An Ambitious Capex Heavy Rail Budget: Hemant Kanoria

Modernization, capacity augmentation, better governance and laying out a roadmap for partnerships with both state governments and private sector have been the principal building blocks for this year’s Rail Budget. The Minister has touched upon every vital aspect of Indian Railways to make it future-ready and for that he has outlined a substantial capital expenditure target.

In particular, I liked the Minister’s candid admission that the previous schemes for attracting private investment have not quite worked. The fact that he is reviewing all those schemes with active feedback from the various stakeholders and would come up with the revised policies in the next 3 months speaks volumes about his positive intent on getting things moving. I have a feeling that during Mr. Prabhu’s tenure as Rail Minister, we will get to see the unfolding of a new chapter for PPP in rail projects.

The Minister has set himself an ambitious target of bringing down the Operating Ratio to 88.5%. With a capex plan of Rs. 1.1 lakh crore for FY16, the focus is on capacity augmentation. Clearly, budgetary support from Centre alone would not be enough. The Minister expects to tap foreign resources like Insurance Funds and Pension Funds and also raise money from bilateral and multilateral funds. I hope India would be able to tap resources from funding institutions in countries like Japan and other multilateral institutions like the World Bank and Asian Development Bank. I expect to see domestic private sector also getting more active in railway PPP projects once the revised policies take care of the existing concern areas. I liked the Minister’s proposal to monetize existing idle assets of railways instead of going for sale in order to generate additional resources.

The budget has kept passenger fares untouched, but the Minister has announced a number of steps towards improving customer experience. He did mention that some of those services will entail extra costs, which is welcomed. The intent to embrace IT in a big way towards improving enterprise resource planning and safety in railways is another positive step. The proposal to set up dedicated institutes for fundamental research towards advancement of coach design, rail tracks, improvement of rail technology, etc. and for upskilling rail personnel are steps that would go a long way in modernizing the skill-sets of this mammoth organization. No new trains have been added; instead the Minister has focused on ongoing projects and aims to work towards better efficiency from the existing route network, modernization and timely completion of ongoing projects. Overall, I feel the Minister has done a fine job in presenting a balanced budget. However, while the Centre would be providing 41% of the planned investments, the success of this Budget would be determined by how the Rail Minister mobilises the rest of the amount.