In an interview to CNBC-TV18, Rajiv Lall, Executive Chairman, IDFC shares his views on the Railway Budget which was announced in the Parliament today. Referring to Railway Budget as pragmatic, Rajiv Lall, Executive Chairman, IDFC said it was a development and reform Budget. According to him, the budget intended to transform railways over the next five years. Below is verbatim transcript of the interview:
Q: Suresh Prabhu saying that this is the first time a government has actually presented a Railway Budget for the railways and not one for the country. Would you say this has been a much more pragmatic and prudent Budget because they have stayed away from things like adding new trains but on the other hand they have continued to hike freight rates for the second time in eight months and not change passenger fares?
A: It is not just a pragmatic Railway Budget. This should be characterised as a development Budget. It is truly a reform Budget. This Budget is really a thinking person’s Budget.
It has set out a very thoughtful programme of reforms that is intended no less to transform the railways over the next five years starting with some very important efficiency enhancing, productivity increasing and cost control measures.
Q: You are saying that this is a development-oriented and reform-oriented Budget. If I could talk to you about what the government or the minister has articulated in terms of being able to mobilise revenues, one is the entire programme as far as monetisation of assets is concerned where they are not selling any assets including land but are not going to monetise them and the other is long-term debt. What do you make of the revenue mobilisation plan as was articulated by the minister?
A: The revenue mobilisation plan is quite an important innovation for the railways because they are not anything particularly complex but what in effect the minister is saying is that he will effectively sequester some portion of revenues from the Railway Budget in order to raise debt from the capital markets off Budget.
This means he can raise money and so, for every Rs 10 that you have put aside in this form in principle he could raise Rs 100 in debt. From bond holders who will have the comfort in security the railways every year from its revenues will allocate Rs 10 towards paying down that debt.
This actually allows him to raise substantial capital from the market to invest in priority investment projects that will in turn help his revenue generating capacity. So that is a very innovative and interesting way of approaching the financing of the Railway Budget.
Q: They have talked about several things including Special Purpose Vehicle (SPV) with state governments. They believe that will provide a much-needed economic lift. One of the goals that he has articulated in the four goals that he has charted out is self sustainability for the Railways. Do you believe there is enough that you have seen in this transformational road map that he has articulated to achieve both those goals, providing that economic lift as well as being able to become a self sustaining organisation?
A: Yes. In this blueprint over the next five years he envisages an investment of Rs 8.5 lakh crore in expanding railway network which is an extraordinary investment.
He envisages a 20 percent increase in network capacity, a 50 percent increase in freight carrying capacity from 1 billion to 1.5 billion tonnes a year, an increase in passenger carrying capacity from 21 to 30 million passengers a day.
This plan envisages a very significant investment in the railways to discharge its development objective with respect to its financial sustainability, revenue generation is key to the long term financial sustainability of the railways.
It is absolutely imperative that he be able to expand this capacity so that the share of the railways in freight transportation increases rather than declining as it has been for the last 20 years. If that happens the railways will be generating additional revenue and that will bring it back to sustainability.
Finally, no previous government at least in the last decade has had the courage to moot management and organisational reforms. If you read the Budget speech carefully it is a well crafted plan for actually starting on major organisational change. So, you put all that together, I rest my case it is a reform Budget.
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