Jan 7, 2017

Railways may get 6% increase in Budget



Railways will not have to pay dividend to Finance Ministry after the Budget merger in 2017-18. 

: The Finance Ministry may grant the Indian Railways a more than six per cent increase in gross budgetary support to Rs. 48,000 crore, a figure that the operator of the world’s fourth largest railway network wants raised further, according to official sources.
The Finance Ministry has pegged the budgetary support at Rs. 48,000 crore for 2017-18. The Budget, which is likely to be presented on February 1, will be the first time that the state-owned Railways will have its allocation announced in the Union Budget as the colonial-era practice of a separate Railway Budget has been dispensed with.

While the public utility had sought Rs. 60,000 crore for the coming fiscal to rev up investments, the Finance Ministry had pointed out that the Railways won’t have to pay any dividend from the coming year.

“The Finance Ministry has informed us in writing that they will be able to provide a gross budgetary support (GBS) of Rs. 48,000 crore for 2017-18,” said a senior Railway Ministry official, who did not wish to be identified. “However, we had asked for a higher budgetary support of Rs. 60,000 crore and we are still negotiating with them.”

The GBS will, however, be more than six per cent higher than Rs. 45,000 crore provided by the Finance Ministry in 2016-17. The increase in budgetary support is significant as the Indian Railways will no longer be required to pay dividend to the Finance Ministry for the capital invested in it following the Budget merger from 2017-18.

The dividend waiver will allow the Railways to step up investment towards track renewal, maintenance, station improvement and passenger amenities.

In 2016-17, Indian Railways is budgeted to pay Rs. 9,731 crore as dividend, whereas the subsidy claimed by the Railways towards loss-making routes is estimated at Rs. 4,301 crore. As a result, the net dividend payment to the Finance Ministry is estimated at Rs. 5,430 crore in 2016-17 against the gross budgetary support of Rs. 45,000 crore.

The Indian Railways meets its planned expenditure through a combination of GBS, market borrowings and internal revenue generation.

Over the last five years, the GBS provided to the Railways has been substantially lower than its actual requirement. While the Railways had sought from the Finance Ministry budgetary support of Rs. 2, 29,399 crore from 2012-13 to 2016-17, the actual GBS (including diesel cess) was 25 per cent lower at Rs. 1, 67,511 crore. Railway Ministry officials opine that providing budgetary support lower than its demands might impact investment in key infrastructure projects planned for 2017-18. An official said the Railways is planning a plan outlay of about Rs. 1.35 lakh crore for the next financial year, higher than a record plan outlay of Rs. 1,21,000 crore in 2016-17.

“It is a well accepted fact that due to inability of Railways to generate surplus and inadequate Gross Budgetary Support projects have been languishing leading to vicious cycle of time and cost overruns,” the Railway Ministry told a Parliamentary Standing Committee on Railways that recently presented its ninth report in the Lok Sabha.

However, the Committee noted that annual plan sizes of the Railways had been disproportionate in the last four years due to lower generation of extra budgetary resources, lower materialisation of internal resources along with lower allocation of gross budgetary support.
Source - The Hindu