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Ministries look to jointly fund railway projects using NREGS

By Sharmistha Mukherjee
January 27, 2010 12:33 IST
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Mamata BanerjeeThe railway ministry is working on a proposal with the ministry of rural development to jointly fund key railway projects by utilising the government's flagship National Rural Employment Guarantee Scheme.

Under the plan being worked out, the labour component of the railway projects, which include the expansion of train lines or conversion of line gauge, would be funded from NREGS, as most of these projects require a large labour force and generate employment opportunities in rural areas.

The move will also benefit the railways, which already face a resource crunch in taking up or completing more projects for expanding network and line capacity.

As of April 2009, Indian Railways had a throw-forward (balance funds required to complete the earmarked projects) of approximately Rs 80,000 crore (Rs 800 billion) for constructing 286 new line, gauge conversion and doubling projects.

However, under the annual plans for the last two Budgets, these projects were allocated only Rs 18,000 crore (Rs 180 billion).

Taking into consideration, the increase in the cost of the projects, the railways say it will take them over nine years -- if the allocation is not enhanced substantially -- to complete the projects which have been identified.

While labour costs constitute 20-30 per cent of the project cost, funding from NREGS could be crucial for the railways to expedite these projects.

Also, the rural development ministry has asked for a 55 per cent increase in the allocation of rural employment guarantee schemes from the government, totalling Rs 60,300 crore (Rs 603 billion).

Officials say while the details on the possible collaboration have not been worked out, the government may mention about the joint effort being made between the two ministries in the coming Union Budget or the Railway Budget.

Parvesh Minocha, managing director (transportation division) of project management firm Feedback Ventures, says: "Such a proposition is beneficial to all parties involved. Railway projects are being developed in rural areas.

"Unskilled labourers in such areas would get employment. Apart from getting ready labour, railways would be able to save on labour costs."

The scarcity of funds against the requirement has delayed the completion of these projects. This inevitably leads into time and cost overruns.

A senior ministry official said: "Of the sanctioned 286 projects, 123 have been identified by the railways to be taken up on priority on grounds of traffic and operational growth. Around Rs 21,500 crore (Rs 215 billion) is required to complete these projects."

He, however, added that if funds were to be allocated only for such works, the development of other projects sanctioned on socio-economic grounds would face delays.

This has impelled the railways to look at innovative measures to generate additional resources, including the utilisation of funds allocated to the rural sector under NREGS.

A former railway ministry official said on condition of anonymity: "The measure would specifically be useful in the completion of those projects which are being executed departmentally. For projects that are awarded to contractors, the proper regulatory mechanisms have to be considered and put in place, so that there is uninterrupted supply of manpower while construction works are in progress."

Apart from this, the railways have also approached the central government for creating a 'Socio-Economic Railway Lines Fund' for completing 97 new line projects over a period of 7-8 years through a mix of additional gross budgetary support and dividend.

Image: Mamata Banerjee

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Sharmistha Mukherjee in New Delhi
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