Railway Budget 2015: No fare hike on cards; Suresh Prabhu to rely on main budget, JVs to put railways on track

NEW DELHI: An across-the-board increase in railway fares is unlikely to be announced in the Railway Budget on Thursday, with Railway Minister Suresh Prabhu set to rely on higher support from the main Budget, joint ventures with the private sector and soft financing from other countries to put the financially derailed organisation back on track.

As Prabhu, whose appointment as railway minister last November triggered hopes of radical change in a ministry long regarded as a fount of populist thinking, prepares for what arguably will be the biggest day in his ministerial career so far on February 26, sources have told ET that the fare hike option had all but been junked for now and the overall thrust would be incremental.

“An across-the-board hike is unlikely since passenger growth has been negative and even freight has not grown as per expectations,” one official involved with the budget-making process told ET. However, “minor adjustments” in fares of Tatkal and premium special trains that run on dynamic pricing could not be ruled out, the official added. He requested anonymity given the sensitivity of the issue.

Faced with a near-bankrupt organisation, Prabhu, whose budget speech is being closely watched for clues on the tone and thrust of the Union Budget on Saturday, is believed to have taken the longest time to decide whether fares should be increased or not. He left office late on Monday after giving final touches to the Railway Budget for 2015-16.

The budget document went for printing early Tuesday morning. Known to be a hardworking ‘technocrat’ minister, accountant-turned-banker-turned politician Prabhu has averaged 16-hour days since taking charge of the ministry. He worked through the last weekend, wrestling to balance traditional populism with much-needed reforms that are expected from him.

The sources said Prabhu was personally in favour of a fare increase to generate much-needed resources, but senior railway officials managed to convince him that it would be difficult to justify such a move given that fares had been raised steeply only last year.

“Fares were increased by the government in June last year, three weeks before the then railway minister Sadananda Gowda presented his budget. It was a steep hike — 14.2% in passenger fares and 6.5% in freight. With diesel prices down, the government does not have a basis to go for a hike,” one official said.

He said it would be difficult for the minister to explain politically that even though diesel prices are down, the fuel bill of railways has gone up because of high electricity rates. In any case, officials said a fare increase, if it became absolutely unavoidable, could always be done anytime during the year and attributed to the Fuel Adjustment Component.

But Prabhu faces a tough challenge to raise resources to fund critical infrastructure projects.

Officials said the ministry is likely to seek a Gross Budgetary Support of Rs 50,000 crore, up from Rs 38,000 crore last year. Prabhu will also take the joint venture and publicprivate partnership (PPP) route to raise another Rs 70,000 crore and is likely to go in for bilateral financing and technological support from countries such as China, Japan and France, all of which are major suppliers and have evinced interest in participating in India’s railway expansion.

Railway ministry sources said Prabhu could resort to bilateral cooperation with interested nations to take up specific initiatives such as upgrade of network, safety-related infrastructure, dedicated freight corridors and high-speed trains.

Prabhu has received a lot of suggestions from the prime minister’s office and officials spoke of him frequently consulting a blue plastic folder marked ‘Prime Minister’s Office’. Prime Minister Narendra Modi has in the past spoken of the railways being a lynchpin in India’s economic progress as well as its political integration.

Sources said the railway minister was also unlikely to announce any major organisational reform. “He is likely to go in for small incremental steps rather than corporatisation in a single stroke,” one official in the Railway Board said.

Prabhu’s immediate focus will be to finish existing projects rather announce new big-ticket schemes.

He needs at least Rs 1.8 lakh crore just to complete 359 pending rail projects. Even among the new lines, the emphasis is likely to be on improving connectivity in border areas, especially in the Northeastern states along the border with China.

“They will be mostly announced as national or strategic lines since the railways don’t have to pay for such lines from their own budget,” one official said.

With foreign investors yet to show any interest in railway projects under the FDI route, Prabhu has been eyeing other sources of funds. He has asked the finance ministry to allow the railways access the Rs 6 lakh crore of public pension funds. He also made a case for channeling corporate social responsibility funds for railway schemes.

Prabhu is also likely to announce a slew of green initiatives, notably the use of solar energy, CNG, setting up water recycling plants and waste-to-energy projects.