Railways Budget 2013 Analysis

7/28/2019 Railways Budget 2013 Analysis

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This years railway Budget has emerged like train whose destination

is far off and it would long time to reach there. Hence, many experts

believe that there would not be immediate allocation of funds for

companies in various sectors that cater to works related to the

Railways. Here is a detailed analysis of the measures and itsimplications:

Measures

Measures given in this years railway budget are lucrative when

considered from a long span of time. This year the railway budget

has allocated highest outlay of Rs63363 crore for FY14. This would

be met through gross budgetary support of Rs26000 crore, Railway

Safety Fund of Rs2000 crore, Internal Resources of Rs14260 crore,market borrowing of Rs15103 crore and East Bengal Railway-Public

Private Partnership of Rs6000 crore. In addition to this, the Budget

has kept the gross traffic receipts for FY14 at Rs142742 crore. The

gross traffic receipts for FY13 were at Rs125680 crore. Interestingly,

the railways had several long-term measures which concentrated on

improving its operating ratioit is a measure of efficiency in control

the operating expenses and is usually used for sectors that require

substantial portion of revenues to sustain and maintain operations.

In railways, an operating ratio of 80% or lower is consideredreasonably well.

There are measures, which speak volumes of the commitments of

the railways to this financial parameter. Here are a few them:

a) Concerning railways

The Budget has revised the freight loading target to 1007 MT

against 1025 MT in Budget Estimates in FY13. For FY14, freight

loading target has been increased by 40 MT to 1047 MT.

It proposes to target to improve Operating Ratio to around 87.8%

in FY14. The railways had successfully reduced its operating ratio

from to 88.8% in FY13 from 94.9% in FY12.


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The Budget pointed out at an excess remaining as regards

dividend liability for the current year is pegged at Rs 10,409 crore as

against the budget amount of Rs 15,557 cr. The Budget hopes to

end 2013-14 with a balance of Rs 12,506 crore and with Rs 30,000

crore in 2017.

The Budget has estimated freight earning target at RS93554 crore

for FY14.,up by 9% on a year on year basis. It is estimated that the

number of passengers would increase by 5.2% in FY14. The railways

has targeted revenue of Rs42210 crore.

It has a target of Rs1000 crore each fixed for Rail Land

Development Authority and IR Station Development Corporation.

This amount would be raised through Public Private Partnership inFY14

It has proposed a new fund named Debt Service Fund to meet

committed liabilities of debt servicing.

The Planning Commission has aimed the Railways 12th Plan at

Rs5.19 lakh crore with a Gross Budgetary Support of Rs1.94 lakh

crore, internal resources of Rs1.05 lakh crore, and market borrowing

of Rs1.20 lakh crore, with another Rs1 lakh crore expected to be

raised through public private partnership route.

b) For commuters

There is a proposal formulated for setting up of Railway Tariff

Regulatory Authority. It is at inter-ministerial consultation

stage.

Fuel Adjustment Component (FAC) linked revision for freight

tariff to be implemented from 1st April 2013. An across the

board hike in freight charges by an average of about 5.8% has

been made.

Reservation fee for AC first class and executive classes has

been raised to Rs60 from Rs 35 and that of first class and AC- 2

doubled to Rs50.


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Reservation fee for AC chair car, AC-3 economy and AC-3 tier

has been increased to Rs 40 from Rs25.

Supplementary charges for superfast trains have been

increased between Rs5 and Rs 25.

Tatkal charges for sleeper class raised by Rs15 to RS25 and for

AC Chair car from RS25 to RS50.

Tatkal charges in AC-3 tier increased by Rs50; AC-2 tier and

executive class by RS100.

Cancellation charges increased for all classes between Rs5 and

RsS50.

The Budget expects that fare revision would raise the railways

revenues by Rs6600 crore in FY14

Implications

For major sectors, the railway Budget is nothing to cheer about

especially when considered from the point of view of FY14. All

proposals have strong advantages in the long-term. One of the chief

reasons for this is long-term targets by the Railways Budget is lower

revenue growth. The low growth in revenues has compelled therailways minister to set lower targets for the next year. It has

focussed on aspects such as safety, up gradation of lines and freight

corridors rather than traditional points like wagon procurement and

addition of new lines.

An economic slowdown has triggered lower than estimated freight

loading for the Railways this year. As a result, the railway minister

has this time set a realistic 4% rise in freight loading for FY14. In the

previous Budget, the railway minister had increased passenger faresand freight-loading target. By taking into account these parameters,

the railway minister had targeted for an operating ratio of 84.9%.

However, a partial roll back of fares and increase in fuel cost led to a

revised operating ratio of 88.8%, which was still better than 94.9%

operating ratio in FY12. In the coming financial year, the railway


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minister has targeted an operating ratio of 87.8%. This seems to be

realistic and can be achieved given the fact that the minister has

taken into account modest calculations. For FY13, in the wake of

high operating ratio, the railways had to bring down its targets for

laying new lines from 700 kms to 470 kms. In the current Budget, ithas pegged a more realistic target of 500 kms of new lines.

Interestingly, this time, the railway minister proposed one of its kind

initiatives this year. He has introduced Fuel Adjustment component

for freight traffic. This initiative would mean that any change in fuel

price (going up or down) would be passed on to the travellers. For

cement companies, this would mean that their margins would be

volatile given the fact that logistics form an important part of their

business. For sectors such as metals and fertilizers, the impact ofthese measures would be marginal.

The Budget has allocated small amount of funds for rolling stock.

Rolling stock means procurement of wagon, locomotives and

coaches. In the current Budget, only Rs 44 crore is pegged for new

orders of wagons. This is a big negative for wagon procurement

companies. Construction companies on the other hand have reasons

to be upbeat about the railway Budget. The government would

award construction contracts of up to 1,500 km lines on both thededicated freight corridors in this financial year. In addition to this,

to tap into the lucrative freight income from coal, port and iron ore,

it plans to investment of nearly Rs 9000 crore through public private

partnership.

Besides, the Budget has planned 60 more stations, which would be

developed as Adarsh stations. This target is lower than the last

years Budget target of upgrading 84 stations. For construction

companies, which have been battling with fewer orders as orders

from various sectors have depleted, this would be a breather. On

the whole, the measures mentioned in the railway Budget are long-

term. Hence, an immediate benefit on the corporate side of the

railways business would not be seen. However, measures related to

travellers, as usually observed, would be implemented without fail.

Documents

Railways Budget 2013 Analysis