Finnacle-2014 SDMIMD

Indian Railway Budget Highlights

BACKGROUND

Few interesting figures about Indian Railways

Indian Railways runs 12167 trains to carry over 23 million passengers per day

connecting more than 7172 stations. It is equivalent to moving the entire population of

Australia.

More than 7421 freight trains carry about 3 million tonnes of freight every day.

Total track length of 1.16 lakh kilometres; 63,870 coaches; more than 2.4 lakh wagons

and 13.1 lakh employees.

Monopoly business with 100% sales on advance payment.

Few reasons for current sad state of Indian Railways

Slow growth in traffic and high operating ratio (94%) i.e., Indian railways spends 94

paise out of every rupee earned

The share of public transport has come down from the onetime 65:35 to 30:70 at present

Operating surplus of barely Rs 602 Crore for FY 15, it was Rs 11,754 crore in 2007-08

Projects suffer from huge time and cost overrun, just 01 out of 99 new rail projects

announced in past decade has been completed and 359 projects out of 676 projects

approved in last 30 year are still pending with their cost doubling to Rs 1,82,000 cr.

Rs 5 lakh crore needed over next 10 years to complete existing projects.

Currently Indian railways faces a cash crunch of Rs. 26000 crore

Indian railways carries only 31% of the total freight carried in the country by all modes

Passenger fares were kept lower than costs, thus causing loss in the passenger train

operations. Difference between cost and fares increased from 10 paise per passenger in

2000-01 to 23 paise in 2012-13

Above facts suggest that during 10 years of UPA focus was on sanctioning projects rather than

completing them. When projects drag on indefinitely, the investments are essentially dead

investments. Populism was preferred over prudence.

“It is unheard of a business that has a monopoly that has nearly 125 crore customer base, that

has 100% sale on advance payment; but still starve for funds.”-DV Sadananda Gowda- Railway

Minister

Finnacle-2014 SDMIMD

Application of Money- Current Railway Budget 2014

Passenger amenities and Station Management

Online booking to support 7,200 tickets per minute

Wi-Fi facilities in A1 & A category stations and select train

Ready to eat branded food and RO water at stations

Cleanliness budget up by 40% and third party quality audit

4000 women constables to improve safety of women

Parking cum platform ticket combos through e-booking

E-booking of railway retiring rooms

Provision of work stations in select train

Mechanised laundry for better quality bedrolls

Developing identified stations to meet international standards

Planning and Administrational Reforms

Separate the railway board’s functions of policy formulation and implementation

New post of Member infrastructure in the board, who will be in charge of all PPP

projects and deal with private investors

Incubation centres to harness new ideas

Railway university to train railway staff

Project management groups to expedite projects

Planned tax holiday scheme that will incentivise investment for railway projects

that have a long gestation period

Decision support system for project implementation

Strategic partnership and transparency in procurement

Major Decisions

Opening up of the system to overseas investor

Diamond quadrilateral high-speed rail network

Feasibility study for bullet train between Mumbai and Ahmedabad

Connectivity to new and upcoming ports through PPP

Private freight terminal on PPP model

Programmes to facilitate procurement of parcel vans and rakes by private parties,

special milk tanker, increased movement of fruits and vegetables in partnership with

warehousing corporation

100 crores for strategic railway line in border area for defence

Discount under empty flow wagon policy

Up to 5% biodiesel use

Development of loco coaches and wagon leasing market

Target to become largest freight carrier in the world

Eco tourism and education tourism in north eastern states

Golden quadrilateral network- Rs 9 lakh crore

Bullet train- Rs 60,000 crore

359 incomplete projects – Rs 1.82 lakh crore

Finnacle-2014 SDMIMD

Proposed Sources of Money

The budget proposes to attract private domestic funding in infrastructure projects.

Public-Private partnership

Proposal to allow up to 100% FDI in elevated rail corridor project, freight terminals

and sub urban corridors for connectivity to ports and mines

The recent fare revision will bring Indian Railways an additional revenue of about Rs

8,000 crores

Leveraging railway PSU resources i.e surplus funds of railway PSU’S to be invested in

infrastructure projects of railways

Impact

It is expected that FDI influx in the sector can add up to 1.5 percentage points to India’s

GDP

Freight loading to rise from 50 million tonnes to 1,101 million tonnes

Bullet train would help to prevent exodus

Enhanced passenger experience

Tourism sector will get a great boost

CONCLUSION

The rail budget though has some limitations but it is a visionary statement to put railways on

fast track. The focus seems to be on consolidation as not many new projects have been

announced. Speed today is a symbol of progress and the government has done well to accord

high priority to the introduction of fast trains which will add momentum to trade and industry

and also would help to decongest cities as movement of people would be easier and faster. The

diamond quadrilateral network will be the pace setter for rejuvenation of Indian railways. The

focus on dedicated freight corridor and laying of new tracks will metamorphose the rail

movement. The three big messages are- Consolidation, Limited Populism and Expansion

largely with private investment.