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Suffering for a long time from underinvestment, Indian Railways need greater public investments but the support should be clearly linked to reform of the structure of the organisation.
Public investment in an efficient rail network can have positive effect on both manufacturing and aggregate output, and the effects are permanent, said the Economic Survey 2014-15 tabled in Parliament on Friday.
It also envisioned ‘corporatised Railways entities’ in the long run.
Successive plans have allocated less resources to the Railways compared to the transport sector, it added.
"The share of Railways in the total plan outlay is currently only 5.5 per cent vis-à-vis about 11 per cent for the other transport sectors and its share in overall development expenditure has remained low at below 2 per cent over the past decade," the survey said.
Highlighting the difference with that of China, it added: "In per capita terms, China has invested on an average 11 times as much over the same period, even though both countries have similar populations."
Underinvestment in the Indian Railways is also indicated by congestion, strained capacity, poor services, and weak financial health, it added.
Stressing on the need of support from government, it said: "Greater public investments once utilised efficiently can help the Railways to overcome some of these problems... In
the interim, there is scope for public support of Railways, including through assistance via the general Budget."
It, however, added: ". .. any public support should be clearly linked to serious reform; of the structure of the Railways; of their adoption of commercial practises; of rationalising tariff policies and through an overhaul of technology."
The document further said that in the long run, the Railways must be commercially viable and public support for it should be restricted to equity support for investment by the corporatised Railways entities, and for funding the universal service obligations that it provides.
It also said there is a need for bold, accelerated programme of investment in dedicated freight corridors that can parallel the Golden Quadrilateral in the road sector along with associated industrial corridors.
"Such an initiative will transform Indian manufacturing industry with ‘Make in India’ becoming a reality," it added.
This impetus has the potential to boost greater private investment and do so without jeopardising India's public debt dynamics, the survey said.
Image: A man sits on a berth inside the sleeper class compartment of the Kalka Mail passenger train on the way to Kolkata. Photograph: Danish Siddiqui/Reuters