Recommenda

tion for PreBudget

Memorandum
2016-17
This document comprises of suggestions and recommendation from
Alstom Transport India limited on Pre-Budget Memorandum for
upcoming Railway Budget Feb 2016

Dibyayan
Das

Strategy and
Market Analyst

Alstom Transport
India

Alstoms recommendations
Quintessential Priorities for Railways:
o Raise adequate resources for funding network expansion,
modernisation, including creating a supportive environment for
attracting foreign/ private/ new sources of investments
o Improving passenger amenities, freight operations and thereby
increase share of traffic carried
o Promoting asset utilisation/efficiencies
o Enhancing safety of operations
o Implement Central planning tool LRDSS for better planning of CAPEX
& investments
o Aligning Railways to become the engine of growth of nations
economy
Policy Initiatives to address the Priorities:
1. Raising resources for network expansion, modernisation
a. In conjunction with mega showcase projects for manufacturing of rolling
stock, Railways should encourage public private opportunities in
modernisation and life renewal of existing fleet. Life renewal and
modernisation, particularly of ageing fleet, will not only defer the capex
requirements but also significantly enhance the asset/ network
utilisation, thus helping Railways meet its resource goals.
In the current budget, Railways could consider starting pilot projects to
evaluate the possible
opportunities in modernisation and asset life
renewal, involving the private sector.
b. Leasing of space on railway premises to solar power producers to
generate solar energy and transmit it for both railways use as well as
for sale to power utilities. Railways should undertake the same in a
major way in view of its major land holdings and terrestrial rights. A
model could be to set up SPV/ JVs with power companies to undertake
such opportunities and create value for itself.
c. Improvements in procurement Philosophy:
Railways need to evolve their procurement philosophies from
procurement of nuts& bolts/components/hardware to procurement of
systems as the latter has resulted in more effective delivery and
value creation. In the current Model this system integration piece is
left with railways and major part of investment/cost is spent in
making
a
system
comprising
of
individually
sourced
components/parts work together, often leading to interface failures
and resultant failure of investment objectives. Hence change
procurement process to subsystem/system level
o Change GCC and make it more balanced
Alstom Transport India Limited

Page 1

o Include maintenance as part of procurement when system level

procurement is done. Rather than only focusing in CAPEX, the
focus should be more driven towards CAPEX + OPEX, for
addressing LCC ( life cycle cost) of the project
o Focussed approach towards addressing the Life cycle cost
(LCC) of the project is needed
d. RDSO to evolve as COE for Railways: The role of RDSO needs to be
re-assessed and its technical competencies need to be aligned so that it
can function as a centre of excellence in the Railways. It needs to
nurture a mind-set of attracting new technology into the network,
supporting pilot projects, encouraging innovation and be more outward
in its approach. This will create a more favourable environment for the
transformation of railway technology. In doing so, it needs to have more
robust and conducive interfaces with industry and research centres/
universities etc. Involvement of the private sector will help develop new
standards, new policies and bring industry best practices to the system
e. Promote project based on a Comprehensive network Modal on
the lines of LRDSS (Long Range Decision Support System): Such
model will facilitate corridor analysis, route planning, fund forecast etc.
This system will further foster system/sub system optimisation. Such
Platform will improve efficiency in budgeting and estimating volume of
capacity expansion. Prioritising Investments also plays a vital role in
addressing the BIG picture and such planning tool will help IR to take
such qualitative decisions efficiently
f. Regulatory body for Kick starting PPP: A regulatory body needs to
be established with involvement of private players to kicks tart and
monitor PPP projects in Indian Railways. Involvement of Private
participation in turn will bring best practices, technical know-how and
help defining effective policy frameworks for the promising projects.
Direct Taxes:
a) In order to spur the growth of manufacturing, design, research and
development and creation of local talent pool in rolling stock, signalling
and telecommunications to serve both Indian and international markets
as well as in view of the cascading effect such facilities in setting up of
ancillary industry as well as state/ local area development the
Government should evaluate extending 7/10 year income tax
holidays for such facilities. This is amply evident from the success of
such tax benefits in boosting domestic IT industry. The likely shortfall in
direct taxes through such move is likely to be offset by the boost in
indirect taxes as well as incremental direct taxes from ancillary
industries and employment.
Indirect Taxes:

Alstom Transport India Limited

Page 2

a) In view of the growing emphasis on the use of public modes of

transportation (both in mainline as well as urban metro), and in order to

protect the environment and reduce the pressure on roads, the
Government should consider rebalancing some of the benefits such
as lower excise duty currently enjoyed by sections of automobile sector
towards the railway sector. Such a move will also support in restoring the
equilibrium between road and rail in freight transport. Since this is a
rebalance of benefits between two sectors, this will have a minimal
impact on Government revenues.

Alstom Transport India Limited

Page 3