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Will Lalu put economy on the fast track?

Indian Railways attempts to leapfrog into a new stage through a staggering Rs 2,50,000 crore investments over the next five years, reports Gaurav Choudhury.

business Updated: Feb 26, 2008 22:26 IST
Gaurav Choudhury

Lalu Prasad Yadav has taken a leaf out of highways and sought to co-opt the private sector, as Indian Railways attempts to leapfrog into a new stage through a staggering Rs 2,50,000 crore investments over the next five years.

Operating ratio has improved to 76 per cent from 92 per cent in 2003-04. The ratio indicates how much the organisation should spend to earn one rupee. Operating ratio is an important statistic of railway performance and is regarded as an index of operational efficiency.

The improved ratio has enabled the government to raised planned investment estimates for 2008-09 to to Rs 37,000 crore – a three-fold increase in five years from Rs13,311 crore in 2003-04.The government has also estimated a cash surplus of Rs 24,783 crore after making an ad hoc provision of nearly Rs 5,000 crore for meeting anticipated recommendations of the 6th Pay Commission.

Besides, the government has set a target of Rs 2,50,000 crore by 2012, premised on an investment of Rs 1,00,000 crore through the PPP route.

Yadav said the PPP model would be adopted to develop stations, rolling stock manufacturing, multi-modal logistics parks and running container trains among others.

Experts welcomed the targets, but felt fundamental institutional and legal reforms were required for efficient implementation of a PPP model.

“If PPP dream has to become reality, Indian Railways has to transform its thought process, has to drastically increase the speed of decision taking, and has to let go the attitude of to have the cake and eat it too,” Akhileshwar Sahay, president (Infrastructure Advisory) Feedback Ventures.

Rajeev Jyoti, president and MD of Bombardier Transportation said “While the initiative is in the right direction, the mechanism will need to be worked upon from a business and a legal perspective since it entails large scale commitment of funds from private sector.”

The minister proposed that a land acquisition ordinance would be passed on the pattern of National Highways Authority of India (NHAI) Act to enable expeditious commissioning of important railway projects.

With nearly one-third of freight movement operating through road, the budget has sought to make railways a more attractive option with a planned investment of Rs. 75000 crores in the next seven years for saturated transportation lines.

“It is very important that these projects are executed at a fast pace so that Indian Railways is able to support the overall economic growth of the country, and does not become a bottleneck,” Jyoti said.