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  1. No last-minute GBS cut: Railways to Piyush Goyal

No last-minute GBS cut: Railways to Piyush Goyal

Support for railways cut by 27% from FY18 original outlay.

By: | New Delhi | Published: March 6, 2018 6:01 AM
gbs cut, railways, indian railways, piyush goel In the Budget, the government revised the budgetary support for the railways to Rs 40,000 crore, from Rs 55,000 crore estimated earlier, for 2017-18. The GBS for 2018-19 is pegged at Rs 53,060 crore.

Having to rework finances as the finance ministry has cut the gross budgetary support (GBS) by more than 27% from the original outlay for the current financial year, rail officials have approached railway minister Piyush Goyal to impress upon the finance ministry that such massive cuts are not resorted to in future. Goyal is learnt to have asked these officials to draw a list of projects which are likely to be affected by the GBS cut.

“The railways plans its finances and investment keeping in view the GBS outlay, so a reduction from the Budget estimate upsets its maths,” said a railway ministry official requesting not to be named.

In the Budget, the government revised the budgetary support for the railways to Rs 40,000 crore, from Rs 55,000 crore estimated earlier, for 2017-18. The GBS for 2018-19 is pegged at Rs 53,060 crore.

“Certain things which are remunerative will not be affected as they can be funded through EBR (extra budgetary resources), but others such as new lines and doubling will be hurt,” said the official. Other projects which are impacted by a cut in GBS include gauge conversion, expansion of workshops and some traffic-related works, among others.

Experts, however, think reducing dependence on GBS should not affect railways in a big way. “One should ask if railways really needs to depend on GBS given its character has changed,” said a former financial commissioner with the Railway Board.

The railway budget was merged with the general Budget last year and the railways does not pay dividend – usually 6.5-7% as decided by parliamentary committee – anymore to the government against GBS. The current budgetary support is a grant, while previously as it was in the nature of soft loan in perpetuity. The GBS in earlier form was akin to EBR which comes through interest-bearing IRFC bonds or institutional finance — essentially loans.

Railway officials argue that parts of GBS are already committed and cannot be cut. For instance, of Rs 40,000 crore of GBS for 2017-18, Rs 3,000 crore is committed for the western dedicated freight corridor which comes from Japan International Cooperation Agency. Of this, `2,000 crore has already been paid.

There are various projects such as new lines that are taken up on socio-economic considerations and may not be remunerative. The railways loses more than `30,000 crore to subsidise passenger fares. Railway officials argue that the government should decide whether railways should look at socio-economic criterion or profitability before taking up projects.

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