Three large railway networks and markets – what connects them and what makes them different?

by Conall Mac Aongusa, Transport Planner, member of RailHow, 16/07/2019 

Railways have been an important instrument of economic development for over one hundred and seventy years as they are the most efficient mode for moving people in large numbers and goods and freight over long distances. Strategic investment in railways is very often a subject that touches politics, economics, geopolitics, diplomacy and international trade. Such is the scale and impact of railways and the connectivity that railway networks can provide to a region or a country that the railway development market is global and competitive and at forecasted growth rates will be worth over US$800 billion by 2025.

The railway system plays an important but different role in the United States, Europe and India but the three markets are differentiated by systems of government, geographies, economies and societies.

Source: Various

While the United States is the largest and most powerful economy in the world it is also geographically very large. It has a low population density while having a very high urbanisation rate. It has a federal system of government combining 52 states and has had strong and consistent economic growth rate in the last 50 years.

On the other hand, the European Union is a political union of 28 independent nation states aligned around common political economic and social goals and thus when viewed together they comprise the second most powerful economic region in the world. With a higher population but geographically smaller than the United States the European Union has high levels of social diversity population density and rates of urbanisation. It has a low rate of population growth allied to a modest rate of economic growth. It has a strong well-developed advanced economy which leads the world in many areas of science technology industry and business.

India has a larger population than the United States and Europe combined even though it is geographically smaller than either. Its economy is only one sixth of the size of the US or European economies. It has higher population densities while at the same time having lower urbanisation rates. The Union of India has a federal system of government with high levels of centralisation. It has strong levels of population growth and allied with strong levels of economic growth in the last two decades it has emerged to become once again one of the leading economies of the world.

Each of these large and powerful economies has a large railway network which plays a role in supporting and underpinning growth. But due to their different political and economic arrangements, the roles that railways play is different in each of these economies.

Source: Various

In the United States the extensive railway network is predominantly for freight use and it holds 32% of the modal share for freight transport. The structure of the railway networks supports the ownership by private corporations of vertically integrated railway companies, that is they own and control both the infrastructure and the operations. There are 7 major Grade 1 companies in the United States and over 500 smaller companies of lesser size.  Outside the urban areas where municipally owned mass transit systems dominate, the passenger railway services are run mostly by the publicly owned Amtrak which must negotiate operating agreements to run passenger trains over privately owned railway networks. This puts a commercial and operational constraint on the development and expansion of passenger services.

The European railway system by contrast carries much higher volumes of passengers and the railway services compete strongly with road and air transport for longer distance journeys. The European Union has a policy in the last decades to create a single market for railway services across all 27 member states. This initiative has many challenges because it requires the harmonisation of the railway standards and operating rules across all national railway systems. In addition, in pursuing the single railway market European legislation requires the separation of the ownership of the infrastructure and the operation of railway services in order to allow train operating companies to offer their services in any of the other national railway markets. The rail freight market in Europe has strong modal competition maritime, inland waterways and road freight services which makes the European Freight market one of the most competitive in the world.

The Indian railway system is under single unitary ownership by the State which means that decisions in relation to all strategic planning and policy decisions are taken centrally by the Ministry of Railways. The operations of the railway network are managed in accordance with eighteen operational zones and seventy-one divisions which have responsibility for infrastructure and services in their areas. While India has a higher mode share for passenger transport than the US and Europe it has a smaller network by kilometres. The modal share for rail freight has been falling in India in the last two decades due to significant competition from road freight caused by increased investment in improving the national inter city and inter state highway system. Recent policy initiatives by the central government is now focused on reforming the railways including the freight tariff structures as well as the delivery of new dedicated rail freight corridors to improve the efficiency and competitiveness of rail freight and to boot economic growth in key sectors and areas.