No big bang announcements like proposal for a new ‘Bullet Train’ corridor or a new dedicated freight corridor were announced in the Budget. Perhaps, the message was the urgent need to bring in private investment through PPP in what appears to be a wide spectrum of railway activity
We still have to get used to the abridged version of the Railway Budget after it was merged with the Union Budget. Numerous details about its performance, focus areas, list of new trains and projects and future expectations do not receive adequate attention in the new format. However, in the overall context of the Indian economy, a separate Railway Budget was an anachronism, a relic of the past. It was a wise decision to do away with it.
Nonetheless, the brief coverage it received in the Economic Survey 2019 was disappointing. The document highlighted very minor, peripheral achievements such as the provision of lifts and escalators, bottle crushing machines, mechanised cleaning and housekeeping at major stations among other things. There was also, perhaps, a disproportionate emphasis on the electrification programme for transport, which is the most efficient user of fossil fuels, contributes a minuscule percentage to greenhouse gases and carries most of its freight and passenger traffic on electric traction. There have also been commendable achievements in the area of ‘safety’ with a significant decline in the number of train accidents. The ‘Swachh Rail, Swachh Bharat’ mission has received widespread appreciation from the public.
However, one had expected more on railway reforms and restructuring — reduced costs, strategies for attracting private investment, inducting new technology, increasing market share and improving quality of service in terms of reliability and punctuality — both in Finance Minister Nirmala Sitharaman’s Budget speech as well as in the Economic Survey.
The Budget itself provided very little in terms of physical or financial performance. In this context, it may be useful to look at approximate figures published by the railways, the Economic Survey and the Budget annexures. Originating freight loading in 2018-19 grew by 61.84 million tonne over the previous year — an increase of 5.33 per cent. This is a positive development, showcasing that the economy is picking up and the Railways has, despite capacity constraints, been able to meet growth in demand. On the other hand, passenger growth continues to be relatively flat with originating passengers in 2018-19 growing by only 0.64 per cent last year. The total revenue in 2018-19 was estimated at Rs 1,97,214 crore, which was lower than the Budget estimates. Although revenue in freight and passenger segments was higher than the previous year, there has been a fairly sharp drop in earnings from parcel and luggage and sundry earnings, which is a cause for anxiety despite the small contribution to the overall kitty.
With respect to investment, in her Budget, Sitharaman mentioned that the Railways will require funds to the tune of Rs 50,00,000 crore between 2018 and 2030. This sector was currently investing between Rs 1.5 to Rs 1.6 lakh crore on capital account every year. The budget estimate for 2019-20 is Rs 1.62 crore. At this rate, the Minister stated that it will take decades to complete the already sanctioned projects. Her solution for bridging this gap was to use the public private partnership (PPP) mechanism to attract private sector funding for laying down of tracks, rolling stock manufacture and providing passenger and freight services. As a concept, the PPP arrangement is attractive and has been tried out earlier, particularly in port connectivity links. However, experience has been mixed as the Railways has only associated with private entities for funding without bringing in private sector efficiencies in operations and maintenance. The need is to modify the system to permit private sector participation in operations and maintenance besides introducing a strong regulatory mechanism, independent of the Railways.
The Budget set ambitious output targets in its capital Budget for 2019-20. It planned to construct 800 km of new lines, 800 km of gauge conversion and 4,000 km of doubling with a total financial outlay of Rs 47,997 crore, of which budgetary allocation is Rs 10,155 crore and the balance will need to be raised from market borrowings. Similarly, the target for electrification is 7,000 km with a financial outlay of Rs 6,960 crore, of which except for Rs 1 crore, the balance will come through market borrowing. This route for raising funds is not without risks as railway projects generally have long gestation periods and, in many cases, give low returns. Signalling systems are planned to be replaced at 300 stations and 250 level crossings are planned to be interlocked.
Other major capital expenditure includes track renewal of 4,000 km with an outlay of Rs 10,120 crore and procurement of rolling stock with an outlay of Rs 6,114 crore. Station modernisation has been a priority for more than a decade and this year, 30 stations will be upgraded.
An interesting initiative is in the field of suburban rail transport. It is an appropriate focus area as the next few decades will witness growth in urban population on an unprecedented scale. The speech highlighted the fact that 300 km of suburban lines were sanctioned in 2018-19; 210 km will be opened this year and a total of 657 km were operational in the country. With a view to take this metro-railway initiative forward, Sitharaman proposed the PPP route for this segment, mentioning the example of the Regional Rail Transport System (RRTS) of the NCR, which is currently building the Meerut to Delhi line. The RRTS project is a partnership between the Centre and State Governments. Persuading private sector participation in this segment, which is often unviable, will be a major challenge as urban rail transport receives subsidy from local or central Governments in most parts of the world. The idea is a workable proposition if the scheme is clubbed with Transit Oriented Development (TOD), as was suggested and has been successful in some countries. It is yet to be tried out on a significant scale in India. Another area mentioned was the integration of the payment system for all transit modes. A National Common Mobility Card has already been introduced based on the ‘Ru-pay’ card, which facilitates smooth inter-modal transfers. A major drive to popularise the scheme will be essential. This facility has been long overdue for Indian users.
There were no big bang announcements like a new ‘Bullet Train’ corridor or a new dedicated freight corridor. Perhaps, the main message was the urgent need to bring in private investment through the PPP mechanism in what appears to be a wide spectrum of railway activity. Indian Railways faces a number of problems such as a very high unit cost of operations, which is progressively making it uncompetitive, despite the inherent benefits of the mode. Then there are the slow pace of induction of new technology, a declining market share in both the freight and passenger businesses and an archaic organisational structure. The Railways is in desperate need for reform and restructuring. However, this needs a careful thought, else it may prove to be counter-productive.
(The writer is former member traffic, Railway Board, Ministry of Railways)