PPP critical as Railways bankrupt, yet offer new trains
Given the build up, apart from the promise of FDI and a lot more PPP which was very encouraging, there were significant parts of railway minister DV Sadananda Gowda’s maiden railway budget that simply didn’t add up. The minister’s initial comments, though obviously political, set the tone by pointing out the railways’ social service obligations have risen from 9.4% of gross traffic receipts in FY01 to 16.6% in FY11, and in FY13, these cost R20,000 crore as compared to the Plan outlay of R35,241 crore—that is, subsidies ate up over a third of possible capital expenditure. Looked another way, Gowda spoke of losses rising from 10 paise per passenger km in FY01 to 23 paise in FY13, as a result of which, in FY15, he will be left with a surplus of just R602 crore—this was R11,754 crore as late as FY08.
Everything else in the speech, including allowing FDI for the first time, follows from the fact that the Railways simply does not have the money to invest in new projects or modernisation. In 2009, Mamata Banerjee’s vision document had envisaged an investment of R14 lakh crore over the next decade; and we are not even talking of the R9 lakh crore that the prime minister’s diamond quadrilateral is to cost—given the cost, it would be a good idea to relook the economics carefully, seductive as the idea of a bullet train corridor is. With the railways left with little funds—the appropriation to the development fund has collapsed from R2,675 crore in FY14 to a mere R300 crore in FY15—Gowda has promised a lot more PPP including, for the first time, in the actual Railway operations. There is, as yet, no clarity on what projects are to be offered, and on what terms—that will determine whether there are any takers. Given the PM’s speech while inaugurating the Katra rail link in J&K last week, it is not surprising Gowda has talked of developing at least 10 major stations in metros along the lines of India’s new airports through PPP. This is heartening, though timelines would have been welcome. Several of Gowda’s predecessors have spoken of PPP, but there has been little action on this front. Given how the railway bureaucracy has successfully stalled PPP efforts for years, albeit under a different government, it would be advisable to hold the champagne till definite PPP projects are announced and awarded.
Given the backdrop, Gowda’s speech ended on a curious note. Just 1 of 99 new line projects announced in the last 10 years, he said early in his speech, had been completed; 359 of 676 projects announced over 3 decades still need to be completed, and will cost more than the original 676 were to cost. Yet, the minister went and announced 58 new trains on which, he had earlier said, the losses were steadily rising. The budget could fall between the two stools of populism and reform.