Safety back on track in rail budget

With the Railway Budget being subsumed in the General Budget for the first time ever, Finance Minister Arun Jaitley announced an allocation of ₹1,31,000 crore for the rail sector, that included budgetary support of ₹55,000 crore.

Some railway users may have to brace for a marginal hike in fares during the year, although the final call has to be taken by Finance Ministry.

In the background of the recent slew of accidents, the Finance Ministry proposed a non-lapsable safety fund called the Rashtriya Rail Sanrakhsha Kosh (RRSK), on the lines of the fund created during the first NDA government headed by Atal Bihari Vajpayee.

The Finance Minister has proposed the RRSK with a corpus of about ₹20,000 crore, in which the Finance Ministry will provide ₹15,000 crore, with the remaining ₹5,000 crore to come from railway surplus.

However, for the next fiscal, the Railways has set aside ₹1,000 crore, as of now, as per an internal railway “budget” document seen by BusinessLine .

Rationalisation Railway Board officials were not willing to talk directly about the fare hike, and ‘rationalisation’ seemed a more accepted term.

“Tickets are issued stating they are subsidised by some 50-55 per cent. The Finance Minister is seized of the issue…there has to be some rationalisation,” said Shahzad Shah, Financial Commissioner, Railway Board. AK Mital, Railway Board Chairman, said the average subsidy on passenger tickets was 57 per cent, which means there are segments where the subsidy levels are much higher.

The Railways had asked the Finance Ministry to make good the social cost of providing services, which comes to about ₹34,000 crore, or make the States bear part of the social cost. None of this has been heeded.

The Finance Minister said that they would try to improve the operating ratio of the Railways, while adding that the “tariffs would be fixed, taking into consideration costs, quality of service, social obligations and competition from other forms of transport.” To improve the operating ratio, the Railway Convention Committee (RCC) has come to the rescue by waiving the dividend of ₹10,000 crore for the present fiscal. The Railways will not have to pay dividends next year as well.

Stiff target On the revenue side, the Railways expects to register total traffic earnings of ₹1.89 lakh crore in the budget estimate of 2017-18, up almost 10 per cent from the present revised earnings of ₹1.72 lakh crore.

This improvement in revenues is expected to ride over an ambitious growth of 8.5 per cent in the freight segment, with the Railways budgeting to garner ₹1.18 lakh crore from goods movement in the next fiscal.

This is likely to prove difficult, particularly since the freight revenues of 2016-17 are expected to remain at the same level, at best, or may even drop a bit against 2015-16. In 2016-17, Railways expects goods movement to earn ₹1.08 lakh crore as per the revised estimates, against the actual revenue of ₹1.09 lakh crore in 2015-16.

Online ticketing The Finance Ministry has decided to further push the online ticketing system by proposing to waive service charges imposed by IRCTC. This means IRCTC will take a hit of about ₹40 crore a month, or almost ₹500 crore a year. The Railways has asked the Finance Ministry to make good this loss.

Disinvestment confusion The Budget has proposed that the shares of Railway public sector enterprises, such as IRCTC, IRFC and IRCON, will be listed on the stock exchanges. However, there needs to be a clarity on the kind of disinvestment, as the Railways has moved a Cabinet note to have a holding company of its public sector units, that excludes Indian Railways Finance Corporation.

About three days ago, NITI Aayog had a meeting seeking a proposal from the Railways on disinvestment, in which the latter had suggested disinvestment of RITES and IRCON. However, some officials felt that disinvestment of Rail Vikas Nigam Ltd may have been a better option.

Railway Board Chairman Mital said they are not clear right now about what will come first, the disinvestment of separate railway PSUs or the holding company. Overall, the ₹1.31 lakh crore of capital and development expenditure proposed for 2017-18 is up ₹10,000 crore against the ₹1,21,000 crore in the revised estimates level 2016-17.

PPP model Of the ₹55,000 crore of gross budgetary support, about ₹22,000 crore is to be raised through public-private participation. And of the market borrowings of ₹39,000 crore, IRFC is expected to raise ₹21,686 crore with ₹18,314 crore raised through LIC.

The Railways will start modernisation for 25 stations on a self-sustaining basis in 2017-18. This may be much less than the original 400 stations slated for upgrades, as the Railways realised after a survey that not all stations can be modernised on a self-sustainable basis, said Mital.

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