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Parliamentary panel moots rethink on defining Railways as ‘commercial undertaking’

The Standing Committee on Railways wants the government to assess the quantum of social service obligations, and has asked the ministry to take a re-look at defining the Railways as a ‘commercial undertaking’
Railways contributes to overall GDP and also... Source: PTI
Reported by: India TV Business Desk New Delhi 10 Aug 2017, 14:43:16 PM IST

The Centre should not consider the Indian Railways as a commercial undertaking and should find ways to fund ‘socially desirable projects’ that yield a return of less than 12 per cent, a parliamentary panel has said.

The Standing Committee on Railways noted in its report that of the 432 new-line, gauge-conversion and doubling projects, two-thirds (292) have a rate of return of less than 12 per cent, adding that 222 of them have a negative rate of return.

The panel now wants the government to assess the quantum of social service obligations, and has asked the Railway Ministry to take a re-look at defining the Railways as a ‘commercial undertaking’. The Committee has contended that much like defence and roadways, the Railways also makes an indirect contribution to overall GDP, besides also fetching direct earnings.

“...the concept (of the Railways being a commercial undertaking) was alright as long as it was under the British regime. Whatever penny the Britishers invested, they wanted returns out of it,” the report said.

The Committee has also asked the government to come up with viable plans to fund ‘socially desirable projects’ in a phased manner so as to address issues in perspective, remove hindrances and work as a pro-active facilitator of connectivity.

The Railways, the report said, could only fund these projects through gross budgetary support (GBS) and through outside credit whereby the Railways have to pay market rate, because the return from these lines would not be substantial enough to reimburse the cost of borrowing.

The Committee was apprised that, while the Railways had not yet received a response from the Finance Ministry, steps had been initiated in this regard by merging the Rail Budget with the General Budget. According to the Railways, the total net social service obligation on coaching and freight services was at Rs 34,000 crore in FY16.

However, the Railways have prioritised some projects as national projects which is on its ‘top priority’ list. This list includes some in Jammu and Kashmir and the North-East.

As on date, the Railways have 495 ongoing, pending projects worth Rs 4.36-lakh crore, which can never be completed if the public sector behemoth were to proceed with the present mode of funding, the panel report noted.

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