Rail Budget 2016: Projections for FY17 somewhat optimistic, says Bibek Debroy

The freight prices, he says, are very uncompetitive as compared to road transport. The tariffs should be brought down to make them more competitive as Railways make more money from freight rather than passenger trains.
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Feb 26, 2016, 10.03 AM | Source: CNBC-TV18

Rail Budget 2016: Projections for FY17 somewhat optimistic, says Bibek Debroy

The freight prices, he says, are very uncompetitive as compared to road transport. The tariffs should be brought down to make them more competitive as Railways make more money from freight rather than passenger trains.

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Rail Budget 2016: Projections for FY17 somewhat optimistic, says Bibek Debroy

The freight prices, he says, are very uncompetitive as compared to road transport. The tariffs should be brought down to make them more competitive as Railways make more money from freight rather than passenger trains.

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Bibek Debroy (more)

Member, NITI Aayog, GoI |

In an interview with CNBC TV18, Bibek Debroy, NITI Aayog, said the projections in the Rail Budget were "somewhat optimistic", mainly due to higher wage costs to result from from the Seventh Pay Commission.

Debroy does not feel the economy will be bogged down by the slower five percent growth of the Railways. He is optimistic on GDP growth, saying that he hopes for an eight percent growth in GDP next year. This could translate into greater demand for transport services, but not particularly the freight.

The freight prices, he says, are very uncompetitive as compared to road transport. The tariffs should be brought down to make them more competitive as Railways make more money from freight rather than passenger trains.

Debroy is very positive about introduction of the Railway Development Authority and is of the opinion that tariffs will change only after it is set up. Ironicially, it should be set up in an executive way without going through the legislative channel.

Following is the transcript of the interview with Bibek Debroy:

Reema
: Your initial reactions on the Railway Budget? How did the numbers and the fiscal add up?

A: There are two kind of ways to look at the Railway Budget. In my view the myopic way of looking at the Budget is to just look at the numbers in the year just over and the numbers in the year that is going to come. The other way to look at the Budget is in terms of the structural reforms it is going to undertake so that the numbers improve in the future.

Now, many of those structural reforms are indeed proposed in the Budget to address the long-term issues. So far as the numbers are concerned, of course, the numbers are somewhat bad, they do not look as good as they might have been. That is partly because the projections last year were not very good and the projections this year are also somewhat optimistic. But, it is also the case that some of these reflect the implications of the Pay Commission.

Latha: You have given us that sweeping statement that last year’s projections were bad and this year’s projections are also optimistic. I just wanted to give you an idea of how much distanced they are from the actual projections. For this year itself, the expectation was that gross traffic receipts would be Rs 1.83 lakh crore. Now, the projection for next year, FY17 is Rs 1.84 lakh crore. For the current year, we have only done Rs 1.67 lakh crore which is a growth of 5 percent. Even last year, FY15 the growth was 14 percent. Now, this is a measure of the slowdown of the economy, or do you think this is a measure of the poor performance of the railways?

A: Let me put it to you like this, that the Railway Minister and the Railway Ministry have already proposed the setting up of a regulator, although it is being called the railway development authority and it is my understanding that tariff changes will either be done after the railways development authority has been set up and initially, it may be set up in an executive way without waiting for the legislative channel. And it is perfectly possible, if necessary, rates will be revised in the course of the year.

reason I am saying that, is that it is an old argument that has been made several times that one of the things that has made the railways uncompetitive, is that the freight rates are too uncompetitive, vis-à-vis the road transport, and the freight rates need to be adjusted downwards. And I should quickly mention that the railways makes its money from freight, not from passenger. To link it to what you are saying is yes, a lot of the optimism is centred around growth recovery, particularly on the freight side, but it is also the case, that one is delinking implicitly changes in tariff from one particular day in the year, namely the Railway Budget.

Latha: This is every important that you are telling us because in the speech, the Minister did not mention anything about passenger fares or freight fares. You are telling us that it is going to get dynamic. And since you were so deeply involved... (interrupted)

A: I am saying that I am deducing that, I am not suggesting that I know any, I am not privy to any information, but the entire thrust of it ought to be and will probably be that is in the course of the year, if necessary, freight rates can be adjusted.



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