Railway Budget Analyssis

7/29/2019 Railway Budget Analyssis

1/15

RAILWAY BUDGET2013 - 2014

Highlights & Analysis

ICRA ONLINE LIMITED


2/15

Page | 1CRA Online Limited

Executive Summary

While I have a feeling of a colossus today, it is only ephemeral and is instantaneously overtaken by a sense o

humility. Democracy gives wings to the wingless, cautioning us all the while, that howsoever high or wide ou

flight may be, we must remain connected to the ground, the opening speech of Railway Minister PawaKumar Bansal probably sums up the true essence of the Railway Budget for 2013-14. A sort of balancing act

evident from the various proposals put forth during the Railway Budget speech.

While on one hand, the Railway Minister refrained from hiking passenger fares further, especially after a

across-the-board fare hike last month, on the other hand the Minister has adopted the Fuel Adjustmen

Component, which will be dynamic in nature and may move in either direction after revision of fuel price

twice a year. This will result in freight rates going up from April 1. Moreover, various supplementary charge

on tickets and reservation fee, cancellation charges, tatkal rates etc were raised, which will make travellin

in rail costlier. The proposal for setting up of Railway Tariff Regulatory Authority has also been formulate

and was at the stage of inter-ministerial consultations.

Internal revenue generation of the Railways has fallen short of target because of increase in diesel prices an

slowdown in freight. But, the positive lining has been that the Railways did not seek any supplementary grant

and had been able to repay the loan sought in addition to gross Budgetary support before the scheduled time

There were promises to reduce expenditure but that did not stop the Minister from announcing measures t

upgrade safety, introducing 67 new express trains, besides increasing the frequency of sub-urban trai

services, carrying forward East-West Metro corridor project in Kolkata, laying 470 km of new line in 2013-14575 km of gauge conversion, introducing first AC EMU in Mumbai, setting up new manufacturing an

maintenance units, besides other announcements. Moreover, the Operating Ratio, which is pegged to go below

90% this year and the next, is a good sign.

A lot of passenger-friendly measures were taken to improve the overall service of the railways. Next-Gen e

ticketing system, e-ticketing through mobile phones, extended internet ticketing hours, free Wi-Fi facilities i

some trains, mechanized laundries, contacting on-board staff through SMS, phone, e-mail for coac

cleanliness, escalators and lifts at major stations, ISO certified state-of-the-art base kitchen in railwa

premises, extension of bio-toilets in trains, extension of on-board housekeeping scheme are among the variou

proposals put forth by the Railway Minister which will bring a smile on the face of the passengers.

Now that the Railway Budget is over, the focus will definitely shift towards the Union Budget, due to b

presented on February 28. It remains to be seen whether the Government goes ahead with the reform

measures initiated late last year.


3/15


Railway Budget - At a Glance

Financial Performance

Operating Ratio of 88.8% compared to 84.9% in Budget Estimate (BE).

Gross Traffic Receipts fixed at Rs. 1,25,680 crore in Revised Estimate (RE), short by Rs. 6,872 crore

over BE.

Ordinary working expenses fixed at Rs. 84,400 crore, unchanged compared to BE; payment to Pensio

Fund up by Rs. 1,500 crore.

Loading target revised to 1,007 Million Tonnes (MT) against 1,025 MT in BE.

Dividend Liability to the Government to be fully discharged.

Loan of Rs. 3,000 crore, taken in 2011-12, fully repaid along with interest.

(For details refer Annexure 1)

Budget Estimates

Targeted Operating Ratio of 87.8%.

Freight loading of 1,047 MT, 40 MT more than 2012-13.

Passenger growth estimated at 5.2%.

Gross Traffic Receipts fixed at Rs. 1,43,742.00 crore in the BE 2013-14, compared to Rs. 1,32,552.0

crore in BE of 2012-13.

Ordinary Working Expenses: Rs.96,500.00 crore.

Appropriation to Depreciation Reserve Fund and Pension Fund at Rs. 7,500 crore and Rs. 22,000 cror

respectively.

Dividend Payment estimated at Rs. 6,249.20 crore.

Fund Balances to exceed Rs. 12,000.00 crore.

Market borrowings by Indian Railway Finance Corporation for investment in Rolling Stock & Project

stood at Rs. 14,999.00 crore in the Budget estimate of 2013-14.

Market borrowings by Rail Vikas Nigam Ltd. at Rs. 104.00 crore.

Investment through Public Private Partnership (PPP) mode - Rs.6,000.00 crore.


4/15


Operational Performance

Railways completed laying 709 km and 727 km of new line in 2010-11 and 2011-12, respectively

However, during 2012-13, emphasis was laid on capacity enhancement work like laying double line

improving traffic facilities etc. The target of laying 700 km of new line in the current year had to b

scaled down to 470 km due to inadequate resources.

The target of 800 km of gauge conversion fixed for 2012-13 has also been scaled down to 575 km.

Railways met the target of new line and electrification but fell short of the targets for laying doubl

line and gauge conversion, achieving only 2,758 km and 5,321 km respectively.

Land acquisition for nearly 2,800 km of the Eastern and Western Freight Corridors is almost complete.

The number of passenger trains moved up from 8,897 in 2001-02 to 12,335 in 2011-12.

Key Announcements

Elimination of 10,797 level crossings during the 12th Plan and no addition of level crossings.

Introduction of Train Protection Warning System on Automatic Signalling Systems.

Introduction of 160/200 kmph Self-Propelled Accident Relief Trains.

Internet ticketing from 0030 hours to 2330 hours and e-ticketing through mobile phones. Next-Gen e

ticketing system to be rolled out, which will be capable of handling 7,200 tickets per minute agains

2,000 now and 1.20 lakh users simultaneously against 40,000 now. Free Wi-Fi service in several trains.

470 km new lines, 750 km doubling, 575 km gauge conversion and 1200 km electrification targeted i

2013-14.

Passenger friendly initiatives proposed:

179 escalators and 400 lifts at A-1 and other major stations to be installed, which will help

elderly and disabled people.

Upgrading another 60 stations as Adarsh Stations in addition to 980 already selected.

Recruitment in RPF with 10% vacancies reserved for women for safety of women passengers.

Pilot project on select trains to facilitate passengers contact on-board staff through SMS/phone

call/e-mail for coach cleanliness and real time feedback.

Introduction of an Anubhuti coach in select trains to provide excellent ambience and lates

facilities and services.

Third party audit and tie-up with food testing laboratories for food quality control; ISO certifie

state-of-the-art base kitchens to be set up in railway premises. Centralized Catering Service

Monitoring Cell set up with a toll free number: 1800 111 321.


5/15


Fares & Freights

There was no hike in passenger fare this time as already there has been an across-the-board fare hike

in January this year. However, supplementary charges for super fast trains, reservation fees, clerkage

charges, cancellation charges and tatkal charges were raised marginally.

Fuel Adjustment Component (FAC) linked revision for freight tariff to be implemented from April 1,

2013.

Comparison with Five Year Plan

The targets for the Railways for the 12th Five Year Plan are:

The Planning Commission has pegged the Railways 12th Plan at Rs 5.19 lakh crore with a Gross

Budgetary Support of Rs 1.94 lakh crore, internal resources of Rs 1.05 lakh crore and market borrowing

of Rs 1.20 lakh crore, with another Rs. 1 lakh crore expected to be raised through Public Private

Partnership (PPP) route.

In order to improve safety standards, the Government proposes to initiate an exercise of making

Corporate Safety Plan for a ten-year period (2014-24).

For the first time, 347 ongoing projects have been identified as priority projects and provided

committed funding. The Government intends to ensure required funding of these projects during the

12th Plan to complete them within specified time.

(For details refer Annexure - 2)

PublicPrivate Partnership (PPP)

A target of Rs. 1 lakh crore has been set to attract investments through PPP route during the 12th Plan.

A target of Rs 1,000 crore has been proposed to be fixed for both Rail Land Development Authority and

IR Station Development Corporation in 2013-14.

An investment of up to Rs. 9,000 crore is likely to be made under these projects, including Rs. 3,800

crore for port connectivity projects, Rs. 4,000 crore for coal mine connectivity and Rs. 800 crore for

iron ore mines connectivity improvements.


6/15


Projects

To meet the rising demand, reduce dependency on imports and to generate employment opportunities, new

manufacturing/maintenance facilities were proposed to be set up.

New Forged Wheel Factory at Rae Bareli, for which a Memorandum of Understanding has been signe

with Rashtriya Ispat Nigam Limited (RINL).

Greenfield Mainline Electrical Multiple Units (MEMU) manufacturing facility at Bhilwara, Rajasthan i

collaboration with the State Government and BHEL.

Coach manufacturing unit in Sonepat district, Haryana, in collaboration with the State Government.

Midlife Rehabilitation (MLR) Workshop at Kurnool, Andhra Pradesh in tie-up with the Stat

Government.

Conversion of Bikaner and Pratapgarh workshop to undertake POH of BG wagons.

Workshop for repair and rehabilitation of motorised bogies at Misrod, Madhya Pradesh.

New wagon maintenance workshop in Kalahandi district, Odisha.

Modern signalling equipment facility in Chandigarh through PPP route.

Freight Corridors

Land acquisition for nearly 2,800 km of Eastern and Western Freight Corridors is near completion.

The first major civil construction contract on the 343 km Kanpur-Khurja section of the Eastern Corrido

has already been awarded. Construction contract to cover up to 1,500 km on the two corridors woul

be awarded by the end of FY14 and the work has been started.

Preliminary Engineering-cum-Traffic Studies (PETS) have been taken up on four future Dedicate

Freight Corridors.


7/15


Safety Measures

In line with the recommendations by Kakodkar and Sam Pitroda Committee, the improvement of safet

measures have become one of the major thrust area of the Railway Ministry. Accordingly, the Railway Ministe

proposed certain steps to improve the safety standard, some of which are similar to the ones announced i

the previous Railway Budget (FY12-13). The key safety measures announced are:

In order to mitigate the risk of accidents, it was proposed to eliminate 10,797 level crossings durin

the 12th Five Year Plan and not adding any level crossing in future.

To ensure enhanced safety for railway operations and increase the track capacity, the Ministry ha

decided to improve the signalling system.

Introduction of Train Protection Warning System (TPWS) on automatic signalling systems. The system

ensures automatic application of brakes whenever a driver over-shoots a signal, thereby eliminatinchances of collision of trains.

The indigenously developed Train Collision Avoidance System (TCAS) has been proposed to be put i

more extensive ways, following the succession of initial testing.

Upgradation of track structure using 60 kg rails, 260 metre long welded rail-panels and improved flas

butt welding technology.

Induction of Self Propelled Accident Relief Trains (SPART) with speed potential of 160/200 kmph on

trial basis with a view of putting a fast and reliable disaster management system in place.

Rehabilitation of 17 bridges, identified as distressed, to be completed over the next one year.Improvement of fire fighting measures.


8/15


Other Key Highlights

Some of the other important announcements during the Railway Budget are listed below:

An educational tourist train called Azadi Express introduced to enable youths travel to importan

places connected with the freedom movement.

In view of disposing of scrap, the Railway Budget introduced a special drive during the year to take u

disposal of scrap lying in stores, depots, workshops, along the tracks and at construction sites. A targe

of Rs 4,500 crore has been set for 2013-14.

Railways took the initiative of protecting the environment and promoting sustainable development an

use of energy-efficient technologies.

To motivate students undertake research on Indian Railway related issues, it was proposed to introduc

5 fellowships in national universities. The fellowship will carry an appropriate stipend also.

Complimentary passes for Olympic medalist, Arjuna awardees, sportspersons, brave and valian

soldiers, the parents of posthumous unmarried awardees of Maha Vir Chakra, Vir Chakra, Kirti Chakra

Shaurya Chakra, Presidents Police Medal for Gallantry and Police Medal for Gallantry

On the tourism front, mountain railways of the country are the World Heritage Sites, placing India in

an exclusive club of nations that include only Switzerland and Austria. Necessary measures will be

taken to preserve them.

Focused Areas:

In the Railway Budget, the Government has tried to reduce capital investments and othe

expenditure instead of hiking passenger fares. In order to compensate the high fuel bill, the

Government proposed to introduce Fuel Adjustment Component and passenger amenities cess.

Steps were taken to improve safety of women and other individuals and bringing abou

modernisation in Railways.


9/15


Equity Market

The benchmark indices, the 30-share S&P BSE Sensex, and the 50-unit CNXNifty, both hit their lowest closing levels in thirteen weeks.

The Government proposed a 5% hike in freight rate, which is likely toincrease burden on the corporate earnings.

No benefits were announced for the railway wagon makers, which dampenedsentiments further.

Debt Market

The benchmark 10-year bond yield closed 2 basis points (bps) higher at 7.82%after easing earlier to 7.78%.

The five-year OIS rate fell 5 bps to 7.18%, the lowest since January 30.

The Railway Budget reflected contained spending, which is a sign of theGovernments fiscal discipline.

Commodity Market

The implementation of Fuel Adjustment Component (FAC) - linked revision infreight tariff is likely to raise the price of commodities including coal, cementand steel, which use Railways for transportation purposes.

The announcements were overall positive for sectors like steel, cement,metal products, containers, electrical equipment etc. because higher outlayswill lead to an increase in demand for these industries.

Currency Market

There was no direct impact of the Railway Budget on the currency market.However, the sell-off in equity markets due to Railway Budget and global cueshit the domestic currency.

The partially convertible rupee closed at 54.09/10 per dollar against itsprevious close of 53.87/88.

Implication of Railway Budget on Various Markets


10/15


MeasuresSegmentImpacted

Companies* Impacted

1. Thrust on improved signalling.

2. Introduction of Train Protection Warning System (TPWS) onautomatic signalling systems.3. Putting Train Collision Avoidance System (TCAS) to rigoroustrials to validate the technology under complex operationalconditions.4. Progressive induction of crash-worthy Linke Holfmann Busch(LHB) coaches having anti-climb feature.5. Proposed electronic display in trains for giving real timeupdates of train arrivals.

Security

1. Zicom2. Kernex Microsystems Ltd3.Nelco4. Nitin Fire5. Bartronics India

No major announcement regarding wagons. Wagons

1. Titagarh Wagons

2. BEML3. Texmaco4. Container Corporation oIndia

Seventeen distressed bridges have been sanctioned forrehabilitation.

Construction &Engineering

1. Larsen & Toubro Ltd.2. Madhucon Projects Ltd.3. Siemens India Ltd.4. Stone India

1. Greenfield Mainline Electrical Multiple Units (MEMU)

manufacturing facility at Bhilwara (Rajasthan) in collaborationwith the Rajasthan Government and BHEL.2. Induction of crash-worthy LHB coaches having anti-climbfeature.

Coaches 1. BEML2. BHEL

1. Proposal to take up 22 projects of new lines and one gaugeconversion project on socio-economic consideration.2. A target to complete 470 km of new lines has been set for2013-14.3. Target to convert 575 km of MG/NG lines to broad gaugeduring 2013-14.

4. Target for Doubling has been increased to 750 km for 2013-14.

New LineInfrastructure

1. Kalindee Rail2. Texmaco3. Rail & Engg Ltd4. IVRCL5. NCC6. Tantia Construction

7. Era Infra8. C&C Construction

1. Upgrading 60 stations as Adarsh stations in addition to 980already selected.

Construction

1. Tantia Construction2. Madhucon3. Era Infra4. Gammon5. Kalindee Rail6. C&C Construction.


11/15


1. 1500 km construction contract will be awarded in the comingyear in addition to 343 km Kanpur-Khurja section of the Easterncorridor, which has already been awarded.

2. Some parts of the Dedicated Freight Corridor will becompleted under Public Private Partnership model.

Construction

1. IVRCL2. NCC3. Tantia Construction4. Era Infra

5. Kalindee Rail6. C&C Construction7. Gateway Distriparks

1. 67 new express trains and 26 new passenger trains. New Trains

1. MIC Electronics2.Nitin Fire3. Hind Rectifiers4. Kernex Micro5.Integra Hindustan.6. TRIL

Performance of Railway Specific Stocks

Source: ICRA Online Research; * The list of companies is indicative not exhaustive


12/15


Annexures

Annexure 1

Statement of Revenue and Expenditure

( Figures in Rs. Crore) FY 2012-13 FY 2013-14

Particulars Budgeted Revised Budgeted

Revenue receipts

i Passenger Earnings 36,073.00 32,500.00 42,210.0

ii Other coach earnings 2,994.00 3,083.00 3,422.0

iii Goods earnings 89,339.00 85,956.00 93,554.0

iv Sundry other earnings 4,096.00 4,096.00 4,506.0

v Suspense 50.00 45.00 50.0

Gross Traffic Receipts (A) 132,552.00 125,680.00 143,742.0

Miscellaneous Receipts:

i Receipts from subsidised companies Nil Nil N

ii Railway Recruitment Board 9.97 9.36 9.8

iii Other Miscellaneous Receipts 128.03 128.64 128.1

iv Subsidy from General Revenue

3,003.89 2,384.23 2,746.0towards dividend relief and

other concessions

Total Miscellaneous Receipts (B) 3,141.89 2,522.23 2,884.0

1)TOTAL RECEIPTS (A+B) 135,693.89 128,202.23 146,626.0

Expenditures

i Ordinary Working Expenditures 84,400.00 84,400.00 96,500.0

ii Appropriation to:Depreciation Reserve Fund 9,500.00 7,000.00 7,500.0

Pension Fund 18,500.00 20,000.00 22,000.0

iii Other Misc. expenditure 1,000.82 993.32 1,170.0

iv Open Line Works- Revenue 60.00 60.00 60.0

2)TOTAL EXPENDITURE 113,460.82 112,453.32 127,230.0

NET REVENUE (1-2) 22,233.07 15,748.91 19,396.0

Payment To general Revenues 6,676.07 5,339.78 6,249.2

Excess/(Shortfall) 15,557.00 10,409.13 13,146.8

Appropriation to:Development Fund 10,557.00 9,984.00 3,550.0

Capital Fund 5,000.00 425.13 5,433.8

Railway Liability Reserve Fund Nil Nil 4,163.0

15557.00 10409.13 13146.8

Operating ratio 84.9% 88.8% 87.8

Ratio of Net Revenue to Capital at charge andinvestment from Capital Fund

12.1% 8.6% 9.2

Source: Ex lanator Memorandum: Railwa Bud et - 2013 14 ICRA Online Research


13/15


Annexure 2

Overview of Financial Position of the Indian Railways (in Rs. Crore at current prices)

Description Terminal Year of Tenth

200607

2011-12

(RE)

Twelfth 201213

(BE)Gross Traffic Receipts 62,731 1,03,917 1,32,552

Net Ordinary Working Expenses 37,432 75,650 84,400

Appropriation to Pension Fund 7,416 16,800 18,500

Appropriation to Depreciation Reserve Fund 4,198 6,160 9,500

Total Working Expenses 49,047 98,610 1,12,400

Net Revenue 14,453 7,144 22,233

Total Dividend Payable 4,247 5,652 6,676

Excess/Shortfall 10,206 1,492 15,557

Operating Ratio (per cent) 78.7 95 85

Ratio of Net Revenue to capital at charge andinvestment from capital fund (per cent)

4.43 12.10

Source: Explanatory Memorandum to the Railway Budget for Various Years; ICRA Online Research

Annexure 3

95.394.6 94.9

88.887.8

84

86

88

90

92

94

96

2009-10 2010-11 2011-12 2012-13* 2013-14**

Indian Rail - Operating Ratio

Operating ratio

Source: Ministery of Railways; * Revised Estimates,** Budgeted Estimates

5,544.1 6,346.16,781.6

15,748.9

19,396.0

0.00

5,000.00

10,000.00

15,000.00

20,000.00

25,000.00

2009-10 2010-11 2011-12 2012-13* 2013-14**

Indian Rail - Net Revenue

Net Revenue

Source: Ministery of Railways; * Revised Estimates,** Budgeted Estimates


14/15


Disclaimer

All information contained in this document has been obtained by ICRA Online Limited from sources believed

by it to be accurate and reliable. Although reasonable care has been taken to ensure that the information

herein is true, such information is provided as is without any warranty of any kind, and ICRA Online Limited

in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness o

completeness of any such information. All information contained herein must be construed solely a

statements of opinion, and ICRA Online Limited shall not be liable for any losses incurred by users from any

use of this document or its contents in any manner. Opinions expressed in this document are not the opinions

of our holding company, ICRA Limited (ICRA), and should not be construed as any indication of credit rating

or grading of ICRA for any instruments that have been issued or are to be issued by any entity.


15/15

Regd. Office: FMC Fortuna, A-10 & 11, 3rd Floor, 234/3A, AJC Bose Road, Kolkata - 700 020Tel +91-33-2287 6617/8839/2280 0008, Fax +91-33-2287 0728

Corporate Office: 107, 1st Floor, Raheja Arcade, Plot No.61, Sector-XI, CBD Belapur, Navi Mumbai- 400 614Tel +91-22-6781 6100, Fax +91-22-2756 3057

Kolkata Office: 2nd, 5 th and 6th Floor, Convergence Contact Centre, Plot D 2/2, Block EP & GP, Sector-V, Salt Lake City, Kolkata - 700 091Tel +91-33-40170100, Fax +91-33-40170101

ICRA ONLINE LIMITEDEnterprise, Team Spirit, Innovation...

Mail us at:

For MFI Division: [email protected]

For KPO Division: [email protected]

US Representative Office:

ICRA Techno Analytics Inc.

10000 Lincoln Drive East, Suite 201

Marlton, NJ 08053

Email: [email protected]

Phone: +1 732 626 5000 Cell: +1 848 482 6440

Visit us at:

www.icraonline.com

www.MutualFundsIndia.com

Pune

Tel +91-20-2552 0194-96

Fax +91-20-2553 9231

Ahmedabad

Tel +91-79-2658 5049/2008/5494

Fax +91-79-2658 4924

Chennai

Tel +91-44-2434 0043/9659/8080,2433 0724/3293-4

Fax +91-44-2434 3663

Hyderabad

Tel +91-40-2373 5061/5152/7251

Fax +91-40-2373 5152

Enquiries may also be directed to the following ICRA Offices:

Vayudhoot Chambers,

2nd Floor, Trinity Circle

15-16, MG Road

Bangalore - 560 001

Tel +91-80-2559 7401/4049/2532 7803

Fax +91-80-2559 4065

Electric Mansion, 3rd Floor

Appasaheb Marathe Marg

Prabhadevi, Mumbai - 400 025

Tel.: +91-22 24331046/53/62/74/86/87,

2436 2044

Fax +91-22-2433 1390

1105, Kailash Building

11th Floor,

26, Kasturba Gandhi Marg

New Delhi - 110 001

Tel +91-11-23357940-50

Fax +91-11-23357014

Building No.8,Tower A, ll Floor

DLF Cyber City, Phase ll

Gurgaon-122 002

Tel +91-124-454 5300/454 5800

Fax +91-124-454 5350/454 5850

Mumbai Bangalore Gurgaon New Delhi

Documents

Railway Budget Analyssis