Railway Minister Suresh Prabhu’s maiden Budget may not have introduced new trains but it has laid down the track to turn the monolith into a financially self-sustainable organisation.

Prime Minister Narendra Modi hailed the Budget as being people-centric — putting “speed, scale, service and safety all on one track”. The stock market, however, gave it a thumbs down.

The centrepiece of the Budget, presented on Thursday, was a five-year action plan that aims to transform the Railways into a commercially viable and customer-centric organisation. To achieve this, Prabhu set four goals, five drivers and 11 thrust areas.

The Railway Minister refrained from hiking passenger fares. But he “rationalised” — increased — freight rates for certain commodities, which could fetch additional revenue of ₹4,000 crore in the next fiscal year.

Banking on growth Prabhu seems to be betting big on the economy, budgeting a freight revenue growth of 13.55 per cent and fare growth of 16.7 per cent in his projections for 2015-16.

This assumption is “ambitious” given that passenger earnings are estimated to contract in 2014-15 and that freight earnings will grow only marginally.

Freight traffic, pegged at an all-time high of an incremental 85 million tonnes, is based on the expectation of healthier growth in the core sector.

Highlighting that the Railways would need investments of ₹8.5 lakh crore over the next five years, Prabhu has come up with some ‘out-of-the-box’ ideas to mobilise resources from the market and from multilateral bodies.

The first step towards this is a new financing approach of “institutional investments” — projected at ₹17,136 crore — to accelerate completion of capacity-augmentation projects across the rail network.

This is in addition to the ₹17,655 crore to be raised by Indian Railway Finance Corporation (Budget Estimate for 2015-16 for IRFC: ₹17,276 crore) and Rail Vikas Nigam through market borrowings.

The gross budgetary support for the Railways’ annual plan has been pegged at ₹40,000 crore.

Recognising that the Centre’s resources are stretched, Prabhu is looking at other avenues such as setting up an infrastructure fund and allowing IRFC to set up a joint venture with a non-banking finance company promoted by a public sector enterprise.

The Budget also provides for long-term debt to flow into the Railways from pension funds. Prabhu also tabled a white paper on the Railways in the Lok Sabha.

PPP focus “We will go for monetisation of assets rather than selling them,” the Railway Minister said adding that the focus would be on public private partnerships (PPP) as part of the Railways’ revamp efforts.

States will also be roped in as partners through joint ventures for focused project development.

Prabhu hopes all this will make the Railways efficient and has set an ambitious target to improve the operating ratio to 88.5 in 2015-16. Meaning, out of every ₹100 it earns, the Railways wants to cap spends on salaries, fuel, maintenance etc to ₹88.5. In 2014-15, the operating ratio was 91.5 per cent, a tad better than the 93.5 for 2013-14.

Opposition parties were not impressed by the Budget, saying Prabhu’s speech had more rhetoric and less content, and that he had failed to come up with any new suggestions to generate revenue.

In a reflection of the challenging task before him, the Minister remarked: “ Hey Prabhu, ye kaise hoga (Oh God, how can this be done?),” while spelling out his long-term vision. Aiming to dispel any doubt, Prabhu completed his remarks by saying that large resources and strong political will would ensure “rebirth of the railways”, evoking peals of laughter.

India Inc happy India Inc, on the other hand, termed the Budget an innovative, comprehensive plan for modernisation of infrastructure and improving customer experience. Industry bodies CII, FICCI and Assocham welcomed the proposals.

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