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Budget 2022: A Different Track: Indian Railways Puts Profit Before Politics

With the approach of the Union budget, several parliamentarians still frequent the Rail Bhawan. One of their strident demands is a survey for a new railway line in their constituency. The survey is the starting point for a new project. It does not need a big budget but manages to send a developmental political message among voters. While Indian Railways continues to make the decisions on technical matters even after ceding its financial autonomy in 2017 – when the railways budget was merged with the Union budget – MPs do not surrender. to the northern block with a proposal for a railway as finance ministry only puts the finishing touches to the paragraphs relating to railways that appear in the budget speech.

While some of those weird investigations still creep into the pink book, which incorporates area-by-area detail of rail projects with sanctioned outlay, railroads have largely stopped pursuing projects with a not so rate of return (RoR). healthy.

The introduction of a new train, more stops on an existing route and the improvement of a key station – highlights of past railway budget speeches – are now divorced from budget announcements.

Five years after the railway budget ceased to exist as a separate entity, the national carrier is putting profit before politics while rolling out new projects.

If one reviews the rose-coloured documents of recent years, the construction project of around 18,000 km of new lines, which was sanctioned mainly for political considerations, is either frozen or advanced at a late pace. . These projects have not been officially declared dead, but once a project receives a meager allocation of 1,000 rupees for a financial year, this too many times means the project is dumped, albeit unofficially. Here is an example: The 38 km long Basukinath-Chitra broad gauge project in Jharkhand was sanctioned Rs 450 crore in 2016, but the expenditure for it in 2020-21 and 2021-22 was only Rs 1,000 each.

According to available data, as of April 1, 2020, around 18,700 km of new railway lines were in various stages of development, which would have required funding of over Rs 3 lakh crore. A railway officer, on condition of anonymity, tells ET that the carrier is only prioritizing around 800km to be completed by 2024, however, targeting projects mainly in Jammu and Kashmir, in the ‘Himachal Pradesh and in the northeast, and is deliberately slowing down the construction of the remaining 17,900 km. . A close look at the pink books for 2020-21 and 2021-22 shows that the Rs 1,000 projects are mostly new lines, confirming what the officer claimed. Allowing an expenditure of Rs 1,000 to keep a project alive was also practiced earlier, but has become more common in recent times.

Meanwhile, the railways are moving forward with two projects that deliver robust RoR – gauge conversion (a target of over 3,000 km in April 2020) and line doubling (21,000 km).

Against this backdrop, two critical data points need to be monitored when Finance Minister Nirmala Sitharaman presents her fourth Union budget on February 1.

First, the funds it will allocate to the capital expenditures of the railways. In the latest budget, it announced a record Rs 1.10 lakh crore for railways of which Rs 1.07 lakh crore was earmarked for capital expenditure. This was double the Rs 55,000 crore granted in the 2017 budget, the first document after the merger of the two budgets. VK Yadav, former chief executive of the Board of Railways, said the merger has proven beneficial for the railways as the carrier now receives more funds from the Indian government. In addition, the railways no longer need to pay dividends to the Indian government. “What we need is better implementation of projects over time,” he adds.

Second, the number and types of projects for which the FM will allocate Rs 1,000 each. Another senior railway officer said a large number of projects partially funded by state governments were on hold, with several states, such as Telangana and Andhra Pradesh, having stopped paying their share.

“Many Rs 1,000 projects belong to this category. This trend could also continue in the next budget,” he says. The officer declined to appear on the record due to the ongoing silent period ahead of the 2022 budget. According to data available till April 1, 2021, 52 projects worth Rs 1 lakh crore are partly funded by state governments. These are mainly projects for new lines with a total length of approximately 6,500 km.

Rail projects are funded in different ways – some are fully funded by the Center, others partially funded by the states, and a few built with its own resources. Then some are financed with borrowed money. Former Railway Minister Suresh Prabhu, who presented the latest railway budget in 2016, stressed the need for additional budgetary resources; he borrowed money from the Indian Railway Finance Corporation and the Life Insurance Corporation on market terms. According to its master plan, railways should only pursue viable projects with a healthy RoR.

“Before the merger of the railways budget, my argument was that the Ministry of Finance should take care of the social obligations of the railways. The railways must be allowed to operate as an efficient organization, accepting only viable projects. Since that was not happening, I proposed – that our budget be merged with the general budget,” Prabhu told ET, adding that he was worried about the high operating rate of the railways – officially 97, 45% (unofficially, even more) in 2020-21 The operating ratio is the amount spent to earn `100 “I don’t want to use the word profit, but I think the railways need to be financially viable” Prabhu says Shiva Gopal Mishra, a union leader and general secretary of the All India Railwaymen’s Federation, says there has been no visible benefit due to the merger of the railways budget and the general budget. , we had more autonomy. Now our officers have to go to the Ministry of Finance for project approval. The railways only get 2 or 3 paragraphs in the budget,” he says.

Prior to the merger, the railroads were in the spotlight for at least one day a year—Railroad Budget Day. This visibility has disappeared but the transporter has not lost its functional autonomy. Railway officials always prepare the pink book alongside the preparation of the Union budget. A railway officer, the Executive Director (Budget), is the nodal person to coordinate with the Ministry of Finance.

Usually in mid-January, the financial details are finalized once the member (finance) of the railways and the expenditure secretary of the Ministry of Finance meet. At this time, the railways send a long note, always after the approval of the Minister of Railways, to the Ministry of Finance. Part of this memo, with minor edits, appears in FM’s budget speech.

ET has learned from sources at the Ministry of Railways that the FM is keen to dramatically increase the Indian government’s capital spending support for the railways, so much so that Rail Bhawan officials have had to struggle a bit to find projects appropriate to spend on.

With private investment blocked, it makes sense for Sitharaman to spend more money on infrastructure. This means that roads, railways and shipping will incur large expenditures in the coming year.

In the last budget, when the Government of India earmarked Rs 1.07 crore as capital expenditure of the railways, it was equivalent to Rs 19.30 for every Rs 100 given to all ministries for the development of the basic sector .

We have to wait until Tuesday to find out if Sitharaman breaks his own record and pays the railways even more.