After roads, Finance Ministry to push spending by Railways

After the road sector, the Finance Ministry will push spending by the Railways, thanks to the surge in indirect tax collections and surplus from the Reserve Bank of India.

“Improvement is clearly visible in the highway sector. Now, the next destination is the Railways where the effort would be not only to push Budget spending , but also expect to get ₹20,000-25,000 crore from LIC as the first tranche of its five-year commitment,” a senior government official told BusinessLine . In March, the Railways and LIC signed a memorandum of understanding for five-year funding of ₹1.5-lakh crore, with the first tranche to be made available in the current fiscal year.

Higher government spending is expected to encourage more private investment in the rail sector.

During the April-June quarter, the Railways spent over ₹8,300 crore out of the budgetary support of ₹40,000 crore. Though, this is higher than the ₹7,525 crore spent last fiscal, as a percentage of total Budget estimate, it is down to 21 per cent from 25 per cent. Now, the effort would be increase the expenditure not only with the Centre’s support, but also with assistance from LIC, the official added.

For 2015-16, the Railways has a total Plan outlay of over ₹1 lakh crore, which is 52 per cent higher than in 2014-15. Of this, the Finance Ministry is to provide ₹40,000 crore, while the market borrowing of ₹17,655 crore will be covered by the LIC funding.

Funds provided by the insurance major will have a five-year moratorium on interest and loan repayment and the rest of the terms would be negotiated while signing the finance assistance agreement.  According to data from Controller General Accounts, the Road Ministry spent over ₹11,700 crore during the first quarter of theis fiscal. As a percentage of Budgeted Plan expenditure for the entire year, it is 27 per cent or the same as the last fiscal. However, in absolute terms, it is higher as last year’s expenditure was just little over ₹7,750 crore. Meanwhile, the Finance Ministry is expected to frontload more Plan expenditure during the first half of the current fiscal as its revenue situation is improving. The indirect tax (Customs Duty, Excise Duty and Service Tax) collection has grown by over 37 per cent in the April-July period, while the RBI has transferred ₹65,896 crore as surplus to the government against around ₹52,600 crore during last fiscal.

All this is expected to help in raising the development expenditure.

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