14-03-2012 Highlights of Indian Railway Budget 2012-13 Minister for Railways, Dinesh Trivedi has presented his maiden Railway Budget for the financial year 2012-2013 in Parliament. The budget emphasized the need for funding to achieve ambitions of safety, consolidation capacity augmentation and decongestion. The emphasis of the Rail Budget is on improving infrastructure. The minister has announced a number of new initiatives as part of his budget. The details of the budget are given below: Budget Estimates 2012-13 For the plans mentioned in the budget, railways to invest Rs.7.35 lakh crore during 12th Five Year Plan period (2012-17), a quantum jump from the Rs.1.92 lakh crore invested in previous plan period. Railways plans to attract 10 percent of the Rs. 20 lakh crore governments expects to spend on infrastructure. The railways is targeting to carry 1025 million tonne of revenue earning originating traffic during 2012-13, which is 55 million tonne more than the revised estimate target of 970 million tonne. The freight earnings target has been kept at Rs. 89,339 crore, indicating a growth of 30.2% over the current year revised target. The number of passengers is expected to increase by 5.4% in the year 2012-13 with the increase in number of trains and higher occupancy. The passenger earnings have been kept at Rs. 36,073 crore, an increase of Rs. 7,273 crore over the revised estimates of the current year. The Other Coaching and Sundry earnings are expected to grow by 8.9% and 10.7% in 2012-13 to Rs. 2,994 34 crore and Rs. 4,096 crore respectively and Gross 1
Traffic Receipts are expected to be Rs. 1,32,552 crore, i.e. an increase of Rs. 28,635 crore over the Revised Estimates of 2011-12. The financial highlights given in the budget is needed to bring down operating ratio from 95% to 84.9% by 2012-13. Railway should contribute 2 percent of GDP from present 1 percent. Gross traffic receipts fixed at Rs 1.03 trillion crore, short by Rs 2,322 crore of budget estimates. The railway has planned to target freight carriage of 1,025 million tonnes to bring in Rs.89,339 crore; passenger earnings estimated at Rs.36,073 crore; gross reciepts estimated at Rs.1.32 lakh crore. Some other as follows: The ministry plans to borrow 500 billion rupees from the market through the Indian Railway Finance Corporation (IRFC) in the 2012/13 fiscal year Railways will require Rs.14 lakh crore in the next 10 years for modernization Railways should provide 2-2.5 % to GDP instead of current 1% The Railways will contribute Rs 1.99 lakh crore through internal resources. Emphasis on projects in Kashmir and the North East Propose to set up Research and Development council for Railways Ordinary working expenses fixed at Rs 75,650 cr, an increase of Rs 2,000 crore over Budget Estimates Pension payments also up by Rs 1,000 crore Rs 6872 crore allocated under the new line plan Government support for national projects of Rs. 30,000 crore Ploughing back of dividend of Rs. 20,000 crore Internal Resources of Rs. 1,99,805 crore Extra Budgetary Resources of Rs. 2,18,775 crore Setup of rail coach factories New coach factory in Kutch in Gujarat and Kolar in Karnatka Wagon unit to be set at Sitapali in Ganjam district of Orissa Set up of new diesel locomotive production plant in Vidisha in MP 2
2100 specially designed coaches manufactured to meet needs of the differently disabled; aim to provide one such coach in each express train 1500 EMU Coaches added Upped Carrying Capacity 35% Mumbai Power plants 31 projects are being executed with assistance from the states 17 projects have been sanctioned under PPP mode Annual Plan 2012-13 Within the constraints of funds, the Annual Plan outlay for the year 2012-13 has been targeted at Rs. 60,100 crore, which is highest ever plan investment. The plan would be financed through:- Gross Budgetary Support of Rs 24,000 crore; Railway Safety Fund of Rs 2,000 crore; Internal Resources of Rs 18,050 crore; and Extra Budgetary Resources of Rs 16,050 crore, which includes market borrowing of Rs 15,000 crore through IRFC. Passenger services 1. Trains and Routes 21 new passenger and 75 new express trains to be launched Plan to introduce 75 new services in Mumbai Guru Parikrama trains to be run to Amritsar, Patna and Nanded. Delhi- Kolkata travel time to be brought down to 14 hours from 17 hours 3
Elevated Mumbai rail lane PPP model being firmed up New lines to be set up for Kolkata Metro To commuter electrification of 1100Km Lines infy13 Plan to upgrade 19,000 kms of tracks in 5 years 725 km of new line completed in the current year, Rs 6,725 crore for new lines Plan to modernize 19000Km of Rail tracks which cater to 80% Traffic 487 Gauge Expansion Projects in stages of Implementations of RS 1 Lakh cr Approved Gauge conversion to be undertaken over 800 km with an allocation of Rs.1, 950 crore. To electrify 6500 km Line in 12 th plan Special Trains Guru Parikrama Special Trains to be introduced for Sikh pilgrimage Plan to provide rail connectivity to Nepal and Bangladesh Need to provide rail connectivity to north east and Kashmir Introducing double-decker container trains 2. Concessions 50 % concession in AC and AC chair cars for sickle-cell anaemia patients. All Arjuna Awardees to get free travel in Rajdhani and Shatabdi express. Izzat scheme- Rs. 25 rail pass- travel distance increased from 100 kms to 150 kms. Value of travel concession granted over Rs. 800 crore per year. 4
3. Improvements in ticketing SMS alerts for all trains The minimum fare chargeable and the platform ticket will now be Rs. 5. Introduction of coin/currency operated ticket vending machines as a pilot project 4. Passenger fares Marginal Hike in Passenger Fares after 8 years and the fare in future may be linked to fuel prices (Fare hikes do not cover rise in fuel prices) Increase between 2 Paisa to 30 paise per kilometer across various passenger classes Fares hiked by 2 paise per KM for Suburban train Travelers Sleeper class fare hiked by 5 paise per Km For AC first class fares hiked by 30ps /km Hike in the Platform ticket to cost by 5 per Ticket. Propose to hike AC Coach tariff By 10 ps / Km To hike mail Express Fare By 3 ps/km 2nd Class Travel cost for 375 Km to rise By Rs 12 5
Freight business Reductions & other World Bank is to fund Rs.6, 500 crore firmed up for dedicated freight corridors; land acquired for 3,300 km; first contracts to be handed out during 2012-13. Loading targets cut due to ban on Iron ore exports Freight earnings at Rs.89339 crores for FY13 Safety measures Safety is emerging as the critical need for the Indian Railways given the rising casualty rate, although the number of fatal accidents may be lower. Electrification to be undertaken over 6,500 km at an allocation of Rs.8,000 crore during 12 th Plan. Special purpose vehicle to be set up on safety protocols. Government has given a loan of Rs 3,000 cr to the Railways to meet the urgent need of safety. The loan carries an interest of 8.55%. RPF helpline to be integration with other helplines. Plan to enhance GPS use in railways. 6
Welfare measures 1. Social Welfare Improvement of passenger amenities at a cost of Rs.1,112 crore; regional cuisines to be introduced. Rs. 350 crore to be spent on e-toilets Green toilets to be installed in 2,500 coaches in the next one year. A total of Rs 5 lakh crore needed under PM's Rail Vikas Scheme. 2. Staff Welfare Setting up expert body to explore setting up independent railway tariff regulatory authority 80,000 people recruited in 2011-12 Railways to hire over 1 lakh people in 2012-13 To introduce wagons with high payloads Effect of Budget on Capital Market Railway related stocks have given mixed signals. Titagarh Wagons, Stone India, Kernex Microsystems and Kalindee Rail were trading lower by 3-5% while Nelco, Transformer and Rectifiers (India) Limited (TRIL) and Zicom Electronic Security Systems have rallied more than 5% each after the announcement in Railway budget to install security systems at 202 stations. The markets have obviously rated this Budget. 7
Railway stocks slide post Budget The Railway Minister may move some proposals to mop up resources for speedy completion of rail projects. Indian Railways is a vital national transportation grid for the country's 1.2 billion people. Indian railway requires Rs.14 lakh crore in the next 10 years for modernization. The ministry plans to borrow 500 billion rupees from the market through the Indian Railway Finance Corporation (IRFC) in the 2012/13 fiscal year. Technically the railway stocks are seeing volatility backed by heavy trading volumes. As expected during this eventful day the volumes are substantially higher for most of the railway companies stocks. Railway related stocks have given mixed signals. The proposal made to the event has given a drastic change to the following companies like BEML, BHEL, Siemens on positive note whereas some negative impact has also been identified with Titagarh Wargons, Kalidee Rail Nirman, Texmaco and India Stone. Conclusion The budget for 2012-13 would be a link in the chain and would seamlessly integrate with the 12 th Plan with the parameters set out in Vision 2020. India cannot sustain its present GDP growth unless its lead basic infrastructure, Indian Railways, modernizes and grows at least 10% annually. Budget has tried to address four strategic national goals i.e. inclusive development (geographically and socially), strengthening national integration, large-scale generation of productive employment and environment sustainability. In order to promote industrial activity, Railways would welcome investment through PPP mode for providing rail connectivity to important ports through allocating 100 stations via PPP in next 5 years. 8
The Railway Budget for 2012-13 is more focused on the improvement of the infrastructure and passenger amenities. The railway minister has announced huge plans for upgrading over 900 stations and to install security systems at 202 stations. Future of Railways in India is bright because of higher demand for new trains, increasing population, infrastructure building and modernization in Railways. Railway business can see spike ahead of Railway budget and can give good returns in longer term also. Disclaimer: This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but we do not represent that it is accurate or complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt.Ltd. or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. 9
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