Click here for Budget 2017 - Railways Part I
How the new rail budget differed?
- Presenting the proposals for the railways within the ambit of the general Budget, the finance minister refrained from announcing any populist measures.
- The FM also accepted that the railways were facing stiff competition from other modes of transportation and required transformative measures.
Why Indian Railway can’t perform?
- Indian Railways failed to provide quality and timely service to passengers, has a poor record on safety and faces increasingly worsening finances.
- It can’t perform better because it doesn’t invest and it can’t invest because it doesn’t raise tariffs, especially for passengers.
- It was imperative to change the situation because the top 1% of the highest paying customers account for 30% of all railway revenues.
- The railways cannot afford to lose these clients to airlines.
- India has one of the lowest passenger fares in the world — the ratio of average passenger fare to the freight rate for India is 0.3 as compared to 1.2 in China and 1.3 in France.
- Moreover, deceleration in earnings growth in both passenger and freight fares has meant that the operating ratio – has deteriorated from 90.5 per cent in 2015-16 to 94.9 per cent in 2016-17.
What are the measures that are announced?
- In his Budget, the FM has tried to target each of these weaknesses, starting with finances and tariffs.
- Tariffs would be fixed after taking into consideration costs, quality of service, social obligations and competition from other forms of transport.
- An independent Rail Tariff Authority is expected to be in place in a few months.
- Another significant change is the announcement of a Rashtriya Rail Sanraksha Kosh with a corpus of Rs 1 lakh crore.
- This was one of the crucial and long-pending recommendations of the Anil Kakodkar-led high-level safety review committee in 2012. The fund will be used to improve safety preparedness and maintenance practices.
- The other key directional shift is to nudge the railways to engage with the private sector, especially for finances.
- Therefore the FM announced that three profit-making public sector undertakings under the railways would be listed on the stock exchange during the coming financial year.
- Also a new Metro Rail Act would be brought in to facilitate greater private participation and investment in construction and operation.
- But it should also beclear that the private sector will not commit unless the railways demonstrate their ability to improve functioning.
- This, in turn, will test not only the government’s promise to allow fare increases but also the railways’ capability to become more efficient.
Source: Business Standard
