1,000 km rail lines planned

Although the Indian Railways is likely to miss its current year’s target of adding 1,000 km new lines by 30 per cent, it has set up yet another ambitious target of adding 1,000 km new lines in financial year 2011-12. Also, it has increased the outlay on new lines by 92 per cent to Rs 9,583 crore for the year.
The outlay for gauge conversion has been increased by over eight per cent to Rs 2,776 crore for conversion of 1,017 km. The outlay on doubling of lines has been raised from Rs 2,204 crore to Rs 5,406 crore. The Rail Ministry has set a target to double lines running up to 867 km.
West Bengal, which will face Assembly polls soon, has clearly emerged as the biggest gainer of other new projects. The railways on Friday proposed to set up a metro coach factory at Singur, an industry for production of large on-track machines and a new track machine, POH facility, at Uluberia. The state will also get a rail industrial park at Jellingham. The park will be a cluster of diverse industrial units whose output will be consumed by the railways. A unit to manufacture car steel bogies and couplers through a joint venture between Burn Standard and SAIL has already been initiated in this park.
The railways will set up a bridge factory in Jammu & Kashmir, a diesel locomotive centre in Manipur and two more wagon units under joint venture/public-private-partnership mode — one each at Kolar and Alappuzha in Kerala, and another one in Buniadpur. They also plan to set up a 700-megawatt gas-based power plant at Thakurli in Maharashtra.
In order to fund the socially-desirable projects during the 12th Plan, the Railway Budget proposed to set up a new scheme — Pradhan Mantri Rail Vikas Yojana. To fast-track implementation of projects, the Budget also proposed setting up of a Central Organisation for Project Implementation. The body will ensure uniformity of systems and methodologies, follow best practices and optimise on resources.

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Renewed optimism on PPP projects

 Talks again of seriousness on 2020 vision, but not much on why this mode hasn’t taken off
PPP (public-private-partnership) projects is a subject on which railway minister Mamata Banerjee has again sounded optimistic. The idea has made its way into the railways’ annual plan for 2011-12.
External financing through PPP and WIS (the wagon investment scheme) is expected to yield Rs 1,776 crore, the annual plan in the Railway Budget said. Single-window clearance for PPP projects has been reiterated, to hasten the process.
This is although rail PPP projects have yet to take off in any significant manner. Still, Banerjee peppered her rail budget speech with references to Vision 2020, to suggest that industry was eager to participate in such ventures. Vision 2020, presented to the Parliament in December 2009, spoke of generating Rs 14 lakh crore worth of investment by year 2020, and that PPP would be a vehicle for doing so.
On Friday, Mamata said, “During this year, we met industry leaders to encourage investment” in areas which included infrastructure. The ministry, she stressed, wanted PPP projects in areas related to infrastructure. “With this objective, the Railways have developed several business-oriented policies for the first time,” she said. The policy initiatives include Railways’ Infrastructure for Industry Initiative, where PPP would be encouraged. Other projects mentioned in this connection were automobile and ancillary hubs, and cold chains, called Kisan Vision. Mamata assured the House on Friday that if Vision 2020 was to be followed, results would be positive. “I believe in positive approach and action.”
Not enough
Abhaya Agarwal, Executive Director & PPP Leader, Ernst & Young, said, “The budget follows the incremental approach of Indian Railways. More concrete steps would be required to realise Vision 2020.” According to Agarwal, the high operating ratio shows the perilous health of rail finances, which requires immediate attention. Adding, “The new projects like captive power generation can be easily developed through PPP, thus allowing Indian Railways to invest in its core areas.”
The government has ambitious plans of transforming the country’s transport infrastructure through private participation. Originally, private investment for the 11th Plan period (2007-12) was projected at Rs 211,600 crore in the three transport sub-sectors of rail, road and airports. It has been brought down by 60 per cent, to Rs 86,700 crore. The railways stayed away from privatisation for years.
The Planning Commission recently brought down the expected private investment of Rs 50,354 crore, which accounted for 20 per cent of the overall investment of Rs 261,800 crore in the railways for the current Plan period, by as much as 83 per cent to Rs 8,316 crore. Although the PPP model for infrastructure projects has been a major success in telecom and highway development projects, it has failed to impact the rail sector, despite the ministry coming out with several policies aimed in that direction.
Prime Minister Manmohan Singh had also recently spoken on the significance of PPP for infrastructure projects.
In the railways, the government retains ownership, but gets into partnership with private players for improving facilities at railway stations, for instance. Projects on offer through PPP include new engine manufacturing units at Marhoura and Madhepura in Bihar, high capacity freight bogie manufacturing factories at Dalmianagar in Bihar and Majerhar in West Bengal and the Son Nagar-Dankuni section of the Dedicated Freight Corridor.
PPP projects have failed to take off in the railways as industry has not responded well to the model agreements formulated by the ministry. Also, the railways’ insistence on majority stake in each projects have held up their awards.

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Railways project 16.5% rise in earnings

With no across-the-board increase in fares, passenger numbers and capacity rise will help achieve target
Even as Mamata Banerjee did not announce any across-the-board increase in fares in the Railway Budget on Friday, the railways have projected an increase in passenger earnings by over 16.5 per cent to Rs 30,456 crore.
For the financial year 2011-12, the railways have projected a 17.1 per cent increase in upper-class passenger revenues and 16.4 per cent in second-class revenues, over a passenger growth of 6.4 per cent. During financial year 2010-11, with a 5.3 per cent increase in passenger numbers, the railways’ revenue is set to grow 11.2 per cent.
The Indian Railways is hopeful of achieving the target with an increase in passenger numbers and capacity. “Assuming 6.4 per cent growth in the originating number of passengers and higher traffic output due to the proposed induction of a large number of new trains in the non-suburban segment, the target for next year is achievable,” read the Budget document.
Analysts said the target could be achieved with the railways tweaking reservation charges. “The railways will most likely be able to achieve the target for the current year, as they have tweaked the reservation charges,” said Abhaya Agarwal, executive director & PPP leader, Ernst & Young.
Banerjee also announced the gross traffic receipts were set to cross the Rs 1 lakh-crore mark for the first time and have been estimated at Rs 1,06,239 crore.
However, Banerjee not increasing fares is a matter of concern as the railways need money for expansion. Earnings may be strained further with Banerjee continuing sops for journalists, senior citizens, army personnel and specially abled people.
Vishwas Udgirkar, senior director (transport), Deloitte, said, “The Budget is a completely populist one. Not increasing fares will impact the expansion plans of the railways. Many new trains and lines will need huge amounts of money for their implementation, and by not increasing fares, she is not utilising her income source.”
Fares were not increased during her predecessor’s time, but he tinkered with other things to bring revenues for the railways, he added.
Many additions in concessions announced in the Railway Budget last year are also set to bring cheer for the beneficiaries. Specially abled people will now be able to avail themselves of concessions in Rajdhani and Shatabadi trains. Journalists, who had got a 50 per cent concession on travel with family once a year, can claim the concession twice a year now. Senior citizens, especially women, and army personnel also got their share of happiness.
“In case of women, the age for getting the senior citizens’ concession will be reduced to 58 years from 60 now; and the concession for senior citizen men has been increased from 30 per cent to 40 per cent,” said Banerjee.
Banerjee has also extended the facility of travelling in Rajdhani and Shatabdi trains to the Kirti and Shaurya Chakra Awardees. “In case of unmarried posthumous Param Vir Chakra and Ashok Chakra Gallantry award winners of armed forces, I propose to extend the facility of card passes to their parents,” announced Banerjee.

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Inflation remains principal concern, says Pranab

The government on Monday said inflation continues to remain a concern, but exuded confidence that the Reserve Bank of India’s monetary policy will lead to moderation in inflation numbers in the coming months.

“But it (inflation) clearly remains a concern... But I expect the policy taken by RBI to further moderate inflation in coming months... Average inflation to be lower next year,” Finance Minister Pranab Mukherjee said while presenting the Budget for 2011-12.

He, however, said that inflation, specially high food prices, continue to worry and also called for improvement of distribution and marketing systems to bridge the gap between wholesale and retail prices.

“... Difference in wholesale and retail prices is not acceptable,” Mr. Mukherjee said.

Regarding food inflation, he said: “The total food inflation declined from 20.4 per cent in February, 2010, to less than half, at 9.3 per cent in January, 2011.”

Mr. Mukherjee also put emphasis on increasing agricultural productivity to curb food inflation.

The government and the RBI have been under pressure due to inflationary pressure, particularly of food products.

The RBI has hiked short-term lending and borrowing rates six times during the current fiscal, including a hike of 25 basis points in its third quarterly review in January.

The government had earlier said it expects inflation to fall to around 7 per cent by March-end and dip to around 5-6 per cent by the middle of the year.

However, the Economic Survey released last week said the high growth rate would also affect inflation, which would be 1.5 per cent more than what it would have been otherwise. The Survey had also said that high global commodity prices, particularly crude prices, are going to be affected due to the turmoil in the Middle East and this may affect the domestic trend also.

Headline inflation has been above 8 per cent since February 2010. It was 8.23 per cent in January this year.

Food inflation has been in double digits for the most of the current fiscal. According to the latest data, food inflation stood at 11.49 per cent for the week ended February 12.

Skyrocketing prices of vegetables, particularly onions, even forced the government to go for an export ban for some period earlier in the fiscal.

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Union Budget 2011: Air travel, eating out become dearer

NEW DELHI: Finance minister Pranab Mukherjee presented Union Budget 2011 in Parliament today.

OVERVIEW: Budget estimates for 2011-12 projects Rs 9,32,440 crore - an increase of 24 per cent.
Expenditure in 2011-12 is estimated at Rs 12,57,729 crore, an increase of 13.4%.

Revenue deficit fixed at 2.3% in revised estimates of 2010-11 and 1.8% in 2011-12.

Tax reductions to result in revenue loss of Rs 11,500 crore

INFLATION: The finance minister opened his speech with reference to inflation saying that food inflation came down from 20.2% last year to 9.3% in January 2011 but it was still a matter of concern. "Government's principle concern is high food prices... food prices were high for cereals, there was a spurt in prices of onions and milk," he said. ( Inflation remains principal concern, to fall next year )

AGRICULTURE: In what may be a big relief for farmers, the FM said credit flows to farmers will be raised from Rs 3.75 lakh crore to Rs 4.75 lakh crores and the allocation under Rashtriya Krishi Vikas Yojana will be raised from Rs 6755 crore in the current year to Rs 7860 crore. ( Farm loans at 4%; credit target raised to Rs 4,75,000cr )

An additional Rs 300 cr will be provided to promote pulses cultivation in rain-fed areas and another Rs 300 cr to promote farm product cultivation.

In joy for anganwadi workers, their remuneration is being raised from Rs 1500 to Rs 3,000 per month. Anganwadi helpers will get Rs 1,500 from Rs 750, Pranab said. ( Social spending to be raised by 17% )

Old age pension to persons of over the age of 80 will be raised from Rs 200 to Rs 500.

HEALTH: 20 percent hike in health budget for 2011-2012. (Finance minister announces 20 per cent hike in health budget)
(
Healthcare industry fumes at Budget)
DEFENCE: The finance minister has allotted Rs 1.64 lakh crore for defence saying that more will be given if required. (11% hike in defence allocation)

Rs 9 lakh compensation will be given to men of defence and central paramilitary forces for permanent disability and on being discharged from service. (Rs 9 lakh disability compensation for defence personnel)

INCOME TAX: No change in tax slabs has been proposed. The tax exemption limit for general category has been raised from Rs 1,60,000 to Rs 1,80,000. ( Tax limit enhanced from Rs 1,60,000 to Rs 1,80,000)

No change in tax exemption limit for women.

For senior citizens, exemption age limit has been reduced from 65 to 60. Their tax exemption limit will be Rs 2,50,000.

Apart from this, a new exemption bracket has been created for those above 80 years of age. Their tax exemption limit will be Rs 5,00,000.

Surcharge for companies cut to 5 per cent, from 7.5 per cent. (Corporate Tax surcharge reduced to 5%)

A new revised income tax return form 'Sugam' to be introduced for small tax papers.

DIRECT TAX: The FM announced that Direct Tax Code will be implemented from April, 2012 and the Goods and Services Tax Bill is to be introduced in Parliament this year. ( Direct Taxes Code to be implemented from April 1, 2012 )
Goods and services tax bill in budget session: Pranab Mukherjee

SERVICE TAX: Service tax widened to cover hotel accommodation above Rs 1,000 per day, A/C restaurants serving liquor, some category of hospitals, diagnostic tests.

Service tax on air travel increased by Rs 50 for domestic travel and Rs 250 for international travel in economy class. On higher classes, it will be 10% flat. ( Service tax on air travel increased )

EXCISE AND CUSTOMS DUTY: There is a proposal to introduce self-assessment of customs duty wherein importers and exporters will themselves assess payment of duty.

There will be change in excise duty. The standard rate of central exercise duty will be maintained at 10%. A 1% central excise duty on 130 items entering the tax net. Basic food and fuel and precious stones, gold and silver jewellery will be exempted and there will be no change in CENVAT rates. (Excise duty retained at 10%, more items to be taxed)

A new scheme is to be introduced for refund of service tax on the lines of drawback of duties, he announced. Also, capital investment in fertiliser production will be considered as infrastructure sub-sector, Pranab said.

Tax-free bonds of Rs 30,000 cr will be issued for infrastructure development which will cover Warehousing Corporation, NHAI, IRFC and HUDCO.

EDUCATION: A Rs50cr grant is being allocated to Aligarh Muslim University centres in Murshidabad in West Bengal and Malappuram in Kerala. Also, the government has decided to allot Rs 200 cr to IIT Kharagpur. ( 24% hike in allocation for education )

GROWTH: Predicting growth patterns over the next fiscal, Pranab said the overall economic growth in the current fiscal was expected at 8.6 %, agriculture growth at 5.4 %, industry at 8.1 % and services 9.3 %. In the next fiscal, economic growth was likely to be 9%, he said. ( Economy grew 8.2% in last 2010 quarter )

Pranab said India raised foreign institutional investor limit in 5-year corporate bonds for investment in infrastructure by $20 billion.

The government, he said, aims to provide Rs 201.5 billion capital infusion in state-run banks in 2011-12 and Rs 3 billion for 60,000 hectares under palm oil plantation

"I see Budget 2011-12 as transition towards more transparent and result-oriented economic management," he said adding that stronger fiscal coordination was needed.

He said that corruption continued to be deterrent in the country's development and had to be fought extensively.

Pranab Mukherjee said the government plans to create a Women Self Help Group development fund with a corpus of Rs 500 crore. There is also a proposal to increase rural housing fund to Rs 3,000 crore. ( Low-cost housing loans of Rs 15 lakh to get 1% interest sop )

He also announced benefits for Below Poverty Line families by allowing direct transfer of subsidies in kerosene and LPG for such individuals.

Also, NABARD capital base will be strengthened and Rs 10,000 cr will be provided to it as short term credit fund.

Pranab announced the formation of Indian micro finance equity with SIDBI at Rs 100 crore. Another Rs 6,000 cr will be given to public sector banks to maintain capital-to-risk assets ratio norms, he said. ( Rs 500 cr for Regional Rural Banks )

A budget allocation of Rs 100 cr has been made for Ladakh and Rs 150 cr for Jammu for implementation of projects identified by taskforce.

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