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XII Plan - Up-hill Task
The Rail Budget presented is forward looking and aims to focus on modernisation; safety and capacity augmentation. However, with a 29% YoY increase in annual outlay to Rs 601 bn in 2012-13 and a mismatch between gross budgetary support of Rs 240 bn vs. Rs 450 bn required in 2012-13, we see this budget as forward looking with no credible roadmap towards meeting its goal.
The average realisation to railways in per net tonne per kilometer terms have grown at the compounded annual rate of 2.5% over the past 10 years. To meet the revenue gap, Railways has proposed marginal increase in passenger tariffs (ranging from 2 paise to 30 paise with a likely gross revenue accretion of Rs 45 bn) and freight charges have remain unchanged, as it has been recently hiked (ranging from 18%-35%, with a gross revenue accretion of Rs 150-200 bn). With an eye on 2014 general elections, we do not see passenger and freight hikes in the next budget, which would put further strain on internal resources and increase reliance on market borrowings.
The Budget pronounces over-ambitious targets for the XII plan which we believe would be challenging and could impede growth in the medium term, until the Dedicated Freight Corridor (DFC) is constructed over the next 5 years.
IFIN Research Team
