NUTS AND BOLTS OF
RAILWAY BUDGET : 2016-17
COMPILED BY
C.RAJESWARA RAO,
AA,CBS O/o FA&CAO/T/SC
Email : raajpad@gmail.com
SOURCE:
NUTS AND BOLTS OF
RAILWAY BUDGET : 2016-17
Railways are
life line of a nation , it is for this reason that every time when the
Honorable Railway Minister rolls out the Budget ,it is awaited with curiosity
and fanfare by various stake holders. Let us examine how it affects them.
I: CORPORATE
PHILOSOPHY & PLANS OUTLINED:
A clarion call
to Re-organize, Restructure and Rejuvenate the Railways is given by the
Honorable Minister who can be described as a thought leader and whose thought
process for Railway is Nav Arjan( New revenues), Nav Manak (New norms) , Nav
Sanrachna (New structures)
1. The Budget
lays emphasis on zero based budgeting, data-based decision making, and KRAs
(key result areas for top managers)
2.
Deviates
from conventional thinking on freight and fare policies and a competitive rate
structure will be evolved vis-Ã -vis other modes of transport. Long tariff
contracts with key customers will be signed with in- built price escalation
clauses bringing in transparency in revenues and costs for the customer and
the transporter. This stems from the fact that Railway’s share of inter-modal
transport has drastically fallen to 36 % in 2012 from 62% in 1980. A
full-fledged market survey will be under taken to to recapture the traffic
through either containerization or new delivery models. A freight target of
1157 MT and Rs 1,17,932 crores and passenger earnings of Rs 51,102/ crores is
set. Key customer managers will be
appointed to liaison with major freight stake holders
3. Railways look
for higher non traffic revenue through redevelopment of stations ,
commercialization of land along tracks, monetization of soft assets ie web site
and data. With these efforts share of non tariff revenue is likely to go up to
15-20 % . ie around Rs 8000/-9000/ crores.
4. Cost reduction
is expected from dip in diesel prices, equipment efficiency, direct purchase of
power.
5. Structural fixes are needed to improve
Operating ratio. The decrease in commodity
prices , Capital Expenditure is affecting freight traffic. Only ten commodities
contribute to 88% of the Railway freight, the concentration is likely to hurt in the coming years unless the Railway
expands the basket of commodities it transports. Targeted commodities are
automobiles, bamboo, bauxite, charcoal, chemical, fodder, gypsum, manganese,
jute, oil and molasses
6. Of the
targeted Rs 1,84,819/ crores 65% is contributed by freight that occupies only
25% of the track space. The cross subsidized passenger trains get priority on
track slowing the average speed of freight wagon to 30 km/ hr. Nearly 40% of
the tracks are being utilized beyond 100% saturation limits and more than 80%
are being utilized beyond the optimum limit(80% plus capacity) . Thus Railways
will have to realign the priority . Also
increase in passenger fares along some routes will improve revenue.
7.
25
tonne axle load wagons will be introduced. These wagons have carrying capacity
of 80 tonnes . It means every goods train fitted with new wagons will carry 14
% more load helping in faster evacuation of coal. Coal India Limited is
pursuing aggressive expansion plans in
three Coal fields of Talcher, Ib, Korba. Indian Railways have identified three
sections –Jharsuguda-Nagpur, Talcher-Paradip, Bhadrak-Cuttack –Vizag for
strengthening of track , bridges and culverts. This will help in evacuation of
Coal faster.
8. Data analytics
will be play an important role . A team will be set up to analyse the
voluminous data that Railway generate.
9. Procurement
including, works related, will be hooked to e-platform and paper less
contract management system with online bidding and tendering.
10 Railways plan
to step up Capital Expenditure. The CAPEX for the year 2016-17 has been pegged at Rs 1.21 lakh
crore which is double the average during the period 2009-14. Funds will be
raised through Joint ventures with states, PPP, launching rupee bonds in
international markets. Of these Rs 45000 crores will come from Gross Budgetary
support, Rs 12,700 crores from internal sources , Rs 18000/ crores from
partnerships and joint ventures, Rs 23,000 / crores from institutional financing,
Rs 21,700 / crores from IRFC bonds and rupee bonds of Rs 2000 crores. Also
Railways have the cushion of Rs 1,05,000 Crores of investment promised by
LIC of India. It is expected that every rupee of investment
in the Railways has the capacity to increase the economy wide out put by Rs 5/.
11 Three more dedicated Freight corridors announced –
Delhi –Chennai, Kharagpur-Mumbai, Kharagpur –Vijayawada in addition to the two
already under implementation ie Eastern
Dedicated Freight Corridor from Dankuni to Ludhiana and Western Dedicated
Freight Corridor JNPT to Dadri .
12 To synergize
the country’s 7517 kms coastal line, port connectivity will be augmented.
13 The North
Eastern states and J&K will be be brought on Broad guage map.
14 Toeing the
“Make in India” campaign, two loco factories already with order book of Rs
40,000/ crore are being set up in the Eastern regions. This will kick start the
growth of small and medium ancillary units in the region.
15 The transport
logistics company of India will build warehousing facilities and logistics
parks in PPP mode to attract more traffic. At least 10 Goods sheds will be
built in 2016-17. The focus will be on providing last mile connectivity.
16 To reduce
energy costs , Railways will electrify 2000kms of track as against 1600 kms in
2015-16 and savings on this account will be ploughed back to finance the
capital expenditure.
17
By
the end of the current year Railways will commission about 2500 kms of Broad
gauge , setting a target of 7km/day ie 2800 kms for the next year ie 2016-17
18
The
country’s first auto rail hub will come up in Walajabad, near Chennai. It has
capacity to handle over one million four wheelers produced in these areas.
19
Cabinet
has approved redevelopment of 400 stations under PPP and other modes. It is
estimated that redevelopment of stations will generate non tariff revenues to
an extent of 10-20% as is the trend globally. The income will come from
monetization of assets.
20
Road
map for zero accident Rail system in India through collaboration with Japan and
Korea. Phased elimination of unmanned level crossings.
21
To
avoid time and cost over runs, EPC method
will be adopted for all works valuing above Rs 300 crores.
22
Potential
of solar energy will be unlocked especially in remotely located stations which
yield power supply not only to stations and will also facilitate energy access
to rural house holds.
II STRUCTURAL CHANGES: The Honorable
Minister contemplates the
following structural changes:
1.
An
Independent Regulator called Rail Development Authority would be set up and a
Bill would be drafted soon. The Regulator would ensure fair pricing of
services, promote competition, protect customer interests, determine efficiency
standards
2.
Railway
Board would be re-organized , cross functional directorates will be set up
which will focus on areas like non fare revenues, speed enhancement, motive
power, IT.
3.
Railway
Planning and Investment Organization would be set up for revitalizing and
developing the infrastructure which would chalk out 5 to 10 year corporate
plans and identify projects that sync with corporate plans
4.
National
Rail Plan 2030 would be framed in consultation with all the stake holders ie
state governments, Public representatives, relevant central government
ministries.
5.
A
holding company would be created to bring all Railways PSUs under its ambit to
leverage the synergies which each
company can bring.
6.
SRESTHA
, a Special Railway Establishment for Strategic Technology and Holistic
achievement will be established. RDSO will now focus only on day to day issues,
while SRESTHA would drive long term research.
7.
SUTRA(Special
unit for transportation Research and Analytics)
would be set up for carrying out detailed analytics leading to optimum
investment plans and operations. To partner with Foreign Railways , a scheme
would be chalked out.
8.
Will
set aside Rs 50 crore to fund Innovation. Employees, startups, growth oriented small business would be encouraged
to support internal and external innovation.
III: MAN WITH A MISSION: The seven
Mission activities proposed by
Honorable
Minister are :
1. Mission 25 tonne:
Aims to increase revenue by augmenting carrying capacity . for this 25 axle
load wagons will be used. Initially 10-20 % freight loading will be done
through these wagons in 2016-17 raising the number to 70% by 2020.
2. Mission Zero
Accident: Includes elimination of all un manned level crossings on broad gauge
in the next 3-4 years through innovative financing mechanisms and technology by
way of Train collision avoidance system to prevent head on collisions .
3. Mission Pace:
Aims to improve procurement and consumption practices to improve quality of
goods and services.
4. Mission
Hundred: Will commission alteast 100 sidings in the next 2 years through PPP.
5. Mission
Raftaar: Targets doubling average speeds of freight trains and increasing
average speed of superfast mail/express trains by 25 kmphin the 5 years.
6. Mission Beyond
Book Keeping: Will establish an accounting system where outcomes can be tracked
to inputs.
7. Mission
Capacity Utilization: Preparation of an action plan for making use of new
capacity created by DFCs.
IV : TECHNOLOGY
INITIATIVES:
1.
Indian
Railways plan to use technology in every aspect of its operations, including
drones to review progress of various projects. Railways will use the latest
drones and Geospatial based satellite technology to remotely review the
physical progress of all major projects including the DFCs.
2.
Railways
will establish SRESHTHA (Special Railway Establishment for Strategic Technology
and Holistic Advancement , which will be
a niche Railway research organization and also a Special unit for
Transportation Research and Analytics (SUTRA)manned by Professional Analytics.
3.
Track
Management system launched. Inventory Management module of TMS has resulted in inventory reduction leading
to savings of Rs 64 crores. During 2016-17 entire system will be brought on TMS
4.
Digitization
will be used for procurement and tenders will be awarded electronically .
5.
ATVM
, Mobile Apps, Goindia smartcard will enable cashless purchase of tickets both
in UTS AND PRS systems. E ticketing capacity will be enhanced from 2000 tkts
per minute to 7000 per minute. This will reduce challenges in online booking.
6.
In
partnership with Google and Rail Tel, WiFi will be extended to 400 more
stations.
7.
To
attract foreign travelers,e ticketing facility to foreign debit /credit cards
is extended.
8.
Ticketing
cancellation can be done through 139 helpline post verification using OTP (One
Time Password) .
9.
CC
TV cameras will be installed on windows to reduce misuse of Tatkal services by
travel agents.
V: THE
NUMBER GAME:
1.
Twin
head winds , tepid economy and 7Th CPC will impact the operating
ration which is projected to be 92% in the year 2016-17 as against revised
estimate of 90% in the current fiscal. The operating ration will be contained
by optimizing on costs and finding
alternative resources of revenue . In the current year due to stringent
austerity and economy measures helped Railways shave off Rs 8720/ crores from budgeted costs and help
to neutralize revenue short fall.
OPERATING RATIO
2.
Gross
revenues of Rs 1,84,820/ crores is projected for 2016-17 , (12.42 % increase in
passenger revenues and 5.43% increase in freight revenues) . This is 10.1%
higher than the revised estimates for the current fiscal. Passenger earnings
targeted at Rs 51,012/ crores, Freight earnings at 1,17,933 / crores, other coaching
Rs 6,185/ crores and sundries projected at Rs 9590/ crores.
TRACK RECORD
(`
Crore)
|
2014-15
|
2015-16(RE)
|
2016-17(BE)
|
Gross Traffic Receipts
|
156,711
|
167,384
|
184,820
|
Miscellaneous Receipts
|
4,307
|
3,971
|
4,451
|
Ttal Receipts
|
161,017
|
171,805
|
189,271
|
Net ordinary working expenses
|
105,996
|
110,690
|
123,560
|
appropriation to pension fund
|
29,225
|
34,500
|
42,500
|
Appropriation to depreciation reserve fund
|
7,775
|
5,500
|
3,200
|
Total working Expenses
|
142,996
|
150,690
|
169,260
|
Net Revenue
|
16,838
|
19,898
|
18,211
|
Devidend payble to general revenues
|
9,174
|
8,495
|
9,731
|
Excess / Shortfall
|
7,665
|
11,402
|
8,479
|
Appropriation to development fund
|
1,375
|
1,324
|
2,515
|
Appropriation to capital find
|
6,233
|
6,293
|
5,750
|
Appropriation to debt service reserve fund
|
57
|
3,786
|
214
|
Operating ratio
|
91.3%
|
90.0%
|
92.0%
|
ratio of net to capital at charge and
investment fund
|
7.0%
|
7.2%
|
5.8%
|
RE : Revised estimate, BE:
Budget Estimates Resource
:Railway Budget 2016-17
3.
OWE
(Ordinary working expenses) provides for implementation of 7th CPC ,
targeted to restrict rise in OWE to 11.6%
4.
A
proper accounting system will be put in place where outcomes can be tracked
with reference to inputs. Right accounting would determine right costing and
hence right pricing and right outcomes believes the Railway Minister.
5.
For
meeting the requirements of 7th CPC , an amount of Rs 12,000 crores
towards salary and about Rs 8500 crores towards pension for 2016-17 has been
provided.
6.
There
is under reporting in respect of the amount set aside for Depreciation Reserve
fund. The National Transport Development Committee expressed concern on the
adhoc approach policy followed in respect of appropriation to DRF. This has to
be based on scientific and rational approach governed by ICAI and IFRS. Under
reporting is resulting in painting rosy picture
and false projection of Operating ratio.
7.
A
proper accounting system will be put in place where outcomes can be tracked
with reference to inputs. Right accounting would determine right costing and
hence right pricing and right outcomes believes the Railway Minister.
8.
Of
the targeted Rs 1,84,819/ crores 65% is contributed by freight that occupies
only 25% of the track space. The cross subsidized passenger trains get priority
on track slowing the average speed of freight wagon to 30 km/ hr. Nearly 40% of
the tracks are being utilized beyond 100% saturation limits and more than 80%
are being utilized beyond the optimum limit(80% plus capacity) . Thus Railways
will have to realign the priority . Also
increase in passenger fares along some routes will improve revenue.
9.
5%
increase in Goods Earnings is estimated to come from Coal and Steel industry. A
study is being conducted to increase the freight basket beyond 10 commodities.
VI: CUSTOMER
THE KING:
Honorable
Minister has taken a cue from Marketing
Guru Philip Kotler who says “ Good customers are an asset which, when well
managed and served, will return a handsome life time income stream for the
company”.
1. Passenger
customers lured with novel schemes as passenger earnings dipped and low cost
airlines cut in to Railways base. Around 23 million passengers commute daily on
train.
2. Wifi
facilities will be extended to 400 stations and would be covered in two years
time.
3. Janani sewa or
childrens food items will be served on trains. .Hot milk , hot water, baby food
will be made available and changing boards would be provided in train toilets.
4. Antyodaya
express for unreserved passengers for long route will be introduced. Unreserved
coaches called Deen Dayal coaches with potable water and more mobile charging
points announced.
5. Three train
services announced for Reserved Passengers – Humsafar( fully air conditioned,
third AC) with an optional service for meals , Tejas (semi tourism trains to
operate 130 kmph) and offer entertainment, local cuisine, WiFi etc, Uday over night double decker on busy
routes which will enhance carrying capacity by 40%.
6. Introducing more Mahamana coaches which are completely refurbished.
7. To improve
hygiene and quality of food , third party audit will be made mandatory for
catering services. Extending ‘E’ category services to 408 A-1 and A class
stations from existing 45.
8. Inviting FM
Radio stations , for train borne entertainment.
9. Customer
Relationship manager will be appointed to nurture key freight customers.
10
Social
obligations to cater to Physically challenged, senior citizens , women
travelers are met with
11
Clean
my coach SMS service will be launched.
12
Retiring
rooms can be booked on hourly basis instead of minimum 12 hourly basis now.
13 Information
boards will be installed in the trains which give information about on board
services and the GPS system will alter about the coming halts.
VII: REACTIONS FROM INDIA INC: WHAT THE CAPTAINS
OF THE INDUSTRY SAY:
1.
The Minister has rightly addressed the key
issues—ie focus from completion to commissioning of rail projects- Hemant
Kanoria—CMD SREI Infrastructure Finance Ltd.
2. Rail Budget is
a forward looking and development oriented one — TV
Narendran MD Tata Steel.
3. The freight
corridor project , the largest infrastructure project , is the most important.
It is good that the Railways is adapting itself to the digital age. The
Minister has also given a clear indication of how funds will be raised to
finance projects. Sumit Mazumder , President CII
4. It is an
extremely pragmatic budget, aimed at making the Railways the backbone of
development . The rationalization of freight policy and review of PPP policy framework would help attract private players. – Harshavardhan Neotia- FICCI President.
5. It will kick
start the investment cycle in the country . It will help in bringing down over
all logistics cost of the industry and improve competitiveness says Sajjan
Jindal , Chairman JSW steel.
6.
It is a passenger centric budget with measures
like retaining of passenger fares and digitization says Sanjay Kirloskar, Chariman , CII, Western Region.
7.
It is win –win situation for commuters and
industry says Harsh Dhingra Country Head
Bombardier transportation.
VIII: HUMAN RESOURCES:
1)
Working
conditions will be improved so that work force will continue serve the
Organisation with devotion.
2)
AYUSH
systems will be introduced in 5 Railway hospitals. Railways will tie up with
Ministry of Health for exchange programme between Railways and Government
hospitals.
3)
Gangmen
will be provided with wireless device called ‘Rakshak’, which will intimate them
about approaching trains. Weight of the tools carried by them will be brought
down through value engineering.
4)
For
promoting research in key areas, C.T Venugopal chair on Strategic Finance and
Kalpana Chawla chair on Geo-Spatial technology in IR , will be introduced.
5)
Workshops
and Production units will develop centres of excellence for skill development.
6)
Will
tie up with NGOs to provide skilling to people in remote areas including wards
of Railway employees.
IX: CRTICS VIEW:
1. The Budget is a step towards
Corporatization and Privatization . It lays emphasis on PPP models. Toomuch
rely on PPPs will lead to Railways Prime properties going to private players
opines former Railway Minister Sri Kharge.
2. No welfare measueres have been
announced. Commitments given on free medical treatment to dependant parents,
construction of new quarters under corporate welfare plan had not been
fulfilled.
3. There is no move fill 2.5 lakh
vacancies out of which 1.5 lakh belong to safety category. This will put
tremendous stress on employees working in safety categories and will result in long working hours for
Ministerial staff.
4.
Apart
from many positive sides, the flip side relate to meager allocation to DRF and
track renewals which do not augur well. Achieving financial targets at the cost
of safety is not desirable, comments
Sri Samar Jha former FC. Railway Minister for this budget to deliver, will have to carry Railway Management and Staff
with him.
Conclusion with due
humility, it is felt that the following quotes are appropriate in this contest.
The economy is in ruins!
Bottom line? Good management will defeat a bad economy.”
― Stan Slap
“The
first step in turning around your organization’s performance? Think positively
about the people you lead.”
― Cheryl A. Bachelder
To
make customers happy, we have to make sure our employees are happy first.”
― Tony Hsieh, Zappos
