Suresh Prabhu along with his team giving final touches to the Railway Budget 2015.
Suresh Prabhu gave a hint of what his first Rail Budget, to be presented today, holds when he said, "It is a long journey, everything can't be accomplished in the first year."
The chartered-accountant-turned politician said as he arrived at Parliament House, "We need to begin the right direction, we can't be sitting in a train to Chennai if we want to go to Kolkata," pledging commitment to the development agenda of the Narendra Modi government.
Mr Prabhu's induction as India's Railway Minister three months ago was touted by analysts as proof of the Modi government's reformist agenda. Known for his performance as Power Minister in 2002, Mr Prabhu, 61, faces huge expectations today.
Railway stocks have staged an impressive rally in the run up to the Budget. Thursday's announcements are also expected give a peek into the Union Budget, which will be presented in two days' time. (Read: Ten Expectations From Suresh Prabhu's Rail Budget)
"It will be a solid Budget, working towards strengthening the infrastructure," said LV Raju, managing director at Kernex Microsystem, which manufactures electronic safety equipment.
Challenges:
Railway finances are under terrible strain; its operating ratio is 94 per cent meaning it saves just 6 paise on every 1 rupee it earns from operations, leaving little surplus funds for infrastructure development. In 2007-08, the operating ratio was a healthy 76 per cent. Mr Prabhu can raise additional resources by hiking passenger fares, but his deputy has ruled out any increase in fares in the upcoming Budget. The railways incur a loss of Rs 26,000 crore on passenger fares, which is cross-subsidized by freight fares. (Railway Budget: Why You Need to Know These 10 Numbers)
Freight rates are already among the highest in the world because of which the railways has been consistently losing market share in goods transportation to the roads sector.
Mr Prabhu needs to generate additional funds to complete pending projects, build new infrastructure and improve passenger amenities.
Expectations:
Mr Prabhu has said the railways need $100 billion or Rs 6 lakh crore in funding over the next 3-4 years. It is expected to get a mere Rs 50,000 as budgetary support from the government. The rest has to come from external source of funding, either through foreign direct investment or public-private participation.
Past efforts at getting even the Indian private sector to set up facilities for the Indian Railways have failed to make much headway. Mr Prabhu must start with cutting red tape and bureaucracy in railways to raise the confidence of the private sector as well as foreign investors, analysts say.
"There is a need to restructure the organization so that it does not have the burden of scrutiny to such as extent that it results into implementation of projects becoming tardy," said Sachin Bhanushali, CEO of Gateway Rail Freight.
Railways should switch from a full-fledged operator to an infrastructure service provider as is the case worldwide, analysts say. Rolling stocks (wagons, coaches, etc.) should be funded through private investment.
"An asset light model will help railways in a big way without privatizing it," Mr Bhanushali added.
The third big expectation is the announcement of a tariff regulatory authority, which will fix passenger and freight fares. This will help reduce the cross-subsidy burden on freight tariff.
To attract private investment, Mr Prabhu must come up with a detailed roadmap for building dedicated freight corridors.
To tap more revenue channels, trains named after corporates should be announced and surplus land should be leveraged, analysts say.
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