India Markets closed

Rail Budget: How rupee comes, how it goes

(KBK Graphics)

The Railways is one of the biggest organisations in the country. Its budget runs in lakhs and crores of rupees. And it continues to grow in size every year. Yet, despite the expansion, the ministry remains under-funded. “The Indian Railways require Rs 1,82,000 crore to complete 359 projects of expansion and modernisation,” the previous Railway Minister Sadanand Gowda had said in his speech last July.

In the latest Budget, the current Railway Minister Suresh Prabhu too pointed at the constant under-investment in the sector.

Here is a look at the Railway’s financial health:

1)      Income: The Railways earns income from passenger fares as well as freight charges. This brings in lakhs and crores of rupees for the Ministry. The government expects to earn Rs 1,59,248 crore in total gross receipts or revenue in the current fiscal year ending March 2015. This is short of the targeted gross income of Rs 1.6 lakh crore by 917 crore. This is because passenger earnings were estimated to rise 22.2% in the fiscal. However, this is expected to rise only 17.7%.  
Your train travel tickets together amounts to nearly 28% of the Railways’ totally revenues. It earns the ministry Rs 41,795.775 crore. This is expected to rise to Rs 50,175 crore in the next fiscal year. As a result, total revenues is budgeted to rise to Rs 1,83,578 crore, a growth of 15.3%.

Railway Budget 2015-16 at a glance

2)      Freight revenue: Ever seen trains carrying coal and other goods passing by? That is the biggest revenue generator for the railways. The Railways carries millions of tonnes of goods in the coming fiscal year. This earns the ministry Rs 1 lakh crore – 66% of its total revenues. The Railways expects freight traffic to rise in the coming sector due to a healthier economy and increase in efficiencies. It has pegged traffic to grow to 85 million tonnes in FY2015-16. This is expected to earn it Rs 1,21,423 crore.

3)      Expenditure: The Railways spends its money in many ways. Majority of its expenditure is in the ordinary operations like maintenance, cleanliness and so on. This amounts to Rs 1,08,970 crore for FY2014-15, lower than the budgeted amount by Rs 3,679 crore. This fall in amount is because of the drop in fuel prices. It does not take into account planning and execution of new projects, new railway lines and so on. For the next fiscal year, the Railways expects its Ordinary Working Expenses to increase by 9.6% even though its fuel bill is likely to shrink further. This is mainly because the Railways plans to spend more on safety maintenance and cleanliness.

4)      Pension expenditure: A significant portion of the Railways’ expenditure goes to pension. This is the money given to employees after they retire. The Railways spends Rs 29,540 crore for its Pension Fund in 2014-15. This is higher than the original Budgeted figure of Rs 28,865 crore. Pension outflow is expected to increase to Rs 35,260 crore in the next fiscal year.

5)      Investment: Its own revenues can only help the Railways pay for its bills. For all its expansion and infrastructure development activities, the ministry depends on funds from the central government as well as revenues from railway PSUs. However, even this is not enough. The ministry often borrows from the market. This year, it is expecting to see money flow in from multi-lateral development banks and pension funds as investment in Railways. It thus expects Rs 8.5 lakh crore as investment in five years.

6)      Operating efficiency: The Railways spends 91.8 paise of every rupee it earns. This is called the ‘Operating Ratio’. It is a measure of the efficiency of its operations. Lower the ratio, greater is the efficiency. The Railways showed a 1.8% improvement in efficiency in 2014-15 from the previous year. This is more than the previous Budget’s estimates. This ratio is expected to further improve to 88.5% in 2015-16, the best in the last nine years.

7)      Government support: The Railways’ internal revenues are not enough to fund all its developmental activities. For this reason, the central government sets aside a sum every year for the Railways. This is called Gross Budgetary Support. “Ministry of Finance has communicated a Gross Budgetary Support of Rs 40,000 crore for the Railway’s annual Plan,” the Railway Minister said in his speech. This money will account for 41.6% of the Railways’ total planned developmental spending or Plan Outlay of Rs 1 lakh crore for 2015-16. Internal resources can only account for 18% of the total spending. The ministry is expected to borrow Rs 17,655 crore from the market in 2015-16.