Rail Budget Growth-Oriented, Revenue Target Challenge: India Inc.

New Delhi
Rail Budget Growth-Oriented, Revenue Target Challenge: India Inc.
outlookindia.com
2016-02-25T22:52:42+0530

Terming Railway Budget for 2016-17 as "growth-oriented", India Inc has said the three new freight corridors envisaged by 2019 will help reduce transportation costs, even as it described the revenue generation target of Rs 1.84 lakh crore as a "strong challenge".

Railway Budget today spared passengers and goods movement from any rise in tariffs while it announced introduction of three new superfast trains and creation of dedicated north- south, east-west and east coast freight corridors by 2019.

Rajeev Jyoti CEO Railway Business L&T said: "The Railway Minister has been very aggressive to retain a pretty high revenue target of Rs 1.8 lakh crore. I think this is a strong challenge considering there are challenges on GDP growth etc.

"Despite the Pay Commission recommendations, which will hit them by Rs 30,000 crore he is still looking at an operating ratio of 92 per cent which is extremely challenging. He enunciated a lot of actions towards cost saving. Targets of commissioning 2 corridors by 2019 very challenging."

"The focus on completion and implementation of projects is good. The creation of three new corridors will act as a catalyst for reducing the logistics cost," CII President Sumit Mazumder said.

Presenting his second budget in the Lok Sabha, Railway Minister Suresh Prabhu promised rationalising of the tariff structure by undertaking a review to evolve competitive rates vis-a-vis other modes of transport and to expand the freight basket as a means of additional revenue mobilisation. Revenue generation has been targeted at Rs 1.84 lakh crore.

"The rationalisation of freight policy and review of PPP policy framework would help to attract private players for transforming rail transportation and increasing the revenue.

"Initiatives towards developing an integrated railway network, greater emphasis on dedicated freight corridors, and improving port connectivity as well as north-east connectivity would go a long way in expanding the freight business," Ficci President Harshvardhan Neotia said.

"While we saw qualitative measures on freight like enhancing its basket we could have looked at more concrete measures," said Tilak Raj Seth Vice Chairman CII Rail Transportation & Equipment Division.

"Railway Minister has given a no-tariff hike budget without compromising on capital expenditure for increasing carrying capacity of both passengers and freight even in a challenging economic environment marked by a severe slowdown in the commodity sectors," Assocham President Sunil Kanoria said.

Nalin Jain, President & CEO, GE Transportation said if without increasing freight pricing revenues can be grown then it will automatically better the finances of Railways.

The three new freight corridors, north-south will connect Delhi and Chennai, East-West connecting Kharagpur to Mumbai and East Coast from Kharagpur to Vijawada.

Assocham President Sunil Kanoria said, while committing himself to improving Railways in terms of better passenger amenities and adopting a service-provider approach to the industry, which is the main revenue customer for it, Prabhu has lived up to his reputation of being a financial wizard in banking on non-budget resources for funding the capital plans.

"The project implementation would remain a key. The best thing is that he is willing to challenge the age old notion as if it is only through tariff hike that the organisation as important as the Railways can be turned around," he said.

Welcoming the rail budget, Ficci president Neotia said, "it is an extremely pragmatic Rail Budget based on the three critical strategy-pillars, aimed at making railways the backbone of overall development."

CII president Sumit Mazumder said the rail budget is "a bold vision and foresight with a strong focus on investment, job creation, safety and security that will help reach actual growth potential."

"This budget has created enormous opportunities and the industry would look forward to working closely with the ministry to ensure the success of a number of the initiatives announced," he said and thanked the minister for taking into consideration CII recommendations for focusing on augmenting investments, particularly in infrastructure.

"Rationalisation of freight policy and review of PPP policy framework would help to attract private players for transforming rail transportation and increasing the revenue," Neotia said, adding initiatives towards developing an integrated railway network, emphasis on dedicated freight corridors, and improving port connectivity especially for the Northeast will go a long way in expanding freight business.

The budget has laid down the roadmap for developing next generation railway infrastructure including high-end technology to improve safety, higher average speed of freight trains and high-speed passenger trains, he said.

"The focus on investment, laid out last year, and the initiatives on capacity enhancement and time-bound implementation of key projects are indeed welcome," Mazumder said, and particularly hailed move to develop 3 new freight corridors, logistics parks and warehousing on PPP route.

The review of tariff policy to evolve a competitive rate structure vis-à-vis other modes of transport should be used in this direction, he said, adding at the same time, steps such as zero-based costing, electricity at cheaper rates, delegation of responsibilities to zonal railways will help reduce costs.

CII also welcomed moves like revamping the Railway Board, setting up of cross-functional directorates within the Board, focus on R&D, elimination of all unmanned crossings by 2020, increasing outlay for electrification by 50 per cent and target to electrify 2,000 km more, augmenting speed of passenger and freight movement etc.

"Steel demand in country is expected to get a fillip with the developmental projects proposed including laying of 2,800 kilometers of new railway tracks in the next financial year where railways is poised to commission broad gauge lines at the rate of 7 km per day besides proposed development of three dedicated freight corridors," SAIL Chairman P K Singh said.

However, Vineet Agarwal, MD, TCI Group, said: "For the industry to be competitive at a global level integrating all modes to bring in cost and operational efficiencies is a must and the same is not covered in the current budget".

President of PHD Chamber of Commerce Mahesh Gupta described the Railway Budget as a pragmatic one which has well-defined strategies and stresses on modernisation, employment generation, freight movement, socio-economic welfare and private participation.

"It is heartening to see that the Railway Minister has earmarked Rs 1,21,000 crore towards capital investments. This will provide much-needed impetus to kickstart the investment cycle in the country," Sajjan Jindal, CMD of JSW, said.

Mahesh Y Reddy, Director General, Infrastructure Industry and Logistics Federation of India, said the better performance of railways as reflected in its balance sheet can send the right signals to the foreign and domestic investors.

"The budget has focused on key issues plaguing the railways which are customer experience, increasing efficiency, network decongestion, improving safety, improving stations, increasing revenues and increasing availability," Jaijit Bhattacharya, Partner–Infrastructure and Government Services, KPMG in India said.

"The budget seems to be focused on huge investments in technology and upgrading of railway infrastructure which is a move with positive intent despite the disappointing overall revenue growth," Centrum Infrastructure Advisory Managing Director and CEO Sandeep Upadhyay said.

"The focus on electrification, laying of fresh railway lines and upgradation of existing railway infrastructure presents huge opportunity for CMI as a company. Railways is already our largest customer and we have been strengthening our product portfolio of specialised cables catering to this sector. Considering the huge capex on Railways, we will quadruple its turnover in the next 3-5 years," CMI Managing Director Amit Jain said.

However, the experts cautioned that effective implementation of projects in time-bound manner will be crucial.

"Several reform measures remain on the agenda, though timeframe for their implementation is still unclear. These include setting up of an independent regulator through legislation, organisational restructuring (including enabling separate focus on suburban rail), large scale use of PPPs and successful monetisation of land and commercial assets," PwC India Partner and Leader-Infrastructure Manish Agarwal said.

"The rail budget reinforces the government's commitment to the electrical equipment sector with increased outlay for railway electrification by almost 50 per cent and proposal to electrify 2,000 kms," Babu Babel, President Indian Electrical and Electronics Manufacturers Association said.

Yes Bank MD & CEO Rana Kapoor said the short and medium term milestones in revenue generation, capital creation and improving efficiencies will create significant employment and ancillary business activity.

"The Budget is in line with the government's vision of achieving holistic growth of Indian Railways. It is very heartening to note that government is focused on developing railway infrastructure with renewed vigour and is targeting a capital expenditure of Rs 1.21 lakh crore for FY. 16-17, an increase of 20 per cent y-o-y," JSPL MD Ravi Uppal said.

Ajay Kapur, MD &CEO, Ambuja Cement said: "Overall, the Railway budget is a good one. This year there was no hike in freight fares which bodes well for the cement and coal industries."

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