The Asian Development Bank (ADB) has approved a EUR 42.8 million loan to Azerbaijan Railways (ADY) which will be used to support the digitalisation of railway system.
ADB’s financial assistance will primarily focus on modernising key operations within ADY, including cargo operations upgrade, asset management, maintenance and repair processes, and investment planning. The digitalisation project also spans measures to significantly enhance client access to essential information, including shipment pricing, tax calculations and other essential data.
The project will also bolster corporate functions like budgeting and contract management, thereby improving the overall client experience. Within this framework, Azerbaijan Railways has developed multiple projects to design systems for effective cargo-commercial operations, movement control, maintenance management, and cybersecurity.
Considering Azerbaijan’s strategic locations at the crossroads of Asia and Europe, rapid digitalisation of railway system is critical to enhancing operational efficiency, improving competitiveness, and fully leveraging the country’s role in regional transit corridors.
“The company is gearing up to launch several key projects. These include the locomotive crew management system, the freight commercial operations management system, and the freight transport management system. These projects underscore ADY’s commitment to digital transformation and its readiness to embrace the future of railway operations,” the Chairman of ADY, Rovshan Rustamov, said.
Modernising ADY’s transport management system is expected to increase freight turnover and the total volume transported, and a digitalized sales and customer experience platform is expected to increase tariffs. These improvements are expected to increase ADY’s revenues by USD 97 million from 2025 to 2034. Moreover, the increased efficiency from the new IT infrastructure is also expected to yield savings of USD 72 million in operating costs.
The total investment cost of the project is estimated at USD 60.5 million, including hardware, software, consultancies, project management, taxes, contingencies, and financial charges. The government has also contributed USD 8.4 million to the project even before it started. However, for this financial analysis, finance charges of $3.4 million and the prior government contribution were considered sunk costs and have been excluded, and thus the total cost will be USD 57.1 million.
Over the last two years, ADY has been actively implementing measures for the digitalisation of railway to optimise and accelerate cargo operations, establish a centralised control management system with neighbouring countries, modernise old infrastructure, and establish an eco-friendly railway grid.
The company aims to throw more weight behind efforts for strengthening multimodal connectivity along international transit routes, namely the International North-South Transport Route and Middle Corridor, respectively linking India with Europe, and China with Europe.
The performance of the Middle Corridor and ADY’s transit transport require advanced coordination and communication between the corridor countries. The digitalisation programme will be useful for streamlining corridor transport through improved communication, better use of wagons, and eased procedures. The relatively higher transit volumes recorded in 2022 and 2023 show the potential for increased transit. Seeing this opportunity, more corridor countries are taking action to increase their potential and capacity. ADY’s digitalization program can play a crucial role in unlocking this capacity. Rail transport is more efficient for cargo because of its higher capacity and lower energy consumption per ton-kilometer (ton-km) than road transport. It also reduces congestion and produces fewer emissions than road transport over the same distance.
In addition to transit freight, efficiently operating railways increase the attractiveness of rail transport and may facilitate a modal shift from road to rail for the transport of domestic, export, and import goods. Domestic rail freight has seen a major decrease from 2014 to 2023 because of inefficiencies in railway transport and an improved road transport network. In coordination with local industries, the project can help revitalize domestic rail freight.
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