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Indian railways budgeting challenges and the Indian railway finance corp. ltd.


Indian Railways abbreviated as IR , is a departmental undertaking

of Government of India, which owns and operates most of India's rail transport.

It is overseen by the Ministry of Railways. It has the world's fourth largest railway network after those of the United

States, Russia and China.

The railways traverse the length and breadth of the country and carry over

30 million passengers and 2.8 million tons of freight daily. 1.54 million employees.

It is the world's second largest commercial employer, with more than

Above all this IR is facing a lot of financial crunch.

Indian Railways face a massive finance crunch

Twenty five thousand crore! Twenty five thousand crore,

is our surplus, former Railway Minister Lalu Prasad Yadav had thundered on the floor of Parliament while presenting the railway budget in 2008. But when his successor, Mamata Banerjee, presents the ministrys budget later this month, the mood is likely to be sombre. The Indian Railways is faced with a massive depletion in finances due to the slowing down of growth in its freight business. It is also struggling with the financial burden.

Budgeting Challenges
The present Railway Budget 2011-12 set aside the need to restructure railways, instead presented a populist budget. The gross budgetary support of Rs.20,000 crore in a plan outlay of

Rs.57,630 crore in the annual plan for 2011-12, where it relies heavily on the Central Governments Fiscal budgetary support. crore in the coming year. But the Railways has been losing the freight traffic to Roads for the past few years. despite of the heavy increase in fuel charges.

The Railways is betting on Freight traffic to generate Rs.1,06,239

The passenger fares has not been increased for the past three years

Indian Railway Finance Corporation Ltd. Financing Indian Railways

Indian Railway Finance Corporation Ltd. (IRFC) a dedicated financing arm of the Ministry of Railways. objective is to raise money from the market to part

finance the plan outlay of Indian Railways. the money made available is used for acquisition of rolling stock assets and for meeting other developmental needs of the IR. it has successfully met the targeted borrowings year after year, through issue of both taxable and tax-free Bonds, term loans from banks/financial institutions and through off shore borrowings.

Strategies adopted by IRFC

To focus on its existing business consolidate its position as a low-cost funding source for MOR. establish its pre-eminence as the only market borrowing arm of MoR to diversify its activities through funding financially viable and remunerative railway projects involving port connectivity or specific industry based new lines conversion projects. To engage in advisory services in financial structuring. To mobilize funds through loans from agencies such as ADB and World Bank so as to diversify sources of funds and ensure access to desired pool of resources at the most optimum cost.