RIDF - Rail India Development Fund

·         Conceptual stage - proposed in 2017

·         Govt has circulated a draft cabinet note for setting up a RIDF

·         Estimated fund - 5 Billion Dollars  (approximately Rs. 35000 Crores)

·         Anchored by World Bank and will serve as an vehicle to arrange funds from the Market. 

·         Managed independently by a Non-Govt entity.

·         Leveraging the funds from multilateral (all sides) sources such as Pension Funds from India and the Rest of the World and Other borrowing agencies.

·         Indian Railways as well as private players i.e., SPVs (Special Purpose Vehicles), Concessionaires etc in the railway sector are eligible to draw from this Fund in the form of Equity and Debt. .

·         Hope the above fund will be materialized in future.

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Sources of Finance Erstwhile Demand No. 16 / Capital segment of Demand No.80

Indian Railways - Demand No.16 – Sources of Finance

	Sources of Finance	financed from	chargeable to
20	Capital	General Revenues (Ministry of Finance) as Budgetary support	Land, New Lines, Gauge conversions, Doubling, Electrification, Locos, Coaches & Wagons.
21	DRF- Depreciation Reserve Fund	Appropriated from Ordinary Revenue (i.e., Railway Revenue under Demand No.14 – Appropriation to DRF, Pension Fund	Track renewals, Replacement of Locos, Coaches & Wagons
22	OLWR - Open Line Works Revenue	Not existed	Not existed
23	D.F – Development Fund I	Appropriated from Ordinary Revenue (i.e., Railway Revenue) after paying Dividends to General Revenues. Note: PLUS – easy way to remember DF I, II, III & IV.	Passenger welfare works and other Railway user works (waiting hall, goods sheds & Parcel offices)
33	D.F – Development Fund II		Labour/Staff Welfare Works (Hospitals, Schools, Rly. Institutes, Quarters for Cl.III& IV staff)
43	D.F – Development Fund III		Un-remunerative works (modern train control equipment, washable aprons, new flag stations, improvements to Station/Office buildings)
53	D.F – Development Fund IV		Safety Works (All safety works other than ROB/RUBs & LC gates)
24	ACSPF - Accident Compensation, Safety, Passenger Fund	Not existed.  Accident compensation - transferred to Demand No.12/SMH 10 Safety - Transferred to DF IV Passenger welfare works -  DF I	Not existed
25	C.F – Capital Fund	From Ordinary Revenue (i.e., Railway Revenue). If any surplus available after paying Dividends to General Revenues and appropriating to D.F, R.S.F, Railway Liability Reserve Fund.	All works which are hitherto chargeable to Capital are now chargeable to Capital fund subject to availability of amount in the Capital Fund.
26	R.S.F – Railway Safety Fund	Appropriated from Ordinary Revenue (i.e., Railway Revenue) after paying Dividends to General Revenues and from CRF-Central Road Fund and RSWF – Railway Safety Works Fund ( maintained in the ministry of finance)	Plan Head 29 – Conversion of unmanned to manned Level Crossing(LC) Gates Plan Head -30 – Construction of ROBs/RUBs
27	SRSF - Special Railway SafetyFund	Not existed	Not existed
29	RRSK - Rashtriya Rail Sanraksha Kosh	From ordinary Revenue, Cess on Fares, Contribution from CRF- Central Road Fund & Budgetary support from ministry of finance	Tr     Track renewals &upgradation 2.       Bridge rehabilitation 3.       Elimination of LC gates on BG routes by 2022  }         Construction of ROBs/RUBs     4.       Replacement & Improvement of Signaling system. 5.       Improvement & up gradation of Rolling Stock. 6.       Replacement of Electrical assets 7.       HRD – Human Resources Development.

Note: 

1.      The above table is just an outline for understanding of Funds in broad sense. For complete details, refer chapter VII of Indian Railways Finance Code volume I for allocation rules.

Quiz

Attempt quiz on the following topics 

Budget



Sources of Finance



Performance Guarantee

RSF-Railway Safety Fund - Source of Finance

   RSF-Railway Safety Fund

Ø  OBJECT:   (1) Conversion of unmanned level crossings into manned level crossings and (2) Conversion of busy manned level crossings into Grade Separator i.e., ROBRoad Over Bridge/RUB-Road Under Bridge,/FOB-Foot Over Bridge/Sub-way.

Ø Since inception of Railways, there has been policy to provide unmanned level crossings where Train Vehicle Units (TVU) are low and manned if expected TVU is on higher side. 

•  Road Over Bridge can be build over level crossings with Train Vehicle Unit (TVU) more than one lakh provided state government or local body is agreed to share 50 percent cost of the project.

ØAs on date (30.07.2016), Indian Railways have 28607 level crossings out of which,19267 (67 %) are manned and balance 9340 (33%) are unmanned. These unmanned level crossings account for maximum number of consequential train accidents.

                At present Indian Railways has deployed "Gate Mitras" (Gate counsellors) at unmanned Level Crossings on contract basis to avoid casualties.

Ø RSF created w.e.f 01st April, 2001

Ø created based on the recommendations of RCC - Railway Convention Committee, 1999.

Ø It is Non-Interest bearing Fund.

Ø SOURCES:   1.   Surplus after meeting the dividend liability in Railway Revenues.  2. Transfer of funds from CRF - Central Road Fund (12.5 % of CRF - to Railways) by the Central Government.  3. The present contribution 20 % out of the Dividends payable to RSWF - Railway Safety Works fund (operated in the books of Ministry of Finance)

Ø New Plan Head 2900 - for conversion of unmanned level crossings into manned level crossings.

Ø New Plan head 3000 - construction of ROB/RUBs in place of manned level crossings.

SRSF-Special Railway Safety Fund (Closed in year 2008)

ü  Object:   To wipe out the accumulated arrears of renewal of over-aged assets,  especially safety related ones i.e., tracks, bridges, signaling gears and Rolling stock. 

ü  SRSF has been created w.e.f   1st April, 2001  and  closed  from 1st April, 2008.

ü On closing, the balance in SRSF  Rs.597.73 Crores transferred to DRF - Depreciation Reserve Fund.

ü It is Non-lapsable and Non-Interest  bearing Fund.

ü Sources: created with an amount of Rs.17,000 Crores.  Out of this, Rs.12,000 Crores recd. from Finance Ministry in the form of Dividend Free Capital and Rs.5,000 Crores raised through by levying Safety surcharge on Passenger fares w.e.f. 01.10.2001.

ü The Safety surcharge on Passenger fares was discontinued w.e.f 01.04.2007, but subsumed in passenger fares "ON AS IS WHERE IS BASIS" and renamed as Development Fund to the DFC - Dedicated Freight Corridor.

ü carved out of the recommendations of "Railway Safety Review Committee" headed by Justice H.R.Khanna, Retd. Supreme Court Judge in the year 1998.

ü GREEN BOOK -  All SRSF works sanctioned are incorporated in the Book named as GREEN BOOK.

ü Progress/Results of creation of SRSF are mentioned below.

Renewal of	Target	Achieved	Percentage
Tracks	16538 Kms	15624 Kms	94 %
Bridges	2286 Nos	2191 Nos	96 %
Signaling gears	1448 stations	1282 stations	89 %

•  With sustained efforts in the last decade, Indian Railways have reduced the number of accidents per million train kilometers from 0.44 in 2003-04 to 0.13 in 2012-13.

ü  The creation of Second SRSF with an proposed amount of Rs.40,000 Crores is on the news.

ü So it is best time for contemplation as "Is it require SRSF's to the Indian Railways ?"   .  The simple answer is NO, as long as provide sufficient amounts to DRF - Depreciation Reserve Fund for replacement of Railway assets.

ü  Let us observe CAG remarks on SRSF  (CAG report on Railway finances of 2009-10 year)

ü  "Railways need to maintain a reserve with a minimum amount under DRF

accumulation to facilitate the timely execution of renewals with a view to

maintain the assets at the highest standard of efficiency. Accumulation of

arrears in renewal/replacement may at later stage create a need to set up

another fund (as done in the year 2001 when Special Railway Safety Fund was created) to wipe out the arrears of renewal/replacement.

OLWR - No more a Source of Finance in Indian Railways

• Board(FC) has approved abolition of Allocation Head - OLWR - Open Line Works (Revenue). 
• Existing work if any under OLWR, the same may be transferred to DRF or DF as the case may be.
• As Such there is no allotment of Grant under OLWR in Demand NO.16 from the year 2015-16 onwards.
• 
  
• Necessary correction slip to the Accounts Code will be issued on receipt of approval from CGA - Controller General of Accounts and C&AG- Comptroller and Auditor General of India. 
• Reason: Insignificant expenditure under OLWR in Annual Plan of Works Expenditure.  For example in the year 2013-14 -  Rs.28 Crores expenditure under OLWR against huge Budget under Demand No. 16 (approximately around 63,000 Crores)

      Click here for the Railway Board letter on the above subject 

 OLWR - Board's Letter

CAPITAL FUND - An Important short notes/Essay type question

CAPITAL FUND

1995 (with Books)   1997 (without Books)                                          5 Marks  - short notes question   

        Ü  Created w.e.f 1992-93 in pursuance of the recommendation of RCC 1991.

        Ü  Operated as a Minor Head under Major Head 8118.

        Ü  Credits to the Fund are:

A)     Appropriation of the Revenue Surplus after meeting obligations of

§  Payment of Principal as well as Interest on Loan to  D.F.

§  Appropriation of current year D.F.

§  Payment of deferred dividend.

B)      Interest on Capital Fund ( at the rate decided by the RCC)

        Ü  Debits to the Fund are:

 A)     This Fund is utilized to finance expenditure until now charged to Loan Capital , to the extent of balance available under this Head

B)      No separate rules existing for utilizing this Fund usually charged to all Plan Heads (except Plan Heads 11 & 51).

 RATIONALE OF CREATING CAPITAL FUND:

        Ü  To reduce the borrowings from General Revenues (i.e., Loan Capital or Gross Budgetary Support (GBS) from Government).  Because the loan capital  is non -refundable and interest bearing loan.  The Interest is paid in the form of Dividend to General Revenues.  Since Loan Capital is non – refundable, the payment of dividend also perpetual. 

        Ü  Year by year, the GBS (Gross Budgetary Support to Railways is declining. During 1975-76, the GBS is around 75 %.  Now in the year 2011-12, it came down to 34%.

        Ü  Plan Size of the Railways cannot be reduced, since capacity restrictions would endanger the economic progress of the country.   The gap between the requirements and the availability is to be bridged.  The only way is to increase internal resources, that’s why the creation of Capital Fund.

        Ü  No dividend will be paid on the expenditure met from the Capital Fund, as the same is generated from internal resources ( not borrowing from General Revenues).  On the other hand, Interest is credited to the Capital Fund on the balance of the Fund at the end of financial year.  (Rate of interest is equal to the Dividend rate and recommended by RCC from time to time)

        Ü  Total Investments made from Capital Fund till 2010-11 were Rs.38676 crores. That means every year, actual saving of Rs.2320 crores by avoiding dividend payment, since these investments are met from Capital Fund, not Capital. (if assumes dividend rate is 6%).

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Debt Service Fund

Debt Service Fund

v  Created a new fund in the year 2013-14 year.

v  Object: To meet the liabilities for debt servicing of Japan International Cooperation Agency and the World Bank loans taken for the Dedicated Freight Corridor project and obligations of future Pay Commissions/Awards.

v  Allocation for the current year 2013-14 is Rs.4,163 Crores and Interest accrued on balance of the Fund is Rs.83.26 Crores (Total 4246.23 Crores)

v   Credits to the Fund:  A) From the net surplus (Railways' excess of receipts over expenditure) of the Indian Railways after appropriating the amounts to Development Fund and Capital Fund. B) Interest on closing balance of the Fund.

v   Debits to the Fund:  A) to meet committed liabilities of debt servicing for World Bank and JICA- Japan International Cooperation Agency loans for DFC B) Other future liabilities arise due to implementation of future Pay Commissions/Awards etc.

v

v  Importance:

A) Railways finances were burdened so much in the years 2008-09 and 2009-10 years due to implementation of 6th Pay Commission recommendations retrospectively from the year 01.01.2006 onwards. Also JICA and World Bank financing on very big scale the ambitious project of DFC - Dedicated Freight Corridor which is expecting the cost of Rs. 95,836 Crores. 

B) Western DFC (1,499 km) is being funded by loan from Japan International Cooperation Agency (JICA) to the extent of 77% of the project cost. Out of 1,839 km of Eastern DFC, 1,183 km of Ludhiana-Khurja-Dadri-Kanpur-Mughalsarai section is being funded through loan from World Bank to the extent of 66% of the project cost.

C) Unless contributing annually from the surpluses, the repayment of loans to the JICA and World Bank and meeting the 7th Pay commission obligations will be a major burden on the Railway Finances.  In order to prevent the huge burden on Railway finances, this Fund is created and planned to allocate the contributions from the excess of Receipts over Expenditure from 2013-14 year onwards.

v  During the year 2016-17 , Rs.3000 Crores from the Fund balances were utilised to meet 7th Pay commission arrears.  To accountal this, separate Classification/Allocation was enabled under all Demands (i.e., Demand No.4 to 13) - Sub Head 990 under Credits & Recoveries- Amount met from Railway Debt Service Fund Link is ACS128 to Finance Code II

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