Rail Budget 2016: Indian railways targets new sources of revenue, cost cuts

India`s state-owned railway said on Thursday it planned to cut costs and generate new sources of revenue next year to offset a big rise in its wage bill and help keep an ambitious modernisation plan on track on track.

Reuters| Updated: Feb 25, 2016, 14:16 PM IST
Rail Budget 2016: Indian railways targets new sources of revenue, cost cuts

New Delhi: India`s state-owned railway said on Thursday it planned to cut costs and generate new sources of revenue next year to offset a big rise in its wage bill and help keep an ambitious modernisation plan on track on track.

Presenting the annual rail budget for 2016/17, Railway Minister Suresh Prabhu said the planned budget outlay for the world`s fourth-largest network would be 1.21 trillion rupees ($17.6 billion), up about 20 percent from the current year`s estimated expenditure.

But a slowdown in growth of passenger and freight revenues has put pressure on the railways` finances one year after Prime Minister Narendra Modi`s government unveiled a 5-year $137 billion investment plan to overhaul the saturated and decrepit network.

"These are challenging times...We are faced with two headwinds, entirely beyond our control; tepid growth of our economy`s core sectors due to an international slowdown and the looming impact of the 7th pay commission," Prabhu told India`s parliament four days ahead of the federal budget.

Prabhu said the railway would need to cut costs, grow its freight business which provides two-thirds of its revenue and target new sources of non-tariff revenue through measures such as redeveloping train stations. 

"We need to look beyond the current approach to expand the basket (of freight commodities). We will make sure we recapture the traffic," he told India`s parliament, announcing plans for three new dedicated freight corridors across the country.