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The Big Picture – Rail Budget: Is it on new tracks?

Summary:

The first railway budget of the new government and the new railway minister was presented recently. The budget tries to turn around the railways, which is reeling under losses and many other problems now. The ambitious projections, including 8.5 lac crore investments in the next five years, have received mixed responses. Announcing of new railways, which was the hallmark of the railway budgets so far, was however missing in this budget.  There is also no passenger fare increase and there are only very few freight increases. The focus of the Budget has been on to complete the earlier announced projects.

It is also true that introduction of new trains need not necessarily be announced in the Budget. They can be announced anytime depending upon the requirements. This is also true with respect to ticket fares. They can also be increased at any time. The Budget is being appreciated by the experts. It is a budget that is at once pragmatic and visionary. It is one that has the potential to be transformational—by increasing capacity and improving technology on the supply side, improving quality of service on the demand side, and focusing on transparency and efficiency on the operational side.

Since Railways is a corporate entity and corporate undertaking which requires a budget every year as part of a corporate plan. Previous railway budgets followed populous trend and did not have any business plan in them. The challenge before the railways minister is to immediately fill the financial gap by attracting the investors. The railway minister has also said that railway colonies and staff would be taken care, and this is a welcome step.

The rail budget envisages an investment plan of Rs.8.5 trillion over the next five years. If successful, this could have a multiplier effect on everything from the fortunes of steel companies to the country’s ability to attract foreign interest in railways and boost the government’s ambitious Make in India programme. The budget sets out a five-year action plan that is based on the principle that fundamental to Railways’ turnaround is enhancing its capacity and generating the resources to fund it.

The budget aims to channelize most of the PPP participation for improving its freight business. It has been losing traffic to roads and will focus on the construction of feeder routes to the dedicated freight corridor and set up a Transport Logistics Corporation of India to develop user facilities and provide end-to-end logistics solutions. Freight rates were increased by an average 3% across commodities. The budget also mentions a review of the wagon leasing scheme, special freight train operator scheme, private freight terminal scheme and liberalized wagon investment scheme to make them more liberal and attractive for the private sector. All these have been longstanding demands of the industry. To succeed in PPP model the railways has to have clear demarcation of jobs that they take up.