Forbes India 15th Anniversary Special

Railway Budget 2016 is a train to increased customer focus

Prabhu unveiled well considered steps to recapture the lost modal share of freight for railways

Published: Feb 25, 2016 05:10:09 PM IST
Updated: Feb 26, 2016 03:17:13 PM IST
Railway Budget 2016 is a train to increased customer focus

Suresh Prabhu envisages to improve passenger service and capture increased market share for freight traffic through enhanced governance mechanisms within the Indian Railways, adoption of internal audit measures, increased transparency in the system and partnerships with state governments.
Railway Budget 2016 focuses on execution and efficiency improvement through internal organizational transformation, suitably supported by technology and innovation – thus transforming what has traditionally been an operations focused organization to a more customer focused and market driven entity. The seven missions for the transformation of Indian Railways will be the important cogs in the wheel of this exercise.

Railway Budget 2016: Highlights
Technology and innovation are going to be the key enablers for a better customer experience. Use of social media, introduction of modern refurbished coaches, Wi-Fi at 100 stations, bar coded tickets and improved safety and security are some of the measures aimed at greater passenger comfort. Skilling front-end customer facing staff and manning of A1 class stations by Station Directors supported by cross-functional teams are welcome steps to enhance passenger experience on stations and in trains.
Prabhu unveiled well considered steps to re-capture the lost modal share of freight for railways. This involves introduction of timetabled freight container, parcels and special commodity trains on pilot basis, increasing terminal capacity through construction of rail side logistics parks and warehousing, development of three new DFCs, expanding IR’s freight basket and opening up of container sector to all traffic barring few commodities.
Other measures that are expected to find support with the industry include granting access to all existing terminals / sheds to container traffic. Entering into long-term tariff contracts with select key freight customers using pre-determined price escalation principles and appointment of Key Customer Managers to liaison with major freight stakeholders marks the Indian Railways’ vision to increase share of freight movement.
Keeping the Target Operating Ratio at 92% for 2016-17 is going to be a challenge for the Railways and achieving the cost reductions is going to be the key. Cost recovery through tariff and non-tariff measures as well as planned reductions in diesel and electricity costs can help to an extent in the short-term. Steps to increase share of non-fare revenues through monetizing soft assets and increased advertising can be helpful in the short-term while measures like station redevelopment and monetization of land banks along railway tracks are medium-to-long term revenue sources.
The capital expenditure requirement of Rs. 1.21 lakh crores is proposed to be financed through sources different from those traditionally followed. Such institutional financing, financing from international markets, seeking financing from multi-lateral and bi-lateral agencies and implementation of projects through JVs with state governments and on PPP are more likely long-term solutions. Most of the measures are medium-long term means of financing and challenges can be seen in the short-term financing for the much needed investments.

Overall, this seems a balanced, execution focused and customer friendly budget, and is a welcome step in the right direction for ‘reorganizing, restructuring and rejuvenating’ the Indian Railways.

- By Biswanath Bhattacharya, Partner – Infrastructure and Government Services, KPMG in India