Decision by mid-November: Indian Railways looks for additional gross budgetary support of Rs 18,000 crore

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New Delhi | Updated: October 31, 2018 7:04:05 AM

Indian Railways (IR) is set to ask the finance ministry for an additional `18,000 crore of gross budgetary support (GBS) for the current financial year (Budget outlay is `53,060 crore) to accelerate its existing infrastructure projects.

As reported by FE earlier, the railway had earlier pitched for a 40% increase in FY19’s GBS but the finance ministry instead asked the carrier to borrow the extra amount, and promised that it would pay up the principal part of the loan as and when the repayment begins.

Indian Railways (IR) is set to ask the finance ministry for an additional `18,000 crore of gross budgetary support (GBS) for the current financial year (Budget outlay is `53,060 crore) to accelerate its existing infrastructure projects. This is even as the transporter has utilised only 40% of its planned annual capex of `1.46 lakh crore till the end of September.
The demand for additional GBS will be made during a meeting, chaired by the expenditure secretary with the finance ministry, by mid-November to finalise revised estimates (RE) for FY19 and BE for FY20, a source said.
IR has already utilised 60% of the GBS budgeted for FY19 and capital spending of `50,700 crore has been made by end of August.

“Another `6,000-7,000 crore of capex may have been spent in September,” said the source. The total capex of the railways include GBS, extra budgetary resources (EBR) and internal resources. For FY18, the capex was revised from initial estimate of `1.31 lakh crore to `1.2 lakh crore.

The requirement for additional GBS is mainly for the Mumbai-Ahmedabad high-speed rail project (`8,000 crore) and the western dedicated freight corridor (`6,000 crore). While these projects are funded through loans from JICA, the multilateral loans are routed through the Union Budget for sovereign protection to the lenders and form a part of the GBS. The World Bank loan for Eastern DFC is a direct loan, though.

As reported by FE earlier, the railway had earlier pitched for a 40% increase in FY19’s GBS but the finance ministry instead asked the carrier to borrow the extra amount, and promised that it would pay up the principal part of the loan as and when the repayment begins. In fact, the finance ministry wants the GBS to be nil and railways should fund all its projects, except the ones of strategic importance, through loans.

But the railway ministry declined to accept this offer as it felt its borrowing limits are being tested already. For FY19 itself, the IRFC bonds (the conventional market borrowing tool for IR) to be issued are worth `28,550 crore and the transporter is scheduled to raise another `26,440 crore from institutional sources (Life Insurance Corporation), through issuance of 30-years-tenor bonds to the insurer by IRFC. These two constitute EBR.

“The issue regarding reducing GBS and increasing loans has not moved in any direction till now,” said the source, adding that it will be taken up in the coming meeting.
The government cut the budgetary support by 27% for the railways to `40,000 crore from `55,000 crore estimated earlier for 2017-18 in the Budget. Rail officials had then approached railway minister Piyush Goyal to press upon the finance ministry that such massive cuts are not resorted to in future as it leads to reworking of finances. Goyal is learnt to have asked these officials to draw a list of projects which are likely to be affected by the GBS cut.

Railway officials also argue that the actual support through GBS is much less than the figures announced.
“Of the `53,060 crore of GBS (for FY19), around `12,000 crore is loans from external agencies,” said the source. The finance ministry does not segregate between actual support and the loan component in GBS and external loans routed through GBS inflates the figures.
“Once more funds for high-speed also starts coming through GBS, while the support may look huge but actually it will be not,” added the source.

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