IRCTC to step up production of packaged drinking water

The Indian Railway subsidiary sells its drinking water under ‘Rail Neer’ brand

With the ministry of railways making it mandatory to sell the packaged drinking water at railway stations under the "Rail Neer" brand, the Indian Railway Catering and Tourism Corporation (IRCTC) has drawn up an ambitious plan to increase production. It is setting up ten additional Rail Neer plants across the country.

IRCTC has entered into an agreement with NTPC Limited (NTPC) to develop a Rail Neer plant at Simhadri (Vishakhapatnam). Under this agreement, NTPC will supply raw water which will be converted from waste sea water through a multi-effect desalination system utilising wasteful hot flue gases.

IRCTC, a subsidiary of Indian Railways, first started producing packaged drinking water in 2003 at Nangloi in Delhi. To increase its presence in the packaged drinking water market at railways stations, and to meet the growing demand, the company is setting up new Rail Neer plants at Sankrail, Jagi Road, Nagpur, Bhusawal, Jabalpur, and Una. In the second phase, it plans to set up plants at Vijaywada, Ranchi, Vishakhapatnam, and Bhubaneshwar.

"We have also installed 1,950 water vending machines (WVMs) at 600 railway stations to provide purified, chilled and potable drinking water to railway passengers at an affordable price," IRCTC said in its draft prospectus.

Currently, IRCTC operates ten plants. These plants are located at Nangloi, Danapur, Palur, Ambernath, Amethi, Parassala, Bilaspur, Hapur, Ahmedabad and Bhopal with an installed production capacity of approximately 1.09 million litres per day, which caters to about 45% of the current demand of packaged drinking water at railway premises and on trains.

The packaged drinking water business revenues stood at Rs 176 crore in FY19 compared to Rs 169 crore in FY18. The total revenues of the company stood at Rs 1,89 crore in FY19 compared to Rs 1,520 crore in FY18.

Currently, Rail Neer is distributed at only a few Railway establishments in India due to constraints in capacity. Going forward, with a significant step up in investments across the country in drinking water facilities through PPP model and semi-PPP model, Rail Neer availability will be increased to majority of Railway establishments in the country, IRCTC said.

According to CRISIL report, the packaged drinking water market is expected to grow, with increasing health awareness and unavailability of clean drinking water. Domestic tourism (Indians travelling to destinations within India) and inbound tourism (foreign nationals travelling to destinations in India) has seen a strong growth between 2013 and 2018, as indicated by the estimated growth of domestic tourist visits (DTVs) and foreign tourist arrivals (FTAs) at 9-10% CAGR and 8-9% CAGR respectively.

As of fiscal 2019, the share of organised segment in the packaged drinking water market is 60-65% whereas the share of unorganised segment in the market is 35-40%. Sustained growth in domestic and inbound tourism coupled with preference for packaged drinking water over tap water is expected to be a major driver for bottled water demand in India.

The packaged drinking water market is expected to further grow by 16-17% CAGR and reach ₹ 18,000 crore in fiscal 2024. “With the current mismatch in supply and demand, we have a significant opportunity to grow our business operation by making Rail Neer more accessible to general public at railway stations and on trains,” IRCTC said.