Rail Budget 2013: Too focused on financial discipline?
The market was looking forward to the Railway Budget as an indication of what to expect from the Union Budget on Thursday.
The market was looking forward to the Railway Budget as an indication of what to expect from the Union Budget on Thursday. Like his counterpart in the finance ministry, Railway Minister Pawan Kumar Bansal too had the onerous task of balancing financial discipline and popular sentiment. Bansal may have done the best he could have, given the constraints, but that may not really help the cause of his department.
His revenue assumptions are being seen as too optimistic, and many feel he may have chosen to err on the side of caution, given the crunch in railway’s finances.
(The Railways is set to lose Rs 24,600 crore on its passenger train operations this fiscal.)
Passengers have been spared of an across-the-board hike in ticket prices. But then it would have been political suicide to increase fares when they had been raised just last month. Freight rates have been hiked by 5-6 percent, linked to market price of diesel. That means the rates could fall if diesel prices decline. Given the slowing economy, it would not have made sense to extract a higher charge from freight customers. There is always the risk they may look for a cheaper alternative to transport their goods. Already, freight target for FY13 has been scaled down to 1007 metric tonnes from the Budget estimate of 1025 metric tonnes, and freight earnings target from to Rs 85,976 crore from Rs 89,339 crore.
Operating ratio—what the Railways spends to earn Rs 100--for FY13 has been estimated at 88.8 percent. Railway Minister Bansal terms that as a great source of satisfaction as operating ratio has been mostly above 90 percent since 1997-98. But that appears to have been achieved largely through a reduction in plan investment to Rs 60,100 crore from Rs 52,265 crore.
Passenger earnings for FY13 is expected to be Rs 32,500 crore, down from the Budgest estimate of Rs 36,073 crore, and gross traffic receipts (freight + passenger+ others) has been pruned to 1,25,680 crore from the earlier estimate of Rs 1,32,552 crore.
Bansal is betting that freight volume for next year would rise to 1047 metric tonnes, freight earnings to Rs 93,554 crore, passenger earnings to Rs 42,210 crore. Gross traffic receipts are seen at Rs 1.43 lakh crore. Many see the passenger earnings target (+ 29 percent) as a bit too optimistic, unless the railways manages to hike fares during the course of the election year, which is a difficult proposition.
The hike in fares in January is expected to add around Rs 6600 crore to the Railways’ kitty in FY14. But much of that has already been neutralized by an increase of Rs 3300 crore in fuel bill in January alone.
And Railway equipment makers are not too enthused about the expansion targets for the coming year.
The target of 700 km of new lines in the current year had to be scaled down to 470 km due to inadequate resources, and the target for FY14 has been set at 500 km. The target of 800 km for gauge conversion fixed for 2012-13 has been scaled down to 575 km, and the target for FY14 is 450 km. The only positive development has been in the doubling of tracks where the target of 700 km for FY13 is expected to be exceeded and the target for next year is 750 km.
For the coming fiscal, a plan investment of Rs 63,363 crore has been outlined. The Plan is proposed to be financed through gross budgetary support of Rs 26,000 crore, Railway’s share in Road Safety Fund of Rs 2,000 crore, internal resources of Rs 14,260 crore, market borrowings of Rs 15,103 cr and an expected mobilization of Rs 6,000 cr through the private public partnership route.
Operating ratio is expected to improve to 87.8 percent in FY14 from the Revised Estimate of 88.8 percent for FY13, and Bansal is hopeful of closing next year with a balance of Rs 12,506 cr in the Railway Funds.