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Derailed projects throw railways off track

July 03, 2015 12:37 IST

Porters transport goods on a hand-pulled trolley to load onto a train at a railway station in Kolkata. Porters transport goods on a hand-pulled trolley to load onto a train at a railway station in Kolkata. Project awarding hits one-year low

Railway Minister Suresh Prabhakar Prabhu may be busy projecting Indian Railways would attract $500 billion investments over 10-12 years, but on the ground the national transporter seems to be floundering on project activity like never before.

India awarded projects worth a minuscule Rs 31 crore (Rs 310 million) in the rail sector in May 2015, the lowest monthly figure in at least a year, and a 92 per cent reduction from Rs 427 crore (Rs 4.27 billion) worth of projects awarded in May 2014.

“The total value of contracts awarded in April-May 2015 stood at Rs 60,700 crore or Rs 607 billion (up 45.5 per cent).

“We witnessed growth in awarding in roadways (up 259.5 per cent), real estate (up 327.1 per cent), and power equipment (up 55.6 per cent), whereas railways segment grew 92.3 per cent Year-on-Year,” an equity research firm Emkay Global Financial Services Ltd, that tracks project activity, said in its latest report on infrastructure sector.

In May, the total value of contracts awarded across infrastructure sectors stood at Rs 15,300 crore (Rs 153 billion), down 37.4 per cent as compared to the same month last year.

This was led by a 93 per cent decline in awarding in power equipment sector, 92 per cent decline in railways and a 50 per cent decline in power distribution project awards.

The latest core sector data released by the commerce ministry on Tuesday showed core sector index -- which measures the output of eight key infrastructure industries of coal, crude oil, electricity, natural gas, refinery products, fertilisers, steel and cement -- rose 4.4 per cent in May, its fastest since November 2014.

Seven out of eight core sectors posted growth in May, with coal and refinery products being top performers clocking a growth of 7.8 per cent and 7.9 per cent.

Business Standard had reported on 17 May Indian Railways is yet to catch up on project activity even as the government is busy projecting it as the vehicle of economic growth.

The sector is witnessing weak tendering, with the exception of Dedicated Freight Corridor project, analysts say.

The rail sector had witnessed projects worth Rs 19,527 crore (Rs 195.27 billion) awarded in 2014-15, a 35 per cent dip from Rs 30,000 crore (Rs 300 billion) in the previous fiscal.

Experts point out two reasons for slow railway project awards: The general elections of last year and the subsequent change in government, and the ministry’s focus on streamlining systems.

“Now that that phase of instability is over and the ministry is taking steps to boost project award, things must improve from now on,” says Vishwas Udgirkar, senior director at Deloitte.

“It is equally important to first implement the projects already awarded. The ministry has identified a priority list of projects to be implemented. That is a good sign.”

Indian Railways has estimated a shelf of pending projects to the tune of Rs 491,510 crore (Rs 4,915.1 billion) on the basis of originally estimated costs.

Of these, the fund requirement for priority works such as doubling new lines, gauge conversion, traffic facilities and electrification, is estimated at Rs 2,08,054 crore (Rs 2,080.54 billion).

Image: Porters transport goods on a hand-pulled trolley to load onto a train at a railway station in Kolkata. Photograph: Rupak De Chowdhuri/Reuters

Sudheer Pal Singh in New Delhi
Source: source image