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Getting Railways on track PDF Print E-mail
Saturday, 09 August 2014 00:00
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100% FDI is welcome, now to make it happen

Given the Railways need to spend upwards of R14 lakh crore (at 2011-12 prices) during the decade—going by the Rakesh Mohan committee’s India Transport Report—and we are not even talking of the R9 lakh crore the prime minister’s diamond quadrilateral of bullet trains will cost, it is obvious a lot of private sector investment will be called for. Though the Mohan Committee is looking at a fifth of the money coming in from the private sector, it is worth keeping in mind the fact that while the Railways is supposed to generate about a sixth of this R14 lakh crore internally, it simply doesn’t have the resources to do so. Indeed, as part of his budget speech, railway minister DV Sadananda Gowda had pointed out that the Railways’ social service obligations had risen from 9.4% of gross traffic receipts in FY01 to 16.6% in FY11—put another way, Gowda said, the social obligations added up to R20,000 crore in FY13 as compared to the Plan outlay of R35,241 crore. In other words, until this is sorted out, the Railways have no hope of being able to invest enough to get back their prime position as the transporter to the nation.

Which is why the government’s decision to allow 100% FDI for infrastructure in the sector is more than welcome. Indeed, after the debacle at the WTO and the inability to get the insurance Bill through the Rajya Sabha, the move will give the prime minister something to showcase when he goes to the US in September—two US companies, GE and EMD, have been shortlisted for a proposed diesel locomotive plant in Bihar. Comparing the Railways need with the amount of private investment that has actually come in underscores the problem since just R812 crore came in the 11th Plan, R2,500 crore in FY14 and this year’s expectation is R6,000 crore.

 

It is easy to hope the shortfall will be made up now that FDI has been allowed. This is easier said than done since the Railway bureaucracy has been successful at blocking private sector participation for years. The two locomotive engine factories, one diesel and one electric, were first supposed to be set up way back in 2008, but they were shelved for one reason or another—in one case, though the bid was lower than the Railways internal estimate if the locos were to be produced by it, it was rejected on grounds there was just one bid. The process of getting private investment for the New Delhi railway station is even older, and began in 2007, but got scuttled early on. While it is possible to argue it is the government’s intent that matters, work will now have to begin on designing PPP contracts that are fair for all concerned, but as the finance minister’s budget acknowledged, the current PPP model has run into serious problems. The Cabinet clearing FDI in Railways is an enabling step, getting serious FDI in will take a long time.

 

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