Comment: Ranen Banerjee

Private sector role must be raised significantly

“Railway Minister Mamata Banerjee has proposed a two-pronged approach — focussing on sustainable, efficient and rapidly-growing Indian Railways, balanced by social consideration. Apart from providing concessions for senior citizens, the Budget proposed construction of over 10,000 night shelters, smart card for seamless travel and monthly season ticket for only Rs 25 for travel upto 100 km for poor.

On the economic front, the minister announced that railways have added over 700 km of new lines, which was almost three times the achievement in the previous years. She also added that railways was on track to achieve targets for gauge conversion, doubling and electrification. The annual plan for financial year 2011-12 of Rs 57,630 crore is the highest-ever planned by the railways, and approximately a 40 per cent increase from financial year 2010-11. While gross budgetary support is estimated at Rs 20,000 crore, market borrowing will contribute 20,594 crore. Expected contribution from public-private partnership (PPP) projects has been kept at only Rs 1776 crore.

A slew of projects focussed on setting up rail-based industries was announced. These include rail-industrial parks, bridge factory, locomotive manufacturing units, metro coach manufacturing unit. On the safety front, the Minister announced that three zonal railways will commission anti-collision devices.

The minister announced that 85 proposals on PPP mode were under consideration, besides a single window system to be set-up to review these proposals. However, there was no clear direction on how railways plan to invigorate important PPP projects, such as diesel and electric locomotive manufacturing units in Bihar. Financial year 2011-12 is for the first time in the history of railways when earnings have been projected to exceed the Rs 1 lakh crore-mark.

The impact of the Sixth Pay Commission recommendations during the 11th Plan period is expected to be Rs 73,000 crore. As a result, the operating ratio for 2010-11 is expected at 92.7 and 91.1 for 2011-12. With a small estimated surplus of Rs 5,260 for 2011-12, railways will not be in a position to meet the ambitious expansion plans laid down in the Budget, unless private sector involvement through PPP mode is significantly increased. It requires enabling policies and adoption of an investor-friendly approach. The question is whether railways is willing to travel along this track.”

Ranen Banerjee,
Executive Director, PwC India