Rail Bud­get 2015-16: Full steam ahead

With no an­nounce­ments of new trains or new routes the Rail­way Bud­get 2015 put forth a clear tar­get of con­sol­i­da­tion and im­prove­ment of ser­vices. As a ma­jor­ity of mea­sures were aimed at aug­ment­ing ser­vice qual­ity, ca­pac­ity, freight traf­fic and han­dling, th

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The Rail­way Bud­get put forth by Rail­way Min­is­ter Suresh Prabhu on Fe­bru­ary 26 and passed by Lok Sabha on March 12 re­ceived mixed re­ac­tions from the in­dus­try. While the em­pha­sis on tech­nol­ogy and in­creased con­nec­tiv­ity has been ap­pre­ci­ated by many, the bud­get has been termed dis­ap­point­ing with re­gard to other an­nounce­ments. Dis­cussing the mea­sures in the pro­posed in­vest­ment plan for the Rail­way Bud­get 2015-16, Kalpesh

Sony, Vice Pres­i­dent, Haiko Lo­gis­tics In­dia says, “Apart from FDI in rail­way projects and in­fra­struc­ture, Public Pri­vate Part­ner­ship (PPP) is a good ini­tia­tive for over­all de­velop- ment of freight han­dling net­work of In­dian Rail­ways.” Man­ish Puri, Man­ag­ing Direc­tor, APL In­di­aLinx, though, is of an op­pos­ing view. Puri says, “There are no new ini­tia­tives that will at­tract in­vest­ment and at the same time no vis­i­ble ef­fort is there to im­prove the work­ing of ex­ist­ing poli­cies.” Anu­pam Shah, Chair­man, En­gi­neer­ing Ex­port Pro­mo­tion Coun­cil of In­dia ex­plains, “The Rail Bud­get has the po­ten­tial to im­prove ease of do­ing busi­ness and im­prove con­nec­tiv­ity of the man­u­fac­tur­ing units with the ports and air con­nec- tiv­ity. In the long run, It would cer­tainly re­move bot­tle­necks in the key in­fra­struc­ture re­duc­ing cost of man­u­fac­tur­ing in In­dia.”

Time for meta­mor­pho­sis

Prabhu’s maiden bud­get is be­ing looked upon as an at­tempt to turn the na­tional trans­porter into a fi­nan­cially self-sus­tain­able or­gan­i­sa­tion. Ra­jaji Meshram, Direc­tor Ad­vi­sory – In­fra­struc­ture and Gov­ern­ment Prac­tice, KPMG ex­plains, “The bud­get talks about new av­enues of rais­ing funds, JVs with PSUs and states for rail­way line con­struc­tion along with for­eign col­lab­o­ra­tion for ar­eas where ad­vanced tech­nol­ogy is re­quired etc.” The pro­posal to set up Trans­port Lo­gis­tics Cor­po­ra­tion of In­dia (TRANSLOC) to make avail­able end-to-end lo­gis­tics ser­vices through PPP and de­vel­op­ing the air cargo sec­tor to fa­cil­i­tate the move­ment of cargo be­tween In­land Con­tainer De­pots and the gate­way air­ports in­di­cates the gov­ern­ment’s in­ten­tions to trans­form the rail­ways.

Sony sug­gests, “Con­nec­tiv­ity of air­ports with Rail­ways will open new

av­enues to en­hance EXIM trade to and from north­ern hin­ter­land. Pro­posed TDC and mul­ti­modal lo­gis­tics parks look promis­ing to im­prove the de­liv­ery ca­pa­bil­ity which is in per­fect sync with ‘Make in In­dia’ cam­paign.” Bharat Sal­ho­tra, Man­ag­ing Direc­tor, Al­stom Trans­port In­dia stresses, “Prabhu’s maiden bud­get is aimed at in­fus­ing new pur­pose and di­rec­tion in In­dian Rail­ways as in­dus­tries de­pend on it. The bud­get has fo­cused on get­ting the ba­sics back on track.”

Su­nil Shah, Coun­try Manager, MIQ Lo­gis­tics In­dia, how­ever points to is­sues that have been given a miss, “There should have been ad­di­tional cargo coaches pro­posed to be added to all ma­jor pas­sen­ger trains on ma­jor routes. We also need to see cargo hubs cre­ated across the coun­try at sta­tions with very few pas­sen­ger trains for bet­ter utilisation of re­sources.”

At­tract­ing pri­vate in­vest­ments

Hop­ing to in­volve the pri­vate sec­tor in var­i­ous PPP projects, the bud­get stressed on pri­vate in­vest­ment. Sal­ho­tra says, “A vi­brant PPP model will lead to rapid mod­erni­sa­tion of rail­ways and will of­fer huge scope for pri­vate play­ers. It will also al­low the In­dian Rail­ways to in­duct from the pri­vate sec­tor, new tech­nolo­gies based on life cy­cle costs rather than merely the cap­i­tal cost of pro­cure­ment.” The in­vestors and pri­vate par­tic­i­pants, though, are en­thu­si­as­tic about the Min­istry’s fo­cus on in­creased in­vest­ment for ca­pac­ity build­ing but are cau­tious in the ab­sence of finer de­tails. Meshram stresses, “The Rail­way Bud­get does not have any de­tailed an­nounce­ments on the var­i­ous PPP schemes and poli­cies. It has an an­nounce­ment that the PPP cell will be re-or­gan­ised and that var­i­ous schemes like Spe­cial Freight Train Op­er­a­tor Scheme, Pri­vate Freight Ter­mi­nal Scheme, Lib­er­alised Wagon In­vest­ment Scheme, etc. will be re­viewed in the next three months.”

While Prabhu has tar­geted in­fras­truc­tural devel­op­ment over a span of four to five years with­out de­tail­ing the source of funds, he also an­nounced that the PPP pol­icy needs to un­dergo a change to at­tract in­vest­ments.

Amit Chaudhri, Chief Ex­ec­u­tive Of­fi­cer, KRIBHCO In­fra­struc­ture Limited ex­plains, “The an­nounce­ment for pri­vate funds alone with­out any con­crete ac­tion plan for the pri­vate par­tic­i­pa­tion and devel­op­ment of trust in the Rail­way’s PPP model is not go­ing to help. There is a trust deficit with past ex­pe­ri­ence of the Rail­ways chang­ing the goal-posts mid­way.”

Em­pha­sis­ing that there is need to look at mak­ing in­vest­ment less cum­ber­some, Puri says, “Old poli­cies have been re­tained which is good, but at the same time, there is a need to make the ex­e­cu­tion of th­ese poli­cies more user friendly. At present, there are mul­ti­ple ser­vice tax re­lated is­sues that are not re­solved.”

In­crease in freight rates

The de­ci­sion to hike freight rates up to 10 per cent and the pro­posed hike in freight rates for 12 com­modi­ties in the range of 0.8 per cent to 10 per cent has drawn wide­spread crit­i­cism.

Shreyas Malkan, As­sis­tant Vice Pres­i­dent – Sup­ply Chain, Re­liance Com­mu­ni­ca­tions views, “The freight rate in­crease pro­posed in this needs to be re­voked. How can freight be in­creased when diesel prices have dropped sig­nif­i­cantly? The age old method­ol­ogy of freight rev­enues sub­si­dis­ing pas­sen­ger travel has to end. Due to this cross sub­sidy is­sues the rail­way’s share of to­tal freight has col­lapsed from 89 per cent in 1951 to 30 per cent to­day.” Sony says, “In my opin­ion, this bud­get has not suf­fi­ciently ad­dressed the con­cern of lo­gis­tics cost which con­tinue to re­main high. In the long run, it will af­fect our cost com­pet­i­tive­ness as com­pared to other Asian coun­tries as a man­u­fac­tur­ing hub. In the short run, how­ever, prices of food grain, pulses, ce­ment, coal and steel and prod­ucts thereof are likely to go up fol­low­ing the pro­posal to hike rail freight.”

Shah says, “The prin­ci­ple of cross sub­si­dis­ing by en­hanc­ing freight rates is a wrong thing to do and will af­fect In­dia’s cost com­peti- tive­ness as well as con­trib­ute to en­vi­ron­men­tal prob­lems as cargo will then move to road trans­port.” Ex­ter­nal reg­u­la­tor & re­forms

Re­act­ing to the Bud­getary pro­vi­sions for ap­point­ment of a tar­iff reg­u­la­tor for the Rail­ways by 2016, Puri says, “An ex­ter­nal reg­u­la­tor to man­age such ini­tia­tives is an ab­so­lute must, as it has proved im­pos­si­ble for In­dian Rail­ways to it­self im­ple­ment and man­age th­ese poli­cies in a fair man­ner.” Chaudhri fur­ther sug­gests, “There is a need to re­visit all PPP projects with mon­i­tor­ing com­mit­tees con­sist­ing of cus­tomers and stake­hold­ers along with hav­ing a ‘Rail Reg­u­la­tor’ to mon­i­tor price mech­a­nism and pric­ing.”

As ex­perts be­lieve that fi­nan­cial and or­gan­i­sa­tional re­forms are badly needed to bring about a turn­around, CP Sharma, Man­ag­ing Direc­tor, Daulat Ram En­gi­neer­ing Ser­vices rec­om­mends, “Zonal Rail­ways as profit cen­tre should be al­lowed free­dom to fix tar­iff freight es­pe­cially for train routes which have empty move­ment.”

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