The Indian Railways will depend heavily on public-private partnership (PPP) projects for growth despite its past record of slow pace in attracting investors.
Union Finance Minister Nirmala Sitharaman pointed out sectors for PPP projects that were not open earlier. Private investments are being pushed thanks to the Rs 50-trillion investment required between 2018 and 2030, which the government would find difficult to generate by itself.
“Given that the capital expenditure outlays of the Railways are around Rs 1.5-1.6 trillion, completing all sanctioned projects would take decades. It is, therefore, proposed to use public-private partnerships to unleash faster development and completion of tracks, rolling-stock manufacturing and delivery of passenger freight services,” said Sitharaman during the Budget speech on Friday.
At present, engines and wagons that are part of railway rolling stock are the ones that are manufactured privately. Laying tracks and railway services have not been opened up yet though private port railways are operational in some stretches.
As much as Rs 28,100 crore is expected to come during the current year from PPP initiatives. This will include station redevelopment.
According to Rajaji Meshram, partner, EY India, however, a steep jump in private sector investment will be difficult in the current situation, where the Indian Railways in both the operator and regulator.
“With government investment in the range of Rs 1.5 trillion per annum in railways, the triple increase is targeted through private sector involvement. To make this happen, the establishment of an independent railway regulator is essential,” he said.
The Budget estimates government investment in railways to increase by a good 24 per cent to Rs 65,837 crore from Rs 53,060 crore in 2018-19. At the same time, borrowings through Indian Railway Finance Corporation are expected to go up to Rs 55,471 crore from Rs 52,297 crore in 2018-19.
In 2018-19, the capital expenditure was Rs 1.38 trillion, comprising Rs 53,060 crore from budgetary support, Rs 6,500 crore from internal resources and Rs 79,297.52 crore from extra-budgetary resources.
This meant that little over 38 per cent of the railway capital expenditure was met through government resources; this has increased to 41 per cent.
For the current year, the government is hoping to bring in efficiency in railway operations, reflected in improved operating ratio of 95 per cent over 97.3 per cent last year.
The railways are banking on a 10 per cent increase in gross traffic receipts to Rs 2.17 trillion for 2019-20 over the Revised Estimates 2018-19. While the passenger earnings at Rs 56,000 crore are based on a 2.9 per cent growth in originating passengers, the goods earnings at Rs 1.43 trillion are keeping in view an incremental loading of 58 million tonne of revenue earning freight and an average freight lead of 564 kilometre.
Other coaching earnings and non-traffic earnings are expected to be Rs 6,000 crore and Rs 11,575 crore, respectively, keeping in view the focus of the Railways on increasing the share of non-fare revenue sources of income.
Sitharaman also gave the railway infrastructure an important link with urban transit systems by stating it the railways would encouraged to invest more in suburban railways through special purpose vehicle (SPV) structures such as Rapid Regional Transport System (RRTS) proposed on the Delhi-Meerut route.
“I propose to enhance the metro-railway initiatives by encouraging more PPP initiatives and ensuring completion of sanctioned works, while supporting Transit Oriented Development (TOD) to ensure commercial activity around transit hubs,” she said.
Besides, the dedicated freight corridor project would get emphasis in order to free up some of the existing railway network for passenger trains.