Railway Budget-2007-08: Merry growth on market sensitive approach

Indian railways reported healthy 36% rise in profits to Rs 20,000 crore on sensible and market oriented approach and increasing operational ratio

Buoyancy in the Indian economy, market oriented approach of Indian Railways in the past few years together have facilitated healthy growth in the Indian Railways position in the past few years. The Railway Minister Lalu Prasad Yadav has announced his fourth consecutive budget today for the year, 2007-08.

Indian Railway has registered a profit of Rs 20,000 crore against Rs 14700 crore, last year. Freight earning recorded the growth of 17 per cent. There is remarkable growth in passenger earning, other coaching earning, sundry earning, 14%, 48%, and 11% respectively.

Another important source of revenue i.e. gross traffic earning recorded the growth of 17 per cent as compared to the last year.

One of the important announcements from Hon’ble Railway minister regarding freight tariff, Lalu Prasad Yadav has announced reduction and discount in the freight tariff on various commodities like diesel, petrol, steel, cement.

The railways have generated Rs 34083.49 crore of revenue earnings from freight traffic during April-January –07 as compared to Rs 29231.71 crore in the same period last year-growth of 16.60 per cent. The earnings from freight traffic during the month of January 2007 was Rs 3842.14 crore compared to Rs 3364.38 crore in the same period last year.

Of the total earnings during the month of January 2007, Rs. 1493.94 crore came from transportation of 29.19 million tonnes of coal, followed by Rs. 338.67 crore from 3.84 million tonnes of foodgrains, Rs. 310.35 crore from 6.23 million tonnes of cement, Rs. 261.65 crore from 3.12 million tonnes of petroleum oil and lubricant (POL), Rs. 233.09 crore from 3.37 million tonnes iron ore for exports, Rs. 202.70 crore from 3.22 million tonnes of fertilizers, Rs. 198.80 crore from 1.79 million tonnes of iron & steel for steel plants, Rs. 177.62 crore from 4.83 million tonnes of raw material for steel plants and Rs. 625.32 crore from 10.15 million tonnes of other goods.

The Railway Minister also announced a new commodity based tariff policy on an experimental basis from 1 April 2007 through a special package for cement.

The railway freight cost of steel, cement and refineries are set to come down.

SAIL to save Rs 70 crore per annum

Steel Authority of India (SAIL) has welcomed the announcement of the Railway Minister for collaborating with steel producers for their expansion plans. The growth plans of the steel industry, including those of SAIL, will need substantial additions to the railway infrastructure.

Over the last few years, the changes in freight classification on steel making inputs had substantially increased freight cost. In this context, SAIL has welcomed the reversal of this trend. Freight reduction of 6% on iron ore, limestone and dolomite is likely to have a positive impact of around Rs. 70 cr. annually on SAIL.

SAIL also welcomed the plans to set up dedicated freight corridors, which when completed, will help meet the growing transportation requirements of the economy.

Several other steps announced in the Rail Budget will help in increasing the demand for steel include (a) Expenditure of Rs 30,000 crore for freight corridor (b) Wagon production increase by 10% including addition of 800 bogies to popular trains (c) Revamping of rail infrastructure and laying of new rail lines (d) Proposal of 3-tier freight container movement, etc. (d) Conversion of most of the meter gauge to broad gauge track.

SAIL is confident that it would be in a position to meet the increased requirement of the Indian Railways for different steel products.

Indian Oil Corporation (IOC) is the largest petro refinery and marketing company in India, with an estimated market share of 50%. The company is likely to save around Rs 35 to 40 crore, on account of reduction in cost of rail freight on petrol and diesel. About 30% of the company’s transport is through railways.

With sizeable investments to be made in modernization and expansion of capacity of Indian Railways, we expect healthy order flow for Texmaco, Stone India (wagon manufacturers), Hind Rectifiers, Kalindee Rail Nirman, Kernex Microsystems etc (equipment manufacturer).

Freight business

Lot of initiatives is taken from Indian Railways for further improvements and developments in Freight business Target for freight loading kept at 785 MT in 2007-08. Further, the share of cement and steel in total transportation has gone up in favour of railways. . Production of wagons of higher axle-load and payload to commence. The Ministry has set itself a target of 785 million tonne of rail freight freight loading for FY 2007-08.

Indian railways registered significant profit this year and at the same time it gives equal attention towards the comfort of passengers. It can easily seen from the various announcements declared from the Hon’ble Minister in speech, like, Passenger fares were reduced across all categories including both AC as well as second class by two to eight per cent.

Railway has decided to start production of new design coaching from 2007-08;the capacity of sleeper coaches has been increased from 72 to 84, AC chair car from 67 to 102.

800 more coaches to be attached in popular trains in coming year. Another important announcement related to the senior citizen. Facility for reservation of lower berths for senior coaching and women above 45 years traveling alone will certainly give comforts to the passengers who are belong to this group.

Apart from this, Railways plan to introduced 8 new Garib Raths, additional new trains (32 pairs) extensions of trains (23 pairs) in coming year.

Indian railway targeting 1100 MT freight loading and 840 crore passengers in the terminal year of 11 th plan. As a short-term strategy, Indian railway will focus on low cost high return projects. Public-private partnership will play important role at this perspective. Another important aspects in this way –construction of Eastern and Western dedicated freight at a cost of Rs 30,000 crore will commence from 2007-08 for completion during the 11 th plan.

The annual plan of Rs 31000 crore is the largest ever Annual plan so far, which includes, support of Rs 7611 crore from general revenue, 17323 crore from internal generation and 5740 crore from extra budgetary resources.

The main focus of the annual plan is to maintain the high growth in traffic.

Indian railways plan to impart training to railway personnel of African countries.along with this, chairman Railway board elected as first chairman of Asian Railway association and also as first non European President of International Railways union.

Reduction in fraight traffic on some commodities will definitely helpul to reduce the transport cost. But we donot expect the industry to pass on this benefit. Thanks to low cost air transport, the Railways had little scope for increasing passenger fares.

Overall, the Railway Budget was in line with expectations, but with some unexpected benefits for steel, cement and petro refinery and marketing companies.