Global Outlook

Indian Union Railway Minister presented a populist railway budget

Contributed by Nirmal Bang

By Nirmal Bang

Mamata Banerjee, the Union Railway Minister, under the leadership of Prime Minister Manmohan Singh, played safe and presented a please-all budget on 24th February, which according to her is aimed at “not only growth but also the common man”.

With her decision to keep railway tariffs unchanged for the next year, she managed to bring cheer to the masses but could not provide concrete answers as to how she would meet expenditures to overhaul the 157-year-old railway network. Through the budget, she made way for the private players to join as partners in important projects. This will allow the railways to raise money and fund key projects.

The proposed budget laid an outlay of Rs 41,426 crore. Of these, Rs 4,411 crore will be spent on laying new railway lines covering 1,002 km and Rs 1,302 crore will be spent on passenger amenities. This is the highest ever planned outlay to provide an efficient railway network through dedicated freight and passenger corridors.

The railway budget, it seems is a part of the government’s efforts to curb inflation. It kept freight rates unchanged. This has come as a huge relief to commodity producers of cement, steel, iron ore and coal. Any increase in freight rates would have badly affected the economy, which is recovering from one of the worstfelt recessions in recent times.

It is even more important because the government is taking steps to rollback stimulus measures it had announced to fight recessionary blues. There has also been a reduction in freight rates by Rs 100 per wagon on foodgrains and also kerosene to indirectly reduce food prices, which have been increasing rapidly over the last few months.

This reduction also explains the sudden positive move ment of stock prices of food companies like KRBL and Kohinoor Foods. Moreover, by not increasing freight rates the government has further given a signal that it is equally concerned about inflation.

The Indian railways has added on an average 180 route km per year since 1956 to take 53,596 km of railway connectivity to 64,015 km, which is dismal compared to the global average. The government has realized its shortcomings and has taken a positive step by planning to complete 1,000 km new lines in the next one year.

The government has taken more aggressive steps by setting a target of 25,000 km new lines over the next 10 years. This is expected to benefit railway companies in general and Kalindee Rail Nirman (Engineers) Ltd and ARSS Infrastructure Projects Ltd in particular.

For the first time in the history of the Indian Railways, the UPA government has taken initiatives to set longterm goals under the ‘Vision 2020’ programme. The government will achieve short-term (1 to 2 years), medium-term (5 years) and long-term (10 years) targets under this programme.

To overcome administrative bottlenecks, the government plans to set up a Task Force to ensure a 100-day clearance for investment proposals. She explained, “It is a fact that administrative and procedural delays discourage potential investors. We will need to overcome this. I am setting up a special task force." Vision 2020 also aims at adding 25,000 route km to the railway network.

The government is taking the Public Private Partnership route for few projects. However, didi clearly mentioned that the government does not intend to privatize the railway sector. “The railways will remain with the government,” she said during the budget presentation.

Some of the projects to be started through the PPP route are development of multi-level parking complexes, setting up of five state-of-the-art wagon factories in JV/PPP mode, which will help railways meet transportation demands of the economy. However, this news sent a negative signal to wagon manufacturers, which led to a sharp fall in stock prices of some players like Titagarh Wagons and Texmaco.

The railway ministry also announced the introduction of modified wagon investment scheme for high capacity general purpose and special purpose wagons. It will also cover iron ore, coal and cement. It plans to acquire 18,000 new wagons in the next one year.

The government initiated this scheme in 2006 also but discontinued it after some years. But if this scheme is implemented properly then it will help revive demand for new wagons from private companies.

Apart from policy initiatives, the key aspect will be to implement the announced measures. The Gross Traffic Receipts is projected to be Rs 94,765 crore for the current financial year as compared to Rs 88,356 crore (revised) for FY10.

The surplus is projected to be Rs 3,173 crore for FY11 against Rs 951 crore (revised) for FY10. The target for freight loading for FY11 has been kept at 944 mt, an increase of 54 mt over the revised figure of 890 mt for the current financial year.

The railways will construct 93 multi-functional stations across India. Gauge conversion will help railways to attain the target of 120 new trains. It will also flag off 117 new trains in the next few months.

Other announcements included modernization of the Integral Coach Factory in Chennai, setting up of new wagon repair shop in Mumbai, setting up of new design, development and testing centre for railway wheels at Bangalore. It will also launch double-decker trains and introduce mobile ticketing vans.

In its endeavour to provide better facilities to passengers, Banerjee’s budget included a host of amenities for travelers like better pantry service, potable drinking water, more ticket counters and assistance to aged passengers among others. Discounts and concessions in ticket rates were also a part of the budget.

Keeping up with technological advancements, several announcements pertaining to SMS updates, anti-collision systems, GPS-based optimized driver guidance systems have also been accounted for in this budget.

The implementation of radio frequency identification (RFID) to track freight wagons is also on the anvil. SMS updates on reservation and train timings will help passengers to make last-minute changes in their travel plans.

The railways will create a separate unit within the organization to spearhead implementation of projects. Apart from this, it will introduce new anti-collision devices, better traffic signaling systems along 880 km track. Out of the 17,000 unmanned crossings, 3,000 unmanned crossings will be manned this year and 1,000 next year. The remaining 13,000 crossings will be manned in the next five years to avoid accidents.

Going by the past experience in Singur, Mamata in her budget speech clearly stated that forcible acquisition of land for rail projects would not be made. Moreover, a policy decision has been taken to employ one member of a family whose land is requisitioned for railway projects, Banerjee said in the budget speech adding that the railways plans to provide houses to all its employees in the next 10 years in collaboration with the urban development ministry. It will also run 400 hospitals and diagnostic centres on rail land and set up 50 cr?ches for children of women employees.

However, the announcements clearly show that Mamata has doled out sops to her home state West Bengal in view of the assembly elections next year and left several other states asking for more.

There are plans to set up 17 new complexes in Bengal. A wagon factory will be set up in Barddhaman and Haldia, a diesel multiple unit factory will come up at Sankrail and clean drinking water bottling plant will be built in Malda and Farraka. Out of the 94 new stations to be  developed as Adarsh stations, 30 are situated in her State. Expansion of the Kolkata Metro Network is also a part of the railway budget.

Banerjee said that railways will be a lead partner for Commonwealth Games and will run special trains on the occasion. Railways will run a special train to Bangladesh on the 150th birth centenary of Rabindranath Tagore.

Though the railway budget failed to excite a section of the country, cement, fertilizer, steel, construction and mining companies are likely to benefit from the budget in due course for various reasons.

Others who will also benefit are KRBL, Kohinoor Foods, REI Agro, Kalindee Railway, ARSS Infra, Bartronics, Gemini Communications, Kernex Micro Systems, Texmaco, BEML and Titagarah Wagons among others.

The railway budget looks good on paper but it will make real sense only if it is executed as planned. Only time will tell if Mamata Banerjee is a better Railway Minister than her predecessor.