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BW Businessworld

High On Ideas, Hazy On Specifics

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DV Sadananda Gowda’s maiden Railway Budget is a medley of old and new. While the most significant announcement related to introducing foreign direct investment (FDI) in the railways, the minister did not forget to introduce 51 new trains and initiate surveys for 18 new lines.

He has gone ahead with Narendra Modi’s plan of introducing high speed trains (160-200 kilometres) on nine corridors on the Diamond Quadrilateral (connecting metros and high growth centres). All that will entail an investment of Rs 900,000 crore. Add to that Rs 60,000 crore ($10 billion) for introducing bullet trains on the 534 kilometre on the Mumbai-Ahmedabad route. That would work out to an annual capital expenditure of around Rs 50,000 crore.

It will take five years to introduce a bullet train once work on building the corridor starts. Rather than announce a series of bullet trains, Gowda has listed only one. Building that would be a learning experience for the railways and the country as a whole.

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Since internal revenues and government funding are insufficient to meet the needs of the railways, the FDI will help. That’s critical as railway finances are in bad shape. The transporter ended the year with an operating ratio of 94 per cent, which means that out of every Rs 100 that the railways earn, it spends Rs 94.

While there were big announcements, the biggest problem with Gowda’s Budget was a sheer lack of detail. There is no clarity on what will be the level of FDI — 26 per cent, 49 per cent, 74 per cent or even 100 per cent? On the high profile bullet train and the high speed corridors on the Golden Quadrilateral, there are no timelines mentioned.

That’s surprising since Gowda went out and mentioned that in the last 30 years, 676 projects worth Rs 157,883 crore were sanctioned. Of that, only 317 projects were completed and the balance 359 projects will require Rs 182,000 crore. Also in the last 10 years, 99 new line projects worth Rs 60,000 crore were sanctioned of which only one project is complete. Four projects that were planned 30 years ago are still not complete. Yet, Gowda has gone out on a limb and sought surveys for 18 new lines.

Gowda did not have to go in for a fare hike since he had done that a few days ago. The recent hike would provide the railways an additional Rs 8,000 crore this fiscal. However, the minister made no mention of the Rail Tariff Authority. What he did mention in passing was that periodic revision in passenger fare and freight rates, as approved by this august House, will be linked to revisions in fuel prices in order to insulate the Railway revenues from fuel cost escalation. Again, there is no clarity on how frequently will fares change? Is there a scope of fares falling in the eventuality that fuel prices fall? How will it be passed on to consumers?

There has been an increased focus on passenger amenities at stations (escalators, lifts, cleanliness), on trains and for booking tickets (e-ticketing, mobile booking). Like mentioned earlier, one needs to wait for the detailed guidelines on each of the initiatives to see how well it can rolled out quickly. The boost to railway investment will lead to all round growth of infrastructure industries. That in turn can lead to faster GDP growth. That hopefully should be clear in the next few days.