Arun Jaitley unveils largest-ever rail budget in infrastructure push: Budget 2017

New Delhi: India will invest as much as Rs3,96,135 crore in creating and upgrading infrastructure in the next financial year, finance minister Arun Jaitley said in his fourth budget speech on Wednesday.

As part of the new integrated infrastructure planning paradigm comprising roads, railways, waterways and civil aviation, the National Democratic Alliance government unveiled the largest-ever rail budget of Rs1.31 trillion, an 8.26% increase over the Rs1.21 trillion allocated to the national carrier in 2016-17.

Jaitley said an effective multi-modal transportation system was important for a competitive economy and stressed upon ‘synergic investments.’

Of the Rs1.31 trillion, the highest-ever capital outlay for the Indian Railways, a gross budgetary support (GBS) of Rs55,000 crore will be provided by the finance ministry, as reported by Mint on 19 January.

As part of the radical rethinking on improving the country’s transportation architecture, this is for the first time in 92 years that a combined budget has been presented on 1 February after the merger of the railway budget with the Union budget. This is a break from the colonial legacy of having a separate railway budget which was recommended by British politician William Ackworth in 1924.

Given the abysmal safety record of the national carrier, the finance minister also announced the creation of a Rs1 trillion railway safety fund which will be given seed capital by the finance ministry, with the balance to be raised by the railways from other sources.

Indian Railways will also list its subsidiaries—Indian Railway Catering and Tourism Corporation, Indian Railway Finance Corporation and Ircon International Ltd.

Jaitley said the railways will increase its throughput by 10% by upgrading dedicated corridors which have high traffic volumes. The national carrier will lay down 3,500km of tracks in 2017-18 as compared with 2,800km in 2016-17.

Conscious of the falling freight revenues of the Indian Railways, Jaitley announced that the national carrier will offer end-to-end transportation solutions for commodities. Indian Railways registered a 2.15% dip in December revenue earning to Rs9,240 crore, compared with Rs9,442.32 crore in December 2015.

“The set of initiatives announced seem to acknowledge the challenge that Railways is losing share in both freight and premium passenger services to alternate modes of transport, and hence an integrated approach to improving safety, cleanliness and passenger comfort, and higher levels of service to freight customers through end to end services have been introduced in this budget,” said Biswanath Bhattacharya, partner, infrastructure and government Services, KPMG in India.

“The introduction of accounting reforms will also facilitate better management control systems, to track performance improvement of the Railways,” added Bhattacharya.

For the road sector, finance minister has allocated Rs67,000 crore for the national highways in 2017-18 as compared to Rs57,676 crore in 2016-17. Also, 2,000km of coastal connectivity roads will be constructed.

In addition, an allocation of Rs19,000 crore has been made towards the Pradhan Mantri Gram Sadak Yojana (PMGSY) to connect far flung habitats, which, along with the spending by the state governments, may result in a total capital expenditure of Rs27,000 crore.

Jaitley said the pace of road construction was 133km per day under PMGSY in 2016-17 as compared to 73km during 2011-14. The country has a road network of 3.3 million, the second largest globally. India has been constructing highways at a rate of 27-28km per day, with the aim of speeding up the construction rate to 41km per day.

The government has made an allocation of Rs2,41,387 crore for roads, railways and ports in 2017-18. The finance minister also announce a proposed amendment in the Airports Authority of India Act to monetise surplus land for the development of airports.

“The focus on investment in infrastructure was expected and in line with previous policy direction. An infrastructure gap in India has likely hampered growth and contributed to economic volatility. Higher government spending in that area may partly address the infrastructure constraints,” said William Foster, vice president, Sovereign Risk Group, Moody’s Investors Service, in an emailed statement.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.