Gathering steam for the long-term spurt

The Railway budget for 2017-18 shows the Centre’s strong commitment to revamp the Railway system. Indian Railways expects to commission 3,500 km of new lines for the year 2017-18, a 25 per cent increase over the earlier year.

The budget estimate for 2017-18 stands at ₹1.31 lakh crore, about 9 per cent higher than the revised expenditure of ₹1.21 lakh crore in 2016-17. About 40 per cent of the budget estimate of ₹1.31 lakh crore is expected to come from budget support while the rest will be raised through internal and extra-budgetary resources.

In the current fiscal, the Railways continued to show lacklustre performance. The gross projected revenue for the current fiscal till December 2016 stands at ₹1,16,762 crore, or 2.8 per cent lower than the year before. The worrying sign is the freight segment — the profitable arm of Railways — whose projected revenue for 2016-17 is expected to drop more than 7 per cent for the current fiscal. But continuing order flows — thanks to the Railways’ increased investment focus — is expected to benefit its vendors. Many listed rail equipment, rolling stock and allied infrastructure manufacturing companies saw solid growth in their order books this fiscal which also reflects in their profit. For the six months ending December 2016, both the listed wagon manufacturers — Texmaco Rail & Engineering and Titagarh Wagons — showed a profit growth close to three times the level notched up in the same period a year earlier. These companies will benefit from the higher budget allocation. Texmaco Rail & Engineering should get a further boost in revenues after its merger with Kalindee Rail — that deals mainly with engineering, procurement and construction of infrastructure.

Similarly, GPT Infraprojects, which manufactures steel reinforced concrete for laying railway lines and is engaged in the execution of civil and infrastructure projects, should get a booster dose from the current budget.

With the Railways’ increasing emphasis on improving rail signalling systems, companies such as Siemens should also benefit from a good order flow.

The Railways’ long-term strategy to create end-to-end connectivity through tie-ups with logistics companies seems a distant dream. With the first right of way reserved for passenger trains and a very low average speed for freight, operationalising the above strategy will take some doing. But the intent to bring in structural changes by adopting an accrual-based accounting system is a step in the right direction.

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