Infrastructure: Indian Railways –interesting trends and patterns

Updated: January 23, 2017 3:44:59 AM

An analysis of railway budgets—to be merged with Union Budget from this year—of the past few years reveals interesting trends/patterns...

(PTI)The Capital outlay proposed by the Indian Railways in different years is captured in the figure on left. (PTI)

Significant increase in Capital Expenditure (Rs cr)

The Capital outlay proposed by the Indian Railways in different years is captured in the figure on left. As can be seen, there was a quantum jump in the capital outlay in 2015-16. In alignment with this trend, the capital outlay in the 2017-18 Budget is expected to be in the range of R1 lakh crore.

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Reliance on Gross Budgetary Support (Rs cr)

Gross Budgetary Support is provided to the railways when the surplus generated by IR and funds raised from external borrowings are insufficient to fund its capital projects. The reliance of IR on Gross Budgetary Support has been increasing (figure above) and is expected to follow the same trend this year.

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Emphasis on Non-fare Box revenues (in %)

Non-fare box revenue as a percentage of the total revenue of railway systems abroad range anywhere from about 26% in the case of SMRT, Singapore to as high as 60% in MTR, Hong Kong (figure left). However, the share of non-fare box revenue in the total revenue of IR has not been at the levels seen globally. The upcoming Budget is expected to lay emphasis on non-fare box revenue initiatives.

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Merger with General Budget: logical decision (Rs cr) 

Since 1924, the railway budget was separate from the general  budget. This was because revenue from the railways was substantial as compared to central tax revenue (figure above). With this no longer true, it seems logical to merge the railway budget with the general budget.

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Prudent approach on new trains

The number of new trains introduced in budget statements decreased sharply in 2016-17. The current level of cross-subsidisation of passenger fares needs to be reduced. So, the approach to cut down on new trains is welcome. It is expected that a similar approach will be followed in this Budget.

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Investment related to Safety (Rs cr)

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To conclude, this year’s budget is unique for the Indian Railways — there is no railway budget! The merger with the General Budget can lead to a capacity to address important issues such as cross-subsidisation of passenger fares, rationalisation of railway tariffs and enhancement of non-fare box revenues. Some of the good trends/practices set in the previous two budgets are expected to continue this year.

Rajaji Meshram is Director, KPMG Advisory Services Private Limited

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