Is railway budget populist: Rail companies react

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Is railway budget populist: Rail companies react

Railways Minister Mamata Banerjee vowed to support the "common people" as she unveiled her third annual budget on Friday that promised to invest Rs 57,630 crore (USD 12.68 billion) in the network in the financial year 2011-12.

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Railways Minister Mamata Banerjee vowed to support the "common people" as she unveiled her third annual budget on Friday that promised to invest Rs 57,630 crore (USD 12.68 billion) in the network in the financial year 2011/12.

Despite populist measures, railway budget 2011 was a sheer disappointment for the markets. All railway stocks have reacted negatively to the miserable announcement.

However, Arvind Gemini, Director, Kalindee Rail Nirman feels that the railway budget has lot of opportunities for rail companies.

"Actually last year, we got  orders not directly from railways but from the sidings, private operator but this year if they go with this 700 kilometers target even if they are able to achieve 500 kilometers probably we have a hope to get at least 100-200 kilometers," Gemini explains.

Meanwhile, SK Nevatia, CMD, Hind Rectifiers is not so optimistic on it. He thinks that the railway budget 'sounds too good to be true'. "She has announced to get public investment via JV mode or PP in smaller 20-25 towns. I don't think it is a workable proposition because you need the infrastructure to offload it," Nevatia adds.

J Mehra of Essar Group is little disappointed on the railway budget. According to him, the government is unlikely to raise capital as per its targets.

"In the previous budget the government had indicated that they would be raising around Rs 95000 crore, till December the total earning was around Rs 67000 crore odd. In the three months period, to do the balance of around Rs 27000 crore means Rs 9000 crore of earnings. They have to make every month which is 30% increase on the first nine months. I am not sure whether they would be able to raise this because there is a big gap," Mehra says.

The minister has annual plan for FY 12 at Rs 57630 crore and plans to borrow Rs 20594 crore from the market for FY12. IRFC plans to borrow Rs 10,000 crore via tax free bonds. It plans to spend Rs 9583 crore on new lines in FY 12.

However, Nevatia has raised doubts on the time of its implementation and how much can be achieved by the end of the next year.

Sachin Bhanushali, President and CEO, Gateway Rail Freight thinks, "It is an implementation issue more than finding fault with whatever she has said.There will be an effort to bring operating ratio down to 91.1% as mentioned by the minister but it is going to be a hardest task." Bhausali also feels that the target for freight is not very easy to achieve.

"This money is hard to come unless we tap additional alternative resources like JV and the PPP route. There I don't see any light being thrown on the financing of railway requirements," Bhanusali notes.