Home » Indian Budget » Budget 2006-2007 » Rail Budget 2006-2007 » Speech of Shri Lalu Prasad : Railway Budget 2006-07 (Part-II)

Speech of Shri Lalu Prasad

Introducing the Railway Budget 2006-07

On 24th February 2006

Part –II

Budget Estimates 2006-07

106. Sir, I shall now deal with the Budget Estimates for 2006-07.

107. For the year 2006-07, the freight loading target has been set at 726 million tonnes and freight output at 479 btkms. Continuing the double digit growth in freight, passenger and parcel businesses, a growth target of 11% has been set for the freight and passenger revenues and 19% in the other coaching segment. Revenues in freight, passenger, other coaching and sundry other earning segments in the year 2006-07 are expected to be Rs. 40,320 cr, Rs. 16,800 cr, Rs. 1400 cr and Rs. 1308 cr, respectively. On the basis of these assumptions and considering the various rationalization measures proposed in the Budget, the gross traffic receipts (GTR) are estimated at Rs. 59,978 cr. These are Rs. 5278 cr higher than the Revised Estimates of the current financial year.

108. Ordinary working expenses are estimated to be Rs. 38,300 cr, around 9% more than the revised estimates of the current year. It is proposed to appropriate Rs. 7790 cr and Rs. 4307 cr respectively to the Pension Fund and the Depreciation Reserve Fund. The total working expenses will, thus, amount to Rs. 50397 cr, leading to Net Traffic Receipts of Rs. 9,581 cr. As per the budget estimates, the internal generation before dividend would be Rs. 14,293 cr and the operating ratio is expected to be 84.3% in 2006-07. At the end of next year, fund balances are expected to be at a level of Rs. 12,819 cr.

109. A memorandum on the rate of dividend payable to General Revenues for 2006-07 is presently under the consideration of the Railway Convention Committee. Based on the recommended rate of 6.5% for 2005-06 the dividend liability for 2006-07 works out to Rs. 3208 cr. Along with payment of Rs. 663 cr towards deferred dividend, an amount of Rs. 3871 cr becomes payable to General Revenue. This, liability will be discharged in full.

110. The above provisions are expected to fetch the internally generated funds required for the annual plan, which are Rs. 10,794 cr.

Proposals relating to freight rates & passenger fares.

Dynamic Pricing Policy

111. Railways’ passenger fares and freight rates remain unvarying for all seasons and for all routes, whereas tariffs in the airline and road sectors vary depending upon the demand and the season. In order to be able to effectively face the challenges posed by stiff competition, in the current year we had started a discount scheme for non-peak season and empty flow direction for freight rate, which has been successful. As an extension of this policy, I propose to introduce a Dynamic Pricing Policy for freight as well as passenger, for peak and non-peak seasons, premium and non-premium services, and for busy and non-busy routes. As per this policy the rates for non-peak season, non-premium service and empty flow directions will be less than the general rates and the rates for peak season and premium services could be higher than normal. For the freight the non-peak season would be 1^st July to 31^st October. For the passenger segment this period would be 15^th January to 15^th April and 15^th July to 15^th September.

112. Sir, generally the public apprehends that fares and freight would increase in the Rail Budget. This apprehension has, however, been proved baseless in every Railway Budget presented by me. In my view the basic "mantra" for success in a competitive market is not increasing tariffs, but reaching the benefits of reduced costs to customers. I would like to express this in the following words :

"Aam admi hee hamara devta hai,

vah jeetega toh hum bhi jeet payenge,

tabhi toh yeh tay karke baithey hain,

faisle ab usi ke hak mein jaayenge."

113. It was in the interest of common man that while replying to the debate on "Supplementary Demand" last year, I had announced a reduction of Re. 1/- in passenger fares and a rebate of up to 20% in respect of freight, in empty flow direction. As a continuing exercise, I propose no increase in passenger and freight services, and instead announce the following reductions of up to 30%.

Freight Services

114. I do not propose any across the board increase in freight rates for 2006-07.

115. Sir, to simplify and rationalize goods tariff, I had, last year, reduced the classification of items from over 4000 to 80 groups of commodities. As a result, goods tariff, which was running into more than 500 pages earlier, has been condensed to a few pages. Continuing this process further, I propose to reduce the number of commodity Groups to a mere 28. In 2005-06, the total number of classes in the freight tariff schedule were reduced from 27 to 19. The highest class - 250 for charging freight was lowered to 240 in 2005-06. In the next year, I propose to lower this highest class to 220. With this, there will be a reduction in freight rates of diesel and petrol by around 8%. Over the next three years the highest class will be lowered below 200. Over the next three years, except rates of some light commodities, the rates for the highest classification would be less than double that of the lowest classification.

116. To ensure that the process of rationalization does not result in abnormal increase in freight rates of lighter commodities, I had announced introduction of new classes 90 W1, 90 W2 and 90 W3 for charging of lighter commodities. The existing rates for these classes are not evenly spaced from the rate of break even class 100. These classes are therefore proposed to be replaced with new classes, namely, LR1, LR2, LR3, LR4 and LR5. The new classes will be equivalent to 90%, 80%, 70%, 60% and 50% respectively of the class 100.

Non-peak season incremental freight discount scheme

117. The demand for freight transportation dips from 1^st July to 31^st October on account of monsoon. Hence, during this period, under non-peak season incremental freight discount scheme, freight rebate of 15% will be offered for incremental freight revenues of over Rs.5 cr in a month and 10 % if the incremental earning is less than Rs. 5 cr. This rebate will be applicable for all commodities except coal, minerals and items with classification below 120.

Empty flow Direction Freight Discount Scheme

118. Sir, the truck rate for Delhi to Guwahati is considerably higher than the rate for the return trip whereas the railways charge the same rate in both directions. It is seen that 40 out of 100 freight trains return empty. The additional expenditure in loading freight in the empty flow direction trains is quite low. Hence, I announce a heavy discount on incremental freight in the empty flow direction. For distances beyond 700 kms., the discount will be 30% during non peak season and 20% in the peak season. The scheme will be applicable for all items loaded in covered wagons. In the case of open wagons, the discount will be applicable for all commodities except coal, coke and iron-ore for export. In peak season, this discount will be applicable for open wagons for distances over 1000 kms. only.

Loyalty Discount Scheme

119. Sir, to encourage the transportation of cement and iron & steel by rail, I announce Loyalty Discount Scheme. Under this scheme, during the non-peak season, if over 90% of the production of any steel or cement factory is transported by rail, a discount of 1% in freight would be given. The discount will be half percent if the share of rail transportation is above 50% but less than 90% of the total production. This discount will be applicable on the transportation of finished products only. The discount will not be given for the transportation of raw materials or clinker being used in these industries.

Long-term freight discount scheme

120. Merchants want to make transportation arrangement for goods on a long term basis. Hence, we have empowered zonal railway administrations to offer long-term freight discount to attract new customers and new freight traffic. Under this scheme, zonal railway administration will be able to offer a discount of up to 20% during non-peak season and up to 10% in the peak season, over the normal rates, for a period of three years. For loading in empty flow direction, the discount would be up to 20% and 30% during peak season and non-peak season, respectively.

Terminal Incentive Engine-on-load Scheme

121. With a view to bring down the wagon turn round time, we have, as announced in the last Budget, formulated a new Terminal Incentive cum Engine-on-load Scheme. Customers who fulfill the conditions laid down in the scheme and invest in their terminals so as to bring down the loading and unloading time, and complete loading/unloading in lesser time, will qualify for 5% rebate in the first year. Over the next ten years the rebate will be given at a diminishing rate and would be 1% from the fifth year onwards.

Mini Rake and 2-point rake scheme

122. Considering the popularity of mini rake and two-point rake scheme, this facility will now be made available both in the peak and non-peak season. During the non-peak season, mini-rakes, 2-point rakes will be made available without any additional charge, whereas during the peak season, for commodities up to class 130, the freight rates charged for commodities loaded in such rakes will be 5% more than the rate for block rake trains.

Freight Forwarder Scheme

123. Sir, to increase Railways’ share in the piecemeal traffic segment, I announce a new Freight Forwarder Scheme. For goods booked under this scheme during non-peak season, freight will be charged under Class LR2 in empty flow direction and under Class 100 in the loaded direction. During peak season, the freight will be charged under Classes 100 and 130 respectively. For round-trip loading i.e. for loading offered simultaneously for both the directions, the freight will be charged under LR2 during non-peak season and under Class LR1 during peak season. This scheme will be applicable only for freight offered for more than 700 kms.

Passenger services

124. Sir, in the context of Railways’ sound financial position, I present the outline of my new vision.

"Maine dekhe hain saare khwab naye,

likh raha hoon main inqilab naye"

125. Sir, the fares of AC First Class and AC Second Class are more than the fare for general class by over 14 times and 7 times, respectively. This has blunted our competitiveness in air-conditioned classes, which is having an adverse effect on the occupancy of these classes. Hence, I propose to rationalize the passenger tariff structure as has been done for the freight tariff structure. In the new structure, the fares of AC First and AC Second Class will be 11.5 times and 6.5 times the Second Class fare, respectively. With this, there will be a reduction of about 18% in the fares of AC-I and 10% in that of AC-II. Sustained rationalization measures over the next three years will sharpen the competitive edge of the Railways.

Fully Air-conditioned Garib Rath

126. Sir, with a view to providing fully air-conditioned but affordable service to passengers in long distance trains, it has been decided to run a fully air-conditioned Garib Rath on a pilot project basis. Initially the superfast AC Garib Rath will run between Delhi-Patna, Delhi-Mumbai, Delhi-Chennai and Saharasa-Amritsar. The fares on these trains will be about 25% lower than the present AC-3 tier fares. In line with this objective of providing affordable air-conditioned service, we will also make efforts to start fully air-conditioned double decker trains.

127. For the convenience of passengers, the renewal period of Monthly Season Tickets is being increased from 3 days to 10 days. Simultaneously, the superfast charges applicable on MSTs and QSTs is being reduced to one-fourth of the current levels.

128. Railway Fare and Freight Committee and some other committees have recommended rationalisation and simplification of the complex military goods and coaching tariff. Therefore, we have decided to rationalise and simplify the tariff fixation mechanism for military traffic on no-profit no-loss basis. Instead of fixing it on the basis of cost incurred in earlier years, this tariff will be based now on the principle of no profit no loss on current prices. Similarly, parcel and luggage tariffs have also been rationalized.

Conclusion

129. Sir, the excellent performance of railways has been possible only due to the able guidance provided by Hon’ble Prime Minister. He has always encouraged us and provided constructive assistance. On behalf of the entire railway family, I express my gratitude to him. I also thank all the railwaymen who, working as an excellent team, have completed the given tasks with dedication and devotion. I also profusely thank passengers and other railway users who have continuously cooperated with us and I hope that they would continue to do so in future also.

130. Sir, I consider myself fortunate for having the opportunity to serve the nation through the railway service. I would like to assure the House that we will be continuously striving to meet the expectations of public by constantly improving railway services. During discussions on the Railways, Hon’ble Members have always boosted our morale. While wishing that they continue to harbour these sentiments, I would like to say

‘Yeh inaayat nahin, mera vishwas hai,

daurey mehengai mein rail sasti rahe,

apnaa inaam humko to mill jayega,

rail par aapki sarparasti rahe."

131. With these words, Sir, I commend the Railway Budget 2006-07.

Source: http://pib.nic.in