The Big Picture – Railway Budget: What’s On Offer?

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The Big Picture – Railway Budget: What’s on offer?

Railway Minister Suresh Prabu presented his 2^nd railway budget in Lok Saba yesterday. The budget has been shift from his predecessors in many ways. This year railway budget includes not many new trains but the focus is on effective commissioning of already existing projects. Efforts to reorganise restructure and rejuvenate railways is the main highlight of this year’s railway budget.

First, The issue of freight.

Revenues from freight through which railways generate enormous amount of money has come down to the tune of 12000 crore compared to last year. Various reasons are attributed for the decline in revenues

1. Railways has been relying on ten important commodities that it will carry, among them Coal constitute nearly 50 percent of the total carried freight. However this year the government effective policy on coal through which it has reduced imports and also an order to procure domestic coal for government owned power companies has hit the revenues sharply.
2. Slowdown in manufacturing sector.

To revive the revenues the railway minister has diversified the list of commodities that railways will carry.  On manufacturing front government initiatives like Make in India and National capital goods policy 2016 is expected to revive manufacturing sector.

Second, Efficacy of PPP model.

Government has been pressing PPP model for railways since 4-5 years. However the PPP model has failed to take off completely despite various interventions by government. Important reasons among them are

1. Absence of stable PPP policy from Government.
2. Low return of investment.
3. Land issues with state.

However the government in this railway budget has formulated a plan to revamp the existing PPP model by setting up an empowered committee to look in to all the issues associated with it and to explore options for increased ROI. Also the railway is planning to setup Joint venture companies with states so that all the outstanding land issues will be resolved on time.

Third, the operating ratio for every rupee spent is increasing every year since 2012. This has implications on profitability for railways. So government is planning to raise revenues from various sources like increasing passenger amenities, freight development, station development, parcel services and introduction of premium trains etc.

Four, an ambitious target of construction of 2500 kms of new railway line and a greater stress on commissioning of new railway lines that are already constructed is a welcome step. Efforts to increase man power for maintenance of new tracks and safety precautions are some of the other important elements of this year’s railway budget.

Q.1) Discuss the broad issues associated with Indian railways?