In a Parliamentary address unveiling his 2015-2016 budget yesterday, India’s Railway Minister Shri Suresh Prabhakar Prabhu (Suresh Prabhu) presented a forward-looking strategy which will see a 52 percent year-on-year allocation increase, from Rs65.8 billion in 2014- 15 (€9.5 billion; $10.6 billion) to Rs1trillion in 2015-16, to finance modernisation and upgrades of the network system, while rendering the network more investment-worthy for institutional investors.
In light of difficulty in mobilising extra-budgetary resources, the Minister went beyond the government’s efforts to liberalise the railway sector, which took a serious step forward last November with regulation opening up 17 industry segments to foreign capital, and proposing to set up a Financing Cell in the Railway Board, which would seek the benefit of advice from experts in the field, as well as the creation of new vehicles to crowd in investment from long-term institutional investors and other partners.
Commenting on the budgetary plan laid out by his Minister, Prime Minister Shri Narendra Modi said it was “a forward looking, futuristic and passenger-centric budget, combining a clear vision and a definite plan to achieve it”.
He added: “This is a watershed moment for railways, marking a paradigm shift from discussing coaches and trains to comprehensive railway reform. I am particularly delighted that for the first time, there is a concrete vision for technology upgradation and modernisation of the railways. The Railway Budget lays out a clear roadmap to make the railways the key driver of India`s economic growth, playing a key role in India`s progress. Railway Budget 2015 stands out for its focus on the common man, putting speed, scale, service and safety, all on one track.”
In line with its policy to monetise assets rather than selling them, the Railways Minister announced that to finance remunerative projects through market borrowing, the Ministry intended to tap low-cost long-term funds from insurance and pension funds and multi-lateral and bilateral agencies which can be serviced through incremental revenues.
These would include setting up an infrastructure fund, a holding company and a joint venture with an existing non-banking financial company. A public sector undertaking with the Indian Railway Finance Corporation (IRFC) will raise long-term debt from domestic as well as overseas sources, including multilateral and bilateral financial institutions that have expressed keen interest in working closely with the railways in the endeavour.
Rs40 billion of the annual plan’s funds have been secured by the Ministry of Finance, while an additional Rs1.65 billion comes from the railway’s share of revenue generated from tax on diesel and collected through the Central Road Fund.
Among key features of the programme, the minister boasted ready approvals for the construction of 970 roads over bridges (ROBs) and roads under bridges (RUBs) and other safety-related works to replace 3,438 level crossings at a total expense of Rs6.6 billion.
Furthermore, a web-based application has been commissioned with user-friendly measures for online submission and approval of drawings within 60 days and a memorandum of understanding has also been signed with the Ministry of Road Transport and Highways in this regard.