Railways can help push India’s GDP by 2.5%: Suresh Prabhu

Railways BudgetRailway Minister Suresh Prabhu has voiced confidence that railways would help push India’s GDP by 2.5% in the coming years, asserting that Narendra Modi government was especially focusing on research and development works so that the transporter acts as a growth engine.

Earlier, little effort was made in the field of research and development in the railways. However, the NDA government has signed agreements with 14 countries including Japan and Korea to undertake research and development works, the minister said at a function at Jammu railway station.

“In the coming years the railway will contribute 2.5% to the GDP growth in the country,” Prabhu said.

He said that Prime Minister Narendra Modi and Finance Minister Arun Jaitley helped revive the economy of the country.

“One-and-a-half years ago, the economic situation of the country was in a mess and the world had lost faith and was not ready to invest in the country.

“Economy was in shambles, inflation was high, growth was down, but after Narendra Modi took over, he brought the country out of the economic mess,” he said.

“The world is now looking forward to invest in our country. We need investment from other countries to not only build infrastructure but also to help eradicate poverty. Foreign investment in China helped eradicate its poverty,” he said.

He said that the growth of India under Prime Minister Narendra Modi has surpassed the growth of China.

“After Narendra Modi took over as Prime Minister, India has surpassed the growth of China. In our country, foreign direct investment (FDI) has increased as compared to China,” Prabhu said.

Railways GDPThe Minister said that the country needs to invest in infrastructure for a higher growth rate. “If we need infrastructure we need to invest in railways as the PM has rightly said that railway is an engine of growth,” he said, adding Modi “was the first Prime Minister in the country who had a vision for the development of the railways”.

The railway minister said that in his first budget, Rs 8.5 lakh crore were earmarked to be invested in the railways in the next five years.

“We have fulfilled 110 points that we had mentioned in the railway budget and the work is on to fulfill the others”, he said.

He said that e-catering was introduced to improve the quality of food being served onboard the trains.

The government has signed an MoU with Japan so as to improve the safety standards of the Indian railway. “We have signed the MoU with Japan to make our safety standards on a par with theirs,” he said.

Indian Railways’ target of increasing freight tonnage by an incremental 85 million tonnes (mt) in 2015-16, against the traditional annual average of 50 mt, might appear ambitious, but the national transporter believes achieving such growth will not be a big ask. The railways is pinning hopes on gross domestic product (GDP) growth of more than eight per cent in 2015-16. It also hopes recent reform initiatives, including e-auction of coal (which will raise demand for coal transport), will lead to a revival in key sectors such as energy.

“The railways’ loading is directly linked to GDP growth and is, in fact, projected a notch higher. We did the entire calculation of incremental 85 mt tonnage (increase) based on the anticipated 8-10 per cent growth next financial year. The target is stiff and difficult but we want to challenge ourselves,” Ajay Shukla, member (traffic) of the Railway Board told in an interview.

In the Railway Budget presented in Parliament on Thursday, Railway Minister Suresh Prabhu had announced the railways estimated freight traffic would grow from 1,101 mt in 2014-15 to 1,186 mt in 2015-16. Of the additional tonnage of 85 mt, 42 would be accounted for by coal (the largest component of the railways’ commodity traffic basket), while nine mt would come from iron ore and seven from cement traffic.

Shukla said the primary contributing commodities to this incremental growth would be coal, iron ore, cement and steel. Asked whether the railways would be able to attract the additional traffic, given the average three per cent rise in freight rates, which has made Indian Railways less competitive, Shukla said the ministry had rationalised freight rates, not increased those. The rationalisation exercise has, however, led to higher rates for some commodities.

“The basic idea is to incentivise long-distance freight traffic by reducing rates and compensating for this by increasing the rates for short-distance traffic marginally. We have also taken care to avoid an impact on items that directly impact the common man, including petroleum products,” Shukla said.

Commodities hit the most by the freight rate restructuring are foodgrain, which account for 5.2 per cent of the railways’ traffic, and fertilisers (4.2 per cent). For both the segments, freight rates have increased up to 10 per cent. “Freight rates in both these commodities are subsidised by the government. We have ensured the common man is not impacted,” Shukla said.

The average three per cent rise in freight rates will give the railways an additional Rs 4,000 crore in 2015-16. The railways has revised its estimated freight earnings for this financial year to Rs 106,927 crore from Rs 1,05,770 crore estimated in June 2014. In 2015-16, freight earnings are estimated to record a steep 13.5 per cent jump at Rs 1,21,423 crore.

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