Railway Budget 2015: High on hopes but challenges lie ahead

By: Subodh Jain, Advisor, Hyderabad Metro and former member Engineering, Railway Board

The rail budget always comes with far greater expectations than the general budget as it touches the everyday life of common man, and this being the first full budget of Modi government has special significance as the prime minister himself attaches a lot of importance to the development of railways. While critics will speak along party lines, it must be appreciated that in a very short time the railway minister has understood very clearly the Indian railway system and popular expectations from it. The four goals, five drivers and 11 thrust areas say it all and perhaps you cannot ask for more.

Unlike previous budgets, most of the announcements are in line with the goals and objectives, such as no new line projects, no new trains and no new rail manufacturing unit to gain political mileage; doubling the allocation for creating capacity on existing network; and substantial increase in the allocation for upkeep of track and bridges and traffic facility works is indicative of courage and commitment to take the reform agenda forward.

The announcements like ticket in five minutes, decent toilets in all stations and water vending machines are far more relevant than high-speed trains and on-board entertainment. Abolition of rail transport clearance has been a right step but revamping the accounting system or introduction of EPC (engineering, procurement and construction) is not going to be easy. The target of 1.5 billion tonnes of traffic and 20% increase in track kilometres in five years is desirable but will require a paradigm shift in the mindset and the way railways is organised.

The commercial exploitation of surplus land has been a favourite of previous budgets. There is need to have clarity in the policy and courage to exploit or monetise land assets. The railways’ track record of PPP (public-private partnership) has been far from satisfactory and instead of nominating one more cell, it would have been better to resolve the implementation problems being faced by private freight terminals, wagon leasing scheme, private container operators or freight rebate scheme on priority before the budget instead of postponing it for further three months.

Similarly, the strengthening of feeder routes should be part of the DFCCIL (Dedicated Freight Corridor Corporation of India Ltd) project, which is going to be the beneficiary instead of looking for private investors. Private investment will not come unless the revenue stream is well defined or the investor is able to treat the investment as sunk cost like most of the present PPP partners are doing — ports, mine owners, power plants or other bulk consumers. Even when the state governments come in for participation, it is because some major stakeholder is also a beneficiary. State governments have serious limitations in allocating large funds for railways, as has been the experience in the past.

The budget is very bold and growth-oriented as there is 25% increase in gross budgetary support and 100% increase in borrowings. This is sustainable if the operating ratio of 88% is achieved and maintained, but this is going to be the real challenge in view of the fact that the operating ratio of 88% is being forecast in the ninth year after pay commission. Things should have been much better by this time. Overall the budget is high on hope and time will be the best judge.