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  1. From Nitin Gadkari to Suresh Prabhu: One is spending fast, the other needs to up his game

From Nitin Gadkari to Suresh Prabhu: One is spending fast, the other needs to up his game

Any comparison between the highways and the roadways ministry is unfair given the vast complexity of the latter – it also employs 1.33 million people– but it remains true that these two sectors, above all, were chosen by Prime Minister Narendra Modi to lead India’s economic revival.

By: | Updated: September 25, 2015 2:00 PM
Suresh Prabhu on indian railways accident

In the case of new railway lines to be constructed, for instance, a total of Rs 12,800 crore was to be spent in the full year – of this, Rs 8,700 crore was to come from the railways itself. (PTI)

Any comparison between the highways and the railways ministry is unfair given the vast complexity of the latter – it also employs 1.33 million people – but it remains true that these two sectors, above all, were chosen by Prime Minister Narendra Modi to lead India’s economic revival. With the private sector cash-strapped, and PPPs in all manner of trouble, the government’s big plan was to step up public investment and mostly in railways and roads given their big multiplier effects in terms of both inducing private investment as well as in terms of employment generation. To that extent, though only to that extent, the comparison is an acceptable one. In the first five months of the year, from April to August, according to Ambit Capital, the award of 1,855 km of new road contracts represented a 93% increase over the same period last year. By contrast, the railways performance has been quite poor with total expenditure rising a mere 12%, from Rs 19,100 crore in Apr-Aug 2014 to Rs 21,300 crore in Apr-Aug 2015 and, within this, the capex by the railways itself – as opposed to JVs/SPVs – was flat at Rs 14,700 crore in both periods.

Most important, the numbers are woefully short of target. In the case of new lines to be constructed, for instance, a total of Rs 12,800 crore was to be spent in the full year – of this, Rs 8,700 crore was to come from the railways itself, and the rest from extra budgetary resources like LIC and the World Bank – while just Rs 2,500 crore was actually spent; that’s 29% of the capex that was to come from the railways itself and an even lower 19% of the total target. In the case of doubling of tracks where Rs 18,400 crore is to be spent – Rs 7,100 from the railways itself – just Rs 2,000 crore was spent.

All told, of the Rs 100,000 crore that is to be spent – Rs 59,400 crore from the railway budget – the total spent in the first five months of the year was Rs 21,300 crore. There is, of course, the possibility that spending may increase later on, but it is important to monitor targets on a monthly/quarterly basis so that the necessary course correction can take place. One possibility is that, for instance, the railway bureaucracy that has been empowered to take as many financial decisions by minister Suresh Prabhu has not yet got used to the responsibility given to it.

indian railways

Under Prabhu, the railways has come out with many innovative means to raise finance, such as from LIC and even the World Bank – to that extent, it is fair to say funds are not going to be the constraint, at least for the next few years. And, given timely repayments have to be made to LIC – and the World Bank is not in favour of lending if the projects are not viable – the railways is being smart in first taking up projects that cross a minimum hurdle rate in terms of internal rates of return. The task ahead of the railways is also huge, adding to Prabhu’s challenges – in the case of doubling projects for instance, while the railways has done 600-700 km annually at its peak, the targets envisage this going up four times by FY19. All of which means Prabhu has to not only really crank up the railways machinery, he has to involve more private players. The latter though, is easier said than done given the bureaucracy’s resistance – look at the heavy weather made over awarding two locomotive projects to private players over the last few years. Privatising railway stations, in the manner AAI did various airports like the Delhi one, would have allowed a few really big projects to start, but that too seems to be stuck on a slow track. Given the promise of change, the slow start is unfortunate.

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  1. Umeshchandra Mishra
    Sep 24, 2015 at 5:24 pm
    Prabhu's ministry seems content to go at the speed of its trains . Gadkari has the retion of a go getter, from his days as Maharashtra PWD minister days, Prabhu seems too cerbral. Moreover Railway board seems to be cocoon, they seem to guarding their turfs.
    Reply
    1. R
      Rajendra
      Sep 24, 2015 at 4:12 pm
      Biggest impediment in spending in Railways are the procedural delays and worsening expenditure controls. Despite good suggestions by Sridharan Committe to speed up projects, no reform has been made. Situation is getting more and more worse.
      Reply

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