The Railway portion of the Budget is on expected lines – completion of electrification and dedicated freight corridors (DFC), survey for new dedicated freight corridors, among others. However, monetisation of Eastern and Western DFC after its completion is interesting.

Even after the commissioning of these corridors, it will take a long time for revenue streams to stabilise and operational expenses to crystalise.

Therefore, any effort to monetise DFC assets earlier than that will need assurances with regard to traffic and tariff. Railways’ track record about PPP and asset monetisation has not been very encouraging as even station re-development, which has proved to be revenue generator globally for railway systems, has not made any progress during the last six years. Therefore, monetisation of even brownfield assets will not happen unless the processes and business model are revamped.

Implementation of indigenous train control and collision avoidance system on heavy-density routes can contribute to the financial turnaround of Railways, as it gives an opportunity to increase the traffic density and reduce the huge manpower deployed on lower-end jobs such as patrolling of tracks. Hopefully, adequate funds will be allocated to this activity.

A win-win situation

Railways has been performing consistently well and disinvestments have been well received by stock markets. Consolidation and sale of PSUs is being talked about, but no concrete proposal has been shared in public domain, creating speculations and uncertainties.

‘Stakeholders are keenly waiting the proposal of sale of CONCOR. CONCOR is a dominant player in logistics and its sale is going to be win-win situation for all.

State JVs have been formed to fulfil the regional aspirations in the spirit of co-operative federalism, with the mandate of undertaking viable projects under Joint Venture model. Railways will get an opportunity to execute last-mile connectivity project by contributing only 20-30 per cent project cost. It is seen that only ₹800 crore has been allocated during 2021-2022 out of the ₹1.07-lakh crore for this. It is in the interest of Railways to aggressively support State JVs.

Capital outlay

The capital outlay of ₹1.07 crore is substantially higher than actuals of previous years, but it is below expectations. Calculated backwards from the projected figures of National Infra Pipeline of ₹111-lakh crore in five years, Railways’ share at 12 per cent works out to ₹2.6-lakh crore annually.

In the absence of the possibility of private sector participation, the entire amount must come from Central and State governments.

National Rail Plan has projected huge investments to increase Railways’ share from 27 per cent to 45 per cent by 2030, but it is also to be seen that despite substantial investments during the last 6 years, Railways’ share in transportation is going down. The ratio of net revenue to capital-at-charge has deteriorated to less than one per cent.

Therefore, it is more important for Railways to be competitive and bring down the unit cost of transportation to save it from debt trap rather than creating long-term assets with borrowed capital.

However, the recent trend in freight has been very encouraging, perhaps on account of good mobility, aggressive freight discounts and high diesel prices. This shows that the market is price-sensitive and if Railways has to survive as a viable business entity, it will have to bring down the tariffs.

The writer is the Former Member-Engineering, Railway Board