With the present economic conditions not providing much scope for either large-scale fare concessions or an across-the-board increase in freight rates, the highlight of the Railway Budget for 2009-10 is likely to be a big push to public-private partnership (PPP) initiatives to enhance the Indian Railways’ capacity to earn higher revenues on a sustainable basis.
Even though Railway Minister Mamata Banerjee will like to present a populist budget on July 3 with more amenities for passengers, another fare cut is unlikely because Lalu Prasad’s Interim Railway Budget in February has already strained the Indian Railways’ finances. Prasad had announced a 2 per cent reduction in passenger fares. Similarly, any increase in freight rates looks unfeasible because of the current economic downturn.
With the fare cut already in place, achieving the projected 12 per cent growth in passenger revenue in the current year will be a challenging task, admit railway ministry officials. Moreover, if the freight rates remain unchanged, growing freight revenues by 8 per cent will again prove to be a difficult target.
If the Indian Railways, therefore, wishes to implement its expenditure plans as outlined in the Interim Railway Budget, it has to look for alternative sources of funding. One option under study is to adopt the PPP route to implement new projects. Mamata Banerjee’s first Railway Budget in the United Progressive Alliance government, therefore, may outline major PPP initiatives for several new projects, say these officials.
Banerjee’s challenge, however, will be to make the PPP experiment work for the Indian Railways. PPP initiatives by railways have not been successful so far. In the Xth Five-Year (FY) Plan, PPP projects by the Indian Railways constituted only 2 per cent of the total plan outlay and the projections for the XIth FY Plan is 19 per cent, a target that may not be achieved.
Analysts also feel that Banerjee is in a tight spot vis-a-vis her predecessor Prasad, who was at the helm when economic growth was at its peak. They also want the government and not the railways to finance the freebies that the railway minister may like to announce in the Budget.
“The Planning Commission is promoting PPP. So, railways should also promote PPP in the manufacturing sector. It also has a huge salary bill and it should work on reducing manpower,” said an analyst.