The Minister of Railways, Dinesh Trivedi, presented the Railways Budget 2012 to Parliament on 14th March. While commenting on the financial position of Railways, the Minister said that 'the Indian Railways are passing through a difficult phase'. The Operating Ratio for the closing year is now estimated to equal 95%. This is significantly higher than the 91.1% figure budgeted last year. Operating Ratio is a metric that compares operating expenses to revenues. A higher ratio indicates lower ability to generate surplus. Surplus is used for capital investments such as laying of new lines, deploying more coaches etc. Therefore, a smaller surplus affects the Railway’s capability to make such investments. Budget v/s Revised estimates 2011-12 Budget 2011-12 had estimated the performance of Railways for the financial year. Revised estimates have now been submitted. Taken together, these two figures help in comparing actual performance against targets. Some observations are enumerated below:
Budget estimates 2012-13 In 2012-13, Railways plan to improve Operating Ratio to 84.9% and to increase surplus to Rs 15,557 crore. This is more than 10 times the surplus generated in 2011-12 (Revised Estimates). The effective increase in freight rates is estimated to average 23%. During this time, passenger fares are also estimated to increase by an effective average rate of 19%. [1] Infrastructure Performance during the 11th Plan Under the 11th Five Year Plan, the total plan expenditure for Railways had been approved at Rs 2,33,289 crore. The Outcome Budget shows that the actual expenditure is only likely to be Rs 1,92,291 crore. Thus, expenditure will fall short by Rs 40,998 crore. This gaps exists despite a significant increase in the Gross Budgetary Support approved by Parliament. Plan expenditure during 2007-12 (In Rs Crore)
|
Approved Expenditure |
Actual Expenditure |
|
| Gross Budgetary Support |
63,635 |
75,979 |
| Internal Resources |
90,000 |
67,763 |
| Extra Budgetary Support |
79,654 |
48,549 |
| Total |
2,33,289 |
1,92,291 |
The Standing Committee on Railways, in its 11th report presented in August 2011, had sought an explanation from the Ministry. According to the Ministry, lower mobilization of internal resources and lack of extra budgetary support are the main reasons for the shortfall. Internal resource mobilization has been low because of (i) impact of the 6th Pay Commission; and (ii) slow growth in freight earnings due to the economic slowdown. Extra budgetary resources have been low due to non-materialization of funds through the Public-Private Partnership route. Proposals for the 12th Plan Two recent committees – Kakodkar Committee on Railway Safety and the Pitroda Committee on Railway Modernization – have called for large investments in the next five years. The Kakodkar Committee has recommended an investment of Rs 1,00,000 crore in the next five years to improve safety; the Pitroda Committee has recommended an expenditure of Rs 3,96,000 crore in the next five years on modernization. The Railway sub-group of the 12th Five Year Plan has also estimated a requirement of Rs 4,42,744 crore for various other investments proposed to be undertaken during the Plan period. [2] All three groups have called for significant investments in infrastructure augmentation in the next five years. Budget proposals 2012-13 According to the Minister’s speech, the Annual Plan outlay for the year 2012-13 has been set at Rs 60,100 crore. The plan would be financed through:
What happens now? The Budget is likely to be discussed in the two Houses within the next few days. Post the discussion, the Ministry's proposals will be put to vote. Once passed, the Ministry can put its proposals into action. For more details on the Railway Budget, including the projects proposed this year and the status of proposals made last year, please see our analysis here. To understand some of the challenges faced by the Indian Railways, see our blog post from last year. Notes: [1] The ‘effective average fare’ has been calculated by dividing the total income from the segment (freight/ passenger) by the total traffic (in NTKM/ PKM). This would vary with changes in fares as well as the usage by different categories of users (including the proportion of tickets booked through Tatkal). [2] Source: Report of the Expert Group on Railway Modernization (Chairman: Sam Pitroda)
On September 14, 2012 the government announced a new FDI policy for the broadcasting sector. Under the policy, FDI up to 74% has been allowed in broadcasting infrastructure services. Previously the maximum level of FDI permitted in most infrastructure services in the sector was 49% through automatic route. There could be three reasons for the increase in FDI in the sector. First, the broadcasting sector is moving towards an addressable (digital) network. As per Telecom Regulatory Authority of India (TRAI), this upgradation could cost Rs 40,000 crore. Second, the increase in FDI was mandated because a higher FDI was allowed for telecommunication services, which too are utilised for broadcast purposes. In telecommunications 74% FDI is allowed under the approval route. Third, within the broadcasting sector, there was disparity in FDI allowed on the basis of the mode of delivery. These issues were referred to by TRAI in detail in its recommendations of 2008 and 2010. Recent history of FDI in broadcasting services In 2008 and 2010 TRAI had recommended an increase in the level of FDI permitted. A comparison of recommendations and the new policy is provided below. 
As noted in the table, FDI in services that relate to establishing infrastructure, like setting up transmission hubs and providing services to the customers, is now at 49% under automatic route and 74% with government approval. FDI in media houses, on the other hand, have a different level of FDI permitted. TRAI’s recommendations on the two aspects of FDI in broadcasting Digitisation of cable television network: The Cable Televisions Networks Act, 1995 was amended in 2011 to require cable television networks to be digitised. By October 31, 2012 all cable subscriptions in Delhi, Mumbai, Chennai and Kolkata are required to be digitised. The time frame for digitisation for the entire country is December 31, 2014. However, this requires investment to establish infrastructure. As per the TRAI 2010 report, there are a large number of multi-system operators (who receive broadcasting signals and transmit them further to the cable operator or on their own). As per the regulator, this has led to increased fragmentation of the industry, sub-optimal funding and poor services. Smaller cable operators do not have the resources to provide set-top boxes and enjoy economies of scale. As per news reports, the announcement of higher FDI permission would enable the TV distribution industry to meet the October 31 deadline for mandatory digitisation in the four metros. Diversity in television services: FDI in transmitting signals from India to a satellite hub for further transmission (up-linking services) has not been changed. This varies on the basis of the nature of the channel. For non-news channels, FDI up to 100% with government approval was allowed even under the previous policy. However, the FDI limit for news channels is 26% with government approval. In 2008 TRAI had recommended that this be increased to 49%. However, it reviewed its position in 2010. It argued that since FM and up-linking of news channels had the ability to influence the public, the existing FDI level of 26% was acceptable. It also relied upon the level of FDI permitted in the press, stating that parity had to be maintained between the two modes of broadcast. Under the new policy the level of FDI permitted in these sectors has not been changed.
