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Budget 2017 - Railways Part II

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February 03, 2017

Click here  for Budget 2017 - Railways Part I

How the new rail budget differed?

  • Presenting the proposals for the railways within the ambit of the general Budget, the finance minister refrained from announcing any populist measures.
  • The FM also accepted that the railways were facing stiff competition from other modes of transportation and required transformative measures.

Why Indian Railway can’t perform?

  • Indian Railways failed to provide quality and timely service to passengers, has a poor record on safety and faces increasingly worsening finances.
  • It can’t perform better because it doesn’t invest and it can’t invest because it doesn’t raise tariffs, especially for passengers.
  • It was imperative to change the situation because the top 1% of the highest paying customers account for 30% of all railway revenues.
  • The railways cannot afford to lose these clients to airlines.
  • India has one of the lowest passenger fares in the world — the ratio of average passenger fare to the freight rate for India is 0.3 as compared to 1.2 in China and 1.3 in France.
  • Moreover, deceleration in earnings growth in both passenger and freight fares has meant that the operating ratio – has deteriorated from 90.5 per cent in 2015-16 to 94.9 per cent in 2016-17.

What are the measures that are announced?

  • In his Budget, the FM has tried to target each of these weaknesses, starting with finances and tariffs.
  • Tariffs would be fixed after taking into consideration costs, quality of service, social obligations and competition from other forms of transport.
  • An independent Rail Tariff Authority is expected to be in place in a few months.
  • Another significant change is the announcement of a Rashtriya Rail Sanraksha Kosh with a corpus of Rs 1 lakh crore.
  • This was one of the crucial and long-pending recommendations of the Anil Kakodkar-led high-level safety review committee in 2012. The fund will be used to improve safety preparedness and maintenance practices.
  • The other key directional shift is to nudge the railways to engage with the private sector, especially for finances.
  • Therefore the FM announced that three profit-making public sector undertakings under the railways would be listed on the stock exchange during the coming financial year.
  • Also a new Metro Rail Act would be brought in to facilitate greater private participation and investment in construction and operation.
  • But it should also beclear that the private sector will not commit unless the railways demonstrate their ability to improve functioning.
  • This, in turn, will test not only the government’s promise to allow fare increases but also the railways’ capability to become more efficient.


Source: Business Standard

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