The first Railway Budget of Union Minister Suresh Prabhu sets a vision for Indian Railways, striving to make it the prime mover of the economy, once again...
The first Railway Budget of Union Minister Suresh Prabhu sets a vision for Indian Railways, striving to make it the prime mover of the economy, once again.
Prime focus of the minister is in enhancing its operations, targeting operating ratio at 88.5% for FY16 from 91.8% in FY15. Budget carves out various resource mobilization routes, moving away from budgetary supports.
He has proposed to part-finance the ambitious 5-year investment plan of Rs.8.56trn through funds from foreign institutions, Pension Funds, States, PSUs and PPPs both in form of equity and debt through SPVs.
Focus is more on implementation and improving the service quality rather than on big bang announcements. Focus is also on commercial viability as much as it is on social welfare. We believe that, efficient execution of these initiatives will indeed improve the passenger revenues while also attracting more freight traffic to Railways.
Change in freight fares seems cosmetic in nature, no change in passenger fare is welcome move, given fuel cost has come down significantly over the period.
The markets have likely been disappointed by the absence of several big announcements relating to the dedicated freight corridors or other capex programs as well as finer details on FDI / PPP financing. However, the focus on effective implementation, improving the operating ratio as well as on new initiatives bodes well for the railways in the long term.
We expect the focus on deficit as well as reforms to be reflected in the Union Budget, and we will watch out for the same.
By Dipen Shah, Head- Private Client Group Research, Kotak Securities