High borrowings to continue

At Rs 13,146 cr, the surplus would be lower than that targeted by Bansal's predecessor, Dinesh Trivedi

The fact that the United Progressive Alliance government might have just this year to fix the woes of Indian Railways notwithstanding, Railway Minister Pawan Kumar Bansal has chosen a path of financial prudence for the government-owned transporter. With no rise in basic passenger fares and a fuel levy of about five per cent on freight, Bansal hopes the railways’ surplus, a measure of profitability, would rise 26 per cent in 2013-14.

At Rs 13,146 crore, the surplus would, however, be lower than that targeted by Bansal’s predecessor, Dinesh Trivedi, in Railway Budget 2012-13, which proved his political nemesis. Trivedi had budgeted for a surplus of Rs 15,557 crore. However, with the roll-back of the passenger fare rise at the beginning of the year and the fact that freight loading was lower than expected, at the end of this financial year, the railways would have a surplus of Rs 10,409 crore. Bansal said, “A modest increase of five to six per cent in fares over a period of 10 years can provide about Rs 1 lakh crore by way of additional resources, which can substantially finance the internal generation component of a throw-forward of about Rs 75,000 crore.” However, he didn’t elaborate on how this would happen. It appears the fuel adjustment component, applicable on freight from April 1, could be extended to fares as well.

The increased dependence on borrowings would, however, continue. The Indian Railway Finance Corporation expected to raise Rs 15,103 crore from the market to fund 24 per cent of the Plan expenditure of Rs 63,363 crore in 2013-14. Internal generation would contribute Rs 14,260 crore.

Despite the slowing freight business and the loading target being scaled down by 18 million tonnes (mt) to 1,007 mt, the operating ratio (the percentage of spending to earnings) for this year is 88.8 per cent. For 2013-14, the ratio is estimated at 87.8 per cent.

At Rs 1,43,742 crore, gross traffic receipts are budgeted to rise 12.6 per cent over the revised estimate of Rs 1,25,680 crore for 2012-13. This is Rs 6,872 crore less than the budgetary target. The operating ratio has been managed well by limiting ordinary working expenses to Rs 84,400 crore. “This is a source of great satisfaction, as the operating ratio has consistently been over 90 per cent since 1997-98. The only exception was during the three years from 2005-06, the period immediately preceding the implementation of the Sixth Pay Commission recommendations,” Bansal said in his speech.

The railways would create a new fund to service debt from the Japan International Cooperation Agency and the World Bank. Loans from the two multilateral lending agencies would be used to fund dedicated freight corridors.