Home >opinion >online-views >Rail budget has promises to keep and miles to go

At the outset, the new railway minister Sadanand Gowda must be congratulated for taking a bold decision to increase passenger fares before the budget and standing by his decision. Former railway minister Dinesh Trivedi had rightly stated that Indian Railways was in the ICU, when he increased passenger fares in his budget for the year 2012-13, which unfortunately had to be rolled back.

The first rail budget of the new government and the railway minister, while not a pathbreaking one, has positive features. For one, it is not a populist budget announcing a slew of new projects. While retaining the contours of the vote on account budget presented in February 2014, initiatives have been spelt out to take the Railways forward. Perhaps the minister could have given more details on the proposed foreign direct investment (FDI) and private investments, which would have had an immediate impact on market sentiment. These modalities must be spelt out at the earliest.

Already steps have been taken in the previous budget of 2013-14 through the introduction of automatic fare revision based on the fuel adjustment component (FAC). The current railway minister has confirmed that this would be implemented. No mention has been made about taking forward the creation of a Rail Tariff Authority, which hopefully, must crystalize in the current year for the fare revisions to be made independent. A salient feature of this budget is containing market borrowings through IRFC (Indian Railway Finance Corp.) and the proposal for a near-plan holiday, which would give a much-needed reprieve to the sagging finances of the Railways. To concretize this plan, the railway ministry should prepare a Green Book, like the Pink Book, indicating the projects proposed to be frozen, and a separate book according high priority for projects that would augment the capacity of Indian Railways.

While introduction of bullet trains and other high-speed initiatives for travel are welcome, parallelly the minister must address the safety requirements of the railway tracks and other infrastructure. What is encouraging is that this is also the Prime Minister’s dream rail budget and financial support from the Union government, especially in the form of a safety fund, would help to modernize rail infrastructure.

What is really required for the national transporter is a clear policy for financial support not only in the current year, but also in the years to come. Budgetary support from the Union government comes at a cost of 5% in the form of a dividend payable by the railways to the Union government. For the current year, approximately 9,100 crore has been set aside as dividend payable. This needs to be revisited, keeping in view the social obligations of providing a safe rail network to the country.

The railway minister has also correctly hinted at the need for cost-sharing and participation by the state governments for their respective prioritized projects, which would accelerate progress. Increasing Plan expenditure comes at a cost, since development, repairs and renewals are funded through the internal generation of Indian Railways. This would affect adequate provision to the debt service fund created in the last budget primarily to meet the repayment of loans taken for the Dedicated Freight Corridor and also to cover the future demands of the Seventh Pay Commission. On no account should the fund balances be compromised, and the necessity to set aside adequate predetermined amounts to this fund should be ensured. Ideally, about 30,000 crore must be built up within the next three-four years. This again underlines the need for a dedicated safety fund to meet the renewals of the overburdened tracks and closure of level crossings and several other measures to modernize the assets of Indian Railways.

To conclude, this is a budget on the right track and a dream budget with the promise of fulfilling the aspirations of millions of travellers with a boost to the country’s economy.

Vijaya Kanth is a former financial commissioner, Indian Railways.

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