Lalu on track for elections

RAILWAY BUDGET 2008-09

Bets on higher investment for growth, modernisation.

A buoyant economy helped Railways Minister Lalu Prasad better most of his estimates for the current financial year with a record cash surplus, though the pragmatic politician from Bihar has budgeted for a slowdown in his 2008-09 targets in his fifth consecutive railway budget.

An eye to elections due 2009, however, saw Prasad announce a 5 per cent cut in freight rates on petrol and diesel and a token drop in fares for all classes of passengers.

"Bowing to the hopes and expectations of millions of people, I have decided to reduce passenger fares and freight rates this year," Prasad said in a characteristically entertaining speech in Parliament.

Although these moves may help the United Progressive Alliance in a year of major electoral reversals in five states, substantial capital investments and provisioning for the Sixth Pay Commission's award will also take the sheen off some of the numbers in the coming year.

Growth in freight earnings in 2008-09 is projected at 10.4 per cent, down from 14.4 per cent in 2007-08. The freight loading target is 850 million tonnes for 2008-09 "" just 7.6 per cent above this year's revised estimate of 790 million tonnes. For the past few years, this target has always been in excess of 10 per cent. 
 

AN EYE TO THE HUSTINGS
CUTS	FREIGHT
5%	Petrol/diesel
14%	Fly ash
6%	Traffic to north-east
5%	2nd class fares for tickets >Rs 50
Re 1	Fares for tickets <Rs 50
7%	AC 1st class
4%	AC 2nd class
The Pay Commission's impact
Operating ratio
07-08*	76.3
08-09**	81.4
Cash surplus
07-08*	Rs 25,065 cr
08-09**	Rs 24,782 cr
* Revised estimate       ** Budget Estimate

Similarly, growth in passenger earnings is slated to less than halve from 16.5 per cent to 8 per cent during the period.

As a result, the growth in gross traffic revenue of Indian Railways will fall from 16 per cent in 2007-08 to 12.6 per cent in 2008-09.

A step-up of almost Rs 9,000 crore in net ordinary working expenses, largely on account of anticipated pay-outs for the yet-to-be-submitted Sixth Pay Commission recommendations, is expected to reduce the cash surplus before dividend from Rs 25,065 crore in the current financial year (up from the budget estimate of Rs 21,578 crore) to Rs 24,782 crore next year.

This will also show up in the operating ratio (of expenses to receipts) of the Indian Railways "" it is estimated to go up from 76.3 per cent this year, a 14-year high, to 81.4 per cent next year.

For the current year, Prasad has beaten his budget estimates for freight earnings by 1.7 per cent to end the year with a figure of Rs 47,743 crore.

However, the revised estimate for passenger earnings is the same as the budget estimate of Rs 20,075 crore. The gross traffic revenue of Rs 72,755 crore is two per cent above the budget estimates.

The cash surplus before dividend of Rs 25,065 crore is 16.16 per cent above the target. The operating ratio of 76.3 per cent for the year too is better than the budget estimate of 79.6 per cent.

With a Return on Capital Employed (ROCE) of 21 per cent, Prasad told Parliament that Indian Railways were as efficient as any global corporation.

"Our achievement, on the benchmark of net surplus before dividend, makes us better than most of the Fortune 500 companies in the world," he said.

With record surplus cash in hand, Prasad announced substantial investments in upgrading the infrastructure of Indian Railways. The annual Plan investment has been raised from Rs 32,000 crore in 2007-08 to Rs 37,500 crore in 2008-09.

Notable amongst the new projects are the RS 75,000-crore investment over the next seven years in creating new capacities on high freight traffic routes, a 1,000-Mw power plant in collaboration with NTPC at Nabinagar in Bihar, a new rail coach factory in Kerala and a new wagon reconstruction unit in the Chapra district of Bihar.

Prasad also said that the Railways would launch public-private partnership projects worth Rs 100,000 crore in the next five years to upgrade stations, set up brand new rolling stock facilities and a multi-modal logistics park.