When rail minister Suresh Prabhu announced Rs 8.5 lakh crore in investment over the next five years in his first full-term budget, he offered passengers perks such as stable fares, better toilets and cleaner stations — but no new trains on the world’s fourth largest rail network, a first.
Prabhu has delivered, by a wide reckoning, India’s first reform-oriented rail budget in decades. For the first time, the railway board will have, within it, a financial cell. That’s a step towards installing corporate-style book-keeping. In other words, the rail network looks veering towards a much-needed profit-and-loss approach.
Two, the railways was fast losing its most lucrative business of hauling oil. Frustrated by a congested network, oil firms gradually were finding it comparatively cheaper to transport fuel by laying costly pipelines. Prabhu announced setting up of a transport logistic arm and connectivity with ports to snatch the business back. Steering clear of populism is in itself a landmark.
Successive governments have tended to prioritise populist objectives like keeping fares low and adding new trains to please voters, rather than increase investment to make the ramshackle 64,000-km British-era network fitter.
Prabhu has set in motion a process to wean the railways off from over-depending on the government for funds. According to his plan, 59.4% of budgetary support will come from the Centre and internal resources, down from 66% earlier. To make up, Prabhu will dip into financial institutions and the markets.
The blueprint includes setting up of an infrastructure fund, a holding company and a joint venture, raising long term debt from domestic as well as overseas sources, including multilateral and bilateral financial institutions.
The catchline, as Prabhu spelt out: “Monetisation of assets rather than selling them.”
In all, Prabhu’s budget looks more like a corporate turnaround blueprint, rather than a statement of account and expenditure.