Rail Budget: Premium trains likely to be the highlight

When Mallikarjun Kharge, the sixth railway minister in the United Progressive Alliance (UPA) government's second term, presents an interim Railway Budget on Wednesday, it would be quite different from his predecessor Lalu Prasad Yadav’s interim Budget in 2009.

No major announcements or tariff changes for freight or passenger segments are likely to be announced. 

Officials said premium trains on 37 identified routes were likely to be the highlight of his speech. Besides, keeping with the tradition, some new trains will also be announced.

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Since the fuel adjustment component has already resulted in two hikes in freight and one hike in passenger fares, no further adjustments are expected to be made in the Budget.

The UPA-II’s tenure would end with no major breakthrough in improving the financial health of the Railways.

The operating ratio, which reflects the expenditure outgo incurred in earning revenue, may hover around 88 per cent, above the Budget target of 87.8 per cent, reflecting inefficiency in operations.

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Although earnings and loading targets in freight might be achieved, the worry is the falling average lead per kilometre.

The Budget target was set at 645 km and December registered a lead of 622 km. Lead is the average distance travelled by a commodity.

The Plan outlay due to less earnings and more expenditure is set to be cut by about Rs 5,000 crore (Rs 50 billion). The earnings in December went down by Rs 5,000 crore because of lower passenger numbers and falling average lead in freight. Expenditure this year went up by about Rs 4,900 crore (Rs 49 billion) because of higher fuel bill.

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Major public-private partnership (PPP) projects, which were the highlights of Railway Budget 2013-14, had failed to materialise.

The Rs 21,000-crore (Rs 210 billion) Oval Maidan-Virar Rail Corridor project, too, has gone for a toss after the Maharashtra government raised objections to the design, arguing Mumbai Metro would go through the same route.

After missing many deadlines, the locomotive factory projects in Marhowra and Madhepura have  got Cabinet approval.

The Railways may also fall short of achieving its Budget target to get Rs 6,000 crore (Rs 60 billion) through the PPP route for total Plan outlay of about Rs 26,000 crore (Rs 260 billion), according to senior Railway officials. 

Key projects in station modernisation, through the PPP route, are yet to attract investors. 

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Six out of the eight rail-based industry projects announced in the Budget have not seen any development.

Senior Railway officials attribute this dismal performance to lack of funds. But the silver lining has been rail connectivity projects in the Northeast.

The Ministry of Finance provided additional Rs 4,000 crore (Rs 40 billion) for these national projects to augment capacity in the infrastructure-starved Northeast.

Also, the public sector undertakings of the Railways have performed well this year, with over 25 per cent year-over-year increase in the dividend to the Indian Railways.

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With 100 per cent foreign direct investment expected to be permitted in the Railways, the biggest challenge in the coming year would be to engage with the private sector more widely in projects worth over Rs 2,25,000 crore (Rs 2.25 trillion).

In the seven months that Kharge has been the railway minister, no policy announcement for improving either the investment flow or the financial health of the railways were made.

In fact, when the next railway minister assumes office this summer, he would face the daunting task of setting right the skewed railways finances and attracting the private sector for greater participation in railway projects.