of course plenty in there that some would argue, "more Government control", but they'd be missing the fact that even though this is a "Government" railroad it is by no means operated like a Government Department.  He even makes not of that in the speech.  It is operated at profit, for private investment stakeholders who of course demand this.  They continue to turn profit even after the stock pay outs!

If the FRA would get their act straight, we could have our service back.  It would easily take a decade or two to get it back, but as we exist now, the north east corridor being a prime testament, we'll NEVER have the level of service we had before without private operations and clearing the legislative mess from forward progress.

Published Sunday, March 16, 2008 10:03 PM by adron
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Comments

# re: Private Fund Raising for Rail

How much profit do you think Indian Railways would make if they had levels of car ownership comparable to the US?
Monday, March 17, 2008 5:46 AM by Cap'n Transit

# re: Private Fund Raising for Rail

The key here is that India hasn't dumped what amounts to trillions into one industry (auto) and infrastructure (auto based roads) while taxing and regulating the hell out of the other industry (rail & rail infrastructure).

Obviously India can turn a profit, just as US companies could, because they aren't excessively manipulating and constraining the price and valuation of the rail industry in India.

I personally, would invest in India rail.  In the US of course we can't even actually invest in our passenger rail services even if we wanted to.  We have to go beg the Feds/States for permission for them to beg us for money.

...absurd and sad.  Maybe one day we can come up with a solution.  After seeing what is now the publicly operated and maintained (sort of maintained) rust belt they call the north east corridor that was built over a 100 years ago by private sector industry - it's a scary thought we continue down the same road we're on.
Monday, March 17, 2008 11:47 AM by Adron B. Hall

# re: Private Fund Raising for Rail

Great post Adron.  Sad part is I have a hard time believing our transportation system will ever return to its free-market roots. I don't even know if it can, as Cap'n Transit brings up. Really sad.
Monday, March 17, 2008 1:55 PM by Fred Camino

# re: Private Fund Raising for Rail

Yeah, most of us that realize the history also realize how difficult it would be to return.  I think most pragmatists and realists just toss the idea of a good market based system and keep up the begging.  I mean, at the end of each day, that's almost what I do.  I however just can't bring myself to be involved in many of the "public" hearings and meetings where the special interests fuss and bitch about how things should be all day.

In a sense, I'm just on permanent strike.  If it doesn't get put back in the hands of the people and stays in the hands of special interests, so be it.  I won't deal with that level of dishonesty and theft.
Monday, March 17, 2008 3:07 PM by Adron B. Hall

# re: Private Fund Raising for Rail

India is currently dumping billions into highway expansion:

<a href=http://www.nytimes.com/2005/12/04/international/asia/04highway.html>http://www.nytimes.com/2005/12/04/international/asia/04highway.html</a>

If they keep it up, how long will Indian Railways be able to continue to make a profit?
Monday, March 17, 2008 7:43 PM by Cap'n Transit

# re: Private Fund Raising for Rail

My point, which I'm not sure what your suggesting at this point, is that railways WILL and have in the past paid for themselves.  Easily when left to compete directly with competitors.  Especially with auto based modes.

India, if it continues smart ways, will probably impose some type of usage fees on auto usage when it starts increasing costs drastically.  Similar to Europe.  The other thing they might do is allow tolling and actual financial structures to directly impart the cost onto users.

If they do that, then the rail services won't have a problem at all in competing.  Including passenger service.  Some of the areas are so dense that even with autos coming into play it doesn't matter, it's still more price conscious to use transit.  Just like it would be in the NEC of the US if they actually charged amiable prices across the board.  You'd have a decrease in travel of about 8-12% but you'd have profitable rail and profitable road systems - in other words, in those areas both could sustain themselves.

In places like Montana, large parts of Oregon, and some of those other states there is absolutely zero reason that the Interstates or other highway system could sustain themselves without some type of external abrogation of funds from other states (exactly like what happens).  The vast majority of rail service though, at least freight, can be sustained without absurd, unbalanced, and special interest based funding mechanisms.

The basic point is this.  India is a prime example where an entity has not dumped trillions into an Interstate type system yet, and rail performs damn well on its own.  Only when other modes get "subsidies" and other hand outs does rail start to falter.

The simple fact is, rail is one of the most efficient, powerful, and reliable ways ever devised to haul equipment, people, and goods from one point to another.  Capital intensive yes, investment worthy absolutely, sustainable (in a realistic sense, environmentally and economically) absolutely yes.

Will India go the same way, to balloon their economy by building massive roadways and subsidizing the cost, probably.  Will it destroy the railroads - at least in a forward thinking, progressive, economically reasonable, environmentally friendly, technologically aggressive way - they'll be destroyed just like ours have.  They'll most likely always be there, but just like ours.  If they don't operate at profit, they'll balloon massively in actual cost so that in some weird perverted way they become more expensive than cars.

Just like in the US.
Monday, March 17, 2008 9:08 PM by Adron B. Hall

# re: Private Fund Raising for Rail

Yes, it's just proof, like you said, that as a direct competitor, in a true free market, rail is a total competitor.  I mean, if you really thing about it, it's completely logical.  After the capital costs, the costs are much lower than having a fleet of trucks and imagine if those trucks actually had to pay the full costs of the freebie roadways they drive on.  As a business person, which would you choose?  Whatever could move the most good (or people as the case may be) at the lowest price.  Unfortunately, due to government intervention, the price for automobile transportation is artificially low, so the choice is unfairly skewed.
Monday, March 17, 2008 11:42 PM by Fred Camino
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