Rail Budget: Populist and Embarking a New Growth

MUMBAI, India - July 9, 2014 - PRLog -- A populous budget yet with a very global outlook, such is the Rail budget this year which aims to revive the ailing railways. After the hikes were made effective with a 14.2 percent raise in ticket price, railways have come with an ambitious plan. It includes introduction of bullet trains between Ahmedabad and Mumbai. Proposal  to allow Foreign Direct Investment and expansion of PPP (Public-Private Partnership) in new areas is expected to give a much awaited thrust to the sector, Sachin Karpe analyses how the budget looked like.

Bullet Trains will need Rs 60,000 crore for new set of tracks. This ambitious project seems difficult without foreign participation.  The diamond quadrilateral will need track upgradation to raise train speeds to 160-200 kmph, but even this will call for massive foreign and private investment.

As reported by Firspost, “Justifying the 14.2 percent fare hike that took effect from 25 June, which drew considerable political flak, Gowda pointed out that passenger fares were so low that freight hikes needed to be more than what the traffic could bear. The net result was a drop in rail freight traffic’s market share. On the other hand, losses per passenger km (the cost of moving one passenger by one km on the rail network minus the revenues) had more than doubled from 10 paise to 23 paise between 2000-01 and 2012-13. Clearly, “the tariff policy adopted lacked a rational approach.”

Incomplete projects, announced by erstwhile ministers, have dug a hole in railway’s pockets, driving them to red. Gowda advocated that the intent was to only announce projects to woo public and not complete them. The number if incomplete projects are high and some of them are as old as 30 years. Price escalation of such projects is humongous and unrealistic plus outdated, feels Sachin Karpe.

Introduction of new trains is on the cards. Of the 58 new trains being introduced, there are more in the premium (five), AC Express (six) and Express (27) categories which attract higher fares, and just five Jansadharan (unreserved) trains and eight passenger trains, among others. The mix is thus moving towards higher fares.

The railways, despite announcing a hike in the plan outlay by Rs 9,383 crore to Rs 47,650 crore in 2014-15, are not doing much in terms of cleanliness. Improvement in food, e-ticketing . Emphasis has also been paid to these areas. Gowda’s message to India is thus simple: I am cutting my coat according to the cloth. In future, we have to buy the cloth from private sources. We don’t have the money to do it all ourselves.

Sachin Karpe a business consultant having an experienced finance, accounting and business systems. Sachin Karpe also help improve companies through assessing weaknesses and recommending solutions.

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