Feb 2, 2017

Railways taken by surprise over listing of its 3 PSUs

According to sources, the Railways officials were only asked if the ministry had any objection to the listing of some of its PSUs for better fund infusion and market competitiveness.

Taking the meeting as the first step, the ministry was under the impression that the process had just begun and it would get back with details, like a possible roadmap. Reuters photo
IN THE first merger of the Rail Budget with the General Budget on Wednesday, the Railways Ministry was reportedly caught unawares by the government’s announcement that three of its public sector units (PSUs) would be listed in the stock market.

Sources said the announcement came barely two days after the issue was first discussed at a meeting on Monday. With no indication that the future of its PSUs was up for discussion, the ministry did not send any Railway Board member for the meeting. A joint secretary-level officer and an additional member attended the meeting with NITI Aayog officials and Secretary, Department of Investment and Public Asset Management (DIPAM).

According to sources, the Railways officials were only asked if the ministry had any objection to the listing of some of its PSUs for better fund infusion and market competitiveness. The need to energise the PSUs and bring them out of their “comfort zone” was discussed, said sources.

Taking the meeting as the first step, the ministry was under the impression that the process had just begun and it would get back with details, like a possible roadmap. The Railway Board, the ministry’s highest decision-making body, had not even discussed the issue yet.

But the government on Wednesday announced the listing of three of its PSUs — IRCON (Indian Railway Construction Company Limited), Indian Railway Finance Corporation, and Indian Railway Catering and Tourism Corporation.

Sources said the Board will now discuss the issue, after which a proposal will be sent to DIPAM, before a Cabinet note is finally sent.

While the government has been seeking in-principle approval from the Railways to list these companies, the ministry was not too keen, and the government’s seriousness or urgency was never conveyed before Wednesday.

IRCON was listed earlier, but was voluntarily delisted in 2011. Among other things, it also does construction work in areas considered strategically sensitive. There is concern over sharing such information with equity investors.

Apart from this, the only takeaway for the Railways from the Budget is the creation of the Rs 1 lakh crore Rashtriya Rail Sanraksha Kosh (RRSK) for five years — Rs 20,000 crore per year — for critical safety upgrades. Railways has budgeted its share of Rs 5,000 crore in the annual corpus from its funds and has not built in any safety cess on tariff yet. The total budgetary support, including Rs 10,000 crore from the Central Road Fund’s diesel cess and additional Rs 5,000 crore towards RRSK, is Rs 55,000 crore.

A fare hike is likely next fiscal, said sources. In its financial statements in the Budget, Railways has indicated that next fiscal, it will carry only 0.2 per cent more passengers than this year while its earnings from the passenger segment will increase by 4.4 per cent. Sources said an overall impact of 7 per cent hike in fares has been deliberated.

In freight, Railways has projected a modest 6.5 per cent growth, carrying an estimated 1,165 million tonnes of goods in 2017-18. - Indian Express