Estimating Rs 6.7 trillion business opportunities for the Railways in 5 years, Crisil today said the upcoming Union Budget could allocate funds to the tune of Rs 1.3-1.4 trillion in this sector for 2017-18, a move which could help in faster execution of projects in this space.
According to Crisil Research, government’s move to reinvigorate Indian Railways offers unprecedented business opportunities worth Rs 6.7 trillion in the five years to 2020.
The business opportunities could be the largest compared to rest of the world except China and would be more than 2.5 times the capital expenditure seen in five fiscals to 2015.
“We expect the upcoming Union Budget to earmark Rs 1.3 – 1.4 trillion spending for next fiscal,” the report said.
“The pipeline of projects, too, is ramping up as sanctions gather pace. Around Rs 1.1 trillion worth of projects were sanctioned on average in the past two fiscals in key segments compared with an average Rs 250 billion in the four fiscals preceding,” it added.
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Crisil Research senior director Prasad Koparkar said the gross budgetary support would mainly go towards network decongestion and expansion.
“Secured debt of Rs 1.5 trillion from the Life Insurance Corporation of India (LIC), and Rs 523 billion loan from the World Bank and the Japan International Cooperation Agency have already been tied up,” Koparkar said.
“These will lead to higher allocation for, and faster execution of, strategic and remunerative projects,” he added.
As per the report, loan from LIC is expected to boost investments in electrification and track-doubling projects, which offer adequate returns.
The multilateral funds, on the other hand, are expected to aid investments in dedicated freight corridors (DFCs).
“Consequently, we see planned capex on network decongestion and rolling stock materialising largely by fiscal 2020,” the report noted.
Going by Crisil’s estimates, high-impact projects involving decongestion would be prioritised over new lines, and open up a Rs 2.4 trillion business opportunity.
Investment in rolling stock -–locomotives and coaches — is seen at Rs 1.1 trillion. Of this, purchase of locomotives would account for nearly half.
Further, investments in safety are likely to treble to Rs 900 billion, but will fall short of Rs 1.27 trillion target.
“Bulk of it will be to build rail under-bridges and over-bridges, with the rest for track renewal, signalling and telecom, etc,” the report said.