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NIDHI N SHAH

ROLL NO :- 96

EMBA FINANCE

Indian railways budgetingchallenges and the Indian railway

finance corp. ltd.

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Introduction

Indian Railways abbreviated as IR, is a departmental undertakingof Government of India, which owns and operates most of India's railtransport.

It is overseen by the Ministry of Railways.

It has the world's fourth largest railway network after those of the UnitedStates, Russia and China.

The railways traverse the length and breadth of the country and carry over30 million passengers and 2.8 million tons of freight daily.

It is the world's second largest commercial employer, with more than1.54 million employees.

Above all this IR is facing a lot of financial crunch.

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Indian Railways face a massive finance crunch

Twenty five thousand crore! Twenty five thousand crore,is our surplus, former Railway Minister Lalu Prasad

Yadav had thundered on the floor of Parliament whilepresenting the railway budget in 2008.

But when his successor, Mamata Banerjee, presents theministrys budget later this month, the mood is likely to

be sombre.

The Indian Railways is faced with a massive depletion infinances due to the slowing down of growth in its freight

business. It is also struggling with the financial burden.

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Budgeting Challenges

The present Railway Budget 2011-12 set aside the need to restructure railways, instead presented a populist budget.

The gross budgetary support of Rs.20,000 crore in a plan outlay of

Rs.57,630 crore in the annual plan for 2011-12, where it reliesheavily on the Central Governments Fiscal budgetary support.

The Railways is betting on Freight traffic to generate Rs.1,06,239crore in the coming year. But the Railways has been losing thefreight traffic to Roads for the past few years.

The passenger fares has not been increased for the past three yearsdespite of the heavy increase in fuel charges.

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Indian Railway Finance Corporation Ltd.

Financing Indian Railways

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Introduction

Indian Railway Finance Corporation Ltd. (IRFC)

a dedicated financing arm of the Ministry of Railways.

objective is to raise money from the market to partfinance the plan outlay of Indian Railways.

the money made available is used for acquisition ofrolling stock assets and for meeting other developmentalneeds of the IR.

it has successfully met the targeted borrowings year after

year, through issue of both taxable and tax-free Bonds,term loans from banks/financial institutions and throughoff shore borrowings.

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Strategies adopted by IRFC

To focus on its existing business

consolidate its position as a low-cost funding source for MOR.

establish its pre-eminence as the only market borrowing armof MoR

to diversify its activities through funding financially viable andremunerative railway projects involving port connectivity orspecific industry based new lines conversion projects.

To engage in advisory services in financial structuring.

To mobilize funds through loans from agencies such as ADBand World Bank so as to diversify sources of funds and ensureaccess to desired pool of resources at the most optimum cost.

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THANKYOU