At a time when Prime Minister Manmohan Singh is pushing for investment in major infrastructure projects, the Indian Railways is forced to scale down its Plan size this year by over five per cent, following Rs 3,150 crore (Rs 31.5 billion) shortfall in its earnings.
The reassessed Plan size for the railways in 2012-13 has already shrunk to Rs 56,950 crore (Rs 569.5 billion) from Rs 60,100 crore (Rs 601 billion) after the first quarter.
It has slashed the budget for signal and telecommunications works by around 50 per cent, down to Rs 1,007 crore (Rs 10.07 billion) from Rs 2,002 crore (Rs 20.02 billion).
According to a railways official, "The plan expenditure has been reduced under the internal resource component by around Rs 3,150 crore (Rs 31.5 billion), in view of the resource constraints faced by the railways."
With the rollback in the passenger fares after Mukul Roy took over as the railways minister, the reassessment of the plan size was inevitable.
Railways fell short of internal accruals by Rs 3,500 crore (Rs 35 billion) as a result of the rollback, the official said.
Though Roy had committed he would find some alternative means of financing the plan size, there had been no success on this front.
The planned expenditure of the railways has been Rs 11,656 crore (Rs 116.56 billion) in the first quarter of 2012-13, which accounts for around 20 per cent of the reassessed budget grant.
Among the key heads under the Plan expenditure are: New lines, gauge conversion, track renewals, bridge works, electrification projects, etc. Around 20 to 25 per cent of the reassessed budgeted plan expenditure has been spent in the first quarter.
The plan size of Rs 60,100 crore was expected to be financed by Gross Budgetary Support (GBS) of Rs 24,000 crore (Rs 240 billion), railways safety fund of Rs 2,000 crore (Rs 20 billion), internal resources of Rs 18,050 crore (Rs 180.5 billion) and extra budgetary resources of Rs 16,050 crore (Rs 160.5 billion), which includes market borrowings of Rs 15,000 crore (Rs 150 billion) through Indian Railways Finance Corporation, a railways public sector undertaking.
In the Rail Budgets of 2011-12 and 2012-13, planned expenditure of Rs 57,630 crore (Rs 576.3 billion) and Rs 60,100 crore (Rs 601 billion), respectively, was claimed as the highest-ever planned expenditure in a single year. Mamata Banerjee presented the In 2011-12 Rail Budget, while Dinesh Trivedi presented the 2012-13 one.
In 2011-12, against the targeted grant of Rs 57,630 crore, the railways spent Rs 44,914 crore (Rs 449.14 billion).
The target was cut by 22 per cent, finally. In 2012-13, the plan size of Rs 60,100 shows signs of wearing off with the first reassessment.
According to a senior railways official, "the absorption capacity of the project on an annual basis is also inflated sometimes to make the overall plan size look big.
"At present, the railways should focus on speedy completion of planned heads."
The railways should ensure that the entire allocation under GBS is fully utilised. In case the funds are not utilised within the timeframe, these should be surrendered immediately, rather than waiting till March 2013, so that the money is not locked in.
The railways cannot divert the GBS funds to any other purpose.
If it fails to utilise a part of the GBS money in a year, the funds lapse, the official added.