New initiatives in IR Budgeting

22.12.2015

OUTLINE OF THE PRESENTATION

• Financial Scenario

• New Initiatives

Components of O.R.

ITEM Share in Pie % growth over COPPY

Staff costs 49% of OWE 13%

Fuel 25% of OWE 4%

Stores 5% of OWE 4%

Lease 7% of OWE 24%

Others 14 % of OWE 28%

Other components for calculation of OR: Pension ( 17.5% growth over previous year) and DRF (6.7% growth over previous year)

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Operating Ratio = {(OWE excl. suspense) +Approp.to (DRF+Pension Fund)}

Total Earnings from (Pass.+Other Coach.+Goods+Sundry)

IR : Performance to end of Nov’15

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(Rs. in crore)

Target 2015-16

Nov'15 BP

Nov'15 % Var. over BP

% Growth

over COPPY

% Required growth

Passenger 50175 33267 29412 -12% 5% 19%Other Chg 4612 3088 2788 -10% 6% 15%Goods 121423 77758 71207 -8% 8% 15%Sundry 7318 3278 2707 -17% 2% 47%Total 183528 117391 106115 -10% 7% 17%

To end of Nov'15

1. Earnings are higher over COPPY but lower than the target2. Partly, they are higher over COPPY due to the impact of the fare & freight

revision implemented in June ’14 & April’15.

Trends in Expenditure upto Nov 2015

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Zone Nov' 14 Expenditure % variation with B.P.

Growth over

COPPYCR 6888.15 6917.95 -5% 0%ER 5222.51 5359.19 -3% 3%ECR 4901.60 5102.18 -3% 4%ECoR 3702.95 3865.91 -10% 4%NR 9013.59 9134.09 -4% 1%NCR 4457.76 4640.12 0% 4%NER 2729.64 2990.12 6% 10%NFR 3422.80 3311.80 -8% -3%NWR 3425.35 3340.57 -9% -2%SR 5162.82 5218.19 -7% 1%SCR 6680.42 6496.77 -10% -3%SER 4423.59 4674.84 -3% 6%SECR 3073.18 3368.45 0% 10%SWR 2649.68 2651.92 -7% 0%WR 6127.21 5975.67 -1% -2%WCR 3693.06 3852.23 1% 4%Metro 205.97 213.35 -5% 4%Total 75780.28 77113.35 -4.2% 2%*Higher trend (>=10%) in NER (D08, D10 & D12) and SECR (D06 & D12)

Commodity-wise Freight loading 2015-16

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Commodity (In MT)

15-16 target

Nov 15 Nov 14 Var. over BP

Var. over

COPPYCOAL 585 360.46 351.43 -22.11 9.03Raw material for steel plants

21 13.66 12.36 -0.07 1.30

Pig Iron & finished Steel

43.50 27.29 26.18 -1.15 1.11

Iron ore 125 76.2 74.38 -5.52 1.82Cement 120.50 69.42 72.95 -9.45 -3.53Food grains 62 28.72 36.15 -11.79 -7.43Fertilizers 49.50 36.36 30.63 4.01 5.73Mineral Oil (POL) 43.25 28.55 28.21 0.25 0.34Container Service 54.50 30.57 32.71 -5 -2.14Balance other goods

82 48.94 46.19 -4.77 2.75

Trends in Originating Passenger & Earnings

2013-14 2014-15 2015-16

23810.96

27990.88

29411.79

Earnings from Passenger Operations (April to November)

5662.54 5578.075454.31

Rs in crore Rs in croreIn million

Passengers Originating trend up to Nov’15

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ItemGrowth up to

Nov’14 Growth up to Nov15

Overall passengers

-1.4% -2.2%

Sub-urban passengers

-0.2% -2.5%

Non- Suburban inclusive of

-2.9% -1.9%

a PRS 9.4% 2%b Non-Sub Non-

PRS-4.4% -2.4%

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-160

10

20

30

40

50

60

70

80

Incremental Freight Traffic since 6th PC

Full YearTill Oct.

year

incr

emen

tal t

onna

ge in

MT

Focus areas in Other Coaching Earnings

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Item B.E. 2015-16 Growth Target over 2015-16

Other Coaching Rs 4,612 cr 15.4%

Item B.P. Nov’15 Actual Nov’15

Shortfall over B.P.

Growth over COPPY

Other Coaching

Rs 3088 cr Rs 2788 cr (-) Rs 300 cr

5.8%

Major Items 2012-13 2013-14 2014-15 RE

2015-16 BE

Parcel Rs 1,594 cr

Rs 1,780 cr

Rs 1926 cr

Rs 2101 cr

Luggage Rs 94 cr Rs 95 cr Rs 103 cr Rs 107 crPost Office Mails Rs 140 cr Rs 180 cr Rs 196 cr Rs 198 cr

Penalties, fines, parcel demurrage, platform-tickets etc.

Rs 1,012 cr

Rs 1,353 cr

Rs 1493 cr

Rs 1791 cr

Financial Impact

BE 15-16 Growth over COPPY

Annualized growth (since

2007-08)

Likely Post-7th PC growth

Staff Cost 58,333 10% 15.7% 38%

Pension Outgo

33,220 15% 19.6% 56%

-The 7th PC will put stress on revenue generation which has not been encouraging so far. -Traffic Earnings required to grow at 27% to 30% to meet the impact .-Hence ,close monitoring of expenditure along with cost cutting measures and initiatives.

New Initiatives in

Budgeting on IR

-Working towards ‘Nil” excess: 2014-15 fewer zones reported excess under certain grants.

-Constitutional position mandates no spending more than what has been granted under the Appropriation Act. -P.A.C. takes harsh view of the excess especially when Supplementary Grant is obtained

-Remarks of the P.A.C. scathing including fixing of responsibility. : fix responsibility through APAR & refer to DoPT.-Therefore instructions to all zones on control over expenditure within Grants/SL

Point of concern 1: Excess Expenditure

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Point of Concern 2• Incidences of Items under Objection

increasing• Course correction in 2015-16 i.e: Delegation of

powers for sanctioning the revised cost of work

• Appropriate budgeting• Pink Book now reflects Sanctioned Cost. Rlys

required to revise prior to sending for re-appropriation.

Point of Concern 3: Availing of Supplementary

• SDG taken and amounts not spent

• Out of turn work moved through SDG and not executed immediately or later dropped from Pink Book

• Estimation of Charged Appropriation in correctly estimated leading to insufficient SDG being obtained.

Point of Concern 4: blocking of Capital

• Only around 40% of rail supplies are utilised in track renewals

• Impacts inventory levels and avoidable blocking of funds

• Therefore Rails procured be linked to Track Renewal done in km

Linking Inventory to the Final Head outlays

• Since 2014-15, this has been effected.• Production Units outturn of Rolling Stock &

budget requirements are now inter-related.• ZR’s workshop & fuel budgeting is linked to

their final head outlays (PU 27,34, 35,63, 64,60)

• Entire Rolling Stock Budget is linked now to transfer price & quantity; PU’s to freeze Transfer Price for the entire f.y

Budget VPN• Assists in accurate forecasting: linking of all units to a

central server through VPN courtesy Railtel & their regional Centres.

• Secured through password/permissions granted by Board. Open round-the-clock.

• Inputs solicited post submission of Accounts and various fields frozen: reduces year-end data collection.

• Extensive training & workshops held with all .• RE inputs sought early for distribution by December.• RE Pink Book introduced with work-wise allotments.• Inputs from ZR’s used for framing the estimates at RE

& FM stage

Budget VPN

• Final supplementary obtained from Parliament on these inputs ( when Supplementary can be taken)

• Initially only RE solicited which will form base for BE.

• Pension data to be carefully reviewed & trend analysis done.

• All the cleanliness activities are to be booked under Demand No.8 Sub-head 590, except station sanitation which would continue to be shown under Demand No.9, Sub-head 290.

New Modules on the VPN• Re-appropriation: modified outlays now

immediately visible with correction in the database

• ALL reappropriations to be effected only through this module.

• Exchequer : Receipt of request & dispatch of orders speedened.

Facilitating processes• Reappropriation orders clubbed and powers delegated to

Rs. 2.5 crore; full powers for LAW Book items ; ZR’s powers upto Rs.2.5 crore for Reappropriation between itemized Pink Book items & Lumpsum provisions;

• Request that the proforma appended to Board’s letter number 2011-B-174 dated 3.7.2015 be strictly adhered to.

• Reverse Reappropriation

• Post-facto approval sought for higher expenditure already incurred through Reappropriations

Facilitating processes• Re-vamping of Budget Call letter

• Shared Budget folder for dissemination of issues, policy, instructions etc.

• Comprehensive Economy Instructions

Recurring savings of paper• Previously, Pink Book was one consolidated

document for all zones. • Consumed more than 12 lakh sheets of paper

approximately• In Budget 2015-16, Zone-wise Pink Book

introduced.• Recurring savings of more than 1.4 million

pages

Redefining relationship with MoF • Intention to redefine methodology of dividend computation and bring in

more reliefsCURRENT LIABILITIES ABOSRBED BY IR AND LIKELY CONCERNS • Konkan Rail Corporation Ltd• KMRCL• IRFC debt; incremental debt on account of augmented borrowing in the

fututre• Impact of 7th Pay Commission• Requirement for DRF, DF; Operating Losses on Uneconomic Branch Lines.ISSUES• Ring Fencing of GBS by MoF• Higher GBS translates into higher Dividend, paid in perpetuity• Debt Servicing of EBR(IF)• No scope of squeezing costs; subsidies a living reality

Contd…• Rate of dividend for 2014-15 and 2015-16 • All National Projects and Projects of National

Importance including identified strategic and border area projects be declared dividend free or eligible for subsidy relief on dividend liability and further that Dedicated Freight Corridors to be considered at par with new lines for relief in dividend payment.