Fare, freight hikes bring little cheer to rlys' finances

An across-the-board rise in passenger fares and an increase in freight rates this year haven’t improved Indian Railways’ financial health. The railways expects a shortfall of Rs 4,000 crore in budgeted passenger earnings. On the freight front, too, business lags targets - loading at the end of this financial year is estimated at 1,012 million tonnes (mt), against the targeted 1,025 mt.

As a result, internal revenue generation in 2012-13 may fall short of the target by about Rs 8,000 crore (Rs 80 billion). To add to woes, diesel prices were raised twice this year, wiping off half the additional revenue of Rs 6,600 crore (Rs 66 billion) the railways was expected to accrue from the passenger fare rise. The plan size has now been to about Rs 52,000 crore (Rs 520 billion).

Passenger earnings would stand at Rs 32,000 crore (Rs 320 billion), against the estimated Rs 36,000 crore (Rs 360 billion), owing to the rollback of the passenger fare rise (except in AC-I and AC-II classes) announced by former railway minister Dinesh Trivedi. “The additional earnings from the passenger fare rise in 2012-13 would be Rs 1,200 crore (Rs 12 billion). However, this did not help much, as the railways was already falling short of its passenger earning targets because of lower volumes,” said a railway official.

The railways is also expected to fall short of the freight earnings target, owing to the economic slowdown. Till December, its freight earnings stood at about 68 per cent of the budgeted target of Rs  89,000 crore. Freight earnings of Rs 61,434 crore (Rs 614.34 billion) in the April-December period are about 25 per cent more than in the corresponding period of 2011. This was primarily due to the pre-Budget across-the-board freight rise of about 25 per cent.

This financial year, the railways showed extreme fiscal prudence. It stuck to the targeted ordinary working expenses, including salaries and other running expenses (excluding pension fund and depreciation reserve fund), of Rs 84,400 crore (Rs 844 billion).

The railways also repaid the Centre a loan of Rs 3,000 crore (Rs 30 billion), at 8.5 per cent interest. The repayment period was two years. The railway ministry had sought the loan outside the gross budgetary support of Rs 24,000 crore. A senior ministry official said, “We stuck to our commitment of repaying the loan amount, rather than paying it back in two years. We have tried to maintain fiscal discipline in 2012-13, as the freight (rate) hike landed us in a very comfortable position.”

This financial year, the railways prioritised 360 projects worth Rs 4 lakh crore. A senior ministry official told Business Standard, “Right now, the railways is focusing on the existing shelf of projects. We have tied up funds for works at the zonal level. Also, the power to reappropriate funds from one work to another now vests with the board. Earlier, the zone was empowered for this.”

For the first time in about a decade, the railways didn’t opt for a supplementary demand for grants during parliamentary sessions, as it intended to focus its resources on budgeted works, rather than new ones, the official said.