IN THE first merger of the Rail Budget with the General Budget on Wednesday, the Railways Ministry was reportedly caught unawares by the government’s announcement that three of its public sector units (PSUs) would be listed in the stock market.
Sources said the announcement came barely two days after the issue was first discussed at a meeting on Monday. With no indication that the future of its PSUs was up for discussion, the ministry did not send any Railway Board member for the meeting. A joint secretary-level officer and an additional member attended the meeting with NITI Aayog officials and Secretary, Department of Investment and Public Asset Management (DIPAM).
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According to sources, the Railways officials were only asked if the ministry had any objection to the listing of some of its PSUs for better fund infusion and market competitiveness. The need to energise the PSUs and bring them out of their “comfort zone” was discussed, said sources.
Taking the meeting as the first step, the ministry was under the impression that the process had just begun and it would get back with details, like a possible roadmap. The Railway Board, the ministry’s highest decision-making body, had not even discussed the issue yet.
But the government on Wednesday announced the listing of three of its PSUs — IRCON (Indian Railway Construction Company Limited), Indian Railway Finance Corporation, and Indian Railway Catering and Tourism Corporation.
Sources said the Board will now discuss the issue, after which a proposal will be sent to DIPAM, before a Cabinet note is finally sent.
While the government has been seeking in-principle approval from the Railways to list these companies, the ministry was not too keen, and the government’s seriousness or urgency was never conveyed before Wednesday.
IRCON was listed earlier, but was voluntarily delisted in 2011. Among other things, it also does construction work in areas considered strategically sensitive. There is concern over sharing such information with equity investors.
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Apart from this, the only takeaway for the Railways from the Budget is the creation of the Rs 1 lakh crore Rashtriya Rail Sanraksha Kosh (RRSK) for five years — Rs 20,000 crore per year — for critical safety upgrades. Railways has budgeted its share of Rs 5,000 crore in the annual corpus from its funds and has not built in any safety cess on tariff yet. The total budgetary support, including Rs 10,000 crore from the Central Road Fund’s diesel cess and additional Rs 5,000 crore towards RRSK, is Rs 55,000 crore.
A fare hike is likely next fiscal, said sources. In its financial statements in the Budget, Railways has indicated that next fiscal, it will carry only 0.2 per cent more passengers than this year while its earnings from the passenger segment will increase by 4.4 per cent. Sources said an overall impact of 7 per cent hike in fares has been deliberated.
In freight, Railways has projected a modest 6.5 per cent growth, carrying an estimated 1,165 million tonnes of goods in 2017-18.
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Jaitley did not mention the Operating Ratio (OR) — a key indicator of the financial health of the transporter. Figures show that the Railways expects to close with an OR of 94.9 per cent this year — the worst in four years. And for next year, it expects the OR to be around 94.5 per cent, indicating that it does not expect business to be great.
The size of its total business, as per its own projections, will be around Rs 1.89 lakh crore, a 10 per cent jump from this year’s Rs 1.72 lakh crore. It will commission 3,500 km of railway tracks — the highest ever — with a capital expenditure of Rs 1.31 lakh crore.
The Railways got only a three-and-a-half minute mention in Jaitley’s speech, during which he mostly read out the ministry’s proposals. Officials said that from next year, Railways may feature even less in the Budget speech.
“The merger of the Railways Budget with the General Budget is a historic step. We have discontinued the colonial practice prevalent since 1924. This decision brings the Railways to the centrestage of the government’s fiscal policy and would facilitate multi-modal transport planning between Railways, highways and inland waterways. The functional autonomy of Railways will, however, continue,” said Jaitley.
“It is a growth-oriented Budget,” Railways Minister Suresh Prabhu later said. “The PM’s imprint is all over the Budget.”
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