No Fare Hike, No New Trains: A Rs 18,782 Crore Hole Stares At The Railway Minister

Posted on February 27, 2015 in Politics

By Prachi Salve:

“Prabhu, yeh kaise hoga? (God, how will this happen?)”

In droll fashion, that was the rhetorical question Railway Minister Suresh Prabhu posed to himself and God, as he presented the first full railway budget of the National Democratic Alliance (NDA).

Picture Credit: Wikicommons
Picture Credit: Wikicommons

Prabhu’s ministry intends to invest Rs. 856,020 crore ($137 billion) over the next five years to revamp the world’s most travelled railway network – and he intends to do this without any passenger-fare hikes.

For the year 2015-16, Prabhu intends to spend Rs. 100,011 crore, an increase of 52% over the previous year.

Part of the money over this year and the next four will come from the central government, which, on Thursday, announced Rs. 40,000 crore annually as additional finance. The ministry also plans to borrow Rs. 17,655 crore from the market, use Rs. 17,793 crore from internal resources, and get Rs. 5,781 crore through private-public partnerships.

This leaves Prabhu with a Rs. 18,782-crore hole for this year alone and quite a few tasks on his hands: to cut costs, raise money, and generate profits.

As a first measure to cut costs, Prabhu announced no new trains – the first for a railway minister after many years.

Source: Indian Railways
Source: Indian Railways

The minister has set four goals for the transformation of Indian Railways over the next five years:

* To deliver sustained and measurable improvement in customer experience
* To make the railway a safer means of travel
* Expand, modernise infrastructure
* Make the railways financially self-sustaining

The rail budget has laid out a white paper for railway reform.

The minister informed the Parliament that the operating ratio (how much money is spent on day-to-day operations to earn revenues, giving an indication of the funds left for safety and expansion) of Indian Railways would improve from 91.8% in 2014-15 to 88.5% this year, the best in the last nine years.

The operating ratio of a company is said to be good if it is below 80%. The last time it was below 80% for the Indian Railways was 74.7% in 1963-64.

Let us look at the projected income of Indian Railways for 2015-16.

Source: Indian Railways; figures in crore
Source: Indian Railways; figures in crore

Passenger receipts are expected to increase by 16.7%, that is, to Rs. 50,175 crore in 2015-16. In 2014-15, passenger receipts declined from the budget estimates. Goods earnings increased 1% and are estimated to increase 13% in 2015-16.

Let us now look at the projected expenses.

Source: Indian Railways; figures in crore
Source: Indian Railways; figures in crore

Total working expenses are expected to go up from Rs. 130,320 crore in 2013-14 to Rs. 154,476 crore in 2015-16, an increase of 18%.

The government has also been able to save on working expenses in the current financial year on account of a drop in prices of high-speed diesel (HSD).

This article was originally published on IndiaSpend