Industry leaders, experts describe railway budget as ‘balanced’
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New Delhi: Industry veterans and experts on Thursday described railway minister Suresh Prabhu’s second budget for the national transporter as a fairly “balanced” and “growth oriented” package.
Through the budget, the government has made clear its intent to create new and long-term revenue streams for Indian Railways, they said at an event organized by the Confederation of Indian Industry (CII) to discuss the budget.
“This is a very balanced budget, meant for citizens of India,” said Tilak Raj Seth, executive vice-president at Siemens Ltd. “The new dedicated freight corridors are a welcome step, as it is a critical measure to enhance revenues over the long term.”
The government, which has earmarked Rs.1.2 trillion for capital investment in the next fiscal year, also focussed on enhancing revenue and cutting costs.
“For revenue enhancement there is a lot of strategic direction provided. We need to see the details to find out all the qualitative measures, but the intent is very clear—instead of raising freight rates, the government has expanded the freight basket to create new revenues,” said Nalin Jain, president and CEO of GE Transportation, a division of General Electric Co., and member, CII Rail Transportation and Equipment Division.
“It is looking to generate revenues through new products, new terminals and new solutions rather than core commodities as they have been historically doing. So there is a clear intent on revenue enhancement. The challenge will be execution.”
The budget threw up a few surprises as well.
“The three new freight corridors were quite unexpected. It is going to be a major expense for the government,” said Rajeev Jyoti, chief executive officer of the railway business at Larsen and Toubro Ltd and member, CII Rail Transportation and Equipment Division. “Typically a freight corridor costs around Rs.80,000-90,000 crore. These new freight corridors will cover about 50,000 odd kilometers, and the estimated investment would be around Rs.3 lakh crore.”
Industry experts applauded the government’s attempt to move towards the engineering, procurement and construction (EPC) model for rail projects.
The EPC model assigns the responsibility for investigation, design and construction of a project to contractors for a lump-sum price awarded through competitive bidding.
“The move toward the EPC model will bring in transparency, where investors will be able to see where their money is going and what’s the progress of projects,” said Jyoti. “For the larger projects worth more than Rs.1,000 crore, government’s commitment towards adopting global practices will attract big multinational companies.”
“It is very clear the government is looking at railway sector to kick-start the economy,” he added.
According to Jaijit Bhattacharya, a partner at consulting firm KPMG, the railway budget focused more on consolidation than expansion.
“The budget has focused on key issues plaguing the railways which are customer experience, increasing efficiency, network decongestion, improving safety, improving stations, increasing revenues and increasing availability,” said Bhattacharya. “It also gave a push to projects that will lay the foundation of next generation railways, which is primarily high-speed railway, popularly referred to as bullet trains. Overall a mature rail budget that balances much-needed investments with the revenue and funding constraints.”