Capital expenditure: Less than a quarter remaining, target only half way through

The total expenditure incurred in the 24 main plan heads that signify actual asset creation in Railways during a particular year, the expenditure, so far, is just about Rs 600 crore more than last year’s figures.

Written by Avishek G Dastidar | New Delhi | Updated: January 18, 2017 5:30 am
Capital expenditure, Extra Budgetary Resources, Indian Railways, railway budget, rail budget, railway infrastructure, Institutional Financing, indian express news, india news, business news The target of capex being Rs 1.17 lakh crore, around Rs 23,000 crore more than last year’s actual capital expenditure achieved, will eventually include around Rs 18,000 crore worth of works done by partnership ventures. Illustration: C R Sasikumar

Despite assured funding, Indian Railways is struggling to spend the money towards infrastructure as it lags behind in speed of capital expenditure (capex), with less than three months to go before the financial year closes and just a month before the Budget.

Unable to execute works in the required speed, it could spend only around 50 per cent of the assured funds allocated under various major plan heads by December 2016, documents available with The Indian Express show. This is a couple of per cent less than last year for major plan heads.

The total expenditure incurred in the 24 main plan heads that signify actual asset creation in Railways during a particular year, the expenditure, so far, is just about Rs 600 crore more than last year’s figures.

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Moreover, its proactiveness in taking loan from the LIC of India to fund high-returns works is not matched by the rate at which it is actually able to utilise the borrowed money as only 24 per cent of Extra Budgetary Resources (Institutional Financing)- or about Rs 5,000 crore out of the budgeted Rs 20,985 crore has been spent so far, signifying a lack of appetite for the borrowed funds.

In doubling of lines, funded majorly by borrowed (assured) money, and which does not involve acquiring of land since almost all doubling works happen on land owned by Railways, the utilisation of money is a dismal Rs 4,547 crore or around 20 per cent of the allocated Rs 25,000 crore, records show.

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The target of capex being Rs 1.17 lakh crore, around Rs 23,000 crore more than last year’s actual capital expenditure achieved, will eventually include around Rs 18,000 crore worth of works done by partnership ventures.

Sources said delay in finalisation of high-value tenders across Indian Railways is one of the reasons behind the slothness. Railway minister Suresh Prabhu in one of his major policy decisions two years ago had delegated all the minister’s powers in matters of tenders in favour of Railway Board members, zonal general managers and downwards.

What this means is that in the next three months, there will be ample scope for fund managers in Railways to book expenditure in the name of advances for works to be done next financial year to get as close to the target as possible even though the worth of actual assets created this year will be much less.

For those who have been at the helm of affairs, these are telltale signs.

“I don’t know how they will meet the targets at this rate. This means that despite the delegation of powers down the ranks, the organisation is unable to come together to perform,” said Sanjoy Mookerjee, who retired as financial commissioner last year.

By December, the total capex in major plan heads has been Rs 50,823 crore, excluding the expenditure on account of partnership entities.

This is almost as good as the figures achieved last year, which means despite an increased budget to spend, the transporter’s ability to spend remains more or less the same.

For next financial year, Railways has got Rs 48,000 as Gross Budgetary Support. It’s pace of spending money under capital fund, so far, has been just about 58 per cent or around Rs 19,334 crore.

In matters of safety, the funds related to works on level crossings and such infrastructure saw utilisation of between 51 and 57 per cent by December.

Prabhu, sources said, has insisted that the Budget targets be met no matter what.

As per officials in zonal railways and construction organizations, there is a propensity to show expenditure in the books in order to achieve the never-before figure of capital expenditure.

Pace of spending is the real indicator of how much work Railways is able to get done in a given period.

Unlike other ministries, Railways has the advantage that all the implementing agencies for expenditure, like construction organisations, PSUs, and zonal railways are either directly or indirectly controlled by the Railway Board.

“This means there is something seriously wrong. Most probably managerial follow ups are not happening as effectively as they should for a large capex target as this one. The implementing agencies are not executing work in the required pace,” said Arunendra Kumar, former chairman, Railway Board.

An extra Rs 10,780 crore that Railways got last year after much bargaining and haggling with the finance ministry as safety fund, has also seen sub-optimal utilisation at around Rs 5,809 crore or around 53 per cent.

In fact in the three main works concerning new lines, doubling and gauge conversion, the total expenditure so far has been just about Rs 600 crore more than last year.

According to Subodh Jain, former Railway Board Member (Engineering), the capital expenditure figures this year show lack of intention.

Two years ago, Prabhu had announced in Budget that Railways would eventually go the way of awarding Engineering Procurement Construction (EPC) contracts. As is the global norm, these contacts are given in large value works wherein one big player does everything from producing the detailed engineering design of the project, procurement of materials and the actual construction. The nature of execution and management in EPC contracts is believed to produce results faster with less hassle in terms of overseeing of work.

“If they wanted to do EPC contracts, they would have done so but they just do not have the intention, that’s my opinion. How fast can the same horse continue to run? Singly beating the horse to run faster would hardly produce results,” Jain said.

Railways’ pace of capex has always been a matter of contention. Two years ago, the Prime Minister’s Office (PMO) wrote a letter to Prabhu expressing concern on the delay in spending money and getting works done. In fact, the finance ministry had also slashed its Gross Budgetary Support citing same reason. This time around, when it is the last cycle of independent budgeting exercise for Railways, the slowness in spending could weaken the transporter’s case before the finance ministry in negotiations for more funds.

After being rapped by the PMO and the finance ministry in 2015, Railways had struggled to eventually reach the highest ever capex figure of Rs 93,794.84 crore in 2015-16.

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