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.
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.
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