 "Fares, freight rates unchanged, railway finances stutter along")
The interim Railway Budget for 2014-15 has kept passenger fares and freight rates unchanged and launched 65 new trains, but has done little to shore up the Indian Railways’ finances, which could adversely impact its future expansion and modernisation plans. Not surprisingly, the share of gross working expenses in total earnings, or the operating ratio, has seen no improvement. Indeed, it has increased from 90.2 per cent last year to 90.8 per cent this year and is expected to show only a marginal improvement to 89.8 per cent next year.
Presenting the interim Budget for 2014-15 in Parliament here on Wednesday to seek its authorisation for expenditure for the first four months of the year, Railway Minister Mallikarjun Kharge desisted from making too many big-bang pre-poll announcements — new services to politically sensitive destinations, factories in key constituencies and populist schemes — and stressed the need for the Railways “to operate in a financially self-sustaining manner” because it is “primarily a commercial organisation”.
Indeed, he announced a few reformist steps like the setting up of an independent authority which will initiate a process of transparent fixation of freight and fares, foreign direct investment in specific areas to improve railway infrastructure and the launch of feasibility project studies for high-speed trains. Kharge’s interim Budget speech, however, was cut short because of the protests over Telengana in the Lok Sabha.
A significant takeaway from the Budget was that passenger revenue in 2013-14 was higher by almost a fifth than in 2012-13, while freight revenue was up by over a tenth (on the back of a rise of almost 5 per cent in volumes). As a result, there has been some correction in the imbalance between passenger and freight revenues.
For long, high freight tariffs have subsidised low passenger fares, thanks to the compulsions of electoral politics. Thus, while Indian passenger fares are amongst the lowest in the world, freight tariffs are unreasonably high. This not only stokes inflation but also renders Indian manufacturing inefficient. But that could be changing. Passenger revenue was 37 per cent of freight revenue in 2012-13; it improved to almost 40 per cent in 2013-14 and is projected to rise to over 42 per cent in 2014-15.
To carry the reform in passenger fares forward, Kharge announced that dynamic pricing, which was introduced on the Delhi-Mumbai sector in December, will be expanded to other routes, and an independent Rail Tariff Authority will be set up. He added that the authority will include “all stake holders” but did not mention when it will see the light of the day. Last year, then minister Pawan Kumar Bansal had indicated that the proposal to set up the authority was on the backburner — the matter had been referred to an inter-ministerial group. Studies for a high-speed corridor between Ahmedabad and Mumbai are underway, Kharge disclosed in his speech interspersed with Urdu couplets. Semi-high-speed trains, which can a speed of up to 200 km per hour, too are being planned on routes like Delhi-Agra and Delhi-Chandigarh, he added. As these would be premium services, the Railways can expect them to substantially improve their passenger revenue.
Kharge, the Member of Parliament from Gulbarga in Karnataka, said there are plans to increase the throughput by allowing trains to load more on the wagons, which would bolster earnings. He talked of special parcel trains which will run on scheduled timings and a new policy to encourage the transportation of milk by train all over the country. In the next financial year, the Railways expect freight revenue to improve 12 per cent.
With higher traffic receipts, the Railways reported higher net revenue for 2013-14 (Rs 15,783 crore) than 2012-13 (Rs 13, 616 crore). However, the Railways paid significantly higher dividend this year, thanks to Finance Minister P Chidambaram’s drive to contain the fiscal deficit. This payout contracted the money left for appropriation to some key accounts. Thus, the money earmarked for the development fund has plummeted two-thirds from 2012-13 and that for the capital fund has become zero. The closing balance of Rs 21 crore in the depreciation reserve fund, Rs 21 crore in the pension fund and the Rs 44 crore in the capital fund are way below the targets of Rs 160 crore, Rs 657 crore and Rs 2,504 crore, respectively. The provisions under these heads for next year are projected to rise, but given its past record of not meeting these targets, it casts a shadow over the Railways’ capability to make investments in the future.
In his speech, Kharge reiterated the need for public-private partnerships to bridge the investment gap. Such investments are estimated at Rs 6,000 crore this year (the same as the budget estimates). The target for next year is more or less the same. A proposal to allow foreign direct investment in the sector was under the government’s consideration, he said. The Rail Land Development Authority, he said, was on course to raise the targeted Rs 1,000 crore during the current financial year. Civil construction contracts worth Rs 1,000 crore have already been awarded for the eastern and western dedicated freight corridors, Kharge said, adding that a similar amount is being targeted for 2014-15.
For the strategically sensitive Northeast, Kharge announced that Itanagar, the capital of Arunachal Pradesh, will soon be linked by rail, and Meghalaya too will join the national rail network. The important 510-km Rangiya-Murkongselek line will be converted from meter gauge to broad gauge within this year.
RAIL BUDGET IN TWO MINUTES
Presenting the interim Budget for 2014-15 in Parliament here on Wednesday to seek its authorisation for expenditure for the first four months of the year, Railway Minister Mallikarjun Kharge desisted from making too many big-bang pre-poll announcements — new services to politically sensitive destinations, factories in key constituencies and populist schemes — and stressed the need for the Railways “to operate in a financially self-sustaining manner” because it is “primarily a commercial organisation”.
Indeed, he announced a few reformist steps like the setting up of an independent authority which will initiate a process of transparent fixation of freight and fares, foreign direct investment in specific areas to improve railway infrastructure and the launch of feasibility project studies for high-speed trains. Kharge’s interim Budget speech, however, was cut short because of the protests over Telengana in the Lok Sabha.
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The Railways’ plan outlay for next year has also been kept at a relatively modest level of Rs 64,305 crore, compared to Rs 59,359 crore in the current financial year. Next year’s projections are dependent on an increase in traffic revenues, higher internal revenues and extra budgetary resources.
A significant takeaway from the Budget was that passenger revenue in 2013-14 was higher by almost a fifth than in 2012-13, while freight revenue was up by over a tenth (on the back of a rise of almost 5 per cent in volumes). As a result, there has been some correction in the imbalance between passenger and freight revenues.
For long, high freight tariffs have subsidised low passenger fares, thanks to the compulsions of electoral politics. Thus, while Indian passenger fares are amongst the lowest in the world, freight tariffs are unreasonably high. This not only stokes inflation but also renders Indian manufacturing inefficient. But that could be changing. Passenger revenue was 37 per cent of freight revenue in 2012-13; it improved to almost 40 per cent in 2013-14 and is projected to rise to over 42 per cent in 2014-15.
To carry the reform in passenger fares forward, Kharge announced that dynamic pricing, which was introduced on the Delhi-Mumbai sector in December, will be expanded to other routes, and an independent Rail Tariff Authority will be set up. He added that the authority will include “all stake holders” but did not mention when it will see the light of the day. Last year, then minister Pawan Kumar Bansal had indicated that the proposal to set up the authority was on the backburner — the matter had been referred to an inter-ministerial group. Studies for a high-speed corridor between Ahmedabad and Mumbai are underway, Kharge disclosed in his speech interspersed with Urdu couplets. Semi-high-speed trains, which can a speed of up to 200 km per hour, too are being planned on routes like Delhi-Agra and Delhi-Chandigarh, he added. As these would be premium services, the Railways can expect them to substantially improve their passenger revenue.
Kharge, the Member of Parliament from Gulbarga in Karnataka, said there are plans to increase the throughput by allowing trains to load more on the wagons, which would bolster earnings. He talked of special parcel trains which will run on scheduled timings and a new policy to encourage the transportation of milk by train all over the country. In the next financial year, the Railways expect freight revenue to improve 12 per cent.
With higher traffic receipts, the Railways reported higher net revenue for 2013-14 (Rs 15,783 crore) than 2012-13 (Rs 13, 616 crore). However, the Railways paid significantly higher dividend this year, thanks to Finance Minister P Chidambaram’s drive to contain the fiscal deficit. This payout contracted the money left for appropriation to some key accounts. Thus, the money earmarked for the development fund has plummeted two-thirds from 2012-13 and that for the capital fund has become zero. The closing balance of Rs 21 crore in the depreciation reserve fund, Rs 21 crore in the pension fund and the Rs 44 crore in the capital fund are way below the targets of Rs 160 crore, Rs 657 crore and Rs 2,504 crore, respectively. The provisions under these heads for next year are projected to rise, but given its past record of not meeting these targets, it casts a shadow over the Railways’ capability to make investments in the future.
In his speech, Kharge reiterated the need for public-private partnerships to bridge the investment gap. Such investments are estimated at Rs 6,000 crore this year (the same as the budget estimates). The target for next year is more or less the same. A proposal to allow foreign direct investment in the sector was under the government’s consideration, he said. The Rail Land Development Authority, he said, was on course to raise the targeted Rs 1,000 crore during the current financial year. Civil construction contracts worth Rs 1,000 crore have already been awarded for the eastern and western dedicated freight corridors, Kharge said, adding that a similar amount is being targeted for 2014-15.
For the strategically sensitive Northeast, Kharge announced that Itanagar, the capital of Arunachal Pradesh, will soon be linked by rail, and Meghalaya too will join the national rail network. The important 510-km Rangiya-Murkongselek line will be converted from meter gauge to broad gauge within this year.
RAIL BUDGET IN TWO MINUTES
- Annual Rail Plan envisaged at Rs 64,305 cr with budgetary support of Rs 30,223 cr
- Money earmarked for the development fund has plummeted two-thirds from 2012-13 and that for the capital fund has become zero
- Closing balance of Rs 21 cr in the depreciation reserve fund, Rs 21 cr in the pension fund and Rs 44 cr in the capital fund way below targets of Rs 160 cr, Rs 657 cr and Rs 2,504 cr, respectively
- Railways to end current year with a surplus
- Rail Tariff Authority to advise on fares and freight
- FDI being enabled for creation of rail infrastructure
- 17 new premium trains, 38 express trains and 10 passenger trains
- More high-speed trains to be launched
- Railways exploring low-cost option of 160-200 kmph trains on select routes
- Trains to display info on next stations, arrival times