EXPECT A "SLOW TRAIN" FROM THE RAILWAY BUDGET
By Ruma Dubey
It will indeed be a precarious run on stilts for the Railway Minister, Suresh Prabhu. Big ticket reforms are what he has always promised, all along. Yet, his ideas might not the financial muscle that is required as the Finance Ministry will itself need to think a bit out-of-the-box to increase its revenues. Appeasing the public is easy but to implement is another thing altogether – that is what this Railway and Union Budget will be all about.
There seems to be a major disconnect between what is available and what is being promised. The earnings of Indian Railways in current fiscal recorded an earnings of Rs.1,36,079 crore v/s target of Rs.1,41,416 crore, a decline of 4%. The good news in this Budget is that Railway’s energy bills would have come down significantly; savings to the tune of Rs.5000 crore is expected. This in turn means that its expenses will also come down from what was targeted.
Like the FM’s over ambitious divestment target, the Railway Minister too had got carried away and had said that capex would go up by 52% to over Rs.1 lakh crore. This was based on major public-private partnerships taking off. But as we all have been a witness, nothing much has happened; railway companies continue to wait for orders.
It is murmured in the corridors of power that Railways Plan outlay for FY17 could be set at Rs.1.25 lakh crore. But where will this come from? The FM has raised his hands and said that the Railways will have to fund its 7th Pay Commission. Here, we are talking about an additional Rs.35,000 to 40,000 crore required to fund this payment. The mood in the economy remains somber and industrial growth continues to stagnate. Till growth does not take off, revenue receipts will also continue to remain sluggish.
What is once again pretty evident like in all Budgets is the need to hike passenger fares. The fares are so subsidized that passenger fares has been perennially running into losses. The subsidization is said to be costing the Railways around Rs.30,000 crore. But will this Govt have the political will to hike fares? Apart from ruffling feathers of the common man, it could stoke inflation further. Lets see if the economic will is stronger than the other compulsions. The news is that Prabhu will work a way around this – instead of hiking fares, he may announce running of several special trains but on higher fares. This might be his way of announcing a fare hike.
No new trains are expected to be announced and there is strong news of a scheme for premium high-speed parcel trains to be announced tomorrow.
Under these circumstances, it is best to be circumspect about railway stocks. And as such also, even when new plans are announced, they rarely translate into a deluge of orders. Best to wait and watch and avoid the railway theme.