Rail Budget 2016: Operating surplus to fall 26% in FY17

Dividend payment to govt would be higher at Rs 9,731 cr in 2016-17

Indian Railways (IR) is looking at a tough year ahead, with its operating surplus expected to fall 26 per cent to Rs 8,479 crore in 2016-17.

The excess of receipts over expenditure that roughly amounts to the profit it makes after paying dividend to the government and before it allots money to its various funds is estimated at Rs 11,402 crore for 2015-16, according to the revised numbers presented to Parliament on Thursday.

Dividend payment to the government would, however, be higher at Rs 9,731 crore in 2016-17 as against the Rs 8,495 crore expected this year.

“These are challenging times. We are faced with two headwinds, entirely beyond our control; tepid growth of our economy’s core sectors due to an international slowdown and the looming impact of the 7th pay commission,” minister Suresh Prabhu said.

Consequently, the operating ratio (OR), a parameter of railway efficiency, calculated as a percentage of spending over earnings, will deteriorate to 92 per cent next year. The current year is likely to end with an OR of 90 per cent, against 91.3 per cent in 2014-15 and 93.6 per cent in 2013-14. Gross traffic receipts in 2015-16 were short by Rs 15,744 crore as compared to the earlier Budget target of Rs 1,83,578 crore. Both passenger and goods traffic were below expectation. Freight earnings have been impacted by low demand from core sectors.

The trend in traffic earnings seen from the first quarter of the financial year had prompted the Railways to take measures for containing the ordinary working expenses, through controls on inventory, variable costs and contingent expenditure, saving Rs 8,720 crore. On account of cheaper fuel alone, the Railways saved Rs 3,475 crore in the year.

Going forward, the Railways faces an additional burden of Rs 28,450 crore on account of an increase in staff salary and pensions in line with the Pay Commission recommendations. Prabhu, however, did not propose to raise either fare or freight rates.

For 2016-17, a 10 per cent increase over the Revised Estimates for the current year in gross traffic receipts has been projected at Rs 1,84,820 crore, on the back of a mere one per cent increase in passenger volumes and of 4.5 per cent in freight volumes. The minister is hoping for an incremental traffic of 50 million tonnes in freight. Taking into account the likely increase in salary and pensions, appropriation to the Depreciation Reserve and other funds has been reduced.