CONFIDENTIAL Report No. 612 TM'7DATArTrMTAT TQATLr TP DPANC!TDTTf1rTTMT AMTn VT VAM'? T'r SPANISH RAILWAYS' 1964-73 MODERNIZATION PROGRAM (LOANS 387-SP, 507-SP, 772-SP) Tananrty 1ri 1 Q7 Operations Evaluation Department  PREFACE fLoJanl. 50 - f. August fl.5 0 afl to .the Spanis DIV41--OL T?At.WJ TMY f LJ.J closed on July 31, 1972. According to current guidelines, the Operations EvaudLLui DepartlellL i1cLuueu Ld1 yydLdLLULL Ut. p eprLoUL111411LC o P rUL L ULL the project supported by that loan in its FY 1974 work program. However, Loan 507-SP was the second or three loans made to KENFE to help rinance its 1964-3 Modernization Program. The Bank played a central role in the preparatian of that Program and has maintained a continuous dialogue with RENFE since 1963. Thus, the nature and scope of the Bank's objectives in this case made it appropriate to study the loan in the context of the whole Modernization Program, and to review in the audit all Bank assistance to that Program. The audit deals not only with the economic effects of the Investment Plan but also with the institutional and operational improve- ments included in the Program, which attempted to modernize all aspects of RENFE's operations. The study took about six months, including two missions to Spain totalling seven weeks. The audit has been based on a review of all Bank files and consultant reports, particularly those of SOFRERAIL of France, the principal consultant in the design and implementation of the Modernization Program. The audit team also analyzed in some detail some aspects of RENFE's technical operations through special visits to existing facilities, and made a new estimate of the economic return of the Invest- ment Plan. The excellent collaboration received from RENFE's authorities and from the Ministry of Public Wnrks is grefully acknowledged. Exchange Rates 1964-1966: Ptas. 60 = US$ 1.00 1qA7-1970* 'Pts. 70 - n 1 .0 1971: Ptas. 66 US$ 1.00 1972: Ptas. 64 = US$ 1.00 1973: Ptas. 57 =US$ 1.00  TABLE OF CONTENTS Page No. Summary i -v I. Introduction. Transport in Spain and Bank Lending to RENFE 1 A. The Bank's Role in Spain 1 B. Transnort in Rnin lqAn-73 Co~ RENFE. The Moderniz-timnn -Pvrnq-rznnA thD Bank's Three Loans 3 II. Implementation of the Investment Plan 5 III. Impact of the Plan of Action 8 A. Introduction 8 B. RENFE's Operational Efficiency 8 Efficiency Programs 9 Efficiency Indicators 14 C. Institutional Efficiency 17 D. RENFE's Financial Performance 19 E. Transport Coordination 22 IV. Benefit-Cost Analysis 26 A. Introduction 26 B. Return of the Investment Plan 26 C. Track Renewal Program 28 D. Dieselization Program 29 E. The Electrification Program 32 V. Conclusions 34  LIST OF TABLES Following Page No. I-1 Spain Railway Projects: Basic Data Sheet 4 II-1 RENFE: Investment Plan - Costs and Physical Achievements, Actual vs. Estimated 7 11-2 RENFE: Loans 387-, 507-, and 772-SP Investment Plan: 1964-1973; Actual vs. Planned by Period 7 11-3 RENFE: Loans 387-, 507-, and 772-SP Investment Plan, Physical Units: 1964-1973; Actual vs Planned by Period 7 III-1 RENFE: Accomplishemnts of the Plan of Action in Operating and Financial Areas 25 111-2 Transport Coordination Measures Included in Plan of Action. Suwmary of Achievements 25 111-3 Operating Statistics of Selected European Railways 25 111-4 RENFE: Selected Operating Statistics 25 111-5 RENFE: Actual Traffic by Commodity: 1963-1972 25 111-6 RENFE: Estimated (1964-1973) and Actual (1956-1973) 111-7 ~ ~ '7- ew:~erl i of 'Estimated and& t~ Financial Evolution 25 111-8 RENFE: Estimated and Actual Balance Sheet: 196w4+ L71. 25 -9 RENFE: Actual Revenues andExpenditures as a Percentage of Forecasts 25 III-10 RENFE: Traffic Patterns and Evolution of Network 25 III-11 RENFE: Financing of the Investment Plan: 1966-72 25 IV-1 RENFE's Investment Plan. Estimated and Actual Rates of Return 33 IV-2 RENFE: Investment Plan 1964-73 33 List of Tables (cont'd.) Following Page No. IV-3 RENFE: Actual Average Running Speeds Type of Train 33 IV-4 RENFE: Motive Power and Rolling Stock 33 IV-5 RENFE: Characteristics of the Lines Included 33 in the Electrification Program IV-6 RENFE Electrification Program. New Estimates of Rates of Return 33 Graph 1 - RENFE: Evolution of the Labor Force, 1954-72 25 Benefit Cost Analysis Methodological Annex 39 I. Rates of Return to the Whole Prnoram II. Dieselization ITT. Electrification IV. Track Renewal Map: RPAI: *RNVE Lines (IBRD 1334R2) S LhKr Since 1961, the Bank has extended 10 loans to Spain totalling US$ 428 million equivalent, half of which has been for railways: US$ 65 million in 1964, US$ 50 million in 1967, and US$ 90 million in 1971. These three loans were made to the National Railway of Spain (RENFE) to help finance its 1964-73 Modernization Program. The general objective of the Program was to "transform RENFE from an antiquated enterprise opera- ting at a large deficit and providing inadequate service into an efficient and modern railway system earning a reasonable return on its investment." The Modernization Program, prepared by a firm of consultants with active Bank supervision, has been modified several times since 1964 but its gen- eral lines have remained largely unchanged. It had two major components, the Investment Plan, comprising modernization of motive power and rolling stock and renovation of track and other fixed installations, and the Plan of Action. a set of measures dealing with transport coordination, railway operations, rates and fares, and finances. The particular characteristic, and the innovation, of the Bank's relations with RENFE is that throuhot the 1964-73 nPrind the Tnvet-ment Plan, which the loans helped finance, and the Plan of Action were given the name nrinrity Roth PlPmaent of the Mndprni7Ation Prnoram were offi- cially incorporated in the Loan Agreements and targets related to them w-ro in.lvierl n lqsin rnxYPnqnta R knnt qimprl7icinn nl.n -nt n cdnArqllY adequate balance between objectives related to the Plan of Action and to the Tnvestment lan Thp Tn%vePmPnt Plnn wnA imnlpmpntpa witvhit- qnvrioiuis fiffi,-iiltiac At various times modifications were made, the most important being the Are.elration of the nrnaram to eliminate steam trAction and renlc it with deisel and electric locomotives. The total cost of the Plan, origi- nallv Ptimated at Rlivhtly over TTR 1 billion, had a 17/ overrun 1arely due to inflation and to higher standards of track renewal. The latter nroarnm aw-narnred the lnopQt dp1nv c nd 1AreAQt- nerrinc. Awrn ll more resources were invested in fixed installations, mainly track renewal (64/ of total finds) than in motive nnwer and rolling stnk (36%) instead of the original almost equal allocation between these two categories. The economic justification of the investment given in the 1964 anroa.l-vnr- nA a -_ n nc a _hi- only, i4navariatins in t-he oi-her two projects, was that "a significant part of the nation's traffic can be a ~u L m J JLU JAa. LJ vy LCaL.LWay, LuatL L.L.Ln L nL.L.L LO L.MC.Ly LU LL- crease in the next 10 years and, most important, that the Investment Plan will make it possible LU carry the traffic at substantially lower costs and improve the quality of service." Two-thirds of the investments were expected to increase efficiency and the remainder to increase capacity. The overall rate of return for the Plan was estimated at 15%, the same - ii - rate implicitly used in the second appraisal, and explicitly in the third. The new estimate made in this audit produced a rate of 12%, which is re- markably close to the appraisal figure, especially if one takes into account that both calculations include among benefits, in an unknown amount, the effects of operational improvements which might or might not be independent from the Investment Plan. Among the investment components which were analyzed in detail in the new estimate, the most successful was the diesel- ization program, which had a return of about 24%, less than the 30% esti- mated at appraisal, but still a successful program. The fast absorption of a relatively complex technology such as diesel traction, with its prob- lems of retraining personnel for operations and maintenance. has been one of RENFE's main accomplishments during the Modernization Program. The new estimate of the return of the electrification program is 12%. similar to the figure quoted in the appraisal for the third project. Finally, thp track rpnpwal nrogram had a low rpt-,irn- abotit 6'/ -n arnmint nf th high investment costs (partly due to higher than projected standards) and thoro~H~lnw . ine-PnP in HP nWvri- -riinni'nc speedt of t-rains. of the threen areas includedA in then Vlan of Actiorn, operaions, finances and transport coordination, progress has been fast in the technical asplect-c n-f nnPrt-nn_, rp1nH uplu Oi.nv in tHip finanr-inl, fiPlel- nncln nii-it-, unsatisfactory in transport coordination. Overall, RENFE's operational efiiec imroe cosdeal during, t-her peid n mos of the tar- gets of the Plan of Action have been achieved. In many aspects of opera- t.ionL RNAE141 L is noJw equa o or~ beu ut t- erJ thanL mos t- Europ ea rai lways . Ma J orL improvements have been achieved in the rationalization of less-than-carload the system of allocating wagons, resulting in a large reduction in the numbeUL UL WagUs LUliU, 11 Lr1C uUirLdL; LUICtL eLs . ylt o a sy Ut o unit Lins, and particularly in the organization of commercial operations, which are now modern and effective. The end result of thee and other measures, including the Investment Plan, has been important reductions in personnel, from 120,000 in 9o co itJUU in imiL. nowever, progress [as been slow in areas which required a better organization of operations; for example, in the organization of train services, in order to have bigger trainloads, in the utilization and availability of motive power, and in commercial speeds. Similarly, line closures have not proceeded at the speed indicated by economic considerations. The original version of the Plan of Action contained a program for achieving financial independence and a positive return on net fixed assets by 1973 based on a series of measures, largely promoted by the Bank, such as revision of the level and structure of rates and fares, application of normal comercial rates to Government traffic, a clarification of the financial relations of RENFE with the Government, and revaluation of assets. - 111 - However, although most of the measures included in the Plan have finally been taken- nrnQrPAA in this area has hion qlowpr than PrntetPd_ RENFR's financial situation remained relatively stable between 1964 and 196 14- ~ ~ ~ ~ ~ ~ i A Ir-a-. -r~l,4 QA7 M.-4 10AR -.,-Cin".~ 1QA~Q 4- l-nq Qcrnw" a slow but steady progress. The original targets have since been revised operating expenses, including interest and depreciation, in 1977 instead 0. U ;?J L lJ. L LLrUlL LLLZ LICL UUJi.L L 114 UCL LLCU Lii L XLLCLutOi , %_Ll. ratio has remained above 100 and cash operating expenses, including interest, were covered only in 1973. These accumulated deficits continued to nave a negative impact on the overall financial position of RENFE, particularly on its cash situation. Government delays in making the necessary payments to cover the deficits further deteriorated the cash position. The increasing impact of road competition appears as the central cause of RENFVs financial difficulties. It has had a negative effect on traffic: freight movement has been less than expected (9.7 billion ton-kms against 11.2 billion expected in 1972) and only passengers have shown some dynamism (14.4 billion passenger-km against 12.0 billion planned in 1972). More importantly, competition has not allowed RENFE to raise its rates and fares to cover the increase in costs, and average revenues per unit of traf- fic have declined in real terms between 15% and 30%. Another reason for the poor financial performance has been the higher than expected growth of labor costs, in spite of massive personnel reductions, because of important increases in real wages. One consequence of RENFE's financial difficulties has been its inability to contribute to the financing of the Investment Plan and, aside from foreign loans, the Plan has been largely financed by the Government. Finally, an important set of measures included in the Plan of Action dealt with transport coordination. The main objective of these measures was to ensure Government "neutrality" in the sector in order to achieve an efficient allocation of traffic between road and rail through market forces. Progress in this area has been slow and in some respects non-existent, largely because of the Government's lack of interest in the subject and, at times, the impression that the country's economic growth reauired vast amounts of transoort services and little coordination. However, several achievements can be reported. Various measures have been Pnanted and imnlmenfPd to rpiealntp thp tchnic.1 qnnct-s of road transport. Many studies were undertaken about the operation of transport in the sector deriving from Government actions. The findings and conclu- plemented -- particularly the planning capability -- have provided the b.asisC forJ ani effic.Lient transportJL pol..icy. - iv - On the whole, the Modernization Program, that is, the combination of the Investment Plan and the Plan of Action, has succeeded in transforming RENFE from an antiquated enterprise into a modern company. The positive effects are reflected not only in RENFE's operational efficiency, but also in the attitude of its management and a large proportion of its staff, who consider RENFE an undertaking operating in a competitive environment, that must show a profit, and be efficient. The Railway is by now capable of niursuiny and improvine other modernization DroLrams on its own. Its com- mercial department is truly a sales department, actively promoting traffic nnd havino nn influence in thp organization nf thp Rprvicp.- Among the most important are the very structure of the Program itself; VVTWc 4 tnna fF4 p4 nr., acnar, n1l1- 4 andooromn operi atirons; 4th adequate use of efficient consultants, and the rapid growth of the Spanish which the potential benefits of the Program could not have materialized. level in absolute terms in spite of a steadily declining share of total moJveents. 1n jaL,L L[LC UI J II 116"L.LV= k.L.J. LiL . Live LI L Lx4LII ,LI utL o necessarily for the Spanish economy) faced by the company has been the growing ---pet,*-,on from road trxansport. was the Bank's participation. The Bank deserves most of the credit for LUmUlilL) 11 Li UUD.LL L)dU Ii L LUt X1UUCL 111.d LLJUi1 KLUr ill, ULi ILdV.iLI, diL investment plan and a plan of action which in principle were given the same pLvity, anu fr suggSting te use uf cbu tants i- Key arteabs Of opptra- tions. In addition, the Bank's attention to RENFE in the last 10 years has been by and large sustained and imely, aLtougn In retroUpect it prob- ably paid too much attention to the railways' financial problems and to transport coordinaltion. It is likely that earlier attention to operational efficiency might have had a positive effect on RENFE's development. Several lessons can be derived from RENFE's experience in the last ten years, particularly about the way in which the design and imple- mentation of the Modernization Program could have been improved. First, the Program should have put relatively more emphasis on the technical aspects of railway operations (e.g., train composition, wagon turnaround, yard operations) and probably less emphasis on RENFE's tinancial goals. Second, the track renewal program, the most important component of the Investment Plan, should have been reappraised in more detail in one of the revisions of the Program, in light of the overrun and upgrading of standards. - v - Third, personnel reductions were a key factor in achieving the objectives of the Program. These reductions were facilitated Dy the dynamic growth of the Spanish economy, because labor could be absorbed by other activities, but planning the reductions was essential in achieving the results. Fourth, the impact of road competition on RENFE's finances was not fully taken into account. The assumption that all cost increases could be compensated through higher rates and fares, proved to be unrealistic. Finally, the im- provement of RENFE' commercial capability should have been given a higher priority in the Program and achieved several years earlier. After all, RENFE's degree of competitiveness will be essential in determining its future role in the Spanish economy.  I. INTRODUCTION. TRANSPORT IN SPAIN AND BANK LENDING TO RENFE A. The Bank's Role in Spain Since the 1961 economic survey mission, the Bank has extended 10 loans to Spain, totalling US$ 427.7 million equivalent of which 77% has been for transportation and nearly 50% for railways, as follows: Sector and Loan No. Date of Loan Agreement Amount of Loan (US$ million) Transport Railways 387 July 31, 1964 65.0 507 August 4. 1967 50.0 772 June 30, 1971 90.0 Roads 360 October 25, 1963 33.0 Ports 429 September 29, 1965 40.0 884 March 27, 1973 50.0 Other Sectors Acririilmirp W July 17. 1969 25.0 768 June 28, 1971 12.7 Fducainn 699 -Tune 30, 1970 12.0 832 June 21, 1971 50.0 49777 In the 1963-65 period the Bank became very active in the trans- port sector. Loans were ma de for railw-7ay7S , hiighiwaYsQ andl por ts, and trnsc- port coordination was a major subject of discussion with the Spanish .qi-hnrit-iP HnwPupr -the Rnnc did not continii it- lpndino to the hichwev sector and assistance to ports was renewed only in 1973, after a seven-year ga". Thu, the main aqnd4 mtt tnntinvirmc affvrt hna haon in rnilTav% nnA through them, in transport coordination. B. Transport in Spain 1960-73 Spain's mountainous terrain and the concentration of population .n LL HUA H, ULLordLCLOL CLIiU %VZHLC.L 1 dib LH L GL 1 1 LLUI C i ULL (see map), has required costly investments in land transport. The extensive netwurk rauiates from Madrido oner large cities which, in turn, are con- nected laterally with local and branch systems. There are about -300 ports, - 2 - but only a dozen are of importance. The network of airports is very extensive and has grown rapidly as a result of growth in tourism. Spain invested the equivalent of US$ 8.1 billion in transport (including vehicles) in 1964-70. Freight traffic (in ton-kms) grew between 1960 and 1972 at about 7% per year. Rail and coastal shipping, although increasing their traffic, meclined in thpir shares of the total freight market from 18% and 37% to 10% and 29%, respectively. Road transport, favored by the pattern of devel- Opmnt and bxr thep absePnce of restrictive- rimgulAt-inoz,inPrtensedr its.0 marketf share from 45% to 60%. The trucking industry, largely formed by owner op r trsp o i es ~fas and -flex bl - -4 - -a , - - - -m-nf-4 -- ,4f~-1,4 - h + -1-iV t ~ as well as with other modes, is intense. Due to its higher speed and re- 1-lauilitLy, road transportJ h as alsoI beenL ale. to, capture from thel C r ailLway some long hauls of high value commodities. The railway carries mainly bulk commodities over long hauls, although it is also LUt: ILLJUL dLeaL.L U1L;.LLLUb t-APULLZ: LV LtU ULU Western Europe. It is now attempting to increase its share of the freight market by further improving tne quality of service, upgrading its marketing organization and developing container services. Recent investments in ifrlastructure an1 equipmenL dHU Lmpr -UVU _*LLLL ) dit _ [dviLH_ L_ _ id 1 way to capture more traffic of high-value commodities such as steel products and automobiles. Total passenger traffic in Spain has been more dynamic than freight, inoreasing by almost 400% between 1960 and 1972. With rising per- sonal income, increased mobility and tourism, the private car has played a key role; its share of the total traffic increased from 38% to 64% between 1961 and 1972. The road transport vehicle fleet has grown at 21% per year between 1960 and 1972. During severe winter weather, however, the railway provides the only reliable transportation tor various regions. Following Bank recommendations, the Government established in 1964 the Superior Council of Land Transport (CSTT) within the Ministry of Public Works as an advisory body, with the purpose of studying all aspects of land transport coordination, as well as ports. After a good start and a satis- factory performance in carrying out basic studies, the CSTT lost its momentum in the late 1960s due to lack aEpolitical support. In 1971, at the Bank's insistence, the Government agreed to broaden the structure and functions of the CSTT and to strengthen its organization. The effect of these measures will be apparent during the next few years. However, the studies that have been made about transport services have concluded that there has been no major distortion in the sector deriving from Government actions. - 3 - C. RENFE: The Modernization Program and the Bank's Three Loans The Bank first became involved with RENFE during the survey mission of 1961-62. The Government had requested that transportation, and RENFE especially, be studied in some detail. RENFE had been estab- lished as the National Railway of Spain in 1941 when all broad gauge railways, consisting of more than 20 privately owned companies, were brought under Government ownership. The Ministry of Public Works was made directly responsible for RENFE's operations. Since its establish- ment, RENFE faced severe problems, most importantly large deficits, declining performance and loss of traffic to highways. In 1962, it operated 13,000 km of broad gauge track. Motive power was primarily steam, and rolling stock was largely obsolete and under-utilized. While freight traffic remained relatively constant between 1951 and 1958 (7-8 bil- lion ton-km per year) it began to decline in 1959 largely due to an untimely rate increase, economic recession and increased trucking canpetition. However, perhaps the most important of RENFE's problems were its inadequate internal structure, weak management and lack of commercial motivation. The Government saw the importance of transforming RENFE from an antiouated and inefficient system into a viable modern railway and began to take remedial steps in 1959 when SOFRERAIL of France was hired to carr onut a comprehensive study of onrationq- However. by 1963 few improvements had taken place. The Bank indicated a willingness to assist RENFE on the basis of the coe-nc'l usions nf 1-hp -,,rx7pv Tni c:Qin wh-uie-h rPrnM c-n1r1 q mn1rni7._- tion program very similar, in its general lines, to the one finally adopted. At the Bank's sugesio P RFEretAinedl qOPPPEATTfn vnnL to mater -1n along the lines proposed by the survey mission. SOFRERAIL's report, "Modernization Plan of DVXTF'V11wa published in July 1963. rM-A modified following RENFE and Bank suggestions, is the basis of RENFE's indicated above. The Modernization Program has been modified on several occasions s n e .1.7 U9 IUt .s generaL l Ql lines LLLL V 5... V LJ.LI0..LiiCU UUL.IL0LLr %U Lt .LLL0U LWU major components, the Investment Plan, equally divided between moderniza- tion of motive power anu rulling stvek, anu reuvation o tracK ana otner fixed installationp, and the Plan of Action, dealing with transport coordi- nation, railway operations, rates and fares, and finances. The objectives of the Investment Plan were to replace steam by diesel and electric traction; to interconnect and expand the existing electrified network; and to renew the track and antiquated rolling stock. The objectives of the Plan of Action were to eliminate the deficit and achieve financial strength within the planning period; to implement a structure of rates and fares closer to the economic costs of providing the services; to improve operational effi- ciency, mainly through personnel reductions and uneconomic line closures; and to obtain an efficient transport coordination through the market system. The particular characteristic of the Bank's relations with RENFE is that throughout the 1964-73 period the Investment Plan, which the loans helped finance, and the Plan of Action were given the same priority. Both elements of the Modernization Program were officially incorporated in the Loan Agreements and targets related to them were included as loan covenants. Bank supervision also kept a generally adequate balance between objectives related to the Plan of Action and to the Investment Plan. The first loan (387-SP of 1964) helped finance one-third of the first two years, 1964-65, of the Investment Plan. The list of goods in- cluded mainly ties, shunting locomotives and passenger and freight cars. The second loan (507-SP of 1967) helped finance about one-fifth of total commitments in 1967-68. Major items covered by the loan proceeds were rolling stock, electric locomotives, rails and ties and signalling and interlocking equipment. Finally, the third loan (772-SP of 1971) was expected to cover one-fifth of tctal planned investments in 1971-73 and the list of goods included items similar to that of the second. The terms of these three loans are presented in Table I-1. Throughout the ten years of the Modernization Program, the Spanish Government, RENFE and the Bank have had a fruitful and continuous dialogue about the implementation and modifications of the Program. This dialogue is summarized in the following chapters where each of the major issues is analyzed. The relative importance of these issues in the dialogue changed according to the problems being faced during implementa- tion. At the outset the subject of RENFE' autonomy was paramount, but in later years RENFE's financial situation and transport coordination took the largest proportion of the time, in view of the slow progress in those areas. The final impression from the nature and impact of this dialogue is that, by and large, it has been useful for the implementation of the Program and explains an important proportion of the achievements described in the following chanters. TABLE I-1 SPAIN RAILWAY PROJECTS Basic Data Sheet Loan 387-SP Loan 507-SP Loan 772-SP 1. Borrower The National Railways of Spain (RENFE) RENFE RENFE 2. Guarantor The Goverrment of Spain The Government of Spain The Govermient of Spain 3. Amount of Loan US$65.0 million US$50.0 million US$90.0 million 4. Amount Cancelled 5. Amount Disbursed US$65.0 million US$50.0 million US$76.73 million * 6. Date of Loan Agreement July 31, 1964 August 4, 1967 June 30, 1971 7. Date of Effectiveness February 25, 1965 December 15, 1967 December 29, 1971 8. Closing Date - Original June 30, 1967 June 30, 1971 June 30, 1974 - Actual December 31, 1968 July 31, 1972 (not yet closed) 9. Term of Loan 20 years 15 years 20 years 10. Grace Period 4 years 4 years 5 years * As of October 31, 1974  II. IMPLEMENTATION OF THE INVESTMENT PLAN of Ptas. 62 billion (at the time, US$ 1,033 million) in 1964-73. The final cost o uthe r'a, iuc uuug iuvestmuLn over tne name periu, was Ptas. 84.6 billion, a 36.6% overrun. During implementation, several changes were made in the physical composition of the Plan. Table 1I-1 summarizes the estimated and actual investments in physical and monetary terms. Overall, more resources were invested in fixed installations, mainly track renewal (64% of total funds), than in motive power and rolling stock (367), in ead of the original almost equal allocation between these two categories.- Major overruns occurred in track renewal and telecommuni- cations, and the main underrun was in the acquisition of diesel motive power. The large increase in cost under the general administrative expenses category, found particularly since 1969 (Table 11-2) is due to direct coverage by RENFE of the cost of the large personnel reduction program, which prior to that year had been financed by the Government. In physical terms, less track was renewed than originally planned (5,746 km against 7,000) although at higher standards, a fact that partially explains the big cost overrun in this category. Conversely, the electrification program, mostly completed before 1967, was larger and implemented faster than expected (1,450 km instead of 1,100 km). The acquisition of diesel motive power and of new rolling stock, on the other hand, was lower than planned. Only 7,790 freight cars were purchased instead of the 14,604 programmed in 1964 (although expenditures on rolling stock were slightly higher than projected) reflecting unforeseen improvements in operations which resulted in reduced equipment requirements, and lower than expected traffic. The only exceptions were certain types of equipment for passenger transport, due to increased demand. Finally, the station and yards' program was drastically reduced in physical terms although, again, there was a relatively small cost overrun. Further details about the accomplishments of the Plan appear in Tables 11-2 and 11-3. As regards time schedules. procurement of motive Dower and rolling stock experienced only minor delays. Greater delay was experienced with track renewal, where the time necessary for training -- including the Spanish contractors -- and for manpower relocation proved unpredictable. Construction of marshalling yards. for which detailed plans were not completed in the early years and numerous revisions were made throughout the period, was also delayed. Several reasons explain these differences between estimated and actual cont and schedi19- Thp mAin rpnon fnr thp one- yorriin hn bnn price increases: by 1972 the average increase in price and wages exceeded 70%. as comnared tn 1964. These innrPnRn nfetfd n-rtiin1rTh track 1/ These figures exclude contingencies, miscellaneous and general admin- iRtrative ernenditures. - 6 - renewal and more generally, civil works, and the provision of diesel loco.- motives. Engineering problems explain part of the delays and to a certain extent the overruns of renewal of track, marshalling yards and stations, but their impact has been minor. Another major reason that explains the differences with the oriainal obiectives was that the Plan was modified twice. in 1966 and 1970. In 1966, RENFE proposed, and the Bank agreed, to accelerate the elimination of steam traction in view of the advantages already obtained with the Program. Electrification had been moving at a faster pace than expected t-hp nrPvinnm thrpp varg- Thp marshallina vnrd nrngram wan reduced harsn it became clear that with the introduction of unit trains and a better nrnni7n-inn of nnorntinnc thp nnmber of yards ruvired nuld e lnes than originally planned. Track renewal standards were also upgraded, but the chnag was n - nnnrnicael in tha vouic oA veorsion of the Investment- Plan. The 1970 revision was actually in the form of a new five-year plan for 1971-7r. It- further acceolera ted thle elm ainof steam traction and the extension of electrified lines, but also provided the basis for new types o f spe ci4al 1i z ed t ra-f f i c, par t41c u la r I containers and iron ore. Thp.qp roui.qi Cn- nr ve in crg-n g-rn, tn hAl7o hi-On _qt i1_t-o nnf demonstrated flexibility in modifying the Plan according to changing con- di ti o n s. Tha fact t-hat the whole effort had to be evalae durng the preparation and appraisal of the second and third projects provided a to delays in loan effectiveness resulting from slow approval of the original anu A rv4 se A uvestment plans by "e GouverunumeL -At LU UH L HHC t L A. ~ ~ ~ ~ e Fvt -i.f.iVOSmiL 9 LLO "Y LLA LAtJVC1eL U1=Lj CLML LU) LULLrfCL LLuaLu :A t::e tender procedures and lengthy terms of delivery, a result of Government policy in LavuL U UUmestically pLULULe gUoU. Alle closing date for the first loan was extended from June 30, 1967 to December 31, 1968, and of the second loan from June 30, 197/1 to July 31, 1972. The closing date of the third loan has already been extended from June 30, 1974 to December 31, 1974. Regarding procurement, all goods financed through the three loans have been acquired through international competitive bidding. Goods outside of the IBRD-supported project, however, were required by the Spanish Industrial Protection Law to be procured from Spanish suppliers in cases where quality met specified standards, regardless of the cost. Under the procedures set by the Bank and RENFE, which were discussed at length during negotiations of the first two loans, the Spanish supplier was granted a margin of preference of 15% (or applicable customs duties, whichever was lower). Foreign bids were increased by the amount of the "Tarifa Fiscal" which imposed on imported - 7 - goods the indirect taxes levied on the same goods when manufactured in the GATT. In the end, about 60% of all contracts under the Bank loans were awarded to Spanish firms. Of the contracts awarded to Spanish bid- ders under the first two loans, about 74% of costs were in foreign exchange. Under the first loan there were problems with tendering of bids, mainly as a result of the Govermnent's policy in favor of domestically procured goods. Bid specifications were complicated and foreign bidders frequently complained, though after lengthy debate the Bank's opinion was usually that the Spanish authorities had satisfactorily carried out the bid evaluation process, thus approving RENFE's choices for award of con- tracts. Similar problems arose during the early implementation period of the second loan, but no difficulties have appeared under the third loan.  TABLE II-1: REfFE: Investment Plan -Costs and Pihys:cal Achievements, Actual vs. Estimated 1964-73 Physical Units, Main Items Investment Cost (Pts. Billions) Actual/ Actual/ Estimated Estimated Estimated Actual Estimated Actual . Category 1 1. Track Renewal (km) 7,000 5,746 82 15.2 32.5 213 2-. Stations and Yards 4.0 4.9 122 3. Electrification of Line (km) 1,100 1,450 132 2.21/ 3.311 150 4. Shops and Storehouses 1].4 2.5 178 5. Telecomunications 0.5 1..5 300 6. Safety Installations 2.0 3.1 155 Subtotal 25.0 41.8 189 Category 2 1. Diesel Locomotives (no.) 655 458 70 ( 14.5 12.3 85 Trainsets (no.) 220! 203 ( 2. Electric Locomotives (no.) 70 86 123 ( / 5.9Y 151 Trainsets (no.) 220ý' 273 ( 3. Rolling Stock (no.) 14,604 7,790 53 7.9 8.6 109 Subtotal 25.3 26.8 102 M4scellaneous 5.8 - 2.4 41 Contingencies 4.6 0.3 4 Subtotal 10.4 2.6 25 General Administrative Expenses - 7.4 TOTAL 61.7 84.7 1/ Approximate divisions as among all items included under electrification. 2/ To be divided between diesel and electric trainsets. Source: RENFE-: MEmorias del Consejo de Administracion. Planned figures as approved by Bank. Table 11-2 - RENFE: Loans 387- 507- and 772-SP Investment Plan: 1964-1973 Actual vs Planned byPeriod (Ptas. Millions) Total 1964-1966 1967-1970 1971-1973 1964-73 Actual/ Actual/ Actual/ Planned Actual Planned Planned Actual Planned Planned Actual Planned Actual Track Renewal 3,621 3,807 105 7,437 11,726 158 13,706 16,940 124 32,473 Stations and Yards 1,026 779 76 2,427 1,607 65 1,816 2,543 14) 4,929 Diesel Motive Power 4,171 3,748 90 3,975 3,167 79 1,498 -1,118 75 8,033 Diesel Train Sets 1,903 1,412 74 1,767 2,125 120 347 728 210 4,265 Rolling Stock 3,283 3,251 99 3,669 2,600 71 2,686 2,706 101 8,557 Shops and Storehouses 853 612 72 1,969 1,184 60 1,296 746 58 2,542 Telecommunications :231 283 122 866 518 60 730 685 94 1,486 Safety Installations 698 486 70 1,652 844 53 2,134 1,773 83 3,103 Electrification, Electric Locomotives and Train Sets 1,980 1,923 97 5,636 3,956 70 4,051 3,355 83 9,234 Housing and Miscellaneous 303 436 144 734 689 94 1,030 1,062 10:3 2,187 Investment Stores - - - 1,204 821 68 -64 -600 938 221 Subtotal 18,069 16,737 31,376 29,237 29,230 31,056 77,030 (% planned investment completed) 92.6 93.2 106.2 Contingencies 904 32 3.5 2,067 67 3.2 1,374 139 10.1 238 General Admin. Expenses!! 1,517 437 28.8 1,922 2,467 128.3 4,928 4,541 92.1 7,447 Total 20,490 17,206 83.9 35,365 31,771 89..8 35,532 35 73 100.6 84,713 1/ Including cost of Personnel Reduction Program, Consultant Services, Studies, Deferred Maintenance. Source: RENFE: Memorias del Consejo de Administracion. Planned figures as approved by Bank. Table 11-3 RENFE: Loans 387-, 507- and 772-SP Investment Plan Physical Units: 1964-1973 Actual vs. Planned b Period Total 1964-1966 1967-1970 1971-1973 1964/73 7. % % Actual/ Actual/ Actual/ Planned Actual Planned Planned Actual Planned Planned Actual Planned Actual Track Renewal Km. 2,230 1,623 73 2,736 1,942 71 2,891 2,181 75 5,746 Stations and Yards No. 3 9 300 10 1 10 1 1 100 11 Diesel Motive Power Line Locomotives No. 147 152 103 148 90 61 75 19 25 261 Shunting Locomotives No. 133 113 85 89 84 94 16 0 0 197 Diesel Train Sets TER No. 36 30 83 15 0 0 - - - 30 Ferrobuses No. 15 0 0 34 75 220 0 14 1400 89 TALGO No. 6 6 100 3 3 100 26 75 288 84 Rolling Stock No. 5,580 3,637 65 3,725 2,397 64 3,182 1,756 55 7,790 Workshops No. 2 1 50 2 2 100 10 4 40 7 Telecommunications Improvement Lines Km. 1,129 1,352 120 1,790 4,038 226 New Equipment No. 245 155 63 172 153 89 Safet2jgiment Signalling Lights No. 64 26 41 120 92 76n CTC Km. 252 74 29 285 520 182 Automatic Block Km. 295 164 56 191 279 146 Manual Block Km. 249 114 46 560 844 151 Remote Control No. 4 5 125 20 83 - 415 Electrification New Lines Km. 346 755 218 346 436 116 389 259 66 1,450 Electric Locomotives No. 17 24 141 56 52 93 15 10 67 86 No. 20 20 100 62 37 60 45 0 0 57 No. 55 60 109 1:25 116 93 20 40 200 216 No. - - - - 20 0 0 0 Source: RENFE: Menorias del Consejo de Administracion. Planned figures as approved by Bank.  III. IMPACT OF THE PLAN OF ACTION A. Introduction The modernization of RENFE was expected to be achieved through the combined effects of the investment Plan and the Plan of Action. We have already discussed the implementation of the Investment Plan and its impact is analyzed in the next chapter. The purpose of this chapter is to assess the impact of the other three groups of measures included in the Plan of Action, i.e.,those dealing with a) RENFE's operations and orga- nization; b) RENFE's finances; and c) transport coordination. In these fields, the objectives of the Modernization Program were to achieve RENFE's financial independence, an objective that was assumed to require its becoming an autonomous agency under the general guidance of the Government, and to make the enterprise technically efficient so that, in the competitive atmosphere in which it was expected to operate, it would attract that traffic for which railways have a comparative advantage. The Bank played an important role in the shaping and the revisions of these aspects of the Plan of Action. The emphasis on more specific measures dealing with the fina!ncial situation became increasingly important in RENFE-Bank relations as the financial status did not improve and progress was good on the operational side. Similarly. the Bank's attention to the problems of transport coordination increased in the second and third revisions of the Plan as a result of the few advances in the field (Tables III-1 and 111-2 summarize the objectives and achievements in these areas). In the remainder of this chanter- we analyze separately the achieve- ments in these three main areas, and the role played by the Bank in some of the actions taken, RB RENPF'q Onprntinnal Fffinipnrv tended to improve overall efficiency and to achieve a high utilization of thp new euinment and infrastmir-irp ir- iidped in the Tnvtnment Plan. Following SOFRERAIL recommendations, RENFE and the Bank put special emphasis on personnel reductions and1 training, to adaprt t-he labOr force to the more technically advanced operating conditions expected as a result of the alization of less-than-carload (LCL) traffic, the consolidation of marshall- Ing yaru, anu the LCUUUIn 01 panacuger exames trum Luucee to Two. noUweve- Z no specific targets were set about operational standards such as car turn- arounu time, trainloauds, operating speeas or utilization factors.  - 9 - The Bank was particularly interested in personnel reductions and quite impressed by the progress that was being made although, as we shall see later in this section, most of those reductions did not result from the Investment Plan. Throughout the period, the Bank concentrated its efforts on personnel reduction, LCL and marshalling yards programs, implicitly assuming that RENFE's operational standards were good and no further detailed targets were necessary in the Plan of Action. Overall, RENFE's operational efficiency improved considerably during the ten-year period,and most of the targets of the Plan of Action have been achieved. The figures in Table 111-3 illustrate how in many aspects RENFE is now equal to or better than most European railways. Major improvements have been achieved in the rationalization of LCL traffic, thus eliminating one of the major causes of financial loss; in the system for allocating wagons; in the establishment of a system of unit trains; in staff efficiency (Table 111-4), and particularly in the organization of commercial operations. However, progress has been slow or non-existent in areas where it was possible with better planning; for example, in the organization of train services, in order to have bigger trainloads; in the utilization and availability of motive power, and in commercial speeds. In retrospect, the Plan of Action should have been more precise in these areas. In the following sections these points are discussed in more detail. Efficiency Proarams Personnel Reductions RENE's staff had been growing since its establishment, reaching a maximum of 141,000 in the late 1940s. Since 1954, new hiring had not been nlloi o ian hir 1QA tha I.Qhnr fnre-P hnd hppn rdnred to 120-000. Personnel expenditures accounted, on the average, for 48.5% of total oper- atin cot during.. 195763 An-tio --rtow-T.!1a tha redurjtin in -nPrqonnP_l would therefore have an important effect on RENFE's finances. Thus, spe- cific targetS were inglud in he Pln sf A:tion- Renfeeo 1-keen ~n ig,hly au.p,.easafu in anc-hie-tring these taret-s as shown by the following figures: - 10O - Personnel Reduction: Estimated and Actual (number) Plan of Action (1964) Revised Plan of Action (1967) Period Forecast Actual Forecast Actual 1964-68 23.500 21.550 1966-68 11,000 10,250 1968-70 9,000 15,636 1970-73 b/ 9,000 5,664 a/ 196A-73 36500 42,865- a! 1070-72 b/ 1964-72 in 1972 RENFE'S lnhnr _f 0rca was only A. '/ nf the 1Q6 lAe1l a reduction of 42,865 people. Thus, although there was a policy of per- sonne]LfCA. redutio beor 193 te mos Sinfcn effor&ts were. m.ade after 1963. These reductions were not only the continuation of previous actions Ut thUe result of a e n stronger policy, a-s illustrated in Graph 1 which highlights two different time periods, with reductions during 1963-72 fllotwing1 a differt 1 . L .ft t.JLtS tL,~S .LLL. 0 USC VCLLJJLUCLtL U a a- LL LLL- J F lLC L..uj nt tc tt£ i6 .nc tJiJ saving benefits of the Investment Plan. We have estimated that even with all IIhe new eq u ip.Ltu tanu ne uinpr 1em e n t atio n u LuL e1Ld eJ.rLnui a Lun rZ ugIdlim, the operating expenditures in 1972 would have been 40% higher than the actual if personnel reductions had not taken place. Two issues are important in relation to this suDject: (a) the role played by the Plan of Action and the Investment Plan and (b) the importance of exogenous factors (i.e.,general economic conditions of the country) that may have facilitated the personnel reduction effort. Regarding the first, it is our impression that the Bank, through the targets included in the Plan of Action, played an important role in promoting this process. A significant part of the reductions was not the direct consequence of the Investment Plan but of the administrative reorga- nization and other rationalization measures that were implemented as a result of the Plan of Action (LCL traffic, line closures, etc.). RENFE - 11 - has estimated that reductions during 1964-67 were mainly due to elimina- .1/ - tion of redundant personnel;1' they accounted tor 35.6% of the total in 1964-72. A more precise idea of the effect of the Investment Plan can be obtained from analysis of personnel reductions by categories: Personnel Reductions by Category: 1964-72 Category % A: Staff personnel of the Central Administrative Office 1.2 B: Train crews (excluding engineers) and other personnel working in the stations 32.3 C: Engineers and personnel working in the workshops 29.2 D: Track maintenance personnel 16.6 E: Personnel working in the Commercial Department 4.7 F: All other personnel 16.0 TOTAL 100.0 Ppr.nnnpl rodiit'innQ in rf-panarv R t-h ln-royept are mainly the cnnsQnuence of the reorganization of work at terminals, line closures, etc., and can hp nttrihoitad only in an i ndi rect wayi to Hen Invetolment Plan, RW1NFV has estimated that about 86% of the reduction in this category is the result of the reorganization. The e analysis applie to- Caeg ' -wher 70% of the reduction was induced by workshop reorganization, and only 30% related to the investments and are a direct consequence of track renewal .Tfln sumara*y , at leta 4't oS. LJC C -4ttLJU I £U .a t tt result of the improved administrative and organizational methods brought directly to investments. Due to lack of information, the remaining 28% cannot Ue GcaL LLLiUULtU to anfy paLLuidL 1aLUL UUL Lhe chdidCLL- istics of the activities involved, e.g., general administration, the Commercial Department, temporary workers, etc., suggest tnat this reduc- tion is more closely related to targets in the Plan of Action. As regards the second point, the extent to which personnel re- duction has been affected by exogenous factors, most of the reductions took place through a system of early retirement options, and practically 1/ RENFE "Plan TDPrpnnl d Mndrni7anion Actuali9ado, 1QA7" nn 11 L9 all workers left KENFE voluntarily. IC is 11-ey tnat the genera" improvemuent of the Spanish economy in the 1960s and the creation of new employment possibilities might have acted as an incentive for people to leave RENFE. Another job, plus RENFE's pension, provided an excellent monetary incentive. In any case, the dynamism of the economy and the gradual elimination of structural unemployment drastically reduced the pressures over RENFE to slow down on the program or, even more, to continue to hire more labor. Uneconomic Line Closures Traffic density (defined as the ratio between traffic and the length of the network) in Spain is very low, as can be observed in the following figures: Traffic Density in Selected European Countries (1968) (Traffic units/km track, million) Germany 3.16 Beliium 3.31 France 2.72 Holland 3.40 Italy 2.87 RnpJnnti 2.67 Spain 1.49 At- t-l. Q- tim" t-rniff-ir i- -,Trv rnnrt-ntrqftd_ and 6~5% nf tht- total net ton-kms are carried on line sections that account for only 30% portant issue at the time of the first loan, and the Plan of Action in- RELNFE agreed tosuyfr lsr 9 lowU traffi li-.-Iiii~.~ 2,638 km. From 1964 to 1966, progress was delayed as an effective method- ology had not yet been developed. By eary 19/ studes fur /0 u Lne 1.ne- had been completed and RENFE had requested abandonment of 1,089 km, of which 505 had already been closed. Appropriate action had not been taken by the Government, for political considerations, on an earlier 1969 proposal to close 269 km and elimination of passenger services on ZU3 km. As a condition for effectiveness of the third loan, Government action was required on these proposals. In the end, the lines were closed. The 1971 Plan of Action called for studies on 55 additional lines comprising 4,000 km, and requested - 13 - that where the Government, for political or other reasons, forced operations for the financial losses incurred. In 1964, it had also been agreed to work on a program of phasing out uneconomic stations. Out of a total of 3,000, 1,500 were to be studied and 250 were to be closed each year after 1966. By 1970, 631 stations had been closed or converted to reduced operations, a number that the Bank considered to be satisfactory. Agreement to continue the program was con- firmed during negotiations for the third loan. It was not possible to assess whether the program of line closures was adequate, but the benefit-cost analysis of the Investment Plan concluded that it was clearly not profitable to renew the track in these low density lines. Less-than-carload Traffic (LCL) The reorganization of this traffic was called for in the 1964 Plan of Action and it is an excellent example of the substantial gains in efficiency that can be brought about with very little investment and only managerial and administrative changes. LCL traffic was moved through a system of "Central Stations" which served as distribution centers within each region. Traffic between each station and its corresponding "Central Station" was carried on "trenes colectores" (collecting trains). The operation was considered to be very inefficient: for example, the average wagonload was only 1.5 tons. In 1968. 19.7% of the total freight train-kms was devoted to this traffic while contributing with only 13% of total freight revenue. In that same year, RENFE started a complete reorganization of T.CT. transnort and aq a first qtpn it dprided to-n rlnp t-n thic trnffir qll stations with a gross annual income of less than Ptas. 300,000. As a result, only 389 stations. accounting for 90% of LCL freight revenues (out of a total of 1,121) continued to handle this traffic. The result was a con- siderable saving- not only in relation to the train-kmn of "t-rpnpq rol1rtnrePn" which went down by almost 50%, but also in the other expenditures necessary ton linnel thin trj:ffi r in th A Qt-.qti %na + a- wors-1 namA Ttt, 1071 thea benefits of the program were impressive; the average load per wagon went upr tor 2. ton-s, LCPT alin-pa oif trotal f,-eg ,ht revnu AeC.14ne slig .1, . .1 y o r -V.lUI - -fl-1 - 5 -. - -. .LLU L o LuLty LS 11%, but the proportion of this traffic in terms of freight train-kms went down t21 7.4%a. A ,io ,mie th e rstof tih t 11 T ad by trck, n 5 , ~ S~~ L C OLLLl,WL&LL Will mov Af l, 4Li at tt U LL.Ly among 21 central stations, with the rest of the transport made by truck, W4. 1. 15 '-v LAjJ1I & V. is.iLL - 14 - E4ffie-iPnry Tnrn ~tnr.q Averagea Trainlonad I.LLe V~ averag taLin.loau L. s .lo.wer in Spai thanLL Lin0I most otheL r L European countries (Table 111-3). The Bank has been concerned about this because it was aware that increaseu crain length is one of the best ways of improving efficiency and major improvements are possible in Spain in spite of topographical difficulties. The Plan of Action contained only one measure that tackled the problem, which was the reorganization of the LCL traffic. However, the improvements have been minor: average freight per train went up from 188 net tons in 1964 to 227 tons in 1972, a growth of 20.7% (Table 111-4). The increase that took place between 1964 and 1968 was mainly the result of the replacement of steam traction by electric and diesel, which allow for greater train tonnages, and the increase be- tween 1969 and 1972 can largely be attributed (80%) to the reorfnization of the LCL traffic just described, by eliminating short trains..' Average Carload The average carload was also lower in Spain than in most other European countries (Table 111-3), but there has been an important improve- ment from 12.5 tons in 1964 to 18 tons in 1972, or 44.2% (Table 111-4). The reorganization of the LCL played again an important role in achieving this improvement: the reduction in the number of freight cars devoted to LCL traffic explains about 37% of the observed increase in the average carload.2/ Thus, another conclusion is that the increase in the average carload in 1964/72, which is not explained by the change in the relative importance of LCL, is only about 28%.3/ 1/ The average trainload for the whole network can be expressed as a weighted average of the average freight of the LCL trains and the other trains. The weights are the proportion of train-kms corres- ponding to each category out of the total train-kms. The reorganiza- tion of the LCL traffic, by just changing the relative weights of each category of trains, led to an increase in the average freight per train for the whole network. 2/ Thp mP.thnrInInqv is similmr fti thnf mqp-d fnr thp nnalu.qiq nf tHP__ age trainload. 3/ This figure is arrived at by subtracting from the total observed in- weight of LCL traffic (.44 x .37 = .16). - 15 - Speed The combined effect of the Investment Plan and of the Plan of ActionL prouced~L s.~inificantL Lincrease in LILe average comria pe of both passenger and freight trains (Table 111-4). One of the benefits resulting from an increase in speed is a reduction in freightcar turnaround time (TAT). in Spain, TAT remained practically constant between 1964 and 19681/ as can be seen from the following figures: Evolution of TAT: 1964 and 1968 (days) Private Freight RENFE + Private Years RENFE Freight Cars Cars Freight Cars D 0 T D 0 T 1964 4.41 8.60 6.90 7.74 4.41 8.28 7.04 1968 4.43 8.36 7.25 6.26 4.47 7.76 7.01 D = LCL freight cars 0 = all other freight cars T = total freight cars However, speed is not the key variable to reduce TAT, because travel time amcotints for only about 18% of the total; the increase in speed that took place between 1964 and 1972 would lead to a reduction of only about 6% in TAT- The relative importance of travel time and other items in TAT in 1964 and 1968 was as follows: Time gnant in 1964 1968 Intermediate Stops 20.5 16.6 100.0 100.0 1/ These are the only two years for which a detailed analysis was available. - 16 - The time spent in terminals is the most significant item and considerable savings in equipment could be obtained through its reduction. An important improvement was a new system for allocating wagons among the different stations. This new system, called "Central de Reparto Centralizado" was developed through the technical assistance of SOFRERAIL and established in 1966. Prior to this change the operation was very inefficient; in 1964 there were about 75,000 cars, but a shortage of ma- terial because of the bad allocation system. The average yearly car utili- zation was 110,000 net ton-kms and the total number of net ton-kms was about 8,376 million. A rough measure of the effects of the new system is given by the comparison of these figures with those for 1968. During that year it was possible to transport 5% more ton-kms than in 1964 with only 87% of the cars. The average ton-kms per freight car increased by 21%. Availability of Motive Power and Rolling Stock Table 111-3 shows the motive power and rolling stock availability for selected European countries. By comparison, Spain has significantly lower availability, on average, for diesel railcars and passenger and freight cars and shows, moreover, a gradual decline (Table 111-4). This decline is to some extent logical in cases like Spain, where a large amount of new equipment is placed in service at the same time. Nevertheless, even under these circumstances maintenance could be planned so that, in the case of lie.P1 locomotives, not more than 7% or 8% are out of service af one time. Similarly, not more than 4% or 5% of the electric locomotives should be underning renir- For rolling stork thp fnrgPt should be not more than 5% out of service. RENFE's lower than average performance in this respect is due toS severl actorsUA. Wit rear t-" diesel' loooie and. diesll oe units, the difficulty is related to (a) the diversity of equipment, a re- flection ofL inadequate planning, which preven ts asmoo th and fast repair- shop operation; (b) the inability -- or incapacity -- of suppliers to Uelivr sar parts aniu compnent on~IL scheule (cEU1~) tIIe delay ini availiity of retrained technicians and skilled workers in those maintenance shops which, under tHe workshop reorganization plan, were to make major repairs to motive power and rolling stock.!/ The possibility of attaining better availability targets is borne out by the fact that the proposed targets have already been surpassed in the case of the Talgo (diesel passenger units) motive power, which had a 1/ These delays are not entirely due to the training programs, which were in general very efficient, but more to the problem of transferring the labor force from one place to another. This has been a major problem in Spain because people are very reluctant to change their places of residence. - 17 - 94.7% availability in 1972, thus supporting the advantages of standardi- zation. The two orincinal workshops visited, the locomotive and nower unit main repair shop in Madrid and the specialized two-axle box-car re- in areloa efectth hih ecnological an practi---al capacity of RENFE in this area. Once it is possible to reduce the many ty e JfL Alcomotives powe Vits, andi dL oAkA LO 1, -lf -i -LJ -9 -~* -lL -1. U- 1J -O CI , to contend with, RENFE's efficiency will improve considerably. C. Institutional Efficiency Before 1964, RENFE was a semi-autonomous public agency facing an important degree or Government intervention, largely due to its ri- nancial weakness. At the time, the Bank thought that to have more autonomy and to be able to operate along commercial lines was an essential ingredient of the Modernization Program. The Bank made this a major issue during negotiations for the first loan, and in 1964 obtained from the Governent a new statute for RENFE which largely complied with Bank requirements. The new organization gave RENFE more control on day-to-day operations but the Goverment still reserved the power to appoint the Chairman and the Board of Directois and the control on tariff policy, line closures and the approval of the annual operating and investment budget. Direct Government intervention -- aside from general economic policy matters -- declined in the following years, but it still influenced operations in an important way. The frequent changes in the top management adversely affected decision making, especially in the late 1960s. For example, in 1967/70 there were four Chairmen and three General Managers in office. The Bank expressed its concern about this lack of continuity and the Government finally agreed in 1971 to maintain fixed-term appoint- ments for the top management positions. Government intervention was also a major factor explaining the delays in the line closure program, and only as late as 1971 did RENFE obtain adequate freedom to modify its tariffs. One institution-building approach that produced positive results in this case was the use of a large number of consultants. SOFRERAIL, the leading group, appointed technical advisors to all key management positions and acted as coordinator of the large number of consultants that were em- ployed: between 1964 and 1968, 128 individuals from 12 firms participated in RENFE's modernization efforts. This approach helped also to smooth the process of change in management that took place in 1964, when a number of new people with little railway exneriennp inined the enternriRe ;ter on, the consultants also helped to set up useful training programs for the top and middle management. - 18 - RENFE has now a cnmmrrially-orienfed orpnnization- th moral of its staff is high and the top management is well qualified. One inter- given by the changes that have taken place in the Commercial Department. Before LVD'+, thisL LieparLUILn a just an appendix~ of'REIFE WthutMuh power in operations and with a poor image with the customers. In the late 1960s a major change took place, which transformed it into one of RENFE's leading departments. It became a very aggressive group, maintaining close relations with the big customers_= and, more importantly, it Vegan to have an influence in the organization of the railway services. The fact that this influence exists is probably the best indication of the changes in attitude that have taken place in RENFE. Current practice is that in the transport contract with its main customers, RENFE guarantees that the service will be performed according to an agreed schedule. If it is not done, RENFE pays a penalty which is proportional to the delay involved. At the Bank's suggestion, RENFE employed consultants (Transmark of England was finally selected), who helped reorganize the Department and later developed the system for use of containers. The growing importance of the Commercial Department and its role in the organization of the services are crucial for the success of RENFE as a commercial enterprise. However, there is a serious potential danger because of the lack of a good costing system for the different services that RENFE provides. Misleading information about true economic costs might induce the Commercial Department to make wrong decisions in relation to the services that have to he promoted or the kind of tariff structure that is more convenient. The new administration of RENFE is aware of this problem and a new costing system is being introduced. 1/ RENFE's commercial traffic is very concentrated as can be observed in Table III--. - 19 - D. RENFE's Financial Performance The original version of the Plan of Action contained a program for achieving financial independence during the 10-year period of the Program consisting of three stages: a) cash operating expenses, including interest, were to be met out of revenues by 1968; b) depreciation by 1971; and c) a return on net fixed assets of 3.6% by 1973. The projected attain- ment of these targets was based on a series of measures (summarized in Table III-1) such as a revision of the level and structure of rates and fares, application of commercial rates to Government traffic, a clarifi- cation of the financial relations of RENFE with the Government, incorpor- ating Government contributions -- past and future -- as RENFE equity and settling the mutual debt, and revaluation of assets. However, progress in the financial area has been from the very beginning slower than expected. The original targets have since been revised twice. In 1966. it was agreed to postpone the date by which cash operating expenses should be covered to 1969, although depreciation was still expected to be covered ahead of schedule, in 1970. The lack of progress resulted in a serious reappraisal of the financial situation in 1970. At that time, it was projected that RENFE would be able to earn operating revenues sufficient to cover cash operating expenses and interest only by 19739 and denreciation by 1977. The operating ratio was not to exceed 100 in 1975. RENFE's financial situation improved slowly between 1964 and 1973 (Tahles TTT-A nnA TTT-71 The nPt def4iri hovered around Ptas. 4 billion and only in 1973 was it reduced to 2.42 billion (the reduction in real terms has been higher hauae nf inflation. A6 a cnnsequence the onerating ratio remained above 100 during the whole period and most of the targets Set in the threa orniprtinng APRrribed ave were not achieved. The improvement in 1973 is also reflected in a working ratio for that year of: 97 Indicating that the target set in 19Q70l nf nn7r4na rnq h nnprntincr expenses in 1973 had been achieved.1" These accumulated deficits continued to haea neg6ative impact on the overall! financial po sitio4_0n of PVNVFE: the current ratio declined from 1.9 in 1964 to 1.2 in 1971, and the liquid ratio ha been underI 1.0 mot o 'te pe~ riodL.., largely beaus o.Gven ment delays in making the necessary payments to cover the deficits. In terms ur trends, RUMIFEElL' s financLLi sitLuatiUon reminedC rl±ativety OLaL' between 1964 and 1966, it deteriorated considerably in 1967 and 1968, but 1/ Financial ratios since 1971 have been calculated without including income from the Canon de Coincidencia, a special duplication tax that had to be paid to RENFE by the owner of a road service parallel to a railway line. - 20 - qine 196 ii- has shown a slow but steadv nrogress- Preliminarv indirA- tions about 1974 suggest that the improvement has continued. In retrospect, the revisions of the financial situation in 1966 dHU 17/U ldeilyi JiLT. U Lpro Dotd wLC y tChL L M CO.Ly LLL VieW UL the changing conditions at the time. However, a review of the difference between estimated and actual revenues and costs (Tables 111-8 and 111-9) suggests that the first three projections consistently underestimated the growtn u expenditures, particularly of labor costs. The latter continued to grow in spite of personnel reductions because the average expenditure per worker grew at a very fast pace, 34% between 1964 and 1966 alone. Also, the first two projections underestimated the savings in fuel that would be obtained from the phasing out of steam traction, a retlection of the faster than expected implementation of the dieselization program. Total revenues were, by and large, correctly predicted in 1964-66 and 1971-73, and overestimated in 1967-70, but the evolution of freight and passenger revenues has been somewhat different. Estimates of income from freight traffic were about right the first two years of the program but too opti- mistic until 1972, reflecting the fact that the projections overestimated the traffic and tariff levels. Revenues from passenger traffic were better than expected for the first three years, largely on account of a higher than expected increase in traffic, but there was an important shortfall between 1967 and 1972.1/ Several reasons have been given to explain RENFE's slow progress in the financial area, but the increasing impact of road competition appears as the central cause of RENFE's difficulties. The optimistic bias of the financial projections was also to a large extent due to the failure to take this impact fully into account. Road competition has affected RENFE's financial situation in several ways. First, traffic has grown very slowly: freight movement has been less than expected (8.7 billion ton-kms against 10.6 billion ex- pected in 1968 and 9.7 and 11.2 billion, respectively, in 1972) and only passengers have shown some unexpected dynamism -14.4 billion passenger-kms against 12.0 billion planned, in 1972 (Table III-10). Second, commtition has not allowed RENFE to raise its rates and fares to cover the increase in costs: average revenue per passenger-km has declined 15% in real terms hPtwPPn 1964 and 1972, and revenue per ton-km has declined 30/ over the same period. RP.NFF nnd the Rnnk snent a considerable amount of time nPvntintin with the Government for greater freedom in raising rates and fares. This -/ -T 4 - - - - - c untl 101-1 was unsa n . of past trends. The existing evidence suggests that it was due to tue inmpu veu quali4y U.L LuAC 0c.V .%ce, WLuLL was veCn.LiL.Ltii LU Ut 1IULLLC - able at the time, and the expanding tourist trade. - 21 - negotiation was, in retrospect, largely academic, because when that free- dom was finally achieved in 1971, RENFE was not able to raise tariffs in any significant way. Third, RENFE has been concentrating on the transport of bulk commoditien which nay Inwer tariffs than the high value commodities that have been lost to the trucking industry. Another reason for RENFE's poor financial performance has been thie hIigherL thanL ex ec e 4~ ------ Z_ . 1. - - . .+ M1 -. -- - estimated the increase in wages in real terms and compounded the problem Uy ats:uming tuat whatever raises wouU -LUe place cvul U Cumpe-nsted for by tariff increases, thus neglecting the effect of road competition. A factor that has been frequently mentioned in explaining RENFE's financial difficulties is the Government anti-inflationary policies, which kept tariffs at low levels. However, our analysis suggests that this factor did not play a major role during the period under study because of the overwhelming importance of road competition. Its only significant influence was through the negative impact of inflation on the Government finances, which delayed the transfer of funds to RENFE, thus complicating its cash position. In spite of these negative developments,progress did take place in preparing the basis for better financial management through several of the measures included in the Plan of Action. The financial relations with the Government were normalized: Government contributions have been incor- porated as RENFE's equity since 1967, mutual debts were settled in that same year, and Government traffic is now charged commercial rates. The structure of rates and fares has been simplified and made more flexible, in passenger traffic through the establishment of two classes only, and in freight through more comercially-oriented contracts with RENFE's major customers. Assets have been finally revalued, although with considerable delay, and economic cost studies are underway and will be available shortly. One important consequence of RENFE's poor financial situation has been that its contribution to the financing of the Investment Plan has been practically non-existent. Originally, it was expected that RENFE would contribute 37% of the cost of the Plan, mainly through retained earnings (largely depreciation), foreign loans would finance 20% of the costs, and the Government the rest (Table III-11). In practice, since RENFE did not have profits, the Government financed a large proportion of the Plan. In the 1966-72 period (the Period for which figures are fully comparable), foreign loans financed 18% of the expenses and the Government the remaining 82%. of which 28% was financing of depreciation and 54% a direct contribution to equity. - 22 - The Bank has played an important role in the achievement of whatever progress has taken place in the financial field. The request for detailed financial projections and for their continuous revision had been an important institutional contribution to RENFE. Some of the measures promoted by the Bank have been particularly useful, such as the normaliza- tion of the financial relations with the Government and the efforts, par- Heilarlv nr 1QAA_ to Tnake qurp that fiind.- from thp roVrnmPnt- weor delivered to RENFE on schedule.L/ However, the Bank's major effort rear in the leve,l nf vntpc nnr fw _ cgiamc t-n llniyO haagn nn-rt-l%, m4y4 ,iAIA in view of the preponderant influence of road competition in determining those rat~es _-nA fares, TransDLLportL CoordLLQt....LL dealt with transport coordination. At the time of the first appraisal, the Bank nad a wide interest in Lue transport sector, and the apparent bias in favor of the railways was a problem which the Bank thought-it could help solve. Legislation dealing with transport until 1964 considered the railway the basic means of transportation and attempted to protect it from the emerging competition from the roads. The basic Laws were: a) Ley de Coordinacion de los Transportes Mecanicos (1947) and b) Ley de Ordenaci6n de los Transportes Mecanicos por Carretera (194/). The first dealt with the coordination of land transport and the second with the organization of the road transport industry. Both laws were highly protective of RENFE. They established that, in principle, road transport services parallel to railway lines already in existence should not be authorized, giving RENFE the right to decide whether a new transportation service was needed (derecho de tanteo). The laws also established the special duplication tax (Canon de Coincidencia). In the early 1960s the increasing competition from road transport, despite this legal protection, led RENFE to ask for further safeguards. However, during their initial contacts, the Bank pressed hard for the elimin- ation of this protective approach, and during negotiations it convinced the Spanish authorities that the most efficient way of obtaining coordination was through market forces. This approach required that the Government should 1/ During negotiations for the second loan in 1966, it was agreed that the Government would make advance auarterly Dayments to RENFR to cover its deficits, debt service and investment, and to provide the necessary funds for making the cash working capital not lens than 191 of its annual operating expenses by 1969. This latter objective was achieved only in 1972, and the former has been generally complied with- nartimnlarlv in the last years. - 23 - be "neutral" with respect to road and rail, that is, both modes should be taxed or subsidized in the same way. Also, technical standards on both modes should be similar and at a good level. Thus, the Bank's approach to transport coordination at the time of the first appraisal was to propose several studies designed to clarify the existing situation, to assess how "neutral" Government policy was, and to provide the bases for regulating the technical aspects of road transport. In the 1967 revision of the Plan of Action other studies were added to help ensure that investments in road and rail would be made under the same principles. It was expected that these studies would serve as a basis for the formulation of a better trans- port policy. Table III-1 summarizes the objectives of the Plan of Action in relation to transport coordination and the achievements to date. In order to undertake the studies and implement these measures it was first necessary to set up a coordinating body. This was done in January 1964 with the creation of the Superior Council of Land Transport (CSTT). The Cauncil, with a permanent staff, operated mainly in an advisory capacity and was in charge of organizing and carrying out studies on all aspects of land transport coordination. In order to cover other modes, the CSTT was expected to interact with the Commission for Transport Coordi- nation organized in 1963 and composed of the Under Secretaries of the relevant ministries. The studies on rates, taxes and fuel prices were to have been completed by 1966. but were barely underway by the end of that year mainly as a result of the 1965 change of Government. In that year the Chairman of the CSTT was replaced and the new Chairman. not familiar with transport coordination problems, delayed the studies. A second problem was a shift in amphasis by the new Government away from overall noordination and towards urban transport. The Government thought that the country's economic growth rcmtiirPdj vaqt- nmmiint'n of t i'ran nnt p -trt-- Qn litt10 I%nvelinnt-inn Was, necessary. For these reasons, the three studies, in slightly revised form, were carried over to the 1967 Revised Plan of Action. early years. Numerous regulations were enacted during 1965 and 1966; how- use of approved contract format by truckers, and for freight services claim- *C~~5 A. ~~U.LCA. IJUF=&L.4WLL D,O Ihe~ G.LVVr=er&nMCe:n Ce-Xpla1nCU LLL HiU L .L.L.L ii LLJ L ment mainly as a result of the small-enterprise nature of Spanish trucking, WIL:.HL mUde UHiLUm regulation UILY1cULL. At the time of the second loan, transport coordination became even more important for the Bank because of the negligible progress in the previous period. The 1967 Revised Plan of Action was devoted almost entirely - 24 - to the formulation and implementation of measures in this field. They can be classified into three groups: a) completion of the studies on tax neutrality; b) a set of studies to determine investment priorities in transportation; and c) implementation of the road transport regulations. The studies on tax neutrality faced the problem of finding an adequate definition of "neutrality." The Bank played a useful role in developning the methodologv that waq finally annlipd and h fli mst- of which were completed by 1971, concluded that there was no discrimination anainst RVNVV n an ruilt of the exisfing tar structure (Table TTT_11 The studies designed to determine inVeStm-en.t priori ties hnelped define the investment criteria, as well as detailed guidelines for invest- *UCU -r41 _Y -i -1 - .75.O Th e otlle tO W )C It .)L C U LD 1.1 .Lr,LLCU L11Z...LLL.Ly LU provide a better basis for investment decisions, on inter-city freight traffic, transport market perform ance, and freight flows by conmodity, route and transport mode, were also undertaken. However, their use for investment planning and pUolcy fumuLU1atUn s been Limited; no follow-up to their conclusions has been established. Finally, the regulatory measures dealing with road transport that were developeu in 17604/6 vegan to be applied. Weight and size regu- lations were made the responsibility of the police in an effort to strengthen enforcement. Implementation of the Plan developed in 1966 for systematic vehicle inspection had been delayed by problems in land acquisition for the location of inspection facilities and in procurement of equipment, and was still not fully operational. A new uniform accounting system for larger trucking enterprises was distributed to private operators, but adoption of its use was optional since truckers were already operating under general Government-prescribed accounting methods. At the time of the third loan, the Bank concluded that in order to implement the recommendations arising from the studies already completed, it was necessary to create a new transport coordination agency, which should be located in the MPW. However, in the end it was decided to broaden the functions of the CSTT to enable it to perform this function. In addition, a new program of studies for the CSTT was prepared in 1972 in consultation with the Bank, covering the following points: a) inter-regional flows of freight traffic; b) road transport costs and road user charges; c) economies of scale in road transport; d) public and own account road transport; and e) structure of inter-urban public transport. In 1971, a Government decree imposed restrictions on the increase in the capacity of the bus and trucking industry by limiting the number of licenses issued each year. These restrictions created, for a while an - 25 - artificial demand for railway services and resulted in an increase in the size of trucks..! The Bank expressed great concern about this discrim- inatory measure and by 1972 the restrictions were eased. Our findings, which on this subject are very general, confirm the conclusions of the Bank-sponsored studies. We do not see a maior dis- tortion in the market for transport services derived from Government actions. Tf anything the railway seems to have been favored throughout most of the period, especially after the 1971 measures. Progress has been slow in imnlomnina the roulatory moniroc in hiohwnu trannort qnd in eliminating some distorting elements such as the Canon de Coincidencia. The Bank deserves most of the credit for the elimination of the 1960s, for the measures taken to regulate the technical aspects of the rna t, ransponrt i-ndust 4ry, a-A fnr t-he bette-r 4 nfCo-4t-nn flno. ava'"l h about. . transport in Spain. It is conceivable that the studies now underway will and for the elimination of the remaining discriminatory measures. 1/ The restriction was only in relation to the number of trucks, but not to their capacity.  TABLE !II-i RNE ACC-PLISllbI- OF =H PI-AN OF ACIN IN OPERLATING ADFINAI,CIAL AREA o-~CTWSATDS RE~OMNDED ACTIEVE-NS I Reduc, jabor2 force from Onuaroy 1963 by 21,000 permaneetj and Reducot,ons. proeeded.atisfaoryly, jabor jorc. 2,500 temorary,workers by 2966, an,,2 by ao,dditlona I11,000 reduced y lost 10,000 be tween 1964 .nd 0966 per-anent ..d 2,000 emoray by the n of 1973 2 22,proved6recru120ent.and66raining Programs foyryecrutment ndb trIning o peronnel6 0 Consoldatio 0of marshllIngyyrd.s,I btrctionof. sixo neOodernittion of0 arshalling yard. was in prgres,* 0yrd, replacement o te o oo .o repair sops ihsmle thb.,1,boughlater discontinued2beause.apparentlyotb bersjon .stations.and lines completed jo 2072 The numbr ofrepair .bopswas r -u,ced by 1966 4. 1odernlaton of p-k-up aod del1iver of lo fei,,2ght traffb 35 *tton w , pla.ned, 9 je operatio by 1966 thr,goug centr lton, of2stations progesssatisfactoy 52 Ipoved..afety by0 .tricter regultionj.and super1itan Ra2lway .afety Impov,oj accidents. decreased 00PERATI626 6 Redcton of3 to 2 jclas 1 passenger1ser Fjjmnao n of bhIrd class on 40 rain, 1964-966 and on 30 more 1n 0967, prog.... ..tifacty, I PoE lbor foc of about . -bo force , as redued more ythan 6or n joo 9.020 permanent and 2,000 temporary --Ao between the nd of plans, whthout any Government res tritin 1966 nd the nd of 1968 A further r-ctioof ,bot 9,000 1967 by t,,.d of 1970 anld an addli..ton not eduo n of ta. t EFFICIECY R.eIoo 9,000 by jhe e6d of 1973 2 A re- dy of 662FE pronnel needa by 1969, jo determine St,dy completed f,,ther redctons were jo b. made desirab6lity of further oed on10 rerruitment22 a,2 tranin were2 o. at.I.factory by December 31, 1972 2 Competes tie on60 26a.dditionalj 2line to be co ed jotalling 9 complete by 2nd 1900 062 km 06.,.., by- cah basis, th, Borr ..r . llO roptly 1971 ubmt jo ohe Cuaranor an appyljcation2 o 60620, Ior partial Revision closure of each lIn and2 for pay6ent of 2 2sses2 2f .uthority to cutI .service 2s withheld or dela,yed for o r thanj.o 1. onh after.sbmjssion - of *uch applocatio -- December 1974 32 ak ap.pryoprte action to reduce6 jo.,,, 0n unpofitable pas. Pogrsssa rlacory, *2,udie. made 4~~~~~~Il 02. yo.1bo.o12yj.06,j20 to rol.6 0I.j,.joob,. dl.. l626220 2 _ pI-2oph-bl,fltyjlo' 6.2 ...2No . 26 k.h.p. by eeber 31, 1 2 d d 197 - 276,00 197 - 76,960 1973 - 72,600 0004 - 68,500 f97 - -f5,b0II j6 Revisionof rate ad fare, structure basedOon6 ransport6cost. A0cosing sectonwas.established in RENFE's mangement p-yr,oA... I -II -11d62 o..d.- -py6 ,y6 r.669j 206,2 ,f 00 fr 6-7 ight I.d pa,,.geroservces,clt nly .666,u nn oi lie ardi e n 20604.6, 02 , y.y. 126, bp I , 25706 - 6,6201, 16,b13p2., 1y 1166 1.1 .pob26720y. b, o26.220.,p,22o.... 0 .. N.l9.......2.60.2N2o.. ,,b.~ob, .m6dty 666. ment6 voIs-2-vi shippe62.rs otat 296 trif2 twhich wer j- p o be re1 et9 in6 196 9 Apl foAon f- nor1mAl come g..r.c r A by 6.0ver 6ent ,taffi Accmplsed by 2 bOE .2. 22 o. 0bb,, 6220 .6 22 l,ob 2 nd. b-~It 0 Aod 26 o--t by 2960 6 16, rfe bproved orc Adtoeto eea.oigtrtst.emd fe 52 12ybo tores in passengerf 66 revnue,aspa 26, 1o2 ynitltion6 of,0266222 Prgr .26ai ac o y .k,1 0 6621cra 026 ben2 taie 2-c-sssytmb -96 and 'he ful. 12. was expected fo 1196 92 Increase in6 ol passenger faro .by ,5% in1976022 ard 20%in 1973 Passenger6. fae were.1 2,ncrea 26,d 12 90y95, , *p~. o 67266002.616 ,b- ttsc. obo I.- b2. -d-.I.. I ,6,, 62ob .0.06.62 2 asenr t.vie -k.n q arriy ~ t . Is n co-,er ia (b efo re ~ ~ ~ ~ ~ ~ .1 thh ,nA r e m n ) a R N E E u t aI.- 09 69, and2conversionof balance, f any, ..n favor of Go6720 n, p ooto 0uit cont buo to,, RENF 1o 26. 26ital. RIo lo .o 2.02 , 0 .... . I . 6 010 b o o 0 2 ,0 0222 ý2 2 .tI o.orI I_oj 2d 2 b. ish no famo.. dern mechanioe commecia accountng A n 226y2,e was2insta n t p ,2,n 1967Iooth.prooer.12.a0d2deprecfation60c,o22, ,6and ,y6 922) 60786accounts12rece,v0ble.0fr0m the,2G1verNO2nt .EFF1CjgIENCY2.b02, .72,1222 .2oenets,2 . tk opnatn tp oofstls oN edcini ao TABLE iI-2 TRANSPORT COORDINATION MEASIIRES INCLUDED IN PLAN OF ACTION. SUl!IARY OP ACHIEVEIENfS PIan of Action 1 Rrvicw cf taÅ on. highway paGssege- se,ices p the ra,luay. Deliy due to hange in Coernment, incorported int 1967 Plan of Ation. ORIGINAL 2. Revision of fue prits to line with a policy of neutralitly nla due to hange in GoerInt, inor.porated int 1967 Plan of Action. 1964 among modes of tranport. 3 More effective rogulation of highway transport a) minimn entry ~ondition; for highway transport Effectvsness ofla decroo defintog minimm cpetnc.e atn ftoanIal qalifications for new truckers operating nationally or regionally b) more effective weight and siz regolations. Claw progress, tncorporated Into 1967 Plan of Action. c) crootion of a hettor inpection nystta tv enoure sound finn complotod by 1966, systMcm non not xpectaed to be fully ehn ca 2 -ondton ~f vehicies =pe 2t1na unti99 d) requirment of written contracts for highway freight. rontract format prescrihed for ntiona oporotionn wIth mora than 000 customer; for small truckers, Government baieved it wold ha mpoa sible to enforce such spe:IpA-aremnnn nn ed rhnfro, ~noragehtrconlidation to associa tions asafirst step towards regation. al hbettne t r egulon of freighe forwarders through adeqate Regulannons roqniring peformance bonds effecead. Gormnt propo-d that perfoermance hondo, privata treight forwiarders nhonuld undetakeh the impiamentton af trucking operattons regulations fl tagua tion of adeqac of aerv,cehich clatiott ta be Adequate regulations were issed, but mathot oF enforcement had nov operating with fixed rates and schedtes. bona defined, g) asurances that highway transport met mnimum labor Gvar-nme t stauy showed adequate labor canditions for large operations coodstions. atd that regala ton of numerous noall operatnr owners was not posihle. h) ininmu oinrance rcquirements. Requirents establ,shed i) establisnmnt af a unifoem seoounting sysnemn for highway Plan completed, legislation onactad by end 1967 transport. 4. Studycrates and tax policy an all ndes of transport, toansaure Study delayd, i rpoaento an 1967 Pln af Action. fs scal noutraliey. REtVISED i T effect gre-aer neutrnlity with regard to fincal and otber p-lncy as regards their impact on the varou mod-s of transport throu,gh 197st udy and action taken on, Rad user charges s elated to highwh Compled, sowed that road sers nred all cos , and that overtxation b) Fuel prices as related to fuel cos-s. haycmltd c) Rate and fart policy for all transport mtdes is related ta This study excluded RENFE, ports and air transport, it daalt only with cest of providing the servie. alernative rate regulationn for trucking services; tt saggasted ihit te th näal enterpr-se nature of Spanis trcigrsle rmtelc f etonomites of scale, whore fnxed costs were a small pare of total eosts Wthoat nery estrititons, pricesowee cloself related to costs, and cnsmern benefittt from tethnological tmprovean through lower pstes. d) Taxation of transport servicen (ater road nser charges had Stady tonplated, st dsscused all taes borne by rad and ratl and analyzed ben oen tt for) inludsng te gas/nunoi t an the sa the 1965 roand cser tonen collected as allocated tn groups nng inter-orhan on highay ~oasisnger servie es roads, concluding that fiscal treatment of the ratlways, vis-a-vis the road was man ,s ir. e ice differeenal fr different andes of transport os regards Study completed. it concludad ehat for both road and ral, prataremant of purchase of Spanish verann other equ pment, to determine if Spanisan pqunent was eqtallp rxpenive as a rasult of the industal ove mode .as bearint .a anfnir barden protection lao. 2. Achievement of itfom investment policy for more effective transport coordination, through study and action as follows a) Esalsmn fcriterla for lnves-ment in tran-port by, 196,- Completed;uin addition tu general guidnlinnes, Cjo s-b-s i d'ies reltedt rall ond road ir.ves1mn re tranrme d inta spacif s gldeines. b) Cost of invenreent in, and operation f, level crossings as Completed, conluded that iherenwra 4 araas of tonflict between road and rail shared by road and raind enrly thot eenditr hold be borne by eah mode inprop-r no benfts received. i) Nesd for pipeline regulatiOn, including user tharges. Relts thowed that the ro of pipelines in Spain was significant. d) Compilation of road transport statistics for inter-city freight. Completed e) Study nf transport market performance to ashow hy shippers Study consited in three surveys of the users market, road transport and thoose a particlar mode intermediaries - uing samples. f) Study of freight trafsff flows by mode nf transport, by na1or A field survey was carried o t in 1969 by the National Inst, of Statstits routes and by eomadity for one year. on 45,000 trucks, nation-wide. The results wr ro oass potent markets for porential RENFE container services. g) Study of combined highway-ta-ilwy-port failities, and use Completed, ased by REFE to iplneemnt container services. of coatainers, pallaet, cran, etc 3. To achieve effective regulation and poliica of highway tranport as follos a) Implementation of mtnimum conditions of entry. Those measures introduced in 1966 were satisafactory, they had been put into use. b) nforce~~ent a gt and sie rega rtons Stal e ~re et op at ehe Spanish boeder, and orders plated far 2 stalen In ean, of the provinces, but implementation oas inemplete c) Ensure sound condition of vehinlas and a syatem of inspection A plan for sapectin was developed, imp memntatn was slow, due ta delap to nrquirIng aquipment and land for staions. d) Uniform accounting systan for large transport enterprises. "-pl,ered for large trucking enterprisen and distributed bp Governe to priate operators, adoption of the spsem oas, bowever, optional an general nrten.l accounting rules were alread-y used by trucking enterprises Enforie weight, aale oad and safety regilations for motor vehiclas F xed weighng stations built. Progs ls s-ayia ty Beoden and strenhn the functins of tho Consejo da Transporte, Progress ~ s sa isfatory lereereorgnizing Consejo bas haan passae 1971 Restrictions n road transport impoed only for limited and Sonn restrictino on av.lablity of new ltcnes Stan progress of defined periods, and to carry ont appropiate studies on stodies Intrrgina Fow o FeihtTrffc,Ecnms -f Scalc in Road Tranport, Public ond Dsn Accont Road Transport, Struesaro of Pcblic Transport of Inter-arhan Passengers, fynd fast, and Rood fiat Charge~. Table .IT OPERATING STATISTICS OF SELECTED EUROPEAN RAILWAYS Average Ca:gope. FreiAt Car Average Ne: Carg, Per Commercial Traffic: 1958, 1965, 196,170 Train: 1958, 1965. 1967 (Tons) (Tons) 1958 1965 1967 1970 1958 1965 1967 Germany 14 18 19 20 271 303 308 Austria 15 16 16 19 240 265 265 Belgium 18 21 22 24 300 311 315 France 15 18 20 26 273 294 301 Italy 12 12 14 15 244 244 273 Sweden 12 16 17 22 246 313 301 Spain 12 14 15 20 146 181 189 Availability of Mctive Power and Rolling St:ock 1963. 1967 and 1970; % Available (in working order) of Total Steam Locomotivea Diesel Locomotives Elect. Locomotives Diesel Railcars- Electric Railcars. Passenger Cars Freight Cars 1963 1967 1970) 1963 1967 1970 19653 1967 1970 1963 1967 1970 1963 1967 1970 1963 1967 1970 1963 1967 1970 Germany 87 85 79 94 95 94 95 95 95 93 92 92 94 94 90 94 94 92 97 95 95 Austria 77 61 75 86 89 90 90 90 90 82 88 87 90 90 91 91 92 93 95 93 92 Belgium 96 - - 96 98 98 96 96 99 85 97 99 96 96 98 91 91 92 92 98 90 Denmark 98 99 100 96 94 97 - - 93 93 95 96 97 97 91 90 93 96 97 97 Finland 95 58 72 93 92 94 - - 94 93 87 - - 92 95 91 95 96 96 96 France 87 91 85 95 93 91 92 92 91 91 91 91 92 92 93 89 92 93 91 92 94 Great Britain 79 100 - 85 85 84 73 77 80 90 93 94 91 91 93 91 91. 92 94 n.a. 94 Italy 57 76 64 85 83 77 88 88 86 87 88 84 85 85 80 86 86 84 91 92 90 Luxembourg 91 - - 85 91 91 90 89 84 78 93 94 - - - 95 96 94 90 92 97 Sweden 64 45 33 87 86 83 89 87 88 90 89 85 86 85 84 96 n.a. 97 99 98 98 Switzerland 94 93 - 93 91 90 92 92 90 67 67 100 90 86 88 96 af 97 96 99a/ 96 99 Spain 71 71 73 8811 92 85 91±' 86 88 79 73 79 90 91 94 82- 79 83 87- 83 74 a/ Data for 1964. (Note: All other traction and rolling stock as used on standard gauge rail) Source: International Railway Statistics, International Union of Railways, Paris, 1964, 1968 and 1971 editions. TABLE I11-4 REFE: SELETED OPEAIG STArISTICS 1956 195_7 1958 1959 1960 1961 1962 1963 L964 1965 1966 1967 1968 1969 1970 1971 1972 Operating EfficiecY Average Cargy per Freight Car (1964-100) 82.9 84.o 86.4 &.O 91.2 9..2 96.8 94.4 100.0 104.8 108.0 119.2 124.ß 132.8 112.1 146.4 l14.2 Average Cargo per Train (1964-100) 98.9 99.9 100.h 92.3 90.5 94.1 94.6 96.6 100.0 101.1 98.9 106.4 106.9 118.1 124.9 120.2 120.7 Average Speed, Pa5senger Trains Comnercial: Average of Steam, Electric, and Diesel (km/h) 38.2 38.1. 38.9 39.9 U2.7 44.1 45.4 46.3 47.4 46.9 Running: Steam (km/h) 18.1 5o.3 49.8 48.9 48.7 46.4 46.1 Electric (kip/h) 52.5 56.6 57.4 58.2 60.2 61.1 61 2 Diesel - Li (km/h) 53.7 52.5 51.6 52.5 53.2 53.1 53.3 - Talgo (l,/h) 78.8 81.5 80.6 80.5 80.0 82.1 82.2 hverage Speed, Freight Trains Commercial: Average of Steam, Electric, and Diesel (km/h) 18.14 18.5 18.2 17.8 19.7 20.9 22.3 23.8 24.1 24.1 RunnIng: Steam (km/h) 36.4 37.3 34.5 34.9 36.5 38.6 36.3 Electric (km/h) 38.7 41.3 40.4 40.9 41.6 41.3 41.4 Diesel (km/h) 39.2 36.7 37.2 37.3 38.4 39.0 39.1 Steam L.cæotives (9) 73.8 72.3 68.7 70.8 70.6 71.1 72.6 61.o 63.2 Electric Lcomotives (?) 90.8 87.4 84.3 85.8 83.1 84.5 88.0 90.4 87.6 Talgo Locomotives (9) 100.0 97.2 92.9 88.1 93.1 94.6 94.7 89.5 91.7 Diesel Locotives (9) 38.1 87.6 91.7 92.2 91.4 86.4 84.8 85.5 85.7 Passenger Cars (9) 81.6 79.3 78.8 78.7 78.0 80.1 82.9 73.6 8o.8 Freight Cars (9) 87.3 85.b 79.3 83.0 67.1 70.0 74.2 84.1 87.2 Utilization Stema Locotives (%: 21.3 20.0 19.5 19.1 18.7 18.4 36.6 Diesel Shunting Loconotives (9> 58.3 60.4 60.8 57.1 61.3 53.9 63.5 Diesel Line 1l.cotives (9) 46.8 8.8 52.0 51.8 52. 62.8 61.3 Electric Locomotives (9) 41.4 42.9 1.0 39.9 LC.3 43.0 54.2 Electric Units (9) 22.7 22.5 21.0 26.1 26.1 31.0 35.1 Average (9) 28.5 31.6 32.9 35.4 37.7 40.8 47.9 Average Without Steam Locomotives (9) 39.8 41.0 40.1 41.6 40.4 3.2 48.8 Staff Efficiency Traffic Units per Hour Worked 54.5 57.6 513.7 56.6 47.0 50.0 55.7 69.0 71.1 74.9 87.0 95.4 88.9 96.6 127.6 131.6 147.1 Source: RENFE, Meorias Table 111-5 RENFE: ACTUAL TRAFFIC BY COMMODITY: 1963-1972 (Million Ton-Kh) 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 Petroleum Products 686 823 897 828 942 1008 1072 1380 1305 1453 Iron & Steel 207 366 542 585 804 767 941 982 903 1151 Minerals 529 543 577 540 726 978 980 1226 1413 1161 Fertilizers 471 508 513 520 631 603 571 515 483 581 Cement, Lime, etc. 205 246 307 339 379 392 339 310 342 522 Coal 1398 1216 1168 988 979 890 871 1115 883 743 Beverage 176 164 149 150 179 170 142 156 145 151 Sugar Beets 135 188 156 168 210 166 156 840 267 221 Grain, Flour, etc. 615 635 624 640 768 626 589 547 492 653 Sub-total 4422 4689 4933 4758 5618 5600 5661 6471 6323 6641 Other Commercial Traffic 1759 1919 1820 1966 :2116 1935 2100 2599 1990 1793 Total Commercial Traffic 6181 6608 6753 6724 7734 7535 7161 9070 8313 8434 RENFE Supplies - 911 1061 895 646 534 491 Mail 205 224 225 260 274 279 297 306 330 334 Service Traffic 1598 633 413 389 427 396 473 730 818 930 Total 1803 1768 1699 1544 1347 1209 1261 1036 1148 1264 GRAND TOTAL 7984 8376 8452 8268 9081 8744 9022 10106 9461 9698 Source: RENFE, Memorias Table i1-6 _RENFE ESTIMATED (1964-1973) ÅND ACTUAL (1956-1973) RE\ENUES, EXPENSES, AND NET INCDME (Million setas) 1956 1957 1958. 1959 1960 1961 1962 1963 196- 1965 1966 1967 1968 1969 1970 1971 1977 1973 Est Act. E_t_ Att Et . LEst. Ac t. .At 197 3ot 0_pe,ratin Revenues --- i -- - --- - - -- d Passeger 1829 2345 2606 2761 3053 3244 3627 4097 4870 4899 5530 5838 5750 6636 7837 6982 8930 7096 9780 7576 10560 8338 9410 9078 10007 10008 10340 12200: Freght 3841 504,7 5685 5927 5700 5732 5907 6049 6880 6934 7430 7592 7950 7171 8170 7750 9310 7790 10170 7817 11010 8406 9010 8773 9740 9841 10190 11681 iscel leaneo. Mail 194 241 335 455. 526 562 576 599 643 621 745 757 776 830 843 903 943 1020 Canon Coincidlencta 151 172 216 251 342 390 639 747 880 1015 1550 1902 7103 Other __ _150 21 26 269 51 244 271 875 __87 1046 ___ __5 __ 728 __ _ 726 _727 ___ 1530 ____ 1846 1661 Total Miscll-neous 345 _563 572 89 1046 1080 1162 1260 1,3 1510 1250 1667 1290 173 2011 10.9 2245 j0 2436 134_ 2584 3630 3983 4660 4691 5120 4784 Total Operating Revenes 6015 7955 8863 9589 9799 10056 10696 11406 12980 13351 14210 15097 14990 15557 17760 16743 20040 17131 21753 17829 23310 19329 22050 21834 34407 24540 25650 28665 gjperating E. enses Peroson ne 3523 4524 4762 4912 5365 5358 6701 8114 8300 8632 8340 9497 0380 9879 11330 11551 11180 1216? 11190 12096 11240 12178 14910 14690 15340 16188 14500 17830 Power 2098 2811 3000 2818 2722 2908 3098 3016 3370 2987 3330 3624 3290 3154 2910 2842 32 2311 2910 2008 2850 1926 1920 1991 1888 2058 1860 2263 Othrs 1952 2529 3077 327: 3131 2923 2688 3097 3740 3703 3680 3052 3610 3980 4820 4938 4900 5879 4780 4775 4660 5480 5870 4834 5512 5044 5450 5558 Total Operating Ex i00 -- -- -- - - - ------------- -- -- -- -- -- -nse (Excltding Depreciation) 7573 9864 10839 11007 11218 11189 12487 14227 15410 15322 15350 16173 15280 17013 19060 19331 19310 20357 18880 18879 18750 19584 22700 21515 22740 23290 21810 25651 Net Cash Operating Revenues (Defitit. (1558) (1909) (1976) (1412) (,41 (1133) (1797) (2821) (2430) (1971) (1140) (1076) 290) (1456) (1300) (2588) 730 (3226) 2870 (>0) 4560 (263) (650) 319 1667 1250 3840 3014 Ineres: 691 797 875 991 1020 1120 590 598 630 623 710 645 730 739 910 429 1020 561 1100 656 750 693 730 752 950 1025 Not Cash Inooe (Los) (2667) (2205) (2294: (2124) (2811) (3941) (3020) (2569) (1770) -1699) (.000) (2101) (2030) (3327) (180) (3655) (1850) (1611) 3460 (919) (1400) (374) 937 498 2890 1989 Detrectation Expensel 1470 1470 1660 1700 1880 1950 2110 2240 2350 2"90 2600 2611 2840 2870 3850 3130 4070 3860 4370 4410 ,Ne> lono (Loss (4490) (4039) (3430) (3399) (2880) (4051) (4140) (5567) (2530) (6245) (750) (4222) 620 (3789 (5250) (3504) (3133) (3362) (1480> (2421) Ratos Operatng (7,) 2/ 130 126 170 118 114 122 119 179 18 '3 99 121 93 - 3 130±' 12111 1201 1201 113-1 113 working (%) 21 126 124 122 125 114 til 117 125 719 115 108 207 102 109 107 175 96 116 88 106 80 101 111 106 1021 194 97i Source Estimates for 1964-1966 Appraisat Report T0-420 (Lan 387-1P) 1966-1970 Appraisal Reporn TO-595 (Ltan 570-SP> 1971-1972 Appraisal Report P1R-89 (10an 772-SP) Actuals for 1964-1970 - From above bank Appraisal Reports., .tutals lot 1971-1972 - From Renfo 'Semoria" (1971-73) 1/ Without taking into account the revenue from the Canon de Coincidencta 2/ Defined at th, ratio at total operating revenues to total operating expenses (including deprecoato) 3/ Defined as the ratio of total operating revenue to total operating epenses (excluding deptreiation) Table 111-7 RENFE: OVERALL VIEw OF ESTIMATED AND ACTUAL FINANCIAL EVOLUTION 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1. Net Surplus or Deficit (Billion Ptas.) 1964 Estimate -4.49 -3.47 -2.88 -2.45 -1.20 -0.87 -0.2'3 0.29 0.65 1.90 1967 " -4.14 -2.53 -0.75 0.62 1.53 1.98 3.10 1971 " -5.25 -3.13 -1.48 Actual -4.04 -3.39 -4.05 -5.56 -6.04 -4.22 -3.78 -3.50 -3.36 -2.42 2. Operating Ratio 1964 EstiMate 130 120 114 110 101 99 95 93 91 87 1967 119 108 99 93 89 87 85 1971 " 130 120 113 Actual 126 118 122 129 133 121 113 121 120- 113- 3. Working Ratio 1964 Estimate 119 108 102 97 88 85 80 78 76 71 1967 " 107 96 88 80 76 74 71 1971 111 102 94 Ac tual 115 107 109 115 119 106 101 106 1031/ 97 4. Current Ratio 1964 Estimate 1.29 1.28 1.27 1.27 1.29 1.29 1.31 1.33 1.38 1.87 1967 " 1.58 1.69 1.89 2.00 1.98 1.97 3.90 1971 " 2.55 2.39 2.20 Actual 1.90 1.92 1.79 1.37 1.36 1.43 1.39 1.21 n.a. n.a. 5. Liquid Ratio 1964 Estimate 0.77 0.84 0.84 0.84 0.83 0.83 0.82 0.80 0.78 1.22 1967 " 0.89 1.02 1.15 1.18 1.12 1.06 2.02 1971 1.34 1.36 1.10 Actual 1.24 1.08 0.91 0.77 0.81 0.93 0.99 0.66 n.a. n.a. 1/ The 1971 estimates do not include the revenue from the Canon de Coincidencia. 2/ Without including the revenue from the Canon de Coincidencia. Source: Appraisal reports and Tables 111.6 and 111.8. Table 11-8 RENE; ESTIMATED AND ACTUAL BALANCE SHEET: 1964-1971 (Billion Pesetas Est. 194Act. E.19. Act. Eat. 196Act. Eat. 197Act. Est. 198Act. E19 Act. Eat.17 Act. Eat. 9 Act. ASSETS Current Assets Cash 1.15 .23 1.53 .23 1.61 .34 2.58 .51 3.15 1.06 3.29 t.52 3-27 .35 2.89 .25 Securities .01 .04 .01 .04 .01 .05 .05 .05 .05 .05 .05 .05 .05 .05 .05 'ccunts Receivable 1.36 5 59 1.35 4.69 1.34 3 73 1.83 4.62 1.61 5.84 1.47 7.27 1.43 10.27 1.60 5.02 Stores 1 75 3.20 1.60 4.41 1.60 4.73 4.27 4.98 3.72 4.82 3.47 4.83 3.72 4.95 4.07 5.17 Other Current Assets .17 .20 .17 .76 .17 .82 1.07 1.29 .84 .26 .64 .27 .54 1.63 - - Total Current Assets 4.44 9.26 4.66 10.13 4.73 9.67 9.80 11.45 9.37 12.03 8.t' 13.94 9.01 17.25 8.61 9 69 Fixed Assets Gross Value 48.49 61.90 55.44 67.38 63.69 75.46 83.60 82.67 92.56 91.40 101.76 99.45 110.53 98.75 108.45 10'.64 Less Accuulated Depreciation 1.47 14.67 3.13 16.38 5.01 18.33 20.44 20.45 22.79 22.76 25.39 25.56 z8.23 15.06 18 90 18.18 Work in Progress 1.04 - .75 - 1.01 ______ Net Fixed Assets 47.02 47.23 52.31 51.00 58 68 57.13 63.16 63.26 69.77 -e 9 76.37 74.90 82.30 83.69 89 S 894 Deferred Assets .09 .96 .86 .49 .36 investment Stores 4.09 Total Assets 51.46 56.49 56.97 61.13 63.41 66.00 72.96 74 80 79.14 82.38 85.289 70 91 31 101.90 90.16 101.35 LIABILITIES Current Liabilities Accounts Payable 2.40 3.21 2.62 3.02 2.74 3.44 2.81 4.41 2 35 5.65 2.38 6.29 2 40 6.07 2.68 7 Accrued Wages and Social Security 1 00 6Al 1 n 51 95 22 .40 .3i L5 7 45 .0 . Deposits and other Creditors - .45 - .65 - .71 .20 1.28 .18 .60 .16 1.04 .14 1.17 57 Other Current Liabilities .03 .60 .03 1.30 .03 1.03 2.80 2.37 2.55 2.36 1.74 2.36 1.51 4.6 .01 2 35 Total Current Liabilities 3.3 4.87 3.65 5.2e 3.72 5.4-0 4.21 0.37 807 4.7 9 12.44 3an4. 7 99 Lena-Tenm Debt Sends 1946-l997 12.81 5 B u 2.6 12.6 5 7 12.54 12.52 1L.36 12.50 12.19 - 12.02 - 11.84 - - U.S. Loans and Er'-"FIW. 1.01 .91 1.04 .83 .96 .75 65 1.25 .54 1.71 .43 1.97 37 1 91 1.99 IBRD Leans 80 - 2.60 .44 3.90 1.87 3.64 2.89 5.26 4.32 6.30 5.46 6.51 6.11 7 17 Other Log-Ten Debt .40 .29 .50 .32 1.60 47 .63 .28 .79 .28 '.77 .27 3.03 .24 64 Total Long-Term Debt 15.02 14.02 16.82 14.26 19.00 15.61 17.28 16.92 18.78 6.31 20.52 7.70 21.75 8,36 9.60 8.93 Total Liabilities 18.45 18.89 20.47 19.54 22.72 21.01 23.49 25.29 24.31 15.18 25.25 17.47 26.25 20 80 12.98 16.92 EQUITY Reserves Amertied Sands 1.32 1.33 1 4: 1.48 1.62 1.63 1 79 1.66 1.96 - 2.13 - 2.31 - - Debu, Redenptien - .09 - .19 - .27 .37 35 .55 .54 .82 .80 1.26 1.07 1.57 eusng Conostrauctien - .05 - .06 - 07 .08 04 .10 .04 .12 .06 .14 07 07 Other Resrv- .50 - .14 - - - - - - Z- Total Reserves 1.32 1.97 1.47 1.87 1.62 1.97 2.24 2.05 2.61 .58 3.07 .86 3.51 1l1 1.64 1 59 -andSrls r'ei- (5.36) - (9.26) - (13.16) (17.32) (19,85) (20.60) (19.96) - Uneared Surplus (Revaluation) 12.89 - 12.89 - 12.89 12.89 12.89 12.89 12.85 12 89 12.89 12.89 12.89 12.09 OlId lends - Assuned by -oenment - 14.16 14,16 14.16 14.16 W=itten Off Assets (Negative) (13.20) (13.20) (13.20) (13.20) (13.20) sassa6 28.su 3s 36.09 79.U 44.tt 51.66 47.77 59.18 52.77 64.88 57.52 69.64 66.11 69.69 82.84 fotal Equity 33.01 37.60 36.50 41.59 40.69 45.79 49.47 49.51 54.83 67.20 60.04 72 23 65.06 81.10 85.18 2AL3 TtlLaiiisand Equity 51lue 56.49 56.97 61ii 63.41 66.80 70.96 74.80 79.14 82.38 85.29 89.70 91.31 121.90 99.16 121.35 Current 1 29 1.90 1.28 1 92 1.27 1.79 1.58 1.37 1.69 1 36 1.89 1.43 2.00 1.3S' 2.55 1 21 Liquid 0 77 1.24 0.84 1.08 0.84 .91 .89 .77 1.02 .81 1 15 .93 1.18 .99 1.34 .66 Debt/Equity 31/69 27/73 32/68 26/74 32/68 25/75 32/68 25/75 31/69 9/91 30/70 10/90 29/71 9/91 13/87 10/90 Source Estimates for 1964-1966. Appraisal Report TU-420a (Loan 387-SP) 1966-1970: Appraisal Report TO-595a (Loan 507-SP) 1971-1972. Appraisal Report PTR-89 (Loan 772-SP) Actuals for 1964-1970. From above Bank Appraisal Reports. Actuaels for 1971 From Bank Supervision Report of June 28, 1972. Table 111-9 RENFE: ACTUAL REVENUES AND EXPENDITURES AS A PERCENTAGE OF FORECASTS Revenues Expenditures Passengers Freight Total Labor Fuel Total 1964 100 101 103 104 87 99 1965 106 102 106 114 109 105 1966 115 90 104 118 96 111 1967 89 95 94 102 98 101 1968 79 84 85 109 71 105 1969 77 77 82 108 69 99L 1970 79 76 83 108 68 104 1971 96 97 99 98 104 94- I 1972 100 101 100 105 109 102- 'I 1973 118 114 111 123 122 119- Z/ Thesep resulits, are -not -trirt1v comparablP with -hnczp nf thp- previous years because of some change in the definition of o-erating expenses. in 1969 th PrnP-nditir, aq a r-1iilt of personnel reductions (about Ptas. 854 million or 4.5% of the total actual expenses Of that year) -Tr taken Out of the accounts and written off as "activo inmobilizado" and financed through reducitio^ns in 4-ivestments. FProm 1970 nwYards Hea Government took care of these payments and they are no longer previously listed as "conservacion extraordinaria" were also Table III-10 RENFE: TRAFFIC PATTERNS AND EVOLUTION OF NETWORK 1964 1965 1966 1967 1968 1969 1970 1971 1972 I. Network Total Route Kms ( km ) 13,300 13,385 13,386 13,391 13,668 13,672 13,649 13,476 13,504 Double Track " n.a. 961 798 774 597 615 591 602 620 Single Track " n.a. 9,748 9,669 9,669 9,930 9,935 9,981 9,783 9,760 Electrified Lines 2,200 2,676 2,919 2,948 3,121 3,122 3,077 3,091 3,124 Double Track " n.a. 956 1,120 1,149 1,322 1,356 1,412 1,414 1,475 Single Track " n.a. 1,720 1,799 1,799 1,779 1,766 1,665 1,677 1,649 II. Pass_enger Traffic Total Passengers (mln.) 169 174 176 156 148 159 164 167 178 Passenger-km " 11,820 12,198 12,523 12,437 11,836 12,647 13,293 13,533 14,391 Average Distance of Trip ( km ) 70 70 71 80 80 80 81 81 81 Passenger-km per Route-km ("000) 889 911 936 929 866 925 974 1,004 1,068 III. FreightJraffic Total Net Tons (mln.) 29.3 31.2 31.2 32.4 27.8 27.3 28.0 28.9 31.2 Net Tons-km " 8,376 8,452 8,268 9,081 8,744 9,022 10,106 9,461 9,698 Net Tons-km Steam Traction " 5,153 4,782 3,673 3,084 2,360 1,618 1,092 517 530 Net Torts-km Diesel Traction " 492 692 1,117 1,910 2,437 2,912 3,959 4,001 3,943 Net Tons-km Electric Traction 2,731 2,978 3,478 4,087 3,947 4,492 5,055 4,943 5,225 Average Haul ( km ) 286 271 265 280 314 330 361 327 311 Net Tons-km per Route-km ('000) 630 631 618 678 640 660 740 702 720 IV. Operations Locomotive-km ('000) 158,784 163,794 169,139 170,999 167,891 167,591 170,922 174,467 179,469 Total Train-km, Passenger 66,200 71,500 75,358 77,884 78,904 80,688 80,497 81,565 84,313 Steam Train-km, Passenger " 25,600 25,400 18,963 12,936 8,706 4,959 1,905 783 584 Diesel Train-km, Passenger 17,800 21,700 29,916 36,263 39,674 44,164 46,871 47,006 47,135 Electric Train-km, Passenger " 22,800 24,400 26,479 28,685 30,524 31,565 31,721 33,776 36,594 Total Train-km: Freight 44,554 44,507 44,169 45,393 43,465 41,842 43,209 41,875 42,867 Source: RENFE , Memorias, 1964-197:3. TABLE I1I-11 RENFE: FINANCING OF THE INVESTMENT PLAN: 1966-72 (Billions of current Pesetas) Total 1966 1967 1968 1969 1970 1971 1972 1966/72 Foreign Loans 1.53 1.31 1.89 1.65 0.89 1.00 2.67 10.94 Government Contributions to Equity 4.06 3.67 5.00 4.75 4.89 3.37 6.11 31.85 Financing of Depreciation 2.05 2.47 1.40 1.62 2.23 3.18 3.18 16.13 TOTAL 7.64 7.45 8.29 8.02 8.01 7.55 11.96 58.92 Source: RENFE, Memorias 1966-72 GRAPH 1 RENFE: Evolution of the Labor Force, 1954-72 Personnel (thousands) 40 JDuring the Plan Before the Plan 130 120 110 100 90 70 1 55 56 57 5859 60 61 62 63 64 65 66 67 68 69 70 71 72 Years A. introduction The purpose or tnis chapter is to present tne sCults o a new estimate of the rate of return of the Investment Plan. The rates of return have been recalculated using, whenever possible, the same principles used in the three appraisals, but modifying them when actual practice suggests that some benefits had to be added or SuDLracteu. we have also added a rather detailed sensitivity analysis in order to assess the relative importance of different factors. The Harvard Railway Simula- tion Model, already used in other evaluation studies of railway projects, was used as a tool to obtain some of the newly estimated rates of return, particularly of the components of the Plan, and the sensitivity analysis. Due to time and resource constraints for preparing this audit, we have made a new calculation of the benefit-cost analysis only for the Plan as a whole and for the investments in track renewal, diesel motive power and electrification. These last three items comprise 64% of tne investment. B. Return of the Investment Plan The economic justification for RENFE's Investment Plan given in the 1964 appraisal report, and maintained with only minor variations in the other two projects, was that "a significant part of the nation's traffic can be carried most economically by railway, that this traffic is likely to increase in the next 10 years, and, most important, that the Investment Plan will make it possible to carry the traffic at substantially lower costs and improve the quality of service" (Appraisal Report, page 18). It was also expected that about three-quarters of the total investment would increase RENFE's efficiency through a 33% reduction in operating costs, and the remainder would increase capacity. The overall rate of return for the Plan was estimated at 15%, the same rate implicitly used in the second appraisal, and explicitly in the third. Table IV-1 summarizes the expected and actual returns of the Plan and its components and the benefits considered in the calculation. The original estimate included as part of the benefits the impact of some measures of the Plan of Action because of the impossibility of separating them; it considered that in the absence of the Investment Plan operating costs would remain at the 1963 levels -- a very optimistic assumption -- and it did not add other benefits such as time savings and improvements in the quality of service. In this audit we have tried to separate as much as possible the effects of the investments from those of the Plan of Action, but the other two assumptions have been maintained,  - 27 - although the quality of service, especially for passengers, has improved considerably. The overall return of the Plan can then be estimated through savings in operating costs, broken down into different categories: a) savings in direct operating costs, including not only those derived from the change in traction (dieselization or electrification) but also the benefits from higher speed and average trainload; b) savings in track maintenance; and c) savings in terminal costs (including operations at terminals) and administrative expenditures.1/ Two alternative methods were used for estimating the total cost savings. The first was to build up the total from the statistics that reflect the changes that have taken place in operations: speeds, types of traction, average trainloads, etc., and the second was to attempt an aggregated estimation of total savings by comparing the actual cost figures for each year in the 1964-71 period (in 1971 pesetas) with the expendi- tures in each major item estimated from a trend line adjusted to the period 1956-63. The projection is considered in this second alternative the "without situation", because it indicates the way costs would have evolved if the operational efficiency in the 1956-63 period had been maintained. Thus, the benefits for each year in the 1964-72 period were the difference between projected and actual costs. The end product of these calculations has been a set of rates of return which are summarized in Table IV-2. Our "best estimate" about the overall Investment Plan's rate of return is 12% (Alternative C4 in the aggregated analysis, assuming an investment lifetime of 25 years, which seems to be the most reasonable figure in light of the investment composi- tion). This rate is remarkably close to the appraisal estimate of 15%. especially if one takes into account that both calculations are mixed in an unknown amount with the effects of operational improvements which might or might not be independent from the Investment Plan. In this estimate about half of the costs of the track renewal vroRram has been considered current expenditure and not investment, because it was a kind of deferred maintenance necessary to keep the railway going. However, the other half, which was used to upgrade the track standards to allow for higher speeds of passenger trains, is clearly an investment and must be included in the calculation. If all track renewal costs are taken into account, the rate of return falls to about 9% (Alternative C9 in the aggregated analysis). 1/ By attributina all the increases in sneed and average trainload and the reduction in terminal and general expenditures to the investment program, we are overestimating the benefits because part of those improvements have been achieved through increases in operating effi- ciency which require only minor invenments. 2/ The detailed analysis is included in the Methodological Annex. - 28 - An analysis of the extreme positions in the set of rates of return is useful to help interpret the results. For example, to consider that the Investment Plan had no impact on terminal or fixed expenses will reduce the return to 6% (Alternative C2, B2). Similarly, if only half of the track renewal cost is included, all other benefits, and an average lifetime of 35 years is used in the calculation, the return increases to 15% (Alternative C4, B3). The overall conclusion is that the Plan as a whole has been for Spain a worthwhile effort, obtaining a return eaual to or higher than alternative investments. A more detailed analysis of the return of the main investment components will permit a fuller interpreta- tion of these results. C. Track Renewal Program Track renewal was the largest item in the Investment Plan, comprisinR 38% of the total. It was also one of the most important because there was a serious backlog in maintenance, resulting in difficult operating conditions and high costs. By the end of 1963 only 3.2% of the track was equipped with heavy rail (54.4 kg/m), the type suitable for high-speed passenger trains and high axle loads. The section with the new track nnr- responded to that with the highest traffic and was laid mainly after 1958. Thp 1964-73 Tnvestment Plan inclidpd r-npwal nf 7,000 km nF track. In the first appraisal it was justified as an indispensable invest- ment to keeAn fbA railway gninc, The second appraisal predicted that be.tter" tracks would lower train operating costs by preventing frequent slowdowns And rpdiirina wear and tPar nf -rnlling cfnr1r in Addition ton an reutini maintenance and repairs. RENFE estimated a rate of return of 8%. In the third qnnrqimql hpnpfi t-- nf thp trqrl-rg renhi Ii--qtionn inclued in the Pla at that time (renewal of 2,639 kms and reballasting of 579 kms) were tipfinod Ac -raglilroo trnolr ndir -rr%l 1 i"cr af-nelr -in en n---i-ro ed safety of operations, c) higher speeds and d) reduced fuel consumption. The octi Atad -rna nf rptirrn rnagdr fvrom 19% ton 17%/ for difFerent sections. By the end of 1973, however, only 82%/ of this prora h-A been accomplished. Track renewal evolved as follows: Year Kms of track renewed 1964 620 .L Y .. JI/U 1966 433 1I JU 1968 296 1970 764 7/1i 000 1972 948 LO/J 547 Total5,4 - 29 - In this audit we have included as benefits of the track renewal program lower track maintenance costs and higher speeds. The latter, in turn, results in lower equipment requirements and operating costs, parti- cularly fuel consumption. As for track maintenance, the new track allowed the change from manual to mechanical systems, a major step which has been one of the main causes of personnel reductions and has resulted in a reduction of average maintenance costs oer km from Ptas. 181-000 to Ptas. 110,000. Regarding speed, the right indicator is average running sneed. because average commercial Rned is inflnnced by other measures unrelated to the Investment Plan, such as reduction in intermediate stops or sunDression of slow trainR. FvPn average running sn,d is influenced by many other factors, particularly the change in traction. However, the running sned by tvnp of trartion dno not sem ton have changed much, with the exception of electric and Talgo passenger trains (Table IV-3 in snite of imnnrtant arniinztinn nf motive nnwar and rolling stock - Fo he best estimate of the rateofrtn,nlhaffte costs of the renewal program, which correspond (approximately) to the - r -_'- ded ir LLl..Lt . the -L I I..%.A.L..L 1. 1aV this favorable assumption, and considering an economic lifetime of 40 years and A grOulth rate Of 3%per annum for tebenefits st---.ing fro high"er speeds, the rate of return is 6%, lower than originally expected (Table IV-1). The reasons for this low return are the higher than. expec ted invest-&ment and, to a lesser extent, the relatively low impact, in practice, on average in accidents, will not change this conclusion. If all costs of the track renewaol prram are, i.ncA e .1.A 4..n t-le ca.lcu..lation,- 4the rate-,- of return... is 11Y *~~~~ '. I a A IL.U.C.f I. LLL L . L.LLI LILC 4 L L i. £C LUL L 1./0, These results suggest that the track has been renewed to standards that are to oigh and used in practi-c oLy vy a small numuer. Lii. Lgu- Acu passenger trains. D. Dieselization Program In 1963, RENFE was still a steam-traction railway. At the end of thats yea -r nu 'k A A ony 10 desl LLUULA.VCO LUMLLacU WLLLU J-/ ) LGLeU a....... ..... %.- LLO J LULLU LL C 'iI0L U WLI J LIJ. bLCCIL. Vi. these diesel, 183 were shunting and 4 Talgo passenger units (Table IV-4). Only 175/ of Ute traln.i su-Sm ued diesell traction nUd L L thXLsUg equipment was concentrated in the transport of minerals in Orense, in the LI ILLe effects o track renewai on speed nave Deen overestimateG Decause we have attributed all the increase in running speed to this investment, while in practice it is tne result or many factors including, for example, the scrapping of very old wagons. Data availability has limited the analysis of changes in speed up to 1971. Thus, we have considered investments up to that year only. 2/ See Table 17 of the Methodological Annex for the detailed analysis of the change in average running speeds. - 30 - northwest (54%) and in the Sevilla region (38%).1/ Dieselization moved very fast after 1963: in 1967, 40% of the a relatively complex technology such as diesel traction, with its problems o retraiig persU-nneL LUL Uperations anu maitunCz a no e vone o RENFE's main accomplishments during the Modernization Program. The'1964 appraisal did not contain a detailed analysis of the return of these investments, but it expected, in light of C prticuLLm hn other countries, that dieselization would have a return of about 30%. The second appraisal was based on a more precise estimate auu arEiVeU ZL Lltn same rate, specifying also that the 757 diesel and electric locomotives to be bought in the 10-year Investment Plan could replace 3,000 steam locomotives, a ratio of practically 4 to 1. In making a new estimate of the return of this investment we were faced again with the same problem of attribution of some of the benefits, especially speed and average trainload which, as indicated, are the effects of several other investments and administrative actions. Thus, we have used four basic alternatives for the analysis.V Their description and the rates of return obtained for the dieselization program are as follows: Alternative Economic Lifetime 20 years 15 years 1. Upper limit. All increases in speed and trainload attributed to dieselization 27.7% 27.2% 2. Lower limit. None of the increases in speed and trainload attributed to dieselization 23.2% 22.5% 3. Only increased trainload attributed to dieselization 27.5% 27.0% 4. Only increased speed attributed to dieselization 23.5% 22.7% 1/ For full details, see Table 5 of the Methodological Annex. 2/ These alternatives are developed more fully in the Methodological Annex. Inese estimates nave Deen maGe incuing as Denelits the UILLLULUC ILL operating costs between diesel and steam traction, plus the impact on speed and trainload as described above. Growth of Denefis after 17/3 has been extrapolated on the basis of the trend in the 1964-72 period. The best estimate of the rate of return should be in the 23-24% range, lower than estimated during appraisal but still a successful program. The reason for selecting a best estimate on the low side of the 22-27% range presented above is that the effect of the investment on trainload is more important than the effect on speed, and the variation in the average tonnage per train is large y explained by the overall increase in RENFE's efficiency after 1964.1' The main reason for these high rates of return is the ineffi- cient way in which steam traction was being operated (very low tonnage per train, low locomotive utilization factor, etc.). Thus., it is interesting to explore other ways through which a reduction in costs could have been achieved even with steam traction. One way is through an increase in the average tonnage per train. From the data used for the analysis of the returns for dieselization, it is possible to estimate the increases in average tonnage of trains using steam traction (with respect to the 1964 figure) that would produce benefits in relation to freight traffic similar to those derived from dieselization. The results of this exercise are as follows: % Increase in Average Savings per ton-km as a Tonnage of Steam Trains % of those Obtained over the Level of 1964 from Dieselization 117 100 78 80 37 50 28 40 12 20 For example, an increase of only 28% in the average tonnage of steam trains would lead to savings per ton-km amounting to 40% of those obtained with the dieselization program. What this calculation means is 1/ One benefit not added to the calculation is the scrap value of the old steam engines, a factor that could increase the rate of return by 10-15%. - 32 - that any program for increasing the average trainload in that proportion will have a rate of return similar to that for dieselization if its cost is equal to 40% of the dieselization costs. If the cost is smaller than 40%, the program will have even higher returns than dieselization. The results also suggest that a stronger effort at increasing trainloads will result in a major reduction in the needs for diesel motive power. E. The Electrification Program In 1964, RENFE had 2.474 kms of electrified lines (18.2% of the network), which included 824 kms of double track. These lines correspond in general to those with the highest traffic density in the country. but some sections were not interconnected and as a consequence equipment utilization was not as high as it could be- Thus. one of the main purposes of the electrification works included in the Investment Plan was to interconnect the electrified Rectionq in the northern part of the country, and the lines between Madrid and Cordoba. The six lines finally included in the orogram and their main charnvc-rintion ar do- cribed in Table IV-5. Freight traffic on these lines accounted for 18.5% of the total net ton-kmTR transnorted in 1QAA Yhile they reprsnted only 4.6% of the total network. SOFRERAIL studied the electrification issue as part of its preparatory work for the Modernization Prnaram, They cnmnared the ost of electrification against that of providing the service with diesel frnnftion_ Thp-ir ronc1iinn wAQ thnt tli e-ni-n costs of Nb altenatib.c. were very similar but electrification involved lower operating costs. This asessqment HPrhPndPd hpnxrilu nn t-ha Avaiim~-in th-kt -.4t-h Aq-c~r1 f-nf- gross tonnage per train was only 75% that of electric trains, and the 'hio,!h,r voeniiv-Amrntc in tavn nf rlioc.l locomoives',c m,.ader capital f-nves ments in both alternatives similar. In the third project, two additional linesc -- no%t anlze inar t"His study because they- ar not- ye ful in -_ operation -- were added: Valencia-Tarragona and Madrid-Guadalajara. A new calculation of their.. benfit ad cot arriLved at a. rate of return of 12%. Our estimates are also based on a comparison between the economic cs of providing a given amount of services by electric ur diesel traction. Since there are different possibilities or ways of defining benefits and costs we have considered four alternatives. Ie definItion of these alter- natives and the corresponding rates of return are presented in Table IV-6. While Alternative 1 can be considered the basic estimate, because all operating conditions are assumed to be the same witn diesel and elec- tric traction, Alternatives 3 and 4 are more realistic, in the sense that the economic lifetime of electric Locomotives is longer than diesel, and - 33 - that for certain sections the better use of existing equipment was an important benefit of the interconnection. Finally, Alternative 2 is similar to Alternative 1, with the exception that the average net train- load in the case of diesel traction is assumed to be 75% of the one corresponding to electric traction. The returns by section range from 9% on Segovia-Medina to 17% on Medina-Vta de Banos, one of the sections with the highest traffic density in the network (Alternatives 3 and 4). Our best estimate of the return of the electrification program is 12% which, again, is remarkably close to the estimates made for other electrification work included in the third project.l/ Two issues are important in the interpretation of these results. First, the benefits of electrification are higher for RENFE than for the economy as a whole because of the high level of the tax on gas-oil. Total cost savings increase by about 45% if taxes are included. Second, the level of benefits is directly proportional to the traffic density, in the sense that given a certain tonnage to be trans- ported, the lower the average trainload, the higher the number of daily trains that are necessary to move the traffic. Since the benefits are measured by the difference between the social operating costs of the total number of diesel and electric-powered trains that were required, the lower the average trainload and consequently the less efficient the system, the higher will be the benefits from electrification and, for that matter, of all the other investments. In practice, it is not possible to interpret Properly the return of an investment when it is based on conditions that are not fully efficient. This issue, and the importance of the Plan of Action, are raised again in the next chanter. 1/ This calculation has been based on market prices for the factors of prorlI I - f-i An P,ri-P1iid4n tnyaao nnelr .,i'r1e e hn'rp nr%t- an lT f in detail the type of fuel used to generate electricity; however, the important proportion oil dris s t electrf i geation w Spai nd the recent increase in oil prices suggest that electrification will have an eve hihe reur tha wha hasWL-L bee es.timated in this audit.  TABLE IV-1. RENFE's Investment Plan. Estimated and Actual Rates of Return Actual Investment Cost A pp r a i a a 1 l a t i is a t e s A u d i t E s t i m a t e Investment Items Total % of Total Rates of Return Benefits Included Rates of Return Benefits Included 0 b s e r v a t i o ns (MilliLon Pesetas) 1. Total Program 84,713 15% in first appraisal Savings in total costs 12% best estimate, a) Replacement of steam Two approaches: aggregated, based on 17% in second appraisal per traffic unit. Com- including only half traction by electric comparison of total cost trends in 14% in third appraisal parison of 1964 cost of track renewal and diesel 1958-72, and disaggregated analysis structure without invest- costs. b) Savings in track by cost item. ment with 1973 cost maintenance structure with invest- c) Increase in opera- ment. ting efficiency 2. Track Renewal 32,473 38.3 Not measured in first Savings in track and 6% best estimate. a) Savings in track It was assumed that half of the appraisal equipment maintenance; 1% if total track maintenance program costs are current expenditure. 8% in second appraisal increase in speed renewal costs b) Increase in speed 12-17% in third ap- considered praisal 3. Diesel Motive Power 12,298 14.5 30% throughout Savings in train 23-24% best estimate a) Savings in train Estimate based on detailed analysis (including train sets) operating costs operating costs of sample covering 43% of freight b) Increases in speed train-kms and 26% of passenger and trainload train-loss. 4. Electrification 9,234 10.9 No quantification in Savings in train op- 12% best estimate Savings in train oper- No analysis of indirect effects first appraisal erating costs as com- Return on individual ating cost as compared dealing with fuel used to produce 12% in third appraisal pared with diesel links range from with diesel traction. electricity. traction 9% to 17% Investments in third loan not analyzed 5. Rolling Stock 8,557 10.1 No estimate in first Maintenance savings appraisal Not analyzed in detail 14-15% in second ap- praisal 16% in third appraisal 6. Stations and yards 4,929 5.8 15% in first appraisal Savings in train Not analyzed in detail formation costs Table IV-2 RENFE: INVESTMENT PLAN 1964-73 New Estimates of Rates of Return Aggregated Detailed Analysis Analysis Benefit B B B B Alternatives Cost Years Years Years Years Alternatives 35 25 20 35 25 20 35 25 20 35 25 20 C1 8.8 6.4 3.0 9.4 7.2 4.2 13.8 12.4 10.4 11.8 10.0 7.4 C2 7.8 5.0 1.4 8.4 6.0 2.6 12.6 11.0 8.6 10.6 8.6 5.6 C3 11.2 9.4 6.6 12.0 10.4 8.0 17.0 16.2 14.8 14.8 13.6 11.6 C4 9.8 7.6 4.6 10.6 8.6 5.8 15.4 14.2 12.4 13.2 11.6 9.2 ExllMation of Benefit and Cost Alternatives Bl: Savings in operation costs, all trains Benefits B2: B1 + savings in track maintenance B3: B2 + savings in terminal and fixed costs C1: Direct investment costs C2: C1 + all contingencies and general expenses Costs C3: Cl - 50% cost of track renewal C : C2 - 50% cost of track renewal TABLE IV-3 RENFE. ACTUAL AVERAGE RUNNING SPEEDS, BY TYPE OF TRAIN 1964 1966 1967 1968 1969 1970 1971 Passener Trains Steam 48.1 50.3 49.8 48.9 48.7 46.4 46.1 Electric 52.5 56.6 57.4 58.2 60.2 61.1 61.2 Diesel 53.7 52.5 51.6 52.5 53.2 53.1 53.3 TALGO (diesel) 78.8 81.5 80.6 80.5 80.0 82.1 82.2 Freight Trains Steam 36.4 37.3 34.5 34.9 36.5 38.6 36.3 Electric 38.7 41.3 40.4 40.9 41.6 41.3 41.4 Diesel 39.2 36.7 37.2 37.3 38.4 39.0 39.1 Source: RENFE Table IV-4 RENFE: MOTIVE POWER AND ROLLING STOCK 1963 1966 1968 1970 1972 I. Motive Power Locomotives 3,741 2,726 1,857 1,712 1,398 Steam 3.173 1.857 850 642 339 Diesel 228 506 633 686 693 Electric 340 363 374 384 367 Electric Trainsets 197 236 293 287 304 Diesel Trainsets 74 353 407 565 n.a. Diesel RailcarR RA 250 356 393 373 TT Rollin Rtrk Passenger Cars 3A,A 31 xcA , c61a 2,325 19A7 Bana e and Mail Cars 2,624 1,721 1,400 1,053 820 C2Sv efrigh arsht 6e h , mobi 57 l,421 36 tn al VV9o L-rV ,uJ f V,, Uu 4 Sevc Frelb-bAt Cars 1,L .1L2 :7 1.J'V L , 7J IL V.JV .L/ CIommierciail freight cars include: flatcars, boxcars, cattlecars, tankcars, and hoppers. 2/ Service freight cars include: hoppers, mobile stations, tank and special cars. 3/ Private freight cars include: flatcars, boxcars, cattlecars, hoppers and special cars. Source: RENFE: Memorias, 1963-1972. Table I1-5 REFE - Characteristics o[ the Lines Included in the Electrification Program Segovia-Medina Avila-Medina Medina-Vta. Banos Vta. Bagos-Leon Palencia-Alar Vta. Ba'nos-Miranda Kilometers 79.1b/ 85.8!ý 78.9 134.2!' 79.G= 173. a Average Daily Trains 196,4 Freight 8 22 3.',' 31 10 25 Passengers 16 27 32 15 9 18 1968 Freight 6 24 36 28 11 24 Passengers 11 24 47 18 11 29 1971 Freight 3 31 38 29 11 28 Passengers 1:3 31 47 23 11 32 Average Net Tonnage per Freight Train (Tons) 1964 187 24d 265 280 320 232 1968 167 211 247 254 290 240 1971 187 226 260 280 363 250 Average Rumting Speed (km/h) 1964 Freight 33 33 3:3 33 35 36 Passengers 50 56 63 57 56 60 1968 Freight 40 48 48 45 48 50 Passengers 58 78 67 74 66 73 1971 FreiUh . 40 48 48 45 48 50 Passengers 58 78 67 74 66 73 a/ Double track b/ Single track Source: RENFE, "lnformacion Estadistica para Movimiento, 1964, 1968, 1971". Table I1-6: RENFE ELECTRIFICATION PROGRAM. NEW ESTIMATES OF RATES OF RETURN Alternatives in Relation to Operating Coiditions A. Operating Conditions 1 2 3 4 Average tonnage per same for both diesel 75% of same as in same as in freight train types of traction electric Alternative 1 Alternative 1 Average gross tonnage per same for both same for both types same for both types passenger train 'types of trac- of traction of traction Average running speed n Economic lifetime of 20 years for diesel equipment 30 years for electric Locomotive utilization actual average same as in same as in 30% of the traffic factor for each traction Alternative 1 Alternative 1 is carried by the equipment already available B. Rates of Return () Link Segovia-Medina 0.6 2.2 4.9 9. 1 Avila-Medina 10.9 18.9 13.3 n.a. Medina-Vta. Banos 14.9 26.4 16.9 n.a. Vta. Banos-Leon 9.5 16.1 11.7 n.a. Palencia-Alar 3.5 8.4 7.7 12.7 Vta. Banos-Miranda 9.9 15.9 12.3 n.a. All sections 9.9 16.3 12.3 n.a. V. CONCLUSIONS The appraisal report of the first project summarized the purpose oL RENfE's 1764- I 'UUernlLatioH PrOgrall, LUL WHICH LHe Daux lldUe L e three loans audited in this study, stating that it was "designed to trans- form RENFE from an antiquated enterprise operating at a large deficit and providing inadequate service into an efficient and modern railway system earning a reasonable return on its investment." If the conclusions of the study are presented in relation to that statement, we can say that the Modernization Program has largely succeeded. RENFE is now a technically efficient and modern undertaking, comparable to other European railways, although it has still to earn a reasonable return on its investments. Prog- ress on the technical and institutional items has been better and faster than on the financial. However, this general statement requires two important clarifications. First, by saying that progress has been good in the technical and institutional areas, we are not describing fully the changes that have taken place. RENFE was truly an antiquated enterprise, yet another agency in an archaic public administration, supposedly providing a "public service" but without having clear objectives and standards of efficiency. Its objective -- to operate as a commercial undertaking -- is now clear and the enterprise is beginning to enjoy the advantages of the recently acquired financial independence. Perhaps more importantly, there is a change of attitude that permeates most levels of operation. RENFE is no longer con- sidered part of the public administration, but a company that is competing with road transport. that must show a profit, and be efficient. The impact of this change of attitude is difficult to assess, but our impression is that it probably explains a considerable proportion of the imorovements that have taken place. The second clarification deals with the importance in terms of re sour ce allocatnfion oF he denla i-n aciin the In finncialq tanrgets- setf in the Plan of Action. The issue is raised by economic theory, which con- liteio thn- thpro ic nn reason whyi% aqn activ7ity- T.if- inrazic -retuirns tof- scale -- as is most probably the case of RENFE -- and charging marginal rtcs t s fr i t S -r-iA cIShou,,I As ow.. _n -f n _acil pr f t- . "kneoe , ro~- - could be interpreted as a misallocation of resources. It is possible, thenLL, th,at the delay in achiing those fL~O inanciall ojL ectie LLVd 1id not ha ve the importance given to it by the Bank. However, with the existing knowledge ab1out VT r:JE1ZE'S cost structure it is difficult LU ases clearly whether- its poor financial performance was due to the application of marginal cost prLing or to a vau LLLi policy that includes cross-suDsidization or rail- way services. Our impression is that the competitive nature of transport in Spain ensures that tariffs might be closer to marginal costs than what  is geneatlly accepteu. iue issue nas serious praccical implications, because the profit objective is an excellent test of operational effi- ciency and should not be easily abandoned, but it is likely that other objectives, for example, to maximize output subject to the constraint that the enterprise should not incur losses, are as meaningful opera- tionally and might result in a better allocation of resources. The main reason why progress in the technical and institutional areas was faster than in the financial is that efforts related to the former can be internalized better, and the influence of elements exogenous to the enterprise can be minimized. The main factor that explains the slow progress in the financial field was road competition, and RENFE had in practice little control over the evolution of road transport since 1964. The only way that RENFE could successfully compete with road transportation, which was through an aggressive commercial policy, could not be applied until the 1970s, when RENFE's commercial activities were greatly strengthened. Other, although less important factors that explain RENFE's financial evolution were the inorpqse in real waves in Snain and the Government's anti-inflationary policies, both also outside RENFE's Thp hnpir nnnrnnrh nf t-hp MnrArniVAfinn PrnarAm, of havring aqn Investment Plan and a Plan of Action which in principle were given the same pri-rity, wroved to linwo beeon -ricylits- On thisa, the Bank drves7P mosgt of the credit. The point also confirms the adequacy of present Bank rail- the Plan of Action kept appearing in the course of the study. Did the more ments in other areas? To what extent did the potential benefits of the investments maLLi.aliz UecausU LhC measures inCLUUe in LIe PlaI UL Action? In practice, the interactions were so many that it was not possible to separate the impact of one program from that of the other. It was as unrealistic to expect that the Plan of Action alone, without investments, could have achieved much progress, as it was to assume that the investments alone, without any improvement in operational efficiency, could have been of any use. What has also been important in Spain is the catalytic effect of the Program: a few of the improvements in operational efficiency have been the result of programs not included in the Plan of Action or in any of its revisions. For example, the new system for the allocation of freight cars, which "freed" thousands of wagons; the unit trains and the consequent elimination of many of the investments in marshalling yards, or the system of "planning by objectives" now being implemented. However, it seems that these interactions between inrestments and operational improvements were - 36 - not adequately analyzed during the preparation of the Modernization Program or subsequent revisions. If the effects of the operational improvements included in the Program had been studied in detail, planned investments in rolling stock and motive power could have been reduced considerably. Investment in these items was subsequently reduced, but in a less systematic way than what would have been possible with better planning. Finally, at the general level, the slowest progress took place in the measures dealing with transport coordination. Main reasons were administrative changes in the Government and the lack of interest in the subject at the political level, especially between 1965 and 1970, based on the judgment that Spain required all the transport it could get. thus making coordination unnecessary. On the basis of the very simple analysis that we have made of the subiect, it seems that no major distortion in the intermodal allocation of traffic derived from Government intervention has taken place. Regnrding the Tnustmmt= Plan, nrobably the main ranon T'h, it had a relatively high return (12%) is the inefficient "without investment" Sil-n,atan noinqta whith bnefits have been measured* RENFE's old and antiquated equipment in 1964 obviously implied that better equipment, if nen,tel nii-ilized- wonld have a reasonable return- -owever- this rpquIt has to be interpreted with care, because it is based on conditions of relative inefficiency in bo^thk then wthf1 ndel h~.t4 ct1~ iutos a point illustrated by the apparent paradox that returns will go up if tainloaAs-'~ are s aller, thus --ce-sng traffcdniy probably too much was invested in track renewal and that the high standards at which the program was iMplmne migh --".- C4 JUS_ 'k C- -A T_ L - -- --c-- the construction delays might turn out to have been economically justified. The Bank does not seem to have pressea enough for an in-depth reappraisal of track renewal during the 1966 and 1970 revisions of the Program, par- ticularly on the issue of higher track standards which were to be used largely by high-speed passenger trains. Conversely, the faster pace of the dieselization program appears to have been Justified in light or its high return. Finally, some elements were missing from the Investment Plan, particularly items designed to increase train length in some sections of the network where heavier unit trains were justified. These investments are, for example, longer sidings or wagons with better brake systems. The Plan of Action had the catalytic effect described above, but in its original version and successive revisions it was too much oriented towards financial targets and issues related to transport coordi- nation. The Bank probably spent too much of its time discussing these two subjects. More precise targets related to operational efficiency, of the type used in more recent railway loans, might have helped to speed up progress in operations. Relatively few detailed studies dealing with operational efficiency were done by consultants. Nevertheless, RENFE can show some impressive achievements in its operational efficiency. Perhaps the most important is the reduction in personnel -- one of the points included in the Plan of Action -- which is the result of several investments and administrative measures. Another improvement that has had important effects in reducing the need for uneconomic trains has been the rationalization of LCL traffic through the creation of a few collecting stations. There is still, as always, maior room for improvement, especially in the coordination of the Commercial Department with train operations, in the possibility of operating even more unit trains, and in further streamlining terminal operations. One of the improvements that is a good reflection of the changes in attitude discussed above is the new role being plaved by the Commercial Department. This Department not only is a sales organization, but is also beginning to hnvp an infltnri on "nrndiiction"_ that in train qtrvies. Operations no longer decides which trains to run and Commercial is expected to dn itp ~ hcto fnQ11 f-hp nunilnhlp c-n- h~i- tiv i-- now an eme-rgingr dialogue between the two departments which has had several positive results, fo%r exoanple, thin4-casingy imnportann o-f unit- ti-ns. Hoevr tisC dialogue has at this stage several dangers because of the slow progress in no. _-_n nwic adeua eot estimrates. t-.na- could be use ..as an basi t ,for raten fixing. For this reason, the dialogue between Commercial and Operations train operations that look dubious to the staff that has to plan operations A- C..U_ 4 4 t1oL erL~ L-ULA (1rctra ca ngeL6 ULLCL LLCC L.CMUL Jar Ji t%.f= LI Nj rVr is A InI management. Aside from the obvious effects of modern management on opera- CLAvu, eacauy U V LLLu Iu JJLCVLVUS sections, Lts real impact can ue vest summarized by the fact that RENFE "took-off" into a period of self-sustained progress. No doubt the Modernization Program triggered that progress, but by the early 1970s RENFE was already capable of pursuing and improving the Progarm .-n '4- ow.. - 38 - The reasons that explain the good results achieved by RENFE, compared to other not so successful railway prgamvr,-ist ls internal efficiency, especially in management and the technical aspects of operations.* Second, th e B ank' s approach i-n this' case - was particularly , adequate for the circumstances, largely because it was based on consult- ants 'w r (SOl~r. RNRAUL 0 rgn ralr ---I-__ - ance woLK touransaJ; uf generaly gouu quality. inira, the consultants were able to remain the several years required to see some of the measures implemented; similarly, the Bank's attention in the last 10 years has been sustained and timely. Finally, an important proportion, impossible to determine, of RENFEs success is explained by the rapid growth of the Spanish economy, which made politically and socially possible the massive program of personnel reduction, without which the potential benefits of many of the investments and of parts of the Plan of Action could not have materialized. In addition, the large increase in the total demand for transport services allowed RENFE to experience a moderate traffic growth in spite of a steadily declining share of total movements. Also, the expanding industrial base helped RENFE to acquire part of its supplies internally without noticeable reduction in quality, and without having to endure the problems faced by railways in other countries with their imports of equipment and parts. In fact, RENFE has been faced with few negative factors during the period under analysis. The most important from the viewpoint of RENFE (but probably not from the standpoint of the economy as a whole), has been road competition, which depressed RENFE's growth and had a negative impact on its financial situation. Other negative factors, such as the Government's delays in providing funds on schedule, or the anti-inflationary policies, were less important. The lack of a well-structured transport policy does not seem to have affected RENFE in any significant way. although the studies undertaken as part of the Plan of Action served to assess the relative position of each mode and probably to avoid discriminatory nnlicipn in favor of one particular mode. Finally, although the lessons derived from RENFE's experience have been discussed in the course of the andit we would like ton brieflr highlight a few points which we consider to be of particular interest. First, the Plan of Action should have put relatively more emphasis on RENFE's financial goals. The Plan of Action did contain several opera- tonal measures that provu o ve o high priority, such as the plan to rationalize less-than-carload traffic. However, more detailed targets on tmin lngth, wagon utilization and turnaround, or rationalization of yard operations, would have had a posiLive impact on RENFE's operations - 39 - Second, personnel reductions were a key factor in achieving the objectives of the Modernization Program, otherwise most of the poten- tial benefits would not have materialized. The dynamic growth of the Spanish economy was central in allowing the reductions to take place, because labor could be absorbed by other activities,but the fact that the reductions were planned and incorporated in the Program was essential in establishing the necessary discipline. Third, the financial projections included in the Modernization Program should have been based on a more in-depth study of the effects of road competition, and to a lesser extent of the effects of the Government's anti-inflationary policies. on RENFE's possibility of raising rates and fares to compensate for cost increases. The basic assumption on which th nrniention wprp bnApd that hipher exnenditures could be comnensated through increases in tariffs, proved to be unrealistic. Fourth, the low return of the track renewal program suggests th- thi c inrcfman chould have eon reoppraised in more detnil Aring the 1966 or 1970 revisions of the Program. This reappraisal would have we 1IEIW 1o mak at ' better de- -;F An about the way, 4 n T.ib 4 I t- i - V,n nT. -n program should have been continued, and about the provision of high-speed passenger trains, the- main user of the, higher tadad rk Last I., Lthe sLi~ impr vemn t ofL U .. ITINT. 'A4 s. Co - -4q 5 - -b 14 - have been given a higher priority in the Modernization Program and achieved c years arlL i IOi 0-A-U .hLuak - Lcaue wouu no -La ve a S.IJweu Ad RXDTFE oe more positively to road competition and to be more mature commercially in LLLC edi LLIL Will LUL LUW WLCI. L.1UdU Liw drata UL L W IL L UL onu LU grow rapidly in Spain. After all, its degree of competitiveness is what will UOLasi- J.L U LL rillL ILNr D i .LL CLIt .L LILDC 3J[iI ILLJIy  BENEFIT-COST ANALYSIS METHODOLOGICAL ANNEX I. Rates of Return to the Whole Program A. Benefits The overall savings as a result of the modernization plan were broken down into the following categories for purposes of analysis: - Savings in operating costs, including not only the change in the operating costs per ton-km for freight and per train-km for passengers resulting from changes in the trpe of traction, but also the benefits asso- ciated with higher speed and higher average cargo per train-1/ - Savings in trark maintenan-tc. q- vinaq in tprminnl rn-t nnd Adminiftrqtiv%e Pvnpneli- tures.2/ By summing the sources of savings, we obtained the total attri- buta-ble to the moderniZa-Cion plan for each year. Tt.o- methods were used to estimate that total: first, we estimated, in detail, each source of I0M -_L 6 - - we h o trLL al.4t n.AL 0iL p.,e.r a tILng6 -c 0 t, G jt.t 2 ak- I -- 5 cargo per train, etc.; secondly, we calculated an aggregate estimate of period 1964/71, in constant pesetas of 1971, with the expenditure for each Detailed Analysis J. Savings in Operating Costs The major savings in relation to freight traffic, savings per ton-km, resulted from two main factors: a) changes in the relative importance of the different types of traction. b) increases in average cargo per train and in speed for each type of traction. 1/ Attributing all of the increase in average cargo and speed to the invest- ment program would clearly have overestimated its benefits, because those changes were attributable, to some extent, to an overall increase in efficiency that would have taken place anyway. 2/ These are other items for which inclusion would have led to an over- estimation of benefits because these savings were mainly the result of Reneral administrative AnA - ar n t ht - - have taken place anyway. - 2 - The combined effect of both factors induced reductions in the average costs per ton-km in 1968 and 1971 as compared with 1964. Costs per ton-km were estimated on the basis of the actual technical conditions of opera- tion for the different types of traction as shown in Table 1 below: Table I Toehnical Onrating Conditions by Tyne of Traction Tyne of Traction Year Steam Diesel Electric Average net cargo 1964 171 228 226 per train (1tons) 1968 186A 191 21) 1971 170 218 248 Average running 1964 36 39 39 speed k/LL) 1 3o90 37 41 1971 39 39 41 -... --~ -I 1/ . Tne operating cost of ecn Lype of tractiOn,- esLimates on the basis of these technical characteristics, in conjunction with a weighting by relative importance for each type of traction and transport service, led to the calculation of savings shown in Table 2, as against 1964 operating costs. Table 2 Savings in Operating Costs (Millions Ptas. 1971) Other Year Freight Passengers Services Total 1965 165 150 124 439 1966 504 585 426 1,515 1967 935 613 606 2,154 1968 1,268 1,250 986 3,504 1969 1,539 1,480 1,026 4,045 1970 2,009 1,650 1,081 4,740 1971 2,025 1,808 1,106 4,939 1972 2,122 1,897 1.174 5.193 1/ Including expenditure, net of taxes, on fuel, oil, crew and equipment maintenance. 2. Savings in Track Maintenance Costs Forv fvmnl mnintpnnnra tho Pcimntpg dprivpd in thp qprinrn n~f the text on track renewal (Table 16, Page 17). 3. Savings in Terminal Costs and Other Fixed Expenditures This item comprised general administrative expenses and the expenses Lor statious anu train organization. Ine mULOU UseU was to coM- pare the 1968 and 1971 expenditures for these items with those of 1964 (after adjustments for salary increases, in order to convert to 1971 pesetas). We then considered as a benefit the total difference between expenditure amounts for those years and for 1964. The estimated savings for 1968 and 1971 amounted to Ptas. 673 million and Ptas. 2,582 million, respectively. 4. Total Benefits The total benefits are summarized in Table 3. Table 3 Total Benefits of the Program (Millions Ptas. 1971) Item 1965 1966 1967 1968 1969 1970 1971 1972 Savings in operating costs 439 1,515 2,154 3,504 4,045 4,740 4,939 5,193 Savings in track maintenance 44.0 84.0 115.2 140.1 161.1 198.8 253.1 301.8 Savings in fixed costs 98 289 480 673 1,312 1,948 2,582 2,582 TOTAL SAVINGS 581.0 1,888.4 2,749.2 4,317.1 5,518.1 6.886.8 7.774.1 8.076.8 Aggregate Analysis For this estimate, analysis was concentrated on projecting, for the 1964/72 neriod- the most imnnrtnnt Prnnditiire 1mei (personel and fuel which accounted for 75% of total expenditures). The projection was haed n th1 trInd nf the bast4 o ex-i t"to n these itn, 4in the period 1956/63. It represented the basic "without"' situation, indicating the possible evolution of costs if the organizational structure of the 19530/ 0-3 perioU uau veen maintaieU. Le vuneits for each year in the period 1964/72 were the difference between projected and actual costs, as shown on Table 4. Tne rirst step in calculating the projections consisted in converting all the actual costs to 1971 prices. For that purpose, we derived two main sets of deflators: (1) for personnel the deflator used was an index of average expenditure per worker with base 1971 = 100; and (2) for fuel we used an index of the price of coal, fuel oil, gas-oil and electricity with base 1971 = 100 for each type. Table 4 Aggregated Estimates of Total Savings (Millions 1971 pesetas) Years Personnel Fuel Actual Projected Actual ?rojected Total Benefits 1956 24,958 6,990 1957 23,314 6,244 1958 23,224 6,664 1959 23,061 6,260 1960 23,321 5,668 1961 22,897 6,058 1962 23,103 5,250 1963 21,695 4,944 1964 21,580 21,877 4,595 4,847 549 1965 20,645 21.585 4.646 4.589 997 1966 20,161 21,292 3,942 4,331 1,520 1967 19,577 20.999 2.991 4.078 2.509 1968 18,434 20,706 2,432 3,815 3,655 1969 16 ,34 ?0 13 070 3 557 5 555 1970 15,415 20,120 1,926 3,299 6,078 1971 14,690 19, 997 1,991 3,016 6,332 B. Estimate of the Ex-post Rate of Return The rates of return were estimated using the following hypotheses in relato toU LUenefLitsL aun costs: Benefits B1: savings in operating costs, all trains 20 1 1 Sa 3ng --- track maintenance P.^ -4- Raving's in tprminal and fi-zpt rngta Costs-=' Cl: Investment costs r2 f, -L co-t gntsa..8L~ C-: C1 - 50% of the cost of track renewal j. -.L - -- - - - C4: C2 - 50% of the cost of track renewal Aggregate Analysis The benefits used were those shown in Table 4; with reference to costs, the same hypotheses were used as for the detailed analysis. II. Dieselization At the end of 1963, RENFE had a total of 228 diesel locomotives of the following types: 41 line locomotives, 183 shunting locomotives and 4 talgo locomotives. The relative share for diesel traction out of total train-kms had been growing, as can be observed in the following table.but the substantial increases took place after 1964. Table 5 Relative ImDortance of Diesel Traction to Total Train-km (%) 1961 13.5 1962 14.6 1963 17.5 1964 2M0 1967 40.0 1972 56.2 1/ The reduction of the costs by 50% of the expenditure in track renewal under alternatives C3 and C4 was made to account for the improvements in standards that led to important cost increases. - 6 - The majority of diesel line locomotives in existence in 1963 were concentrated in the Northwest nart of the cotintrv (5947- and in the qouth CAROM where they were used for transporting minerals. Ex-post Benefits of Dieselization Analysis of the social benefits associated with the replacement ~~~~~~~~~F ~ ~ ~ ~ ~ ~ ~ I fFon h,A nel r ,n4 n r e .Arnrn I rn e n. 1 N T7n -P,n+ established the average social cost savings per ton-km for freight and train-km selected so as to combine lines with high and low traffic densities and with varilaliC ucgcc s Lu ange in average cargo anu sencu iaic U main characteristics of the lines involved. In 1971, they accounted for 43% U L LfrilL LIgditAinI ULLD UeUsp ing LU ULC LLLatUi, 42/o UK Le net ton-km transported by diesel trains and 26% of the total passenger train-km currempuniuiug LU uLtaCb Lia . ~L); We then applieu Lne Ctimateu sUcial cost savings, as derived in (1), to the actual traffic diverted each year from steam LO Uiesel LLcLLUi. The years for which we attempted to measure such benefits were 1968 and 1971 and in all cases our basic "with" situation was based on the actual traffic flows for those years. By comparing the total social costs of that traffic hauled by diesel or steam traction we have probably overestimated the corresponding benefits. (1) Average Social Cost Savings The cost savings per ton-km on any particular line depended upon the changes in average speed and average cargo per train brought about by the use of diesel traction, and were expressed as: Savings/ton-km = A CTRKMS - CTRKMD (1) AV CS L o where AVCS is the average cargo per steam train, and CTRKMS and CTRKMD are the cost per train-km corresponding to steam and diesel traction, including fuel and oil, crew, and locomotive and car maintenance, all of which were clearly a function of speed. Finally "j)" is the average cargo of diesel trains as a proportion of that corresponding to steam trains. The data on average speed and average cargo indicated a general improvement, when comparing 1971 with 1964, but dieselization was not the only change in the system between these years. There were also important investments in other items such as new freight cars, track renewal, etc., which may also have had an effect on average cargo. By comDaring these in- dicators for steam traction in 1964 with those corresponding to diesel traction in 19R nnd 1971 we have at-tribited all imnrovements to die.qlivation and thereby overestimated the benefits of this program. Table 6 CHARACTERISTICS OF THE LINES SELECTED FOR THE ANALYSIS OF THE BENEFITS OF DIESELIZATION Daily Average Cargo/Train Average Speed Average Speed Distance Net ton-km Daily Freight Freight Train Passenger Passenger Tons _ _ Freight Trains Pass. -Trains km 1971(l-3 Trains 1971 km 1971 Trains 1971 Train-km 1964 1971 1964 1971 1964 1971 Valencia - Tortosa 193 140,890 13 915,785 26 1,831,570 170 180 36 38 47 48 La Encina - Valencia 113 123,735 15 618,675 36 1,484,820 175 250 32 36 50 50 Linares - Almeria 242 264,990 15 1,324,950 9 794,970 117 200 23 25 38 40 Calatayud - Casetas 83 90,885 11 333,245 21 636,195 200 272 37 48 58 68 Alcazar - Albacete 131 239,075 17 812,855 17 812,855 253 280 46 46 62 62 Aranjuez - Valencia 353 51,538 3 386,535 14 1,803,830 100 130 26 31 44 48 Miranda - Zaragoza 224 327,040 16 1,308,160 18 1,471,680 230 250 35 48 52 63 Zaragoza - Valencia 344 200,896 8 1,004,480 7 878,920 170 200 30 38 42 42 Madrid - Baides 123 134,685 12 538,740 34 1,526,430 154 250 40 48 58 68 Baides - Calatayud 122 133,590 11 489,830 17 757,010 164 270 35 48 54 60 TOTAL 128 1,707,324 ,733255 112998328 -8- The definitionsof the "with" and "without" situations used for purposes of IsolatIng-----------------------------an cag er--folw. With Situation: diesel traction with the actual operating efficiency (speed and average cargo) corresponding to the year under analysis. Without Situation: Alternatives Basic assumptions on operatingj Assumptions with respect to efficiency. the benefits when compared Ito the "with" situation. Alternative 1. Steam with the average cargo We attributed the total in- and speed of 1964. crease in speed and average cargo to dieselization, setting an upper limit to the benefits. Alternative 2. Steam with the speed and This set a lower limit to the average cargo of diesel. benefits of dieselization by assuming that the total in- crease in speed and average cargo was due to other factors. Alternative 3. Steam with the average cargo We assumed that the increase of 1964, but the speed of in speed was the result of diesel. other investments, track Irenewal, etc. Alternative 4. Steam with the speed of 1964, We assumed that the increase in but the average cargo of average cargo was independent diesel, of dieselization and would have taken place in any case due to an overall increase rin efficiency. For each year we calculated four different estimates of the savings nPr tn-km on eanh link- Vinallv_ by combining these esimates for tho 10 links we obtained an average social savings per ton-km for each year. The SCnln anirinerc no-r t-n-en, fn-r 1 QAR qnel 1 071, r.1i-n4 ncA hkiv rn-r inl- chrost per ton-km of diesel traction with that corresponding to each of the four basic~~W assumedt thatton thee increaselow renewal etc. ',,4-hn,a-average cargonrwas-.independent DIeselization: Average Social Savings Per Ton-km Savings (Ptastlton-lak) "Without" Situation 1971 1968 Alternative 1 0.293 0.257 Alternative 2 0.165 0.174 Alternative 3 0.286 0.253 Alternative 4 0.171 0.180 Def-iCts unLC A er A I ternatve .T, the~ upper li.tL, wer re A--A o I'll. /.41/a in 1968 and 1971, respectively, in terms of Alternative 2, the lower limit. Average cargo per train was more important than speed in deter- mining Le Level o1tne savings.LL jL ciampc, Tne vuIy ntin vw Alternatives 1 and 3 was speed; it led to a reduction in savings of only 2.3% while a change in the average cargo (Alternatives 1 and 4) uuinished them by 41.6%. Similar results were found for 1971. In relation to passenger trains, we have estimated the savings per train-km as a result of the s bstitution of steam traction Dy diesel for each of the links under analysis.l. The basic "with" situation corresponded to diesel traction with the actual diesel speed for the year under analysis while for the "without" situation we assumed steam traction with the speed of steam in 1964. The savings per train-km turned out to be Ptas.45.11.1/ (2) Social Savings Applied to Actual Traffic Diverted from Steam to Diesel In order to arrive at total savings in any particular year, it was necessary to establish what proportion of the ton-km transported in that year by diesel traction would have been transported by steam if the investment had not been made. The actual ton-km relating to diesel traction in 1964 for freight and the actual passenger train-km for passengers, were the base for our estimate of the traffic diverted each year from steam traction. As an approximation we assumed that the total increase in ton-km of diesel traction since 1964 would have been transported by steam. A similar assumption was made in relation to passenger train-km. The following table shows the esti- mated diversion of traffic from steam to diesel traction for each year. Table 8 Traffic Diverted from Steam to Diesel Traction Net ton-km, freight trains Pass. train-km Year (millions) (thousands) 1965 204 3,900 1966 625 12,116 1967 1.418 18.463 1968 1,945 21,874 1QAQ 21690 26-364 1970 3,467 29,071 1971 I _09 29-206 1972 3,981 29,335 1/ We took as given the number of yearly trains for each link; the benefits were simply the diferen-e between tne COSt uI ru nning [nese trains witLL steam and with diesel traction. 2/ It should be noted that to the extent that part of the increase in passenger-km could be attributed to improving the service (more comfort. faster trains, etc.), we have underestimated the total benefits by com- puting only the savings in train oDeratina costs. - 10o Combining the information of the preceding table with our savings per ton-km and passenger train-km for the different alternatives we obtained the following streams of benefits (103 Pesetas): Freight 1965 1966 1967 1968 1969 1970 1971 1972 Alternative 1 52,428 160,626 364,426 499,865 650,980 974,227 1,028,137 1,166,430 Alternative 2 35,496 108,750 246,732 338,430 406,560 592,857 578,985 656,865 Alternative 3 51,612 158,125 358,754 492,085 642,120 953,425 1,003,574 1,138,566 Alternative 4 36,720 112,500 255,240 350,100 428,340 603,258 600,039 680,751 Passenger 175,929 546,552 832,865 986,736 1,189,820 1,311,392 1,317,482 1,323,301 Finally, the investment in diesel motive power, excluding shunting lnrnmotivps- is shown in Table 9. Table 9 Tnvestments in Wesel MnHire Panpr (Ptas.million) 1964 943.80 1QA 1,199.0 1966 2,076.80 1967 1 530 A 1968 1,089.00 1969 1,102.20 1970 722.00 1971 AQ 1972 687.20 In relation to the rate of growth of the benefits after 1972, we assumed the following: DCHCLLL LUUI daLe Of GrOWth Freight traffic The same as ton-Km in 1964-72 Passenger traffic The same as passenger train-km in 1964-72 - 11 - The corresponding rates of return are shown in the table below. (To each alternative for freight traffic, benefits were added for passenger traffic for calculation of the rate of return.) Ex-post Rates of Return to Diesel Useful Life Alternative 20 years 15 years 1 27.7 27.2 2 23.2 22.5 3 27.5 27.0 4 23.5 22.7 III. ELECTRIFICATION The lines included for electrification in the Modernization Plan were thosp connecting Madrid with T.on and Miranda in quch a way aq to int-p- grate the electrified section in the northern part of the country with Madrid and C!erdnhn and aira nhnwn hpln% Tnhle 10 PlAannpa IQAZL Atyornacp Taily T-rnffin Construction Freight Passengers Description IV~.4. M* +- 'K.T' +- Medina-Vta. Banos 78.9A/ 1964/66 9,000 34 32 Vt.-. BOnsiaA 1-7, nia/ 1o09-7L70 grnn 1)rIQ Vta. Banos-Leon 134.2-a 1964/66 8,900 31 15 n 1I ' Al - -70 nb/ ior1. 14r lnn in n x ial.ncia ZILar I1 %j- Um -WJ ..,.. L Segovia-Medina 79.1-Y 1964/66 1,500 8 16 b/ Single track Freight traffic on those lines accounted for 18.5% of total net ton-km transported in 1964, while their length as a portion of the total net- work was only 4.6%. It is clear, then, that their traffic density was well above the average for the whole network. A. Ex-post Benefits We measured the social benefits of electrification as the difference between the social costs of providing the transport service with diesel and electric traction. Estimates were based on the actual traffic flows for 1968 - 12 - and 1971, interpolating for the interim and projecting for the following xyars. The haMic annimnin-nn in thAt dPAlig'At-inn nf thpa 14nac W.uld have taken place anyway. Since the service provided by both types of trac'-4_L -------- ~.iu'1~t we conside-red the obse?red traffic, flows as given, that is to say, independent of whether the electrification had taken place or not. The tech.lnical characte-risic a-fn the trlai-n opeatio~'ns (average cargo, speed, etc.) were the actuals for 1968 and 1971 and the following was assumedu ini rltion±U Lo tIe operatLing conditionsL fUr dieslbL anU electric traction: Alternatives iunRe"at..0on tO OpVrating1 CU-nuitious Operating Conditions 1 2 3 4 Average tonnage per same for diesel 75% same as in same as in freight train both types of electric Alternative 1 Alternative 1 of traction Average gross tonnage same for both same for both same for both per passenger train types or trac- types or trac- Lypes Of traction tion tion Average running speed " " " Economic lifetime 20 years for of equipment diesel 30 years for electric Locomotive utiliza- actual same as in same as in 30% of the traffic tion factor average Alternative 1 Alternative 1 is carried by the for each equipment already traction available The following table summarizes the main indicators of actual train operations on the lines under analysis: TABLE 12: Main Characteristics of the Lines Included for Electrification Average Net Cargo Average Dailsrafic (nio. of trains) _ r pe Feight Train Average Running Speed h 1964 1968 1971 (Tons) 1964 1968 1971 Feght Pass. Freight Pass. Freight Pass. 1964 1968 1971 Freight Pass. Freight Pass. Freight Pass. Segovia - Medina 8 16 6 11 3 13 187 167 187 33 50 40 58 40 58 Avila - Medina 22 27 24 24 31 31 240 211 226 33 56 48 78 48 78 Medina - Vta. Barios 34 32 36 47 38 47 265 247 260 33 63 48 67 48 67 Vta. BaRos - Leon 31 15 28 18 29 23 280 254 280 33 57 45 74 45 74 Palencia - Alar 10 9 11 11 11 11 320 290 363 35 56 48 66 48 66 Vta. BaKos - Miranda 25 18 24 29 28 32 232 240 250 36 60 50 73 50 73 Source: RENFE, "'Infornacion Estadistica para Movimiento, 1964, 1968, 1971." - 14 - The social savings in operating costs of electric, as compared to diesel traction, were measured as the-difference between the following cost iu (net of taxes) for each type of traction: fuel and oil, crew and locomotive maintenance.1/ The main source of benefits was fuel consumption, a result of the important price differential between both sources of energy (electricity and gas-oil)2/ leading to a much higher fuel expenditure per km for diesel than for electric locomotives. The following table shows the composition of savings for a typical link, Venta de Banos-Leon: Fuel and oil* 58.0% Locomotive maintenance 36.9% * including the tax on gas-oil The tax on fuel-oil played an important role in fuel savings. When taken out, the S-navng on n th1is4 #-em,v,e n,-n was ~ 'k *'# I;rl'l ~LL- 'tL L I - " - "Y - -/o A n i n ter eSt i ng factor tonot was thatf then magnitudea of savings per ton-km on the different links depended heavily on the operating efficiency of each (defned nnn tem of the average c.argo per train)N. An invrs-- lation between the magnitude of the savings and the operating efficiency was LULL u L- ft LLVe 6IIC e a ICCveriag cargo per trF ia tin, Lh sI maller.3 C L-I CaVt U60 *.3 is simple to show the validity of this proposition; the savings/ton-km of a given iLn II can be jJ exprsse as LIe raio betU ween- and per km x distance, and, 2. ton-km to be transported per unit of time, where the number of trains is the ratio between total tons and average cargo per train (AC). The savings per ton-km can then De expressed as the ratIO Detween the savings per train-km and the average cargo. The main factor explaining the differences in the savings per ton-km among the ditterent links was, theretore, the average cargo per train. Comparison of the savings per ton-km for each link with the average cargo per freight train, as seen in the following table, shows clearly that the greater savings corre- sponded to the more inefficient links. 1/ We did not include the savings in car maintenance nor car depreciation as we assumed the same average speed for both types of traction, thus cancelling out those savings. 2/ The prices for 1971 were: electricity, 0.5 Pesetas/kwh and gas-oil 7 Pesetas/liter. - 1 - Table 13 Electrification Program: Estimated Cost Savings per ton-km (Ptas) 1968 1971 Without With Without With Link Tax Tax Tax Tax Segovia-Medina 0.126 0.190 0.105 0.158 Avila-Medina 0.129 0.187 0.087 0.127 Medina-Vta. Banos 0.080 0.117 0.084 0.123 Vta. Baffos-Leon 0.078 0.115 0.072 0.106 Palencia-Alar 0.067 0.098 0.048 0.073 Vta. BanoszMiranda 0.078 0.113 0.075 0.108 The savings per ton-km in 1971 (without taxes) varied between Ptas. 0.048 and Ptas. 0.105. The difference in savings amone the links reflected not only their different physical conditions, but also the fact that the operating efficiencies of the rail links were different, as can be observed in Table 12. A similar situation was observed when we compared for each given link the savines ner ton-km corrAnnondIna tn 196.- The nverall in- crease in efficiency in RENFE led to an increase in the average cargo per train betwen 191R and 1971 and an a Annnaniianea he navinon ndr tnn-km went down. Another important factor was the high sensitivity of the savings tn tha alinAtinn nf tho tnr t%n fiial Ihr ann>a i-A.*^ n t-^*at amr4nna wnc to he l44na-ln ~I- I- o ful.The mducior ir t-1 savings w-s roughly 30%, when the gas-oil tax was deleted, as can be observed in Table 13. B. Ex-post Returns to Electrification The following table smarizes the information used for the esti- mateon af the .-post returns t the elecrfian in the basic case, Alternative 1. - 16 - Table 14 Social Benefits and Costs of Electrification Program: Alternative 1 Total Social Total Invest- Benefits Annual Electrifi- ment Cost Date of (Pass. + Freight) catio maintenance (103 Ptas_.) CoMletion (103 Ptas.)a/ CostLb (103 Ptas.) 1968 1971 Segovia-Medina 136,794 1966 8,061 6,670 5,403 Avila-Medina 255,152 1966 27,853 28,457 11,721 Medina-Vta. Ban-os 234,632 1966 34,152 35,419 10,779 Vta. Baios-Leon 398,489 1965 35,547 39,016 18,307 Palencia-Alar 117,465 1965 9,123 8,461 5,396 Vta. Babos-Miranda 514,467 1968 45,427 52,299 23,635 a! The benefits are estimated net of taxes and subsidies. b/ As there were no figures available with regard to the maintenance cost of the electrified lines under analysis, we had to use an average expenditure per km derived from the total expenditure on this item and the length of the electri- fied network. The annual maintenance expenditure, was Ptas. 68,310. Total benefits were estimated on the basis of the actual runs for commercial trains on the lines under analysis: there were also other runs -- service trains, locomotives alone, etc. In order to get the total benefits, we had to increase the commPrein1 train-km by the rAt-in tntal trains-km:commercial train-kms, for electric locomotives.17 The following table shows the estimated rates of return under the different hvnothene2 p_/ Table 15 Ex-post Rates of Return to Electrification IM Alternatives ates tf Rtnrn 1 2 3 4 Link Segovia-ed n 0. __ 4-9 9._1 Avila-Medina 10.9 18.9 13.3 n.a. LCX.LLLC - V c e 26.4 4.-r 16 n.a. Vta. BadKos-Leon 9.5 16.1 11.7 n.a. 7.7) 12.7 r n ci-l.-La C:. Q. RA 7 7 1 Vta. Bafios-Miranda 9.9 15.9 12.3 n.a. All sections 7.7 LU.3 * "*** 1/ This ratio was about 1.30 in 1971 2/ _I all ^aaaa t-h ho,nafita n-r at nf tAvao nnd Riihnl idipR - 17 - IV. Track Renewal A. Benefits The main sources of benefits in relation to track renewal were: a) a decrease in track maintenance and its costs b) higher speeds c) reduction in accidents d) lower cost of maintenance for locomotives and units of rolling stock Lower Track Maintenance Costs The new track was responsible for a reduction in maintenance cost per km, not only-because it was of improved quality, but also beause. maintenance had been mechanized. RENFE estimated an average cost per km of maintenace o Ut. 110,000 for new track; whereas, the average cost of maintenance for old track was Ptas. 181,000, 64.5% higher. The savings in maintunce costs were estimated at about Ptas. 71,000/km, and the annual savings are shown in the following table. Table 16 Savu ngsin Track nPaILtenaAce osts (Ptas. m1n.) 1964..... 44.0 ' "'r, 01 1Yo7... .....04. 4 1966.....115.2 1968.....161.1 1970.....253.1 J9i...uL.o Higher Speed One of the most important direct benefits made possible by invest- ment in track renewal was the increase in speed. This in turn led to better utilization of both personnel and equipment. Table 17 shows the changes in average commercial speeds during the period from 1964 to 1971. - 18 - Table 17 Increases in Average Commercial Sveeds Period Papseneers Freiaht 10QA/#A 10.5 17 40 TORI/71 7 57 TR 1I The main reasons for the changes in average commercial speeds seem ou nave uen Luhe cuange i t - Lpe u LLLat;.LUIL kLtLacZUmHnL Or steam traction) and reduction of intermediate stops. This general conclusion nas been derived from the fact that the actual average running speed or the different types of trains did not change substantially, as can be seen in Table 108, and these changes were much lower than the changes in commercial speed. As the latter may have reflected the effect of changes other than track renewal (suppre-on uf intermediate stops, suppression of trains with low speeds, etc.), we based our measure of the benefits as a result of track renewal on the changes in the actual running speed. By attributing all the changes in actual running speed.to track renewal, we overestimated the actual change and the benefits from this investment mainly because other factors such as new rolling stock, new motive power, etc., may also have had an effect on the running speed of each type of train. The following table shows the changes in the actual running speed for each type of traction: Table 18 Increases in Actual Running Speeds Type of Train 1964/68 1964/71 Passenger Trains Steam Diesel Electric 10.8% 16.5% TAT.CO 211 A 'A 7 Elrpchtr Tr5in.9 Steam Electric 5.6% 6.9% - 19 - The impact of savings realized from the higher speeds was re- flected in the reduction of the number of locomotives and rolling stock needed to carry the same volume of traffic prior to the increase in speed, and a reduction in the crew expenditure per km as a result of the higher average number of km that each crew was able to travel.-/ Table 19 shows the average savings per train-km associated with the higher speeds (Table 17), as we compared the train operating costs for 1968 and 1971 with those corresponding to 1964. Table 19 Average Savings per Train-km as a Consequence of the Increase in Speed (Ptas/train-km) Type of Train 1968 1971 Passenger Electric 2.65 4.05 TALGO 0.71 1.46 Freight Electric 1.37 1.71 Combining these savings per train-km with the actual train-km for 1968 and 1971. we obtained the following total savings aR a rARiI nf thp higher speeds: Table 20 Savings in Train Operating Costs 1968, 1971 (m&l1{nR Ptal 'FrPn~r ri aht- To%taln 196R R~32.2 0 6 1971 141.509 34.102 175.611 Reduction in Accidents The data available indicated a substantial decrease in accidents, but once again, not wholly attributable to track renewal. The new rolling 1/ By ignoring the changes in fuel consumption and equipment maintenance, and their probable higher costs, we overestimated the benefits from higher speeds. - 20 - s"cI't use or passnge,r triaffi4-ci alo playe ra n 4- --.-+- - ,1- 4 -l. process./&. The number of passengers injured per each 10 passenger-km was redUuced' fro--1----r--CeO- .1 1- . -- - -- 1Ir,.I/C3L -r - I1U L * ,LJ LLL LAIC IJ:LUU LI-J-+IUJ LU LU. U LnI LLIe_ following period (1964/73). Table 21 Evolution of the Number of Passenger injuri-es per 1O9 --ssn--k-- 1958 29.2 1962 21.0 1964 20.9 1965 34.3 1966 22.2 1967 20.6 1968 23.7 1969 10.0 1970 6.1 1971 4.1 1972 7.6 We did not attempt to estimate the benefits accruing from accident reductions, so that total benefits from track renewal were underestimated in this respect. B. Ex-post Rate of Return to Track Renewal The total benefits from track renewal were measured by summing benefits resulting from higher speeds and reductions in the cost of maintenance. Table 22 shows total benefits and costs for track renewal: The rate of return to track renewal, assuming a useful life of 40 years, and a growth rate of 3% per annum for the benefits accruing from higher speeds after 1971,2/ was 1%. As an alternative, we took into account the fact that part of the investment in track renewal was absolutely necessary in order to guarantee a minimum degree of safety in train operations, by considering only the upgrading of standards, allowing for the running of faster passenger trains and representing 50% of the total investment in track renewal. The estimated rate of return in this case is about 6%. 1/ The renlacement of wnndpn na.qPnoPr Par.q by metn on-s was a major factor in reducing casualties. 2/ 3% was the average growth rate for total train-km in the period 1964/72. Table 22 Track Renewal: Total Benefits and Costs (Ptas million) 1964 1965 1966 1967 1968 1959 1970 1971 Total Investment 76516 1,211.8 1,483.2 1,496.0 1,964.0 2,457.9 3,542.5 3,888.0 Benefits from Higher Speeds1/ 28.4 54.3 74.9 89.3 106.1 115.9 149.3 175.6 Benefits from Savings in Maintenance Costs 44.0 84.4 115.2 140.1 161.1 198.8 253.1 301.8 Total Benefits 72.4 138.7 190.1 229.4 267.2 314.7 402.4 477.4 1/ The figures for all years,except 1968 and 1971, have been interpolated in proportion to the km of track renewed each year.  ASTURIAS er usel BASQUE PROVINCES LACORUA S J de Neo NTANDE R As ids Ggon -- aComocha- OVI E SJló nure 3 edy El Etrego SEBASTIAN F R A N C E LUGO TreDje 0 B-rrel Cd Dosonte B;LBAO llo rono del 8MIR ANDA r la'1 Ponferrada LEOL D TORIA PAMPLONA I.-. MONFORT E LRnfro .. ORENSE dOBURGOS Tour Cerbere :B UR)G EISorg P o lb lo d e S L-OGROÑO.. S.nebr, Bostro Abodesas V.tenca PALENCIA Vento de stej HUESCA MA SA GERONA VALLADOLIO SORIA n A ZAMORA ZARAGO2A LERISA NTANAREMor EARCELONA Lo Fregenedo' SALAMANCA S U TARONA Pers de IvcRrRdACaOneA AILTots Fe de Ororø GUADALAJARA TERUEL MADRI[ Polazelo CUENCA CA STE LLOIN rno de C: TOLEDO Liria ' ento Arroyo CACERES Qdentona de l, O CoboFiaf V\ e, Z R LCAZAR 'El Grco l.-ncde A A'lucc.Tme%llr CIUDAD REAL M nrALBACETE jdt, 'BADAJO2 A L. Encine Gandi ChanchloA Jerá de los c Z,fro ALCANT Los Sn IRdos Cvc~ MURCI C deerr CCMOBA BAEZA T MIn, AulSDouble Track M ere,,0 511 1S e ngle Treck B oooleAN o,AA ALMERIA CAD s * To be Electrified 1971-1973 ANDALUCiA 0 50 100 150 KMS APRIL l171 ¯BRO-1334R2