The railway ministry has been granted a huge increase of Rs 1,100 crore in the plan outlay for 1998-99. The outlay has been fixed at Rs 9,500 crore against the revised outlay of Rs 8,403 crore in 1997-98.
This follows protracted negotiations with the finance ministry and the Planning Commission.
But Rail Bhavan is seriously considering the possibility of raising the fare for upper class passengers.
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The outlay of Rs 9,500 crore also represents a sharp increase over the outlay of Rs 8,300 crore indicated in the interim budget.
A substantial part of the outlay will be met through market borrowings. The target for this has been set at Rs 2,900 crore, compared to the original target of Rs 2,150 crore set for 1997-98, plan panel sources said.
The finance ministry also agreed to a 10 per cent increase in the budgetary support from Rs 2,000 crore to Rs 2,200 crore.
The ministry said that it was not possible to give a larger budgetary support given the overall resource constraint. Instead, it advised the railways to improve internal resource mobalisation.
The railways are expected to mobalise Rs 4,400 crore internally during 1998-99.
The reason for higher market borrowings is the realisation in the Rail Bhavan that freight rates have reached a point of saturation and any move to increase them will result in a loss of business.
We will leave most commercial freight rates untouched. But, we are trying to do something about the items that attract subsidised rates, an official said.
The cost of subsidising transport of 15 items of mass consumption like salt, coal and jaggery comes to nearly Rs 780 crore. The next budget will see another attempt by the ministry to reduce the element of subsidy, sources said. In fact, it had made a beginning last year, when it raised coal freight by 4.5 per cent.
Railway minister Nitish Kumar was initially opposed to the idea of enhancing market borrowings as he felt that the railways were sliding into a debt trap, given the high cost of borrowings. Besides, the return on investment is lower than the cost of servicing debt.
But the railways were left with no option as the finance ministry did not agree to a higher level of budgetary support.
Another reason was that not much improvement is expected in freight movement during 1998-99, given the overall industrial slowdown.
This years borrowings target at Rs 2,900 crore is even larger than the revised target of Rs 2,550 crore in 1997-98 and Rs 500 crore more than that indicated in the interim budget.
The 1997-98 target had been enhanced because the railways decided to halve the Rs 900 crore revenue target under the own-your-wagon scheme.
The Indian Railways Finance Corporation, the market borrowing arm of the railways, did manage to meet the enhanced target after strenuous efforts in the last month of 1997-98.
During internal discussions, railway minister Nitish Kumar is learnt to have made it clear that he against any increase in passenger fare for second class travellers.