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This article was first published 12 years ago  » Business » 'Our priority is to consolidate what we have done'

'Our priority is to consolidate what we have done'

By Vinay Mittal and Vijaya Kanth
March 15, 2012 11:37 IST
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TrainAfter presenting the Railway Budget, Railway Board Chairman Vinay Mittal and Financial Commissioner Vijaya Kanth spoke to Business Standard on the proposals.

Edited excerpts:

How much additional revenue would come from the passenger fare rise? What is the long-term vision on this front?

Freight traffic on Indian Railways is very largely dependent on the economic scenario and the market.

We are betting that economic growth would pick up in the current financial year.

The railways would definitely be able to achieve the traffic targets.

In case economic growth itself becomes a question mark, we might have an issue.

If the passenger fare rise and five per cent passenger traffic growth is considered, we would be able to reap up to Rs 7,000 crore (Rs 70 billion).

This is a highly sensitive area.

Our priority is to consolidate what we have done and we hope to be permitted to do that.

One vision coming out of the document is that passenger fares should at least be linked to fuel price rises.

Why are IRFC (Railway Finance Corp) borrowings down from Rs 20,000 crore in 2011-12 to Rs 15,000 crore?

Any borrowing must take into consideration two factors -- ability to pay back the money and the railways' capacity to deploy those funds in productive areas, with returns of more than 14 per cent.

We have been raising money through bonds and will continue to do that.

In our estimation, Rs 15,000 crore (Rs 150 billion) would be an apt amount.

Else, we would be raising the funds from the market at 8.5 per cent interest, to invest in areas where the internal rate of return would be below 14 per cent.

This is the amount we could deploy for productive works and how we will raise the money has still to be decided, in consultation with the finance ministry.

If the finance minister were to implement the service tax, would the railways be looking at rolling back some part of the freight rate hike that it just did?

Freight has a very dynamic tariff (rate) structure and everything would depend on what the market can accept.

It would be fair enough if the market accepts and if it does not, then we will have a look at it. It is difficult to answer that question in a static manner.

What exactly is the fuel adjustment component the minister talked about?

There is a proposal that the minister is contemplating.


FAC is a system of segregating the fuel component in the cost associated with passenger services.

The FAC will be dynamic in nature and change in either direction with the change of fuel cost.

In the event of any further increase in the input costs of the railways, it will not be possible for us to keep passengers cushioned from the impact of such increases.

At present, there is no indication in the Budget that he would be implementing it. He would have a look at it if the fuel costs go haywire.

How do you propose to achieve an operating ratio (OR) of 84 per cent for 2012-13, which is around 11 percentage points better than the railways managed in 2011-12?

The surplus projected for 2012-13 is Rs 15,557 crore (Rs 155.57 billion).

The railways plan to bring down the OR from 95 per cent to 84.9 per cent in 2012-13 and to 74 per cent in the terminal year of the 12th Plan, which would be the best ever achieved.

Our earnings are growing at a faster pace than expenditure.

With around 28 per cent increase in earnings and 11.6 per cent increase in ordinary working expenses, we expect OR to be 84 per cent in 2012-13.

The railways are targeting to carry 1,025 million tonnes of revenue-earning originating traffic during 2012-13, which is 55 million tonnes more than the revised estimate target of 970 million tonnes.

The freight earnings target has been kept at Rs 89,339 crore (Rs 893.39 billion), indicating a growth of 30.2 per cent.

Similarly, passenger earnings have been projected at Rs 36,073 crore (Rs 360.73 billion), an increase of Rs 7,273 crore (Rs 72.73 billion).

Gross Traffic Receipts are expected to be Rs 132,552 crore (Rs 1,325,52 billion), an increase of Rs 28,635 crore (Rs 286.35 billion) over the revised estimates of this year.

Ordinary working expenses are estimated at Rs 84,400 crore (Rs 844 billion), which would be 11.6 per cent higher than the current year, to meet additional liabilities, along with an appropriation of Rs 18,500 crore (Rs 185 billion) to the pension fund.

To step up investment in safety, appropriation to the Depreciation Reserve Fund has been enhanced to Rs 9,500 crore (Rs 95 billion), an increase of 54 per cent over the RE of the current year.

The railways have budgeted to discharge the full dividend liability of Rs 6,676 crore (Rs 66.76 billion) to the general exchequer for 2012-13.

Union Budget 2012-13: Complete coverage
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Vinay Mittal and Vijaya Kanth in New Delhi
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