Railways may miss Rs 1 lakh-cr capex target this fiscal

BofA-ML report notes capex growth this financial year has been trending below long-term average

The Ministry of Railways is likely to miss its "ambitious" capital expenditure target of Rs 1 lakh crore for the current fiscal, says a BofA-ML report.

Noting that capital expenditure growth this financial year has been trending below the long-term average, Bank of America Merill Lynch said a capex of Rs 378 billion (Rs 37,800 crore), or 38%, of the 2015-16 plan has been made till October.

"This implies that growth so far has been trending below the long-term average and requires 105% growth in the remainder of FY16, which is improbable," it said.

However, the report noted that the ministry remains confident of achieving the growth.

"We believe that while capex growth is likely to pick up in the remaining 5M (five months of) FY16, full-year FY16 targets are going to be missed, with FY16 capex growth resembling past averages," the finanical services major said.

According to BofA-ML, in the budget for FY16, the ministry has "set an ambitious target of Rs 1 trillion of capex, or 52% y-o-y (year-on-year) growth vs 16% CAGR (Compounded Annual Growth Rate) registered in the past 10 years."

While funding for the entire Rs 1 lakh crore is in place and ready to be drawn-down depending on the progress of a project's execution, the report said delays could limit growth during the fiscal.

"Growth should pick up from FY17 onwards, given new funding avenues, a strong project pipeline and historical under-investment," it added.

So far, the ministry has raised Rs 20 billion (Rs 2,000 crore) from LIC as the first tranche of funding assistance while the budgeted amount is Rs 298 billion (Rs 29,800 crore) for the this fiscal ending March 2016, as per BofA-ML.

"Our interactions suggest that only 40-50% of the targeted funds from LIC will be drawn-down in FY16," it noted.