TERM PAPER ON

RAILWAY BUDGET-
COMPARITIVE STUDY OF LAST
TWO YEARS BUDGET

SUBMITTED TO: SUBMITTED BY:

Mr. Satinder Sharma Gaurav Saini

Reg no. 11000076
Roll no. B32
 Introduction to Indian Railways

Indian Railways (IR) is the state-owned railway company of India. Indian Railways had, until
very recently, a monopoly on the country’s rail transport. It is one of the largest and busiest rail
networks in the world, transporting just over six billion passengers and almost 750 million
tonnes of freight annually. IR is the world’s largest commercial or utility employer, with more
than 1.6 million employees.

The railways traverse through the length and width of the country; the routes cover a total length
of 63,940 km (39,230 miles). As of 2005 IR owns a total of 216,717 wagons, 39,936 coaches and
7,339 locomotives and runs a total of 14,244 trains daily, including about 8,002 passenger trains.

Railways were first introduced to India in 1853. By 1947, the year of India’s independence, there
were forty-two rail systems. In 1951 the systems were nationalised as one unit, becoming one of
the largest networks in the world. Indian Railways operates both long distance and suburban rail
systems.

Background

The development of IR had its roots in the 1800s, when India was a British colony. The British
East India Company and later, the British colonial governments were credited with starting a
railway system in India.

The British found it difficult to traverse great distances between different places in India. They
felt the need to connect those places with trains to speed up the journey as well as to make it
more comfortable than travel by road in the great heat. They also sought a more efficient means
to transfer raw materials like cotton and wheat from the hinterlands of the country to the ports
located in Bombay, Madras and Calcutta, from where they would be transported to factories in
England. Besides, the mid-1800s were a period of mutiny and struggle for independence in India,
with uprisings in several parts of the country.

The British leaders wanted to be able to transfer soldiers quickly to places of unrest. Railways
seemed to be the ideal solution to all these problems.

Work began on the development of railway systems in India in the early 1850s. Initially, trains
were used to transport material between different places. The first commercial passenger train in
India ran between Bombay and Thane (places in western India) on April 16, 1853.

The distance of 34 kilometers was covered in about 75 minutes. Indians were initially
apprehensive of accepting railways as a means of travel, but soon overcame that fear and
railways gained popularity. Soon, railway lines began to be laid in other parts of the country,
mostly by private British companies, and the major regions in India were connected by rail. To
promote the construction of railway lines in India, the British Parliament introduced the
guarantee system.

Under this system, any company that constructed railway lines in India was given a guarantee of
a five percent return per annum on the capital invested. The company also had the right to pull
out from the venture and receive compensation from the government at any time if it was not
satisfied with the returns. This helped accelerate the development of railways in the country.

A number of railway companies were incorporated between 1855 and 1870. Most of them
operated at a regional level. By the beginning of the 1870s, the total track coverage in India was
4000 miles. In addition to commercial objectives, railways also began to play a social role in
India. When there were famines in several parts of the country between 1870 and 1880, railways
played a very important role in providing relief to the affected areas.\

By the end of 1880, the total track coverage increased to 9000 miles. In 1880, the Darjeeling
Steam Tramway started operating (the name was changed to Darjeeling Himalayan Railway in
1881). This railway track was considered one of the greatest engineering feats in the history of
IR, crossing as it did, rough and dangerous mountain terrain at a steep gradient.
In 1890, the British Government passed the Railways Act, to govern the construction and
operation of railways in India. By the beginning of the 20th century, there were nearly 25,000
miles of railway track in the country.

Rail budget and finances

The Railway Budget deals with the induction and improvement of existing trains and routes, the
modernisation and most importantly the tariff for freight and passenger travel. The Parliament
discusses the policies and allocations proposed in the budget. The budget needs to be passed by a
simple majority in the Lok Sabha (India’s Lower House). The comments of the Rajya Sabha
(Upper House) are non binding. Indian Railways are subject to the same audit control as other
government revenue and expenditures. Based on the anticipated traffic and the projected tariff,
the level of resources required for railway’s capital and revenue expenditure is worked out.
While the revenue expenditure is met entirely by railways itself, the shortfall in the capital (plan)
expenditure is met partly from borrowings (raised by Indian Railway Finance Corporation) and
the rest from Budgetory support from the Central Government. Indian Railways pays dividend to
the Central Government for the capital invested by the Central Government.

The formation of policy and overall control of the railways is vested in Railway Board
comprising the Chairman, Financial Commissioner and other functional Members for Traffic,
Engineering, Mechanical, Electrical and Staff matters. As per the 2006 budget, Indian Railways
earned Rs. 54,600 crores (Rs. 546,000 million or US$12,300 million). Freight earnings increased
by 10% from Rs. 30,450 cr (US$7,000 million) in the previous year. Passenger earnings, other
coaching earnings and sundry other earnings increased by 7%, 19% and 56% respectively over
previous year. Its year end fund balance is expected to stand at Rs. 11,280 cr (US $2.54 billion).

Around 20% of the passenger revenue is earned from the upper class segments of the passenger
segment (the air-conditioned classes). The overall passenger traffic grew 7.5% in the previous
year. In the first two months of India’s fiscal year 2005-06 (April and May), the Railways
registered a 10% growth in passenger traffic, and a 12% in passenger earnings.
A new concern faced by Indian Railways is competition from low cost airlines that has recently
made its début in India. In a cost cutting move, the Railways plans to minimise unwanted
cessations, and scrap unpopular routes.
 REVIEW OF LITERATURE

An article from “THE HINDU” dated 25th Feb 2010 stated that the railway minister MAMTA
BANERJEE had presented her second budget. The 2010-11 budget suggest its intentions and
policy pronouncements rather than for specific budgetary measures. She promised to come up
with a business model for the Railways, to set up a task force for clearing private investment in
Public Private Partnership (PPP) projects within 100 days, and to find innovative funding
methods to operationalise the ambitious ‘Vision 2020' plan tabled in Parliament. Industry hopes
that Ms Banerjee will come up with a detailed framework for PPP before long to realize her
vision.

An article from “THE HINDU” dated 4th July 2010 stated that railway minister decided to keep
the focus on passenger amenities and early implementation of on-going projects. The bonanza to
passengers is that the passenger fares and freight tariff are unchanged. She focused on
developing 50 world-class stations, expand the ticket reservation network, and step up resources
for new lines. To ensure timely completion of projects, she had proposed to set up a committee
to monitor their implementation.

An article by Manoj Govindaswamy dated 26th Feb 2010 reveals the pros and cons of the railway
budget 2010. It briefly explains about the projection, funding and expansion of railways. He says
that though government has introduced some good schemes like improved online booking
system, SMS updates for train’s reservation and departure and reservation status and strong
research partnerships with premier institutes of India, still government has some unrealistic plans
such as housing for all railway employees in next 10 years and special efforts to control
outstanding debt of the railways.

An article published in “INDIA TODAY” by S.P.S. Pannu dated 25th Feb 2010 disclose the
inside scene of railway budgets by putting forward different evidences. It mainly focuses on the
ambiguity of the railway budget 2010. Railway minister is having a lot of hope from her public-
private partnership scheme for railways though it had been a failure in the past. Moreover
corporate always look for heavy returns which goes against the concept of social responsibility
which Mrs. Banerjee is pushing so strongly.
An article published in “INDIA TODAY” comparing the previous year budget with this year and
assessing the status of last fiscal’s announcements. It highlights the point that Mamta Banerjee
turned liberal in entertaining the demands of politicians of all hues and from across the country.
Railway minister has not been able to fulfill the promises made in last year’s budget. Main
reason which took toll on her promises was the financial crisis Indian railway is facing.

The article solely explains the data presented in the railway budget presented by Mamta Banerjee
in parliament. It basically focuses on the financial condition of Indian railways. The budget had
approach for 'inclusive growth' and expansion of rail network to take development to every
corner of the country. Focus was on modernization of Railways and for increasing concessions
and reservations for Press persons and women.

An article released on “moneycontrol.com” by Angel Securities stating that the railway budget
had negligible impact on stock market perspective. Ms. Mamta Banerjee's second Railway
Budget has turned out to be a non-event from the stockmarket point of view even though certain
key points are worth highlighting, which makes this Railway Budget somewhat different from
the earlier ones. The release of the 'Vision 2020' document aimed at widening and strengthening
the country's rail infrastructure network and regaining the position of the world’s second largest
network.

An article released on “merinews.com” focus on the main ideology of railway budget 2010
which emphasize on safety and security and ingeminate that there would be zero tolerance for
the attendance. It tells that Railways will adopt Anti-collision device (ACD) and Train Protection
Warning System (TPWS) to prevent accidents. Referring to security of women passengers, she
said it will be improved by raising 12 companies of women RPF personnel to be named ‘Mahila
Vahini’. Railway Protection Special Force (RPSF) will also be strengthened and priority will be
given to women especially those belonging to minorities, SC/ST, OBC and economically
backward classes.

An article released on “merinews.com” mainly criticizes the budget and figure out the
shortcomings and loopholes of the budget. Railway budget favors the home state of the railway
minister concerned. It does not address the issues like bribing for reservation in black and
allowing the attendants of senior citizens to receive them at stations.
An article on railway budget explains the excepted total revenue generation of railways in fiscal
year 2010-11. Railways is expecting its revenue to increase sharply. For the current fiscal, the
estimated earning is at Rs 24,057.03 crore. It is expected that in the next fiscal, over 404 crore
passengers would come from the suburban areas and 372 crore from the non—suburban areas.
Which can increase earnings from passenger traffic to 9 per cent to amount to Rs 26,126.47 crore
in the next fiscal.

An article released on “surfindia.com” about reviews of all quarters of society on railway budget
2010. It says that move for public-private-partnership is good move. Railways is doing some
good things by concentrating on high tech drive for safety and security. Railways need good
short term plans to execute the plans effectively.

OBJECTIVES OF THE STUDY

• To study the comparison between budget 2009-2010 and 2010-2011 and to observe the
direction of inclination of the budget.

• To study how much commitments of last year budget have been fulfilled and analysing
the possible achievement of thief years budget’s commitments.

METHDOLOGY

This paper is a review paper and entirely based on secondary data and relevant sources including
Articles, Journals, Magazines and Newspapers.
RAILWAY BUDGET 2010-2011

•
• Railway Minister Mamata Banerjee appeals to business houses to join hands for building
partnership with Railways. Presenting Railway Budget for 2010-11, Banerjee says a
special task force will be set up for early clearance of projects.
• No fare hike for passengers.
• Railways not to be privatised; It will remain with the government, says Banerjee. While
not privatising, Railways have to develop business models for improving earnings, says
Banerjee.

• Railways 2020 vision document will contain short, medium and long-term goals.
Commitments fulfilled to the maximum. Out of 120 trains announced in last budget, only
three remain to be flagged off because of lack of broad-gauge lines, says Banerjee.

• Plans to launch a pilot project for fire detection. The government also plans to construct
more underpasses for safety, the minister said while presenting the Railway Budget.

• Railways to start six water bottling plants in places like Ambala, Thiruvananthapuram,
Farakka, Amethi and Nasik to provide clean and cheap drinking water to passengers.

• Indian Railways aims to add 25,000 route kilometres by 2020. The railways currently has
64,015 route kilometres, she said.

• India's railways has set up a special task force to clear investment proposals in 100 days

• Indian Railways plans to keep rail freight rates unchanged, Bloomberg-UTV news channel
reported, without saying where it got the information.

• Railways to set up mobile e-ticketing centres at hospitals, universities, courts, IITs, IIMs,
district headquarters and village panchayats. All 13,000 unmanned level crossings to be
manned in the next five years.
• Railway Protection Force to be strengthened through amendments in RPF Act; women's
wing to be formed in RPF to ensure security of women. Ex-servicemen to be inducted in
RPF. Railways will be the lead partner in the Commonwealth Games in Delhi.

• Railways to set up Rabindra Museum in Howrah and Geetanjali Museum in Bolpur -- both
in West Bengal – to commemorate Rabindranath Tagore's 125th birth anniversary.

• Railways will provide houses to all its employees in the the next 10 years in collaboration
with the Urban Development ministry.

• Railways to enhance contribution to central staff benefit fund. Centre for Railway
Research to be set up at IIT-Kharagpur. Chittaranjan Locomotive Works capacity to be
augmented from 200 to 275 engines a year.

• Work on Rae Bareli Coach Factory in Uttar Pradesh to start within a year. Wagon Repair
Shop to be set up in Badnera near Amravati in Maharashtra.

• Integral Coach Factory in Chennai to be modernised and a new unit to be set up there. If
land is available, Railways willing to set up a Diesel Multiple Unit factory in West Bengal.

• No forcible acquisition of land for freight corridor project. One member of each family of
land losers to be given employment in the freight corridor as also in the new projects.

• High-speed dedicated passenger corridors to be constructed; National High Speed Rail

Authority to be set up.

• Revenue from non-core business of Railways to go up from Rs 150 crore to Rs 1,000

crore. Indian Railways has set a target to transport 944 million tons of goods in the year
beginning April 1.
 • Railways expects to increase earnings from non core activities. The government aims to
increase non core earnings to Rs10 billion rupees from Rs1.5 billion.

• Railways expects to increase earnings from non core activities. The government aims to
increase non core earnings to Rs10 billion rupees from Rs1.5 billion.

• Despite slowdown, Railways to exceed freight loading target by eight million tonnes
during 2009-10. Freight loading target for 2010-11 fixed at 944 million tonnes, 54 million
tonnes more than the current year's revised target. Gross traffic receipt for 2010-11 pegged
at Rs94,765 crore.

• Allocation for construction of new lines increased from Rs2848 crore to Rs 4411 crore.

• Rs1,302 crore provided for passenger amenities in the 2010-11 railway budget against Rs
923 crore last year.

• Indian Railway Finance Corporation (IRFC) will borrow 91.2 billion rupees ($1.97 billion)
from the market in 2010-11.
• Railways to have master plan for North Eastern region. Special train between India and
Bangladesh to be started to commemorate 150th birth anniversary of Rabindranath Tagore.
• 101 additional services to start on Mumbai suburban railways. Survey will be conducted to
connect Sealdah and Howrah stations in West Bengal. To commemorate Rabindranath
Tagore's 150th birth anniversary, 'Bharat Teertha' trains to connect several pilgrimage
centres across the country.
• Indian Railway Finance Corporation will borrow Rs91.2 billion ($1.97 billion) from the
market in 2010-11.

RAILWAY BUDGET 2009-2010

• SMS updates to indicate berth and confirmation status
• E-ticketing simplified
• 49 stations of religious importance to be upgraded
• Tatkal scheme to be reduced from 5 days to 2 days
• No increase in passenger fares across classes
• Toilets to be similar to ones in aircrafts; facilities for every journey longer than 2 hours
• Multi-functional utilities like bookstores and STD booths will be made available in
stations
• Cold storage facilities for farmers to store produce
• Non-stop AC 'Turant' trains to be introduced
• 12 new 'Turant' AC sleeper trains between major metros
• Optic fiber network to be optimized
• Increase number of women commandos in key routes
• Hospitals to be developed for railway staff
• Girl child scholarship for Group B Rail employees
Cold storage facilities to be developed
• Mechanized laundry to be provided at key stations
• 11,000 MW power project for traction support
• Metro concession in Kolkata to minority students
• Launch of premium parcel service between 3 stations
• Total working expenditure estimated at Rs 81,685cr
• New scheme called 'Ijjat' for low income monthly travel
• Press correspondents to get 50% concession
• Commando unit to be raised, women unit will also be there
• Integrated security system for 140 sensitive stations
• ADGM of each zone will be responsible for supervision
• Ambulance services for passenger in metro cities to start with
• Ramps, special bogeys for physically challenged and senior citizens
• Rail over and under bridges : Centre-state funding to be reviewed
• Security will be priority : both on stations and on board
• 50 stations to be class-1 stations with world class facilities
• Doctors on long-distance trains
• Focus on cleaner trains
• Multi-function complexes in station premises
• Special facilities to be provided at 375 stations
• Air-conditioned double Decker coaches will be rolled out for intercity commuters
• Passengers can now buy computerized tickets from over 5000 post-offices
• ATMs on 200 mid and small sized stations
• New train information system to be started in Kolkata, Chennai, Delhi
• Launch of premium parcel service between 3 stations
• New policy to allow private freight terminal
• Railways to lease out land for commercial purposes
• Special recruitment drive to fill up physically challenged posts
• Metro Rail Hospital in Tollygunj to be upgraded
• Press correspondents to be given 50% discount along with spouse
• Student concession: High Madrassa and Senior Madrassa students to be included in
discount scheme
• Rs 25 per month ticket without surcharge for unorganized sector employees under ‘Izzat’
scheme for people with salary upto 1500
• National sports persons to be preferred at in recruitment
• E-ticketing to be enhanced, simplified
• Unreserved ticketing terminals to be expanded from 5000 to 8000
• Automatic ticket vending machines to be increased
• Computerized issuance of tickets from 5000 post offices
• SMS updates to indicate berth and confirmation status
• Railways to develop cold storages for farmers to store vegetables and fruits
• Tests on environment friendly, green toilets
• Mobile ticketing vans for purchase in local markets: 50 such vans to be introduced
• Vacuum toilets in trains
• Railway hospitals to be upgraded
• Ambulance services for passenger in metro cities to start
• Online infotainment services in major long distance trains including Rajdhani and
Shatabdi trains
• PRS is now in 800 locations with more than 600 terminals, will cover 200 locations more
• All MPs can now identify one PRS location of their choice in their constituencies
• Automated ticketing vendors in 200 large stations
• AC double decker coaches for intercity travel
• ADGM of each zone will be responsible for supervision
• At least one doctor in long distance trains
• Punctuality, safety, good food, water and toilet facilities. Also emphasis on cleanliness
• To launch ‘janata khana’ with regional cuisines
 FINDINGS

Financial Performance in 2009-10:

•Loading target of 882 MT likely to surpassed by 8 MT in 2009-10.

•Gross Traffic Receipts kept at Rs. 88,356 crore, i.e. an increase of 10.7%.
•The full impact of VI CPC fully absorbed within the Railway resources.
•The current dividend liability to be fully discharged.
•Annual Plan kept at Rs 40,284 cr.

Budget Estimates 2010-11.

•Freight loading targeted at 944 MT – an increment of 54 MT; number of passengers likely to

grow by 5.3 %.
•Gross Traffic Receipts estimated at Rs. 94,765 crore, i.e Rs 6490 cr more than 2009-10.
•The dividend payable to general revenues kept at Rs 6608 cr.
•Budgeted operating ratio 92.3%
Impacts of the initiatives taken by Indian railways:

Commitments Fulfilled:

• Of the 120 new trains, extensions and increase in frequencies announced, 117 would be flagged
off by the end of March 2010.
•Recruitment policy of the Railway Recruitment Boards (RRBs) has been reviewed.
•RRB examination fee for woman candidates and those belonging to minority and economically
backward classes waived.
•All question papers to be set in Hindi, Urdu, English and in local State languages and
examination for a particular post will be held on the same date simultaneously by all RRBs.
•Izzat Scheme, implemented within three months of announcement.
•Work initiated in all the 67 Multi-functional Complexes (MFCs). Development of Adarsh
Stations started in phases
 CONCLUSION

For middle class Indians it is a friendly budget. It is ant-inflationary as it spared a hike in

passenger and freight rates, while laying the roadmap for higher participation by the industry in
modernization projects. The implementation of these projects in the PPP (Private-Public
Participation) mode would help in improving the effectiveness and efficiency of railway
services. Railway budget has been a relief for Steel and cement sector. Wagon rate has been
decreased for kerosene and food grains. The budget set ambitious targets such as 1000 Km of
railway line in a year, flagging off 117 trains in 7 months and addressed security issues by setting
goals such as manning all unmanned bridges in five years. Mamata’s expected populist budget
also showed a Bengal-bias which invited the ire of opposition parties when she presented the
budget.

As compared to the budget of 2009-2010, budget for the year 2010-2011 is much
ambitious. Though it is expecting an increase in the expenses still it is expecting a rise in net
revenues of the railways as compared to previous year. Without increasing the passenger fares
and freight charges this budget expects to increase revenues by increasing the number of trains.
While the focus of the budget 2009-2010 was on developing infrastructure and welfare of staff of
railways, but railway budget 2010-2011 budget focuses on increasing the concessions for
women, cancer patients and technicians of regional film industry etc.
 REFERENCES

1) A catalogue of good intentions, The Hindu, Feb 25 2010

http://www.hindu.com/2010/02/25/stories/2010022555221000.htm

2) Focus on passenger amenities, The Hindu, July 4, 2009

http://www.hindu.com/2009/07/04/stories/2009070455821000.htm
3) Indian Railway Budget 2010 – 2011 : Complete summary, the Good and the Bad
Manoj Govindassamy, February 26, 2010
http://www.moneymint.in/review/indian-railway-budget-2010-2011-complete-
summary-the-good-and-the-bad
4) More passenger trains will only hit rail finances, S.P.S Pannu, February 25, 2010
http://indiatoday.intoday.in/site/Story/85591/Business/More+passenger+train
s+will+only+hit+rail+finances.html

5) Not all promises made last year by Mamata have tick marks against them
http://indiatoday.intoday.in/site/Story/85587/LATEST
%20HEADLINES/Not+all+promises+made+last+year+by+Mamata+have+tick+marks+a
gainst+them.html

6) Railway Budget 2009-10: Mamata focuses on passenger amenities, July 3, 2009

http://economictimes.indiatimes.com/news/news-by-
industry/transportation/railways/Railway-Budget-2009-10-Mamata-focuses-
on-passenger-amenities/articleshow/4732996.cms

7) Railway Budget 2010-11 Review: Angel Securities,

http://www.moneycontrol.com/news/brokerage-recos-others/railway-budget-
2010-11-review-angel-securities_443584.html

8) Railway Budget 2010: Better security, less accidents is the mantra,

http://www.merinews.com/article/railway-budget-2010-better-security-less-
accidents-is-the-mantra/15799252.shtml

9) Railway Budget 2010 has no hope for common man

http://www.merinews.com/article/railway-budget-2010-has-no-hope-for-
comman-man/15799344.shtml

10) Railways to earn over Rs.26,000 cr from passengers, Feb 24,2010

http://www.thehindu.com/news/national/article112439.ece

11) Review of Rail Budget 2010

http://www.surfindia.com/finance/budget-india/rail-budget-review.html