The Hindu Business Line : Exchequer dependence on financing Rail Plan on the rise

THE Railways' dependence on the exchequer to finance its Plan investments has gone up significantly in recent years. During the coming fiscal, over 47 per cent of the proposed Plan size of Rs 15,349 crore will be financed through budget support.

That the Railways is becoming less of a self-financing commercial undertaking is clear from the fact that monies from the exchequer funded 42 per cent of its total Plan investments during the 7th Plan period (1985-86 to 1989-90) and only 34.5 per cent in the 9th Plan period (1997-98 to 2001-02). But in the current 10th Plan, this share has climbed to over 50 per cent, while amounting to a whopping 56 per cent as per the revised estimates for 2004-05.

Between 1997-98 and 2004-05, the extent of annual budget support climbed up almost 4.5 times (from Rs 1,992 crore to Rs 8,857 crore), while the contribution from its internal resources rose marginally (from Rs 3,452 crore to Rs 3,776 crore). The inability to mop up own resources has meant that the Railways, apart from dipping into exchequer funds, has also had to rely significantly on borrowings raised through the Indian Railways Finance Corporation (IRFC).

The IRFC mobilises funds from the market, which it then deploys to procure rolling stock and then leases out to the Railways. In fact, as on March 31, 2004, the IRFC had financed the acquisition of 2,813 locomotives, 18,021 passenger coaches and 104,444 wagons, which it has leased out to the Railways for a 15-year primary tenor. These account for roughly half of the total rolling stock fleet employed by the Railways.

It is a different matter though that the IRFC borrowings route entails a cost, in the form of lease rentals payable to the corporation.

During 2004-05, the Railways is expected to fork out lease rentals of Rs 3,340 crore to the IRFC, with the figure budgeted at Rs 3,386 crore in the ensuing fiscal. These are, in fact, almost equal to, if not more than, the IRFC's borrowings of Rs 2,992 crore and Rs 3,440 crore for these two years.

As for the other source of financing the Railways' Plan - private investment under the build-operate-transfer (BOT) and own your wagon (OYW) schemes - the record has been dismal, to say the least.

After showing some promise in the early years of the 8th Plan, when investments worth Rs 559 crore were attracted in 1997-98 alone, not a single pie is expected from these schemes in the coming fiscal, partly due to the high servicing cost they entail for the Railways.

During 2004-05, the Railways' lease rentals on the OYW scheme are expected to be at Rs 269 crore, while being budgeted at Rs 286 crore in 2005-06.

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