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Rosy ride on a sketchy track

- Railway budget stays off populism bandwagon but silent on means to realise big dreams

New Delhi, July 8: The railway budget unveiled by the Narendra Modi government today is big on intent and refreshingly low on populism but dreadfully short on details.

Railway minister Sadananda Gowda rattled off figures to show the parlous state of the utility — and then went on to paint an aspirational picture for a new tomorrow.

In such a future, business executives can whip out their gizmos, pre-book seats on bullet trains, find themselves chaperoned into squeaky-clean coaches by smartly turned-out hostesses at world-class stations operated with the panache of corporate-style hospitality, and hope to catch up on their work schedules over a dedicated, on-board Wi-fi network.

But Gowda’s glib talk was thin on details about the financing for these mammoth projects.

The railway minister did say that he would move a cabinet note seeking approval to allow foreign direct investment in the railways but didn’t spell out how much stake his government would allow foreign investors to hold in these ventures.

The pretty picture started to fall apart when a close look at the finances showed that the railways had an operating ratio of 92.5 per cent — which meant that the utility was spending more than 92 paise of every single rupee it earned. This leaves little room for investments to overhaul the unsafe network that sprawls across 64,000 route kilometres.

The stock markets, which had been in an ebullient mood ever since Modi assumed office, tanked as investors were disappointed that the railway budget was short on specifics and big ideas. The sensex tumbled by 518 points to close at 25582.11.

An audacious goal is to turn the Indian Railways into the world’s biggest freight railroad, dwarfing competing networks in China, Russia and the US — an ambition underpinned by its achievement of breaking into the select club of nations that carry more than 1 billion tonnes of freight a year.

The cost of one bullet train alone is Rs 60,000 crore. The first one will operate between Mumbai and Ahmedabad — a gift to the city that Modi lorded over till he was picked to steer the BJP juggernaut into Delhi.

The Modi government also has a grand plan to build a Diamond Quadrilateral that will link the country’s four metros with high-speed trains. The 9-lakh-crore project mimics Atal Bihari Vajpayee’s Golden Quadrilateral for highways that was conceived in 2001. An amount of Rs 100 crore has been earmarked this year to kickstart the venture.

But there were searching questions about where the money for these projects would come from. “Funds of about Rs 5 lakh crore… are required for ongoing projects alone. This leaves a huge gap between what is available as surplus and what is needed,” Gowda said.

He had raised railway fares by 14.2 per cent and freight rates by 6.5 per cent ahead of the budget, implementing a decision that the UPA government had kept on hold. The hikes announced on June 19 will yield Rs 8,000 crore, he added.

At his post-budget briefing, the minister said the railways would reserve the right to raise fares under a fuel adjustment cost (FAC) formula that permits increases every six months.

He slammed his predecessors for the mismanagement and apathy that had precipitated the severe funds crunch which, he said, was a result of a decade of the golden dilemma of “choosing between commercial and social viability”.

He said his predecessors had fallen prey to the “nasha (intoxication)” of applause in the House that greeted every announcement of a new line or a project. “I would like to take the claps throughout the year by setting things in order.”

But there was little of that in the budget numbers — especially when it became apparent that he planned to slash the amount he would be putting into the debt service fund to Rs 101 crore from Rs 3,288.11 crore in the interim budget in February, a sharp and inexplicable fall of about 97 per cent.

As a result, the debt servicing corpus would shrink from Rs 9,040.15 crore in February’s interim budget to Rs 5,773.16 crore, a fall of 36 per cent. This means that the railways will have a smaller pool of cash to clear its mountain of debts.

The railway minister said he would leverage surplus funds with state-run firms in the sector, try to drum up private investment in rail infrastructure from domestic and foreign investors, and push the envelope on the so-called public private partnership (PPP) model which hasn’t seen much traction even though the idea has been around for a while.

“The bulk of our future projects will be under the PPP model,” the minister said.

India Inc’s interest was piqued by Gowda’s proposal to attract foreign direct investment (FDI) in railways.

“We have to see the fine print. In some areas, 100 per cent FDI is needed. Nothing less than a 50 per cent FDI limit would persuade companies to invest in the sector,” said Nalin Jain, president and CEO (South Asia) for GE Transportation that builds high-speed locomotives.

“There is nothing in this entire budget which tells you how they will make it attractive for the private sector,” said Manish R. Sharma, executive director of capital projects and infrastructure at PwC India.

Gowda outlined plans to push the railway frontiers in his Rs 164,374-crore budget by promising to push railway lines into border states in the Northeast, Uttarakhand and Kashmir.

Railway officials later said that projects seeking to link Tripura with Bangladesh’s Chittagong port and the doubling of an existing rail link with Nepal would also figure in this year’s capital expenditure of Rs 47,650 crore.

The minister promised paperless office within the railways in five years, digital reservation charts, Wi-fi service in select stations and trains, a wake-up call for passengers, separate freight terminals, more money for cleanliness and safety, food courts at stations, expansion of rail tourism and development of railway stations on the lines of modern airports.