Public RelationsSlowdown shadow on return to high growth
Cash surplus after dividend is projected to decline by over 40 per cent to Rs 8,722 crore in 2009-10.
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The financial performance of Indian Railways is expected to deteriorate further in the current financial year because of the economic slowdown adversely affecting revenues and increased expenditure on account of implementing the Sixth Pay Commission to its 1.4 million employees.
Cash surplus after dividend is projected to decline by over 40 per cent to Rs 8,722 crore in 2009-10, as compared to the revised estimate of Rs 14,609 crore in the previous fiscal.
Implementing the Sixth Pay Commission (SPC) recommendations alone would involve an expenditure of Rs 14,600 crore in 2009-10, in addition to the Rs 13,600 crore already paid as first instalment in the previous financial year. From the fiscal starting April 2010, the railways would incur an additional expenditure of Rs 12,700 crore every year on account of SPC.
“For the railways to return to high growth and generate sufficient surpluses would take time, till the world economy comes out of recession and the payment of arrears of the pay commission is completed,” Railway Minister Mamata Banerjee said while presenting the Railway Budget for 2009-10.
Total revenues are expected to increase only by 7.59 per cent to Rs 90,626 crore in 2009-10, but total expenditure is slated to grow at a much faster pace of 12.76 per cent, to Rs 82,505 crore. Even this increase in revenue receipts looks ambitious in the background of the previous year’s performance. Total revenues, on the basis of revised estimates, grew by only 0.64 per cent in 2008-09 compared to the previous financial year.
Provision for future expansion down sharply
Resource allocation towards funds, which are used to finance expansion projects, are down by 40 per cent in fiscal 2009-10. Allocation to the depreciation reserve fund, development fund and capital fund has declined to Rs 7,967 crore as compared to the revised estimates of Rs 14,609 crore in 2008-09.
In particular, the capital fund saw the sharpest decline of 87 per cent to just Rs 2,642 crore in 2009-10, compared with Rs 4,965 crore in 2008-09. The depreciation reserve fund also saw a decline of 24 per cent to Rs 5,325 crore.
“The plan expenditure has been sustained in the two years of 2008-09 and 2009-10 through drawdown from our accumulated Fund Balances which may not be possible in the future,” Banerjee said. This drawdown has left the available fund balances at Rs 8,361 crore in 2009-10 as compared to Rs 22,279 crore two years back. “Railways require large amount of investments, but there is a time-lag to get returns from such investment. Ideally, it should be supported by a mix of budgetary support and private capital through the public-private partnership route,” said Kuljit Singh, partner with Ernst & Young.
The plan allocation for 2009-10 is estimated at Rs 40,475 crore, with a budgetary support of Rs 15,800 crore. The rest is funded through internal accruals (Rs 15,675 crore) and market borrowing (Rs 9,170 crore). The Budget support was hiked by Rs 5,000 crore since the Interim Budget was presented in February this year. Significantly, the Indian Railway Finance Corporation (IRFC) is allowed to issue tax-free bonds after a gap of seven years. In 2009-10, IRFC is projected to borrow Rs 9,000 crore from the market, as against Rs 6,907 crore in previous financial year.