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Continuing the turnaround story, the minister of railways has presented a surplus Budget without hiking rates. He asserts that the railways have not only offered dreams to passengers but also turned them into a reality. In doing so, the railways bettered most of the Fortune 500 Companies in the world. Indeed, the results are impressive: a cumulative gross cash surplus of Rs 68,778 crore in just four years; a dividend payment of Rs 15,898 crore; investment worth Rs 13,665 crore in infrastructure; and increasing fund balances by Rs 20,483 crore. All these were achieved without an all-round hike in the charges. In 2007-08, the surplus reached Rs 25,065 crore, a very big jump from Rs 9,000 crore in 2005. The operating ratio dipped to 76% and the return on capital reached an all-time high of 21%.
Broadly, the policies that helped in this turnaround are: The incremental loading of 233 MT; yielding Rs 14,000 crore of freight earnings; lean season discounts and a peak season surcharge adding Rs 2,000 crore to the kitty, elongating passenger trains with 3,000 coaches; yielding Rs 2,000 crore; enhanced utilisation of assets with increased productivity, giving priority in investment policy to low-cost high-return projects; adopting strategic alliances with erstwhile competitors like shipping and transport Companies to make them partners by granting them licence to run container trains; playing on volumes, driving down unit cost, reducing tariffs and increasing market share to achieve record profits; and the focus ‘on increasing yield per train rather than increasing tariffs per passenger or per ton’.
However, a cautious approach is evident in the next fiscal. The projections show that the cash surplus is down to Rs 24,782 crore, the operating rises to 81.4% and the ratio of net revenue to capital down to 15.8%. There is an unexplained doubling of sundry earnings from Rs 2,637 crore to Rs 5,000 crore. Expenditure is raised by 20%, earnings, however, grow only by 13 % raising doubts about sustainability of good results. The ratio of net revenue to capital, however, does not bring out the correct picture. It completely ignores the capital cost of rolling stock assets worth Rs 35,379 crore leased to the railways by IRFC up to 31st March 2006. Unlike in the General Budget, in which the impact of changes is indicated as revenue neutral, loss of revenue, and gain in revenue, as the case may be, there is no indication...
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