Pragmatic budget maintains consistency with last year's 'reformist' move: Manish Sharma

The mechanism of fuel adjustment charge in freight rates will result in a burden to the industry

There were multiple expectations from this year's railway budget. There was an anticipation of a further passenger fare rise, underlined by the expectation of a "reformist" budget.

However, what the railway minister has crafted can be termed a "pragmatic" budget. The budget does a little bit in every sphere, balancing the realities of the current financials of Indian Railways and the political compulsions of a government in the last year of its term.

On the topic of passenger fare rise, owing to the fact that fares were raised in January, the minister did not raise these again. The railways minister, however, raised certain supplementary charges like reservation charges, tatkal charges, etc. This could be viewed as a good balancing act, addressing popular sentiment as well as the need for funds by Indian Railways.

The mechanism of fuel adjustment charge in freight rates will result in a burden to industry. However, this mechanism is transparently linked to an underlying cost driver of Indian Railways, viz., the fuel and electricity cost the railways has to incur. This method of tariff increase is more welcome than an absolute increase in rates, as this takes away arbitrariness in setting these and brings a measure of transparency and predictability.

On analysing the budget, one observes repeated emphasis on measures that can contribute to improving users' experience of the railways, whether safety, cleanliness, facilities or ease of ticketing and doing transactions.

On the freight side, the provision of budgetary corpus for creating linkages with ports and mines recognises a dire need. The measures being proposed in the budget for setting up a debt fund to cater to loans taken from the World Bank and JICA, measures for prioritising projects and assuring funds, and progress on a Rail Tariff Authority point towards a reformist flavour in the budget.

Manish Sharma
Executive Director - Capital Projects & Infrastructure, PwC India