Railways back on track
Jul 08 2014 , New Delhi
Pragmatism replaces populism, as PPP, FDI attract priority attention. Gujarat gets Bullet
Railway minister DV Sadananda Gowda shunned high decibel populist measures, the hallmark of a legion of former railway ministers across political dispensations, forcing the steroid-induced stock market benchmark Sensex to shed 517 points at the close of day’s trading.
The budget attempts a fine balancing act between meeting social obligations and making the railways commercially viable and sustainable in the near term (Read FC Edit, Less is good on page 11).
Gowda announced pla-ns for private and foreign investments in a clutch of railway infrastructure development projects and services, barring core rail operations. Several projects have also been earmarked for public private partnership (PPP), based on both user-charges and annuities-linked plans to attract companies.
Gowda also announced the restructuring of the moribund railway board, with an unenviable track record of corruption and bureaucratic red tape. It limits the board’s role in policy making, while setting up two separate groups, driven by professionals, to implement projects and monitor their progress.
Further, the minister has attempted to bring the delicate railway finances on track and build surpluses to modernise the century-old Indian Railways, while expanding the network in the next five years.
Gowda said six-monthly revisions in passenger fares and freight rates to adjust for global fuel prices would continue in the future. The latest revisions on June 26 prices will yield additional revenue of Rs 8,000 crore. The next round of adjustments is due next January.
With revenues pegged at Rs 164,374 crore, Gowda hopes to end the year with a surplus of Rs 25,000 crore. Capital expansion and expenses are projected at Rs 149,176 crore. He has also enhanced the budget outlay for the fiscal to Rs 47,650 crore. This will be Rs 9,384 crore over the allocations made for 2013-14.
Gowda made a modest beginning on the diamond quadrilateral network,
by identifying the Mumbai-Ahmedabad route for the first Bullet train, covering 550 km in 2 hours (Read separate report in this edition).
He also announced the introduction on high-speed trains on nine sections.
Following the presentation of railway budget, prime minister Narendra Modi tweeted, “It’s futuristic, growth oriented, ensures speed as well as safety.”
Besides the Bullet trains and high speed rail network, the railways will offer private and foreign investors opportunities in railway tracking, stations development, rail tourism, signaling, bridges and related infrastructure, logistics, freight movement network, modernisation of platforms, upkeep and maintenance of railway assets, ticketing and IT solutions. The budget even offered some railway stations for adoption to private companies.
Short of going into the nuts and bolts, Gowda said his ministry has sought cabinet approval to allow foreign direct investment. As a first step, he has asked the industry ministry to remove railways from areas in which FDI is prohibited.
“We need huge investment for running Bullet trains. There was a ban on FDI in railways. Now we have requested the industry and commerce ministry to delete that clause so that there can be FDI in infrastructure development. It’s in the process,” he said.
Says managing director of French major Alstom Transport’s Indian outfit, Bharat Salhotra, “Opening the railways to foreign direct investment is a welcome move that would provide much-needed push to the cash-strapped sector, as well as foster creation of world class rail infrastructure.”
For PPPs to takeoff, Gowda said, “We propose to instill confidence in private players... They feel if you invest in railways, there will be no returns. We will have to change certain policies to attract private players.”
The minister announced the government’s intention to grow Indian Railways as the world’s largest freight carrier ahead of China, Russia and the US. At present, the railways carry over one billion tonnes of freight, which is fourth highest by volumes, globally.
As part of resources mobilisation drive, the railways would leverage financial resources held by state-run PSUs under its control. For instance, railway construction consultancy Ircon’s surplus funds worth Rs 4,000 crore would be channeled into infrastructure development projects, helping the railways to scale down borrowings to Rs 11,790 crore and curtailing interest liability.
Gowda said, “We will continue with FAC (fuel adjustment charges) which was also there in 2013-14. There will be a periodic adjustment once in six months. That was also taking place earlier. This will continue."
He said rail tourism would be the new focus area with target to carry more domestic and foreign tourists, especially to the northeastern states, pilgrimage centres and eco-sensitive zones.
Gowda allocated a nominal Rs 100 crore for the Bullet train project, while hoping that most investments would come from foreign companies, especially from Japan, for the trains, tracks and even platforms.
Besides committing the railways to a huge skills development programme through a dedicated railway university, the government has also announced several IT initiatives - from paperless working in five years to e-procurement, next generation ticketing and wi-fi services not only on trains but also at all major stations. Mobile-enabled services will be ushered in for booking tickets, cancellation, upgrade, wake up calls for passengers, arrival and departure announcements of trains and for station navigation.
The government also announced several measure to improve passenger safety, cleanliness, catering services, e booking of railway retiring rooms and a novel office on wheels for corporate customers.
It set aside a huge Rs 40,000 crore for safety measures that include track renewals, removal of unmanned level crossings, road-under-bridges and road over-bridges. Some 17,000 railway police force (RPF) personnel and another 4,000 women RPF constables would be on duty to provide security to female passengers.
Despite the stock market thumbs down, India Inc said the FDI policy and PPP initiatives would boost railway finances and generate jobs.
Support came from Mahindra & Mahindra chairman Anand Mahindra who tweeted, “Renewable energy inputs, e-enabled procurement, more private sector involvement. And, (there are) no megalomaniac schemes. What more are the markets looking for?”
Yes Bank managing director & CEO Rana Kapoor too said that, “PPP models will attract a lot of private and overseas investment as the new government enjoys a great amount of credibility to deliver.”
According to Ficci president Siddharth Birla, “The proposal for financing the bulk of future projects through the PPP route will help overcome the constraint of low investment, enhance connectivity and accelerate the process of modernisation”.
Concurred Ravi Uppal, managing director and group CEO of Jindal Steel & Power, “The railway budget is comprehensive and is indicative of the new government’s vision of restructuring and modernisation”.
Larsen & Toubro chief executive for railways business Rajeev Jyoti was, however, not very enthusiastic and sought more clarity. “If you have FDI, you are not going to open up the sector without criterion...,” he pointed out.