Budget merger can't hide rot in Railway finances

Railways' increased dependence on govt for its capital outlay has put the Union budget under stress

Its annual budget, followed extensively over decades for announcements of new train services, may have folded into the Union budget, but that couldn’t hide the rot in the Railways’ finances. It could be seen in the operating ratio (the extent to which total working expenses are covered by the gross traffic revenue) which deteriorated from 90.5 per cent in 2015-16 to 94.9 per cent in 2016-17 (revised estimates) and is projected to improve marginally to 94.6 per cent in 2017-18.

The situation could have been worse but for some accounting jugglery. In 2017-18, as the budgetary support from the government comes as equity and not debt, the Railways have saved on dividend payout. In 2015-16, the Railways had given dividends of Rs 8,722 crore. In 2016,17, there was a provision of Rs 9,731 crore in the budget estimates, but the revised estimates show zero payout, even though the accounting change is going to happen from the next financial year.

In spite of this relief, the Railways’ surplus (total receipts less total expenditure) for 2017-18 is projected at Rs 8,948 crore, which, though higher than Rs 7,695 crore in 2016-17 (RE), is below the surplus of Rs 10,505 crore in 2015-16.

Finance Minister Arun Jaitley has budgeted for a 10 per cent rise in gross traffic receipts in 2017-18 over 2016-17 (RE), on the back of 4.4 rise in passenger revenues, and 8.5 per cent rise in freight revenues, even though the revised estimates for 2016-17 were way below the target for the year. The slowdown in the economy could also come in way of these targets.

Still, the capital expenditure of the Railways in 2017-18 has been fixed at Rs 1.31 lakh crore, up from Rs 1.21 lakh crore in 2016-17. This has increased the Railways’ dependence on the government for its capital outlay, from Rs 46,355 crore in 2016-17 (RE) to Rs 55,000 crore in 2017-18, putting the Union budget under stress.

The dismal financial situation didn’t keep Jaitley from announcing “transformative measures to make the Railways competitive”: end-to-end integrated transport solutions with other logistics companies for select commodities, customising rolling stock to transport perishable commodities, especially farm produce, competitive ticket booking, and removal of service charge on e-tickets booked through IRCTC.

He also announced that three profit-making railway PSUs – IRCTC, IRFC and Ircon – will be listed on the stock exchange during the course of the next financial year.

After the spate of train accidents, there was, as expected, special focus on rail safety. Jaitley announced the creation of a Rashtriya Rail Sanraksha Kosh which will have a corpus of Rs 1 lakh crore in five years. The government will provide the seed capital for this fund, while the rest of the money will have to be arranged by the Railways. According to a Railway Board member, the government will provide 75 per cent of the corpus.

In previous years, the Railway Budget used to be a full-fledged tamasha in itself, where law makers would listen in rapt attention as the minister would read out the list of new trains, gauge conversions and the like. This year, Railways took up not more than five minutes of Jaitley’s nearly two-hour-long budget speech.

There was no tinkering with freight rates or fares. The independent Rail Tariff Authority is likely to be in place in a few months’ time. “Tariffs will be fixed after taking into consideration costs, quality of service, social obligations and competition from other forms of transport,” Jaitley said.