Medium-term Road Map Consistent with Plugging Infrastructure Gap
New Delhi, February 26, 2015: India Ratings and Research (Ind-Ra) believes the FY16 passenger earning growth target is optimistic in the wake of no increase in passenger fare. The passenger earning growth in FY15 was achieved on the back of fare and tariff revision in June 2014. Even the freight traffic target at a time of sluggish domestic as well as global economic activity appears to be optimistic.
The Railway Budget of FY16 projects an operating ratio of 88.5%, the lowest in last nine years. Passenger earning growth in FY16 is pegged at 16.7% (FY15 (RE): 17.7%). Freight traffic is estimated to grow by 85 million tonnes (maximum addition in any year).
However, a 52% yoy increase in FY16 plan outlays of railways to INR1.0trn is step in the right direction. A sharp decline in crude prices will continue to boost the operating performance of railways. The impact of crude oil price decline was visible when gross traffic receipt declined and expenses on pension, maintenance, safety and cleanliness activities increased. The operating ratio of railways in FY15 is estimated to have reached 91.8% (revised estimate, RE) as against 92.5% (budget estimate, BE) and 93.6% in FY14.
A sum of INR400bn is budgeted to come from gross budgetary support, INR16.46bn from railways’ share in diesel cess, INR1.77bn from market borrowings and the remaining from internal accruals. Ind-Ra believes except the internal accrual, other funding options look plausible.
The medium-term action plan of railways envisages an investment of INR8.56trn (including INR650bn for high-speed trains and elevated corridor) over a period of five years starting FY16. Ind-Ra believes though long pending, the investment, if fructifies as envisaged, has the potential to transform the Indian railways and become a catalyst for sustained economic growth.
(Source: Manager - Corporate Communications and Investor Relations, India Ratings & Research A Fitch Group Company)
Date:
Thursday, February 26, 2015