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Funds remain main worry for expanding India’s rail network

Posted by on February 25, 2011 0 Comment

New Delhi, Feb 25 (IANS) Despite a record investment of Rs.57,630 crore ($12.7 billion), proposed by Railway Minister Mamata Banerjee in her latest rail budget, funding projects for the world’s second largest railroad network remain the main worry, experts maintain.

By the minister’s own admission, even though the Indian economy has been growing at 8-9 percent, requiring railways to grow faster, the loading traffic had to be reduced by 20 million tonnes to 924 million tonnes during the current fiscal.

This apart, the target of freight traffic for the next fiscal projected at 993 million tonnes hardly represents a 7.5 percent growth and that for passenger growth is sharply lower at 6.4 percent. This raises questions over raising money from internal sources.

“While the announcements made in this rail budget are more than welcome by all, there is ample scope to speculate the outcome of the ambitious plans,” said Vishwas Udgirkar, senior director for transport with consultancy Deloitte.

“More so because the budget is silent on the real progress of large projects announced earlier such as the dedicated freight corridor and has not put in place any concrete proposal to finance and implement these projects,” he added.

The railway minister has said the investment of Rs.57,630 crore will be funded in the following manner: gross budgetary support of Rs.20,000 crore, diesel cess of Rs.1,041 crore, internal resources of Rs.14,219 crore and market borrowings of Rs.20,594 crore.

But what has raised an obvious question is: While the Indian Railway Finance Corp has otherwise been raising around Rs.9,000 crore to Rs.10,000 annually to fund the various schemes, how will it manage to pick up double that amount in the ensuing fiscal.

And here, the minister’s own admission on the state of her ministry’s finances is hardly expected to help much. “I have no hesitation in informing this august house that Indian Railways are passing through a very difficult phase,” she said.

“There is no clarity on how the resources will be mobilised for network expansion and building the new coach and locomotive factories,” said Dilip Modi, president of the Associated Chambers of Commerce and Industry of India (Assocham).

Even the operating ratio — which indicates how much money is spent to earn money on a scale of 100 — will hardly see any significant improvement: from 92.1 percent in the revised estimates for this fiscal to 91.1 percent for 2011-12.

This is a sharp fall over 75.9 percent in 2007-08 and 88.3 percent the year later.

In fact, Banerjee’s first budget for the United Progressive Alliance (UPA) government had seen the operating ratio zoom to 94.7 percent in 2009-09, with a budgeted figure of 92.3 percent for this fiscal.

In this light, the decision to keep passenger fares unaltered for the eighth year in a row appears purely populist.

“By keeping passenger tariff at the same level for the last three years, the railways have been depending on freight through cross-subsidisation,” said Mahesh Y. Reddy, the director general of Infrastructure and Logistics Federation of India.

“Also, by keeping the freight rates high, the railways are losing the freight traffic to other modes of transport, thereby adversely affecting its resource generation.”

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