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Indian railway budget 2010 analysis

Contributed by Nirmal Bang

By Nirmal Bang

Focus of Railway budget seems to be on controlling inflation

The Railway budget announced today seems to be an extension of governments efforts to curb inflation. In the budget, government has reduced freight rates by Rs 100/wagon on food grains and kerosene to indirectly reduce the food prices which has been increasing rapidly over last few months and has become a major cause of concern. We can expect more of such measures in the coming union budget on 26 February 2010. This also explains the sudden positive movement of stock prices of food companies like KRBL, Kohinoor Foods. Moreover, by not increasing the freight rates government has further given a signal that it is a more concern about inflation.

Addition of 1000 km new lines in one year

Since 1956 railways added on an average of 180 route km per year to take 53,596 km of railway connectivity to 64015 km, which is dismal compared to global average. The government has realized this now and is taking positive steps by planning to complete 1000 kms new lines in next one year. The government has taken more aggressive steps by setting a target of 25,000 km new lines over next 10 years. This is expected to benefit all the railway companies in general and Kalindee Rail and ARSS infrastructure in particular.

Vision 2020

For the first time in the Indian Railway history, government has taken initiatives to set long term goals under the program ?eVision 2020?f. Under this program government will achieve short term (1?]2 years), medium term (5 years) and long term targets (10 years). To do away with administrative bottlenecks, the government plans to set up a Task Force to ensure a 100?]day clearance for investment proposals.

Lack of Government?fs intention towards complete privatization

Government has announced a few projects in which they are taking the PPP route. However, government has clearly mentioned that it does not intend to privatize railway sector. Some of the projects to be started through PPP route are
- To develop multilevel parking complexes through PPP
- To set up five state?]of?]the?]art wagon factories in JV/PPP mode which will help Railways meet the transportation demands of the economy.

Government emphasis of setting up 5 factories through JV for wagon manufacturing has given a negative signal to wagon manufacturers which led to a sharp fall in stock prices of some of the players like Titagarh Wagons and Texmaco.

Revival of Wagon Investment Scheme

Ministry has announced to introduce a modified wagon investment scheme for high capacity general purpose and special purpose wagons. It will also cover iron ore, coal and cement. Government initiated such scheme in 2006 but discontinued it in later years. This scheme if implemented will help the revival of demand for new wagons from private companies.

Apart from policy initiatives, the key aspect will be to implement these policy measures

Key Budget Highlights

- Gross Traffic Receipts projected to be Rs. 94,765 Crs for FY 2011 as compared to Rs. 88,356 Crs (revised) for FY 2010

- Excess (Surplus) projected to be Rs. 3,173 Crs for FY 2011 against Rs. 951 Crs (revised) for FY 2010

- The target for freight loading for FY 2011 has been kept at 944 mt, an increase of 54 mt over the revised figure of 890 mt for FY 2010.

- Reduced freight rates by Rs 100/wagon on food grains and kerosene

- To construct 93 multi?]functional stations

- Will flag off 117 new trains as planned. Gauge conversion will help attain the target of 120 new trains in total

- To complete 1000 kms new lines in next one year

- Plan to introduce Vision 2020

- To acquire 18,000 new wagons in next one year. There is no year over year increment in this target

- To start 6 bottling plants for providing clean drinking water

Financial Highlights

Government has increased budget for passenger amenities from Rs 923 crs last year to Rs 1,302 crs for 2010?]11

Vision 2020

- Railways to come out with 10?]year plan 'Vision 2020'

- Vision 2020 aims at adding 25,000 route km to the railway network

- Will follow public private partnership model in projects

- Special task force will be set up clear business projects within 100 days

Other Highlights

- Policy decision to employ one member of family whose land is requisitioned for railway projects

- Integral Coach Factory Chennai to be further modernized

- New wagon repair shop in Mumbai

- Design, development and testing centre for railway wheels at Bangalore

- To launch double?]decker trains and to introduce mobile ticketing vans

- Railways will provide houses to all its employees in the next 10 years in collaboration with the Urban Development ministry.

- Railways will be a lead partner for Commonwealth Games. Will run special trains for Commonwealth Games

- Railways to run a special train to Bangladesh on the 150th birth centenary of Rabindranath Tagore

- Separate unit to be created within the railways to spearhead implementation of projects

- New anti?]collision devices, better traffic signaling systems along 880 kms of track

- Out of 17,000 unmanned crossings 3000 unmanned crossings to be manned this year and 1000 in next year while remaining 13,000 will be manned within five years to avoid accidents.