Fillip to rail infrastructure despite strained finances

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Railways has set a target of commissioning over 2,500 km broad gauge lines this financial year

The Indian Railways’ finances may be strained because of the impact of seventh pay commission recommendations but it is set to generate business worth crores for vendors providing railway infrastructure.

The Railway Budget presented in Parliament on Thursday announced a massive 20 per cent increase in capital expenditure at Rs 1.21 lakh crore, much of which would go towards commissioning new broad gauge lines and electrification initiatives.

The railways has set an ambitious target of commissioning over 2,500 km broad gauge lines in the current financial year, a 30 per cent jump over last year. In the next year, the plan is to commission 2,800 kms of new track.

“We are poised to commission broad gauge lines at the rate of over 7 km per day against an average of about 4.3 km per day in the last six years. This pace will increase to about 13 km per day in 2017-18 and 19 km per day in 2018-19 and will generate about 9 crore mandays employment in 2017-18 and 14 crore mandays in 2018-19,” Prabhu said.

In addition, the railways will also complete electrification of 1,600 km of lines in the current financial year, which is the highest ever. In the next financial year, the outlay for railway electrification will increase by almost 50 per cent to electrify 2,000 km.

“The hike in capital expenditure by railways will provide much needed impetus to kickstart the investment cycle in the country. Plan on broad gauge conversion, railway electrification, new dedicated freight corridors, port connectivity, suburban railway projects, station redevelopment work, etc. augur well for giving a fillip to the steel demand in the country,” Sajjan Jindal, chairman and managing director, JSW Group, said.

Sharing the views, Ajay Shriram, chairman and senior managing director of DCM Shriram, said increased investment by the railways would not just increase its capacity but would also improve the country’s overall infrastructure, and kickstart the investment process.

The electrification drive of the railways is also positive for companies like Siemens, Alstom, Schneider Electric, GE and the like as it would generate business opportunities through new tenders. In the third quarter of the current financial year, the railways issued tender documents for projects worth Rs 3,000 crore.

“The indigenous steel sector will be the beneficiaries of enhanced investment in railways and these initiatives augur well for the industry,” said Ravi Uppal, managing director, JSPL. The steel companies are in the midst of a slowdown where both demand and prices of the metal have crashed and put several steel companies under stress.

“Steel demand in the country is expected to get a fillip with the developmental projects,” SAIL chairman P K Singh said.

The rail budget has also announced construction of three new freight corridors while putting the existing dedicated freight corridor (DFC) project on a mission mode for completion by 2019. All work contracts for civil engineering works with relation to DFC would be awarded before the end of current financial year on March 31. Contracts worth Rs 24,000 crore have already been awarded since the NDA government came to power at the Centre.

“For the freight corridors to actually deliver benefits, the states will have to earmark budgetary outlays in their respective budgets for upgrading last-mile connectivity in terms of connecting roads from identified industrial parks to railway dispatch points. This continues to be a major problem in many of the states,” said Arindam Guha, senior director, Deloitte in India.

“The budget has provided a strong focus on augmenting investment, particularly in infrastructure,” CII president Sumit Mazumdar said.

subhashnarayan@mydigitalfc.com

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