Experts have questioned the relevance of having a Railway Budget, as major announcements — such as the recent freight fare rise — are made even otherwise.
“The Railway Budget has been losing its relevance as a separate presentation,” said Abhaya Agarwal, executive director & PPP Leader, Ernst and Young. “As provider of a major transport service, the railways should ideally be driven by market dynamics and the needs of the consumer. That long-term development agenda seems missing.”
The Railway Budget, scheduled tomorrow, is expected to be without a long-term vision. Minister Dinesh Trivedi’s offering could be a long list of projects, to be added to pending ones, with announcements of new trains. A safety cess, at least on the higher class fares, may be imposed.
A former Railway Board official said, “What makes the situation peculiar is that the railways has not moved ahead with the times. The extent of the non-plan expenditure is galloping and this cannot be sustained in the long run unless the railways capitalise on non-traditional means of financing — land, PPP and so on.”
The railways have been adding over 100 passenger trains every year for seven to eight years. At the same time, it has not done much to improve freight services though, it increased rates recently.
The increase was made twice this year. The railways had to go for a steep hike to balance its Budget, said an official. This rise is expected to generate around Rs 10,000 crore in 2012-13. If the increase in volume of loading is factored in, the railways would be able to raise Rs 15,000 crore to Rs 20,000 crore.
“In the2012-13 rail budget, we expect some announcements aimed at providing the much-needed investment push for the sector, including those related to public-private partnership (PPP) and high-speed rail connectivity projects. This becomes important as GBS is not expected to go up substantially this time,” said Ernst and Young’s Agarwal.
But the Budget is likely to present a set of disturbing numbers, as most targets have not been met.
Officials said gross budgetary support was likely to be Rs 25,000 crore, despite Sam Piroda’s modernisation report recommending Rs 50,000 crore. The committee had assumed Rs 40,000 crore from internal revenue generation.
The railways had gone into deficit 12 times before 1985-86. The worst was in 1980-81, of Rs 197.87 crore.
The operating ratio has been above 90 per cent, considered to be an indicator of financial health of the railways, 23 times in the last 60 years of the budget presentation.
The announcement of the largest plan size of Rs 57,630 crore for 2011-12 has been scaled down to around Rs 48,000 crore.
A couple of reasons for scaling down plan size were that the projects did not have the absorption capacity and that the railways would not have been able to generate Rs 14,219 crore as internal revenue generation, a railway official told Business Standard. “There is a need for the rail ministry to set realistic targets in the budget. For instance, traffic growth seems to have been saturated despite the conservative traffic growth projections made last year,” added Agarwal.
In the recent price rise, the busy season charge on freight rate was scaled up from 7 to 10 per cent. The development surcharge levied on the top of base freight rate and busy season charge was revised from 2 to 5 per cent. On top of that, the base freight rate for all the commodities except iron ore was hiked to the extent of 20 per cent.
For the first time in almost three decades, the railways have taken an interest bearing loan from the finance ministry at 8.5 per cent which has to be repaid in two to three years.
Railway surplus, that was projected to be Rs 5,258 crore at the beginning of this year, is expected to be lower. The surplus had hit rock-bottom in 2009-10 at Rs 75 lakh. It is passing through the lowest points for the railways where it could have gone into a deficit had it not resorted to some of the extraordinary measures that it did to fix its finances.
