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Editorial Articles

Editorial Article

Rail Budget 2016  pragmatic and growth-oriented

K. R. Sudhaman

Railway will generate 9 crore man-days employment by 2017-18 and 14 crore man-days by 2018-19.Presenting his Second Railway Budget, the Union Railways Minister Mr Suresh Prabhu said that core objective is to become an engine of employment generation and economic growth at national level. Minister proposed no changes in passenger fares and freight rates. He announced an increase in lower berth quota for senior citizens by 50 per cent. He said railways will increase the quota of lower berths for women also and provide 33 per cent sub-quota for women under all reserved categories.

Overall, Mr Prabhu has done well in this balancing act this yea. Given the resource constraints, he has done well to present a growth-oriented and pragmatic Rail Budget that strives to bring smile on everybody's face while trying to consolidate and fix the creaking rail infrastructure. The budget presents an optimistic strategy for the future. Mr Prabhu is right in saying “We have achieved a lot in the past one year and this budget presents an effort to make it further better.” 

Unlike last year,  Mr Prabhu did not propose a hike in passengers fares or freight rates, and introduced three new superfast trains. Mr Prabhu also announced a slew of measures on improving train-travel such as on-demand cleaning of compartments, bio-vacuum toilets and Wi-Fi at railways stations. He promised to move towards getting rail reservation on demand.

Railways is a critical infrastructure for economic development and Mr Prabhu has done well to step up investment, which has seen a two and a half times jump. Prime Minister Narendra Modi is right in saying that it is a “visionary budget” as Mr Prabhu has not gone for more bullet trains, which are capital intensive. Railways now needed to prioritise to strengthen and improve existing rail infrastructure. Proposal to develop three more freight corridors – the North-South corridor Delhi-Chennai, East-West corridor, Kharagpur-Mumbai and East Coast corridor connecting Kharagpur-Vijaywada are welcome development as it would augment trunk routes and provide more capacity for introducing more trains on these congested routes. It will also help in industrial development of hinterland. He has also promised to complete the Delhi-Mumbai and Kolkata-Amritsar freight corridors by 2019 by stepping up the allocation. He has allocated Rs 24,000 crore for these two corridors alone.

The proposal to develop a new freight tariff structure to evolve a competitive rate structure will help railways regain market share vis-à-vis other transportation modes, particularly roads. Proposal of generating 10 to 20 percent revenues from non-tariff sources predominantly through asset monetization is a significant leap in revenue mobilization endeavours.

On the cost side, the proposed operating ratio at 92 percent for 2016-17, is fairly reasonable target after all, in a year without fare hike and major freight increases.

Cleanliness and upgradation of passenger facilities and technology remains the basic mantra of last two budgets. Besides, Railway projects have been defined on the basis of ‘commissioning’, in place of ‘completion’. I believe this policy-transformation is a Paradigm-shift in nation’s economy. The special arrangement of the ‘Super-fast trains’ for the poor through launch of Antodaya Express and Deen-Dyalu rail coaches , reiterate the commitment of our government to the poor, Mr Prabhu said.

Mr Prabhu's hour-long speech in Parliament met with mixed political and social media reactions, getting both effusive praise and disparaging criticism. Not everyone was convinced with Mr Prabhu's slew of new initiatives.

A detailed road-map in this direction has also been presented. Along with that an effort has been made to seek the co-operation of Passengers and the Railway Employees as well. Discipline in spending, efficiency in management and accountability to the consumer is the focus of this budget.

Mr Prabhu said optional travel insurance for rail journeys at the time of booking and clean my coach through SMS will be introduced in due course. High speed passenger corridor from Ahmedabad to Mumbai will be developed with the financial assistance from Government of Japan. FM Radio Stations will be invited to provide train borne entertainment, and Rail Bandhu Magazine will be provided in all reserved coaches in all regional languages.

Referring to the financial performance of 2015-16 the Railway Minister said stringent economy and austerity measures  have been adopted to contain the ordinary working expenses at Rs 1,10,690 crore, Rs 8,270 crore less than the original estimate of Rs 1,19,410 crore.

There is always craving for more as Railways touches the heart of the people across all sections of the society as it is a major source of transportation both for passengers and freight. But analysts could not agree more with Mr Prabhu that the budget comes to be focused on consolidation rather than expansion to serve the long term interest of the Railways. Therefore, the budget has focused on key issues plaguing the railways, which are customer experience, increasing efficiency, network decongestion, improving safety, improving stations, increasing revenues and increasing availability. It also gave a push to projects, which needed to be taken up on priority basis. It is a mature rail budget that balances much needed investments with the revenue and funding constraints. It has also pushed railway reforms.

But some were critical of the budget due to the decline in the operating ratio from 88 per cent to 90 per cent this year and to 92 per cent next year. This is, however, on expected lines considering freight and passenger traffic have remained flat this year and expenses continuing to increase. Despite this high operating ratio, Mr Prabhu has succeeded in stepping up investment target to Rs 1.2 lakh crore this year and proposed to spend Rs 8.5 lakh crore in the next four years on capital expenditure through innovative funding. It proposed to generate Rs 1.5 lakh crore from LIC at nominal interest rates. Besides it would be getting funding from World Bank and Asian Development Bank. All these make one optimistic about the budget particularly after years of neglect of railways due to over indulgence in populism in the past. Several steps have been taken to speed up contracting and execution of contracts, and construction companies are already seeing their order books grow. Private Freight Terminals are growing, and the award of Madhepura and Marhowra manufacturing projects, are signs of progress. However, the port connectivity projects, Joint Ventures with State governments remain work-in-progress. That new project announcements are limited indicates adherence to implementation focus, highlighted in the previous Budget. Among the new announcements, Dedicated Freight Corridors are perhaps the most impactful, as they would contribute to India participating in global production networks in South East Asia, and to Make in India.

The proposed rationalisation of freight tariffs will be critical to improving financial health, and enabling investments. Railways have become less competitive than road even for 1200 – 1500 km distances for container movements. Coastal shipping and Inland waterways are also emerging as competition. A more pragmatic approach to freight, combining several measures like personalised service and bulk discounts, would be necessary. 

Giving details of the Budget Estimates 2016-17 the Minister informed that the Gross Traffic Receipts are kept at Rs 1,84,820 crore . Passenger earnings growth has been pegged at 12.4 % and earnings target budgeted at Rs. 51,012 crore. The freight traffic is pegged at incremental traffic of 50 million tonnes, anticipating a healthier growth in the core sector of economy. Goods earnings is accordingly proposed at Rs. 1, 17,933 crore. Other coaching and sundries projected at Rs. 6,185 crore and Rs. 9,590.3 crore respectively. The implementation of the 7th CPC Pension outgo  has been budgeted at Rs 45,500 crore in 2016-17.

The Rail Minister has done a fine job in setting achievable targets for FY17 keeping in mind the ground realities of the present times. His 3-pronged approach of expansion of freight basket, rationalization of tariff structure and improvement and enhancement of terminal capacity, setting up of logistics parks and warehouses under PPP mode will perfectly dovetail into this process. The country’s first rail auto hub will soon come up in Walajabad, near Chennai, to help automobile manufacturers in the region transport vehicles to other parts of the country. This has been one of the long-standing demands of the auto industry. It will certainly kick-start the economy by putting in place necessary rail infrastructure. This augurs well as large projects have taken up, pushing up much needed public expenditure to revive growth.

Overall, the railway budget is pragmatic and growth-oriented.

(K R Sudhaman is currently Editor of SMEpost.com. He had been Economic Editor in Press Trust of India, Financial Chronicle and TickerNews, e- mail: sudhaman23@yahoo.co.uk)