Suresh Prabhu's Railway budget today: Big Challenges

Mr Prabhu's induction as India's Railway Minister three months ago was touted by analysts as proof of the Modi government's reformist agenda. Known for his performance as Power Minister in 2002, Mr Prabhu, 61, faces huge expectations today.

Railway stocks have staged an impressive rally in the run up to the Budget. Thursday's announcements are also expected give a peek into the Union Budget, which will be presented in two days' time. "It will be a solid Budget, working towards strengthening the



infrastructure," said LV Raju, managing director at Kernex Microsystem, which manufactures electronic safety equipment.

Railway finances are under terrible strain; its operating ratio is 94 per cent meaning it saves just 6 paise on every 1 rupee it earns from operations, leaving little surplus funds for infrastructure development. In 2007-08, the operating ratio was a healthy 76 per cent. Mr Prabhu can raise additional resources by hiking passenger fares, but his deputy has ruled out any increase in fares in the upcoming Budget. The railways incur a loss of Rs. 26,000 crore on passenger fares, which is cross-subsidized by freight fares. 

Freight rates are already among the highest in the world because of which the railways has been consistently losing market share in goods transportation to the roads sector. Mr Prabhu needs to generate additional funds to complete pending projects, build new infrastructure and improve passenger amenities.