ANALYSIS OF RAILWAY BUDGET 2008-09

Introduction

The Union Minister for Railway Mr. Lalu Prasad Yadav delivered his fifth Railway Budget speech taking immense pride in the years of exceptional growth seen in the Indian Railways under his regime. The success of Railways was marked by a profit of Rs. 25,000 crores with operating ratio likely to be 76.3% for 2007-08. In the last four years, railways have registered a cumulative cash surplus of Rs. 68,778 crores. In the wake of making the Railway Budget more for the common man, Railway Minister has planned 10 new Garib Raths along with senior citizens concession for women enhanced to 50% and AIDS affected persons. Free monthly season tickets for second class travel would now be provided to girl students up to graduation and for boy students up to 12th standard.

This time round also the Railway Minister maintained the record of not hiking the passenger fares for four years but instead reduced AC first, second and third class fares by 7%, 4% and 2% respectively. Second class fare would also be reduced by 5% for tickets costing over Rs. 50. Minister also announced a 5% concession in freight rates for diesel and petrol and a 14% reduction in rates for fly ash. Other facilities to make Railways more user-friendly, Minister introduced plans to install lifts and escalators in 50 stations, to start ticket confirmation via mobile phones, to introduce smart card based ticket system, ‘Go Mumbai’ cards to be sold at BEST bus depots and touch screens, color TVs at stations across country. Tickets would also be made available at 6,000 ATMs. The Indian railways have considered outsourcing house-keeping in Shatabdi along with collaborating with private companies to design new wagons and to male terminals on railway lands.

Industry impact and Market reactions

The industry sees positive impact from the budget. Measures such as freight rate cuts on petrol & diesel by 5% and fly ash by 14% would have an overall positive impact on the economy. The industry sources said that the decision for increased investments on container traffic by running more trains is a welcome step. It will bring down cost to end users and help in the long run to improve railway services.

Food grains, Fertilizer, Cement companies will gain from the decision of building Bulk handling terminals. Since these commodities are transported in bulk to reduce the transportation cost, therefore a new policy has been formulated that will focus on bulk handling terminals. Under this policy producer of these commodities or their authorize agents will be allowed to construct the terminals with all modern facilities working round the clock. Under this scheme wagons will be moved in close circuit for which freight discount will be provided at prescribed rate, surcharge & terminal charge are not applicable for the prescribed period. Besides this, wharfage and demurrage charged will not levy for this terminals. All these measure helps in reduction of cost in moving goods from one place t another in bulk quantities.

Information Technology sector, this time, too got a pie in the rail budget. To improve customer services Railway has planned to bring radical changes in the technology and the process. For this, attention is being focused on I.T. applications in three core areas namely freight service management, passenger service management and general management. Modern technologies like GIS, GPS and RFID will be applied progressively. A centralize information system will be formulated to have accurate, fast & easy access to information on various subjects. Also, the centralize system will help to make the railway operations more efficient especially in terms of safety and value added services like infotainment, onboard television and knowledge kiosks with internet facilities.

Logistic industry also tends to gain as the railway focus on increasing container traffic to 100 million tonnes by 2011-12. For 2007-08 it is expected to be 26 MT. Presently 15 container operators are in action with 146 container trains belongs to Container Corporation and 44 are run by other operators. The number of trains run by other operators is expected to increase to 55 by the end of this year. Also, 60 container depots are under operations and further 48 depots is expected to be built by Container Corporation (40) and by other operators (8).

Railway Minister has also taken decision of providing LHB coaches with stainless steel ICF bogies to Mail and Express trains besides Rajdhani and Shatabdi trains. Production of these coaches will commence in 2008-09 and from 2009-2010 onwards only stainless steel coaches will be manufactured. This would boost demand for the steel in coming years.

As Railway Minister, Lalu Prasad Yadav, presented his budget 2008 stocks like BEML, Gateway Distriparks, Kernex Micro, Texmaco, Hind Rectifiers, Stone India, Alstom, Crompton Greaves, Sail, Tata Steel were all trading strong. Hind Rectifiers manufacturers a wide range of products used for railways, AC electric locomotives and AC electrical multiple units. The management expects to see increased requirements from the budget.

Kalindee Rail is engaged in the manufacture and installation of signaling and telecommunication equipment and execution of gauge conversion projects of the Indian Railways. The company expects some contracts to be awarded by FY08 and they believe that they will get a substantial share of the Freight Corridor.

Stone India, which manufactures various equipment for the railways like alternators, air brakes and brake regulators, expects more revenue due to new wagons.

BEML, manufactures hydraulic excavators, rope shovels, bulldozers, wheel dozers, wheel loaders, pipe layers, type handlers etc., also expects business due to new wagons.

The major BSE gainers were Grasim Industries which gained 5.06% to Rs 3,042.70; Reliance Energy rose 4.59% to Rs 1697.25; BHEL rose 4.58% to Rs 2,180.55; Infosys Technologies jumped up 3.02% to Rs 1662.10 and HDFC Bank rose 2.27 % to Rs 1,455. The major losers were Bharti Airtel that declined 1.38% to Rs 838.80; HDFC fell 0.48 % to Rs 2,574.35; Tata Motors was down 0.46% to Rs 702.10; State Bank of India fell 0.36% to Rs 2,119.85 and ITC Ltd fell 0.35% to Rs 201.25.

Steel companies such as SAIL, Tata Steel and JSW Steel will be benefited on decision of using stainless steel body coaches 2009-10 onwards and in 2008-09, 5000 open wagons will be upgraded to stainless steel body. Indian Oil Corporation lost nearly 4.64 % to Rs 554.65, even as freight rates on transport of petrol and diesel were cut by 5 % each, in the rail budget.

Bonanza for Passengers

Fares: The passenger fares being slashed further to a tune of 2-7%. This rail budget has surely met the expectations of passengers if not exceeding them. Finally a win-win situation for both the railways and its passengers.
Reduction in Fares

Class of Travel
Lean Period Peak Period Popular Trains

Sleeper Class (newly designed)
2% 2% _

AC 3tire & AC Chaircar
2% 1% 1%(throughout the year)

AC I Class
7% 3.5% 3.5%(throughout the year)

AC 2tier
4% 2% 2%(throughout the year)

* 50% concession for senior women citizen and AIDS patients.
* Reduction of Re 1 in the second-class fares of up to Rs 50 per passenger for non-suburban mail/express and ordinary passenger trains.
* Reduction of 5% in the second-class fares of all mail/express and ordinary trains for the tickets costing more than Rs 50 per passenger.
* Free monthly season tickets to travel by second class for girl students up to graduation and for boy students up to 12th standard.
* Free Rajdhani, Shatabdi travel for Ashoka Chakra awardees of IAF.
* The Rail Budget announced the introduction of 10 new Garib Rath, 53 new trains, extension of 16 trains and increase in frequency of 11 trains for 2008-09.
* Indian Railways in collaboration with Rajiv Gandhi Foundation proposes to run a Mother-Child Health express of 7 coaches with facilities like Delivery operation room, child health centre etc. at concessianal fares on a pilot basis.

Accessibility

In Rail Budget 2008-09, Railway Minister has been decided to set up a Strategic Business Unit at the apex level- single window system to take full advantage of emerging business opportunities and improving railway’s competitiveness in the market. He also proposes to add 10 garib raths, 53 new trains & extension of 16 trains while 20,000 wagons, 250 diesel and 220 electric locomotives to be manufactured. He has formulated various schemes to address the concerns of masses and improve accessibility of Rail services:-

* Termination of long queues at ticket counters at stations targeted in 2 years- Passengers would now be able to purchase railway tickets sitting at home on their computers, through mobile phones, through counters in their own neighbourhood or automatic ticket vending machines at stations. In the next two years, the number of UTS counters will be increased from 3,000 to 15,000 and automatic ticket vending machines (ATVMs) from 250 to 6,000.
* Link train call center with control office- By dialing the telephone number 139, passengers gets information about arrival and departure of trains, seat availability etc. Now, it has been decided to use modern IT and telecom technology to link the call centers with control office and NTES (National Train Enquiry System) on an on-line basis. This work will be completed by March 2009 to disseminate latest updated information about trains.
* Rail ticket on “Go Mumbai Card” in Mumbai Suburban Service- These cards will be sold at stations, bus depots of BEST and various locations in the city.
* Passenger Amenities- Provision of on-line coach indication display board; on-line train arrival departure information board; on-line reservation availability information board.
* Public Private Partnership schemes- These to be launched for attracting investment of Rs 1,00,000 crores over the next five years for developing world class stations, rolling stock manufacturing, multi modal logistics parks, running of container trains etc.
* Dedicated Freight Corridor- Work on Eastern freight corridor from Ludhiana to Dankuni (Kolkata) and Western freight corridor from Delhi to JNPT to start in 2008-09.
* New routes for coal movements- Most of the new dedicated routes for coal movement will be fit for 25 ton axle load trains. The doubling of Alwar- Rewari and doubling and electrification of Mughalsarai- Lucknow route is being carried out in response to the demand of the power houses in North India. Focus on throughput enhancement works serving important coal links- many new works proposed.
* Route wise development of High Density Network- Route-wise works will be undertaken in a phased manner including 124 works of doubling, third and fourth lines, bye-passes, flyovers, crossing stations, inter-mediate block stations, automatic signaling works and yard re-modeling over next 7 years at cost of about Rs 75,000 crores.
* Port Traffic-Mission 300 MT- Top priority being given to port rail connectivity projects. Special purpose vehicles have been formed for Haridaspur-Paradeep new line, Krishnapatnam port connectivity new line and gauge conversion of Bharuch- Dahej and will be formed for Surat- Hazira and Pen- Revas port new lines on priority.
* Steel Udyog-Mission 200 MT- targeted traffic of 200 MT by FY12. New and dedicated iron ore routes to be upgraded/constructed for 25-ton to 30-ton axle load trains. Throughput enhancement works of doubling and trebling of lines also being undertaken.
* Cement Industry-Mission 200 MT- targeted traffic of 200 MT by FY12. New lines, throughput enhancement through gauge conversion and extension of lines to serve cement clusters in various regions.
* Container Business-Mission 100 MT - Increased investments expected in container rolling stock and ICD s by CONCOR and other operators. It is expected that 8 container depots by Container Corporation and 40 by other operators would be developed in the coming years. The number of trains run by other operators is expected to increase to 50-55 by the end of this year.

Modernization

In order to make improvements in operational efficiency, bring transparency in the working and provide better services to the customers, railways are trying to bring about radical changes in railway technology systems as well as processes through modernization and hence taken following steps:

* Aiming at terminating long queues at ticket counters in 2 years and making ticket purchase more convenient, Railway minister has proposed to make elevated use of information technology. Passengers would now be able to purchase railway tickets sitting at home on their computers, through mobile phones, through counters in their own neighbourhood or automatic ticket vending machines at stations. In the coming two years, UTS counters will be increased from 3000 to 15000 and automatic ticket vending machines from 250 to 6000. The Jansadharan Ticket Booking Seva will be extended to all Zonal Railways. Further, e-ticket can now be issued to waitlisted passengers also. Go Mumbai Card, will be made available at bus depots of BEST and various locations in the city.
* Fully computerized railway enquiry call centre is available in the entire country on Telephone No. 139 which can be accessed at local call charge through all mobile and fixed line telephones. but non-availability of on-line information on arrival and departure of trains with these call centers is a cause for considerable inconvenience to the passengers. Therefore, it is decided to use modern IT and telecom technology to link the call centers with control office and NTES (National Train Enquiry System) on an on-line basis. This work will be completed by March 2009. Presently, all Rajdhani and Shatabdi have a public address system. It has been decided to extend this facility to select mail/express trains.
* On board passengers are generally unaware of the timely running and likely time of arrival of approaching stations whereas this information is available continuously on screen in international flights. This is a source of inconvenience to passengers de-boarding the train at night time. Therefore it is decided to install on-line coach indication display boards on over night mail and express trains. This facility will be made available in long distance mail/express trains by March 2009.
* On-line Reservation Availability Information Boards will be installed at reservation offices at all A & B category stations dispensing the need of passengers to seek this information at counters. These high quality LED information boards and touch screens will be provided in sufficient number in reservations offices of A & B category stations.
* Discharge from toilets of trains on the run is a primary cause for poor sanitation at stations. Therefore Green Toilets in all 36,000 coaches, by the end of the 11th Plan period at a cost of Rs.4,000 crore, are provided to end the problem of discharge from train toilets. However, Express Trains coaches will be provided with Modular toilets. These toilets will be ergonomically designed with attractive interiors. They will have better arrangement for cleanliness and hygiene, water discharge, air circulation and illumination.
* It is proposed to provide multi-level car parking lots at 30 major stations to modernize car parking facilities. Plus provision is also made for lifts and escalators at 50 major stations as aged and lady passengers face considerable difficulty.
* LHB coaches with stainless steel ICF bogies will be provided in Mail and Express trains besides Rajdhani and Shatabdi trains. These coaches will be more comfortable and will have a carrying capacity of 10-16% more than the existing coaches. These coaches have a longer life and require less maintenance. However, by March 2010 all Rajdhani trains and by March 2011 all Shatabdi trains will be provided with LHB coaches.
* Railways have three levels of platforms - high, medium and low level. Aged people, ladies and children find it extremely difficult to climb from and disembark on low level platforms. It has been decided to upgrade Low level platforms to medium level and medium level to high level. However, provisions are also made to provide foot-over-bridges at all 195 stations of B & D category having high level platforms along with extension of the length of platforms at 560 stations for running longer passenger trains.
* In the absence of platform shelters at ‘D’ class stations passengers are put to great discomfort due to heat, cold and rain. Therefore, it is decided to provide platform shelter at every platform of all 748 ‘D’ Category stations. Along with this, arrangements will be made to provide every platform of ‘B’ category stations with platform shelters of size 250 to 500 square meters.
* So far signaling has been utilized primarily for railway safety, whereas there is considerable scope to enhance line capacity through provision of modern signaling systems. Keeping this in view the expansion of automatic signaling system on the network is started.
* Most of the wagons in use on Railways are of the design of 70s and 80s. The new policy is formulated to promote induction of wagons with modern and new designs in the Railways. In 2008-09, manufacture of 20,000 wagons is planned which would be the highest level of wagon productions so far. Similarly, in 2008-09, 250 diesel and 220 electric 18 locomotives will be manufactured which would be a record in itself.
* The transport market in the Indian economy is undergoing rapid changes. Clients today demand point-to-point solutions in place of separate arrangements for trucks, rail etc. Therefore, Railways is poised to undertake all necessary measures to make its presence felt in this market to provide its customers better point-to-point solutions at competitive prices. Under Public Private Partnership, Railways will provide several value added services including modern handling facilities, warehousing and multi-modal logistic parks.
* Last but not the least Railways would have to make heavy investments for the expansion of the network, modernization & upgradation of the technology and for providing world class facilities to the customers in the coming years. For this purpose, a plan is made to invest Rs.2,50,000 crore, within the next 5 years. However it would be difficult to finance such a large investment programme solely from Railways own resources. Therefore, many PPP schemes are started for attracting an investment of Rs.1,00,000 crore over the next 5 years.

Security & Safety

Safety and security of the passengers has given the utmost priority in the railway budget. A multi-pronged scheme is prepared to reduce human failure as far as possible. This scheme envisages provision of automatic safety devices like Anti Collision Device, Acoustic Bearing Detectors, EOTT device, Digital Ultrasonic Flaw Detecting Machine, Ultrasonic rail testing car, track monitoring car etc to strengthen rail safety. Furthermore, safety of passengers is bludgeoned by employing more RPF personnel with state-of-art equipments. The measures adopted for the same are as follows:

* As the security of passengers is topmost priority, 5,700 vacant posts of constables and 993 vacant posts of sub-inspectors lying vacant in Railway Protection Force (RPF) will be filled up by May 2008. RPF will also be equipped with all necessary modern equipment and adequate funds provision.
* An integrated security plan is drawn to strengthen railway security through installation of close circuit TVs at important stations, and deploying metal detectors, baggage screening system & explosive detection and disposal system for screening passengers & their luggage.
* Sustained efforts have been made to improve Railways’ safety. The work of replacing 16,538 kms of overage track and overage signals at 2,359 stations and rehabilitation of 2,251 bridges utilizing Special Railway Safety Fund would be completed by the end of 2008. Railways are also taking due precaution to make adequate provision under DRF for timely replacement of overage assets. In this context provision of Rs.7,000 crore is made for year 2008-09.
* A pilot project on Anti Collision Device to stop head on collision and collision from the rear between trains had been started in North East Frontier Railway which has yielded encouraging results. Therefore, it is decided to extend this system in a phased manner over the entire Railway network. In the next two years this system will be extended on three railways i.e. Southern, South Central and South Western Railway.
* Failure of axle box bearing and defects in the wheels increase the chances of accidents. Therefore, a master plan has been prepared to install acoustic bearing detectors and wheel impact load detectors at important locations for on-line monitoring of rolling stock by investing Rs.250 crore on 65 instruments. This improves protection and reliability of rolling stock and track.
* At present information on track defects is gathered through analog based SRT and DRT machines. In order to improve reliability it has been planned to install over the next five years, 300 digital SRT and 200 digital DRT machines by replacing the present analog based machines. Besides, Automatic Ultrasonic Rail Testing Cars, Bridge Testing Equipment and Track Monitoring Cars would be provided at a cost of Rs.140 crore under a comprehensive plan during the next five years.
* In-addition using fire resistant material in coaches as per international standards a comprehensive smoke and fire detection system to give an early warning in case of smoke and fire is proposed to be installed in one rake on a pilot basis. Based on the success of trials it will be installed in all the trains in a phased manner at a cost of Rs.700 crore.
* There are 16,600 manned level crossings and 18,200 unmanned level crossings on Indian Railways. With the increase in number of motor vehicles, there is a progressive increase in the rail accidents at unmanned level crossings. Therefore, it is decided to make the policy more comprehensive to man all the busy unmanned level crossings on a fast track basis.
* More ROBs/RUBs to be constructed at Railways’ initiative as well as PPP initiatives to be explored for construction of ROBs/RUBs. The construction of 582 ROBs/RUBs is in progress on a 50:50 cost sharing basis with the state governments. It is proposed to take up another 100 new works of ROBs/RUBs during 2008-09.

Network

Railway minister has announced large scale expansion plan in the Railway Budget 2008-09 which are listed below:

* During 2008-09, 10 new Garib Rath and 53 new trains will run.
* Routes of 16 trains will be extended and the frequency of 11 trains would be increased in 2008-09.
* Rs.1730 crores will be spent on construction of 350 kms of new lines in 2008-09.
* A provision of Rs.2500 cr has been made for doubling works on 1000 kms.
* During 2008-09, a target of gauge conversion of 2150 kms in 2008-09 has been fixed with an expected outlay of Rs.2489 cr. Further, a target for construction of 3500 kms of broad gauge lines in 2008-09 has been fixed.
* Additional funds to the tune of Rs.1712 cr have been sought from Ministry of Finance for national projects.
* Capacity of high density network routes that carries more 75% of railways goods traffic will be augmented with an expected outlay of worth Rs.75000 cr. This also includes construction of the Eastern and Western corridors.
* Works on Eastern freight corridor from Ludhiana to Dankuni and the Western corridor from Delhi to JNPT is expected to commence in 2008-09. Further, detailed feasibility studies for the North-South, East-West, East-South and South-South Dedicated Freight Corridors are being carried out.

Performance across the board

The railway department has shown remarkable performance in the first nine months of the current financial 2007-08 which have represented an unprecedented surplus despite of reduction in passenger fares. Railways had registered a 14% growth in passenger earnings and a growth of 5.6% in originating passengers during first nine months. Gross traffic earnings have increased by 16% higher than the previous year and 2% higher than the Budget Estimates. The railways cash-surplus before dividend is expected to reach around Rs. 25,000 crore as against Rs. 20,000 crore in the previous year with an operating ratio of 76.3%. Freights are growing for fourth consecutive years with an incremental loading of 43 MT during the first nine months and expected to be 62 MT for 2007-08. Railways receive more than 100 MT traffic every year from the cement industry and 120 MT from steel industry and now set new mission targets of 200 MT of cement and steel transportation by the year 2011-12. By the end of 2007-08, railways are expected to have fund balance of Rs 20,483 which is 27% higher than budgeted target.

Budget estimates 2008-09

The target for freight loading for the year 2008-09 has been kept at 850 MT and for freight output at 550 billion tonne km. Maintaining an overall double digit growth, the Budget Estimates for Freight, Passenger, Sundry other Earnings and other Coaching Earnings have been kept at Rs. 52,700 crore, Rs 21,681 crore, Rs. 5,000 crore and Rs 2,420 crore respectively. Gross Traffic Earnings have been projected as Rs 81,801 crore, reflecting an increase of Rs.9,146 crore on the Revised Estimates for the current year.

Ordinary Working Expenses for 2008-09 has been kept at Rs.50,000 crore, which is 20% more than the Revised Estimates for 2007-08. Provision for Depreciation Reserve Fund has been stepped up to Rs.7,000 crore and Pension Fund to Rs.9,590 crore. An ad hoc provision of nearly Rs 5,000 crore has been made for the anticipated recommendations of the 6th Pay Commission. Thus total Working Expenses will be Rs.66,590 crore and Net Revenue Rs.16,423 crore. While Railways’ cash surplus before dividend is projected at Rs.24,783 crore, the targeted Operating Ratio is 81.4%. Fund balances to end of the next financial year are estimated at Rs.19,707 crore. Dividend payable for 2008-09, assessed on the basis of the rate of dividend for 2007-08, is estimated at Rs.4,636 crore. In the Plan outlay for the next year, Rs.20,600 crore will be provided from internal resources.