Union Budget invested in Railways without giving in to populism

Amidst all the “last budget” euphoria and the high expectations from the general public of it, the budget outlay details for the Indian Railway went relatively unnoticed. And possibly this was the prime reason for merging the Railways budget with the Union budget. Significant reforms are needed in Indian Railways whilst keeping populism at bay.

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Updated: Feb 02, 2018, 13:03 PM IST

Amidst all the “last budget” euphoria and the high expectations from the general public of it, the budget outlay details for the Indian Railway went relatively unnoticed. And possibly this was the prime reason for merging the Railways budget with the Union budget. Significant reforms are needed in Indian Railways whilst keeping populism at bay.

The Railways budget has been bumped up from 1.31 lakh crores in 2017-18 to 1.48 lakh crores in 2018-19, an increase of nearly 13%. This substantial increase went mostly under the radar as no fanfare projects like new train announcements were announced. Much of the outlay is towards upgrading the current infrastructure to achieve higher average speeds. Elimination of unmanned road crossings, old track replacement and track strengthening are much needed as the frequency of infrastructure breakdowns have already resulted in an increase in the number of accidents. The 19th January incident near Murad Nagar would also force Railways to rethink plans for enhancing the safety of the infrastructure. The outlay towards safety has been increasing by 6.3% (73065 Cr from 68725 Cr) over the last year.

A significant portion of the budget has been earmarked for upgrading all the 8500 stations with CCTV cameras and escalators for all stations with footfalls more than 25000. CCTV cameras would also be installed in the entire fleet of rolling stock. Fund allocation for increasing rolling stock procurement emphasizes the commitment to upgrading infrastructure. Modern train sets are expected to roll out from the Integrated Coach Factory in Chennai in 2018-19. Mumbai and Bangalore suburban railway networks have also been highlighted for special focus.

These investments are likely to kick in private investments as well, especially in the station redevelopment process. With an operating ratio of 96% (94.8% target), Railways still needs to increase overall revenues. A 92.8% operating ratio target for 2018-19 seems too ambitious. On the revenue front, the Railway Fare Review committee is yet to be formed. Though overall revenue is up by 7.3%, freight loading is up only by 4.3% (1216 million tonnes from 1165). A detailed review of fare revenue (passenger and freight) and non-fare revenue should help make a true assessment of customers’ view of Railways as a freight transporter.

Possibly, the low passenger fares would still continue to crowd out freight share, as the service commitment to the freight customers is still low. Dedicated freight corridors, as mentioned in the budget might help alleviate the situation, but they are still far from completion.

Infrastructure upgrade is also aimed at lessening the delays in train arrivals. Railways could possibly also consider a hub-and-spoke mechanism of travel within the country, but a significant focus would have to be given to punctuality as well as accessibility at interchange stations.

Transportation infrastructure investments have been a key focus of the BJP government since coming to power. Holistically, the Railways future plans must be seen in the overall context of transportation including roads, airways and waterways. A unified system of transportation should ease the issues of traversing this vast country, quickly and inexpensively. Overall, the budget holds steady on the promise of capacity augmentation and infrastructure upgrade. The effectiveness of implementation remains to be seen.

Harish Rao is assistant professor of International Management Institute, Delhi. He takes interests in operational research applications in transport, project management and supply chain management.

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

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