Railway is getting hefty investments, reforms beginning to show results

At a time when public investment is sorely needed to crowd in reluctant private investment, it is welcome to note that the Railways is rising to the challenge.
It is coagulating capital on a scale far in excess of what would be possible purely on the strength of support from the general Budget, lowering its operational costs, restructuring the decision-making process to make it faster and setting up a regulator to ensure fair treatment of private partners as they deal with the behemoth. The Railways’ job is to be a vital component of globalising India’s transport infrastructure.

Investing in itself to realise this goal also drives India’s growth. The goal to invest Rs 8.5 lakh crore over the next five years is ambitious but needed, to add and improve the quality of rolling stock, upgrade signalling and increase capacity along the routes that offer maximum revenue potential.
The Railways is raising resources in innovative ways: foreign direct investment in new-age locomotives and coaches, long-term, surprisingly low-cost debt from the Life Insurance Corporation, leveraging railway land around stations to develop commercial real estate via private sector partners, and setting up new corporations for new projects.

It is also developing projects for rail connectivity to many ports and mines. Strikingly, 17 states have agreed to set up special purpose vehicles to undertake projects, raising debt several times its equity to carry out investment.

The Railways expects large-scale procurement orders from the enterprises it owns to enhance the value of these companies that can be discovered by stake sales and listing, leading to larger mobilisation of debt for investment. This amounts to corporatisation of the Railways by the backdoor, without much resistance from the unions.

The Railways is aggressively moving to lower its fuel costs. The long-term strategy is electrification, while the short-term one is to become a licensee that can buy power directly from generation companies such as the Ratnagiri Gas and Power, which will sell it power at Rs 5 a unit, while the Railways pays Rs 7 a unit. Way to go!

Source : Economics Times