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Railways plans highest outlay of Rs 1.35 lakh crore for FY18

Economic Times:  December, 2016

New Delhi: Indian Railways is likely to have its highest plan outlay of around Rs 1.35 lakh crore for the next financial year.

The national transporter plans to seek almost Rs 60,000 crore from the finance ministry as gross budgetary support and another Rs 25,000 crore from LIC as loan.

The remaining amount will be raised by the Indian Railways Finance Corporation (IRFC) bonds, internal resources and public private partnerships (PPP).

“We’ll have the highest outlay for next financial year. We have already entered into a memorandum of understanding (MoU) with LIC as per which we can avail of an annual loan of Rs 25,000 crore. Through IRFC bonds we can get anywhere between Rs 20,000 crore and Rs 25,000 crore. Several project will also be taken up on PPP,” a senior railway board official said.

“Even if we don’t get desired funds from the finance ministry, we’ll be able to manage the same annual outlay,” the official added. Railways has also set up various joint ventures with state governments. Funds spent through these JVs are accounted as PPP by railways.

Railways plans to use funds for constructing freight corridors, improving connectivity in Kashmir and North-east, upgrading signalling, redeveloping stations, improving passenger amenities, acquiring rolling stock, expanding critical freight lines near coal fields and ports.

However, despite its largestever capacity expenditure plan, railways is unlikely to announce any new major line projects as the focus will be on completing ongoing projects that have been in the pipeline for years.

Railway minister Suresh Prabhu is likely to meet finance minister Arun Jaitley on Wednesday for pre-budgetary consultations. From next year, rail budget will be part of the Union Budget, which is presented by finance minister.

Railways, however, will still be responsible for its losses and all expenditure including salaries and pensions.

All the burden will have to be met by railways on its own through revenue from freight and passenger earnings.

The rail ministry's budgeted plan outlay has gone up drastically it the past two years.

It went up to Rs 1,00,011 crore in 2015-16 from Rs 65,000 crore in 2014-15 and Rs 1.21 lakh crore is the outlay for the current financial year, which includes Rs 45,000 crore as gross budgetary support and safety fund.

Railways, till now, has already spent over Rs 65,000 crore from its current budgetary plan on construction of projects. “Till November, we have spent almost 55% of our total capex plan. Our spending capacity has also increased because of decentralisation of financial authority, which was done earlier this year,” the official added.

ET View: Railways Needs Radical Reforms

The railways needs radical reforms to raise earnings and step up investments to modernise and expand capacity. The government should have the political will to implement reforms recommended by the Bibek Debroy panel in order create an organisational structure that will enable large-scale investment. These include, among other things, bifurcating the railways into two independent organisations and letting private players run trains in competition with the railways. An independent regulator to set tariffs is also a must to improve railway finances.