Railway Budget 2016-17: Focus on reforms, increasing capacity and enhancing efficiency

Focus on reforms, increasing capacity and enhancing efficiency

The Railway Budget 2016-17 focused on process improvements and did not announce any new populist measures. The budget did not include passenger fare or freight rate increases, but instead talked about moving away from the practice of cross-subsidisation, thus taking a more rational approach to fare revisions. The budget also focused on the need for reform measures, capacity augmentation, improvement of passenger and freight services, the constitution of a rail regulator, new avenues of revenue generation and reducing energy consumption.

Key highlights of the budget 

With infrastructure development as its priority, the Ministry of Railways (MoR) increased the plan outlay to Rs 1.21 trillion, 21 per cent higher than the expected plan expenditure in 2015-16. The MoR aims to commission 2,800 km of broad gauge lines during 2016-17 as compared to the 2015-16 target of 2,500 km.  There is also a significant focus on electrification with a 50 per cent higher outlay and a target of completing 2,000 km in 2016-17. Meanwhile, 90 new projects with a total investment of Rs 1,261 billion covering about 8,432 km have been included in the budget. These relate to new line, line doubling, gauge conversion and metropolitan transport projects.

A landmark announcement in the budget was the proposal to develop three additional freight corridors, besides the Eastern and Western Corridors. The ministry has proposed the 2,328 km East-West Corridor, the 2,343 km North-South Corridor and the 1,114 km East Coast Corridor. On the passenger front, the MoR announced two new corridors for Mumbai’s suburban train network – the Churchgate-Virar and Chhatrapati Shivaji Terminus-Panvel sections.

The budget targets an operating ratio of 92 per cent for 2016-17. The higher operating ratio is due to the expected financial burden arising out of the Seventh Pay Commission recommendations. Meanwhile, the operating ratio target of 88.5 per cent set last year remains unachieved and the revised estimate has now been pegged at 90 per cent.

To meet its investment targets, the ministry plans to mobilise funds from the Life Insurance Corporation of India. Moreover, the Indian Railway Finance Corporation will issue infrastructure bonds and a development fund will be set up with assistance from multilateral agencies like the World Bank. Besides this, the MoR is also exploring new avenues of revenue like monetising land and buildings, land along tracks, and soft assets such as data, software, etc. The ministry targets an increase in advertising revenues of over 300 per cent.

Meanwhile, the ministry has announced that it will review the tariff policy to evolve a competitive rate structure vis-à-vis other modes of transport, permit multipoint loading/ unloading and apply differentiated tariffs to increase the utilisation of alternative routes. It is also keen on signing long-term tariff contracts with key freight customers using predetermined price escalation principles.

One of the major changes proposed is starting timetabled freight container, parcel and special commodity trains on a pilot basis. This is expected to improve efficiency in freight operations. Further, the ministry announced the opening up of the container segment to all traffic except coal and specified mineral ores as well as part-loads during the non-peak season. The ministry also plans to develop rail-side logistic parks and warehousing facilities through public-private partnerships. It aims to develop 10 goods sheds through the Transport Logistics Company of India during 2016-17. Another key announcement is the plan to inaugurate India’s first rail auto hub in Chennai soon.

The MoR has announced several measures for the passenger segment as well. These include making Wi-Fi services available at 100 stations this year and at another 400 stations in the next two years, improving passenger amenities, beautifying stations at places of religious  importance, extending e-catering services from 45 stations to all 408 Class A1 and A stations, selling tickets through hand-held terminals and platform tickets through ticket vending machines, providing an additional 30,000 bio-toilets on trains and stations, and setting up waste segregation and recycling centres.

The MoR is continuously exploring ways to reduce its energy bills. It aims to achieve annualised savings of Rs 30 billion in 2016-17. To this end, it plans to commission 132.5 MW of wind-based power plants in the year. Tender documents for 50 MW of solar rooftop plants have been issued and a 100 MW solar power facility is currently being set up. Other announcements in this area include the deployment of light-emitting diode-based lights which would help reduce the energy consumption in non-traction areas by 10-15 per cent, the development of rainwater harvesting facilities, and the introduction of automatic coach washing plants.

Overall, the budget lays emphasis on infrastructure expansion, efficiency improvement, increasing revenues and reducing costs. However, the MoR faces huge challenges related to the Seventh Pay Commission recommendations.