Railway Budget 2012-13 - Another Populist Budget- Part 2

12 March, 2012

This year the Railway Budget will serve only as a stop-gap as the more populist budget will have to..

THE RAILWAY Budget to be presented on March 14, 2012 by the Railway Minister Dinesh Trivedi of the All India Trinamool Congress Party roused lackadaisical response from the industrialists. Probably it will be a colourless budget this year. North Block says that it will be business as usual and the electoral upsets in Uttar Pradesh and other parts of the country will to some extent dictate the tone and tenor of tax and freight proposals.

The sops to be given would be fewer this year, because next year there should be a more populist budget as the elections would comparatively be nearer that time. Concessions cannot be given by Trivedi as much has already been given by his predecessor for boosting her image.

The Indian Railways raised freight rates on iron ore meant for exports by Rs 100 per tonne to Rs 1,600, and this move is likely to add to exporters' difficulties and pump the steel-making commodity's global prices. The decision, coming on the heels of India hiking export duty on fines and lumps to 20% in the 2011/12 federal budget, is seen as a blow to exports in a country where demand for banning iron ore exports has grown over the last year. India, being the world's third-largest supplier of iron ore after Australia and Brazil with about half of its total output of more than 200 million tonnes landing in China cannot raise again the railway freight rates for iron ore. Already it was raised just two months ago on January 27. Mamata Banerjee used to speak about a cash crunch as a good part of revenues came from the railway system close to about 50% as there is a slowdown of orders and payments from the railways as they are delayed.

There is no scaling of the CAPEX plan, predominantly, for the reason that the CAPEX is only for putting up a new wagon in EMU manufacturing plant. In this part of the budget nothing has been reduced in any manner. The total number of new wagons required by railways even for the next financial year is projected at 18,000. The vision 2020 document of Banerjee, promises that about 2, 90,000 wagons will be required over the next 10 years whereas the supply side is only at about 15,000 wagons per annum currently. So, because of that gap it is hoped that there will be enough orders to cater to the railways.

Railway's share in the freight segment is sliding and should be addressed immediately. Railways have increased the freight rate in all commodities including food grains, fertiliser, cement, coal, and petroleum products ahead of Rail Budget. With the latest freight hike across the board, Railways aims to earn between Rs 15,000 crore to Rs 20,000 crore in the next fiscal.

Almost 47.8% of India's population is currently aged below 29 and that number is set increase to almost 50% by 2021. India will account for 20% of the world's workforce in 2020 and it will soon have 136 million graduates compared to 23 million in China and 11 million in the US. This is a great demographic advantage that the Indian Government continues to talk about. The Railways can provide employment the youth more than any other sector.

The industrialists are of the opinion that the Railway Budget 2012-13 should consider speedy execution of the projects announced in last couple of years. The Railway Budget, according to them should focus more on adding to the rail infrastructure. Work on the dedicated freight lines should be accelerated to avoid congestion on the operative routes. The urgent requirement is for capacity augmentation in rakes, wagons and racks. It should be substantially increased to cater to the increasing demand. There is a need for better designed wagons and rakes. Railway has to be more receptive to the ideas of the industry so as to encourage the industry to invest in PPP model. It is undeniable that the Railway Budget is required to focus on modernization of rail network, which includes automation of signalling system, strengthening of track and procurement of modern rolling stock. Duty rationalization in rail freight charges is expected to give a boost to the industry.

(To be continued)