Rai Railway Budget FY15

Railway Budget: FY15

The new Government presented its maiden Railway Budget for FY15 today. The focus of the
Budget remains on induction of technology in order to modernize and strengthen the
infrastructure of the overall railway system with greater efficiency, transparency and integrity
besides enhancing overall quality of services. Railways passenger fares and freight charges were
hiked earlier, which was outside the Budget. Therefore, there has been no fresh change in these
rates. The Budget aims at sourcing its much needed capital support from Private partnerships
and FDI for modernization (subject to Cabinet approval) and expansion of railways. The Budget
also emphasizes on improving the rail safety and security through various measures as also
enhancing passenger amenities. The various positive measures laid down in the Budget would
thus not only help in modernizing the rail system but bring in greater operational efficiency.

Financial Performance: 2013-14

Railways carried 1050.18 MT during the year. The goods earnings fell short of its
estimates by Rs.94 crore. Passengers were also less by 46 million over revised target and
its earnings were short by Rs.968 crore over the revised target.
Gross traffic receipts grew by 12.8% to reach Rs. 1,39,558 crore while the ordinary
working expenses stood at Rs. 97,571 crore which was in excess by Rs.511 crore.
Surplus for the year was Rs.3,783 crore after fulfilling the dividend commitment of Rs.
8,010 crore.
Internal revenue generation for FY14 was Rs. 11,170 crore against the revised target of
Rs. 14,496 crore.
Operating ratio deteriorated by 2.7% over the revised target to touch 93.5%.
The plan expenditure fell short of targets of Rs.59,359 core on account of non-
materialization of PPP projects.

Budget Estimates: 2014-15

Freight traffic growth pegged at 4.9% amounting to 1,101.25 MT while earnings
estimated at Rs.1,05,770 crore
Passenger growth pegged at 2% with earning of Rs. 44,645 crore.
Ordinary Working Expenses proposed at Rs.1,12,649 crore.
Pension outgo trend retained at Rs.28,850 crore
Plan outlay under budgetary sources Rs. 47,650 crore
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Economics
Railway Budget FY15 2

Market borrowings scaled down to Rs. 11,790 crore from Rs.19,805 crore.
Surplus for FY15 is estimated at Rs.602crore
Operating ratio to come down from 93.5% to 92.5% in FY15.

Key measures

In an effort to improve railway services the following announcements have been made-

Will offer Wi-Fi-services in all 'A' category trains and A1 stations.
Digitization of reservation charts at stations
Working on making railway offices paperless in five years.
E-ticketing through mobile phone as well as expanding the scope of online booking
Provision of escalators, lifts via PPP route at all major stations
CCTVs will be installed at major stations in order to keep a check on cleanliness
Recruit 4,000 Women as RPF constables for strengthening safety and security.
Revamping of the entire reservation system
Outsource cleaning services in railways
Launch of new train routes
Construction of 1785 road under bridges and road over bridges
High speed bullet trains to be launched.

Measures to improve efficiency

Proposed to restructure Railway Board
Aims to utilize the station rooftops to harness soar energy
E-procurement compulsory for procurement over Rs.25 lakh
Status of ongoing projects to be made available online.
Proposed to set up project formulation and management group
Independent Rail Tariff Authority Set-Up to Advice on Fares and Freight

Budget Implications

Firstly, the increase in freight rates of 6.5% across the board will affect prices of goods that use
railways as a mode of transport. For the industry as whole the average increases of over 6.5% in
freight rates will push up the cost of production which in turn will exert pressure on prices of
final products. There could be migration to road transport though the higher cost of diesel on
account of the price being calibrated to the market could be a countervailing factor.
Economics
Railway Budget FY15 3

The increase in freight rates (6.5%) and the increase in passenger fares (14.2%) together would
result in additional revenue mop up of Rs 8,000 crore. This is likely to partly offset the increasing
cost during the year.
Passenger friendly measures such as e-ticketing system, e-ticketing through mobile phones, free
Wi-Fi facilities in some trains, escalators and lifts at major stations, CCTVS to monitor stations,
large scale computerization, platform and unreserved tickets through internet, etc. have been
proposed. These initiatives will largely have a positive impact on various sectors particularly
information technology (IT), telecommunication and engineering.
Besides, expansion of railways with faster clearances of proposed projects in the pipeline will
positively boost the demand for industries such as steel, aluminum cables, cement, solar
equipment, electrical equipment, etc.
The modernization of the railways through induction of technology will also help eliminate
corruption and bring in more efficiency into the system.
Share of freight traffic earnings shall increase further as no shift towards substitutes such as road
transport is expected with hike in diesel prices already in place.
The Budget provides significant opportunities for Public investments via PPP mode. It also
seeks to bring in resources through FDI mode. Over Rs 6000 cr is to be mobilized through this
route. To make it more attractive tax holidays have been proposed.
Borrowings through IRFC would be Rs 11,790 cr, which presumably would be tax free bonds. This
will be useful for households and complement any effort in the Union Budget to enhance the
savings rate.

The stock market reaction has not been positive as it was expected that the Railways would go in for
higher spending. Controlled spending by the Railways could also indicate discretion in the Union Budget
to be presented on the 10
th
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Disclaimer
This report is prepared by the Economics Division of Credit Analysis &Research Limited [CARE]. CARE has taken utmost care to ensure
accuracy and objectivity while developing this report based on information available in public domain. However, neither the accuracy
nor completeness of information contained in this report is guaranteed. CARE is not responsible for any errors or omissions in
analysis/inferences/views or for results obtained from the use of information contained in this report and especially states that CARE
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Contact:
Madan Sabnavis Jyoti Wadhwani
Chief Economist Associate Economist
madan.sabnavis@careratings.com Jyoti.wadhwani@careratings.com
91-022-67543489 91-022-61443518