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Capacity expansion and development through partnerships emerged as the key themes of Railway budget 2015.
Railways plan to increase passenger capacity to 30 million from the current 23 million (increase of 30%) and freight capacity to 1.5 billion tonnes from current 1 billion tonnes (50% increase) although no timelines were specified. Track capacity is planned to be increased by 14% to 1.38 lakh km.
The total planned expenditure has seen a steep increase of 67% to Rs. 1.1 lakh Cr for FY 16. The-much needed capacity addition can help dedicate some capacity for freight and enable time-table based freight operations. The investments will be spread over time, estimated at 8.5 lakh crore over the next 5 years. In FY16, a large part of this will need to be funded from Gross Budgetary Support. Multilateral and bilateral agencies, and long term capital like Pension funds, are expected to also play a bigger role in financing the expansion.
There is also emphasis on partnerships and joint ventures with private sectors, PSUs and state governments. The role of PPP in last-mile connectivity, through user-financing type model, is possible. Station redevelopment projects and Private Freight Terminals will require addressing the hurdles seen in the past. The four projects proposed on BOT – Annuity model, if well structured, could lay the ground for much more impactful involvement of the private sector, in the sector.
Achieving the 88.5% operating ratio will require fuel prices to remain low, and somewhat optimistic increase in revenue from freight and passengers. The impact of the freight increase will be felt on the central and state budgets, unless passed through to end consumers. Delivering on the roadmap will require significant reform and restructuring of the delivery organisation, which is hopefully detailed in the White Paper and Vision 2030. The Minister emphasized several times that business-as-usual will not deliver. Organisational reform would be key to answering the Minister’s question of “Kaise Karoge Prabhu?”.
The author is Partner and Leader, Capital Projects & Infrastructure, PwC India