Building 1

Joint UNESCAP – UIC seminar on:

Facilitation and Costing of Railway Services along the Trans-Asian RailwayBangkok9-11 December 2015

ESCAP “Traincost” Point-to-Point Railway Traffic Costing Model

Part B

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1. Purpose and intended application of “Traincost” model

PART B: “Traincost” model description

2. Description of model methods and components

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1. Purpose and intended application of “Traincost”

“Traincost” (version 2) developed for application throughout the ESCAP region

Available online at: http://www.unescap.org/resources/escap-traincost-point-point-railway-traffic-costing-model-users-manual

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Model designed to assist costing of individual trains or OD traffic onvertically integrated railways

Vertically integrated railways combine provision and maintenance ofinfrastructure with operations, unlike vertically separated railways andother modes of transport, where these functions performed by separateorganizations

In ESCAP region nearly all railways are vertically integrated (notableexception is Australia) - unlikely to change in foreseeable future

Must be understood that traffic costing for a vertically integrated railway isa complex and difficult process (high level of fixed costs, complexinteractions between operations and infrastructure maintenance,operational constraints affecting costs, etc)

1. Purpose and intended application of “Traincost”

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1. Purpose and intended application of “Traincost”

Costing of point-to-point railway traffic, why is it needed?• Desire to improve profitability of railways necessarily requires assessment of

profit (or financial contribution) at a disaggregated level , i.e. at level of individualOD traffics or trains, routes and traffic segments

• Railway accounting systems do not provide disaggregated data for individualroute or traffic analysis

• Neither are historical costs of railway accounting systems suitable forprofitability analysis

• Profitability of individual routes, trains and traffic segments must be assessed onbasis of operational parameters which determine costs

• Cost models which are activity or operationally based (such as “Traincost”)provide cost estimates for comparison with prevailing prices (freight tariffsor passenger fares)

• Resulting estimates of financial contribution for individual traffics or trains can beaggregated by route or traffic segment to establish route or traffic profitability

• Cost estimates can be re-assessed by varying operating parameters in order toimprove route or traffic profitability

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1. Purpose and intended application of “Traincost”

• Cost inputs for assessment of individual traffic, route and traffic segmentprofitability, or financial contribution; thus can provide inputs for CorporateStrategy, Marketing and Operating Plans

• O&M cost inputs for feasibility or pre-feasibility studies of investment in railwayinfrastructure or operating assets (such as locomotives and rolling stock)

• Modal cost comparisons (e.g. comparisons of the economic costs of road andrail for given traffic types over a range of distances)

• Capital cost inputs for capital budgets (infrastructure and operating assetinvestment)

Common uses of railway traffic costs

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Model generates costs for a given OD per:

2. Description of model methods and components

Types of costs generated by Traincost model

train type per year train trip freight wagon or passenger carriage trip net tonne or TEU or passenger per net tonne-km or TEU-km or passenger-km

Costs generated both in financial and economic terms Financial costs include taxes and government charges Economic costs exclude taxes and government charges (are

calculated by applying Shadow Pricing Factors to financial costs)

For purpose of traffic profitability analysis, cost items grouped within 3 categories:

Long Run Marginal Cost (LRMC) Short Run Marginal Cost (SRMC)

Fully Allocated or Fully Distributed Costs

Long Run Marginal Cost (LRMC), or SRMC plus other costs whichvary only in the longer term (more than 12 months) but are directlyattributable to traffic being costed.Examples are capital costs of locomotives, wagons/carriages, and any infrastructureneeded to support the costed traffic

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2. Description of model methods and components

Cost category definitions Short Run Marginal Cost (SRMC) - addition to total costs resulting

from addition of small increments, such as one more tonne offreight, to total output.Includes only cost elements which vary in the short run (within 12 months), such ascosts of train crews, energy or fuel consumption, locomotive and rolling stockmaintenance, and variable track maintenance

Fully Allocated or Fully Distributed Costs – addition to LRMC ofoverhead or indirect costs which cannot be associated and do not varydirectly with specific OD traffic.Examples are head office overheads , provision and maintenance of signalling systems andfixed costs of infrastructure maintenance. Methods of allocation to specific trains oftencontroversial

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2. Description of model methods and components

Cost category relationships

2. Indirect costs represent about one third of total FD cost

1. Costs based on model run for intermodal traffic (Double stack container trains)Notes:

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Traincost - is an activity based model

2. Description of model methods and components

- assumes trainloads maximized in line with railway operational constraints

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2. Description of model methods and components

Principal items of fixed cost (costs which do not vary with traffic):

Approach to treatment of fixed costs

Fixed elements of infrastructure maintenance cost, including daily track inspection, fencing and vegetation control, signalling and communications system maintenance, and building maintenance (can represent up to 80% of total infra maintenance cost)

Station and train control staff costs (Number of staff and salaries/wages mostly invariant with traffic level)

Fixed costs have to be allocated to individual trains or traffic – using an appropriate allocation basis (whereas variable costs may be directly calculated for individual traffics and trains)

Traincost allocates fixed costs in direct proportion to the number of trains operated per year e.g. if container trains comprise 20% of all trains operating between a given origin and destination, container traffic will be allocated 20% of fixed costs

UNIT OPERATING AND MAINTENANCE COSTS (DERIVED FROM INDIAN RAILWAYS STATISTICAL STATEMENTS 2011-12)Units: INR

S/N

Container and other freight trains

Passenger trains Container and other freight trains

Passenger trains Container and other freight trains

Passenger trains

1 Train crew cost per train hour 1 1,416                   11,901                         2,014                    8,147                           1,633                                       10,386                                             

2 Unit cost of diesel fuel, per litre 2 43.02                   43.02                           44.81                    44.81                           43.67                                       43.74                                               

3 Unit cost of electricity, per kwh 2 4.85                      4.85                              5.26                       5.26                             5.00                                          5.02                                                 

4 Unit cost of loco maintenance, per loco-km (diesel) 3 11.71                   11.71                           7.93                       7.93                             10.34                                       10.18                                               

5 Unit cost of loco maintenance, per loco-km (electric) 3 5.09                      5.09                              5.09                                          5.09                                                 

6 Unit cost of wagon maintenance, per wagon year 3 91,718                 65,326                  82,160                                    7 Unit cost of carriage maintenance, per car year 3 703,946                       1,192,750                   901,323                                          

8 Variable cost of track maintenance, per GTK 4 0.0280                 0.0280                         0.0237                  0.0237                         0.0265                                     0.0263                                             9 Fixed cost of route inf. maintenance, per track-km per year 4 208,684               208,684                       208,684                                   208,684                                          

10 Station staffing cost per route-km per year 5 4,703                   4,703                           2,655                    2,655                           3,961                                       3,876                                               11 Train marshalling cost, per wagon 6

12 Train marshalling cost, per carriage 6

13 Level crossing barrier guard cost, per year 7

14 Terminal handling expenses, per TEU or per tonne15 Cost of cargo delivery to final destination, per TEU or per tonne

16 2.71                      5.07                              4.21                       6.33                             3.26                                          5.58                                                 17 Electricity consumption, kwh per '000 gross tonne-km 7.69                      18.78                           11.32                    21.33                           9.00                                          19.81                                               

18 93.3% 93.3% 63.6% 63.6% 82.5% 81.3%

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2  Unit costs per kilolitre and per kwh given in Statistical Statement 27A. "Fuel consumption by classes of fuel".3

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5  Statement 40 (II) d‐ Number and Cost of Staff, Group C ‐Other Staff6  Will be minimal on the costed route as trains run mostly as fixed formation rakes. Minimal shunting is performed with the train locomotives.7  There are no manned level crossings on the costed route

Weighted average costs Chennai-BengaluruTRAIN TYPE

South Western RailwayTRAIN TYPETRAIN TYPE

UNIT COST ITEM Southern Railway

 Statement 7 "Working Expenses", supplemented by  Statement 9 (A): "Mean Kilometres Worked, Number of Stations and Gradients" and  Statement 16:  "Tonne Kilometrage Pertaining to Steam Diesel and Electric Locomotives".  Per way maintenance costs assumed to be split 50:50 between fixed and variable costs.

 Freight train crew comprises a driver, assistant driver and train guard. Passenger train crew comprises driver, assistant driver, train guard and 40 security, ticket inspecting and cabin attendant staff.  Includes labour overhead costs (pension, education allowance, health allowance) and paid non‐working time. 

 Unit cost of diesel and electric locos per engine km in Mechanical and Transportation workshops given in Statement 26B "Cost of Repairs and Maintenance of Rolling Stock". Cost per 4 wheel passenger carriage on line and and per 8 wheel freight wagon owned given in same statement. 

Administrative overhead rate (admin.overheads/operating costs)

Diesel fuel consumption, litres per '000 gross tonne-km

Source: http://www.indianrailways.gov.in/railwayboard/view_section.jsp?lang=0&id=0,1,304,366,554,1276

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2. Description of model methods and components

Unit costs for the Chennai-Bengaluru line

Assembly of unit operating cost data for input to model

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2. Description of model methods and componentsModel components

Traincost model comprises five (5) Excel worksheets:

“Sysdata”, which calculates common unit cost and operating data for input to the other four worksheets

“Containers” which generates financial and economic O&M costs for container trains

“General freight” which generates financial and economic O&M costs for trains carrying breakbulk commodities, e.g. palletized cargo

“Bulk freight” – generating financial and economic O&M costs for trains carrying various types of bulk freight, e.g. coal, mineral ores, crushed stone, sand, etc.

“Passengers” - generating financial and economic O&M costs for passenger trains, both locomotive hauled and DMUs or EMUs

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Th nk

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