Rail Budget 2024, did tracks twist, hopes take a Detour? Sudhanshu Mani

Rail Budget 2024

Did tracks twist, hopes take a detour?

Sudhanshu Mani

 

The interim budget, strategically positioned before general elections, serves the purpose of obtaining authorization for spending from the Consolidated Fund of India until the presentation of the full-fledged general budget by the newly-elected government. Ideally, it should refrain from announcing populist measures; however, historical trends reveal a tendency to utilize this platform for such declarations while also highlighting the government's accomplishments over the preceding five years.

 

In the case of the interim budget delivered by Piyush Goyal in February 2019, schemes involving direct payments to farmers and workers in unorganized sectors were unveiled, with the benefits retroactively effective from January 2019. Anticipations were rife that Finance Minister Nirmala Sitharaman might introduce new or augmented schemes. While outlining the government's commitment to inclusive growth, she managed to steer clear of significant populist measures, a commendable departure from the usual pattern.

 

Furthermore, expectations were set for the government to adhere to its growth-propelling policies by increasing the capital outlay for infrastructure. Despite a notable increase from the previous budget, the allocation only reached 11.1 lakh crore, perhaps indicating a conscious effort to restrain the fiscal deficit. Projections estimate the fiscal deficit at 5.8% of GDP for FY 24, with a budgeted reduction to 5.1% in FY 25. The fiscal deficit's trajectory is contingent on addressing revenue deficit and managing capital expenditure, with any substantial reduction in deficit likely necessitating a careful balance with capital expenditure.

 

It is imperative to acknowledge that the consistent maintenance of a fiscal deficit, coupled with substantial investments in infrastructure, has been a defining feature of this government's economic strategy. This approach held the potential to rejuvenate our slowing economy post the repercussions of Covid, as long as the expenditure was directed towards the creation of productive assets. Such assets, in turn, tend to stimulate further investments, enhance purchasing power, and generate new job opportunities.

 

That said, let's delve into the section of the budget dedicated to Indian Railways (IR), which unfortunately has witnessed a diminishing significance following its merger with the main budget. However, this should not undermine its importance. Although IR's gross receipts and operational expenditure pale in comparison to the national figures, a noteworthy aspect is that nearly a quarter of the country's capital expenditure (Capex) is allocated to railways. The investment in railways has experienced substantial growth, escalating manifold since FY 14 and reaching a peak of 2.62 lakh crore in the last budget.

 

Contrary to market expectations of a 10-15% increase, which led to a notable surge in railway stocks recently, the actual allocation showed minimal changes. While General Budgetary support has seen a rise of Rs. 12,000 crore, there is a reduction of Rs. 7,000 crore in borrowings. A decrease in borrowings was on the cards in view of the escalating interest burden impacting the operating ratio; there is, in any case, a pressing need to reevaluate the continuous escalation of investments in Indian Railways (IR). Despite sustained investments, there has been no substantial improvement in IR's revenue performance. Freight loading and revenue, critical income sources for IR, are projected to grow at a modest rate of around 4% in FY 24, with FY 25 budgeted at nearly the same level as FY 24. The silver lining lies in the anticipated increase in passenger receipts, estimated to grow by approximately 15% in FY 24, partly attributed to the restoration of all passenger services post-Covid. However, it's crucial to note that the passenger segment is not a significant revenue generator for railways, and the FY 25 budget forecasts a more conservative growth of around 9%.

 

Now, turning our attention to the two standout announcements (only two banner items for IR), 1) Proposal for three pivotal economic corridors within the realm of existing IR lines;  these corridors, designed to cater to energy, cement, and minerals; ports; and high-density traffic sectors, fall under the ambit of PM Gati Shakti. The overarching goal is to establish a seamless, multi-modal connectivity framework, fostering heightened logistics efficiency while concurrently curbing costs. This strategic move is anticipated to alleviate congestion, thereby enhancing the speed and safety of passenger trains. 2) Conversion of 40,000 existing passenger bogies (I am sure they coaches, some ill-informed mandarin used the common man’s lingo) to meet the standards of Vande Bharat. This initiative, presented in a language resonating with the common man, aims to enhance both safety and comfort levels and hopes to signify a commitment to providing passengers with an elevated travel experience, aligning with the contemporary benchmarks set by the Vande Bharat train.

 

Let's delve into the intricacies of the three proposed railway economic corridors. The sudden introduction of these corridors appears somewhat impromptu, as if an attempt to present a novel initiative under the guise of the familiar PM Gati Shakti mantra. The question that arises is whether this move indicates a shift in focus from the delayed Dedicated Freight Corridors (DFCs). This emphasis seems to be on the doubling or multi-tracking of existing routes, construction of rail-over-rail flyovers and new lines, amounting to an ambitious addition of 40,000 kilometers of tracks, along with the integration of multi-modal facilities. This decentralized approach, budgeted at Rs 11 lakh crore over a decade or more, appears to be a pragmatic strategy to boost both freight and passenger transport capacities. An underlying realization is that investing in upgradation of existing facilities, development of diverse rolling stock and customer-centric policies and exploring new commodities might yield more favorable outcomes. However, despite the ministry's claim of a two-year-long integrated planning process involving 18 ministries, the lack of completed Detailed Project Reports (DPRs) and identification of proposed alignments raises uncertainties, necessitating a patient observation of future developments.

 

Regarding the announcement of upgrading 40,000 coaches to Vande Bharat standards, the information seems cryptic. The concept of achieving "Vande Bharat standards" is somewhat ambiguous, especially considering that Vande Bharat trains are self-propelled coaches and even in the details given later, one can sense some devil. Clarifications from the ministry indicate that, over the next five years, IR plans to refurbish these 40,000 old coaches at a cost of Rs. 15,200 crore. This overhaul aims to enhance passenger experience by incorporating features such as improved toilets, semi-permanent couplers, charging points, automatic water measurement systems, GPS, and CCTV cameras. However, skepticism arises, given the historical challenges faced in previous attempts to upgrade to Tightlock couplers in ICF coaches (abandoned in 2017) and many previous/ongoing projects to improve interiors in dribs and drabs. It might be more prudent to consider a phased retirement program for these coaches, replacing them with new LHB coaches and, more efficiently, with new Vande Bharat train sets.

 

Anticipation had been high for significant announcements detailing prospective events in FY 25, such as the commencement of trains connecting Delhi to Srinagar, the culmination of Dedicated Freight Corridors (DFCs), and the introduction of Vande Sleeper trains. The government's decision to refrain from garnering applause for these projects adds an element of uncertainty regarding their progress and realization in near future.

 

For me, friends, a singular insight gleaned from the budget is the imperative need for a deliberate pause and comprehensive reassessment of the investment profile. It is essential to channel funds predominantly into projects that hold the potential to enable Indian Railways (IR) to generate a surplus. The anticipation is that this recalibration will be undertaken with due diligence by the incoming government, fostering optimism for a strategic and effective approach to economic development within the railway sector.

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