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Business News/ Politics / Policy/  Suresh Prabhu looks to improve ease of doing business
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Suresh Prabhu looks to improve ease of doing business

Railway minister promises review of tariff structure, time-tabled freight trains, online bidding

Suresh Prabhu said that the container sector would be opened to all traffic, barring coal and specified mineral ores, and part-loads would be permitted during non-peak season. Photo: Pradeep Gaur/MintPremium
Suresh Prabhu said that the container sector would be opened to all traffic, barring coal and specified mineral ores, and part-loads would be permitted during non-peak season. Photo: Pradeep Gaur/Mint

New Delhi: Railway minister Suresh Prabhu announced a host of measures in the rail budget on Thursday to improve the ease of doing business and make the railways the preferred mode of transportation for industry.

He proposed a review of tariff structures to make them more competitive, time-tabled freight trains and special commodity trains, expanding the scope of goods transportation for most commodities and moving the entire bidding process online to make the procurement process transparent.

Improving the ease of doing business has been one of the priorities of the National Democratic Alliance (NDA) government since it came to power in May 2014. India is currently ranked 130 among 189 countries in the World Bank’s ease of doing business index. The NDA government hopes to break into the top 100 this year.

Prabhu, in his budget, sought to reverse the decline in the share of rail freight in the overall transport of goods by proposing a three-pronged approach—expanding the freight basket of the Indian Railways, rationalizing the tariff structure and building terminal capacity.

“The freight basket of Indian Railways is dominated by 10 bulk commodities which enjoy a share of around 88%. Indian Railways should look beyond these to expand revenue base. A full-fledged market study is being undertaken and detailed supply and demand scenarios, service level and infrastructure requirements will be assessed so that an action plan to recapture that traffic through either containerization or new delivery models—for example, roll-on, roll-off will be developed and implemented," Prabhu said.

As per the rail budget documents, the Indian Railways has estimated earnings through transportation of goods at 1.17 trillion in 2016-17, marginally higher than the revised estimate of 1.11 trillion for 2015-16 but lower than the 1.21 trillion budget estimate for this fiscal.

Prabhu said that despite network capacity limitations not allowing the running of time-tabled freight trains, such freight container, parcel and special commodity trains will be started on a pilot basis from April.

He also said that the container sector would be opened to all traffic, barring coal and specified mineral ores, and part-loads would be permitted during non-peak season.

Prabhu announced plans to inaugurate the country’s first rail auto hub in Chennai, which will encourage transportation of cars by rail, offering a greener logistical solution that will decongest roads and help auto companies cut down on transport costs.

On tariffs, Prabhu said the current tariff structure of the Indian Railways had led to out-pricing of freight services.

“A review of tariff policy will be undertaken to evolve a competitive rate structure vis-à-vis other modes, permit multi-point loading/unloading and apply differentiated tariffs to increase utilization of alternative routes. The possibility of signing long-term tariff contracts with our key freight customers using predetermined price escalation principles will be explored, which would provide predictability of revenues to Indian Railways and of costs to customers," he added.

Prabhu also announced that the paperless contract management system will be rolled out on a pan-India basis from next year, wherein the entire bidding process will be done electronically.

“All procurement, including procurement of works, has moved to the e-platform. We intend to usher in a new era by switching over to paperless contract management system where not only the bids are invited online, but the entire process leading to award of a tender is also done electronically. We have completed the trial run for the above and intend to roll it out on a pan-India basis in the next financial year," Prabhu said in his speech.

More than two-thirds of freight traffic in India is road-based, with the remainder relying on the railways.

Prabhu pointed out that the ministry’s decision to delegate tender and estimate-related powers to the zones had ensured that projects get sanctioned within a period of six to eight months, a process which earlier took more than two years.

The ministry has finalized the standard documentation for engineering, procurement and construction projects and will implement 20 projects through this mode in 2016-17.

The budget also proposed an increase in the carrying capacity of the railway network so that, by 2019-20, 70% of freight traffic is on high axle load wagons.

Industry welcomed the measures to boost transparency and improve the ease of doing business.

Harshavardhan Neotia, president of the Federation of Indian Chambers of Commerce and Industry, or Ficci, said in a note that the rationalization of freight tariffs and review of the public-private partnership policy framework will help attract private players to transform rail transportation and increase revenue.

“It is significant that to ensure 100% transparency in all its operations, all procurement including procurement of works has moved to the e-platform, and the process of conducting recruitments online will be extended to all positions," Neotia said.

Mahesh Y. Reddy, director general, Infrastructure Industry and Logistics Federation of India, said the railways’ attempt to regain its lost share in freight movement from the road transport sector is welcome. “The proposal to introduce time-tabled freight trains by 2020 is a proactive step that can trigger higher volumes of freight movement for railways," he said.

D. Bhattacharya, managing director, Hindalco Industries Ltd, and vice-chairman, Novelis, said the railway budget is customer-centric, both for passengers and the industry.

“It is seeking to enhance the competitiveness of railways for goods traffic through announcements of review of the freight tariff structure, direct long-term freight negotiations with key partners, container trains with timetables and focus on improving connectivity to ports and speed of freight movement... a win-win for the industry and the railways," he said in a note.

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Published: 26 Feb 2016, 12:40 AM IST
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