Union railway minister Mamata Banerjee is planning to arm the national transporter with a R5-lakh crore fund exclusively for its financially unviable projects. The proposal has received an in-principle approval from Prime Minister Manmohan Singh. The ministry is planning to establish the fund by the end of 2011-12. The means could include budgetary support and a new impost.
The non-lapsable fund will be created under the new scheme Pradhan Mantri Rail Vikas Yojana announced by the minister in her budget speech. The scheme envisages the creation of railway infrastructure in areas which have remained cut off from the network due to financial constraints.
The fund will also part-finance the R14-lakh crore investment proposed by railways as part of its Vision 2020 programme. Investments from the fund will also be made during the period and cater to the inclusive growth agenda of the UPA government. This would mean that money will be spent on socially desirable projects rather than economically viable ones. There is a feeling that with the constrained railway finances, many of these projects may not take off leaving a vast population of the country cut off from railway services.
Railway ministry officials told FE that the resources for the fund would come mostly from the Budget and Railways will not contribute anything from its own resources. ?Options like a special cess could also be considered by the government to operationalise the fund,? one of them said, requesting anonymity.
As per officials, Banerjee wants to set up the fund by March 31, 2012, the end of 11th Five Year Plan. ?The minister wants that we start implementing all socially desirable projects (financially unviable projects) from the beginning of 12th Plan,?another official said.
?So, the fund has to be established by the end of current Plan,? the official said.
Still, how the finance ministry ? keen to tread the path of fiscal consolidation ? would respond to the the rail ministry’s proposal is rather uncertain. The finance ministry, along with the Planning Commission, has been pitching for an increase in passenger fares to generate funds for railway projects but successive railway ministers have been averse to do so. Railways? demand for a five-year dividend waiver was also turned down by the finance ministry on the same grounds in 2010.
The proposal on the new fund comes at a time when the Planning Commission is preparing an approach paper for the 12th Plan, starting April 1, 2012. Railways’ proposal may well form part of the 12th Plan document, highlighting the long-term policy goals of the government. However, in the mid-term appraisal of the current Plan, the investment target for railways was slashed by 23%.
Banerjee has focused on connecting the hitherto unconnected areas to the mainland through rails since the time she took charge as railway minister in 2009. In 2010-11, she announced 114 ?socially desirable projects? but could complete only 94. ?I propose to take up construction of these lines (remaining lines) in the 12th Five Year Plan since this budget year is the terminal year of the 11th Plan,? she had said in her budget speech in February.