Financial Daily from THE HINDU group of publications
Thursday, Feb 27, 2003
Logistics - Railway Budget
Call it populism or commercial sense Nitish makes peace with customer
The Railway Minister, Mr Nitish Kumar, on his way to Parliament House to present the Rail Budget 2003-04.
NEW DELHI, Feb. 26
WITH a clear eye on the forthcoming polls in major States, the `reformist' Railway Minister, Mr Nitish Kumar, has been virtually forced to `do a Mamata' by maintaining status quo with regard to both passenger and freight tariffs.
In fact, the 2003-04 Railway Budget presented by Mr Nitish Kumar today has gone even beyond the populist versions of his colourful predecessor. Ms Mamata Banerjee's successive Railway Budgets of 2000-01 and 2001-02 had refrained from raising passenger fares at all, while placing the entire burden of additional resource mobilisation on freight rate hikes.
Mr Nitish Kumar has, on the other hand, gone one step ahead: he has exempted not just passengers, but even freight customers from any rate increase. Further, he has actually reduced freight rates for most bulk commodities through a `re-classification' exercise, involving a reduction in the number of freight classes (from 32 to 27) along with a narrowing of the ratio between the rates for the highest and lowest class (from 3.3 to 2.8).
The end-result: the effective freight tariffs have come down by 3.6-3.7 per cent for cement, 5.3 per cent for iron and steel, 7.4-7.7 per cent for diesel, lubricants and LPG and 10.7 per cent for petrol.
Even in the case of passenger fares, the Railway Minister has effected a reduction in fares for the Rajdhani and Shatabdi trains. This has been done by `fixing' the basic fares for each class in these premium trains 15 per cent higher than the corresponding class of Superfast Mail/Express trains on a uniform basis. In the case of the 16 Jan Shatabdi Express trains, the mark-up has been halved to five per cent.
Consequently, a commuter travelling by AC 2-Tier in the Rajdhani Express from Chennai to Delhi will now have to cough up a basic fare of only Rs 2,529, against the existing Rs 2,935.
Besides passenger and freight, a similar rationalisation (read lowering) exercise has been proposed for parcel tariff, through a reduction of the number of scales and narrowing of the ratio between the highest and lowest rate.
The cost of transporting apples from Himachal Pradesh and Delhi will, hence, come down by a hefty 64 per cent, while parcel rates for magazines will be lower by over 30 per cent.
All this would mean that there will be no additional resource mobilisation and the entire budgeted 6.3 per cent increase in the Railways' gross traffic receipts, from Rs 40,867 crore in 2002-03 (revised estimates) to Rs 43,495 crore in the coming fiscal, is to come from higher traffic volumes.
The originating freight target for 2003-04 has been pegged at 540 million tonnes (m.t), against the revised figure of 515 m.t for the previous fiscal.
It maybe pointed out that the revised estimate of passenger earnings for 2002-03, at Rs 12,730 crore, turned out to be Rs 720 crore below the budgeted figure. Thus, the 12-15 per cent increase in passenger fares resorted to last year did not really boost the Railways' topline. In contrast, the absence of any rate increase enabled freight revenue targets to be exceeded by Rs 540 crore.
While the Railways' ordinary working expenses are estimated to rise from Rs 30,310 crore in 2002-03 (revised) to Rs 32,460 crore in the coming fiscal, the appropriations to the pension and depreciation reserve funds are correspondingly slated to increase from Rs 5,840 crore to Rs 6,385 crore and from Rs 2,003 crore to Rs 2,005 crore.
After accounting for miscellaneous receipts (Rs 887.66 crore against Rs 473.40), the net revenue - similar to profit after tax of companies - works out to Rs 3,532.66 crore (Rs 3,187.40 crore).
Of the Rs 3,532.66 crore, Rs 2,932.66 crore would go towards payment of dividend to the Centre, leaving a marginal surplus of Rs 600 crore. As a result, the Railways has precious little left for making investments.
Although the Plan outlay for 2003-04 has been marginally raised to Rs 12,918 crore, from Rs 12,315 crore in 2002-03, the bulk of it is to be financed through budget support and borrowings.
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