Amar Ambani, Head of Research, IIFL - India Private Clients:
The Railway Budget sounds ambitious to state the least but given the track record, especially of last year, implementation seems unlikely again. For instance, the minister targets 700 km of rail line addition in FY12 compared to 180 km average. This figure is irrelevant because even last year the aim was for 1,000 km, which missed the target by a wide margin. Despite financial constraints, populist measures were announced in the light of upcoming state elections.
The power plant and wagon manufacturing projects face challenges in terms of land acquisition and financing. For projects announced in smaller towns, material sourcing remains a major constraint.
No change in passenger rates was along expected lines as part of the populist measure. Freight tariff was kept unchanged given the slowdown in business. Overall, finances have deteriorated and the operating ratio has touched 93%. One can only hope that the railway ministry picks up pace in PPP proposals and quickly sets up a single window for such approvals. All-in-all, a negative budget on expected lines.
Ruma Dubey, Independent Analyst:
The Railway Budget of Mamata Banerjee was all about giving and building. It was all about getting more votes. This meant more expenses on the already sagging Indian Railways. Her Budget speech was full of grandiose plans for modernizing and revamping the Railways but little or no talk about how she was planning to raise money to fund all these talks. There was talk about austerity measures to cut costs but how and when, no mention about any details. Blaming the state of the Railways on the Sixth Pay Commission, she completely ignored the fact that operating ratio (ratio of total working expenses to earnings) had slipped to a dismal 92%. This means, for every Rs 100 earning, the railway spends Rs 92. More like a political speech at an election rally than a Budget.
The Budget is all about what one would like to hear but whether even a small percentage of this can be implemented seems unlikely. More Utopian, that`s what one comes feeling after hearing her speech. Surely it was more about canvassing for the West Bengal elections. The Indian Railways as such carries a huge burden of people and now it has to bear the brunt of the Railway Ministers political aspirations. The previous track record has been so bad that all these plans seem meaningless and that probably explains why the railway stocks did not seem too enthused.
The only concrete plan to raise money came from IRFC which hopes to raise Rs 200 billion via tax free bonds v/s Rs 100 billion last year. The big question is whether it will be able to raise this money in time. Because if the money does not come on time, all these plans, as such seeming unrealistic, will fall flat further. All in all, a populist Budget with no clear vision for implementation.
Source: IRIS
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