Railways say financing is in order

Higher surplus, traffic receipts & govt support to fund plan expansion rise.

Mamata Banerjee has refrained from raising passenger fares and freight rates, but it still leaves the railways with 28 per cent higher surplus, at Rs 5,258.41 crore, in 2011-12 compared to the Rs 4,104.5 crore it is likely to get in the current year, 2010-11, ending March 31.

This is despite the railways pegging the plan outlay for the next financial year at the highest ever level of Rs 57,630 crore. It is giving more to expansion of the network, with a larger allocation of Rs 9,583 crore for new lines. It has planned to complete 1,000 km of new lines in 2011-12.

The revised estimates peg the surplus for 2010-11 higher than the estimate presented last year, of Rs 3,173 crore, despite net revenues being estimated to decline by close to eight per cent. This is because dividend to the government would also come down by 25 per cent to Rs 4,104 crore from Rs 3,173 crore.

Net revenue, that is excess of receipts over expenditure before the dividend payout, is coming down in the revised estimates, even as receipts from traffic are going to be higher by three per cent, to Rs 67,090.7 crore from the Rs 65,156 crore estimated earlier. This is primarily because of 21 per cent reduction in receipts from miscellaneous transactions to Rs 2,310 crore from Rs 2,956 crore estimated at the time of the earlier budget.

Despite no increase in passenger fares and freight rates, gross traffic receipts are pegged to rise by 12 per cent to Rs 1,06,239 crore next financial year, from close to Rs 95,000 crore in the current one. However, the operating ratio, which measures the railways’ efficiency in handling its operations, is pegged to decline slightly to 91.1 per cent in 2011-12 from 92.1 per cent this year.

Bond financing
The railways would finance their highest ever plan outlay through gross budgetary support of Rs 20,000 crore, diesel cess of Rs 1,041 crore, internal resources of Rs 14,219 crore and market borrowings of Rs 20,594 crore by Indian Railway Finance Corporation (IRFC). Normally, IRFC raises Rs 9,000-10,000 crore annually for leasing of rolling stock.

The minister said,"Next year, an additional amount of Rs 10,000 crore will be raised through tax-free bonds for financing select capacity enhancement works."

This is the first time that IRFC is to come out with tax-free bonds for retail investors. This would give another opportunity to people to save on tax. The exact guidelines such as ceiling on the investment for an individual, coupon rate, lock-in period and tenor, would be announced later, officials said. Banerjee exuded confidence that the railways would ensure servicing this debt. The railways also expect financing through public-private-partnership models and the wagon investment scheme to yield Rs 1,776 crore.