About Us - Registration/Login - Contact Us - Message Board - Glossary - Features - B-School - Legal - Biz-End - Orange-GTM - WAP
	STOCK MARKETS COMPANIES SECTORS ECONOMY MUTUAL FUNDS ONLINE TRADING INVESTOR POINTS

Budget 2005-06 Budget 2004-05 Highlights Economic Survey Interim Budget '05 Budget 2003-04 Budget 2002-03 Budget 2001-02 Credit Policies Economy Probe About us       Disclaimer

February 26, 2003 Rail Vikas Yojana: On the right track The Railway budget on the eve of an election year has not ruffled too many feathers. Still, it has made an important announcement that may mark a shift from current policies. The Railway Budget has made an announcement launching the National Rail Vikas Yojana. This was announced by the Prime Minister earlier but was formally presented in the Railway Budget today. The thrust of the plan is: Strengthening of Golden Quadrilateral. Augmenting rail connectivity to ports. Construction of four mega bridges An important thing is that it is a non- budgetary initiative, which means it does not depend on budgetary provisions. This work will be executed through Rail Vikas Nigam Ltd. for which Rs 730 crores is proposed to be invested. This represents a departure from the normal way in which Railway projects are executed. As the Prime Minister announced earlier, the new company should be able raise its own funds. This will reduce a lot of burden for raising resources by the Railways. While in principle, it is a wonderful idea and hints at a gradual restructuring of the Railways, it also raises a lot of questions. The most important one is the choice of projects. As of now, most of the Railway projects are politically motivated. The second issue will be viability of projects. If the company is expected to behave like a corporate, it will most likely go for high return projects. This would mean a social cost for the government. Previous corporotisation initiatives like the Konkan Railway Corporation (KRC) have shown that while project execution is very competent, the commercial viability of the projects could take a long time for the company. The Indian Railways undertakes several operations at lower than actual costs as part of its `social obligations'. Passenger fares are subsidized by freight costs. This means that passenger pays lesser for the service and transporters may more to make up for the lower passenger costs. The Railways also move essential goods at a lower than actual costs. The problem with Railways itself is a deeply entrenched one. Improvement in roads saw the Railways steadily losing its share in national freight movement. Due to political constraints, passenger fares were held down at moderate levels while the deficit was partially overcome by increasing freight rates. This also led freight traffic towards the roadways. The Railways found itself in a bind, where increase in freight saw its share slipping while increase in passenger fares was at the mercy of political bosses. The Railways also found itself saddled with unviable, politically directed projects. The problem was compounded for the largest employer in the country by the implementation of the new pay scales laid down by the Fifth Pay Commission. To make the Rail Vikas Nigam successful as well as to meet the social needs, Government can consider tax breaks and also arrive at a viable transfer pricing formula. Nevertheless, the Rail Vikas Nigam is a welcome step in the right direction of making Railway services more market oriented and increasing the viability of projects. The only concern is that of succumbing to the will of its political masters. If it happens, the whole idea of establishing this entity will get derailed. Vinod Chari sIndia Infoline Ltd (IIL) and India Infoline Securities Ltd (IISL) do not have any positions in any of the scrips recommended and which are currently displayed on the site www.indiainfoline.com and www.5paisa.com. IIL and IISL do not do any deals on their own account (proprietary trading) except for testing and demonstration purposes. IIL and IISL also has an internal compliance manual in place which restricts the team who analyze and gives information on various companies and investment opportunities, to place orders on scrips only through IISL and only after the said recommendation has been displayed on the above mentioned websites.

Subscribe to IIL Newsletters Register now to subscribe for India Infoline Newsletter        Corporate Infoline * Information Base on 5000 Companies * Snapshot * Live Quotes * Share Price Charts * News Archives * Quotes Research Charts Snapshot News Enter Co. Name/First Few letters   Drop us a Line Drop us your queries & suggestions

5PAISA

PREMIUM CONTENT

ADVERTISE WITH US

FEEDBACK

DISCLAIMER

PRIVACY POLICY

JOBS

FAQS

SITE MAP

HELP

Sectors: Auto - FMCG - Pharma - Oil & Gas - Infrastructure - Infotech - Steel - Special: K P Saga - Budget - Personal Finance - Economy & Finance - Orange-GTM