Railway project allotments at one-year low

Railway minister Suresh Prabhu may be busy projecting mammoth-scale investments that Indian Railways would attract over years but on ground the national transporter seems to be floundering on project activity like never before.

India awarded projects worth a miniscule Rs 31 crore in the rail sector in May 2015, the lowest monthly figure in at least a year, and a 92% reduction from Rs 427 crore worth of projects awarded in May 2014.

“Total value of contracts awarded in April-May 2015 stood at Rs 60,700 crore (up 45.5%). We witnessed growth in awarding projetcs for roadways (up 259.5%), real estate (up 327.1%), and power equipment (up 55.6%), whereas railways segment degrew 92.3% year-on-year,” equity research firm Emkay Global Financial services, that tracks project activity, said in its latest report on the infrastructure sector.

In May, the total value of contracts awarded across infrastructure sectors stood at Rs 15,300 crore, down 37.4% as compared to the same month last year. This was led by a 93% decline in awarding contracts in power equipments sector, 92% decline in railways and a 50% 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, fertilizers, steel and cement – rose 4.4% 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 growth of 7.8 and 7.9%.

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 (DFC) project, analysts say. The rail sector had witnessed projects worth Rs 19,527 crore awarded in 2014-15, a 35% dip from Rs 30,000 crore 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 awards, 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 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 208,054 crore.