Indian Railways has to raise money from the market

Sir, core railway development is normally undertaken through capex. The Development Fund was a concept which was devised maybe decades ago. At that time, the only money that was available for spending on capital expenditure was the Development Fund. Now, we have gone through a huge evolution. We are now spending Rs 1.21 lakh crore for capex. What is the Development Fund? Please do not misunderstand me. The idea is not to... (interruptions) I am just telling... (interruptions) But do not draw the conclusion that it is inadequate to meet the demand.

What I am saying is that the total demand is far in excess. Even if you provide another Rs 5,000 crore, as you are saying, it is not going to be enough. We need Rs 1.21 lakh crore. That is why, we are providing it in a different way and we are doing that. I am saying that the capex source has increased by 63 per cent in 2015-16 and I expect it to rise further by 25 per cent. It is a major source which takes care of development.
 

The same thing is there with respect to the rolling stock. You said that less provision is made for the rolling stock. Sir, I want to tell you the number. There was a provision of Rs 16,490 crore for rolling stock in 2014-15. In 2015-16, it was Rs 19,088 crore. In 2016-17, it is Rs 27,278 crore. Where is it coming from? It is coming essentially from EBR, extra-budgetary resources, like bonds etc. It is not like that now. We realised it a long time back, including in your time, that for rolling stock financing, we have to find out some sources outside the Budget. That is why, we went to IRFC (Indian Railway Finance Corporation). The IRFC is finding funding for this. Therefore, we are trying to do it from these sources. So, in 2016-17, Rs 21,830 crore will be spent from IRFC money. This is the total amount and that is why, it is mentioned here.

If you look at the overall capex number, in 2014-15, the GBS was Rs 30,121 crore, which increased to Rs 37,745 crore in 2015-16 and in 2016-17 - my colleague, the finance minister has been very kind - we have gone to Rs 45,000 crore and we are hoping to increase it.

Internal resources, which were Rs 15,347 crore in 2014-15, have gone up to Rs 16,574 crore in 2015-16 and it is almost the same at Rs 16,675 crore for 2016-17. EBR has dramatically improved from Rs 11,000 crore to Rs 39,476 crore this year and to Rs 59,325 crore next year. So, please try to understand the amount of money we are spending on this and to make this happen, I want to tell Shri (Mallikarjun) Kharge - if he wants, only one number - that in 2013-14, the year this government was formed, the opening balance in the Depreciation Fund was Rs 16 crore. If you are saying that we are doing something which should have been done more, you may please look at the Depreciation Fund, which has gone up from Rs 16 crore to Rs 1,021 crore in 2014-15 and Rs 1,682 crore next year and Rs 1,777 crore this year. Please try to understand that these are the challenges, but do not try to find that this is not done. This is the problem of the Railways and we have to solve it together.

Shri Kharge, you did not raise this point, but just for the information of the House, I may tell why it is necessary to raise the money from extra-budgetary resources. Sir, you yourself pointed out about the Railway finances. I told you the opening balance of Depreciation Fund for 2013-14. This money is not sufficient to meet the growing demand. How do you find more money? Can we increase the passenger fare to that extent? Can passengers pay Rs 1.21 lakh crore a year? Can we put that burden on the freight handlers and make it more uncompetitive and thereby, lose our share?

We have to find money not only from internal sources and not only from GBS because even GBS money is borrowed by the finance ministry from the market. We have to find money which the Railways can raise and the Railways can service. It is not the Railways only which is doing it. Even the Metro, which you talked about, is raising money from the market. All infrastructure projects need money from the market and therefore, we are doing it.

But what is the global issue here? In Germany, the liability of loan is far, far more than ours. The Indian Railways ratio is not even 17 per cent, including the future borrowings. In Germany, it is 31.53 per cent; in France, it is 55.91 per cent; in Russia, it is 19 per cent; of course, in Japan, it is 32.4 per cent; and in China it is huge. In fact, I do not want to mention the number, but I am telling you this point because we are doing everything to make it possible to make sure that we raise money, create infrastructure and make Railways better.

So, to make this happen, there have been certain old practices of governing, which we need to revisit. I am announcing today that we will be reviewing the financing norms for project financing to bring them in line with best practices. We are introducing the concept of equity IRR and debt service coverage ratio to ensure that returns are evaluated in a holistic manner. Today, when we do the so-called IRR calculation, we say that this particular line is okay, but signalling will not be an IRR.

Now, tell me this. Can you run a Railway without signalling? I was giving an example to some of my colleagues that if we construct a 30-storeyed building, then for each apartment you can calculate the IRR and say that each apartment is an IRR because I can sell and get money. But can you sell an apartment after the 10th floor without an elevator? On elevator, one will say that I cannot calculate IRR because elevator is not part of the apartment. Can you sell an apartment in that building? So, we are revisiting all these issues. I am sure that Shri Kharge will agree because this is a practice that even you followed. So, we are trying to change it to make it better and do it.

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Edited excerpts from the reply to the debate on the Railways Appropriation Bill by Railway Minister Suresh Prabhu in the Lok Sabha, on April 26