Railway Budget 15-16: Though still far from a symphony, budget strikes the right notes

Railway Budget 15-16: Though still far from a symphony, budget strikes the right notes

Swaniti Initiative | March 19, 2015 | The Swaniti Blog

By Surbhi Maheshwari

An often proudly stated fact is that the Indian Railway network carries more number of passengers every year compared to any other nation in the world. However, there is another aspect to railways which is often overlooked and that is freight.More than two-thirds of Indian Railway’s revenues come from freight business. The freight revenue cross-subsidizes the passenger travel and still, freight services are treated like a lesser cousin.

Indian Railway Budget 2015-16 has been hailed for no hikes in passenger fares. Every time there is a proposalto increase passenger fares, there are protests, strikes and backlashes. Freight fare increases have been the easy way for railway ministers to strike a balance while avoiding public fury. In last 15 years, passenger fares have increased by 36% whereas freight fares have increased by 52%. India has the highest freight charges per ton km in the world after Germany- the passenger fare vs freight fare ratio is 0.23 whereas for countries like China, it is greater than 1.

As analyzed by Swaniti Initiative, although this budget has also introduced an increase in freight fare, a significant focus has been given to improving the freight services as well- a major shift from previous budgets. The new measures would play a significant role in contributing to economic growth of the country and also, create a positive impact on environment. There is a visible synergy between this budget and Make in India vision of our Prime Minister.

Currently, rail freight accounts only for 36% of total goods transport in country while 57% is through road despite rail being a more efficient mode owing to long distances and bulk materials. This anomalycan be partly attributed to low reliability and poor support structure from railways.

One of the most important measures in this rail budget is the plan to initiate timetabling of freight trains. Currently, freight trains are allowed track use after requirements of passenger trains have been met. This lack of schedule makes predicting time of arrival of goods impossible and hence, businesses prefer road transport despite higher costs and poor road infrastructure.

Several customer friendly freight movement initiatives have been mentioned. The important ones are introduction of RFID tracking of parcels and freight wagons, automated parcel warehouses, and customer relationship management system. These would further increase quality and reliability of service.To improve revenues and utilization and reduce empty flows of wagons, an Automatic Freight Rebate Scheme for traffic loaded in traditional empty flow direction will be launched country wide. It has been running as a pilot project in two zones for last 6 months.

One of the best aspects is equal focus on freight carrying and freight handling services. While a 50% increase in freight carrying capacity over next 5 years is the target, a PSU- Transport Logistics Corporation of India (TRANSLOC) has been set up for end to end logistics through PPP to ensure that handling capacity and quality increase in the same proportion.

In addition to supporting manufacturing companies with more efficient transportation option, these new plans will give a push to “Make in India” in one more form. There will be an increasedrequirement formanufacturing of tracks, wagons, containers, and associated infrastructure. Rail freight is also more environment friendly- CO2 emissions for goods transport via rail are less than 20% of road transport emissions per unit weight unit distance transport.

It is heartening to see railways waking up to realizing importance of its freight business instead of continuing to exploit it. But only plans are never sufficient. Ensuring acceptance of the reforms and new vigour by its work force, enabling real transparency and not increased corruption due to de-centralization of power and PPP model are just some of the challenges that railways will have to be wary of.


Surbhi is a Swaniti Fellow.

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