RAILWAY BUDGET 2015-16 - AN ANALYSIS
Sign in

RAILWAY BUDGET 2015-16 - AN ANALYSIS

 
print Print email Email
retired professor
Railway Budget 2015-16 – An Analysis

With the railway budget for 2015-16 presented by Suresh Prabhu, minister for railways, to Parliament on 26th February, 2015, a new precedence has been created by not announcing new railways projects unrelated to plan development and new passenger trains as bounty distribution to gain popularity.  If this trend is maintained in letter and spirit and the minister desists from generating further backlog to already choked bulk of railways projects, it will be a great service to the nation by the railway minister.  In most of the cases it is the minister for railways who is the main culprit of creating chaos by announcing such projects.  For the last several years, it was felt that the minister be asked to resist the temptation of announcing popular and non-prudent schemes as vote catching device.  But who is to bell the cat?  It is perhaps for the first time that this process of de-politicising railways has started as a self-disciplinary measure.  Prabhu must be congratulated for this unprecedented step.

The success of this measure will depend upon its continuity - year after year, minister after minister and government after government.  A corollary to this process is of desisting from announcing fare hike.  As a matter of fact the dynamic pricing policy has provided a new mechanism for railways to announce increase in fares outside Parliament even much before or after the presentation of the budget.  There is no need to bring this politically sensitive matter as a part of budget.  Even otherwise, a dominant opinion prevails not to introduce fares hike in the budget because fare is not a tax, but a service, and there is no need of taking consent of Parliament.  Suresh Prabhu in actuality has not announced any hike in freights in Parliament whereas freight rates for goods are up nearly by 10 per cent through executive orders and by reclassification of commodities.  One has to see how long this process of de-politicising railways continues.  But the step taken by Suresh Prabhu is highly commendable. 

Broadly, Indian railways financial facts for the budget 2015-16 are mentioned as follows:

Indian Railways Finances (Figures in ₹ Crore) 

years→

Items↓

2013-14

2014-15(RE)

201516(BE)

Gross Traffic Receipts

1,39,558

1,59,278

1,83,578

Miscellaneous Receipts

      3,655

      4,202

      4,978

Total Receipts

1,43,213

1,63,480

 1,88,556

Net Ordinary Working Expenses

   97,571

1,08,970

 1,19,410

Appropriation to Pension Fund

   24,850

   29,225

     34,900

Appropriation to Depreciation Reserved Fund

     7,900

     7,775

       7,900

Total Working Expenses

1,30,321

1,45,970

1,62,210

Net Revenue

    11,749

    16,453

   25,077

Dividend Payable to General Revenues

       8,009

       9,174

   10,811

Excess/Shortfall

        3,740

       7,279

    14,266  

Appropriation to Development Fund

       3,075

        1,306

         5,750

Appropriation to Capital Fund

           500

         5,919

         7,616

Appropriation to Debt Service Reserve Fund

           165

               54

             900

Operating Ratio

        93.60%

        91.80%

         88.50%

Ratio of Net to Capital-at-Charge and Investment Fund

       5.60%

          6.80%

        8.80%

 

 

Financing Investment Programmes

Suresh Prabhu who joined railways in November, 2014, has budgeted for a plan outlay of over rupees 1 Lakh Crore for the year 2015-16.  He has an ambitious plan of 8.5 Lakh Crore to be allocated for next five years i.e., for the plan period 2015-19.  The annual investment plan for 2015-16 has been laid down as a little over one Lakh Crore.   The following is the resource mobilisation:                                                                                                                                                                                                                              

The Resource Mobilisation (2015-16) in rupees crore

Institutional Finance*                   17,136.00

Budgetary Support                      40,000.00

Borrowing from IRFC                   17,275.00

Internal Resource Generation    25,600.00

Total                                                1,00,011.00

*This is new category of funding not tapped earlier

The plan outlay for the year is meant for acquisition of locomotives, coaches and wagons, doubling of railways lines and their gauge conversion and new lines.  The improvement process has a larger inducement for the economy with a multiplier effect to be seen in new capital formation and generating new employment.  Beg, borrow or ‘steal’, but you must create investment.  Prabhu’s ambitious plan of investment has been directed towards increasing the carrying capability of railways’ traffic and bringing it on the right track.  This is the risk worth taking and the minister has shown great courage in organising investment programme of such a great magnitude.

Freight & Loading Enhancement

The budget has targeted 85 million tonnes more than the previous year as freight traffic which is about 8 per cent more i.e. 1186 mt.  The growth of freight business has not been encouraging because it increased only 3 per cent last year.  The freight earnings for 2015-16 has been estimated to the tune of rupees 1, 21,423 Crore.  How has 8 per cent incremental level of freight in the present budget has been incorporated is a matter of unconvincing target?  Still the budget expectation for 2015-16 regarding Gross Traffic Receipt is to grow by 15.3 per cent to the tune of 1, 83,578 Crore in which passenger earnings will grow by 17 per cent to rupees 50,175 Crore.  Prabhu is expecting a quantum jump in productivity of railways existing assets and operational efficiency on the basis of good governance, perseverance and watchful activities.

The railways believe that the task of increasing freight tonnage by an incremental 85 mt. in 2015-16, as against the traditional average 50 mt. increase will not be a big task for it.  The railways is keeping hope on GDP rate of growth as 7.5 per cent and also on recent reform initiatives of e-auction of coal which is the main component of railways traffic.  The elasticity of coal loading is directly and positively related to GDP growth – rather a bit higher than that.  The target is stiff and difficult but the railways authorities want to challenge themselves in this regard.  They seem to be quite energetic and optimistic and this is the spirit which is required to pursue transport profits that remain almost elusive unless properly chased.

The railways minister Suresh Prabhu had announced the estimated freight traffic to grow from 1101 mt. in 2014-15 to 1186 mt. in 2015-16.  And of this additional tonnage of 85 mt., 42 mt. would be accounted by coal – the largest component of railways commodity traffic basket, while 9 per cent would come from iron ore and 7 percent from cement traffic.  The primary contributing commodities to railways freight would be coal, iron ore, cement and steel.  The railways believe that they can increase the average rate of freight which can go up from 3 per cent to 8 per cent on the basis of rationalisation exercise of freights for heavier and longer distances and for the commodities which impact the common man.  The commodities which form the group of food grains are mostly hit by freight rate restructuring which account 5.2 per cent of railways traffic and fertilizers which account 4.2 per cent.  In both these segments the freight rates are increased because the government subsidise them, and there is no impact on these commodities.  With the average 3 per cent rise in freight rates, the railways will attract additional rupees 4000 crore in 2015-16.  However railways is not satisfied with this nominal increase and has targeted a record steep rise in earnings for 2015-16 to the quantum jump of 13.5 per cent so as to earn rupees 1,21,423 crore.  The following is the growth process as envisaged:  

Growth of Freight Traffic (in MT)

Year

Freight

2013-14 Actual

1,047

2014-15 (RE)

1,101

2015-16 (BE)

1,186

 

 

 

The Following is the Commodity wise Breakup for 2015-16(in MT)

Items→

years↓

Coal

Iron Ore

Cement

Food Grains

Fertilizers

Others

Total

 

2013-14

508

124

109

55

44

207

1047

Actual

2014-15

543

116

113

57

46

226

1101

RE

2015-16

585

125

120

62

49

245

1186

BE


The minister seems to have been influenced by Railway Board for accepting three papers – almost in continuation – one after other.  This is the stereotype process the railways is much used to.  The first is issuing White Paper before the budget.  What is its utility?  This has been done several times earlier too.   If the minister wishes to project areas of weakness, where improvement is needed, he should workout another type of study.  White Paper brings bad name to the railways if it is brought out frequently without much effort to follow up.  This creates a paradoxical siyuation by issuing White Paper and Vision Paper side by side. Creating a detrimental situation by bringing out a White Paper and proposing a robust proposal through a Vision Paper are contradictory issues. One cannot cross a river on a boat with holes inside.  

Instead of White Paper a type of Survey Paper should be adopted highlighting the past and projecting the future.  Indian railways should bring out ‘Survey Paper’ on railways to be put up before Parliament a day before the railways budget much like the Economic Survey which is issued in case of general budget.  All problems and projections should be mentioned in that ‘Survey Paper of Railways’.  This will avoid criticism as is often associated with White Paper.  The second aspect is that Railways should not adopt Vision 2010, 2020, 2030, 2040 etc.  They are almost repetitive and carry the wishes of minister rather than neutral voice regarding railways futuristic approach.  Just think, what happened to much talked about Vision 2020 of Mamata Banerjee?  Lalu Prasad was about to introduce Vision 2025 but could not do so because of shortage of time.  Now a new Vision 2030 is coming up as ‘Prabhu’s Maya’.  What will happen to it if government goes out in 2019?  The best thing is to constitute railways planning commission which should prepare a plan to be followed by every minister.  This will end whimsical approach of the minister as expressed in various vision papers creating a climate of confusion and chaos.  Prabhu has not followed the internal re-structuring of the railways to make it a decentralised set up.  The power should percolate from top to the lower level to facilitate administration.  The railways must set up joint ventures with the state governments under PPP schemes.    

 

 

 

start_blog_img
Sign Up For a Roundup of The Week's Top Bloggers
Email:
Follow SI :