Railways taken by surprise over listing of its 3 PSUS

IN THE first merger of the Rail Budget with the General Budget on Wednesday, the Railways Ministry was reportedly caught unawares by the government’s announcement that three of its public sector units (PSUS) would be listed in the stock market.

Sources said the announcement came barely two days after the issue was first discussed at a meeting on Monday. With no indication that the future of its PSUS was up for discussion, the ministry did not send any Railway Board member for the meeting. A joint secretary-level officer and an additional member attended the meeting with NITI Aayog officials and Secretary, Department of Investment and Public Asset Management (DIPAM).

According to sources, the Railways officials were only asked if the ministry had any objection to the listing of some of its PSUS for better fund infusion and market competitiveness. The need to energise the PSUS and bring them out of their “comfort zone” was discussed, said sources.

Taking the meeting as the first step, the ministry was under the impression that the process had just begun and it would get back with details, like a possible roadmap. The Railway Board, the ministry’s highest decision-making body, had not even discussed the issue yet.

But the government on Wednesday announced the listing of three of its PSUS — IRCON (Indian Railway Construction Company Limited), Indian Railway Finance Corporation, and Indian Railway Catering and Tourism Corporation.

Sources said the Board will now discuss the issue, after which a proposal will be sent to DIPAM, before a Cabinet note is finally sent.

While the government has been seeking in-principle approval from the Railways to list these companies, the ministry was not too keen, and the government’s seriousness or urgency was never conveyed before Wednesday.

IRCON was listed earlier, but was voluntarily delisted in 2011. Among other things, it also does construction work in areas considered strategically sensitive. There is concern over sharing such information with equity investors.

Apart from this, the only takeaway for the Railways from the Budget is the creation of the Rs 1 lakh crore Rashtriya Rail Sanraksha Kosh (RRSK) for five years — Rs 20,000 crore per year — for critical safety upgrades. Railways has budgeted its share of Rs 5,000 crore in the annual corpus from its funds and has not built in any safety cess on tariff yet. The total budgetary support, including Rs 10,000 crore from the Central Road Fund’s diesel cess and additional Rs 5,000 crore towards RRSK, is Rs 55,000 crore.

A fare hike is likely next fiscal, said sources. In its financial statements in the Budget, Railways has indicated that next fiscal, it will carry only 0.2 per cent more passengers than this year while its earnings from the passenger segment will increase by 4.4 per cent. Sources said an overall impact of 7 per cent hike in fares has been deliberated.

In freight, Railways has projected a modest 6.5 per cent growth, carrying an estimated 1,165 million tonnes of goods in 2017-18.

Jaitley did not mention the Operating Ratio (OR) — a key indicator of the financial health of the transporter. Figures show that the Railways expects to close with an OR of 94.9 per cent this year — the worst in four years. And for next year, it expects the OR to be around 94.5 per cent, indicating that it does not expect business to be great.

The size of its total business, as per its own projections, will be around Rs 1.89 lakh crore, a 10 per cent jump from this year’s Rs 1.72 lakh crore. It will commission 3,500 km of railway tracks — the highest ever — with a capital expenditure of Rs 1.31 lakh crore.

The Railways got only a three-and-a-half minute mention in Jaitley’s speech, during which he mostly read out the ministry’s proposals. Officials said that from next year, Railways may feature even less in the Budget speech.

“The merger of the Railways Budget with the General Budget is a historic step. We have discontinued the colonial practice prevalent since 1924. This decision brings the Railways to the centrestage of the government’s fiscal policy and would facilitate multi-modal transport planning between Railways, highways and inland waterways. The functional autonomy of Railways will, however, continue,” said Jaitley.

“It is a growth-oriented Budget,” Railways Minister Suresh Prabhu later said. “The PM’S imprint is all over the Budget.” ANNOUNCING A modest increase of 5.6 per cent in defence expenditure, the government earmarked Rs 2,74,114.12 crore in the Union budget for the next fiscal. In addition, an allocation of Rs 8,57,140 crore for defence pensions was announced by Finance Minister Arun Jaitley in his budget speech.

The defence allocations for FY 17-18 are 12.77 per cent of the total central government expenditure.

The amount allocated for defence at the budgetary stage in FY 16-17 was Rs 2,58,589.32 crore, which increased to Rs 2,59,480.13 crore at the Revised Estimates (RE) stage. With a 5.6 per cent increase over RE figures for FY 16-17, the increased defence allocation for FY 17-18 will only cover the inflation costs.

For the coming year, Rs 1,82,534.42 crore has been allocated for revenue expenditure while Rs 86,488.01 crore has been earmarked for capital expenditure of the defence services. Revenue expenditure is for operating expenses of the defence ministry while the bulk of capital expenditure is for procurement of military equipment to modernise the armed forces.

In the current financial year, Rs 78,586.68 crore was allocated for capital expenditure at the budgetary stage, which came down to Rs 71,700 crore at the RE stage. This means that the ministry did not use Rs 6,886 crore for defence modernisation, and the amount was transferred to revenue expenditure to meet the increased salaries bill after implementation of the Seventh Pay Commission.

The marginal increase in capital expenditure will have an effect on the defence ministry’s plans to sign new contracts for defence equipment in the coming year. Last November, the defence minister had announced that 85 deals worth approximately Rs 1,50,000 crore were in various stages of finalisation and approval. With committed liabilities in capital expenditure already made towards Rafale fighter aircraft, M-777 artillery guns and Apache and Chinook helicopters, the ministry will be constrained in signing new deals in FY 17-18.

Moreover, at Rs 1,06,922.79 crore, pay and allowances of the defence services for FY 17-18 will now take away 39 per cent of the defence budget. With the implementation of One Rank One Pension and the Seventh Pay Commission, the salaries and pensions of defence personnel are together estimated to be Rs 1,92,662.79 crore in the coming year.

MERGED BUDGET

e-ticket system for soldiers, metro rail policy announced

Finance Minister Arun Jaitley announced development of the Centralised Defence Travel System, which will allow defence personnel to book e-tickets. “They do not have to face the hassle of standing in queues with railway warrants,” Jaitley said in his Budget speech.

The government will also announce a Metro rail policy with focus on innovative models of implementation and financing.

“Metro rail is emerging as an important mode of urban transportation. A new Metro Rail Policy will be announced with focus on innovative models of implementation and financing, as well as standardisation and indigenisation of hardware and software. This will open up new job opportunities for our youth,” Jaitley said.