The Union Budget has been lauded across industry segments for the infrastructure push to revive the economy from COVID lows.
However, a closer look at the allocation made for the Indian Railways in the Budget reveals that the Ministry of Finance has drastically curtailed the gross budgetary support (GBS) for the transport behemoth in the current financial year and introduced special loan from general revenues.
This is against the precedent that GBS to the Ministry of Railways is fully funded by the Finance Ministry.
Against a GBS of Rs 70,250 crore budgeted for the current financial year for the railways, the Ministry of Finance has axed the capital support from the Budget in the revised estimate for 2020-21 by a whopping 58 per cent to Rs 29,250 crore.
Under the budgetary support for the current fiscal, however, another Rs 79,398 crore has been allocated as a special loan from general revenues, according to the document outlining the expenditure profile of the Ministry of Railways.
The special loan will be utilised towards COVID-19 related resource gap in the current financial year. The amount will also be utilised towards liquidating adverse balance in public accounts in 2019-20.
While the Railway Ministry did not respond to the queries sent by Business Today on the matter and the reason behind the loan arrangement in the revised estimate pertaining to the gross budgetary support of the current financial year, a government source revealed that this essentially means that the amount will be utilised for bridging the revenue gap caused due to the pandemic and clearance of the pension dues of 2019-20.
Queries sent to the Railway ministry by Business Today pertained to the modality of the loan, repayment period and interest thereof.
Experts believe that the arrangement is just about styling the revenue expenditure as capital expenditure.
Being asked about the special loan from general revenues, former economic affairs secretary Subhash Chandra Garg told Business Today, "All it amounts to is one arm of the government giving a loan to another arm of the government. So it's actually no loan. It is allocation for revenue expenditure. It should have been provided for as revenue expenditure."
"If there are losses in the railway operations in the last year and this year that has to be paid, the government should pay without calling it a loan. The government may convert the loan into a grant in later years. But it should have been termed as a grant this year itself. This is just a window dressing to show that the capital expenditure has gone up in the year of COVID-19," Garg added.
For the next financial year, the government has provided a record sum of Rs 1,10,055 crore.
That being said, the Railway Budget has made conservative projections pertaining to freight and passenger earnings in the next financial year compared with budget estimate (BE) of the current financial year. Under all major revenue heads, the projections made for the next financial year is lower than the BE of 2020-21. This is despite the fact that the Economic Survey has pegged the Indian economy to grow at a rate of 11.5 per cent.
Freight revenue for 2021-22 is projected at Rs 1,37,810 crore, compared with Rs 1,47,000 crore that was estimated for the current financial year. Passenger receipts is projected to remain flat at Rs 61,000 crore.
The COVID impact is visible in the revised estimate of the current financial year. In RE for 2020-21, passenger receipts are pegged at Rs 15,000 crore, while freight earnings are estimated at Rs 1,24,184 crore.