Railway Budget 2013-14 - SPA Securities

Railway Minister Mr. Pawan Kumar Bansal while presenting his maiden Railway Budget laid prime importance to financial viability and fiscal discipline of the Railways without compromising on safety and passenger amenities, unlike many of his predecessors.

Linking of freight rates to movement in fuel prices is a step in the right direction to bring the financials in order. Further setting up a new Rail tariff commission will insulate tariffs from political interference. Passenger fares, as expected, were left untouched after the hike last month, given the impending general elections next year. The move to introduce a new premium class of coaches, called Anubhooti, over and above the existing classes, is a smart way of raising average fares.

Leveraging on India's prowess in information technology is a move in the right direction as it will improve passenger and freight services. Further investment is being taken up in a number of key areas, to upgrade safety, lay new lines, double and extend existing lines, electrify new lines. It has also been decided to fast-track investment in some lines that would connect ports and coal and iron ore mines. The minister has announced a number of additional amenities for passengers - increased booking time on the internet, upgradation of the technology to enable as many as 1 lakh people to log on at the same time - a nextgen e-ticketing system, better stations,more executive lounges and of course, more trains - 67 of them- and a host of other benefits.

Although railways failed to garner INR 1.35 lakh crore as targeted in 2012-13 because of rollback in passenger fare increases, increase in diesel prices and slowdown in freight, it did not ask for supplementary grants and repaid (earlier than scheduled) the loan sought in addition to gross budgetary support. Improvement in freight loading despite economic slowdown comes as a welcome surprise. The drop in the operating ratio below 90% is a matter of great relief. Assurance to return INR 3000 crs of borrowing that the railways had done during last year along with interest to the central treasury is appreciable.

Key Highlights 2013-14

- Indian Railways enters the 1 bn tonne Select Club joining Chinese, Russian and US Railways. It also joins Select Club running freight trains of more than 10000 tonne load.

- Highest ever plan outlay of INR 63363 cr for 2013-14, to be met through Gross Budgetary Support INR 26,000 cr, Railway Safety Fund INR 2,000 cr, Internal Resources INR 14,260 cr, Market Borrowing INR 15,103 cr and EBR - PPP INR 6,000 cr.

- Gross Traffic Receipts for 2012-13 fixed at INR 1,25,680 cr in RE, fell short by INR 6,872 cr over Budget Estimates. Gross Traffic Receipts for 2013-14 fixed at INR 1,43,742 cr i.e. an increase of 18,062 cr over RE, 2012-13.

- Loading target revised to 1007 MT against 1025 MT in BE in 2012-13. For 2013-14, Freight loading increased by 40 MT to 1047 MT.

- Targeting to further improve Operating Ratio to ~87.8% in 2013-14, after successfully reducing it from 94.9% in 2011-12 to 88.8% in 2012-13.

- Excess for the current year is pegged at INR 10,409 cr as against the budget amount of INR 15,557 cr. Railways hopes to end 2013-14 with a balance of INR 12,506 cr and with INR 30,000 cr in 2017.

- Freight earning target for FY14 estimated at INR 93554 cr up by 9% on a YoY basis. Number of passengers likely to increase by 5.2 % in FY14. Targeted revenue INR 42210 cr.

- Target of INR 1000 cr each fixed for Rail Land Development Authority and IR Station Development Corporation to be raised through PPP in 2013-14;

- A new fund named "Debt Service Fund" to be set up to meet committed liabilities of debt servicing.

- 12th Plan railway size to be INR 5.19 lakh cr, with gross budgetary support of INR 1.94 lakh cr. INR 1.0 lakh cr to be raised from public-private partnership and INR 1.1 lakh cr through internal resources in the 12th Plan.

Source : Equity Bulls

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