Rail Budget 2013-14: Who pays, Mr Bansal?

Union Railway Minister Pawan Kumar Bansal raised a lot of hope when he began his budget speech quoting Christine Weatherly, about the song an engine sings as it runs along: "I think I can, I think I can." The fine print of the budget will reveal the extent to which he could meet the pressing infrastructure needs of industry, which is so dependent on the railways.

For the moment, the one measure that appears significant for the infrastructure sector is the plan to provide better connectivity between coal/iron ore mines and customers. "The recently revamped participative policy, enabling partnership with ports, large mines, industry and investors, addresses the specific concerns of private investors," said the minister. "The models seek to create a win-win situation by ensuring payback of investment mainly through freight apportionment. An investment of up to Rs 9,000 crore is expected under these projects, including Rs 3,800 crore for port connectivity projects, Rs 4,000 crore for coal mine connectivity and Rs 800 crore for iron ore mines connectivity improvements."
 
This, however, raises more questions, for it is not clear if the consumer has to pay for the connectivity or if government will make new investments. One will have to wait for the fine print.

Whoever pays, this is critical for India. On the one hand, it has the fourth largest reserves of coal in the world and the sixth largest reserves of iron ore. And on the other hand, consuming industries such as power plants and steel plants face a supply shortage of these very resources. Consequently, they are forced to import expensive substitutes to meet the shortfall.

Better connectivity from the mine to the consumer should help bridge, if not eliminate, this gap.