Railways short on long-term strategies

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: of the financial impact of the concessions proposed in the railway budget.

The annual Plan outlay is set at Rs 37,500 crore, with a moderate budgetary support from a general revenue of Rs 7,874 crore (a 21% share), Rs 20,600 crore (54.93%) from the railways’ internal resources, Rs 1,300 crore from the safety fund, borrowings by IRFC, Rs 6,907 crore (18.4%), RVNL, Rs 293 crore, and the PPP through wagon investment and others, Rs 1,300 crore.

A Railway Vision 2025 is promised in six months. This would call for mind-boggling amounts of money. Even for the next five years, the estimated requirement is Rs 2,50,000 crore, of which Rs 1,00,000 crore are expected through PPP. In 2008-09 itself, Rs 25,000 crore are expected to be invested on stations, loco and coach factory, logistics parks and so on, but the Plan provides for only Rs 1,300 crore! PPP is inevitable for increasing capacity, which alone can be a long-term solution, but international experience does not encourage undue reliance on this method. A recent study by TERA International revealed that in a 15-year period to the end of 2004, only 85 railway projects valued at $ 27.8 billion in 28 developing countries had reached financial closure. Thereafter, there was a steady decline, and it has returned to the level of the 1990s of solitary projects of moderate value. This is indeed a cause for concern.

In India, too, experience has not been very encouraging. Port connectivity projects seem to be the preferred category. Some examples are the port connectivity projects to Pipavav Port, Kandla and Mundra ports, and the private port of Mundra. Private sector participation appears more feasible and attractive in telecom and energy sectors, but least attractive in the transport sector. Even within the transport sector, it is attracted more to road development. PPP should be adopted with critical examination. A difficult task is in designing a model contracting agreement to attain the levels envisaged in the railways’ corporate vision.