By Jaijit Bhattacharya
The budget articulates the vision of transforming the Indian railways in a systematic process over a longer period of time rather than having a big bang approach. It is a balanced budget. However, it leaves question mark on the challenge of convincingly garnering the significant amount of funds required for this audacious transformation.
Representational image. PTI
The budget laid out four goals
a) To deliver a sustained and measurable improvement in customer experience
b) To make Rail a safer means of travel
c) To expand Bhartiya Rail’s capacity substantially and to modernize infrastructure
d) To make Indian Rail financially self-sustainable.
The budget laid out a goal to increase the Indian railways network to 1.38 lakh kilometers and freight traffic from 1 billion tonnes to 1.5 billion tonnes.
The budget adopts an execution strategy based on five drivers
- Adopting a medium-term perspective
- Building Partnerships with states, PSUs, multilateral agencies and private sector for ensuring financing and last mile connectivity
- Leveraging additional resources;
- Revamping management practices, systems, processes, and re-tooling of human resources
- Setting standards for Governance and Transparency.
The budget laid emphasis on gauge conversion over next 5 years and a focus on running fast trains like Rajdhani, Shatabdi by decongesting existing high density routes. It also laid out a goal of increasing track length by 20 percent to 138,000 km in next 5 years. This initiative would also provide significant opportunities to the private sector, if it is actually achieved.
The budget also articulated the objective of substantially regaining freight market share. However, in light of the increase in freight rates, and competition from truckers, it is not clear how Railways actually plans to increase its freight market share.
Although the budget announced no hike in passenger fares, there is an implicit hike as the Fuel Adjustment Component (FAC) that was due to be applied in December 2014, is not being applied.
FAC was designed to pass on the fuel hike or fuel price reduction to the passengers. With the fuel price falling by over 20 percent, the fares should have been reduced. However, there is no mention of the FAC being applied in the near future.
Promise of hygiene
The budget take forward the national flagship program of Swachh Bharat with a focus on hygiene. It promises to adopt vacuum toilets (which exist in aircrafts) in 17,000 places. The Railways plans to build new toilets covering 650 additional stations compared to 120 stations last year. Indian railways will fit Bio-toilets in coaches and is in the process of replacing the existing toilets with 17,388 bio toilets.
The quality of Indian Railways’ On-board Housekeeping Service (OBHS), presently available in 500 pairs of trains, is being re-looked to make it more effective. Indian railways will take steps immediately to address customer concerns.
The budget also brings in focus on the other national program of ‘Make in India’. The local manufacturing will focus on High Horse Power and green technology locomotives, commodity specific wagons like auto carriers, signaling systems and train protection systems and track laying and track maintenance machines.
Focus on safety is a key feature of this budget. It laid out a goal of eliminating all unmanned level crossings by construction of Road over Bridges (ROBs) and Road under Bridges (RUBs). In the short term, RDSO has been asked to develop a suitable device with reliable power supply system based on theft-proof panels/batteries in consultation with Indian Space Research Organization, using geo-spatial technology for providing audio-visual warning to road users at unmanned level crossings.
Further, a radio based signal design project has been taken up with IIT Kanpur for warnings at unmanned level crossing. As part of the budget vision, many other technologies and programmes will be adopted for enhancing railway safety.
Emphasis on technology
This budget also emphasized very significant uptake of technology in every area, and not being limited to only information technology. It lays out a desire to adopt high technology in the areas ranging from toilet and signalling to safety and ticket bookings as well as food ordering. It also lays emphasis on technology creation where it does not exist.
The budget provides for the Indian Railways to be socially sensitive, with railway infrastructure support for the visually challenged, senior citizens, women and defence personnel. It also provides for the role of Indian railways in skill development and employment generation through self-employment.
From a more fundamental structural reforms perspective, the budget laid out a goal of Indian railway to target an operating ratio of 88.5 percent, in the background of the central government providing limited budgetary support. Such a goal would free up some revenues for investing on capital projects and the safety enhancement as laid out in the budget.
Although the budget speech mentioned that pension funds, multi-lateral funds, JV’s with state government and PSU’s and PPP would be the means of garnering the funds required to meet the staggering capital requirement of Rs 8.5 trillion rupees in the next five years, it is hard to envisage pension funds bringing in this capital in the short to medium term. The other bodies such as state government, PSU’s and multi-lateral bodies will find it difficult to provide for this quantum of funds.
Overall the budget is visionary and lays out a longer terms vision for the Indian Railways and should be seen in conjunction with the proposed Vision 2030 document that is proposed to be released in the latter part of this year. Such an approach would provide the much needed continuity in restructuring, strengthening and modernizing this very important piece of infrastructure which is crucial for an efficient functioning and growth of the economy. It would be in the interest of the nation that this vision succeeds and that the necessary funding is managed.
(The author is Partner, Infrastructure and Government Services at KPMG in India)
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