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RAILWAY BUDGET: 2011-12
q Once again, a populist budget with no increase in freight rates and passenger
fares
q Significant initiatives laid down towards addition of railway lines, gauge
conversion and electrification. However, implementation of these initiatives
remains a key going ahead.
q In order to attract investments in railway sector, single window clearance
and economic share to industrials has been proposed.
q Plan outlay increased by 31% to Rs 576.3 bn to be utilized for addition of
new lines, acquisition of rolling stock, gauge conversion and construction
of rail over bridges. However, plan outlay for FY11 has been reduced
downwards by Rs 41 bn.
q Performance during 2010-11 was impacted by disruption of train movement
and ban on iron ore export. Along with this, implementation of 6th
pay commission recommendation also resulted in increasing wage expenses.
q Operating ratio stood at 92.1% as compared to 92.3% in Budget estimates.
Impact of 6th pay commission wage revision hurt the operating
ratio.
q Plan outlay is expected to be funded by gross budgetary support, market
borrowings, diesel cess, internal accruals and tax free bonds.
q Freight revenues budgeted to rise by 6.4% to Rs.625bn, largely on the
back of higher freight volumes (993mn tons v/s 924mn tons); potential
downsides exist
q Sectorally, the budget has disappointed the railway ancillary industry.
Wagon procurement target has been maintained at previous year's level,
thus disappointing the wagon builders. No change in freight rates
should come as a relief to the cement and steel industry, which is reeling
under cost pressures.
PPP focus maintained
In order to attract investments in railway sector, Ms Banerjee has proposed to give
economic share to industrials to invest in rail sector. With this objective, railways
have developed business oriented policy initiatives such as -
n Railways' Infrastructure for Industry Initiative (R3i)
n Private Freight Terminal (PFT)
n Special Freight Train Operators (SFTO)
n Automobile Freight Train Operators (AFTO)
n Automobile and Ancillary Hubs
n Kisan Vision (Cold Chains)
n New Catering Policy
n Rail Connectivity to Coal and Iron ore mines (R2CI)
Thus, in line with these initiatives, Minister has proposed for a single window clearance
for PPP approval and has got 85 proposals.
A populist budget
n Once again Ms Mamata Banerjee has presented a populist railways budget with
no increase proposed in passenger fare or freight rates. Booking charges on AC
were cut to Rs 10 versus Rs 20.
n In order to enhance safety measures, it will do away with all unmanned railway
crossings by next year and will commission anti-collision devices in 3 zones. Anti
collision devices have already been sanctioned in 8 zones.
n Railways will also induct 16,000 ex-servicemen and will also ensure better accessibility
of stations for physically challenged.
n Minister has also made provision for concessions to physically handicapped persons,
press correspondents. Concession to senior citizens to be hiked from 30%
to 40%.
n Along with this, 56 new express trains, 3 new Shatabdi and 9 Duronto trains to
be introduced.
Investments up; plan outlay up by 31%
n Ms Mamata Banerjee increased the total plan by 30.6% to Rs 576.3 bn from Rs
441 bn earlier.
n Annual gross budgetary support is estimated at Rs 200 bn, market borrowings at
Rs 205.94 bn, diesel cess at Rs 10.41 bn, internal accruals at Rs 142.19 bn and
railways also plan to raise Rs 100 bn via tax free bonds.
n These investments are expected to be utilized for addition of new lines, acquisition
of rolling stock, gauge conversion and construction of rail over bridges.
n As against a target of adding 1000 km of new lines in FY11, 700 km was added
in FY11. Minister has laid down a target of adding 1300 km of new lines in
FY12. Total allocation for laying new lines has been hiked to Rs 95.83 bn from
Rs 44.1 bn earlier.
n Apart from these, minister has also proposed :
l Double decker coaches to be introduced on Jaipur-Delhi and Ahmedabad-
Mumbai routes.
l 236 more stations to be upgraded as Adarsh Stations, 47 additional services
proposed in Mumbai and 50 new suburban services proposed for Kolkata.
l 867 km of doubling of rail lines and 1017 km of gauge conversion targeted in
2011-12.
l Setting up coach factory in Palaghat, Kolar and Singur, diesel locomotive
centre in Manipur, wagon units and rail industrial parks.
l Setting up of 700 MW gas based power plant in Maharashtra, 1320 MW
thermal power plant in Agra, 1300 MW power plant in AP and also working
on 1000 MW captive power plant in Bihar.
Performance of 2010-11
n 700 km of new lines being completed in 2010-11
n 800 km gauge conversion, 700 km doubling and 1,000 km electrification targeted
for completion in 2010-11
n Gross receipts stood at Rs 948.4 bn, higher by Rs 750 mn over budgeted estimates
while ordinary working expenses stood at Rs 670 bn, higher by Rs 20 bn
over budgeted estimates. Thus, revised plan outlay stood at Rs 403.15 bn
n Disruption of train movement and ban on iron ore export led to a loss of Rs 15 bn
and Rs 20 bn respectively during 2010-11 while increase in the salary expenditure
for the staff was witnessed on account of implementation of 6th pay commission
recommendations.
n Operating ratio stood at 92.1% as compared to 92.3% in Budget estimates.
Downward revision in freight traffic but healthy outlook for
FY12E
Due to disruptions of train movements and ban on iron exports, the freight loading
target has been reduced by 20 MMT from 944 MMT to 924 MMT in FY11E. The
railway budget has outlined several measures to improve freight traffic on Indian
Railways and thus it is looking to improve the freight loading on the Indian Railways
by 7.5% from 920 MMT in FY11E to 993 MMT in FY12E. This may prove optimistic
in case the economic growth does not match expectations, especially looking at the
FY11 performance of freight traffic.
Initiatives for rail freight
n No hike in freight rates: The freight rates have not been hiked thereby retaining
its competitive advantage to the road transport. Going forward with high
crude oil prices it is possible that auto fuel prices may be increased and thus railways
would in fact increase its competitive advantage over road transport and
this may lead to shift of cargo form road to rail.
n New railway lines to boost capacity and connectivity: It would set up 1300
km of new railway lines every year thereby increasing the capacity, reach and
scope of the cargo that can be moved by rail.
n Wagons: As against a wagon procurement target of 18000 in current fiscal, the
Rail Ministry expects to procure 16500 wagons, thus actual procurement is below
target levels. Furthermore, the wagon procurement target for 2011-12 has been
maintained at 18000 wagons, which is the same as for 2010-11. The Indian Railways
Vision 2020 targets a significant gain of freight transport market share from
35% currently to 50% by 2020.
n Extend web based systems of allotment of iron ore rakes to coal traffic. To increase
capacity, it is planned to run double-stack container trains from Gujarat
ports to the major ICD at Gurgaon.
n Dedicated Freight Corridor: The main loan agreement for phase I of Western
Corridor of DFC with Japan International Cooperation Agency (JICA) has been
signed and bidding process for civil and track work has commenced. For the
Eastern Corridor, the appraisal by World Bank for Khurja-Bhaupur section would
be carried out shortly. The ministry targets to complete the DFC project by December,
2016 as scheduled.
Impact of Railway Budget on other companies
n New rail lines: The target for FY12 is 1300 kms of new rail lines and associated
works, which is positive for Kalindee Rail and KEC.
n Wagon procurement: Muted wagon procurement target for FY12 is disappointing
for wagon manufacturers like Titagarh and Texmaco.
n Investment in Captive Power Projects: The NTPC-Rail JV plans to take up
setting of a 1320 MW power project. Another 700 MW Gas based power project
has been approved in Thakurli, Maharashtra. Positive for BHEL (being prime client
of NTPC), L&T and Thermax(HRSG for Gas-based power project).
n Anti-collision device: The Railway Budget has approved Anti Collision Devise
(ACD) sanctioned to cover 8 zonal railways and GPS Based 'Fog Safe' Device to
be deployed. This is positive for Kernex Micro Systems which is primarily into
various types of anti-collision devices.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
RAILWAY BUDGET: 2011-12
q Once again, a populist budget with no increase in freight rates and passenger
fares
q Significant initiatives laid down towards addition of railway lines, gauge
conversion and electrification. However, implementation of these initiatives
remains a key going ahead.
q In order to attract investments in railway sector, single window clearance
and economic share to industrials has been proposed.
q Plan outlay increased by 31% to Rs 576.3 bn to be utilized for addition of
new lines, acquisition of rolling stock, gauge conversion and construction
of rail over bridges. However, plan outlay for FY11 has been reduced
downwards by Rs 41 bn.
q Performance during 2010-11 was impacted by disruption of train movement
and ban on iron ore export. Along with this, implementation of 6th
pay commission recommendation also resulted in increasing wage expenses.
q Operating ratio stood at 92.1% as compared to 92.3% in Budget estimates.
Impact of 6th pay commission wage revision hurt the operating
ratio.
q Plan outlay is expected to be funded by gross budgetary support, market
borrowings, diesel cess, internal accruals and tax free bonds.
q Freight revenues budgeted to rise by 6.4% to Rs.625bn, largely on the
back of higher freight volumes (993mn tons v/s 924mn tons); potential
downsides exist
q Sectorally, the budget has disappointed the railway ancillary industry.
Wagon procurement target has been maintained at previous year's level,
thus disappointing the wagon builders. No change in freight rates
should come as a relief to the cement and steel industry, which is reeling
under cost pressures.
PPP focus maintained
In order to attract investments in railway sector, Ms Banerjee has proposed to give
economic share to industrials to invest in rail sector. With this objective, railways
have developed business oriented policy initiatives such as -
n Railways' Infrastructure for Industry Initiative (R3i)
n Private Freight Terminal (PFT)
n Special Freight Train Operators (SFTO)
n Automobile Freight Train Operators (AFTO)
n Automobile and Ancillary Hubs
n Kisan Vision (Cold Chains)
n New Catering Policy
n Rail Connectivity to Coal and Iron ore mines (R2CI)
Thus, in line with these initiatives, Minister has proposed for a single window clearance
for PPP approval and has got 85 proposals.
A populist budget
n Once again Ms Mamata Banerjee has presented a populist railways budget with
no increase proposed in passenger fare or freight rates. Booking charges on AC
were cut to Rs 10 versus Rs 20.
n In order to enhance safety measures, it will do away with all unmanned railway
crossings by next year and will commission anti-collision devices in 3 zones. Anti
collision devices have already been sanctioned in 8 zones.
n Railways will also induct 16,000 ex-servicemen and will also ensure better accessibility
of stations for physically challenged.
n Minister has also made provision for concessions to physically handicapped persons,
press correspondents. Concession to senior citizens to be hiked from 30%
to 40%.
n Along with this, 56 new express trains, 3 new Shatabdi and 9 Duronto trains to
be introduced.
Investments up; plan outlay up by 31%
n Ms Mamata Banerjee increased the total plan by 30.6% to Rs 576.3 bn from Rs
441 bn earlier.
n Annual gross budgetary support is estimated at Rs 200 bn, market borrowings at
Rs 205.94 bn, diesel cess at Rs 10.41 bn, internal accruals at Rs 142.19 bn and
railways also plan to raise Rs 100 bn via tax free bonds.
n These investments are expected to be utilized for addition of new lines, acquisition
of rolling stock, gauge conversion and construction of rail over bridges.
n As against a target of adding 1000 km of new lines in FY11, 700 km was added
in FY11. Minister has laid down a target of adding 1300 km of new lines in
FY12. Total allocation for laying new lines has been hiked to Rs 95.83 bn from
Rs 44.1 bn earlier.
n Apart from these, minister has also proposed :
l Double decker coaches to be introduced on Jaipur-Delhi and Ahmedabad-
Mumbai routes.
l 236 more stations to be upgraded as Adarsh Stations, 47 additional services
proposed in Mumbai and 50 new suburban services proposed for Kolkata.
l 867 km of doubling of rail lines and 1017 km of gauge conversion targeted in
2011-12.
l Setting up coach factory in Palaghat, Kolar and Singur, diesel locomotive
centre in Manipur, wagon units and rail industrial parks.
l Setting up of 700 MW gas based power plant in Maharashtra, 1320 MW
thermal power plant in Agra, 1300 MW power plant in AP and also working
on 1000 MW captive power plant in Bihar.
Performance of 2010-11
n 700 km of new lines being completed in 2010-11
n 800 km gauge conversion, 700 km doubling and 1,000 km electrification targeted
for completion in 2010-11
n Gross receipts stood at Rs 948.4 bn, higher by Rs 750 mn over budgeted estimates
while ordinary working expenses stood at Rs 670 bn, higher by Rs 20 bn
over budgeted estimates. Thus, revised plan outlay stood at Rs 403.15 bn
n Disruption of train movement and ban on iron ore export led to a loss of Rs 15 bn
and Rs 20 bn respectively during 2010-11 while increase in the salary expenditure
for the staff was witnessed on account of implementation of 6th pay commission
recommendations.
n Operating ratio stood at 92.1% as compared to 92.3% in Budget estimates.
Downward revision in freight traffic but healthy outlook for
FY12E
Due to disruptions of train movements and ban on iron exports, the freight loading
target has been reduced by 20 MMT from 944 MMT to 924 MMT in FY11E. The
railway budget has outlined several measures to improve freight traffic on Indian
Railways and thus it is looking to improve the freight loading on the Indian Railways
by 7.5% from 920 MMT in FY11E to 993 MMT in FY12E. This may prove optimistic
in case the economic growth does not match expectations, especially looking at the
FY11 performance of freight traffic.
Initiatives for rail freight
n No hike in freight rates: The freight rates have not been hiked thereby retaining
its competitive advantage to the road transport. Going forward with high
crude oil prices it is possible that auto fuel prices may be increased and thus railways
would in fact increase its competitive advantage over road transport and
this may lead to shift of cargo form road to rail.
n New railway lines to boost capacity and connectivity: It would set up 1300
km of new railway lines every year thereby increasing the capacity, reach and
scope of the cargo that can be moved by rail.
n Wagons: As against a wagon procurement target of 18000 in current fiscal, the
Rail Ministry expects to procure 16500 wagons, thus actual procurement is below
target levels. Furthermore, the wagon procurement target for 2011-12 has been
maintained at 18000 wagons, which is the same as for 2010-11. The Indian Railways
Vision 2020 targets a significant gain of freight transport market share from
35% currently to 50% by 2020.
n Extend web based systems of allotment of iron ore rakes to coal traffic. To increase
capacity, it is planned to run double-stack container trains from Gujarat
ports to the major ICD at Gurgaon.
n Dedicated Freight Corridor: The main loan agreement for phase I of Western
Corridor of DFC with Japan International Cooperation Agency (JICA) has been
signed and bidding process for civil and track work has commenced. For the
Eastern Corridor, the appraisal by World Bank for Khurja-Bhaupur section would
be carried out shortly. The ministry targets to complete the DFC project by December,
2016 as scheduled.
Impact of Railway Budget on other companies
n New rail lines: The target for FY12 is 1300 kms of new rail lines and associated
works, which is positive for Kalindee Rail and KEC.
n Wagon procurement: Muted wagon procurement target for FY12 is disappointing
for wagon manufacturers like Titagarh and Texmaco.
n Investment in Captive Power Projects: The NTPC-Rail JV plans to take up
setting of a 1320 MW power project. Another 700 MW Gas based power project
has been approved in Thakurli, Maharashtra. Positive for BHEL (being prime client
of NTPC), L&T and Thermax(HRSG for Gas-based power project).
n Anti-collision device: The Railway Budget has approved Anti Collision Devise
(ACD) sanctioned to cover 8 zonal railways and GPS Based 'Fog Safe' Device to
be deployed. This is positive for Kernex Micro Systems which is primarily into
various types of anti-collision devices.
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