New Delhi: Hinting at greater reliance on extra budgetary resources (EBR) to fund railway projects on a massive scale, the railways minister Suresh Prabhu on Wednesday said that the public transporter’s resources were constantly dwindling as they are not decided in the most optimal manner.
Responding to supplementaries during question hour, Prabhu said that the share of railways in freight as compared to other modes of transportation was declining.
The railways’ share in freight and passenger transport came down to 36 per cent and 14 per cent in 2012 from 62 per cent and 28 per cent, respectively in 1981.
The railways, which earns about 70 per cent of its revenue from freight charges, has been witnessing slippages in its earnings. It earned Rs 136,079.26 crore through freight during the April-January period this fiscal as against the target of Rs 141,416.05 crore, registering a decline of 3.77 per cent.
Moreover, with an additional burden of Rs 32,000 crore on account of the Seventh Pay Commission recommendations, the national transporter’s finances are set to come under further strain.
The railways utilises a large chunk of its freight earnings to cross-subsidise passenger fares and it almost always finds its hands tied over raising fares, given the political implications.
With lower-than-projected freight and passenger earnings taking a toll of its finances, the minister faces the daunting task of carrying out huge rail infrastructure development that requires an investment of Rs 8.56 lakh crore.
As internal resource generation of the railways is insufficient to support this, the public sector transporter has to mobilise funds through EBR by way of tapping funds from agencies like LIC and other multilateral agencies, besides borrowing through IRFC.
“If railways depend on gross budgetary support (GBS) for executing its projects it will take 25-30 years to complete them. It has to go for unconventional ways of funding the projects,” said ex-Railway Board member B S Sudhir Chandra
The minister who had last year set an ambitious target to invest Rs 8.56 lakh crore over a five-year period is expected to have a plan outlay of about Rs 125,000 crore for FY17. While capping the annual spending at Rs 100,011 crore for the current year, Prabhu had earlier said that the plan size would increase once funds from financing institutions are tied up.
“Railways can not afford to take costly funds from the market, including LIC, to implement its projects that have very long gestation period. We need to have a financial institution dedicated for it,” said former Railway Board member (engineering) S K Vij.
The railways has entered into long-term financing arrangement with state-run LIC and would receive Rs 1,50,000 crore over the next five years. It got the first tranche of Rs 2,000 crore in the current financial year and is expected to significantly increase the draw-down from the insurance major.
“Arranging funds from LIC is a good move as only remunerative projects are to be financed by this. Once a project gets completed over 5-6 years, revenue from it would start flowing in and repayment could start,” said former Railway Board chairman SS Khurana.
