Announcing the highest ever investment by Indian Railways in a year, Mamataa Banerjee declared Rs57,630 crore plan outlay for the financial year 2011-12 and has targeted a gross traffic receipt of Rs1,06,239 crore as against Rs 94,840 crore for the financial year 2010-11.
Maintaining a status quo on the passenger and freight rates, she has aimed to fund Rs20,594 crore from market borrowings (through tax free IRFC bonds), Rs20,000 crore from gross budgetary support, Rs14,219 from internal resources, Rs1,041 crore from diesel cess and Rs1,776 crore through external source of financing through PPP, WIS.
“Normally IRFC raises between Rs9,000-R10,000 crore annually for leasing of rolling stock. Next year, an additional amount of Rs10,000 crore will be raised through tax free bonds for financing select capacity enhancement works.
Railways will ensure servicing this debt of tax-free bonds,” said Banerjee in her speech.
Experts say raising funds through tax free bonds should not be a problem, but the liquidity situation will play a key role.
“Unchanged passenger fares and freight rates raises a question as to how is the government going to service the undertaken borrowing. Also, additional borrowing of Rs20,594 crore will be a challenge unless the liquidity conditions in the economy improve. Given the liquidity crunch presently and an expected high borrowing programme of the government, this additional borrowing, which comes partly with tax benefits, will compete for funds,” said Madan Sabnavis, chief economist, Care Ratings.
Functioning at an operating ratio (money spent to earn Rs100) of 92.1% excluding the dividend liability in the financial year 2010-11, railways has set a target of bringing the operating ratio down to 91.1% in the next financial year.
“An operating ratio of below 90 is better as you need to have a 10% margin and with market borrowings being doubled they will have to see how they can repay,” said an expert who did not wish to be named.
In the financial year 2010-11 railways suffered a loss of Rs1,500 crore on account of disruption of train movement and a loss of Rs2,000 crore due to ban on export of iron ore.
“I am now making an offer that whichever state ensures trouble-free train running for the whole year, shall be given two new trains and two projects as a special package,” the minister said.
Railways has also set a loading target of 993 MT in 2011-12 as against a loading target of 924 MT in 2010-11 which was reduced by 20 MT from 944MT. What's in it for you
With highest ever allocation of R57,630 crore, the budget looks optimistic on moving towards building of a strong railroad infrastructure. The budget provides significant opportunities for private investment with 85 proposals for public- private partnership plans. Overall infrastructure investment will receive a boost.