Earnings drought poses challenges for Bansal

Decline in freight loading would also weigh on Railway Minister as he presents his maiden Budget today

 

When Railway Minister Pawan Kumar Bansal presents his maiden Budget today, he might not have to deal with growth worries alone. The decline in freight loading in the quarter ended December would also weigh on him. While the organisation's increasing inability to generate enough revenue is a concern, the fall in freight volume in the third quarter of 2012-13 is another worry. The railways didn't record a fall in freight volume even during the economic slowdown in 2008-09.

The scope to raise passenger fares might be limited due to the increase a month ago.

The two diesel price rises announced this financial year are expected to wipe off half the additional revenue of Rs 6,600 crore from the rise in passenger fares in 2013-14. With passenger losses of about Rs 25,000 crore this financial year, the railways is considering a fuel adjustment component, through which the fuel price rise would be automatically adjusted in ticket prices. (RAILWAY BUDGET TODAY)

In the quarter ended December, freight traffic declined three per cent compared with the year-ago period. Had the government not raised freight rates twice last financial year, the railways' earnings from this wouldn't have exceeded that recorded the previous year.

A senior railways official said for 2012-13, he expected freight earnings to fall short of the target by about Rs 3,000 crore.

Through the 10 months ended January 13, the railways carried freight of 827 million tonnes (mt), 11 mt lower than the target; freight earnings stood at about Rs 70,000 crore, 26 per cent higher than in 2011-12. However, the average distance over which the freight was carried fell 3.47 per cent, leading to a rise of 0.96 per cent in net tonne km, which experts said was the true indicator of railway freight.

With the railways increasing freight rates in March 2012, earnings in 2012-13 are estimated at Rs 89,000 crore, about 30 per cent more than in 2011-12.

The rise in passenger fares in January would fetch the railways only Rs 1,200 crore this financial year. Budgeted passenger fare earnings for this financial year were scaled down from Rs 36,000 crore to about Rs 32,000 crore, after a passenger fare rise was rolled back after Budget 2012-13.

Bansal's task is, therefore, difficult. He would have to rely heavily on non-traffic receipts and borrowings. Without buoyant internal earnings and no significant increase in government support, the railways' expansion programmes would be hit. Its targeted plan size of Rs 60,100 crore has already been scaled down to Rs 52,000 crore, owing to a cut in internal resources. A senior railways official said metropolitan projects would see the most cuts in plan size.