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Railway Budget- High on Intent and sustainable reforms, Execution to be the key!

Here is a quick summary of railway budget by our Financial Fitness Expert Rashi, who is a traveler and a photographer in her own capacities. And that is why is been keeping a close eye on the rail minister’s announcements.

All in all a good budget with lot of hope for the mango people who contribute most to the rail transportation, reforms are great and will certainly change the way Indian Railways are being looked at. Let us hope, they execute all what is been shared.

Railway Minister Suresh Prabhu concluded his speech by quoting Gautam Buddha “Whenever one contemplates a journey, there are two mistakes one may make; not starting, and not going all the way.”

The quote aptly summed up the Railway Budget for Year 2016-17. High on intent… at least making a start somewhere, making noises in the right direction, talking sustainable reforms with the hope to reach samridhi or success

1.The Railway budget emphasized the need to improve operational efficiency, customer satisfaction and laid out the long term vision for structural reforms of the Railways…much required and desired actions.

2.The Railway Minister has envisaged a greater role for institutional sources through collaboration with multi-lateral agencies, pension and insurance funds and the PPP route

3.In the medium term, the priority for the Rail Ministry is to improve capacity and increase investment in the railways

Snapshot
*Slowing Economy hits Railways…in 2015-16 passenger and freight earnings growth slowed.
*Railways Finances get worse despite spending cuts.
*Banking on growth in 2016-17
*The Three ‘R’s…The railway minister outlined ‘reorganizing’, ‘restructuring’ and ‘rejuvenating’ as means to overcome challenges
And The Three ‘N’s., the three pillars of Railway Minster strategy are

  • ‘Nav Arjan’(new revenues),
  • ‘Nav Manak’(new norms),and
  • ‘Nav Sangrachna’(new structures)

KEY TAKEAWAYS for the RAIL BUDGET:

Short term balancing of budgetary constraints: The Railway Budget has had to execute a fine balancing act between shrinking traffic receipts and keeping its growth oriented focus intact. In this regard, the savings generated to offset some revenue shortfall and the adoption of alternative sources of financing indicate that the Ministry remains cognizant of budget targets.

Long term capacity creation: The focus towards long term capacity creation especially, with regard to Dedicated Freight Corridors, tie up with State Governments, increasing capacities in terminals and suburban rail systems, projects such as the auto hub and improving port connectivity are all measures which will yield long term benefits.

Project execution: The thrust towards increasing more broad gauge tracks, scaling up track electrification, boosting average speed of freight trains and increasing carrying capacity through double decker trains are all welcome steps as relatively faster implementation is possible.

Budgetary allocation: Institutional sources gain prominence

The operating ratio for the current fiscal came in at 90% but is targeted at 92% for next fiscal on account of 7th Pay Commission commitments.

Fare receipts have shown a marked slowdown and FY2016 budgeted targets were not met and gross traffic receipts fell short by over INR 15000 crores for FY2016. Growth budgeted for traffic receipts for FY2017 is 10% over RE and almost flat over BE. If this weakness in traffic earnings were to persist then next fiscal’s receipts could come under pressure.

In the current budget there remains a strong focus on institutional sources viz. LIC. PPP budgeting has also been increased substantially and market borrowings by IRFC and RVNL are also expected to aid funding.

The Budget underscores the importance of other sources of non-tariff funding such as monetizing of soft assets and land along tracks, station redevelopments, advertising revenues etc. The use of innovative means of financing is a positive step, however they are unlikely to significantly contribute to the funding equation in the short term.

Key points for Aam Aadmi

  • Wi-fi at 100 stations this year;400 more stations in 2 years
  • Enhancing e-ticketing capacity from 2,000 tickets/minute to 7,200
  • CCTV surveillance at all major stations in the country
  • 17,000 bio-toilets in trains by this fiscal
  • 400 stations to be developed via PPP
  • To launch 3 select train services-Humsafar, Tejas and Uday
  • To start Antyodaya Express, a long distance, unreserved superfast train
  • e-ticketing to be opened to foreign cards for tourists and NRI’s
  • To soon inaugurate India’s first rail auto hub in Chennai
  • IRCTC to introduce local cuisines on demand

Conclusion: On the right track

The Railway Minister continues to address multiple challenges that have marred the sector. We must note that the multiplier effect of one unit of railway output is a factor of 5.

“Every Rupee of investment in the Railways has the capacity to increase the Economy-wide output by Rs.5”-Suresh Prabhu (Railway Minsiter)

The detailed updates on status of implementation of budget proposals are a welcome step. We will watch for the implementation of the Rail Development Authority and the evolution of the tariff rationalization path as even now freight tariffs account for most of the revenues and there is a need to make fares more competitive.

Well! I am already adding a travel budget to my annual financial plan. How about you? Need help! Call up or leave a comment here.