Rail Budget 2012-13: Reduction in operating ratio to 85% well targeted

SPA Research has come out with its report on Railway Budget 2012-13.

Railways Minister Mr. Dinesh Trivedi while presenting his maiden railway budget, kick started the longpending modernization plan of Indian Railways. The Railway Budget 2012-13 emphasized the need for public-private partnerships (PPPs) in Indian Railways to boost investments. The proposal that 10% of total infrastructure spend in the 12th five year plan should be on railways, will go long way in improving the current state of railways.

It also laid significant importance on passenger safety measures. Much needed upward revision of passenger fares after 8 long years will help improve the financials of railways. Some of the key initiatives undertaken in this Budget include introduction of new trains, commencement of new passenger services, up gradation of railway stations and better safety norms.

Although the minister has scored enough points as far as intent is concerned, however it is to be seen how railways manages to garner funds for the same. The fund constraint is severely bottlenecking the progress of projects in hand, and the ministry has a huge backlog. Mr. Trivedi is banking very heavily on the gross budgetary support, which has increased marginally this year. Hence a lot would depend on how the modernization and safety plans are funded. Given the worsening financials of government, expecting a budgetary support of INR 2.5 lakh crore from the government in the 12th five year plan seems to be too ambitious.

The reduction in operating ratio from 95% to 85% is well targeted, but it would need major administrative overhaul and rigorous financial discipline.

Key Highlights 2012-13:

• Plan Outlay revised to INR 48,551 cr for 2011-12.
• Gross Traffic Receipts for 2011-12 fixed at INR 1,03,917 cr in Revised Estimates, fell short by INR 2,322 cr over Budget Estimates
• Ordinary Working Expenses for 2011-12 fixed at INR 75,650 cr, saw an increase of INR 2,000 cr over Budget Estimates.
• Excess for the current year is pegged at Rs 1,492 crs.
• Operating Ratio of 95% as compared to 91.1% in Budget Estimates.
• Loading target reduced to 970 MT from 993 MT in 2011-12.
• Highest ever plan outlay INR 60,100 cr for 2012-13.
• Gross Traffic Receipts estimated at INR 132552 crs for 2012-13.
• OrdinaryWorking Expenses assessed at INR 84,400 cr
• Provision of Rs 6,676 cr made for dividend payment.
• Operating Ratio targeted at 84.9%.
• Freight loading of 1025 MT, 55 MT more than 2011-12 and passenger growth of 5.4% estimated for 2011-12.
• Railways expect Gross Budgetary Support of INR 2.5 lakh crs during 12th Plan.
• Railways to invest INR 7.35 lakh Crs during 12th Five Year Plan period (2012-17), a quantum jump from the INR 1.92 lakh crs invested in 11th Five Year Plan.

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment

Read More