Indian Railway Budget 2012-2013 - An analytical perspective

Posted in Finance Articles, Total Reads: 5741 , Published on 15 March 2012

"The railways is one of the most important infrastructure. Without the railways growing, India's GDP cannot grow,"
These were the words of the Dinesh Trivedi the BREAKAWAY MANTRI who announced his first rail budget focused towards modernization, safety, consolidation and decongestion.
Indian railways are the heartbeat of a nation having a population of 1.2 billion. From the richest in the cities to the poorest in the rural areas, all have their lives and trust dependent on the mighty Indian Railways. And like always, the Railways budget 2012-2013 springs across an anticipation and anxiety amongst a billion.  

Following are the highlights:
RAILWAY BUDGET 2012 History made- For the 1st time in a decade passenger fares have been hiked by 2-30 paise across all segments.
Impact on the government and economy:

With the increase in passenger fares and freight rates the government is targeting a incremental revenue of Rs 4000 cr.

The financials for 2012 and 2013(E) have been given in the table below:

                               (figures in Rs cr.)

Gross Traffic Receipts 1,03,917 1,06,239
Total Working expenses 96,773 94,305
Net Revenues 7,144 11,934
Dividend 5,652 6,676
Net Surplus 1,492 5,258
Freight loading target 970 1,025

The government is targeting an increase in the bottom line with focus on reduction on costs and improvement in revenue.

Ratio analysis- The operating ratio of the railways i.e. the amount spent on running the network against revenues will be lowered to 84.5 percent from the current 95 percent.
Contribution to GDP- Indian Railways will invest Rs 7.35 lakh crore during the 12th Five Year Plan period (2012-17), against Rs 1.92 lakh crore in the current one.

By then, it will double its contribution to India's gross domestic product to 2 percent.
Employment generation- Railways is expected to recruit over one lakh people in the next financial year.
Impact on Industry
Stock market impact- The budget has outlined Rs.828 cr for electrification. Companies like KEC International and Kalpataru Power can gain from increase in outlay of railway electrification projects.
Freight- Logistics Corporation will be created for providing logistics solutions for rail users. The industry would benefit from this as railways is one of the most important sources of transport.

Manufacturing- The minister has proposed to set up the following:

  • A wagon factory at Sitapali (Ganjam District of Orrisa)
  • A rail coach factory with the support of Government of Kerala at Palakkad
  • Two additional new manufacturing units for coaches in the Kutch area in Gujarat and at Kolar in Karnataka

Impact on Infrastructure- The minister has suggested capital investment of Rs 560,000 crores over next 5 years half there are several question marks on source of funds. Some of the important infrastructure initiatives are:
Stations- To create 1000 stations through PPP route in 5 years
Tracks - Addition of 725 km new lines in one year
Safety- An investment of Rs.2002 cr has been proposed for signaling systems in FY12-13. One significant development here is installation of Train Protection & Warning System (TPWS) thereby eliminating chances of collision of trains. TPWS is proposed to be installed on more than 3,000 route kms,

It is proposed to set up an independent railway safety authority, unmanned level crossings would be abolished in the next five years. A special purpose vehicle would be set up to achieve better safety protocols.

Impact on customer

  • Connectivity- 75 express trains, 21 passenger trains, extension of 39 trains and increase in frequency of 23 trains
  • Introduction of satellite based real time train information system (SIMRAN) to provide train running information to passengers through SMS, internet, etc.
  • Rs 1102 crores has been allocated for passenger amenities in FY 13 as compared to Rs 700 cr in previous year
  • Installation of 321 escalators at important stations of which 50 will be commissioned in 2012-13.
  • Setting up of AC Executive lounges at important stations.
  • Introduction of Alternate Train Accommodation System to accommodate waitlisted passengers on alternate trains.
  • SMS alerts for all trains to be introduced.

Impact on Environment
The railway ministry has taken the following Green Initiatives

  • Setting up of 72 MW capacity windmill plants in Andhra Pradesh,Karnataka, Kerala, Tamil Nadu and West Bengal.
  • Commissioning of two bio diesel plants at Raipur and Tondiarpet.
  • Setting up of 200 remote railway stations as ‘green energy stations powered entirely by solar energy.
  • Corrosion from night soil being discharged from toilets on tracks costs Rs 350 crore annually. Green toilets will be installed in 2,500 coaches in the next one year.

Other Initiatives - It is proposed to set up a Rail Khel Ratna Award to be given to 10 sportspersons every year.
With the bold initiative of hiking the passenger fares there is bound to be a lot of political hullabaloo. However, what really counts is the opinion of a billion Indians.

This article has been authored by Bhavin Chotai.


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