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Indian Railway Budget 2011-12: Fairwealth Securities

Fairwealth Securities has come out with a report on Indian Railway Budget 2011-12.

February 25, 2011 / 08:01 PM IST

Fairwealth Securities has come out with a report on Indian Railway Budget 2011-12.


The Union Minister for Indian railways, Ms Mamta Banerjee announced budget that was on track of her 2020 vision for long term plans for railways.

The Indian railways has chalked out its highest ever investment expenditure amounting Rs 57630cr for FY12, with the target to add 700km new lines.

For the third successive year, the Railway Budget for 2011-12 spared the passengers of any increase in fares and proposed no hike in freight rates.

Railway has introduced 56 new trains, including nine non-stop Duronto trains and three Shatabdis.

Focus on building strong infrastructure with next year's budget provides Rs 9,583cr for new lines. A target of 1,300 kms for new lines, 867 kms for doubling lines and 1,017 kms for guage conversion has been set for FY12.

The financial performance for the period under review was sluggish as the freight volume remains lower coupled with financial burden on the back of high
employee cost. Operating ratio stood at 72.1% despite of 7.3% growth in gross traffic receipts which came in at Rs 94840cr.

Gross traffic receipts has been estimated at Rs 1,06,239cr, exceeding Rs 1 lakh crore mark for the first time in FY12, despite of pressure on finances due to Pay Commission payout.

FY10-11 performance remained sluggish:

The gross traffic receipts have registered a growth of over 7.3% to Rs 94840cr against Rs 88356cr during FY10, while the same was higher by Rs 75cr against the budgeted estimates of Rs 94765cr. Freight loading for the year remains subdued to 924mt against the estimates of 944mt costing Rs 2000cr revenue to the railways, while the net loss on account of disruption of trains movement stood over Rs 1500. The ordinary working expenses have been revised to Rs 67000cr, an increase of 3% over previous estimates. Considering the impact of 6th pay commission on railways, the performance looks, meager with operating ratio at 72.1%.

FY12 estimates~ life time achievement:

Railways expects gross traffic earnings to augment by 12% to cross Rs 100,000cr mark for the first time in Indian Railways history to Rs 106,239cr in FY12, driven by 7.1% augmentation in freight earning and 6.4% growth in passenger earnings.

With freight tariff remaining unchanged, ministry expects freight volume to increase by 7.5% to 993 mt. Operating ratios are expected to improve at 91% from 84%.

Railway ministry has proposed Rs 57630cr, the highest ever plan investment to provide efficient, customer focused and modern rail network. With government focusing on adding 700 km new rail lines in one year as against previous five year average of 219 km/year and 180 km in last 59years. It has allocated Rs 9583cr for new line addition and is expected to spend Rs 13824cr on buying rolling stock. Plan would be financed through gross budgetary support of Rs.20,000cr, diesel cess of Rs 1041cr, internal resources of over Rs14000cr, market borrowing would be Rs 20594cr while borrowing through IRFC ~ tax free bond of Rs.10,000cr.

During the year 18000 wagons will be acquired while the target for last year was also 18000 wagons, out of which 16500 wagons have been procured form various players.

Railways loaded 924mt of freight cargo which is a 3.8% growth over the previous year. This is lower than the target of 944mt largely on account of lower Iron Ore exports from Karnataka. The freight traffic target for year 2011-12 has been fixed at 993mt. This translates into an incremental loading of 69mt versus 2010-11.

Irrespective of the largest ever investment outlay planned by the Railway Ministry as a part of 2020 vision, the future outlook looks bleak and difficult mainly on the concerns of lower execution and high cost incurred on employees and projects undertaken by concerned ministry from the delivery prospect last year. However no change in freight rates remains positive for the industries like cement, power and metals since industry was worried about increase in transportation cost.

Rail companies like Kalindee, BEML, Kermax, Hind Rectifiers etc are expected to benefit mainly due to the target of setting up 700 km railway track in FY12.

Disclaimer: The views and investment tips expressed by investment experts on are their own, and not that of the website or its advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment

first published: Feb 25, 2011 07:56 pm

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