Railways Budget: Budgetary provisions for transport to encourage green transport?

By Hiranmoy Roy, T.Bangar Raju, 

Indian Union Budget 2021-22: Indian Railways has been tremendously impacted in 2020 since the COVID-19 pandemic interrupted services, which were completely paused for a few months. In December 2020, the government had announced a draft National Rail Plan to accentuate the growth of Railway sector. The expectation from Union Budget for Railways were to include allocations and proposals to supplement this plan. The draft National Rail Plan envisaged an initial surge in capital investment right up to 2030 to create provisioning of rail transport ahead of demand and increase the modal share of the Railways in freight by 45 percent,” the railways ministry said in a statement. The National Rail Plan aimed at developing adequate rail infrastructure by 2030 to cater to the projected traffic requirements up to 2050. The objective is to increase the modal share of rail in freight from the current level of 27 per cent to 45 per cent. 100% electrification of Broad-Gauge Routes by 2023. Indigenously developed automatic train protection system to be launched. The Finance Minister Sitharaman announced on Monday a record sum of Rs. 1.10 lakh cr. for the Railways, out of which Rs.1.07 lakh cr. is for capital expenditure, and announced that the national transporter would monetise the dedicated freight corridors post its commissioning.

The important objectives of National Rail Plan for India 2030 is to create a future ready railway system by 2030, bringing down the logistic cost for industry is at the core of the strategy to enable Make In India,” FM Sitharaman said.

The finance minister said the Railways would take up the future dedicated freight corridor projects – The East Coast Corridor from Kharagpur to Vijayawada, East-West Corridor from Bhusawal to Kharagpur to Dankuni and North-South Corridor from Itarsi to Vijaywada. Sitharaman also proposed the detailed project report would be prepared in the first phase. She announced broad gauge route electrification is expected to reach 46,000 route kilometers.

As part of Indian Railway, first private investment initiative for operating passenger trains, the Railway Ministry earlier this year, completed the process of evaluating applications for public-private partnership (PPP) in passenger train operations. 102 applicants were found eligible to participate in the request for proposal (RFP) stage. Infrastructure majors such as Larsen & Toubro (L&T), BHEL, and GMR were among the 102 eligible operators qualified to bid in the first stage. Indian Railways sought private investment of around 30,000 crores for running modern passenger train operations. The Indian Railways Catering and Tourism Corporation (IRCTC) is also one of the leading applicants qualified to participate in the RFP stage. The Railway Ministry had invited the request for quotation for private sector participation for passenger train services over 109 origin-destination (OD) pairs of routes through the introduction of 151 modern trains or rakes. The 109 OD pairs of routes have been formed into 12 clusters across the railway network.

Every sector including the Indian Railways hoped high from this year’s budget since the railways was also among the sectors and industries hit by the coronavirus pandemic and subsequent lockdown to curb its spread. When the country was dealing with the cascading impact of the coronavirus, and all the services and activities came to a halt, Railways played a major role as their services were partially active during the pandemic and it helped the migrants to reach back home. However, just like every other sector, railways too faced a huge loss. Earlier, the Indian Railways and Union Budget used to be presented separately in India for the past 92 years. However, the long-run practice came to an end in 2016, and the Railways Budget was merged with the Union Budget.

Last year, the Gross Budgetary Allocation for the railway sector was Rs 70,250 crore and this time it could be higher than the previous ones. Another thing that did not meet this year is that the Union Budget should have announced some high-speed trains that could connect tourist hubs, pilgrimage spots, and other crucial areas. Earlier, the government announced the bullet train project between Mumbai and Ahmedabad, however, it did not go as per the plan due to the coronavirus pandemic. Thus, the Finance Minister should have also announced the expansion plan on the bullet train in the country. The government could also have announced a few Tejas trains and some railway lines that can move agricultural goods at a faster pace. No new plan about the infrastructural up-gradation of railways is also rolled out.

Greening the public transport and combating pollution, we need to expand public transport utilizing electricity generated by renewable sources is a way forward for India. Government announced in its public transport electrification scheme in 2019 FAME – II to provide 7000 electric buses in 100 cities. Electric buses can replace the metro and suburban rail, and this definitely reduce pollution. Public transport electrification scheme can be expanded to metro cities and tier-II cities. Thus, targeting pollution reduction from transport will enable us to meet our Nationally Determined Commitment (NDC) targets. Public and private investments in green transport to be encouraged and this needs policy directives and budgetary provisioning. We can replicate the examples of cities where electric vehicles were introduced resulting in reduction of emissions. Otherwise, negative externality emanating from transport expansion in India will result in huge economic losses from our GDP in terms of accommodating environmental accounting of our National Income. Hence there is huge environmental implication and economic losses from transport growth in India. Pollution taxes on transport i.e., eco- taxes can also be imposed on polluter thereby minimizing GDP losses.

Thus, in the light of these expectation, budget allocation for railways is humble and will need more pragmatic measures for the sector to put the sector in the high trajectory growth along with addressing the issue of negative environmental impact.

(The authors are faculty and researchers in the area of Transportation Economics at School of Business, UPES, Dehradun. Views expressed are personal and do not reflect the position or police of the Financial Express Online.)