A surprise could be in store for millions of railway passengers as the government may hike fares later, even though for now it preferred not to incur the wrath of passengers just few months before the state assembly polls in Kerala, Tamil Nadu, Assam and West Bengal.
"The proposed budget does not envisage an increase in passenger kilometer or passengers, however, earning from various segments are forecast to grow by an average of 10%-12%, thus leaving the door open for fare hikes during the year," says India Ratings and Research (Ind-Ra) in its note on Thursday.
The Indian Railways has projected a shortfall of Rs 15,744 crore in its FY2016 revenues, Railway Minister Suresh Prabhu said while presenting the Railway Budget 2016-2017 on Thursday.
It has projected its current year earnings at Rs 1.67 lakh crore, down from the budgeted estimate Rs 1.83 lakh crore.
"Historically declining model share of Indian Railways, which dropped from 62 per cent in 1980 to 36 per cent in 2012, is continuing to exert pressure on the institution," Prabhu said, while presenting the budget, the third by the Narendra Modi-led government.
The shortfall from passenger earnings is expected to be Rs 4,798 crore, while freight receipts are projected to come lower by 9,570 crore.
The shortfall is unlikely to impact its capital expenditure for the forthcoming financial year when it plans to spend Rs 1.21 lakh crore on various rail infrastructure projects, including the electrification of railway lines, conversion of narrow guage into broad gauge lines, three new freight corridors, setting up of auto hub in Chennai and the launch of new train services catering to different classes of passengers.
Besides, the employer of 13 lakh employees has also tied up with state-owned insurer Life Insurance Corporation to access Rs 1.5 lakh crore over the next five years on "favourable terms," besides firming up plans to raise non-tariff revenues in a big way.
It has projected its earnings for fiscal 2017 to be higher at Rs 1.84 lakh crore, even as passenger fares have not been hiked, broadly in line with expectations that the Modi government won't risk wrath of the electorate when five state elections are round the corner. A hike in passenger would have been good economics, but politically suicidal.
Kerala, Tamil Nadu, Assam, West Bengal and Puducherry are set to go to the polls in April-May this year.
The modest growth projection in receipts in the context of limited options and a tough business environment is being seen as pragmatic by Assocham.
"In view of the continuing challenges, the 10 per cent growth projections on revenue targets of Rs 1,84,820 crore is realistic, although he is banking on revival of growth in the key sectors," Assocham President Sunil Kanoria, reacting to the Railway Budget, said.
A cursory look at the earnings and expenditure pattern of the world's fourth-largest rail network reveals that about 65 percent of its earnings comes from transporting goods, while passenger earnings account for less than half of freight revenues.
From an expenditure viewpoint, the railways spends 29.7 percent on wages and 18.2 percent on its approximately 1.3 lakh pensioners.
Falling crude oil prices have enabled the railways to keep fuel costs at a low 17.8 percent.
In FY2017, the railways is expected to take a hit of Rs 28,450 crore on account of the implementation of the recommendations of the 7th Central Pay Commission.