Railways spending shows sustained rise

Part-1, is the government investing enough?

At a time when private investment is not picking up, Business Standard takes a look at how far government spending is helping revive economic activity. The four-part series begins with the railways.

Indian Railways’ outlay has more than doubled in three years, with the government planning to spend Rs 1.31 lakh crore in 2017-18.
 

The capital expenditure was Rs 58,718 crore in 2014-15 and Rs 93,520 crore in 2015-16. It is estimated at Rs 1.21 lakh crore in the current financial year, “unprecedented in railway history”, Rail Minister Suresh Prabhu told journalists recently. 

In the current financial year, the railways have placed orders for about Rs 40,000 crore for diesel and electric locomotives, though these would be mostly made in its own factories. Beside, projects worth Rs 1.1 lakh crore on an average was sanctioned in the past two financial years, compared to an average of Rs 25,000 crore during the previous four. “In 2016-17, only 17.4 per cent of the total capital expenditure or Rs 21,000 crore is coming from the private sector.
 

Similarly, in the Budget Estimate of 2017-18, only 16.7 per cent of the capex or Rs 22,000 crore is contribution from private sector. This shows the amount of money the Modi government has put in for investments in the rail sector,” said an official source.

Prabhu was also successful in securing a loan of Rs 1.5 lakh crore from government-owned Life Insurance Corporation. The ministry also secured loans from the World Bank in three phases of about $2.7 billion for the Eastern Dedicated Freight Corridor. 

Though a late starter in public-private partnerships, the railways in November 2015 awarded $7-billion contracts to GE and Alstom to set up locomotive factories in Bihar’s Marhowra and Madhepura districts. 
 

Though these are yet to start production, they signalled big-ticket private investment coming to the railways. Another segment where private investment is likely to get a big push is redevelopment of 400 stations, where investment of Rs 1 lakh crore is likely. 

Prabhu recently said his ministry had given permission for private sector investment in most segments of rail infrastructure. These include locomotives and rolling stock, manufacturing and maintenance, signalling and electric works, and dedicated freight lines.

“It needs to be seen how much of this investment is helping the railways in transforming itself and improving of passenger and freight traffic,” said former railway finance commissioner R Sivadasan. 

Passenger traffic has been falling in recent years. It dipped about three per cent in 2015-16, 2.5 per cent in 2014-15 and three per cent in 2013-14. 

In the current year, it has increased marginally, a little above one per cent. Critics say the lines commissioned have not increased by much. For 2017-18, 3,500 km of rail lines will be commissioned, compared to 2,800 km in 2016-17. 

When the capex was only Rs 50,383 crore in 2012-13, the railways had commissioned a little more than 2,000 km of lines, say experts. 

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