By G. Srinivasan
A medium-term massive investment plan of the order of Rs 8.56 lakh crore for the next five years with no hike in passenger fares but a 10 per cent increase in the freight structure for the base class-100 with a few exemptions for essential items such as salt for human consumption and bulk goods like cement, coal and coke, iron and steel, pig iron, iron ores and petroleum products as also rationalization of distance slabs in the next fiscal are the highlights of the 2015-16 Rail Budget presented in Parliament by the Railway Minister Mr. Suresh Prabhu on February 26.
Known for clinical efficiency and managerial techniques to bring the railways back on track after several years of plodding and inept handling by successive rail ministers who used the system as their fief to farm out freebies, Mr. Prabhu desisted from playing to the gallery by not flagging off sops and concessions or new trains or routes; a resolute break from the relic of populist thinking that India had outlived over the last two decades. Being “a network of veins that pump life-giving blood into the heart of India’s economy” as picturesquely put by Mr. Prabhu, the railway facilities to users, both individuals and industry, unfortunately remained far from offering any crumb of comforts. The Minister did not mince words when he pointedly noted that a fundamental factor for the abject service of the railways is the “chronic underinvestment”. No wonder, as a consequence, capacity augmentation suffered, safety sedulously challenged and the quality of service delivery proved pathetic, leading to “poor morale, reduced efficiency, sub-optimal freight and passenger traffic and fewer financial resources”.
Without harping on what went wrong in rendering the system anemic over the years, Mr. Prabhu hit the nail on the head by expatiating on the benefits of investments in the Railways which will have “a large multiplier effect” on the rest of the economy, besides fostering jobs for the poor and ensuring environmental sustainability . He has also rightly diagnosed the need for significantly improving capacity on the extant high-density networks which works out cheaper as there are no major land acquisition issues and completion is also shorter. Hence the stress would be on gauge conversion, doubling, tripling and electrification so that the proverbially tardy average speed would pick up pace to the lasting benefits of users. A particularly noteworthy feature in the rail budget is the boldest hike in electrification proposal for the next fiscal. As against a sanction of 462 route kilometers this fiscal, a length of 6608 route kilometers is sanctioned for 2015-16, an incredible jump of 1330 per cent over the previous year. Considering the fact that electric power is mostly produced through thermal generation tack of using coal, this goes against the grain of green growth and de-carbonized paradigm of development India has vowed to promote. If ecological sustenance and less fuel consumption of railways are what make the Indian Railways a preferable mode of transport compared to roads where vehicles use all mix of polluting fuels, the Minister owes an explanation as to how he intends to get the highest electric power expansion in the next fiscal for hauling freight and passenger trains without striking at the ecological balance..
The four objectives Mr. Prabhu laid out in this regard such as delivering a sustained and measurable improvement in customer experience, safer means of travel, augmenting capacity of the system substantially to modernize infrastructure from 21 million to 30 million daily passengers, track length by 20 per cent from 1.14 lakh km to 1.38 lakh kms and annual freight carrying capacity from one billion to 1.5 billion tones would be doable if the Minister followed it up with action on the ground. The approach to building partnerships by roping in State governments for railway projects through special purpose vehicles and partnering with public sector undertakings (PSUs) would ensure that sufficient capacity is built to transport critical commodities like coal, iron ore and cement. By tapping multilateral and bilateral organizations and other governments to gain access to long-term financing and technology from abroad provided the understanding is absolute and right resolution machinery is in place in the event of any dispute over contract would be encouraging.
An auditor himself, Mr. Prabhu knows what he is talking about for financing remunerative projects through market borrowings. Apart from the costly borrowings that the system contracts from its own arm, the Indian Railways Finance Corporation (IRFC), it is also intended to tap low-cost long-term funds from insurance and pension funds, multilateral and bilateral agencies which could be serviced through incremental revenues. It is salutary to note that the railways plan to create new vehicles to crowd in private investment from long-term institutional investors and other partners. For the first time, on record, the railway minister has spoken openly that he would prefer to “monetize our assets rather than sell them”, putting an end to needless controversies and undue hope that the system may be corporatized or privatized or the lands vested with them would be sold.
An interesting aspect to the rail budget is that most of its revenue projections are based on optimism as compared to the realism on the ground as in the current fiscal passenger and freight revenue receipts had to be slashed and the gross traffic receipts fell by a hefty Rs 917 crore in revised estimates compared to budgetary estimates of Rs 1, 60,165 crore. Against this revision, the gross traffic receipts are budgeted to fetch Rs 1, 83,578 crore next fiscal. Unless a miracle of sorts happens and the Ministry of Railways puts in place some user-friendly policies, both for individual users and industries, the revenue receipts need to be realistic.
What is amazing is the accounting mastery the Minister has displayed in conformity with his professional credentials. Thus faced with stagnant budgetary support to the arterial mode of transport down the decades, Mr. Prabhu has resorted to extra-budgetary resource (EBR) route through an innovative tack of tapping institutional finance which he said is a new vista with promising potentials. This would be based on institutional investments in railway projects through railways/PSUs which are projected to net Rs 17,136 crore which will speed up completion of capacity augmentation projects, instead of spreading thinly the sparse resources that had been the bane of the past. The idea is that many of these projects pertain to decongest heavy traffic sections and as such are remunerative upon completion. In sum, Mr. Prabhu eschewed the populist policies of his predecessors by tweaking the system in a positive manner through a process of re-engineering that would undoubtedly bring benefits to the stakeholders and the shareholders over the long haul. (IPA Service)