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India Macro Watch
Railway budget: The good, the ok and the worrying
Bottom line: Execution of railway infrastructure plan key…
„ The good news from Railway Minister Mamata Banerjee’s budget today is
that operating performance remained reasonably good. The Railways’
operating ratio (total working expenses/gross traffic receipts), a measure of
operational efficiency, is projected at pretty decent 90% levels (Chart 1 and
Table 2). The ok news is that progress in railway infrastructure development
is moving in some quarters at least. If the Singur coach factory announced
last year has not yet started, an impressive 700km of new lines – double of
the previous peak per year – were laid. The worrying news is that in our view
the 2011 Railway Budget missed an opportunity to raise passenger/freight
charges to pass on rising fuel costs when growth is strong. Instead, the
Railways stepped up external borrowing for enhancing capacity.
Why it matters: … with greater reliance on external funding
„ We are concerned that railway minister Mamata Banerjee has scaled up the
annual railway plan outlay by 42.9% to Rs576bn (US$12.8bn) in FY12 on
external funding rather than internal resource generation. Internal resource
generation is projected to stagnate at Rs142bn across FY11-12. The
incremental infra spend will come from higher gross budgetary support of
about Rs50bn and higher market borrowing of Rs100bn via tax-free bonds
issued by the Indian Railway Finance Corporation. Higher leverage cannot
but up the ante for better execution as far as railways are concerned.
Details: Steps to improve railway infrastructure
„ 1300 km new lines, 867 km doubling of lines, 1017 km gauge conversion, and
18,000 production of wagons targeted in FY12.
„ New 56 Express, 3 Shatabdis, and 9 Duronto trains. Besides, 47 additional
suburban services in Mumbai and 50 new suburban services for Kolkata
proposed.
„ A bridge factory and a state-of-the-art Institute for tunnel and bridge
engineering proposed in Jammu and Kashmir.
„ 700 MW gas-based power plant to be set up at Thakurli in Maharashtra.
„ Rail industrial parks to be set up at Jellingham and New Bongaigaon.
„ Wagon units to be set at Kolar and Alappuzha (under JV/PPP mode) and at
Buniadpur.
Next up in India: 5.7% of GDP FY12 fiscal deficit
„ India: Union Budget (FY12), Monday, 28 February 2011.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India Macro Watch
Railway budget: The good, the ok and the worrying
Bottom line: Execution of railway infrastructure plan key…
„ The good news from Railway Minister Mamata Banerjee’s budget today is
that operating performance remained reasonably good. The Railways’
operating ratio (total working expenses/gross traffic receipts), a measure of
operational efficiency, is projected at pretty decent 90% levels (Chart 1 and
Table 2). The ok news is that progress in railway infrastructure development
is moving in some quarters at least. If the Singur coach factory announced
last year has not yet started, an impressive 700km of new lines – double of
the previous peak per year – were laid. The worrying news is that in our view
the 2011 Railway Budget missed an opportunity to raise passenger/freight
charges to pass on rising fuel costs when growth is strong. Instead, the
Railways stepped up external borrowing for enhancing capacity.
Why it matters: … with greater reliance on external funding
„ We are concerned that railway minister Mamata Banerjee has scaled up the
annual railway plan outlay by 42.9% to Rs576bn (US$12.8bn) in FY12 on
external funding rather than internal resource generation. Internal resource
generation is projected to stagnate at Rs142bn across FY11-12. The
incremental infra spend will come from higher gross budgetary support of
about Rs50bn and higher market borrowing of Rs100bn via tax-free bonds
issued by the Indian Railway Finance Corporation. Higher leverage cannot
but up the ante for better execution as far as railways are concerned.
Details: Steps to improve railway infrastructure
„ 1300 km new lines, 867 km doubling of lines, 1017 km gauge conversion, and
18,000 production of wagons targeted in FY12.
„ New 56 Express, 3 Shatabdis, and 9 Duronto trains. Besides, 47 additional
suburban services in Mumbai and 50 new suburban services for Kolkata
proposed.
„ A bridge factory and a state-of-the-art Institute for tunnel and bridge
engineering proposed in Jammu and Kashmir.
„ 700 MW gas-based power plant to be set up at Thakurli in Maharashtra.
„ Rail industrial parks to be set up at Jellingham and New Bongaigaon.
„ Wagon units to be set at Kolar and Alappuzha (under JV/PPP mode) and at
Buniadpur.
Next up in India: 5.7% of GDP FY12 fiscal deficit
„ India: Union Budget (FY12), Monday, 28 February 2011.
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