For most of Suresh Prabhu’s predecessors, the Rail Budget was an opportunity to play to the gallery with some spectacular announcements scoring a few political brownie points in the process. However, for Suresh Prabhakar Prabhu, the Rail Budget represents a template for a radical overhaul of Indian Railways.
Suresh Prabhu’s 2016-17 budget is, in some senses, an extension of his journey that he began with his first budget last year.
What is particularly noteworthy is that within months of assuming office last year, Prabhu had grasped the most critical issues facing Indian Railways and began tackling them in right earnest.
What are the principal challenges faced by Indian Railways today? In brief, two. Plagued by, one, a severe lack of finances over time, the Ministry of Railways could not, two, invest in the development of rail infrastructure, as a result of which both passenger and freight lines got congested, which, in turn, further eroded the profitability of Indian Railways, leading to a vicious cycle kind of situation over the last two decades or so.
In order to combat the first bottleneck of shortage of financial resources, Prabhu unveiled a path-breaking Rs 8.56 lakh crore investment plan spread over a five-year period in his first budget last year. Apart from the Gross Budgetary Support (GBS), Prabhu had put forward some innovative financing models such JVs with state governments, PPP investments to spur manufacturing and railway station redevelopment and market borrowings, so as to ensure adequate funds to execute rail infrastructure projects. For instance, Prabhu has persuaded the LIC to invest Rs 1.5 lakh crore over a period of five years on extremely favourable terms. Or recently, the Railways auctioned scrap for almost Rs 3000 crore through a transparent and scam free online auction process. In fact, the Rail Minister has targeted to increase scrap sale by more than 50% to garner revenue. Or say the JVs with states to mobilise resources to develop rail projects; an idea conceived and unfolded during Prabhu’s tenure as minister. The said JV companies, wherein Railways is a minority shareholder, are free to raise capital from the market to fund the works. The Railways have already signed MOUs with five states to create JVs, namely, Odisha, Kerala, Maharashtra, Andhra Pradesh and Chhattisgarh and another 12 states are reportedly game to the said JVs. Likewise, the Rail Minister is actively looking at monetisation of soft assets data and software through web service, FM radio in trains and monetisation of hard assets like railway land by planning to utilise land near tracks for horticulture and utilising railway land for building specialised warehouses. Or take the ambitious station redevelopment plan for over 100 stations, which will help monetise land and buildings through commercial exploitation of vacant land and space rights over station buildings.
Apart from raising revenues, the minister has also focused on cutting costs. For instance, Railways is attempting to prune its energy bill by purchasing electricity from the open market through the open bidding route, saving money in the process.
The Railways had for the first time invited bids to buy power for the North Central Railways in October 2015; Adani Power emerged as the successful bidder and Railways saved about Rs 150 crore annually over the more expensive power that it sourced earlier from NTPC.
In order to combat the second challenge of under-investment in rail infrastructure, expenditure plans on building rail infrastructure were delineated last year itself. Prabhu had planned to spend about Rs 199,320 crore on network decongestion including Dedicated Freight Corridors, electrification, doubling and tripling of lines, Rs 193,000 crore on network expansion and about Rs 65,000 crore on high speed rail and elevated corridors over a period of five years. For FY 2016-17, Prabhu has pegged plan expenditure (plan spending is regarded as developmental spending by economists and economic administrators) at Rs 1.21 lakh crore, 21% higher than 2015-16, mostly on augmentation of rail infrastructure. He has also commissioned 2,800 km of broad gauge track in 2016-17; 2015-16 is expected to surpass the commissioning of the targeted 2,500 km of broad gauge lines. It may be noted that in 2016-17, broad gauge lines are to be laid down at the rate of over 7 km per day against an average of about 4.3 km per day in the last six years. In 2016-17, 2,000 km of lines are to be commissioned for electrification; up from 1,600 km in 2015-16.
Three new Dedicated Freight Corridors (DFCs) connecting Delhi to Chennai, Kharagpur to Mumbai and Kharagpur to Vijaywada are proposed and rail connectivity to ports of Jaigarh, Dighi, Rewas and Paradip are under implementation, while Tuna port has been commissioned in 2015-16. For 2016-17, the minister proposes to take up rail projects to connect the ports of Nargol and Hazira under PPP.