Budget 2015

26Feb

Rail Budget 2015-16 India Update : Railways needs 2 lakh cr to complete projects

The Health of the Indian Railways in not in good shape. The Railways is facing a huge shortfall of revenue. It lacks resources. Over the years, different Railways ministers have announced several projects across India. Most of these projects are at various stages of implementation. Some are yet to take off.

 

Over the years states have been demanding for better Railway network, infrastructure and connectivity. Unless the states share the cost of various Railway projects, the Centre won’t be able to implement them.

According to the information available with me many state governments are opposing cost sharing on the grounds that they don’t have enough money to bear the cost. In my home state of Karnataka, when I was Minister of State for Railways at the Centre, I had persuaded the state government to share the cost.

The state had shared 50 percent of the cost of laying new tracks and gauge conversion etc. A few other state governments also shared the cost in their respective states.

The new Railways minister Suresh Prabhu has a tough job. He is a decent man with a vision. We expect him to do something big. But, how will he be able to raise the money to complete the ongoing and pending projects?

We need at least two lakh crore rupees to complete these projects. The Railways is facing a huge resource crunch. Unless, he raises money, no promise can be kept. Raising money is not an easy job under present circumstances.

Some argue that the Railways should raise money from the open market. I have a hunch that Suresh Prabhu is keen on external borrowing. But, we should be careful before going to private entities for money. After all Railways is India’s lifeline and we can’t compromise its security and independence for money. Privatization or partial privatization is not a good idea. Before deciding on such things, all stakeholders should be taken into confidence. We in the opposition must also be contacted and convinced.

Suresh Prabhu is a new minister and we will wait for some more time before saying something about his performance. The Railways budget for 2015-16 will decide that. Under UPA-1 and UPA-2 rule, the Railways has done a good job. We initiated and completed several projects.

I don’t agree with the allegations that we did nothing. We may have failed in marketing our good work. The Modi government is good only at marketing. There is no real action on the ground.Railways is India’s pride. It is our national asset. Let’s develop it into an international brand with international standards. However, we must not forget the poor and ordinary people who depend on the Railways. Between money and social responsibility, the government must choose social responsibility.

26Feb

Rail Budget 2015-16 India Preview : Rail stocks mixed; focus on investment, no fare hike seen

Rail stocks are mixed just ahead of the Rail Budget to be presented by Suresh Prabhu at 12 pm today. Stocks like Hind Rectifiers and Titagarh Wagons are up 1-2 percent while Kalindee Rail , Texmaco and Kernex Micro are down 2-4 percent intraday on Thursday.

A lot of suggestions from the Prime Minister’s office have been incorporated in the Budget and the focus is likely to be on attracting investment, modernisation of trains through Wifi and transparency in railway systems.

While a fare hike is unlikely across the board, acess for cleanliness cannot be ruled out. Prabhu is likely to unravel his grand plans of how to decrease the cross-subsidy for passenger service from freight earnings which is touching Rs 24,000 crore and the steps to increase goods transportation share in the national transporter with or without hiking fares.

For 10 years before 2012-13 there was no increase in rail fares. Then Railway Minister and Trinamool Congress leader Dinesh Trivedi had made an across-the-board hike in 2012-2013 but was made to roll back the hike in second and sleeper class categories. Since then there have been hikes in passenger fares.

Before the first Railway budget of the Modi government in July last, fares were increased by 14.2 percent and freight rates by 6.5 percent.

26Feb

Rail Budget 2015-16 India Update : Prabhu to unveil plans for raising resources in Rail Budget

Railways Minister Suresh Prabhu will unveil his first Budget on Thursday and a lot of suggestions from the Prime Minister’s office have been incorporated in the Budget, said sources, adding that its focus will be on attracting investment, modernisation of trains through Wifi and transparency in railway systems.

While a fare hike is unlikely across the board, acess for cleanliness cannot be ruled out. Prabhu is likely to unravel his grand plans of how to decrease the cross-subsidy for passenger service from freight earnings which is touching Rs 24,000 crore and the steps to increase goods transportation share in the national transporter with or without hiking fares.

For 10 years before 2012-13 there was no increase in rail fares. Then Railway Minister and Trinamool Congress leader Dinesh Trivedi had made an across-the-board hike in 2012-2013 but was made to roll back the hike in second and sleeper class categories. Since then there have been hikes in passenger fares.

Before the first Railway budget of the Modi government in July last, fares were increased by 14.2 percent and freight rates by 6.5 percent.

Though there is a decrease in diesel price, electricity cost has gone up by over four percent making it a balancing act for the fuel adjustment cost (FAC)-lnked tariff revision policy adopted by railways since 2013.

Currently there are 676 projects worth Rs 1,57,883 crore sanctioned and out of these, only 317 projects could be completed and 359 projects remain to be completed which will now require as much as Rs 1,82,000 crore.

Considered a reformer, Prabhu may lay the road map for attracting private investment for the public transporter, which badly needs funds for completion of many crucial rail projects. Given the funds constraints, he is likely to go slow in announcing new trains and projects in the budget.

Funds allocation will be made only for those projects including new lines which are strategically crucial, doubling and route electrification which are nearing completion, the sources said.

26Feb

Rail Budget 2015-16 India Update : Passenger svcs breakeven must, says ex-rail board member

The best start for the railway reform will be if the present railway minister can make passenger services of Indian railways breakeven. The Indian railways’ finances has gone from bad to worse gradually for the simple reason that Indian railways had to cross subsidize its passenger sector earnings by about Rs 30,000 crore every year.

Over the years, it is increasing. During my time, the loss of Indian railways due to passenger services was Rs 8,000 crore. After taking a lot of measures, I could reduce it to Rs 6,000 crore but now since then and prior to my time also, passenger fares were not increased and very recently two-three small increases have been made. As a result, what has happened is loss has increased right up to Rs 30,000 crore.

If you calculate the operating ratio of passenger services separately as you know that Indian railway’s overall operating ratio is little more than 90 maybe 92-93 and gradually it is getting worse. Now, if you separately calculate the operating ratio for passenger services and freight services then passenger services operating ratio will be as high as 160, which means for earning each Re 1 from passenger services, you have to spend Rs 1.60 paisa.

Normal course – Indian railway is the only railway in the whole world, which makes a small amount of profit but if you can make the passenger services self sufficient that means breakeven then Indian railway can easily generate internal resource mobilisation to the tune of Rs 40,000-45,000 crore.

The railway is a commercial organisation basically; therefore railways operation broadly should be divided into two categories. First category 80 percent of it should be on commercial configuration, commercial viability. That should be only if the operation, the business is financially viable. Now therefore all commercially viable projects like any other commercial organisation be it PSU or a private corporation it has to be financed following the normal principle of financing a project. That means 30 percent by the organisation through equity or their internal generation and 70 percent by credit, bank loan. If they can earn Rs 40,000-45,000 crore profit, every year it will not be difficult for them to finance those projects and according to me Indian Railways can finance any project.

Balance, about 15-20 percent these are those projects where say in a backward area the rail line should go, the roads have gone because every year thousands of crore either central government or state government have spend for expanding the road network. Like, during Vajpayee’s time the golden quadrilateral of roads have been constructed or started being constructed.

So railway has got 2-3 social obligations, not exactly the social obligations, it is necessary for the country’s benefit, security and defence. So front area, backward area, these projects entirely should be financed by the state government or the central government. If a state wants some line in their backward area they should pay some 50 percent or whatever it is and Center should pay and that project should be constructed based on that.

© 2008-14. All Rights Reserved. Epic Research Pvt. Ltd.