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5 Reasons Why The Rail Budget Is On The Right Track For The Future

25/02/2016 10:54 PM IST | Updated 15/07/2016 8:26 AM IST
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The Indian Railways form the lifeline of our economy and investments made in this sector have the potential to have a 5X multiplier effect on the economy. In this backdrop, the Railway Budget 2016-17 is a firm step forward, building on last year's initiatives announced by Hon'ble Minister Suresh Prabhu.

For a behemoth organization like the Indian Railways, it is always difficult to create immediate short-term wins, as the revenues, investments and processes are relatively inflexible. In this light, we must credit the Minister for delivering on more than 139 promises which were made in last year's Budget, but also laying out a very clear three-pillared strategy for reorganizing, restructuring and rejuvenating the Indian Railways.

Under Suresh Prabhu's leadership, Indian Railways is displaying the confidence and conviction of an efficient corporation...

It is truly commendable that under Suresh Prabhu's leadership, Indian Railways is displaying the confidence and conviction of an efficient corporation with quick decision making, and progressive transparency and governance practices, while not losing sight of keeping the common man's convenience at the core of all the initiatives.

Capacity creation

With a total capital expenditure of ₹1,21,000 crore, the emphasis on capacity creation -- with announcements such as the creation of two loco factories under Make in India with a total investment of ₹40,000 crore, electrification target of 2000 km, commissioning of 2800 km of broad gauge among others -- will create investment multipliers. By deploying innovative methods of funding, and undertaking effective cost-rationalization measures, the Railways has managed to restrict the operating ratio to 92% in FY17 despite the burden of the 7th Pay Commission payouts.

It is commendable that the Minister has taken the wise decision of financing economically viable projects using budgetary and extra-budgetary resources in the form of public-private partnerships, joint ventures with states and institutional funding, bypassing the need to hike passenger fares or freight rates to garner revenue.

The Minister has taken the wise decision of financing economically viable projects using budgetary and extra-budgetary resources... bypassing the need to hike passenger fares or freight rates.

Dedicated freight corridors between JNPT to Dadri (1504 km) and Ludhiana to Dankuni (1839 km) are expected to be completed by 2019 and are being executed at a cost of ₹82,000 crore. This project has seen tremendous acceleration under the current Minister with a sanction of ₹24,000 crore of contracts awarded since November 2014 as against ₹13,000 crore in the last six years. The World Bank and Japan International Cooperation Agency (JICA) have stepped in with funding of ₹13,600 crore and ₹38,000 crore respectively.

Organizational efficiency and productivity

The Railway budget has moved away from 'business as usual' and is fine-tuning the Indian Railways' organizational structure to target better execution and performance. There has been decentralization of power to functional levels which will result in quicker streamlined decision-making. The Minister also mentioned that the e-procurement and e-tendering system which is live in 216 depots and divisions will be extended across India to cover all zones. The revamp of human capital practices at the Indian Railways, with emphasis on targets and regular evaluation of officials will bring in higher accountability and translate to enhanced productivity in the longer term.

Modernization of railway stations

In the previous budget, the Minister had announced redevelopment of 400 Railway stations via partnerships with private entities and this has already been approved by the Cabinet. The redevelopment will happen through tapping the rupee bond market for financing, creation of mezzanine debt market and credit enhancement structures with LIC's support. This redevelopment will unlock unproductive real estate and help the Railways attract investors to modernize the major stations in metros, pilgrimage centres and tourist spots.

The Rail Budget scores both on outlining not just the destination but also how the journey will progress.

International partnerships

The Indian Railways has identified the need for international collaboration to leverage modern technologies for improving railway infrastructure and has forged multiple partnerships with the US, UK, Japan, China, South Korea, Germany, France and Spain among others. Knowledge transfer from such technical and funding collaborations will go a long way in helping the modernization of Indian Railways infrastructure.

Customer convenience and safety

The Ministry also needs to be lauded for its focus on customer convenience and safety which is evident in the launch of a dedicated 24x7 helpline numbers for passengers. Incidentally, it is not uncommon for the Minister to take direct action on complaints received on his Twitter handle. The fact that social media is being used as a powerful channel to reinvigorate a sector like the Indian railways is undoubtedly a great achievement.

Additional convenience measures implemented, such as wifi facility at more than 400 stations, the revamped IRCTC website, paperless ticketing along and improved mobile catering options will boost passenger usage of the Railways.

Finally, while market observers who were looking for big bang announcements on new railway lines and so on may be disappointed, for me God is in the details. The budget delivers by ensuring that the sum of its parts is greater than the whole. The Rail Budget scores both on outlining not just the destination but also how the journey will progress.

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