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New Delhi: Will Suresh Prabhu be able to pull a rabbit out of his hat when he presents the railway budget on Thursday?

The odds are stacked against the minister for railways.

Fiscally, the burden of the payout on account of the Seventh Pay Commission’s recommendations and declining freight volumes have left the railways severely strapped.

At the same time, expectations are building up for the state-run transporter, especially this time around, to step up public investment—not only will it expand infrastructure capacity, it also has the potential to be a force multiplier to economic growth.

The challenge of Prabhu’s second budget is to balance these two extremes.

According to the Confederation of Indian Industry, higher public investment in key projects, especially railways, will have a cascading effect on growth.

The industry lobby has called for faster creation of industrial clusters along the dedicated freight corridors to help reduce time taken to transport freight and cut costs. It also called for incentives for “off balance sheet" investment proposals in the railways to generate revenue.

According to Indian Railways officials, Prabhu is likely to focus on infrastructure development and pursuing innovative ways of earning revenue. “A few railway corridors and increasing rail speeds are going to be one of the prime focus of rail budget," said an official in the traffic department of the railways on condition of anonymity. He added that a premium is likely to be charged on these high-speed trains.

In a recent interview with Mint, Prabhu had signalled his intent to push the envelope on non-freight, non-passenger receipts.

“Anywhere in the world, railway operations are profitable largely because 30-40% of total revenue of railways comes from non-railway operations. In India, it is not even 1-2%," Prabhu said.

At the same time, with a lot of projects languishing due to shortage of funds, the minister is likely to look forward to more external budgetary support and expand public-private-partnership (PPP) projects.

“The accounts are not good as our earning are far less than our targets," said an accounts department official at Indian Railways, who did not want to be identified. “Whatever investments have come are through loans and the JVs (joint ventures) with the state governments would be possible only after the funds are pooled in. So we are looking forward to more revenue-generation measures in the upcoming budget." He declined to spell out what these measures are.

“The upcoming (railway) budget should ease clearances and simplify processes for investments through PPP," said transport economist G. Raghuram, who was also a member of a committee on railway restructuring and teaches at the Indian Institute of Management, Ahmedabad.

Expectations are that Prabhu will present the largest annual outlay for Indian Railways with an increment of 20-25% on top of last year’s outlay, which was 1 trillion. Part of the increase is attributed to an additional burden of 32,000 crore incurred on account of implementation of the Seventh Pay Commission report.

On the issue of new trains and passenger fares, railway officials are divided. According to a section, the minister is convinced that an increase in fares can be justified on the basis of the better passenger experience the railways has provided in 2015-16.

Railway stations have improved in cleanliness and the on-train experience, including food quality, has become better, so the minister may announce an increase in passenger fares and new trains with short durations and expensive tickets.

A Railway Board member said that may have to wait.

“Minister believes that first we need to improve railway services and then ask for a price (hike), so passenger fares are likely to remain unchanged although a strong recommendation was given by railway officials asking him to increase the fare to raise revenue. Let’s see what the minister decides," the member said on condition of anonymity.

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