2016-17 Union Railway Budget - Rs.1.21 lakh crore Investment in 2016-17

 

Railway Minister Suresh Prabhu, in his second budget, announced increasing investments by 21 per cent to Rs.1.21 lakh crore in 2016-17 – more than double the average investments made by the previous United Progressive Alliance (UPA) government in the 2009-14 period. 

While most analysts were sceptical over the source of this investment promise, Mr. Prabhu was candid in admitting that “these are challenging times” for the Railways. In 2015-16, the plan outlay stood at Rs.1 lakh crore. 

“These are challenging times, may be one of the toughest. We are faced with two headwinds, entirely beyond our control; tepid growth of our economy’s core sectors due to international slowdown and the looming impact of the 7th Pay Commission and increased productivity bonus payouts,” Railway Minister Suresh Prabhu said

The budget factored in Rs.20,500 crore as impact of the recommendations of the 7Th Pay Commission in 2016-17; leading to a decline in the projection of the operating ratio to 92 per cent (the Railways will spend 92 paisa to earn a rupee). Operating ratio is a measure of financial performance of the Indian Railways and a lower ratio means better efficiency. In 2015-16, the operating ratio declined to 90 per cent from 91.3 per cent in 2014-15. 

“The decline in operating ratio from 88 per cent to 90 per cent, and to 92 per cent 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,” said Manish Agarwal, Partner and Leader - Infrastructure, PwC India.

Shashikant Hegde, chief executive officer of Projects Today raised questions over the source of the required investment money. 

“Most of the state governments coffers are empty and private players are currently not in a mood to pick up PPP projects. While international agencies are open for investing in Indian projects, they demand more reforms and at faster pace,” Mr. Hegde said. 

The government plans to raise Rs.20,985 crore in 2016-17 from institutional financing, a 119 per cent increase from the revised estimates of 2015-16. 

However, Railway Board Chairman AK Mittal said despite the burden of Seventh Pay Commission, the operating ratio is projected to move up by two per cent. “Usually, the burden of Pay Commission increases the operating ratio by five per cent,” Railway Board Chairman AK Mittal said