Net revenue projected to tumble 27%

Railway minister Mamata Banerjee has significantly lowered the ambitious revenue and expenditure targets for 2009-10 set by her predecessor Lalu Prasad Yadav when he presented the interim Rail Budget in February 2009. When compared to the 2008-09 revised estimates, however, the Rail Budget 2009-10 tabled in Parliament on Friday projects an improvement in the railways' balance sheet.

The net railway revenue and its surplus, though, are projected to tumble sharply by 27% and 58%, respectively in 2009-10 over the previous year's revised estimates. Surplus is the difference between net revenue and dividend. The railways' will pay Rs 5,479 crore dividend to the Centre in 2009-10, up from Rs 4,711 in 2008-09 RE(revised estimate). The gross traffic receipts are estimated to rise by 7.3% to Rs 88,419 in 2009-10, as compared to Rs 82,393 in 2008-09 RE, while the net working expenses are projected to rise by a much higher 14.36% to Rs 62,900 crore in 2009-10, as compared to Rs 55,000 in 2008-09 RE. This can attributed to the economic slowdown and the pay hikes suggested by the 6th Pay Commission.

As a result, railways' operating ratio - a gauge of efficiency is expected to rise to 92.5% in 2009-10, as compared to 88.3% in 2008-09. This means to earn revenue of Rs 100 in 2009-10, the railways has to spend Rs 92.5. This is deterioration to the level seen in 2002-03. The ratio has been raised by 2.6 percentage points over what Lalu has pegged in the interim budget. It stood at 75.9% in 2007-08.

The budget estimates for 2009-10 project a freight earnings target of Rs 58,525 crore, as increase of 7.7% over Rs 54,293 crore in 2008-09 RE. The passenger earnings are projected to rise by 8.8% to Rs 24,309 crore in 2009-10 as compared to Rs 22,330 crore in 2008-09 RE.

The railways cash surplus is estimated to decline and the ministry has also pruned its investible surplus. The cash surplus before dividend is estimated at Rs 14,201.27 crore in 2009-10, over 26% lower than Rs 19,390 crore in 2008-09 RE. This will be the second consecutive year of a fall in cash surplus. Lalu has pegged it at Rs 18,846.77 crore.

The contrast between the Mamata-Lalu budgets comes out much more starkly when one looks at the resources allocated to the development fund and the capital fund. While Lalu did not contribute any money to the development fund in 2009-10, Mamata has decided to put in Rs 2,000 crore in 2009-10, as compared to Rs 1,391 crore in 2008-09 RE.

For the capital fund, Mamata has decided to allocate just Rs 642.26 crore in 2009-10, as compared to Rs 4964.56 crore in 2008-09 RE. Lalu had set aside Rs 5,572.26 crore for the capital fund in February. Resources for the depreciation reserve fund has been lowered to Rs 5325 crore in 2009-10, as compared to Rs 7,000 crore in 2009-10 RE.

The total expenditure has been pegged at Rs 82,505 crore in 2009-10, up by 12.7% from Rs 73166 crore in 2008-09 RE. Despite a resource crunch, the railways would step up plan expenditure by 10.8% at Rs 40,745 crore for laying new lines and gauge conversion in the 2009-10, as compared to Rs 36,773 crore spent in 2008-09.

The ministry got Rs 5,000 crore more from the finance ministry over what it got in the interim Budget. Besides, the railways will fund plan expenses through internal resources of Rs 15,675 crore and market borrowings of Rs 9,170 crore. Railways' subsidiary Indian Railway Catering and Tourism Corporation has been allowed to issue tax free bonds.