As he stood in Parliament on Thursday to read out the rail budget 2016, Suresh Prabhu accepted his unenviable job very early on. “These are challenging times” for the country’s largest public sector employer, the minister of railways said – “maybe one of the toughest”.

Prabhu said the Indian railways is suffering because of a lukewarm economy, international slowdown and its own operational inefficiencies. But he voiced optimism about its future as he announced projects and initiatives that he hopes will “reorganise, restructure and rejuvenate” the railways.

Indian railways carries more than 7 billion passengers every year and in the same period transports more than 1,000 million tonnes of freight. Last year, the Union Railway Ministry was hopeful of substantially increasing earnings from both these areas but fell short of the targets. This led Prabhu to rationalise expectations this time around as he took the state of the economy into account.

In the budget speech, Prabhu set a target of 12.4% increase in passenger earnings and announced that the railways is aiming to carry 50 million extra tonnes of freight as compared to last year. While this reflected pragmatism – pre-empting the country’s economic sluggishness, which has a direct bearing on the railway’s freight volumes – Prabhu showed lesser restraint in announcing other initiatives that may not be inexpensive. The minister announced a new set of trains, called Antyodaya Express, that will provide unreserved, superfast services on dense routes.

To please passengers further, the railway minister also announced Deen Dayal coaches in trains for the unreserved travellers and a reserved double-decker service called the UDAY express on busy routes to enable the entity to increase passenger capacity.

Doubling train speeds

Apart from introducing bio-toilets and women-friendly washrooms on every platform and a slew of other facilities, the minister set himself a big target in improving the railways’ infrastructure. For instance, he set a plan size of Rs 1,21,000 crore this year which will be spent on capacity building, infrastructure development and other long-term measures.

“This year, our investment would be close to double of the average of previous years – a feat never achieved earlier. For the year 2016-’17, the capital plan has been pegged at Rs. 1.21 lakh crore,” Prabhu said, adding that every Rs 1 spent on the railways boosts the economic growth by Rs 5.

To double train speeds from the current average of less than 30km/hr, Prabhu announced that more than 2,800 km of rail lines will be commissioned. Moreover, the minister said the railways has already awarded Rs 24,000 crore worth of contracts in his term for the dedicated freight corridor.

All these measures won’t come cheap. As it is, the railways faces an additional burden of Rs 30,000 crores owing to the Seventh Pay Commission recommendations that will end up increasing salaries of its 13 lakh employees. Where will the money come from?

Stressing on the need for the railways to become financially independent, Prabhu said the entity will explore new modes of revenues apart from tinkering with fares and develop projects through joint ventures. The minister, however, steered away from raising any fares directly in the budget and announced that “rationalisation” of freight tariff will take place soon.

He said his vision is to develop railways into “a system that is capable of taking care of its own needs financially and otherwise”. But, given the cash shortage and without a fare hike, Prabhu might face a tough task ahead. “The current tariff structure of IR has led to out-pricing of our services in the freight market.”

In the past, many experts, including Bibek Debroy, an economist with NITI Aayog, have stressed on the need to increase fares to cut losses immediately. Debroy told Scroll.in recently during an interview that it might not be possible to cut freight fares immediately.

“Railways doesn’t have the flexibility yet to reduce freight charges,” he said. “Even the little scope there is for tinkering with the costs can’t make the situation substantially better.”

To supplement earnings, Prabhu said that he is targeting an additional revenue of Rs 4,000 crore by 2020 from advertising. “Although we enjoy the highest captive eyeballs in a railway system internationally, we earn less than 5% of our revenues through non-tariff sources,” he said. “Many of the world railway systems generate 10% to 20% of their revenues from non-tariff sources. Over a period of the next five years, we will strive to reach this world average by monetizing assets and undertaking other revenue yielding activities.”

Also read: Scroll.in's three-part series on the railway budget here.