This Article is From Jul 08, 2014

Rail Budget 2014: 10 Expectations From Modi Government

Railway Minister Sadananda Gowda's maiden rail budget is likely to focus on modernization and revamping of railways, twin objectives that been part of Prime Minister Narendra Modi's agenda on infrastructure development. Mr Gowda is also expected to unveil plans to improve rail services, which impact the lives of 2.3 crore passengers every day. Mr Gowda's budget will also set the stage for the union budget, due on Thursday, analysts say.

Here's what can be expected in Mr Gowda's first rail budget

  1. Focus on improving finances: Railways' finances are in dire straits. It is estimated to earn Rs 1.6 lakh crore in 2014-15, while its total working expenses were projected at Rs. 1.44 lakh crore. This means the railways is left with little resources for infrastructure upgradation. The previous government had projected an annual investment of over Rs 64,000 crore, largely made up from budgetary support of Rs 29,000 crore from the government exchequer. The railways' operating ratio, a measure of expenses as a percentage of revenue, has declined from 76 per cent in FY08 to an estimated 90.8 per cent in FY14. (Read: Modi Government to Present First Rail Budget)

  2. Rationalisation of freight charges: The railways cross-subsidise passenger fares with freight charges, which has led to loss in freight revenues. The railways' share of freight is estimated to have come down from 90 per cent of the country's cargo in 1950 to one-third today. Finance Minister Arun Jaitley on Monday said the government must end the practice of cross-subsidisation to win greater share of freight traffic and boost railways' revenues.

  3. Passenger fare hikes: Last month's fare hike, the steepest in the last 15 years, will add around Rs 10,000 crore to railway's revenues. But, that will not be enough to plug the losses the government incurs on passenger fares (estimated at Rs 30,000 crore in the interim budget). Mr Jaitley on Monday said last month's fare hike was UPA government's legacy, but hinted that more hikes may be in the offing. "For any public utility, users must pay," he said. (Also Read: PM Modi Faces Uphill Task to Put Railways on Track)

  4. Opening up of railways for FDI: By a conservative estimate, the railways need Rs 20 lakh crore of investment by 2020. That's far in excess of what the railways earns every year. Last month, the railway minister said that the government is short of resources and some resource mobilization should be taken as a priority. There is a proposal to allow foreign investment in sub-urban corridors and freight lines connecting ports, mines and power installations. At present, there is a complete ban on any kind of FDI in railways except mass rapid transport systems.

  5. Public-private partnership: The new government is keen on bringing much more private money into one of the country's largest state-controlled industries. At present, there's small private involvement in suburban services and locomotive manufacturing.

  6. Diamond Quadrilateral project for bullet (high-speed trains): Mr Gowda is likely to spell out the government's action plan on this ambitious project, which PM Modi has singled out as a top priority.

  7. Mr Gowda will also spell out plans for creating a network of freight corridors. These corridors have been envisages to have specialised agri-rail networks for perishable agricultural products.

  8. Modernisation and rail safety is likely to be another top focus are for the new government. In a speech last week, PM Modi hinted at how much of a revamp he believed the railways needed, telling an audience in Kashmir that he wanted an upgrade of stations, many of which look much as they did under the British. He also said that his government's dream was to have better facilities on railway stations than airports.

  9. Expansion: The rail minister is likely to announce new routes for Hilly States and Northeast.

  10. Focus on alternative fuel: The rail budget may outline proposals for bio-diesel plants and LNG locomotives in view of increased fuel prices. It may emphasise on switching over to solar power for rail workshops, colonies, hospitals and stations.

(With inputs from Reuters)