When Union Railway Minister Suresh Prabhu presents the Railway budget on Thursday in Lok Sabha, it would be keenly watched for few reasons.
One, it is Narendra Modi government’s second budget, but the first for a full year and also coming after BJP defeat in Delhi assembly elections. Second, how the minister -- known as pro-reformist -- strikes the balance between populist and reformist measures, at a time when Railways is facing severe cash crunch to fund its projects.
Since diesel prices have been on a slide huge expectations have built up on whether or not the Mr. Prabhu will go ahead and hike passenger fares and freight charges.
“There is a general expectation that the freight rates would be reduced due to the fall in diesel prices,” Ernst and Young Partner and PPP Leader Abhaya Agarwal told The Hindu.
The Government had hiked passenger fares by 14.2 per cent and freight rates by 6.5 per cent in June 2014, just three weeks ahead of the last railway budget.
Last Budget, the NDA Government’s first Railway Minister Sadananda Gowda had allocated 40 per cent more funds than in the previous year for cleanliness on trains, stations and other operations— ahead of the launch of Mr. Modi’s Swachch Bharat initiative.
Mr. Prabhu could make further announcements on bullet trains—Mr. Modi’s pet infrastructure project in the key transport sector. Mr. Gowda had in the last budget proposed starting off with bullet trains on the already identified Mumbai-Ahmedabad sector and to be followed up by Delhi-Agra, Delhi-Chandigarh, Delhi-Kanpur, Nagpur-Bilaspur, Mysore-Bengaluru-Chennai, Mumbai-Goa, Mumbai-Ahmedabad, Chennai-Hyderabad and Nagpur-Secunderabad.
The plans are still at works. In December 2014, the Ministry had released guidelines for domestic/foreign direct investment in railways. In that it was mentioned that Mumbai-Ahmedabad High Speed Corridor running 534 Km and costing Rs. 63,180 crore could be considered for domestic/foreign investment based on the design, build, finance, operate, transfer (DBFOT) model in co-operation with state governments. It also made a mention of Chennai-Bengaluru-Mysore project.
In his maiden budget for 2015-16, Mr. Prabhu could be expected to announce at least some initiatives in the Railways under the PM’s ‘Make in India’ umbrella scheme.
Railways ministers rely on freight charges – key input cost for industry – for cross-subsidising passenger fares that are kept low to ensure affordability for low-income traffic.
“Freight rates are used to cross subsidise the passenger fares to the tune of Rs 28,000-38,000 crore,” according to Mr. Agarwal.
The budget estimate for the Railways’ total revenue during 2014-15 was Rs 1,64,374 crore. Of this, earnings from passengers was estimated at Rs. 44,645 crore and freight at Rs. 1,05,770 crore. The total expenditure was estimated at Rs 1,49,176 crore.
In the ten months from April 2014 to January 2015, Railways earned passenger revenues of Rs 35309.81 crore and Rs. 87291.87 crore from freight.
The Railways spends 94 paise out of every rupee earned, leaving it 6 paise as surplus. In the last budget, it was said Rs 50,000 crore per year will be needed over the next 10 years, just to complete the ongoing projects.
Railways are fast losing freight carriage market share to road transport and now only account for 31 per cent of the freight traffic in the country compared to 90 per cent in 1950s.
