Rail Budget 2013: Bansal's tough task to put Railways back on track

Feb 26 2013, 11:21 IST
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Railway minister Pawan Kumar Bansal has sought Rs 38,000 crore, the gross budgetary outlay for railways. Railway minister Pawan Kumar Bansal has sought Rs 38,000 crore, the gross budgetary outlay for railways.
SummaryWill it flag off a course correction for Indian Railways, the troubled monolith?

drastically since 2007-08, when their combined closing balance stood at an encouraging Rs 22,279 crore. One won’t be surprised if the Revised Estimate for this year’s opening fund balance is close to nil.

The Capital Fund supposed to be used for creating new revenue-generating assets had soared to Rs 11,072 crore in 2007-08 but remained exhausted in 2009-10. Appropriations to this Fund only marginally exceeded withdrawals in subsequent years, and this year’s BE shows net allocation of Rs 5,000 crore, a impossible task given the current state of affairs. The operating ratio for this fiscal could be around 90, although 84.9 was projected in the last rail Budget.

The Railways’ deplorable financial situation is evident from the fact it spends 78% of its revenue receipts for paying wages, pension and fuel bills. After paying 9% of these receipts to meet repairs and maintenance expenses (which are evidently not done up to a satisfactory level) and paying lease rentals to IRFC, the national transporter is left with virtually nothing.

The Railways has recently been brought under the service tax net and the ‘dividend’ it pays is nothing but the interest (6.75%) payable on the “capital at charge” (Plan expenditure), which is treated as “loan in perpetuity.” Plan expenditure comprises budgetary support (Rs 24,000 crore this year) and market borrowings. There is only limited interest in public private partnership projects firmed up by the Railways. Investor interest has been seen only in port connectivity projects. This means the Railways must increase its borrowing power and for that, bolstering its balance sheet and shifting to accrual-based accounting are prerequisites.

Lalu Prasad had introduced some accounting changes with this purpose but denouncing it, Banerjee said in a“white paper” that Prasad inflated the Railways’ cumulative “cash surplus before dividend” (akin to Ebidta or earnings before interest, tax and depreciation and amortisation) in the five years up to 2008-09 by Rs 17,000 crore. Prasad also proposed the disputed concept of “investible surplus” for the Railways. This was a novel financial yardstick for the entity that conventionally reported either surplus or shortfall. Banerjee’s criticism notwithstanding, these accounting changes ought to have been seen as the first step towards attracting lender interest in the railway projects.

Railway minister Pawan Kumar Bansal, who recently revised passenger fares across the board after a decade, has sought Rs 38,000 crore, the gross budgetary outlay for railways in 2013-14 as against this year’s Rs 24,000 crore. No

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