Analysts give mixed reaction to Rail Budget 2013, E&Y, Nomura tag it 'run of mill'

Feb 26 2013, 20:02 IST
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Analysts said there were no radical measures to put Indian Railways back on track. (AP) Analysts said there were no radical measures to put Indian Railways back on track. (AP)
SummaryAnalysts said there were no radical measures to put Indian Railways back on track.

Analysts today gave a mixed reaction to the Rail Budget 2013, with some terming it as a "non-event" saying there were no radical measures to bridge the revenue deficit in the document, and a few calling it "pragmatic" given the limitations.

While E&Y (Ernst & Young) and Nomura analysts described it as 'run of the mill type', PwC India termed the exercise by Rail Minister Pawan Kumar Bansal as pragmatic with focus on the short-term.

Commenting on the rail budget, PwC India Executive Director for capital projects & infrastructure Manish Agarwal said, "I see this as a pragmatic budget, clearly focused on the short-term. The fuel adjustment charge on freight is an economically sensible approach, and the expectation of 3 per cent freight growth recognises the practical implications on further burdening this segment."

Abhaya Agarwal, partner for infrastructure practices at Ernst&Young India, said this was not a growth-inducing and game-changer budget.

"More emphasis on investment and specific roadmap for achieving them was expected from the budget," Agarwal said, adding it only brings lot of cheer to passengers and the staff and not any reforms, as the emphasis is on investment in passenger amenities, skill development and staff welfare.

Nomura India Chief Economist Sonal Varma said the entire exercise has turned out to be largely a "non-event" with the only positive measure being linking freight charge revisions to fuel costs.

Since the Minister left passenger fares unchanged, the operating ratio (expenses/earnings ratio) is expected to improve only marginally to 87.8 per cent in FY14 from 88.8 per cent this fiscal, which itself is much higher than the budgeted target of 84.9 per cent.

That the gross budgetary support for the Railways has risen by 8 per cent y-o-y to Rs 26,000 crore against a 20 per cent rise in the last budget, suggests that the government is likely to keep a tight leash on spending, Varma said.

"On the whole, there are no fireworks in the rail budget. While linking freight to fuel costs is the right move, subsidised passenger fares account for bulk of rail losses and until that is addressed, the financial position of the Railways is unlikely to turn around quickly, and investment in the sector will languish," she said.

PwC's Agarwal said, "The absence of a long-term vision is not necessarily a bad thing, considering the country is heading towards general elections. The appeal to states to participate in rail projects is an important one

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