Despite likely budgetary cut, railways eyes biggest ever capex of Rs 1.7 tn

The Centre is likely to cut budgetary support to the railways by around Rs 5,000-10,000 crore for 2018-19, out of the total budgeted GBS of Rs 53,060 crore. Due to this cut in GBS, the railways is likely to depend more on borrowings, asset monetisation, and internal generation to meet the capex target of Rs 1.465 trillion for the current year.

The railways is likely to line up its highest-ever capital expenditure of Rs 1.65-1.7 trillion for the upcoming Budget.

The national transporter is also knocking on the doors of the finance ministry to increase gross budgetary support (GBS) by 28 per cent from the budgeted Rs 53,060 crore in 2018-19 to around Rs 68,000 crore in 2019-20.

Sources, however, indicate that the Centre is likely to cut budgetary support to the railways by around Rs 5,000-10,000 crore for 2018-19, out of the total budgeted GBS of Rs 53,060 crore. Due to this cut in GBS, the railways is likely to depend more on borrowings, asset monetisation, and internal generation to meet the capex target of Rs 1.465 trillion for the current year.

In 2017-18 also, the finance ministry had opted for a cut of Rs 15,000 crore on the GBS for railways in the revised estimate. "The advantage this year is that the railways has already used over 80 per cent of the GBS allotted to it," said a government official, who was tight-lipped about the possible cut.

Moreover, sources said that Railway Minister Piyush Goyal is of the opinion that there should be no shortage of funds for infrastructure works, whether the GBS is available or not.

The rise in the GBS requirement for the next year is mainly due to the increased capex plan.

There has been a considerable growth in the capital outlay of the railways over the last few years -- increasing from Rs 93,520 crore in 2015-16 to Rs 1.09 trillion in 2016-17 (17.5 per cent growth over 2015-16) and Rs 1.2 trillion 2017-18 (9.2 per cent growth over 2016-17). Any cut in the GBS means the railways will have to depend more on market borrowings.

This comes at a time when the national transporter is struggling to get the promised funds from Life Insurance Corporation (LIC) for infrastructure projects. The plan was an investment of Rs 1.5 trillion in railway infrastructure projects by LIC in a span of five years, starting 2015.

However, in the first three years till 2017-18, the national transporter has secured only about Rs 16,200 crore from LIC, which had a huge impact on the national transporter's capex plans. The railways is reportedly trying to get a sovereign guarantee from the government as well as a special status for LIC bonds, based on the directives by insurance regulator Insurance Regulatory and Development Authority (IRDA).

Earlier this year, a parliamentary committee had cited that the railways should give priority to remunerative and commercially viable projects so that it will not be under financial stress. It also asked the management to hike internal resources generation by improving non-fare earnings.

In the budget estimates for 2018-19, outlay from extra budgetary resources was kept at Rs 81,940 crore -- out of which Rs 28,500 crore was from market borrowings through bonds, Rs 26,440 billion from institutional financing and Rs 27,000 crore as investment under EBR (partnerships).

In terms of key infrastructure areas like track renewal, electrification and doubling, there has been a considerable increase in the last one year.

"We are planning to increase this momentum so far as improving the infrastructure is concerned. In the last one year, track renewal, electrification and doubling were at their highest," said another railways official.