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BW Businessworld

On Track Or Off?

Railways gross traffic receipts have fallen short by Rs 15,744 crore compared to the budget target of Rs 183,578 crore.

Photo Credit : Ritesh Sharma

When measurable units like earnings, revenue and income do not meet the expectations, words like ‘future growth’, ‘hope’, and ‘projections’ often come in handy while preparing a budget speech. It was no different this time around when railway minister Suresh Prabhu presented his second railway budget on 26 February. In his own words, “these were challenging times; the railways were facing low freight demand, a commodity cycle downtrend, and rising expenses”.

However, the Budget has spared corporate India and the commuters as there is no increase in railway freight and fares.

But what is worrisome is the shift in passengers from railways to other means of travel. Railways total passenger volumes dipped 1.4 per cent to 810 crore in 2015-16 from 822.4 crore in FY15. More than half of railway commuters (440 crore) account for the suburban category, with only 46 per cent long-distance commuters. Sadly, even the suburban traffic is dwindling. It dipped from the peak of 455 crore in FY14 to 440 crore in FY16.

What Was Presented
Railways gross traffic receipts have fallen short by Rs 15,744 crore compared to the budget target of Rs 183,578 crore. While the earnings from passenger traffic clocked Rs 38,727 crore compared to Rs 33,755 crore a year ago, in real terms it fell short by 9.56 per cent when compared against the budget target of Rs 45,000 crore.

The freight earnings were hit due to low demand from the core sector forcing railways to reset the target in FY16 to Rs 1,11,853 crore. The passenger earnings too were scaled down due to persistent negative growth trend since 2013-14 in suburban and non-suburban travel, the railway minister said.

For FY16-17, Prabhu has pitched for Rs 1.21 lakh crore in capital expenditure, up from Rs 1 lakh crore this year. “Every rupee of investment in the railways has the capacity to increase the economy-wide output by Rs 5,” Prabhu said in his Budget speech.

But according to former civil aviation minister Praful Patel, railways may not be able to spend Rs 1.2 lakh crore in the next 12 months. “What will they spend on? Where is the work? Which stations are getting modernised that will require an average spend of Rs 10,000 crore every month,” questioned Patel in a television debate.

However, Prabhu is optimistic about generating a 10 per cent jump in gross traffic receipts next fiscal. He has allocated Rs 184,819 crore.

“The only logical assumption for keeping higher traffic receipts is that fares will go up soon because the dip in passenger traffic is not going to reverse overnight,” says a senior consultant who tracks railways.

‘Railways Is Open To Private Sector’s Role’
 Suresh Prabhu, Union Railways Minister

Customer satisfaction is our biggest priority. You would have noticed that as in last year’s Railway Budget, this year too, we have focused on the entire life cycle of the journey.

One reason for punctuality of trains going down is that the network is handling traffic several times over than it can actually handle. In the last one year, we have improved punctuality, but I’m not happy. I wish to take it to 95 per cent, but it will take another 4-5 years. All my capital expenditure, all my budget announcements are geared towards short-, medium-, and long -term goals, which include improving punctuality.

Yes, passenger volumes went down initially but we corrected it. In the last few months, the passenger tally has increased. Improved road networks have made the task of railways more challenging and we are working towards it. On why freight has grown by less than 1 per cent, I would say it comes from sectors like coal, cement, steel. If all that (output / production) increases, Railway’s share increases. This time, unfortunately, the coal sector didn’t expand. Despite fall in revenues, due to reasons which were beyond our control, what is important is that we cut down expenditure by Rs 8,500 crore. This is unprecedented.

As to those who say that 92 per cent operating ratio is too ambitious, I would say if all the former railway ministers had done their job well, the operating ratio would have been much better. I am facing a legacy issue here. As for the private sector’s role in railways, it all depends on them; we are open to the private sector.

On the charge of slow pace of execution of ideas, there’s a counter argument — 139 announcements made in the last budget have been implemented. For the first time in the railway’s history, I have given this implementation report.

On the slow pace of development of Dedicated Freight Corridors, I would say that in the last six months, I have issued tenders which were not issued in the last six years.

­— As told to Suman K. Jha


Future Tense
Prabhu is hoping to garner an incremental traffic of 50 million tonne in freight in the next fiscal and a 10 per cent growth in passenger earnings pegged at Rs 51,000 crore for 2016-17 as compared to Rs 45,000 crore in the current fiscal which was not met.

The only certainty is the increase in expenses, courtesy the rollout of the 7th Pay Commission’s recommendations. Railways expects a 19.16 per cent jump in the coming year because of pay and pension. The retirement benefits will comprise 27 per cent of total expenses in 2016-17, leaving much of railway infrastructure without adequate funding.

But to push development, construction of new lines will get 15 per cent higher allocation of Rs 15,586 crore compared to 2015-16. Total working expenses allocation has been up to Rs 174,046.29 for 2016-17 (from Rs 146,055.6 crore in 2015-16). But there will also be a 36 per cent jump in provident funds, pensions and other retirement benefits of railway employees at Rs 47,170.76. Investment in rolling stock too will see an increased allocation of Rs 27,278 crore, up from Rs 19,087 crore in 2015-16. The railways said its staff costs would also increase to Rs 15,950.22 crore, on account of the Pay Commission.

Prabhu is looking at increasing railways non-traffic revenue four times in the coming year through redevelopment of stations, commercialisation of land along tracks, and monetisation of soft assets. But railways have outlined higher market borrowings by Indian Railway Finance Corporation for investment in rolling stock and projects pegged at Rs 8,168 crore.