India : Railway budget

Bring down passenger fares. Don’t hike freight. But, add capacity & infra. And, yes, we know you are almost bust & have been for as long as we can remember. In a nutshell, this is what analysts had to say about the Railway Budget 2015. But, that still left the dirty job of actually doing it – in executable steps – to the Rail Minister. His maiden budget has not really stuck to the script some would want, but, has moved rail policy on to the right track.

There are the radical reforms – corporatize the railways, shift to a different accounting system, set up an independent rail tariff authority & so on. These will have to wait. For one, the minister has said that a Vision Document would soon be presented. Second, one presumes that the recommendations of the Bibek Debroy committee on revamping railway board would lay the ground for any ‘radical’ reform. Third, the brouhaha over Land Acquisition & the experience with Coal India unions must have taught the government to be less ‘dabangg’ and more circumspect in what it does.

This is perhaps the reason why it chooses to involve external funding & private participation through joint ventures, SPVs etc. The minister’s speech says he will finance ‘remunerative’ projects through market borrowings and he is open to “setting up an infrastructure fund, a holding company and a JV with an existing NBFC of a PSU with IRFC, for raising long term debt from domestic as well as overseas sources”. These are indications of Railways taking partners on a project basis instead of going in for radical privatisation measures that will be politically hot.

All through, the common thread is in getting more out of what the railways already have. Set up more tracks on lands already there, speed up trains on existing tracks, add more coaches & berths, increase haulage capacity of existing wagons, efficient empty wagon operation & so on. This fits in with his ‘short term’ strategy to raise resources for the long term. How railways manage to execute that in the year will determine if the operating ratio ends at a nine year high in 2016.

Yes, freight rate is up and it upsets further the already big imbalance between it and passenger rates. Feb 2016 will tell if the business call of hiking freight paid off for Mr Prabhu. While industries may crib about higher rates now, better rail turnaround time may help them get more product to market. Emphasis on passenger amenities will also come in handy next year. For long passengers have asked ‘where are the amenities’ each time fares have been hiked.

True, more information is needed on how these JVs, external financing will work. The minister mentioned several times in the speech that he has been in touch with other ministers, PSUs, multi-lateral institutions for money, so we have to take his word on it for now.

Finally, there was no long laundry list of ‘new trains’. A lot of significant work will happen under the hood. The minister has proposed management/governance & technological steps to manage freight, clients, vendors, improve performance. These could potentially transform Railways into an efficient transport system with sound processes & oversight systems, setting stage for growth beyond 2016. Suresh Prabhu has made a realistic beginning.

Pratiksha Banerjee

Msc.Media || PG:1