[image: Rail budget has promises to keep and miles to go]
*Sadanand Gowda could have given more details on the proposed FDI in
railways and PPP structure, which would’ve had an immediate impact on the
market. Photo: PTI At the outset, the new railway minister Sadanand Gowda
must be congratulated for taking a bold decision to increase passenger
fares before the budget and standing by his decision. *
*Former railway minister Dinesh Trivedi had rightly stated that Indian
Railways was in the ICU, when he increased passenger fares in his budget
for the year 2012-13, which unfortunately had to be rolled back. *
*The first rail budget of the new government and the railway minister,
while not a path breaking one, has positive features. For one, it is not a
populist budget announcing a slew of new projects. While retaining the
contours of the vote on account budget presented in February 2014,
initiatives have been spell out to take the Railways forward. Perhaps the
minister could have given more details on the proposed foreign direct
investment (FDI) and private investments, which would have had an immediate
impact on market sentiment. These modalities must be spelt out at the
earliest. *
*Ads by Online Browser Advertising Ad Options Already steps have been taken
in the previous budget of 2013-14 through the introduction of automatic
fare revision based on the fuel adjustment component (FAC). The current
railway minister has confirmed that this would be implemented. *
*No mention has been made about taking forward the creation of a Rail
Tariff Authority, which hopefully, must crystalize in the current year for
the fare revisions to be made independent. *
*A salient feature of this budget is containing market borrowings through
IRFC (Indian Railway Finance Corp.) and the proposal for a near-plan
holiday, which would give a much-needed reprieve to the sagging finances of
the Railways. *
*To concretize this plan, the railway ministry should prepare a Green Book,
like the Pink Book, indicating the projects proposed to be frozen, and a
separate book according high priority for projects that would augment the
capacity of Indian Railways. *
*While introduction of bullet trains and other high-speed initiatives for
travel are welcome, parallelly the minister must address the safety
requirements of the railway tracks and other infrastructure. *
*What is encouraging is that this is also the Prime Minister’s dream rail
budget and financial support from the Union government, especially in the
form of a safety fund, would help to modernize rail infrastructure. *
*What is really required for the national transporter is a clear policy for
financial support not only in the current year, but also in the years to
come. Budgetary support from the Union government comes at a cost of 5% in
the form of a dividend payable by the railways to the Union government. For
the current year, approximately Rs.9,100 crore has been set aside as
dividend payable. This needs to be revisited, keeping in view the social
obligations of providing a safe rail network to the country.*
*The railway minister has also correctly hinted at the need for
cost-sharing and participation by the state governments for their
respective prioritized projects, which would accelerate progress. *
*Increasing Plan expenditure comes at a cost, since development, repairs
and renewals are funded through the internal generation of Indian Railways.
This would affect adequate provision to the debt service fund created in
the last budget primarily to meet the repayment of loans taken for the
Dedicated Freight Corridor and also to cover the future demands of the
Seventh Pay Commission. On no account should the fund balances be
compromised, and the necessity to set aside adequate predetermined amounts
to this fund should be ensured.*
*Ideally, about Rs.30,000 crore must be built up within the next three-four
years. This again *
*underlines the need for a dedicated safety fund to meet the renewals of
the overburdened tracks and closure of level crossings and several other
measures to modernize the assets of Indian Railways. To conclude, this is a
budget on the right track and a dream budget with the promise of fulfilling
the aspirations of millions of travellers with a boost to the country’s
economy. *
*Vijaya Kanth is a former financial commissioner, Indian Railways.*
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