The Modi government’s first Railway Budget announced a course correction for the financially crippled monolith and prescribed the obvious way ahead — change policies to attract private funds including foreign direct investment into all but “core operational areas”of the national transporter. But a lack of any plan of action or details on how exactly the government planned to do this unnerved markets.
The lower-than-expected increase in the size of the railways’ Plan outlay for FY15 to Rs 65,445 crore, despite a 25% increase to Rs 47,650 crore in budgetary funds, and the absence of of any signs of intent to corporatise the transporter was also a dampener for the markets, with the benchmark Sensex dropping over 500 points.
In his maiden budget speech, railway minister Sadananda Gowda portrayed the grim financial situation of the transporter: After meeting ordinary working expenses and dividend obligations, its surplus was a meagre Rs 3,783 crore in FY14. This means operating ratio last fiscal was a dismal 93.5%, 2.7 percentage points higher (worse) than what was seen in the February interim budget. (While the minister gave these figures in the speech, the budget documents weren’t updated and kept the revised estimates for FY14 as in the interim budget.)
The budget was vocal about FDI, said the “bulk” of new projects would be executed through the public-private partnership (PPP) model and, as expected, showed the government’s intent — by making a token provision Rs 100 crore — to set up a diamond quadrilateral of bullet trains connecting the four metros at an estimated cost of Rs 9 lakh crore (the first such line would be between Mumbai and Ahmedabad at a cost of Rs 60,000 crore).
A move to monetise the railway’s huge land assets was also evident, as Gowda said these would be digitised and GIS-mapped “for better management and usage”.
Prime Minister Narendra Modi called the budget “futuristic and growth-oriented”, while the Opposition flayed it for the rich. Industry and analysts welcomed the thrust given to the PPP model of funding.
Curiously, on a day India unveiled its plan to privatise most of its railway infrastructure, China came out with new guidelines on management of a fledgling railway development fund to attract private investment into its debt-ridden railway sector. China Railway’s China Railway Development Fund will reportedly last 15 to 20 years.
Given the recent 14.2% hike in fares that would rake in some R8,000 crore (Gowda said the hike “gave