With the economy reeling under slowdown in all sectors, it was expected that the Interim Railway Budget would contain some stimulus package. But Union Railway Minister Lalu Prasad has poured cold water on all such hopes by hiking annual outlay by a measly 3.2 per cent. Also, the industry in general expected incentive by way of freight reduction. Instead, the minister resorted to the more populist measure of passenger fare reduction with an eye on the forthcoming elections. On the whole it was a disappointing exercise.
Indian Railways will be burdened by additional staff costs, thanks to the recommendations of the Sixth Pay Commission. Besides leaving a smaller cash surplus, investment projects are likely to be hampered even as most projects announced in the previous budget are yet to take off.
The plan outlay of Railways for 2009-10 is estimated at Rs 37,905 crore, that is only 3.2 per cent higher than the revised estimate of Rs 36,733 crore for 2008-09. Last year, the annual outlay was 21 per cent higher. Financing would include market borrowings of Rs 8,030 crore (including Rs 7,500 crore by Indian Railway Finance Corporation) and Rs 3,400 crore through public-private partnership.
The recommendations of the Sixth Pay Commission are expected to cost the railways an additional Rs 13,600 crore in 2008-09 and Rs 14,600 crore in 2009-10. This year, the incremental staff cost would account for a steep 17 per cent of the Railways' gross traffic revenue receipts.
The progress on the much-hyped mega projects announced in the previous budget has been scant. The only notable exception was the launch of work on the Delhi-Mumbai stretch of the dedicated freight corridor (see story on page 5). Work on the Ludhiana-Kolkata stretch will be inaugurated by the end of February.
Reacting to the budget, D.P. Agarwal, Vice Chairman and Managing Director, Group TCI, said, “It is a positive move that the ambitious dedicated freight corridor on the Ludhiana-Kolkata route would be inaugurated by the end of this month. This will smoothen the freight traffic movement and reduce the congestion of the operative lines.”
Plans to modernise around 25 railway stations and set up locomotive units in Bihar and a coach factor in Uttar Pradesh are still at the drawing board stage.
There has been no change in freight rates although passenger rates have been lowered by 2 per cent, subject to certain qualifying conditions. The fare reduction would cost the Railways around Rs 700 crore, it is estimated. Railways has estimated that it would haul 910 million tonnes of freight traffic, up 7 per cent.
For the medium term, the Railways has proposed to conduct pre-feasibility studies for bullet trains on six stretches, besides introducing high-capacity wagons. "I am very bullish about the metro bullet trains. We are already in the metro segments so we will be able to play a major role," R.S. Natarajan, Chairman, BEML, said in a report. “The rail freight sector is expected to get a boost, with the railways deciding to introduce new high-capacity wagons. This will help augment the business of the customers,” Agarwal of Group TCI continued.
The status quo on freight rates has generated an ambivalent response from most logistics players. Iron ore producers, reeling under the pressure of falling prices, were anticipating a reduction in freight costs, to improve margins. Rahul Baldota, President, Federation of Indian Mineral Industries, said in a press report, "We are disappointed. We wanted freights to go down,"