Ind-Ra: Railway Budget High on Promises, Low on Design

Author(s): City Air NewsNew Delhi, July 8, 2014: While the Railway Budget 2014-15 talks about India trying to be the largest freight carrier globally and identifies alternative funding requirements to achieve this target, it does not state...

Ind-Ra: Railway Budget High on Promises, Low on Design
Author(s): 

New Delhi, July 8, 2014: While the Railway Budget 2014-15 talks about India trying to be the largest freight carrier globally and identifies alternative funding requirements to achieve this target, it does not state a clear strategy to meet these requirements, says India Ratings & Research (Ind-Ra).

Alternative ways proposed to finance railway operations include encouraging private sector participation through public-private partnerships, leveraging railway public sector undertaking resources and allowing foreign direct investment (after Cabinet approval) in the rail sector.

The passenger and freight tariffs were raised in June 2014 and the budget estimates operating surplus to increase to 9.1% in FY15 (FY14: 6.5%).

Two proposals of the rail budget - transporting fruits and vegetables by air conditioned trains and milk by special milk tankers - can provide some comfort in controlling runaway food inflation. Another area that received attention was connectivity to the North-Eastern region.

Despite acknowledging the fact that growth of the sector depends heavily on the availability of funds for investment in rail infrastructure, borrowing by the Indian Railway Finance Corporation Limited is pegged at only INR117.9bn. Ind-Ra believes for large infrastructure projects with a long gestation period, public equity along with strong supervision and control is the best alternative.

We believe the announcement of bullet trains and diamond quadrilateral for high speed trains are all statements of good intent and will take a while to come true.

Date: 
Tuesday, July 8, 2014