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Indian Railways’ (IR) obligatory lease rental payments to the Indian Railway Finance Corporation (IRFC) will, for the first time, exceed the national transporter’s fresh market borrowings this fiscal, reflecting its heavy indebtedness.
As rental obligations to IRFC for FY15 mounted to about R13,000 crore, railways minister Sadananda Gowda chose to reduce fresh borrowings in the year to R11,790 crore from R13,800 crore assumed in the interim budget presented by the UPA government in February.
This means that excluding the principal component of the rentals to be paid this year, estimated at R5,467 crore, only measly sums will be added to the railways’ key investment funds this fiscal, which have anyway been grossly under-provided by the cash-trapped transporter for several previous years.
The capital fund will get just around R200 crore (the R5,663 crore shown in Budget papers includes principal payments to IRFC, a top railway official confirmed) and the development fund, some R300 crore. Reckoning principal rentals to IRFC as capital spending is justified by the railways, saying that the borrowed funds are used to create rolling stock (wagons, coaches and locomotives), although analysts say these are by no means the capacity expansion that the capital fund is actually meant for.
Even the newly created debt service fund, to which a handsome R5,268 crore was appropriated last fiscal has been starved by Gowda with a paltry contribution of R101 crore. The fund was created to service emerging repayment obligations regarding the JICA and World Bank loans for the dedicated freight corridors and the burden of 7th Pay Commission.
Railway finance commissioner Rashmi Kapoor justified this, saying that these debt service obligations would become substantial only over the next few years (although interest liability has already started), and it was more important to reduce the IRFC burden, which is immediate.
Although Rail Budget FY14 envisaged appropriation of R5,434 crore to the capital fund, nothing was actually added to the fund in the fiscal, as per the revised estimate.
Considering that this year only a pittance would be added, it is evident that it would be starved for two years in a row. In FY14, about Rs 3,000 crore was withdrawn from the fund for “capital works”, although sources in the rail ministry said the amount was not actually used for capacity expansion projects.
Gowda’s budget papers show the transporter will have an excess (of receipts over