With a tough balancing act to justify, between political and social imperatives and the needs of a tough commercial enterprise in a competitive market, Samar Jha, Indian Railways’ financial commissioner, explains the Budget calculations to Sudheer Pal Singh. Edited excerpts:
If freight movement has been impacted by disruptions like the Gujjar agitation, how did you bring down the operating ratio to 92.1 per cent?
Our freight earnings depend on yield per million tonne, which depends on the overall traffic and the product mix. When the movement of iron ore was banned, we made changes in the pattern, picking up products which increase yield. For instance, we picked up coal for longer leads. Of course, we did some rationalisation in freight structure, though sparing essential commodities like foodgrains. Our eyes were always on the inflationary trend. Also, when the price of iron ore went up in the international market, we increased fare by Rs 1,500 per tonne. The OR of 92.1 is better than what was projected in the budget.
What was the impact of this heavy charging of iron ore on earnings?
We earned around Rs 1,700 crore. Right from September 2010, it was being increased gradually, beginning from charging an additional Rs 500 per tonne.
How will you go about the plan to raise Rs 10,000 crore through tax-free bonds?
Through our borrowing arm, Indian Railways Finance Corporation (IRFC). We are thankful to the finance ministry, that it has allowed us to raise tax-free bonds. In any case, IRFC has been raising Rs 10,000 crore every year at the lowest possible rate of 7.7 per cent. This money will be used for bankable projects. The debt will be shown in our books. We are currently working out a way to do this. With the accounting reforms coming up, in a few years it would be easy to account for this debt.
The interesting thing is that IRFC normally buys rolling stock on our behalf and we pay lease charges to them and a capital component. This tax-free bond will not follow that model. This amount has been chosen for certain works which will give us capacity enhancements. We have been funding rolling stock through gross budgetary support (GBS) and borrowing. Now the GBS element for funding rolling stock will be eliminated. So, our rolling stock will be completely funded through these tax-free bonds.
With a GDP freight elasticity of 1.26, how do you explain the freight growth of 7.4 per cent budgeted for the next financial year?
We have said that elasticity should be 1.25. This means the railways’ GDP growth should be 25 per cent more than the national GDP. We have worked out this ratio for the past three years. It was 1.05 in 2008-09. In 2009-10, it was at 1.12. This year, it is going to be 1.17. So, we are close to moving towards the desired level. It is incorrect to say that our GDP is half of the national GDP. In fact, we are going a little faster. Also, our earnings grow more than tonnage in freight. Earnings depend on the mix of traffic we carry.
Is there enough wagon capacity to meet the 993 mt freight target for the next fiscal? Wagon procurement has been kept static.
A tough target; it can be achieved if we get handsome growth in the first two quarters. That is possible when there are no disruptions to train movement.
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Once again, the ministry’s aim seems to be to subsidise passenger traffic through overcharging freight.
Let us not state what is known by everyone. The fact is, you are not objecting to fertiliser subsidy and many other subsidies which are required. A large chunk of the people we are serving find it difficult to pay even the current passenger fares. This does not make us financially weak. We are commercially and financially sound. That is why we have tax-free bonds. We need money for laying 2,000 km of new line. If we get this money from bonds, it is a good arrangement. Even in China and Europe, it is done through loans. It is only in India that you insist the railways should grow from its own internal resources.
You want to be prudent about finances and at the same time have announced a 43 per cent jump in plan investment.
This is for growth. No organisation can survive without it. Also, this figure of Rs 57,630 crore has become huge only because of the tax-free bonds we have announced.