Ensuing interim railway budget may be populist, as elections are around the corner. However, there is dire need for the Railways to raise its own resources. Will Mallikarjun Kharge deliver what is most needed for the railways?

India has the fourth largest rail network in the world, but the work, its performance and developments have not been very satisfactory. Railways carry some 25 million passengers a day, and despite the fare being cheap, we still do have a large percentage of ticketless travel (there are no figures available here) and the freight carried is substantial. Indian railways have an estimated $19 billion in annual revenue.

Railway Minister Mallikarjun Kharge is scheduled to present interim rail budget (Vote-on-account, the presentation of statement of revenue and expenditure for the entire year, with a Parliament nod for expenditure in the next four months) on 12^th February.

By very nature of its size and the volume of traffic, though a few developments have taken place in the related industries, such as production of rails, locomotives, coaches and wagons, and a number of allied products, India cannot boast of top class signalling equipments, engines and coaches being produced in the country itself. Imports continue and there is tremendous scope for industrial development and infrastructural needs that can be additionally met by inducing foreign investors to come into the country.

In fact, the DIPP (Department of Industrial Policy and Promotion) have come out with a plan that proposes a 100% FDI in Railways. After preparation and circulation of a note for the Cabinet, and taking into account certain conditions laid by Railways, there are reasonable prospects for this to become a reality soon.

It appears, when the proposal is finally approved, it may permit foreign investors to fully own new services in suburban areas, lay high speed tracks and connections to ports, mines and power installations. However, the existing passenger and freight network operations may not be open to foreign investors. Also, Railways would gladly accept such investments in areas of construction and maintenance of projects, but not in running operations, as they would like to control these themselves.

DIPP plan would eventually attract an estimated $5 billion of investments in Railways and giants like General Electric Co and Bombardier are keen to take advantage, when this opportunity is given. It appears that this proposal has been vetted by Railways, Ministry of Industry as well as Finance Ministry.

In just making a passing reference, we may note that, in 66 years India has added 13,000 Kms of new railway lines, while, according to Ernst & Young, China added 14,000 Kms just between 2006 and 2011! On the top of that, the China Railway Construction Corporation has plans to invest a staggering $104.2 billion in fixed assets during 2014. Set against this, as mentioned earlier, our revenue in the Railways chugged along to reach a measly $19 billion.

But Railways can no longer act as a cheap public transport system for aam aadmi alone. They need to improve the quality of service by making facilities for the passengers, ensure well maintained passenger coaches and railway stations, and provide security and safety besides eliminating accidents, which, in the recent past, have become a regular occurrence. They need to make Railways a profitable proposition by increasing the passenger fare, ensure no ticketless travel and decrease the freight rates, so that heavy cargo movement that clogs the roads can be taken over by them. This will also save foreign exchange on imported fuel.

FDIs in railways may also be encouraged to build dedicated corridors for movement of freight, such as coal and iron ore from mining centres to areas of consumption and to points of export exit. So far, the Railways did not have any competition and so the aam aadmi had to take what was given to him. By encouraging direct FDIs in railways, it is hoped the spirit of competition would create better, safer and reliable service.

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)