Friday, February 26, 2016

Prabhu's Second Railway Budget -

Amidst a sharply divided polity and more sharply divided citizens on the issue of JNU, Patila House court, Nationalism and the Smriti Irani speech comes a crucial week for the floundering, weakening, growing Indian Economy. The week started with Suresh Prabhu coming up with his second railway budget.
Railway budgets have started to become boring and that's actually good. 

Last year's Railway budget was presented by a new Railway minister who made the budget sound practical, achievable and well directed/targeted. So a good idea would be to start with a review of last year's budget. Here are important highlights of the last Rail budget that I had listed last year in a similar post

* Railway to move to paperless ticketing, to introduce hand held device for TTEs.
* You can now book your rail meal from a food chain online.
* Travel between Delhi-Mumbai and Delhi-Kolkata to be an overnight journey.
* 67% more funds allotted for passenger amenities.
* No increase in passenger fares
* No new train announced in Rail Budget.
* 9 hi-speed corridors, high speed trains, Make in India opportunities.
* Advance reservation period increased to 120 days.
* 1330% increase in railway electrification over previous year.
* In 400 stations wi-fi facility will be provided.
* 17000 toilets to be replaced by bio-toilets.
* Rs 2000 crore for Coastal Connectivity Program
* Speedier Railway- 9 hi-speed corridors, high speed trains, Make in India opportunities.
* 1330% increase in railway electrification over previous year.
* 4 Railway research centres will be opened with IIT BHU

So how did he fair and what's in store this yearUnlike the his predecessor - Suresh prabhu seems to have moved on almost all of his promises incrementally (of course missing most of the targets and yet nothing to criticise there). 
As one goes through this year's speech - one finds it very difficult to figure out what he wants to do as he does not review his work of the last year. This is what I could dig out as a summary
  • No hike in fares.
  • Three new freight corridors announced between Delhi-Chennai, Kharagpur-Mumbai and Kharagpur-Vijayawada.
  • Increase in quota of lower berths for women and senior citizens.
  • Long-distance superfast train Antyodaya Express for unreserved passengers.
  • Baby food at stations, a separate menu for children on all trains.
  • Separate toilets and Braille-enabled new coaches to be introduced for the divyaang, or differently-abled people.
  • All major stations under CCTV surveillance soon. To boost transparency, camera surveillance at all tatkal counters.
  • As many as 17000 toilets to be set up as part of Swacch Rail, Swacch Bharat scheme. The world's first bio-vaccum toilet built by Indian Railways operational in Dibrugarh-Rajdhani Express.
  • New train 'Tejas' to at 120 km per hour: Prabhu
  • India's first rail auto hub to come up in Chennai.
  • Aastha Circuit trains to connect important pilgrimage centres.
  • FM radio stations to provide train borne entertainment via PA systems.
  • Overnight 'Uday' double-decker trains.
  • 2,800 km of new tracks in next year.
  • Mizoram and Manipur to be connected through broad gauge.
  • Wi-Fi at 100 railway stations this year.
  • A Railway University to come up.
  • IRCTC will make available local cuisine.
  • Porters to be trained in soft skills and called 'Sahayaks' and not coolies.
  • 33% sub-quota for women under all reserved categories.
  • Drones to be used for remote monitoring of ongoing projects.

So, what do I think of the Budget
1. This year the budget speech was boring and good both because of the same reason - he continues moving on the big picture in the face of some hardships and has avoided political populism as was the case in his last budget too. 

2. Railways could effect a saving of close to 8000 cr. in expenses (presumably on the back of low fuel costs largely and some improved efficiency too) and yet these savings were neutralised by a drop in freight revenue. The drop in freight revenue is worrisome and could be for two reasons - better road infrastructure and improved operations of logistics companies coupled with decades old practice of subsidising customer fare by high freight rates may have led to shift of some business away from railways. This is obviously also due to general slowdown in the economy specially the manufacturing sector (which brings us back to question of credibility of the 7.5% growth number). This is obviously not his criticism - the business environment is out of his control.

3. One area of concern remains the provisions for depreciation reserve funds. A budgeting of Rs 3200 crores to this against a revised estimate of 5500 crores in the last budget which actually budgeted a 9000 crores to it raises doubts on the ability of Railways to carry out repairs and maintenance effectively, This is directly related to safety of trains.

4. A expected deterioration in Operating ratio to 92% is another worry. Many believe even managing it to this level would be a challenge because of the effect pay commission on salaries.
5. He has however unveiled an ambitious investment plan to modernise the railways which he wishes to fund through LIC, PPP and other means. First one is clear - PPP remains vague and other routes promised last year too - the name was monetisation of Railway's assets without privatising them. We have not seen much on what he meant or he means. So financing remain his biggest challenge. Well intentioned and deserved as well - but will this happen is a question mark. Then there is this question of using LIC as the source of funds - one can argue for and against.

6. His action of most of the promises of the last budget might be a work in progress and yet anyone who has travelled by the Indian Railways in the last six months would agree that there are on the ground changes that can be felt. This one fact makes Prabhu a fantastic minister and so we must allow him time, space and maneuverability to deliver on his intent. Thankfully he has all of that from Modiji. 

7. One thing however - this budget speech shares very little on actual figures and hence is a little difficult to figure out actual performance. It has kept analysts a flummoxed about what is going on.

8. Prabhu has also been bitten by the Modi Govt. bug of throwing a slew of jargons/brands for each of his initiatives. So theme goes "Overcoming challenges – Reorganize, Restructure Rejuvenate Indian Railways". There are three pillars of his strategy "Nav Arjan, Manak, Nav Sanrachna". Then he talks of initiatives like Antyodaya Express, Deen Dayalu coaches, Humsafar, Tejas,UDAY, Vikalp etc each of them a well intentioned initiative.

9. Last year I said that its a good budget and like always execution will be the key. This we can comfortably say that execution is on progress although slower than expected and yet no derailing happened in a tough year. Also the focus remains intact in this budget too. Hence there are reasons to feel more upbeat and confident of Suresh Prabhu as the minister. His initiatives should contribute substantially in reviving the investment cycle that India badly needs.

10. Like last year bold, transformational reforms are missing - but thats not news anymore because by now the staunchest supporters of the Modi government have also probably settled with the reality that "parivartan" promised by Modiji was always intended to be incremental rather than disruptive. So be it.

Overall good budget, stays on focus, cuts through any populism and generates hopes for the future. Suresh prabhu is one of the few good ministers in this government - my opinion. The problem however is that For something so critical as Railways this incremental approach is rather lazy - what we need is nothing short of an overhaul.

If interested read bare details here