The Hindu Business Line : RCC moots 6.5 pc dividend payout for Railways

THE Railway Convention Committee (RCC) has recommended a dividend payout of 6.5 per cent for the Indian Railways for the fiscal 2005-06 instead of the 7 per cent that Railways has been paying out till date.

At a 6.5 per cent dividend payout, Railways would have to pay around Rs 3,378.14 crore, which is around Rs 260 crore less than the seven per cent level.

At a seven per cent level, dividend liability for the Railways for 2004-05 fiscal works out to Rs 3,638 crore. Adding the deferred dividend payout of Rs 300 crore, Railways had provisioned Rs 3,938 crore.

For 2004-05, RCC had recommended a dividend payout at 6.5 per cent rate, on which the Government is yet to take a final decision.

Since Parliament is yet to adopt a resolution for this recommendation, in its Budget for 2005-06, Railways has provisioned dividend payout at the same seven per cent rate of 2003-04.

The Railways had sought a dividend payout rate of six per cent where as the Finance Ministry had sought continuation of seven per cent rate.

"The Government's average cost of borrowings, which was around 12 per cent for 1998-99, has reduced to about seven per cent for 2002-03 and to 5.7 per cent in 2003-04. In the current financial year also, this low rate of interest continues to prevail," the Railway Ministry had proposed to the RCC. The RCC was presented in Lok Sabha on Thursday.

However, the Finance Ministry maintained that "though the average cost of borrowing raised during the year has come down to 5.7 per cent in 2003-04, the weighted average cost of all outstanding borrowing of the Government still remain at 9.3 per cent."

The Secretary (Expenditure), Ministry of Finance, while deposing before the committee, said that the money given to Railways as the gross budgetary support carries an interest cost of 6.2 per cent in 2004-05 against 5.7 per cent in 2003-04.

Thus, a seven per cent dividend payout rate needs to be maintained.

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