Rail budget: No hike in fares; 3 more freight corridors, cut in goods tariff on its wayhttps://indianexpress.com/article/business/budget/suresh-prabhu-union-budget-2016-rail-budget-no-changes-in-passenger-fares-freight/

Rail budget: No hike in fares; 3 more freight corridors, cut in goods tariff on its way

As per the Budget, Railways will rationalise freight rates in the next few months to make it more competitive vis-a-vis the road sector.

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New Delhi : Union Railway Minister Suresh Prabhu. (PTI photo)

With one eye on shoring up finances and the other on populism, Union Railways Minister Suresh Prabhu, in his second Rail Budget Thursday, kept passenger fares unchanged, promised to bring down freight rates and double “non-tariff revenue” for the ailing national transporter, while announcing a few new passenger initiatives.

As per the Budget, Railways will rationalise freight rates in the next few months to make it more competitive vis-a-vis the road sector. It will also broaden the basket of commodities that the Railways can carry to include a range of products where the road sector currently has near-monopoly, like carrying automobiles and FMCG offerings.

Watch video Railway Budget 2016: Here’s What Suresh Prabhu Announced For The Passengers

To give Railways the edge, Prabhu announced three more dedicated freight corridors — although the first two are yet to be completed.


A first ever rail auto-hub will come up in Chennai, whereas new freight corridors will come in North-South connecting Delhi to Chennai, East-West connecting Kharagpur to Mumbai and East Coast connecting Kharagpur to Vijayawada.

The Railways will also aim to run “time-tabled” freight container services — a first for the department — parcel and special commodity trains. It will assign key customer managers to liaison with major freight stakeholders, and introduce Roll-on-Roll-off with a view to completely transform its approach towards how it conducts its main business — freight.

Read Also: Prabhu proposes new trains

Prabhu did not hike passenger fares, relying on what is called “non-fare-box revenues” instead — like advertising and charges for value-added services.

“Indian Railways typically has focused on increasing revenues through tariff hikes. We want to change that and challenge our conventional thinking on freight policies to win back our share in the transportation sector… The current tariff structure has led to outpricing of our services in the freight market. A review of tariff policy will be undertaken to evolve a competitive rate structure vis a vis other modes,” he said in his speech. All this is estimated to get Railways an additional 50 million tonnes of more goods to carry. Incidentally, it had aimed to carry around 85 million tonnes more this year but so far it has done only around 12 million tonnes more.

Unlike the last budget which was a major shift from norm by concentrating on capacity enhancement and investment roadmap, Prabhu’s second budget was low on big ideas or details on implementation of the series of statements of intent the speech is filled with. Most of the comparatively significant ideas that Prabhu expressed will take years to fructify. There is a National Rail Plan 2030 envisaged. Similarly, Prabhu announced the intention to set up a Railway Planning and Investment Organisation to create five-year-plans and 10-year-plans for Railways; a holding company for all rail PSUs, and a new R&D establishment called Special Railway Establishment for Strategic Technology and Holistic Advancement, or SRESTHA.

Prabhu also expressed his intention of reorganising the Railway Board along business lines “to suitably empower Chairman, Railway Board to lead the organization effectively”. Cross-functional directorates — one of them to only improve average speeds of trains — are to come up as a result of this.

Most of the major takeaways: confirmed accommodation to passengers, elimination of unmanned level crossings, assured freight service, 95 per cent punctuality are all in the realm of long-term objectives and vision, likely to see fruition only by 2020, as per the budget.

Read Also: Railway Budget 2016-17: Reactions to Suresh Prabhu’s second budget

The fiscal health of the Railways is far from good. But Prabhu’s budget was somehow able to show a rather healthy operating ratio of 90 per cent in a year when it missed all its revenue targets — he blamed a “tepid growth of our economy’s core sectors due to international slowdown” — while the target set last year was 88.5 per cent. Because of the 7th Pay Commission payouts next fiscal, this figure will reach 92 per cent, Prabhu said. Despite that, Prabhu has aimed a capital expenditure target of Rs 1.21 lakh crore — around 21 per cent more than this year, when Railways has been regularly criticised for slow pace of spending money.

The Finance Ministry has given a Gross Budgetary Support of Rs 45,000 crore — up by Rs 13,000 crore from this fiscal’s revised estimates.

In a year of five state elections, and the crucial Uttar Pradesh polls coming up early next year, Prabhu announced the Antodaya service — general-class-only superfast long-distance trains, more like the existing Jansadharan Express trains — and the Deen Dayalu scheme (named after the RSS ideologue), which entails additional general-class coaches. He gave women 33 per cent quota in reserved coaches and increased the senior-citizen quota for lower berths in coaches by 50 per cent.

The budget also introduced new products supposedly aimed at upper-class passengers to rake in some extra revenue possibly through differential pricing of tickets.

The Humsafar services will be fully air-conditioned third AC service with an optional service for meals. The Tejas will run at 130 kmph and above and offer on-board entertainment, local cuisine and Wi-Fi. The busiest routes will also see introduction of double-decker trains running overnight services called Utkrisht Double Decker Air-Conditioned Yatri (UDAY) Express. All this is supposed to arrest the trend of declining or plateauing passenger business.

In the area of Railway research, a subject pushed by Prime Minister Narendra Modi, Prabhu has decided to set up two up two chairs, one C T Venugopal chair on Strategic Finance, research and policy development and another, Kalpana Chawla chair on geo-spatial technology for Indian Railways. Railways will also open itself up for 100 internships across Engineering and MBA schools for two to six months.

The Railways hopes to earn Rs 1,84,820 crore from all sources of earnings put together. This year, it has been able to do businesses worth Rs 1,67,834 crore, falling short of its target of Rs 1,83,578 crore.

The thrust, sources said, would be on containing expenditure. Through austerity measures and optimising internal processes, Railways has seen a savings of Rs 8,700 crore this year in its working expenses — a reason Prabhu wants to institutionalise this habit, aiming at checking increase in these expenses (salaries, pension, fuel bills) to only 11.6 per cent next year.


Prime Minister Narendra Modi, who was seen congratulating Prabhu after the Budget, tweeted: “Our efforts to comprehensively transform railways will gain even more momentum with this development-oriented #RailBudget2016.”