Railway Budget – Welcome Baby Steps Towards Prudence

By Author: Vamsi Krishna
Total Articles: 27
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The Railway Budget for fiscal year 2013-14 has signaled the Government’s resolve to move towards the path of fiscal discipline. A few steps have been initiated to restore the financial health of Railways.

Freight tariffs linked to fuel prices

Accordingly, the Railway Minister has linked the freight rates to changes in fuel prices through a mechanism called Fuel Adjustment Component (FAC). This means that the freight tariffs will be periodically adjusted depending on the revision in fuel prices. The current hike is by ~5-6%.

The proposed FAC move, which comes into effect from April 1, is neutral to slightly negative for Cement, Iron Ore, Steel and Power producers.

Passenger fares left unchanged

Meanwhile, the passenger fares have been kept out of this purview as of now in view of the 15-20% hike announced in January.

Railway is set to lose INR246bn on its passenger train operations in FY13.

Railway Tariff Regulatory Authority formed

The Railway Tariff Regulatory Authority (proposed in previous year’s budget) has been formulated and is currently at the inter-ministerial ...
... consultation stage.

A new fund - Debt Service Fund - to be set up to meet committed liabilities of debt servicing for World Bank and JICA loans for Dedicated Freight Corridor (DFC) and other future liabilities.

Freight loading to rise 4%; Traffic receipts to jump 14%

Freight loading is expected to increase to 1,047MT in FY14 from 1,007MT in FY13 (~4% increase).

Passenger traffic is estimated to grow by 5.2% in FY14.

Gross traffic receipts are estimated to increase to ~INR1.43tn in FY14 from ~INR1.25tn in FY13 (~14% jump). This is against the 27.6% yoy growth pegged in FY13BE (20.7% growth in FY13RE).

Freight traffic receipts are forecast to grow by 9% yoy in FY14 while the passenger traffic receipts are estimated to grow by 30% yoy.

Operating ratio (expenses/earnings) is estimated to be ~87.80% in FY14 compared to 88.80% in FY13 and 94.90% in FY12.

DFC contract awards pegged at 1500 km

The Railway will award contracts for 1500 km under the Dedicated Freight Corridor (DFC) program in FY14 versus 340 km achieved in FY13.

Capex on metropolitan transport is expected to double to INR23.50 bn

Railway to get INR 26,000 Cr from Union Budget

Union Budget for FY14 will provide the Railways ~INR26,000 crore as against ~INR24,000crore in FY13.

Market borrowings for Railways in FY14 is budgeted at INR15,000 crore, same as last year.

Author Bio

Ritish Kumar is a finance enthusiast and a keen observer of the Indian share market. In this series of articles, he talks about investing in stock market and staying profitable.