Railway ministry sets about plugging revenue gap

Last Updated: Fri, Apr 06, 2012 05:20 hrs
(Blank Headline Received)

After rolling back the increase in passenger fares, the railway ministry, with a deficit of about Rs 5,000 crore, is now struggling to get the Budget math right.

Railway minister Mukul Roy had announced the rollback in fares during the vote-on-account last month. However, with the Budget yet to be passed, the minister is thinking of alternative means of finances, especially the route of increasing the revenue target through land utilisation.

To stick to the budgetary estimate of 84 per cent operating ratio and surplus of Rs 15,557 crore, Roy desperately needs to show additional revenue generation from other sources. Operating ratio, or the ratio of total working expenditure to gross traffic receipts, is a measure of railway efficiency. Since freight rates were already raised before the Budget, the only option before the ministry now is to garner more revenue from non-core activities like land utilisation.

However, a senior railway ministry official expressed doubt on the ability to raise the entire deficit amount through land utilisation. The railways was able to earn just Rs 300 crore in 2011-12 from the development of railway land by the Railway Land Development Authority. "Raising money to the extent of about Rs 5,000 crore is very unlikely through land utilisation in this financial year. First, the finance ministry would have to give the mandate for commercial utilisation of government land," he said.

In March 2011, the finance ministry had notified its approval was necessary for the sale, grant, assignment, allocation, or disposal of any government asset or assets created from government funds. The process of identification of land, its valuation and bidding would take at least nine months. Even then, only 20 to 30 per cent of the assessed land cost was paid as the first lease amount, the official said.

If a realistic approach is adopted, the railway surplus would be squeezed by about Rs 5,000 crore to about Rs 10,500 crore, while the operating ratio would inflate from 84 to about 88 per cent.

When the Railway Budget was presented on March 14, Roy's predecessor, Dinesh Trivedi, had proposed the Plan size of Rs 60,100 crore be funded by a gross budgetary support of Rs 24,000 crore, internal generation of Rs 18,050 crore, a Railway Safety Fund of Rs 2,000 crore and Rs 16,050 crore of extra budgetary resources.

The challenge before the railways is it has to maintain the Plan size of Rs 60,100 crore and the fund balance of Rs 5,743.53 crore, while providing for the repayment of Rs 3,000 crore of loans in 2012-13. "Scaling down the fund balances, deferring Rs 3,000 crore of loans or the dividend will need to be exercised to keep the Plan outlay intact. If the government does not go for any of these options, the Plan size will need to be cut," said a senior railways official. The railway ministry has budgeted the withdrawal of Rs 3,000 crore from the development fund to repay the loan to the Union government in 2012-13.

The path the railway ministry chooses to fix its budget would remain unknown till the Railway Budget is passed in Parliament. So far, only the 'vote-on-account' expenses of the ministry for the next two months have been passed on a pro-rata basis. The standing committee is in talks with the railway board to give a concrete shape to the organisation's finances.

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