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Mint update| Railway Budget: Déjà vu

Mint update| Railway Budget: Dj vu

Mumbai: It usually takes longer to bring in a change in any public sector undertaking in India. But remarkably, for Mamata Banerjee, it took less than two years to bring in a radical change in one of the India’s oldest organization: Indian Railways. The change in finances was so steep; it would have led to a collapse in share price if Railways is listed

Banerjee’s populist policies continued in this year’s budget too. Cheaper online ticketing, a 50% reduction in booking charges for seats, induction of 16,000 ex-servicemen in the railways and trolleys at stations – all perhaps, made with an eye on the forthcoming West Bengal polls.

(The minister also increased the 50% concession travel for accredited journalists with family to twice a year. Thank you, Didi, but oh really?).

Operating ratio, a measure of how much railways spend for every rupee it earns, is fast increasing under Banerjee’s stewardship. The ratio, which stood at 90.8 when she took charge in 2009 increased to 94.4 in 2009-10 revised estimate.

Rising expenses and slow pace of growth in revenues are to be equally blamed for the poor performance. Gross traffic receipts are expected to register a meager growth of only 12% in the coming financial year. Even in 2007-8, the period that is marked by sharp slowdown in economic activity, gross traffic receipts had seen a growth of over 15%.

Railway related stocks

Yet again, Banerjee’s rails budget failed to cheer investors. Stocks of companies that depend on orders from Railways rose hopefully ahead of the Budget and tanked soon after.

It was not as if the minister didn’t have any expansion proposals. Indeed, she did announce building new factories and software centers, but investors just weren’t buying. Perhaps, they looked at promises - made in the previous budgets- which were not always kept.

Like annual targets of building 1000 km of railway lines for example. Brokerages estimate that on an average only 180 km per year. So, the 700 km targeted for fiscal 2012 seems pretty ambitious.

Even the announcement of commission of three anti-collision units failed to cheer software company Kernex Microsystems that fell over 4% during the course of the Budget speech.

This on a day, when the broader markets gradually inched up because of a slight softening in oil prices.

SENSEX17700.91, up 0.39%

NIFTY5303.55 up 0.78%

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