Railways: Green signal for more private funding

An increase of over ₹2/litre in the cost of diesel is bound to pinch the Railways; diesel accounts for more than half the fuel bill. But Railway Minister Piyush Goyal hopes that a faster pace of electrification will allow the Railways to tide over this increase in cost.

The logistics cost can be controlled, despite an increase in diesel prices, by innovative moves such as running trains with trucks on top of them which will help move goods faster with lower fuel consumption than on roads, Goyal told BusinessLine .

The Budget has set an aggressive revenue target for the Railways in FY2019-20. It has to earn ₹2,16,675 crore by moving freight and passenger traffic this year, up 14 per cent from the ₹1,89,904 crore earned in FY2018-19. How the Railways will mop up this extra revenue — unless it hauls much more extra traffic or raises the tariffs for users — will be clear soon.

A move to complete rail-based projects — such as freight corridors and urban transportation — with more private participation for getting funds to improve capacity was flagged by Finance Minister Nirmala Sitharaman in her first Budget speech. Modernisation of railway stations will be launched as a “massive programme,” the Finance Minister added.

Given that the funds required to develop the Railways are too large to be met by the government, public-private partnership will have to be stressed upon, she added. Apart from indigenised bullet train, more Wi-Fi services and cleaner stations, the Railway Minister urged passengers to voice their travel complaints so that the Railways can resolve them.

No diesel locomotives

The Railways has gone completely green in the production of engines, it appears. The target set for the production of diesel locomotives this year is zero, indicating that the Varanasi locomotive factory will stop producing diesel engines. The facility has already started making electric locomotives. This coincides with the Railways procuring more fuel-efficient diesel locomotives from GE Transportation.

“Reinforcement on PPP will gain momentum with faster development of railway infrastructure, including rolling stock, and gives reassurance to the private sector. These commitments, combined with a level-playing field for the private sector, are important for companies such as Bombardier to evaluate the future of the rail industry in India,” said Sudhir Rao, MD, Bombardier Transportation, India Operations.

The Railways will require ₹50 lakh-crore between 2018 and 2030, Sitharaman said, adding that it would require almost ₹1.5 lakh-crore every year. At this rate, it will take decades to complete all sanctioned projects, the Finance Minister admitted.

Focus on completion

A dedicated rail freight corridor — a project that is expected to make available the much needed network capacity for freight movement on railways — is expected to get the desired push required for faster completion as it made it to the first few paras of the Budget speech. As of now, two freight corridors are being constructed — the Western corridor between Delhi and JN Port near Mumbai, and the Eastern corridor between Delhi and Howrah — with funding from Japan and the World Bank, respectively.

Completing rail-based metro projects in various cities through PPP and transit-oriented development were other focus areas that found mention in Sitharaman’s speech. Transit-oriented development is a method where land along metro tracks are commercially developed and funds re-routed to developing and operating the metro rail system. The Railways will be encouraged to invest in urban transportation systems through tie-ups, such as the Regional Rapid Transit System between Delhi and Meerut, Sitharaman said.

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