$137bn boost for India Railway System

NEW DELHI—India plans to spend 8.5 trillion rupees ($137 billion) over the next five years to expand and modernize its vast railway network.

While the South Asian nation unveiled a long list of upgrades for its state-run railways network on Thursday, it said it wouldn’t be increasing train fares.

“We are directing our efforts to make travel on Indian railways a happy experience,” Railways Minister Suresh Prabhu said while presenting the national railway budget for the year starting April 1.

The railways will increase spending by 52% to one trillion rupees next fiscal year. The additional spending will be funded through a mix of cost savings and higher revenues at the railways, financial support from the government, and borrowing.

Mr. Prabhu said the railways would raise 177 billion rupees through internal resources, 348 billion rupees through borrowing, and 400 billion rupees from the government.

While the government kept passenger fares unchanged, it raised freight rates by up to 10% to boost revenue. The government said revenue from both passenger and freight traffic will rise 15% to 1.84 trillion rupees next fiscal year.

Overhauling India’s railways has proved to be a tough task in the past. Previous governments have been wary of raising passenger fares to generate the resources for fear of displeasing the millions of voters who rely on the relatively cheap mode of transportation. Some 23 million Indians take trains each day. Freight rates have been kept high to subsidize the passenger services.

Markets showed little reaction to the new railway budget, with the S&P BSE Sensex edging down 0.9% on Thursday. Stocks of companies manufacturing rail coaches and other railway related stocks fell between 3% and 5%, as investors feared the higher freight rates could hurt traffic.

Still, the government is trying to send a signal that it is serious about improving the country’s infrastructure. The “rail budget lays out a clear road map to make the railways the key driver of India’s economic growth and [play] a key role in India’s progress,” Prime Minister Narendra Modi said in post to his verified Twitter account.- The Wall Street Journal