New Delhi: The economic downturn and high provisioning under the 6th Pay Commission has thrown the finances of railways into shambles forcing railway minister Mamata Banerjee substantially moderate the financial targets for the current fiscal 2009-10. The Railways also fell short to meet its budget targets for the year 2008-09.
The poor showing of the railway finances in 2008-09 forced Banerjee to reduce the targets set by his predecessor Lalu Prasad in the interim railway budget presented in February.
The drop in the rate of growth of earnings coupled with the increase in expenses in the years 2007-08 to 2009-10 has deeply affected railway’s generation of investible surplus which has dropped from Rs19,972 cr in 2007-08 to Rs12,560 crore in 2008-09 and is further expected to drop to Rs8,631 cr in 2009-10.
Total earnings which grew at 14.86% in 2008-09 is projected to grow at 7.35% in 2009-10. The operating ratio has deteriorated from 75.9% in 2008-09 to 92.5% in 2009-10.
As a result of the implementation of the 6th Pay Commission recommendations, additional outgo in 2008-09 was Rs13,600 crore and the anticipated additional outgo in 2009-10 is budgeted to be Rs14,600 crore. However, railways paid dividend liability of Rs4,717 crore in 2008-09 and targets to pay an even higher dividend of Rs5,479 crore in 2009-10.
Due to global economy meltdown there has been a fall in the demand for iron ore export and exim containers, impacting the earnings of the railways. Freight earnings which grew 14.4% in 2008-09 has been projected to grow at 7.8% to Rs58,525 crore.
“Looking at the economic downturn and three years of high performance by the railways due to economic bouyancy, the finances of railway this year looks pulled down. This is because the revenues of railways is heavily dependent on freight revenues,” said Amrit Pandurangi, executive director, PwC.
Pandurangi said that the good thing is that the new projects announced in the railway budget would not add too much to the cost of railway which may save further deterioration in its finances.
Growth rate in passenger earnings has also been declining from 15% in 2007-08 to 10.5% in 2008-09 and is now pegged at 10.8% in 2009-10. The passenger earnings target is fixed at Rs24,309 crore. The railway also could not meet the high target set for sundry earnings at Rs5000 crore in 2008-09, achieving only Rs3,250 crore. For 2009-10, Banerjee revised the target for revenue expected from commercial utilization of surplus railway lands (sundry earnings) to Rs2760 crore from the target of Rs6000 crore set in the interim budget.
“High growth in sundry earnings primarily depends on the revival in the real estate market and the ability of the railways to successfully tap this market through commercial exploitation of surplus railway land,” Banerjee said.
Banerjee accepted that in coming years railways would require increased budgetary support to meet its expansion plans till the time the world economy comes out of recession and the payment of arrears of the pay commission is completed.
asit.m@livemint.com