Railways unlikely to achieve its capex target

The Union budget has proposed a capital expenditure of Rs 1,31,000 crore for Indian Railways in 2017-18. Given this pace, the Railways is unlikely to achieve its five-year capex target of Rs 8.56 lakh crore. But the speed at which new railway lines are being laid down has to be appreciated. In the current financial year, it has commissioned Railway lines of 3,500 kms will, as against 2,800 kms in 2016-17.

The other major announcement is creating a safety fund of Rs 1,00,000 crore over the next five years. While it is good move in the wake of recent train accidents, it is not clear how much fund finance ministry has agreed to contribute for it.

The budget has said that central government will provide seed capital with the Railways arranging the balance resources from their own revenues and other sources. In case Railways has to commit larger share to the fund it is unlikely a significant step. As financial health of the railways is already precarious, it will be very difficult for the public transporter to share this burden.

There was expectation that there would be announcement in the budget for increasing freight traffic for railways but it did not come. The Railways has been seeing both its freight and passenger traffic falling. This shows that something is wrong and therefore some measures should have been taken to address this.

There is modal shift towards roads as railways has been losing the competitive edge. This requires some drastic steps to be taken. The Railways is in urgent need to increase its traffic. It has been losing traffic in bulk items like coal, cement, foodgrains and petroleum products. What Budget has said that Railways will provide end-to-end integrated transport solutions for select commodities tying with logistics players.This is, however, for commodities like perishable items, containers and parcels which are minuscule part of the railways' total traffic.

The budget could have proposed to raise passenger fare marginally to bring some incentives for freight. Further, the government should ensure funds in wagons and rolling stocks. It seems the entire focus of the government is on re-organising the railways. It is definitely a move in the right direction but this could go along with the actions.

It is perfectly fine to shed excess flab and get away from the non-core activities. There are certain areas where Railways is deploying its resources but this is not the core function of the railways. These expenses have huge impact on its profitability and need to minimised.

(The writer is former chairman of Railway Board)