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Indian Railway Budget 2008-09	26-Feb-2008.

With general elections due next year, the Railway Minister Mr Lalu Prasad tabled a people friendly Railway budget in the Lok Sabha on Tuesday. This budget was marked by good performance on both the freight and the passenger traffic fronts and a continued improvement in the operating ratio. The Railway Minister has attributed this performance to reduced fares/tariffs driving volumes and profits. The Railways continue on its profitable growth path and the accent continues to be on capital expenditure (capex) to make it more competitive. Other highlights of this budget are reduction in passenger fares by 5% for second-class sleeper trains and reduction of 3-7% in fares for AC classes. The freight rates on petrol and diesel is reduced by 5% (by reducing its classification), whereas the freight on fly ash is cut by 14%. To further gain market share in the freight segment, the minister has taken initiatives like introduction of new wagon leasing policy and bulk and non-bulk goods terminal scheme. The budget also spells out the aim of using the public private partnership (PPP) model to offer door-to-door solutions including value-added services like modern material handling facilities, warehouses and multi-modal logistic parks. Railway budget at a glance	Rs (cr) Particulars	Budgeted	Revised FY08BE	% chg FY08RE	Budgeted (FY08RE/FY08BE)	% chg FY09BE	(FY09BE/FY08RE) 1	Gross traffic receipts 	71,218	72,655	2.0	81,801	12.6 1.a 	Passenger earnings	20,075	20,075	0.0	21,681	8.0 1.b 	Goods earnings 	46,943	47,743	1.7	52,700	10.4 1.c 	Other earnings	4,200	4,837	15.2	7,420	53.4 2	Total working expenses 	56,867	55,421	-2.5	66,590	20.2 2.a 	Ordinary working expenses 	42,687	41,721	-2.3	50,000	19.8 as a % of gross traffic receipts	59.9	57.4	 	61.1 2.b 	Appropriation to depreciation reserve fund	5,496	5,450	-0.8	7,000	28.4 as a % of gross traffic receipts	7.7	7.5	 	8.6 2.c 	Appropriation to pension fund 	8,683	8,250	-5.0	9,590	16.2 as a % of gross traffic receipts	12.2	11.4	 	11.7 1-2=3 	Net traffic receipts 	14,351	17,234	20.1	15,211	-11.7 4	Net miscellaneous receipts 	1,182	1,182	0.0	1,212	2.5 3+4=5 	Net revenue	15,533	18,416	18.6	16,423	-10.8 Year end fund balance	16,170	20,483	 	19,707 Operating ratio (%)	79.6	76.3	 	81.4 Performance review 2007-08 The financial performance of the Railways continues to improve. The revised estimates for 2007-08 show an increase of 2% in the gross traffic receipts, but a tight control on working expenses resulting in a robust growth of 20.1% in the net revenue receipts. Consequently, the operating ratio is likely to improve to 76.3% as compared with 79.6% budgeted figure and 78.7% reported last year. This operating ratio performance is the best in the last four decades. The cash surplus before dividend is expected to reach Rs25, 000 crore by the end of this year against Rs20, 000 crore last year. The net revenue for FY2008 is likely to be Rs18, 416 crore and the dividend paid this year is Rs4, 218 crore. Railway budget for 2008-09 In the budget estimates for 2008-09, the gross traffic receipts are estimated to grow by 12.6% to Rs81,801 crore. However, the net traffic receipts are expected to decline by 11.7% to Rs15, 211 crore as compared with the revised estimates of Rs17, 234 crore in FY2008. This is largely because of the ad hoc provision of Rs5, 000 crore made for the liability arising from the implementation of the sixth pay commission (reflected in ordinary working expenses for FY2008BE). This is the key reason for the expected worsening of the operating ratio to 81.4% from 76.3% in the revised estimates of FY2008. Freight Freight rates have been reduced by 5% on petrol and diesel. The freight rate on fly ash has been reduced by 14%. This is beneficial for companies making blended cement, who use fly ash as a raw material, as their cost of raw material will go down. Freight loading till December 2007 has gone up 8.2% and the earnings from freight has been Rs33,447 crore. On this basis, the target for freight loading for FY2008 has been raised to 790 million tonne from 785 million tonne. The target for freight loading for FY2009 has been kept at 850 million tonne. The freight-loading target is 1,100 million tonne by 2011-12. To meet this target, the Railways have drawn up an industry wise approach. It is targeting traffic of 200 million tonne from the steel industry by 2011-12 from 120 million tonne at present. It is targeting another 200 million tonne in 2011-12 from the cement industry from more than 100 million tonne at present. Similarly it plans to garner freight from coal industry, port traffic and containerized business. In case of the coal industry, it plans to make most of the new dedicated routes for coal movement fit for trains, which can bear larger weight. In case of ports, it is giving priority to port rail connectivity projects. For containerized business, it plans to build more container depots so that the share of this business goes up. Passenger traffic This budget has reduced passenger fares by 5% for second-class sleeper trains and 3-7% for AC classes. In addition 53 new trains and 10 new Garib Raths (low cost fully AC trains) will be started. Vision 2025 The Railways plan to prepare a Railway Vision 2025 document, which will outline the Railway's strategy and preparedness for the future. This document will set out targets for the next 17 years and also a plan for achieving these targets. It will also contain details of various freight schemes to make Indian Railways more competitive. Dedicated freight corridors (DFCs) Work of the Eastern freight corridor (from Ludhiana to Kolkata) and the Western corridor (from Delhi to JNPT) have been sanctioned and the construction on both these projects will commence in FY2009. Detailed feasibility studies for the North-South, East-West, East-South and South-South DFCs are being carried out and the sanction for the construction of these corridors is likely in FY2009. Modernization Railways have a high-density network of 20,000 km, which needs to be modernized. The Railways plans to invest Rs75, 000 crore over the next seven years to augment line capacity on these routes. Public Private Partnership (PPP) The Railways have drawn up a huge plan of Rs2, 50,000 crore for the expansion, modernization and upgradation of the technology in the next five years. Though the railways would resort to use of internal resources and borrowings, considering the huge amount, it has started many PPPs to attract an investment of Rs1, 00,000 crore over the next five years. In 2008-09, concessions committing an investment of about Rs25, 000 crore are likely to be awarded through the PPP route. The Railways is also looking at raising Rs4, 000 crore in 2008-09 by making commercial use of the surplus land. Capex binge continues Indian Railways continued on its capex spree earmarking an outlay of Rs37, 500 crore for FY2009, which is a strong growth of 21% over the last year. The current year's capex includes an outlay on rolling stock of Rs11, 045 crore, which is at its all-time high, while the outlay on doubling has been increased by 25% to Rs2, 500 crore. Further Rs3, 600 crore, a rise of 7% over last year, is planned to be spent on track renewal, Rs1,520 crore on signal and telecommunication, Rs626 crore on electrification (109% growth), Rs700 crore on road over bridges & road under bridges and Rs600 crore on manning of unmanned level crossings. Increase in capex (Rs crore) Source: Budget documents Increased expenditure (Rs crore) Particulars	4-Mar	5-Apr	6-May	06-07R	07-08B	08-09B Total investment	10,953	13,587	14,079	18,976	31,000	37,500 Doubling outlay	443	434	675	1,052	2,000	2,500 Track renewals	2,605	2,993	2,890	2,922	3,360	3,600 Signal & telecom	689	953	1,164	1,518	1,597	1,520 Gauge conversion	733	1,073	1,234	1,300	2,404	2,489 Prov for new lines	1,005	1,644	1,952	1,510	1,610	1,730 Others*	5,478	6,490	6,164	10,674	20,029	25,661 The target gauge conversion for this fiscal is likely to be 2,300 kilometer (km) and the same is targeted at 3,500 km for FY2009. Further, about 350 km of new lines will be added in the next year. During FY2008, doubling of 500 km is expected to be completed, while a target of 1,000 km has been fixed for FY2009. Plans for year ahead Target 8-Jul	Likely to be achieved 07-08	Target 9-Aug Gauge conversion (km)	1,800	2,300	3,500 New lines (km)	500	155	350 Doubling (km)	700	500	1,000 Wagons (No)	11,000	15,000	20,000
 * Includes Rolling stock, electrification, bridges, metropolitan transport works, projects for RVNL, passenger amenities among others.

Implications of the Railway budget Initiative	Description	Companies to benefit Stainless steel wagons	Stainless steel coaches to be introduced from 2010/New LHB coaches in all Rajdhanis by FY2010 and Shatabdis by FY2011; to procure 20,000 wagons in FY2009	All steel companies, BEML, Titagarh, Texmaco, Gabriel IT spend	Online control of trains in two years; and link trains via software communication	CMC, Wipro Infotech among other domestic IT companies Signaling systems, ACDs	Greater focus on signaling systems and safety solutions such as anti collision devices (ACDs)	Kernex, Integra Hindustan, Siemens Dedicated freight corridor/ICDs	Rail corridor connecting Ludhiana-Dankuni and Delhi-JNPT to commence construction this year; Concor to set up 8 new depots	Concor, Gateway Distriparks, Kalindee Security	Increased thrust on security—CCTVs and metal detectors to be put up in all stations	Zicom, Nelco Enhancing capacity on high density network	An investment of Rs75,000 crore over the next 7 years to augment line capacity on 20,000 km of high density network	Kalindee Rail, Tantia Construction Smart Cards	Railways to launch Go-Mumbai Card/Smart Card	Bartronics Port connectivity	Work on connecting road for Pipavav Port is complete and SPV for links to Mundra, Kandla, and Krishnapatnam ports is also expected to be formed	Mundra Port, Tata Power Development of stations/ additional land through PPP	Development of metro stations, logistic parks, world class stations and other logistics at an investment of Rs100,000 crore through PPP; also to realize Rs4,000 crore through commercialization of additional land; 30 bigger stations to have multi-level parking system; and 50 large stations to have lifts/escalators	Parsvanath, Larsen & Toubro and other real estate developers Fire protection systems	To spend Rs700 crore on anti-fire systems	Nitin Fire Freight on fly ash	Reduced by 14%	Cement companies—due to reduced cost of raw material Freight for petrol	5% reduction in freight rates for petrol and diesel	Oil marketing companies