Railway Budget on management side

New Delhi, 8 July, 2014

-Rail Budget Seeks Course Correction, Avoids Populism
-No Increase in Rail Fare
-Stress on Resource Mobilization Through PSU Surplus, FDI and PPP
-Bullet Train on Ahmedabad-Mumbai Corridor Proposed, Speed of Trains to be Increased in Nine Sectors
-More Thrust on Passenger Amenities, Cleanliness & Efficient Station Management
-Multi Pronged Approach for Improving Safety & Security, 4000 Women RPF Constables to be Recruited
-Revamping Railway Reservation System into Next Generation e-Ticketing, WI-FI Services in Major Stations & in Select Trains, Mobile based Wakeup Calls for Passengers
-58 New Trains Introduced; 11 Existing Trains Extended
-Railway University and Innovation Incubation Centre to be Set UP
-Top Priority to Transparency, e-procurement to be made Compulsory in Higher Purchase, Online Registration for Wagons in Next Two Months
-Highest Ever Plan Outlay of Rs. 65,445 Crore with Higher Allocation for Safety Measures

Increased passenger amenities, more safety measures, timely completion of projects and increased financial discipline are the main highlights of the Railway Budget 2014-15 presented by the Minister of Railways Shri D. V. Sadananda Gowda in Parliament today.

The Budget seeks course correction in the light of mismanagement, apathy, populism in starting projects and severe fund crunch that have inflicted the railways over the years, the Minister averred. For this, structural reforms will be introduced and resources will be mobilized through PSU surplus, FDI and PPP.

The Budget proposes multi-pronged approach to make Railway journey safe and secure and comfortable for passengers. More thrust has been placed on passenger amenities, cleanliness and efficient station management. Now all major stations will have foot-over bridges, escalators, lifts etc.

On safety and security, the Budget has proposed introduction of advance technology for rail-flaw detection to check causes of accidents, a significant amount has been kept for road-over and road-under bridges and a pilot project will be launched on automatic door closing in mainline and sub-urban coaches. In order to make women safer while travelling, the Railway will recruit 4000 women constables. Coaches for ladies will be escorted.

IT initiatives get a big boost in the Budget. Revamping Railway Reservation System into Next Generation e-Ticketing will be taken up with provision of platform tickets and unreserved tickets also over internet. The Railway has proposed real-time tracking of trains and rolling stocks, mobile based Wakeup Call System for passengers, mobile based destination arrival alert and Wi-fi Services in A-1 and A category stations and in select trains. Indian Railways has also planned paperless offices in 5 years.

In order to make Railway management more efficient, Budget has proposed setting up of Railway University for training in both technical and non-technical subjects besides establishing Innovations and Incubation Centre to harness the ideas generated from staff.

In a bid to modernise Indian Railway network, Bullet train has been proposed on Mumbai-Ahmadabad sector besides increasing speed of trains to 160-200 kmph in select 9 sectors. The Railway has also planned setting up of Diamond Quadrilateral Network of High Speed Rail connecting major metros and growth centers of the country. Identified stations will be developed to international standards with modern facilities on lines of newly developed airports through PPP mode. Railway has also proposed harnessing solar energy by utilizing roof top spaces of stations, railway buildings and land.

To augment resources of Railways, the Budget has proposed schemes to facilitate procurement of parcel vans and rakes by private parties, special milk tanker trains, increased movement of fruits and vegetables in partnership with Warehousing Corporation and setting up Private Freight Terminals on PPP model.

The Railway has proposed to bring in more transparency in administration and execution of projects. The status of ongoing projects will be available online, E-procurement will be made compulsory for procurement of higher amount and online registration of demands for wagons will be introduced within next two months.

The Budget has passenger centric focus on suburban and metropolitan rail services. 864 additional state-of-the-art EMUs will be introduced in Mumbai in two years. Study to explore possibility of enhancing existing railway network for better connectivity needs of Bangaluru will be taken up.

The Railway Budget 2014-15 has proposed 58 new trains besides extending 11 existing trains. Provision has been made for 28 surveys for new lines and doubling or gauge conversion of lines. Higher funds have been proposed for ongoing projects in Northeast and remote areas. Special packaged trains on identified pilgrim circuits, two tourist trains and a special train featuring life and work of Swami Vivekananda has been proposed in the Budget.

According to the Budget estimates, the Railways will earn ₹ 1,64,374 crore through various resources and will spend ₹ 1,49,176 crore during 2014-15. The operating ratio is expected to be 92.5% which is 1% better than that in 2013-14.

Budget Comes in the Face of Huge Fund Requirement, Incomplete Projects: Railways need to Balance Commercial and Welfare Objectives

The Minister of Railways Shri D. V. Sadananda Gowda, while presenting the Railway Budget for 2014-15 in Parliament today, said that the Indian Railways practically carries anything and everything and it never says no to ‘a thing’ if it fits in the wagons. Most importantly, it is the backbone of supply chain of the defence establishment and plays a very crucial role in security of the nation.

While it carries 23 million passengers a day, there are still large number of people who have not set a foot on a train yet. It carries over one-billion tonnes of freight a year, connecting ports and mines to industrial clusters, but still there are vast tracts of hinterland waiting for rail connectivity. Though freight business has grown steadily over the years, Indian Railways carry only 31% of the total freight carried in the country by all modes. These are the challenges we have to face.

An organization of this magnitude vested with varied responsibilities, is expected to earn like a commercial enterprise but serve like a welfare organization. These two objectives are like two rails of the railway track, which though travel together but never meet. So far, Indian Railways have managed to do tight-rope walking by balancing these twin conflicting objectives.

It implies that we spend 94 paise out of every rupee earned, leaving 6 paise only as surplus. This surplus, apart from being meager, is continuously on decline due to non-revision of fare. The surplus, after paying obligatory dividend and lease charges, was Rs.11,754 crore in 2007-08 and is estimated to be Rs. 602 crore in the current financial year. This meager surplus so generated is required to finance the Plan Outlay for safety, capacity expansion, infrastructure, improving passenger services and amenities.

Funds to the tune of about Rs. 5 lakh crore i.e. around Rs. 50,000 crore per year for next 10 years, are required for ongoing projects alone. This leaves a huge gap between what is available as surplus and what is needed.

While prudent efforts should have been made to address this gap, the tariff policy adopted lacked rational approach. Passenger fares were kept lower than costs, thus causing loss in the passenger train operations. This loss kept on increasing from 10 paise per passenger kilometer in 2000-01 to 23 paise in 2012-13, as the passenger fares were kept low always. There has been focus on sanctioning projects rather than completing them. In the last 30 years, as many as 676 projects were sanctioned worth Rs. 1,57,883 crore. Of these, only 317 projects could be completed and 359 projects remain to be completed which will now require as much as Rs. 1,82,000 crore.

In the last 10 years, 99 New Line projects worth Rs. 60,000 crore were sanctioned out of which only one project is complete till date. In fact, there are 4 projects that are as old as 30 years, but are still not complete for one reason or another. The more projects we add, the thinner we spread our resources and longer it takes to complete them. If this trend is allowed to continue, many more thousands of crore will get spent yielding hardly any returns, the Minister said.

Railways to Earn Rs. 1.64 lakh Crore in 2014-15 on Improved Operating Ratio

The Minister of Railways Shri D. V. Sadananda Gowda, while presenting the Railway Budget for 2014-15 in Parliament today, gave details of the Budget estimates of Railways for the year 2014-15 as under:-

Anticipating a healthier growth of economy, it is hoped to achieve total receipts of Rs. 1,64,374 crore and would peg total expenditure at Rs. 1,49,176 crore.

The freight traffic growth of 4.9% amounting to 1,101.25 million tonne, an increment of 51.07 million tonne over 2013-14, based on trends in the first two months it anticipated. Also anticipated is a small growth in Passenger Traffic over 2013-14. Earnings from Freight Traffic are estimated at Rs. 1,05,770 crore and from Passenger Traffic Rs. 44,645 crore.

Periodic revision in passenger fare and freight rates, will be linked to revisions in fuel prices in order to insulate the Railway revenues from fuel cost escalation.

Out of total expenditure, the ordinary working expenses have been proposed at Rs. 1,12,649 crore, which is Rs. 15,078 crore higher than 2013-14. This has been necessitated by fuel price hike and increase in staff costs. Pension outgo in 2013-14 had grown by about 16%. Keeping the same trend, provision for pension is kept at Rs. 28,850 crore.

Operating ratio in 2014-15 is pegged at 92.5% which is 1 % better than that in 2013-14.

Steps to be taken to Attract more Investment Under PPP Model

Railways will interact with Industry and take further steps to attract investment under Public Private Partnership (PPP) through BOT and Annuity route and 8 to 10 capacity augmentation projects on congested routes will be identified for this purpose. Presenting the Railway Budget in Parliament today the Minister of Railways Shri D. V. Sadananda Gowda said Zonal Railways will be suitably empowered to finalize and execute such projects.

The Minister said with a large backlog of sanctioned projects, funding continues to be the biggest challenge for Railways. He said while private investment and customer funding for some port connectivity projects and few other Power Sector Projects has started, much more needs to happen if infrastructure creation has to keep pace with the requirement.

Shri Gowda said that Indian Railways has taken up port connectivity on priority through PPP mode of funding in tandem with Sagar Mala Project of Port Development. Railways will facilitate connectivity to the new and upcoming ports through private participation. He said, so far in principle approval has been granted for building rail connectivity to the Ports of Jaigarh, Dighi, Rewas, Hazira, Tuna, Dholera and Astranga under Participative Model Policy of Indian Railways, amounting to a total of over Rs. 4,000 crore.

Railways Committed to Meet Social Service Obligations Despite Rising Costs

The Minister of Railways Shri D. V. Sadananda Gowda, while presenting the Railway Budget for 2014-15 in Parliament today, said that the Social service obligation of Railways rose from 9.4% of Gross Traffic Receipts in 2000-01 to 16.6% in 2010-11. In 2012-13, such obligations stood over Rs. 20,000 crore. The total investment, which is the Plan Outlay under budgetary sources, in the same year, was Rs. 35,241 crore. As an amount, the burden of social service obligation is more than half of the size of our Plan Outlay under budgetary sources.

An organization spending an amount equivalent to more than half of its Plan Outlay under budgetary sources on social obligations, can hardly have adequate resources for its development works. However, Indian Railways would continue to fulfill its social obligations, the Minister said.

Project Management Group to be set up to Overcome Delays in Project Execution

Railways will set up Project Management Group at the level of Railway Board to overcome delays in project execution. Presenting the Railway Budget in Parliament today the Minister of Rai lways Shri D. V. Sadananda Gowda said similarly to expedite the projects at the ground level, a project Monitoring & Coordination Group consisting of officials of State Government, Railways and professionals will also be set up.

Railways have been suffering heavily because of time and cost overrun due to poor project management.

Giving details of the poor state of project completion, the Minister said that in the last 30 years as many as 676 projects were sanctioned worth Rs.1,57,883 crore. Of these, only 317 projects could be completed and 359 projects remain to be completed.

Resource Mobilisation for Railways

The Minister of Railways Shri D. V. Sadananda Gowda, while presenting the Railway Budget for 2014-15 in Parliament today, outlined the Resource Mobilization for Railways as under :-

Leveraging Railway PSU Resources:- Railway PSUs have done very well and are financially sound. It is proposed to launch a scheme to bring in investible surplus funds of Railway PSUs in infrastructure projects of Railways, which can generate attractive returns for PSUs.

Private investment in Rail Infrastructure through Domestic and Foreign Direct Investment (FDI); -Growth of Railway Sector depends heavily on availability of funds for investment in rail infrastructure. Internal revenue sources and government funding are insufficient to meet the requirement. Hence, Ministry of Railways is seeking Cabinet approval to allow FDI in Rail Sector.

Public Private Partnership:-There has been a lot of talk about public private partnership for raising resources. Railways being a capital intensive sector have not been successful so far in raising substantial resource through PPP route. Bulk of our future projects will be financed through PPP mode, including the high-speed rail which requires huge investments. Apart from mobilizing resources, there is also a need to strategically manage other aspects of railway planning and administration.

Rail Budget Identifies Areas Needing Stratigic Management

The Minister of Railways Shri D. V. Sadananda Gowda, while introducing the Railway Budget for 2014-15 in Parliament today, said that there is a need to strategically manage various aspects of railway planning and administration. To meet this end, the following initiatives have been proposed:-

a. Near Plan Holiday approach;

b. Prioritizing and setting timelines for completion of the ongoing projects;

c. Devising a mechanism for raising funds for Rail infrastructure;

d. Decision Support System for project implementation;

e. Strategic partnerships and transparency in procurements;

f. Aggressive indigenization of imported products;

g. Adopting safety standards matching international practices and setting up of Simulation Center to study causes of accidents.

h. Encouraging development of Locomotives, Coaches and Wagon Leasing Market.

Financial Performance of Railways in 2013-14

The Minister of Railways Shri D. V. Sadananda Gowda, while presenting the Railway Budget for 2014-15 in Parliament today, said that the financial position of Railways has undergone a change since presentation of Interim Budget and passing of the ‘Vote on Account’ in February last. He gave the details as under :-

1. Since presentation of Interim Budget and passing of the ’Vote on Account‘ in February last, financial position has undergone a change. Railways carried 1050.18 million tonnes. Goods Earnings were short only by Rs. 94 crore. Originating passengers, also, were less by 46 million over Revised target and Passenger earnings were short by Rs. 968 crore over Revised target.

2. Over all, though the Gross Traffic Receipts grew by 12.8% to reach Rs. 1,39,558 crore, it was short of Revised target by Rs. 942 crore. On the other hand, Ordinary Working Expenses stood at Rs. 97,571 crore, which was in excess by Rs. 511 crore.

3. Appropriation to Pension Fund had to be stepped up to match the actual outgo.

4. As a result, instead of ending the year with a surplus of Rs. 7,943 crore, the surplus was actually Rs. 3,783 crore i.e., a shortfall of Rs. 4,160 crore. This is after fulfilling the dividend commitment of Rs. 8,010 crore.

5. The internal resource generation for Plan, in 2013-14, was Rs. 11,710 crore, as against Revised target of Rs. 14,496 crore. This is short by Rs. 2,786 crore.

6 In 2013-14, there was a decline in traffic growth as compared to Revised projections. Expenditure however, shot up and was more than what was estimated. The Operating Ratio deteriorated by 2.7% over Revised target to touch 93.5% by end of 2013-14 fiscal.

7. As far the Plan Expenditure for 2013-14 is concerned, it fell short of Revised target of Rs. 59,359 crore mainly due to non-materialization of PPP targets.

Digitization and GIS Mapping of Land Assets of Indian Railways to be done

The Minister of Railways Shri D. V. Sadananda Gowda has said that Indian Railways hold vast land assets which need to be digitized and GIS mapped for better management and usage. Presenting the Railway Budget in Parliament today Minister said the resources mobilization using land assets will be explored through private participation in setting up railway related business in railway lands as well as for commercial development. This would hold Railways in protecting the lands as well as leveraging it for raising resources.

Innovations Incubation Centers to be set up to make best use of Ideas and Experience of Staff

Railways proposes to set up an Innovations Incubation Center to harness the ideas generated from the staff of Indian Railways and convert them into practical solutions to increase efficiency of the system.

Presenting the Railway Budget in Parliament today the Minister of Railways Shri D. V. Sadananda Gowda said innovations which result in cost saving as well as revenue generation will be suitably rewarded in the form of incentive.

As part of this exercise, it is also proposed to set up summer internships for the undergraduates of engineering and management studies. Students can intern at any of the various units of Railways i.e. Division, PSUs and Production Units.