The Indian railways had ambitiously projected a 52% jump in its “Plan Budget” — spending that yields financial returns — to Rs 1 lakh crore for the current fiscal year, but could not even spend as much as a year ago in the first half of the year, a trend at odds with the almost-in-line-with-target rise in the Centre’s overall Plan capital spending in the period.
The transporter’s capital spending from budgetary sources was just Rs 15,552 crore or 39% of the full-year estimate in April-September. This was even on absolute terms lower than the spending in the corresponding period last year (Rs 17,359 crore).
The spending through various investment funds — which are basically of the asset replenishment kind and strictly are not of a revenue-enhancing nature — also was significantly lower in H1FY16 than a year ago (see chart).
Plan spending from extra-budget resources (EBR) — the railways is aggressively tapping the market, LIC, multilateral agencies and global pension funds — showed a modest improvement from last year but was far from what the annual targets would have demanded. EBR Plan spending was just Rs 6586 crore or 16% of the full-year estimate of Rs 40,572 crore in April-September. This compared with Rs 5,483 crore in H1FY15. In all, the railways, targeting an operating ratio of 88.5% this year against last year’s 91.8%, reported Plan spending of Rs 32,851 crore in the first half of this year, marginally lower than a year ago Rs 32,952 crore.
Sources in the rail ministry cited “a jump in award of new projects” in recent months would get reflected in capital spending in the coming months. (Outside the Plan Budget are Rs 17,000 crore worth projects awarded for the Dedicated Freight Corridor recently; DFC projects of an equal size are set to be awarded in the second half of the year.) Independent analysts, however, said this year’s Plan Budget target would likely be missed by a wide margin. “While the reasons of lower expenditure under each head will require detailed analysis, given the H1 figures, overall Plan Budget for FY16 might fall significantly short of the budget estimate,” said Rajaji Meshram, director, advisory infrastructure at KPMG.
As for the components of “capital spending”, for which the FY16 budget target is Rs 40,000 crore, the achievements in the first half against the corresponding full-year target were as follows: New lines (34%), gauge conversion (47%), doubling (32.5%), rolling stock (43%) and track renewal (44%).
On the revenue front, things are not really looking up either, although the freight revenue growth, despite being lower than budgeted, was much higher than the tonnage (loading) growth thanks to recent rate hikes. The average earnings per million tonnes of goods carried stood at Rs 98.2 crore in April-September, compared with Rs 90.3 crore in the corresponding period a year ago. While the railways’ internal target for freight loading in April-September was 583 million tonnes, the tonnage achieved was 7% less. Overall freight loading grew a dismal 1.7% April-September, far from 7.7% increase projected for the full fiscal, as the tonnage of cement, foodgrains and iron ore declined from the year ago period by 5.6%, 19.5% and 1.7%, respectively. A source in the food ministry said: “We have started rationalising our foodgrain movement that must be reason for the decline of foodgrain loading.” Of some 3-4 million tonnes of PDS foodgrains transported across the country every month, about 60% is carried via the rail network.
Just about 27% of the railway’s gross traffic receipts come from passenger segment (the earnings/cost ratio is 49.4% for passenger fares and 163.7% for freight, reflecting the untenable level of cross-subsidy).