Indian Railways plans to import crude oil to improve finances

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The rail ministry has embarked on a drive to reform the financially struggling 160-year-old national transporter through a range of initiatives.

The plan, described by the Railway Board's Financial Commissioner S Mookerjee as a "dream", would be implemented over five years. It includes cost optimisation by importing crude oil and procuring refining capacity from oil marketing companies on lease, which would reduce diesel inventories by a third to a mere five days. The railways would raise additional revenue by focusing on export of rolling stock, expanding the freight basket and monetising its vast data bank.

"We are working on a policy that would allow 10 per cent of our rolling stock production capacity to go into producing and exporting rolling stock rather than having it in-house so that our production facilities also stand up on their own feet. We have a target of Rs 4,000 crore of exports by 2020, through exports of machinery and plant," Mookerjee said.

Stressing on cost optimisation, he said reduction in expenditure by cutting down diesel inventories had given the railways relief of around Rs 2,000 crore. "We are also exploring a policy to procure crude oil and then take refining capacity on lease. This is a new thing we are trying to do from next year. This will be in addition to the savings from continued direct purchase of electricity," he said.

Indian Railways consumes around 2.8 billion litres of diesel annually, costing Rs 18,000 crore (around 18 per cent of the net ordinary working expenses).

In addition, the transporter spends around Rs 12,300 crore annually to purchase 17.5 billion units of electricity. About 30 per cent of the fuel bill goes into paying state taxes.

Other initiatives on cards are setting up a dedicated planning and investment organisation for strategic appraisal of projects; redesigning the Railway Board by reclassifying Board Members as Member-Mechanical or Member-Engineering with a new classification on "functional lines" including Member-Freight and Member-Passenger; and creating new directorates for speed and information technology services.

To shore up revenues, the ministry would focus on monetising its data and Intellectual Property Rights (IPRs) and also revamp focus on advertising revenue. Further, the ministry might soon announce a revised freight tariff structure to claw back the Railways' lost modal share in freight.

Mookerjee said the Railways' total cost savings of about Rs 8,700 crore for 2015-16 announced in this year's Budget was likely to go up to Rs 10,000 crore by the end of March 2016. The rail ministry also wants to tackle the Pay Commission impact of Rs 12,000 crore on account of salaries and another Rs 8,000 crore on pension payments by tapping into the debt service fund, which has a balance of Rs 4,000 crore, apart from the Rs 3,000 crore parked in the pension fund.

Source : BusinessStanderd

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