Budget Expectations: What's in store for railways in #Budget2024? Is order execution still a pain point?
Hear from industry leaders.
Hear from industry leaders.
Category
📺
TVTranscript
00:00 (upbeat music)
00:02 - Hello and welcome to NDTV Profit, I'm Hiral Dhadia.
00:12 You're watching a special coverage on what to expect
00:17 from the railway sector in budget 2025.
00:21 Now India is already undergoing a rail revolution
00:24 and let's understand what is India Inc's expectation
00:28 from here on.
00:29 Now after speaking to a couple of veterans as well
00:32 to understand what the outlay could be,
00:35 we've come up with a number of around 2.8
00:37 to around 3 trillion rupees for the railway.
00:41 Now why this number?
00:43 Now the clear expectation is that this is the amount
00:47 that will be spent on various initiatives
00:49 like higher capital allocation.
00:52 Now earlier if you see in terms of where 23 was concerned,
00:56 the allocation was around 2.4 trillion rupees
00:59 and that was the highest ever that we'd seen so far.
01:03 So this time around going to be higher than that as well.
01:07 Apart from that, the National Transporter
01:09 is also looking at revamping the railway assets.
01:12 So that's number two in terms of the agenda
01:14 that India Inc is looking at.
01:16 Moving from there on, you're looking at development
01:19 of the railway infrastructure.
01:21 Maybe the bridges to the railway stations,
01:25 development is a key focus area and that's where
01:28 even India Inc is actually going ahead
01:30 and building their capacities.
01:32 Apart from that, you talk about enhancing connectivity
01:36 as well as efficiency.
01:37 So when you talk about connectivity as well,
01:39 what the railway is looking at is to enhance connectivity
01:43 in such a way that the transportation cost
01:46 with regards to logistics starts to come off as well.
01:48 So that is one of the key criterias
01:50 what we are looking out for as well.
01:52 And you have the India Middle East European Economic Corridor
01:56 I beg your pardon, which is underway.
01:59 That is going to be of utmost importance.
02:02 So these are the key expectations
02:05 with regards to where India Inc goes.
02:07 But now let's quickly look at the projects
02:09 which are underway so far.
02:11 Now to start off with, you have the USBRL.
02:13 Now this is the Udampur-Srinagar-Baramulla Rail Link.
02:18 This is one of the biggest and the most connected
02:22 that will be in terms of where J&K goes.
02:24 So this is one of the projects which is underway.
02:27 Apart from that, connectivity increase
02:29 in terms of Northeast.
02:31 That's the second project that the railway is undertaking.
02:34 You have the bullet train project
02:36 as well as moving from there on.
02:38 The conversion of the narrow gauge to the broad gauge lines
02:42 that is also underway by the railways.
02:45 Redevelopment of railway stations, launching of new trains.
02:49 And you talk about the new purchase of trains
02:51 worth almost one lakh crore
02:53 that has been announced by the government so far.
02:56 So these are the various projects which are underway,
02:58 which is really exciting, India Inc.
03:01 Because if you talk about the railway companies as well,
03:04 clearly in 2023, all of them have been multi-baggers.
03:08 So that up move, the capex that they are investing,
03:12 now it's mainly about how to increase utilizations,
03:15 the kind of orders that the government
03:17 will give them as well.
03:19 Very lastly, let's quickly look at the outlay.
03:22 Now, if you see in terms of the budget allocation
03:24 from FY21 to FY24, it has started with almost 1.34 trillion
03:29 if you see on the screens.
03:33 It went lower to around 1.1 and now again,
03:36 FY24, it's been around 2.4.
03:39 Now in terms of FY25, as we mentioned,
03:42 the number we are looking at is 2.8 to 3 trillion rupees.
03:47 That's the outlay that the street is staring at.
03:51 (upbeat music)
03:54 Let me introduce the panel for today.
04:06 We have Vivek Lohia, MD at Jupiter Wagons joining in
04:09 with Sudipta Mukherjee, Managing Director at Texmaco Rail
04:14 and Mr. Lalit Kumar, Kheerthan ED and CFO at RK Forgings.
04:19 This is gonna be an interesting budget as well
04:22 because it is kind of vote on account and an interim budget
04:26 but what happens from here on being an election year
04:29 and the kind of outlay that we've seen in the last year,
04:33 what does it translate into from here on?
04:35 That's what is gonna be absolutely crucial.
04:38 In fact, first let me head across to Vivek
04:40 to get his views, Vivek.
04:42 Overall, if you see in terms of the current year
04:46 and the kind of allocations that we've already seen
04:49 in terms of FY24, the outlay has been
04:52 absolutely a strong number.
04:55 What is the expectation that you have
04:58 firstly from a number perspective?
04:59 - Thank you.
05:02 Thank you.
05:03 So as you rightly said, in terms of the outlay
05:09 and the actual spend which we are seeing
05:12 from the railways, we have nothing to complain.
05:15 And what we are seeing is that the trust on infrastructure,
05:20 especially on railway side, because it was,
05:24 this trust was missing for a long time
05:27 and railway is going to be the key driver
05:30 when it comes to the lowering the infrastructure costs
05:34 and on getting India to the next level
05:38 in terms of GDP and the goal of the government
05:42 for the $10 trillion economy.
05:44 I think going forward, we expect the momentum to continue
05:50 as outside of the budget already,
05:55 you have seen a lot of announcements
05:58 by the Honorable Minister himself
06:00 and the Honorable Prime Minister,
06:03 where they have clearly earmarked the road ahead.
06:08 They are talking about more than one lakh
06:11 for investments in new rolling stock.
06:15 There is a renewed trust on further augmenting
06:21 the railway track infrastructure.
06:26 The DFCC is going to get fully commissioned shortly.
06:31 The minister already clearly mentioned the roadmap
06:36 for the DFCCs to come up.
06:39 There is a coordinated policy decision on development
06:44 and modernization of the various railway stations,
06:49 along with trust on a lot of private infrastructure
06:54 in terms of sidings and as well as private terminals.
07:01 So overall, I think it is not only
07:06 when you look at railways,
07:08 it's a very, very comprehensive strategy
07:12 under which the railway ministry is working.
07:16 And it is both if you look at the freight side
07:20 of the business, as well as the passenger sides,
07:24 including the passenger amenities,
07:26 I think you will see a renewed momentum
07:31 on all fronts.
07:33 - Absolutely, a lot of areas where the government
07:36 is working on it as well.
07:37 So that they're coming to you clearly,
07:39 if you see the allocation,
07:42 talking to a couple of veterans from the industry as well,
07:45 everyone is pegging the allocation in that range of 2.8
07:50 to 3 trillion this time around,
07:52 versus a 2.4 trillion that we've seen in terms of FI24.
07:57 How are you looking at that number?
07:59 Because the previous year itself,
08:01 it was the highest ever allocation
08:03 to the national transporter.
08:05 Do you think the trend will continue?
08:07 - Well, thank you for having me, first of all.
08:12 And if you want to see the trend of allocation
08:17 in Indian railway budget,
08:20 it has to be evaluated with the India growth story.
08:25 So when we talk about the 7%, 8%,
08:32 GDP growth,
08:33 so the infrastructure push government
08:36 is giving very consciously.
08:38 And as you have rightly mentioned that this interim budget
08:43 and the election is around the corner,
08:46 but I believe that the momentum will continue
08:50 because this is part of the whole lot of a long-term plan
08:55 and a complete makeover government is planning
08:59 in and around the logistic sector as,
09:01 I mean, to align it with the infrastructural growth story
09:05 and the GDP of the country.
09:08 So they say to predict a number that how far it will go,
09:13 but if we even evaluate that what was there
09:18 in the last financial year,
09:20 and probably one encouraging fact is that
09:24 this is the first time the complete allocation
09:28 are going to be exhausted within a financial year.
09:31 So that can be one of the positive side
09:34 for the government to think over
09:36 that whether we are in our optimum level
09:38 or we want to give a better push,
09:40 but we are sure that this momentum will grow.
09:46 And even if the further thing comes,
09:49 as I say that it is all our integrated approach,
09:54 the government has taken,
09:56 and along with that, the industry are also gearing up.
09:59 So we will be very keen to look progress in the way forward.
10:04 Everybody is taking part positively
10:07 in this growth trajectory.
10:09 - Right, thank you, Sudipta, for your views.
10:11 Lalit, coming to you as well,
10:13 you know, we've got a view in terms of the allocations
10:16 and how the trend is expected to be,
10:18 but if you have to look at the translation
10:20 of these capital outlays into orders from the government,
10:24 how has that trend been?
10:26 Because, you know, giving out a number
10:28 and saying that this is what we are going to spend
10:30 for the railways, but by the time it comes to,
10:33 you know, execution or order inflows from the government,
10:36 sometimes there is a miscoming in on that part.
10:38 How are you seeing that trend change?
10:40 - Oh, so, you know what?
10:43 We are looking at the order already,
10:46 I think the order has been issued
10:48 or given to the, I would say,
10:51 the manufacturer and the overall,
10:54 I would say, system is in place to issue that.
10:57 But what we need to watch for is the timely delivery
11:01 or issuance of that order.
11:02 So that's another idea.
11:04 I will say next fiscal is significant in terms of delivery.
11:07 And there we can see the allocation,
11:09 what has been done in terms of fund
11:11 and the delivery from the industry is matching.
11:15 And both together coming will certainly make it successful
11:19 in terms of target, what government has set up
11:21 and what industry has been able to deliver.
11:23 So both, I will say that FY26 is a year to watch for that.
11:27 - A year to watch for all of us.
11:30 Now, I was just looking at a couple of expectations
11:34 that the industry has as well.
11:36 Firstly, we already spoke about
11:37 the higher capital allocation.
11:40 Secondly, we are also watching out
11:42 for revamping of the railway assets,
11:45 developing of the railway infrastructure,
11:48 enhancing the connectivity and efficiency as well as,
11:51 if you talk about the India,
11:53 Middle East, Europe economic corridor.
11:55 These are a few of the things
11:56 where everyone has high expectations.
11:59 So Dipta coming to you, out of this,
12:02 anything else you think could be a major beneficiary
12:06 to a company like yours?
12:07 - Yeah, if you see TxMACO,
12:11 we are into freight rolling stock
12:13 and components of the rolling stock.
12:17 And of course, some part of the passenger part of it.
12:20 We are also into track laying electrification
12:23 and all these segments.
12:25 And it has a unique opportunity with this collaboration
12:30 to play a big role in the technology sphere,
12:34 including the high-speed track laying in the country.
12:37 And we believe that we have tremendous opportunity
12:43 in all these areas.
12:45 Because if you, coming back to your earlier point
12:49 where you have asked the,
12:52 talked to, we're talking about the allocations.
12:54 So if you see that a significant allocation
12:56 has gone to the new lines like 35,000 crore
13:00 in the last financial year,
13:01 around 45,000 crore on safety.
13:04 So government's push on creating new infrastructure,
13:08 acquiring more trains, freight rolling stocks
13:10 and investing on safety,
13:12 definitely puts us in a very unique position
13:15 and it's a multiplier for us.
13:19 - Right, a multiplier from here on.
13:20 Vivek, coming to you as well,
13:23 if you have to look at the various projects
13:24 which are underway right now,
13:26 you have the USBRL, you have the bullet train,
13:29 you're talking about redevelopment of railway stations,
13:32 conversions of the narrow gauge to the broad gauge,
13:34 purchase of new trains that is coming
13:36 to the tune of almost one lakh crores.
13:39 How is it that you as a company are looking to participate
13:43 and any newer segments you think,
13:45 as a company you would want to enter,
13:48 you know, again in the same sector?
13:50 - Yeah, so if you look at Jupiter
13:55 and if you look at our portfolio,
13:57 we are pretty broad based.
13:59 So, you know, whatever investments
14:02 which you have talked about,
14:03 railway is putting up an infrastructure.
14:06 So if you look at the specifically the rolling stock,
14:09 we are pretty much there in most of the sectors.
14:14 So going forward, our focus is to continue
14:19 to be in the rolling stock segment,
14:22 but become a much more integrated player.
14:26 So bringing in much newer technology,
14:29 so we are introducing now the brake systems.
14:33 We are thinking now we are going to be foraying
14:35 into the metro segment.
14:38 So our focus is going to be to continue to be
14:42 in the segment which we are bringing newer technologies
14:47 and become much more integrated
14:51 and, you know, add more value into the segment.
14:56 So that is going to be our focus going forward as a company.
15:00 - Right, so that's what business is looking like
15:03 overall for RK Forging as well.
15:05 (upbeat music)
15:07 So Dipta, coming to you as well, you know, overall,
15:18 from the kind of business that we are into,
15:21 and if you have to look at the overall order book as well,
15:25 how are you looking at that increasing?
15:27 Because in terms of freight cars,
15:29 I think you're sitting on order book of almost
15:30 around 5,000 odd crores.
15:32 You've won the largest order of 20,000 plus freight cars
15:35 from the Indian railways as well,
15:36 and execution is underway.
15:38 But with the way the outlay has been increasing from here on
15:42 and if you have to match your capacities to it,
15:45 where do you stand as a company?
15:47 - So the figure would be little higher.
15:52 It is in the range of around 7,000 crore
15:56 and whatever we are here today.
15:59 And we definitely being in the rolling stock,
16:04 we are having further capacities to do it.
16:09 And we are doing a lot of capexes in and around
16:13 the rolling stock as well as the component ecosystem.
16:16 And other than that, as I was telling,
16:19 that is part of how we have taken it as a company.
16:24 In the beginning, as I was telling that it was part
16:26 of our Indian growth story.
16:29 And you have seen the increased emphasis by railways
16:34 to match the aspirations of the young India,
16:41 to change the expectations of the people
16:44 who are the stakeholder of railways and in and around.
16:48 So it's a complete comprehensive journey,
16:53 which is evolving around and which we have also imbibed
16:58 while we are an important stakeholder of the whole growth.
17:03 And we are trying to position ourselves very consciously
17:08 as a leading technology company in this sphere.
17:11 As Honorable Railway Minister also mentioned,
17:14 decoding that the emphasis is more on technology,
17:18 quality and safety in and around.
17:22 So it's again enriched experience
17:25 and towards a much more matured and global positioning
17:30 of the country as a whole,
17:31 or we as a supplier or stakeholder of railways.
17:36 So in each sphere where we are in,
17:40 we are consciously progressing towards that
17:43 to become a global company by this makeup journey
17:50 of the railways.
17:52 - Absolutely, the Atmanirbhar Bharat journey
17:54 of the Indian railways is absolutely helping well.
17:57 In fact, in terms of Jupiter wagons as well,
18:00 clearly, you know, Vivek,
18:01 we are seeing the way you want to increase capacity as well
18:05 to meet this growing demand.
18:07 Order book absolutely remains robust for you.
18:10 I think last one we spoke as well,
18:11 you were clearly indicating that a visibility
18:13 of almost 18 months is what you're sitting on
18:16 in terms of execution.
18:18 How is that expected to change
18:20 with the allocations increase?
18:22 How are you going to meet the capacities?
18:24 - Yeah, so as you rightly mentioned,
18:28 our focus going forward is on capacity.
18:32 So we have been very clear that by the end of this year,
18:37 we are looking to produce about a thousand wagons per month.
18:44 We have a very robust CapEx outlay.
18:48 Over the next two years,
18:49 we are going to be spending more than thousand crores
18:51 on our CapEx, which includes expansion of our foundry,
18:56 which again goes towards the backward integration,
19:00 which we are talking about.
19:01 We are looking at wheelset manufacturing,
19:07 and that will not only cater to the Indian demand,
19:11 but especially for the European markets,
19:16 as we have very strong presence
19:18 through our partnerships in Europe.
19:20 The whole idea is, going forward,
19:25 Indian railway itself,
19:28 we are seeing further demand for at least
19:32 between 30 to 40,000 new freight wagons.
19:36 The private sector demand is very robust.
19:39 There is a lot of investments,
19:41 private capital for the first time after a long period,
19:44 happening across all sectors,
19:48 be it steel, cement, power.
19:51 So that in turn will again create additional demand
19:55 going forward.
19:57 So definitely on the demand side,
20:00 we don't see any challenge.
20:02 So our whole thrust right now is on capacity-building.
20:06 - Right, so capacity expansion is what is on the cards
20:10 as we speak.
20:12 You know, we're running out of time,
20:13 but one last word with all of you.
20:15 Firstly, Lalit, if I come to you
20:17 in terms of what we've discussed,
20:19 apart from that, what is your key expectation
20:22 from the government?
20:23 Any specific ask that you have
20:26 from an industry perspective?
20:27 - Yeah, if we're specific to the railway,
20:31 I think the government should allocate more budget
20:34 for the sustainable growth,
20:36 improving the infrastructure
20:38 and more on the R&D activity.
20:41 That I think is the ask for the day,
20:42 and certainly everybody is expecting increased allocation,
20:46 and I think that is going to be there.
20:49 But we should not expect too much also from this budget,
20:52 as this is an interim budget,
20:54 and government will come with the full budget
20:56 once the elections are over.
20:58 But overall, we think there cannot be any disruption,
21:01 government will be looking for a stable regime
21:04 in terms of policy on the regulatory side
21:06 or on the tax side.
21:07 All this should remain stable,
21:09 and just look for more allocations
21:12 and more spend on the infrastructure side.
21:15 - Absolutely, the infrastructure spend
21:17 should remain stable as well.
21:18 So Dipta, what would your word be?
21:20 - So the expectation would be that
21:23 the same requirement will continue.
21:26 It may grow also, but as I said,
21:29 that is again against a long-term plan.
21:32 So the consistency, which is going to be key,
21:35 and we're sure that government will take care of that.
21:38 And additionally, if you ask for a wish,
21:43 so I wish that, I mean, government emphasis
21:48 on the railway sector or as a whole in the infrastructure,
21:53 that pushes on production of emerging technology
21:58 or to be qualitative and, I mean,
22:02 focus on safety and world-class experience
22:05 in and around railways.
22:06 So we as a company, I mean,
22:08 if we come across with certain thing
22:13 or the companies which are coming up with,
22:15 if the PLI scheme are a bit extended
22:18 in terms of assurance,
22:21 assured of tech or whatever way,
22:23 in the way forward, it will foster
22:26 and it will bolster the government's push
22:29 to be world-class and number one in the world.
22:34 - Right.
22:36 Vivek, coming to you as well,
22:37 any tax benefits, PLI scheme extensions?
22:41 What is it that you think as a company
22:44 that you need to grow?
22:45 Because the industry, with regards to railways,
22:48 I think I was just looking at the end of December 23,
22:51 all railway stocks have been multi-baggers,
22:54 from a stock price performance perspective.
22:56 Investors have been really happy as well.
22:59 So what is it that you think that the government
23:02 should be doing so that this process continues?
23:05 - Yeah, so I think that, see, in terms of investments,
23:09 there are no complaints and we believe
23:12 that the investment is the government
23:14 and investment on infrastructure will continue.
23:18 I think the key is on the execution piece
23:22 because going forward, I think the way the economy
23:26 is shaping up and across, in terms,
23:31 say, if you look at freight or the passenger business,
23:35 you see more and more demand coming up.
23:39 So I think that it's very important
23:41 that the infrastructure has to keep pace.
23:43 If the infrastructure is going to keep pace,
23:46 I don't see a reason why demand is not going
23:50 to come in.
23:53 So I think the key would be on the execution.
23:56 I think that's where the real focus should be.
23:59 Definitely PLI is something, because this is a sector,
24:03 this is one of the few sectors which has not been covered
24:07 under the PLI scheme.
24:09 And especially now with the thrust which we are putting on
24:13 in terms of modern technology,
24:15 on India being the export base to the global market,
24:20 that is becoming more and more of a focus.
24:24 (upbeat music)
24:27 (upbeat music)
24:30 (upbeat music)
24:32 (upbeat music)
24:35 (upbeat music)
24:37 (electronic music)