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Saturday, February 27, 2021

Rs 80,000-crore loan helps shore up Railways finances

Budget paves way for monetising assets of Dedicated Freight Corridors for ops, maintenance.

Written by Avishek G Dastidar | New Delhi |
Updated: February 2, 2021 2:53:52 am
Shown in the books as ‘Special loan for COVID-related resource gap’, amount will have to be repaid in two years.

A loan of close to Rs 80,000 crore from the Finance Ministry saved Indian Railways this year and helped it manage its finances when passenger train operations remained halted for months, and the national transporter was staring at a massive financial shortfall.

The Rs 79,398 crore loan enabled the largest employer of the government to meet this year’s pension liability of Rs 51,000 cror and make up the revenue shortfall that the transporter had started this financial year with. Shown in the books as “Special loan for COVID-related resource gap”, the amount will have to be repaid in two years. Around Rs 29,000 of that loan carries an interest.

Member (Finance) Naresh Salecha told The Indian Express that this does not mean that the Finance Ministry hs taken over the pension liability of Indian Railways—a long-standing demand of the national transporter.

“Our pension liability continues to be ours. This was a special year due to COVID so we got a loan from the Finance Ministry. We will repay the loan in two years,” he said.

This fiscal year, its appropriation to Pension Fund (money from its own revenues) has been a measly Rs 623 crore, whereas for next year the appropriation has been budgeted to be over Rs 53,000 crore.

The operating ratio of the transporter is estimated to be 96.9 per cent—riding on the loan received from the government. Next fiscal the ratio has been pegged at 96.15 per cent. Last year the ratio was 98.4 per cent. But for the loan, this was not going to be possible, sources told the Indian Express.

Salecha said that other COVID related expenses, like the manufacturing of the COVID isolation coaches, were also born from the Railways coffers.

The books also reveal that even though passenger train operations remained severely truncated and freight operations picked up only towards the latter part of the year, Railways’ expenses on diesel and electric traction remained high. It is expecting to spend Rs 10,076 crore on purchase of electricity meant to run trains this fiscal, just about Rs 2,000 crore less than what it did last fiscal. Its diesel bill will see a Rs 6,000 crore drop from last fiscal, at Rs 12,000 crore.

Next year, Railways expected to spend around Rs 3000 crore more on electricity and about Rs 1000 less on buying diesel. With increasing electrification of lines, Railways is going through a phase of using less and less diesel locomotives since past couple of years.

The precarious financial situation is also evident from the books as it has a shortfall of around Rs 46,000 crore in passenger segment. What was budgeted to be a business worth Rs 61,000 crore this year has shrunk to Rs 15,000 crore in the passenger operations segment, as per budget documents. The budgeted figures indicate that the government expects the economy to recover fully from the COVID shock, bringing back all economic activity, including travel, to pre-COVID levels next fiscal year.

Despite recovery of freight revenues towards the latter part of the year, Railways has estimated that it will earn freight revenues worth Rs 1.24 lakh crore, which is around Rs 23,000 crore less than what was projected in the last Budget. This, however, is around Rs 10,000 crore more than what it earned in the previous fiscal, in pre-COVID times.

The freight performance has seen a significant turnaround this year riding on discounts and an aggressive business policy which resulted in the transporter adding new items to its traditional freight basket even as coal, the most important commodity it carries, saw a plateauing trend. Next year it is expected to carry 1270 million tonnes of goods. This year it may end up carrying around 1210 million tonnes, which is slightly more than last year.

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