Railway Budget: Suresh Prabhu faces challenge in mobilising resources

The cash-strapped behemoth has a backlog of around 300 projects that require an investment of Rs 1.7 lakh crore.

SPS Pannu | February 11, 2015 | Updated 13:35 IST
Railway minister Suresh Prabhu
Railway minister Suresh Prabhu must cobble together a Budget to modernise Railways.

Railway minister Suresh Prabhu faces a huge challenge in the forthcoming Budget to mobilise resources for the cash-strapped behemoth, which has a backlog of around 300 projects that require an investment of Rs 1.7 lakh crore.

The Railways invests a mere Rs 12,000-Rs 14,000 crore to implement these projects annually after meeting its high operational cost and losses in the passenger segment.

The projects involve laying tracks, doubling existing lines in parts of network being served by a single line, gauge conversion and further electrification.

The dire financial straits of the Railways is perhaps reflected in the fact that Prabhu appealed to corporates on Tuesday to invest their corporate social responsibility funds in improving passenger facility.

The Railways bears a Rs 26,000-crore annual loss in the passenger segment as it is forced to charge low fares for suburban and second class travel due to political reasons.

Senior officials lament that Railways charges highest freight rates in the world to cross-subsidise heavy losses made due to suburban and second class passengers fares, which are amongst the lowest in the world.

Since fares cannot be increased due to political reasons and there is little scope for any further increase in freight rates, the Railways is seeking more funds from Union Budget. Due to the continuous increase in freight rates, the Railways has been losing traffic to trucks over the years. From a market share of 65 per cent in goods movement in 1986-87, the Railways' share has come down to 30 per cent while that of the road sector has gone up from 34 per cent to 60 per cent during this period.

According to World Bank figures, the freight rates charged by the Railways are much higher than US Railroads, Chinese and Russian Railways. In fact, the rates on US Railroads are only one-fourth of that charged by the Railways. The fare-freight ratio for the Railways over the years has come down to around 0.26. In sharp contrast to this, the ratio for China is 1.2 and for South Korea 1.4. The fare-tofreight ratio for the Chinese Railways is four times higher than that of India.

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