Railways to monetise freight corridor assets, focus on national plan 2030

Updated on Feb 02, 2021 03:23 AM IST

The national transporter has been allocated ₹1.10 lakh crore, of which ₹1.07 lakh crore accounts for the capital expenditure

Nirmala Sitharaman, India's finance minister. (Bloomberg)
Nirmala Sitharaman, India's finance minister. (Bloomberg)
ByAnisha Dutta, New Delhi

The national carrier will monetise Dedicated Freight Corridor (DFC) assets for operations and maintenance, Union finance minister Nirmala Sitharaman announced in the Union Budget speech on Monday. Sitharaman also said the Indian Railways will work on National Rail Plan to create a “future ready” railways system by 2030.

The national transporter has been allocated 1.10 lakh crore, of which 1.07 lakh crore accounts for the capital expenditure.

“Railways will monetise Dedicated Freight Corridor assets for operations and maintenance, after commissioning. Monetising operating public infrastructure assets is a very important financing option for new infrastructure construction. A ‘National Monetisation Pipeline’ of potential brownfield infrastructure assets will be launched. An Asset Monetisation dashboard will also be created for tracking the progress and to provide visibility to investors,” Sitharaman said in her budget speech.

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“Indian Railways have prepared a National Rail Plan for India 2030. The plan is to create a ‘future ready’ railways system by 2030. Bringing down the logistic costs for our industry is at the core of our strategy to enable ‘Make in India’. It is expected that the Western DFC and Eastern DFC will be commissioned by June 2022,” she said.

In addition to this, the government will explore new corridors—the Sonnagar-Gomoh section (263.7km) of Eastern DFC in PPP mode in 2021-22 and the 274.3km Gomoh-Dankuni section—she announced.

“We will undertake future dedicated freight corridor projects namely East Coast corridor from Kharagpur to Vijayawada, East-West Corridor from Bhusaval to Kharagpur to Dankuni and North-South corridor from Itarsi to Vijayawada. Detailed Project Reports will be undertaken in the first phase. 100% electrification of Broad-Gauge routes will be completed by December, 2023,” she said.

For passenger convenience and safety, railways will introduce the aesthetically designed Vista Dome LHB coach on tourist routes to provide passengers with a better travel experience, she said.

“The safety measures undertaken in the past few years have borne results. To further strengthen this effort, high density network and highly utilised network routes of Indian railways will be provided with an indigenously developed automatic train protection system that eliminates collision due to human error,” she said.

“The budget has a massive emphasis on railways—with the aim of improving performance and lowering logistics costs—which will have a direct multiplier impact on domestic manufacturing and trade. Railways has been a key focus for this government with a massive PPP programme announced last year followed now by an unprecedented budgetary allocation and ambitious capital expenditure (capex) programme. There is a realisation that railways (with its massive coverage, incredible traffic volumes and existing infrastructure bank) represents an excellent monetisable asset—which can be a game-changer if carefully managed. The budget aims at this—particularly the concentration on the freight corridors and the plans to monetise them,” said Deepto Roy, partner, Shardul Amarchand Mangaldas & Co.

The national transporter has faced significant losses in the current fiscal owing to the lockdown imposed on March 22 and the suspension of regular train services since. There has been a 1.1% decrease in freight loading and a negative growth of 4.2% in passenger traffic for Indian Railways in 2019-2020 as against 2018-2019, according to the Economic Survey, which was tabled in Parliament on Friday.

“Rail freight traffic growth nosedived to (-) 35.3 per cent YoY [Year-over-Year] in April 2020 before rising back sharply to 15.5 per cent YoY in September 2020, (Figure 1(b)). The growth momentum has continued till December 2020. Indian Railways loading was 118.13 million tonnes in December 2020, which is 8.54 per cent higher YoY compared to last year’s loading (108.84 million tonnes) for the same period,” it had noted.

Operating ratio—expenses as a portion of revenue or the amount spent on every rupee earned—is pegged at 96.15 % for FY 20-21.

Railways’ operating ratio is expected to improve by end of the current financial year to 96.96% in spite the disruption caused due to Covid-19, Railways board member Naresh Salecha said.

Railways has made an arrangement with the finance ministry to defer its pension liability by some years, he added.

He said that as far as the finances of the Indian Railways is concerned, “this is lower than the revised estimate of 98.36% for 2019-20.” A lower operating ratio can be attributed to lower expenditure on account of a fall in working expenses as well as a sharp fall in pension liabilities.

“Pension liability was budgeted at 53,160 crore in the beginning of the current fiscal. However, the revised estimate stood at 523 crore as the national transporter made an arrangement with the finance ministry to defer this expenses...last year was very extraordinary and exceptional due to Covid-29, because of which passenger trains did not run. Our projections hence went haywire. Before this, we have been taking full pension liabilities. When we could not meet such liabilities, we came to an arrangement with finance ministry so that a separate fund was given to us, which we have to repay to finance ministry. In a couple of years we have to pay it back,” he said.

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