Rail Budget 2012-13

India's Minister for Railways, Dinesh Trivedi has presented his maiden Railway Budget for the financial year 2012-2013 in Parliament. The focus and long term of the Railway Budget 2012 are Safety, Consolidation, Decongestion & Capacity Augmentation, Modernisation and Improve Operating Ratio from 95% to 74% in terminal year of 12^th Five Year Plan.

The Plan Layout

The following chart shows that Plan Size of Indian Railways for the last few years.

The Railway Budget for 2012-13 provides for a Plan size of Rs 60,100 crore. Of this, railway minister Dinesh Trivedi plans to spend Rs 30,045.50 crore on new lines, doubling, gauge conversion and for acquisition of rolling stock. In Mamata Banerjee's speech last year, she promised construction of 700 km of rail lines, whereas Trivedi mentioned he would target 725 km this year. But the emphasis seems to be on Modernization of Railways. The railways have set a target of 1,100 km for electrification in 2012-13.

• The budget envisages 725 km new lines, 700 km doubling, 800 km gauge conversion and 1100 km electrification targeted in 2012-13.
  
• Rs. 6,872 cr provided for new lines, Rs. 3,393 cr for doubling, Rs. 1,950 cr for gauge conversion, Rs. 828 cr for electrification
  

The annual plan outlay for 2012-13 is the highest ever at Rs. 60100 crore. Of this, Rs. 24,000 crore will be supported by the gross budgetary support, Rs. 2000 crore through the Railway Safety Fund, Rs. 18050 crore through the railways' internal resources and Rs. 15000 crore from market borrowings through the Indian Railway Finance Corporation, considering its past excellent performance in the financial markets. An additional amount of Rs. 1050 crore would be raised through external sources of financing through PPP and other initiatives.

So, Rs 60,100 crore, as mentioned above will be arranged as follows:

Gross Budgetary support has increased consistently in last few years. The Gross Budgetary Support for last year was Rs. 20000 Crore.

Some New Entities in the Railways

• The Railway Budget 2012-13 envisions setting up of a Railway Safety Authority as a statutory regulatory
  body as recommended by Kakodkar Committee.
  
• For Modernization of Railways, the ministry plans creating Missions as recommended by Sam Pitroda Committee.
  
• The ministry would align the Annual Plan investment with five focus areas identified by Kakodkar and Pitroda Committees i.e. (a) Track (b) Bridges (c) Signalling & Telecommunication (d) Rolling Stock and (e) Stations & Freight Terminals.
  
• A new Board member (Safety/Research) to be inducted in Railway Board. A New Board Member (PPP/Marketing) to be inducted.
  
• Setting up of "Rail-Road Grade Separation Corporation" with an objective to eliminate level crossings.
  
• Railway forays into the skill development for disaster management by establishing Three 'Safety Villages' to be set up at Bengaluru, Kharagpur and Lucknow
  
• For redeveloping of the stations through PPP (Public Private Partnership) Indian Railway Station Development Corporation will be set up.
  
• For development & management of existing railway goods sheds and multi-modal logistics parks, the Budget proposes to set up a "Logistics Corporation".
  
• A National High Speed Rail Authority to be set up.
  
• Dedicated Railway Design Centre to be set up in the National Institute of Design, Ahmedabad.
  
• Institution of 'Rail Khel Ratna' Award for 10 rail sports-persons every year.
  
• Setting up of Railway Tariff Regulatory Authority to be considered
  

  Development Plans in the Railway Budget 2012-13
  

• Plan allocation to priority works so as to reap benefits after completion in a time bound manner
  
• The Railway Budget 2012-13 proposes to make more attractive private investment schemes for Wagon leasing, Sidings, Private Freight Terminals, Container train operations, Rail connectivity projects (R3i and R2C-i).
  
• New stations to be covered under the Kolkata Metro.
  
• An Special Purpose Vehicle (SPV) will be set up with the Andhra Pradesh Government for commercial management of the MMTS (Multi-Modal Transport System: Hyderabad – Secunderabad).
  
• MRVC (Mumbai Railway Vikas Corporation) will conduct feasibility study for construction of faster corridors on CSTM – Panvel and Virar-Vasai-Diva-Panvel sections.
  
• Work to be taken up facilitating running of 12-car rakes on Harbour line.
  
• Financial modeling of the elevated rail corridor from Churchgate to Virar firmed up with Government of Maharashtra through PPP mode.
  
• A pre-feasibility survey for a similar corridor between CST and Kalyan proposed.
  
• Pre-feasibility studies on six high speed corridors already completed; study on Delhi-Jaipur-Ajmer-Jodhpur to be taken up in 2012-13.
  

  Collaboration with State Governments
  

• At present 31 projects covering a length of more than 5000 km in 10 states being executed with contribution from state governments.
  
• MoU signed with Government of Chhatisgarh to develop three rail corridors in state for movement of passenger and freight. Four projects on cost sharing basis with Governments of Haryana, Andhra Pradesh & West Bengal proposed.
  
• 12 projects on cost sharing basis with Government of Karnataka, Andhra Pradesh, Madhya Pradesh, Jharkhand, Rajasthan & Maharashtra sent to Planning Commission for approval.
  
• 17 projects to facilitate the first and list mile connectivity proactively sanctioned and another 28 projects identified.
  

  New development in International Connectivity
  

• Construction of Jogbani-Biratnagar and Jaynagar-Bijalpura-Bardibas new lines already in progress to provide connectivity to Nepal.
  
• Project to connect Agartala with Akhaura in Bangladesh to be taken up in 2012-13.
  

  New Railway Industries
  

• Rail Wheel Plan at Chhapra produced 78 wheels during 2011-12; the plant would be fully commissioned in 2012-13.
  
• Rae Bareli coach factory manufactured 10 coaches in 2011-12; phase-II of the factory would be commissioned in 2012-13.
  
• Diesel Component Factory at Dankuni has commenced trial production and would be fully commissioned in 2012-13.
  
• Wagon Manufacturing Factory at Kulti and fiat bogey frame unit at Budge Budge to commence production in 2012-13. A wagon factory to be set up at Sitapali (Ganjam District of Odisha).
  
• A rail coach factory with the support of Government of Kerala to be set up at Palakkad; two additional new manufacturing units for coaches to be established in the Kutch area in Gujarat and at Kolar in Karnataka with active participation of the State Governments.
  
• A plant for manufacture of traction alternators for high horse power diesel locomotives to be set up at Vidisha in Madhya Pradesh.
  
• Setting up of a factory at Shyamnagar in West Bengal to manufacture next generation technology propulsion system for use in high power electric locomotives.
  
• Augmenting the electric loco Ancillaries Unit of CLW at Dankuni for fabrication of locomotive shells and assembly of three phase locomotives for manufacturing of new generation 9000 HP locomotives.
  
• Sick wagon unit 'Braithwaite' taken over by Railways has been conferred with Turn Around Award by the Board of Reconstruction of Public Sector Enterprise.
  

  Initiatives in Green Railways
  

• Setting up of 72 MW capacity windmill plants in Andhra Pradesh, Karnataka, Kerala, Tamil Nadu and West Bengal.
  
• Setting up of 200 remote railway stations as 'green energy stations' powered entirely by solar energy.
  
• Providing solar lighting system at 1000 manned level crossing gates. Introduction of mobile emission test cars to measure pollution level of diesel locomotives.
  
• Commissioning of two bio diesel plants at Raipur and Tondiarpet. Introduction of a 'Green Train' to run through the pristine forests of North Bengal. 2500 coaches to be equipped with bio toilets.
  

  New Passenger Amenities
  

• 321 escalators at important stations (50 in this year),
  
• 12 State of art mechanized laundries already set up (6 more in this year)
  
• SMS on passenger mobile phone in case of e-ticket to be accepted as proof of valid reservation, regional cuisine at affordable rates,
  
• Book-ameal scheme (meals through SMS or email)
  
• AC Executive lounges at important stations,
  
• New Rail Neer Plants at Palur in Tamil Nadu and Ambernath in Maharashtra,
  
• Expansion of housekeeping schemes, Rail Bandhu on-board magazines on Rajdhanis, Shatabdis and Duronto trains,
  
• coin/currency operated ticket vending machines,
  
• Alternate Train Accommodation System to accommodate waitlisted passengers on alternate trains,
  
• Model rake with world class interiors, 929 stations to be upgraded as Adarsh Stations including 84 stations proposed in 2012-13 (490 completed),
  
• Multi-functional complexes at 24 locations completed,
  
• Sale of PRS tickets through 151 post offices,
  
• Implementation of electronic transmission of RR for freight traffic.
  
• Satellite based real time train information system (SIMRAN) to provide train running information to passengers through SMS, internet, etc,
  
• On board passenger displays indicating next halt station and expected arrival time to be introduced
  
• Specially designed coaches for differently-abled persons to be provided in each Mail/Express trains,
  
• Dedicated Railway Design Centre to be set up in the National Institute of Design, Ahmedabad.
  

  Security
  

• Installation of Integrated Security System at all 202 identified stations to be completed in 2012-13. Escorting of trains by RPF/GRP extended to 3500 trains.
  
• Integration of RPF helpline with the All India Passenger Helpline.
  

  Welfare of Railway Staff
  

• This year, Railways would introduce a wellness programme for railway staff at their work places. The NID (National Institute of Design) to design appropriate outfits for various categories of workforce.
  

  Training and Recruitment
  

  • The Budget says that 80000 persons were recruited in 2011-12. In the coming year, Railways would recruit 1 Lakh people and will wipe-off the backlog of SC/ST/OBC and other categories.
    

  Sports
  

• In the Budget year 2011-12, 7 Railway sportsperson honoured with Arjuna Award and Major Dhyanchand Award in 2011-12. 5 Railway sportsperson qualified for Olympics 2012.
  
• The Budget envisages development of a roadmap for railway sports.
  
• The budget announces institution of 'Rail Khel Ratna' Award for 10 rail sports-persons every year.
  

  Concessions and new Trains
  

• 50% concession in fare in AC-2, AC-3, and Chair Car & Sleeper classes to patients suffering from 'Aplastic Anaemia' and 'Sickle Cell Anaemia'
  
• Extending the facility of travel by Rajdhani and Shatabdi trains to Arjuna Awardees. Travel distance under 'Izzat Scheme' to increase from 100 kms to 150 kms.
  
• 75 additional services to run in Mumbai suburban.
  
• 18 additional services to be run in Chennai area.
  
• 44 new suburban services to be introduced in Kolkata area.
  
• 50 new services to be introduced in Kolkata Metro in 2012-13.
  
• 75 new Express trains to be introduced.
  
• 21 new passenger services, 9 DEMU services and 8 MEMU services to be introduced.
  
• Run of 39 trains to be extended.
  
• Frequency of 23 trains to be increased.
  

  Financial Performance of Indian Railways
  

  The following table shows the performance of the Railways in last year and the estimates of the Budget 2012-13.
  

  
  

  This image shows that as per the Budget estimates, the Gross Traffic Receipts of Indian Railways are going to be ` 135.70 crore for 2012-13, which is historic in itself as Railways would cross this figure for the first time. This hike is equivalent to 27% jump from the revised estimates of Railway Budget 2011-12. From where this money will come? Certainly, as we are reading in newspapers that the fares have been hiked after a decade. The political drama begun just after the budget says that how daring step it might have been for the minister, who takes such decision.
  

• Please note that the Railway Budget estimate for the year 2011-12 was a 12 per cent increase over the revised budget estimates of 2010-11. It was 13.1 % in 2007-08 and has come down to 12% last year.
  
• The problem was that Railways was unable to hike fares and that was marring the additional revenues it could garner. Last year the freight traffic projection was 993 Million Ton (MT). The performance of Railways shows that the Loading target got short of 23 MT and stands at 970 MT as of this year.
  
• Apart from that the Gross Traffic Receipts fixed at Rs. 103.9 Crore in Revised Estimates of last year have also got short by Rs. 2,322 cr over Budget Estimates of last year, which was 106.2 Crore. The following chart shows some values of Gross Traffic Receipts of Indian Railways of last years, in comparison to the current year.
  

  Operating Ratio of Indian Railways
  

  The operating Ratio was 95.0% as compared to 91.1% in Budget Estimates. The following table shows, how Railways has been not able to maintain an operating Ratio which it had planned a year before.
  

Please note that Operating Ratio is the comparison of operating expense to net sales. The smaller the ratio, the greater the organization's ability to generate profit if revenues decrease. The ministry's step to bring down the operating ratio by 10% within one FY is a bold step. This is a wishful thinking by the Indian Railways to improve the operating ratio to 84.9% for FY 2012-13 from current 95% with overall target to bring it to 74% by 2016-17.

Budget Estimates of year 2012-13

• In the coming year, the Railway plans a Freight loading of 1025 MT, which is 55 MT more than 2011-12.
  
• It expects a Passenger growth at 5.4%.
  
• The gross traffic receipts as mentioned above are Rs. 1,32,552 cr i.e. 27.6% increase over RE, 2011-12. This would include Ordinary Working Expenses - Rs. 84,400 cr, Appropriation to DRF at Rs. 9,500 cr and to Pension Fund at Rs. 8,500 cr. The divident payment is pegged at Rs. 6,676 cr.
  
• The Railways had taken loan of Rs. 3,000 cr taken in 2011-12 to be fully repaid along with interest.
  
• The Railway plans to achieve an operating Ratio estimated at 84.9%.
  

  Fare Hikes & Tariff Proposals (Minister loses job on this account)
  

• Passenger fares increased by 2 paise per km for suburban and ordinary second class; 3 paise per km for mail/express second class; 5 paise per km for sleeper class; 10 paise per km for AC Chair Car, AC 3 tier and First Class; 15 paise per km for AC 2 tier and 30 paise per km for AC I.
  
• Fares to be rounded off to the next nearest five rupees. Minimum fare and platform tickets to cost Rs. 5.
  
• Fuel Adjustment Component (FAC) in fares contemplated.
  

  Review of the Railway Budget 2012-13
  

• The Indian Railways is passing through tremendously difficult times and now this becomes explicit in the targets not getting achieved in the last year. Some of the steps announced by Railway Minister Dinesh Trivedi to prevent the Railways from going further "downhill".
  
• The budget has taken some bold steps by raising the passenger fares. The extent of the rise may not be enough. This is bound to cause the public displeasure of his party leader Mamata Banerjee's. One bolder step was his decision to alter the hitherto unchanging structure of the Railway Board by adding members for public-private partnerships, marketing, and safety.
  
• These all moves should be welcome. The minister tried to addresses a long-felt need to give top priority to both safety and earnings in an organisation, following an adage of "Service with Safety and Profit".
  
• Indian Railways has been facing crises in both the financial and operational aspects. The Budget documents show that last year Indian Railways virtually ran out of cash and had to get a loan of Rs 3,000 crore from the government. The target of Operating Ratio was left far behind.
  
• Operating Ratio which measures the extent to which operating expenses eat up revenue, has touched 95 per cent, overshooting the Budget estimate by nearly four percentage points.
  
• All these problems were despite the fact that last year, there were no pay commission-related arrears. The Budget has projected a massive improvement – by about ten percentage points – in the projected operating ratio for 2012-13.
  
• This seems incredible but may come from the substantial rise in freight rates. However, the prices have been hiked in passenger fares, the Railways has not tried to re-price itself out in the one area where it makes money: goods carriage.
  

The steps on modernisation and safety are welcome and pleasant to hear , but from where the money will be arranged is a quandary. We see that the budgetary support for the railway plan is increased substantially, yet we feel that the ability to meet internal resources generation targets remains unbelievable.