Finance Minister may push Railway CAPEX to Rs.1.50 Lakh Crore; may levy Cess to fund Rail Safety

The Indian Railways (IR) is a behemoth employing 1.3 million workmen, lifting more than 1 billion tonnes of freight annually and carrying 24 million passengers in its 12,000 passenger trains each day. Only a few railway systems in the world match or outdo these indices, but one factor that no other railway had matched was that the Indian Railways had its own budget – to be presented every year on the floor of the Parliament. At least this was the case until last year. 2017 will go down in history as the first year when the Rail Budget was subsumed in the General Budget.

NEW DELHI:  Indian Railways could get a bonanza from the Centre to put its house in order and retrieve its lost credibility, which has taken a beating on account of series of accidents in the past few months.

Government sources privy to the development said that central gross budgetary support (GBS) for railways could see a reasonable increase in the upcoming Union budget to aid the transporter’s plan to increase capital spend on projects that strengthens safety and security feature of its network and focuses on consumer experience.

As it spurs growth by scaling up public spending, the government is likely to substantially increase Indian Railways’ annual CAPEX up to Rs 1.50 lakh crore in FY18, up about 20 per cent over the current financial year.

This will be the highest-ever capital outlay for the public transporter, affirming the role of the public transporter in boosting the economy.

A major chunk of the outlay will come from the market via institutional and multilateral borrowings, but the Centre would also pump more budgetary money as railways’ surplus from internal generation is expected to be a meager Rs 8,500 crore in FY 17, lower than the previous financial year.

Budgetary support for the next fiscal could be Rs 50,000 crore. The GBS for railways is about Rs 45,000 crore for the current fiscal.

Government sources said that with Centre expected to generate a big surplus of funds post-demonetisation and no pressure to cut down on expenditure to maintain fiscal deficit, funds would be made available to the railways to bolster its route network and capacity augmentation.

Ending a 92-year-old tradition, the rail budget, which was earlier presented separately, has now been merged with the Union budget.

Besides, the Union budget has this time been advanced for speedier implementation of projects.

Claiming that the budgeted plan outlay for the current fiscal would be achieved, a senior official made a strong case for higher spending target for next year.

“We expect our plan outlay would be pegged at Rs 1.3-1.5 lakh crore. In the first nine months of FY17, we have already spent Rs 68,059 crore on capital expenditure compared to Rs 53,118 crore in the corresponding period last year,” he said.

It may be noted that the spending of Rs 68,059 crore in the nine months accounts for only 56 per cent of the budgeted outlay of Rs 1,21,000 crore for the full year.

It looks very difficult for railways to achieve its annual target with almost half the task is needed to be completed in the January-March period.

Seeking to make up for years of empathy towards rail infrastructure, the railways has decided to invest a whooping Rs 8.65 lakh crore in five years. It has been earmarking higher spending targets for the last two consecutive Rail budgets.

On February 1, this year, when the Finance Minister presents his General Budget, he will set the tone for the relevance of Indian Railways in the country’s ethos and future health. It will be instructive to see how much time he devotes to the rail sector in his speech.

About Rs. 10,000 crore will likely be earmarked from the Central Road Fund (CRF) that is collected by levying a cess on diesel and petrol at present for safety-related works

The Finance Ministry has agreed to partially fund the creation of a dedicated railway safety fund in the upcoming Union Budget to be presented on February 1.

At a time when train derailments have increased to a six-year high of 74 till January 23 this year compared to 65 in 2015-16, this may prompt the Railways to bring back a cess on railway tickets to fund safety efforts.

The dedicated rail safety fund is proposed to be utilised for track improvement, bridge rehabilitation works, rolling stock replacement, human resource development, improved inspection system, safety work at level crossings, among other things.

The Railway Ministry had requested the Finance Ministry to create a non-lapsable safety fund named ‘Rashtriya Rail Sanraksha Kosh’ over five years. However, the finance ministry is likely to grant a fresh infusion of only ₹5,000 crore in the upcoming financial year out of the initial proposed corpus of ₹ 20,000 crore.

Central Road Fund

About ₹10,000 crore will likely be earmarked from the Central Road Fund (CRF) that is collected by levying a cess on diesel and petrol at present for safety-related works. The Railway Ministry, that was expecting an annual budgetary support of ₹20,000 crore over five years from the Finance Ministry for the proposed ₹1,19,183 crore safety fund, may now be asked to fund the remaining ₹5,000 crore for the initial corpus from its own resources.

Now, it may either have to bring back a cess on rail tickets to finance its share of Rail Safety Fund or look to fund it from non-budgetary resources.

“We were not seeking this fund immediately. We were saying, over a period of time, over a five-year period. On average around ₹20,000 crore per year we were looking for as a support or as a grant from the Ministry of Finance to take care of this assets which were stressed so that we are able to improve the safety scenario in Indian Railways,” Railway Board Chairman A.K. Mittal had told the Parliamentary Standing Committee on Railways in December 2016.

Budgetary support

“The proposal to set up the Rashtriya Rail Sanraksha Kosh fund has been agreed to, but we are told that ₹5,000 crore will come as budgetary support from the Finance Ministry and ₹10,000 crore will flow into the fund from the CRF that we already receive every year,” a senior Railway Ministry official said on conditions of anonymity.

In 2001, when a Special Railway Safety Fund of ₹17,000 crore was created, the Railways raised ₹5,000 crore through safety surcharge on passenger fare and the remaining ₹12,000 crore came from the Finance Ministry.

Back then, the Railways levied a fee of ₹1 for second class ordinary trains and ₹2 for second class Mail or Express trains per person. For other classes, the surcharge on tickets had ranged between ₹10 and ₹100 depending on the class and distance of journey.

The Railways had asked for setting up ‘Rashtriya Rail Sanraksha Kosh’ based on the recommendations of a high-level safety review committee under former chairman Atomic Energy Commission Dr. Anil Kakodkar.

Implementation hurdle

The Committee, which submitted its report in 2012, had projected an investment requirement of ₹1 lakh crore on safety over five years. The Centre has so far fully implemented 22 out of 87 partially or fully accepted recommendations made by the panel.

“Bulk of the recommendations involved either the introduction of some technology that was under trial or improvement of the asset quality which required money. That is why we have not been able to fully implement the recommendations,” Mr. Mittal had told the Parliamentary Committee.

He also told the committee that since both the Union and Railway Budgets will be merged for the first time, Finance Ministry “will be more amenable” to the Indian Railways’ request to fund a substantial portion of the railway safety fund.