Rail Budget- Quote- PwC India
Comment from Manish Agarwal, Partner and Leader -
Infrastructure, PwC India on Rail Budget for FY 17.
Manish Agarwal, Partner and Leader - Infrastructure, PwC India said:
"The decline in operating ratio from 88% to 90%, and to 92% for next year is along expected lines, with freight and passenger traffic remaining nearly flat, and expenses continuing to increase. In this context, how the increased investment target of Rs 1.2 lakh crore will be met, becomes more pertinent. In fact, for the five year target of Rs 8.5 lakh crore, set last year, the annual spends will need to continue to grow faster.
There is a reason to be optimistic. Several steps have been taken to speed up contracting and execution of contracts, and construction companies are already seeing their order books grow. Private Freight Terminals are growing, and the award of Madhepura and Marhowra manufacturing projects, are signs of progress.
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| Manish Agarwal, Partner and Leader - Infrastructure, PwC India. |
However,
the port connectivity projects, JVs with State Govts and 4 BOT Annuity
projects, remain work-in-progress. That new project announcements are limited
indicates adherence to implementation focus, highlighted in the previous
Budget. Among the new announcements, East coast connectivity through Dedicated
Freight Corridor is perhaps the most impactful, as it would contribute to India
participating in global production networks in south east Asia, and to Make in
India.
The proposed rationalisation of freight tariffs will be critical to improving financial health, and enabling investments. Railways have become less competitive than road even for 1200 – 1500 km distances for container movements. Coastal shipping and Inland waterways are also emerging as competition. A more pragmatic approach to freight, combining several measures like personalised service and bulk discounts, would be necessary. Commissioning of the dedicated freight corridors will take a few years; some reprioritisation of track access would be required in the meanwhile to enable time-tabled freight operations.
Several reform measures remain on the agenda, though timeframe for their implementation is still unclear. These include setting up of an independent regulator through legislation, organisational restructuring (including enabling separate focus on suburban rail), large scale use of PPP’s, and successful monetisation of land and commercial assets. Speedier implementation of these is necessary to achieving the five year vision."
The proposed rationalisation of freight tariffs will be critical to improving financial health, and enabling investments. Railways have become less competitive than road even for 1200 – 1500 km distances for container movements. Coastal shipping and Inland waterways are also emerging as competition. A more pragmatic approach to freight, combining several measures like personalised service and bulk discounts, would be necessary. Commissioning of the dedicated freight corridors will take a few years; some reprioritisation of track access would be required in the meanwhile to enable time-tabled freight operations.
Several reform measures remain on the agenda, though timeframe for their implementation is still unclear. These include setting up of an independent regulator through legislation, organisational restructuring (including enabling separate focus on suburban rail), large scale use of PPP’s, and successful monetisation of land and commercial assets. Speedier implementation of these is necessary to achieving the five year vision."
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