CapEx vs OpEx

 

CapEX vs OpEX

CAPEX Model (Capital Expenditure):

• Buyer purchases the asset outright using capital funds
• Ownership immediately with buyer
• Buyer responsible for maintenance, consumables, and lifecycle management
• After warranty → Comprehensive Maintenance Contract (CMC) arranged separately
• Asset retained and disposed by buyer after useful life
• Expenditure = one-time (lump sum)

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👉 Example: A Railway office buys 20 computers

• Full payment made at once
• Computers become Railway property
• After warranty → office arranges AMC/CMC (Annual/Comprehensive Maintenance Contract)
• Office purchases consumables (keyboard, mouse, parts, etc.)
• After 5–7 years → office disposes the computers

👉 Meaning: You own the asset and manage everything

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OPEX Model (Operational Expenditure):

• Seller provides the asset as a service (no upfront purchase)
• Ownership remains with seller
• Seller handles maintenance + consumables + performance
• After contract → asset taken back by seller
• Buyer does not handle disposal
• Expenditure = periodic / staggered payments

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👉 Example: A Railway office hires 20 computers on contract

• No heavy upfront cost
• Monthly/quarterly rent paid
• Vendor provides maintenance + replacements + consumables
• After contract → vendor takes back computers

👉 Meaning: You just use the asset; vendor handles everything

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🎯 Core Exam Difference (One Line)

👉 CAPEX = Buy & Own
👉 OPEX = Use & Pay 

👉 CAPEX = Buy laptop 💻
👉 OPEX = Rent laptop 💻

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⚠️ Quick MCQ Triggers

• Ownership → CAPEX: Buyer | OPEX: Seller
• Maintenance → CAPEX: Buyer | OPEX: Seller
• Payment → CAPEX: One-time | OPEX: Recurring

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Railway Capex 2020-21 Budget

Top of Form

Railway Capex 2020-21 Budget

·         Capex - Capital Expenditure - 1,61,042 Crores

Source of Finance		Amount (Rs.in Crores)	Percentage
Capital	46500
RRSK	5000
CRIF	18500
Total - Gross Budgetary Support	70000	70000	43 %
DRF	1000
Development Fund	1500
RRSK	5000
Total - Internal Resources		7500	5 %
EBR - IRFC	30000
EBR - IF	28000
EBR - PPP	25292
Nirbhaya Fund	250
Total - External Resources	83542	83542	52 %
Grand Total		161042	100 %

Note: RRSK -  Rs. 10,000 Crores (Budgetary support - Rs. 5000 Crores & Internal Sources - Rs. 5000 Crores)

·         Make Indian Railways, the Growth engine of the Indian Economy.

·         GBS - Gross Budgetary Support  -  Rs. 70,000 Crores (includes RRSK - Rs. 5000 Crores & CRIF - Rs. 18,500 Crores)

·         Electrification - 6500 Route KMs - target (By 2023-2224 - target is entire BG network electrification)

·         New Lines, GC, Doubling, Tripling - 3750 Route KMs

·         Freight loading target - 1265 Million Tonnes.

·         Average freight lead - 553 KM

·         Originating Passengers - 879 Crores

·         S & T - to implement CTC - Centralized Traffic Control system along with Automatic Block Signaling system- 1830 Kms over 8 Zonal Railways.

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NIF - National Investments Fund

NIF - National Investments Fund

·         One of the sources of finance for Indian Railways Capex - Capital Expenditure

·         Established in 2005

·         Maintained by : DIPAM - Dept of Investments & Public Asset Management

·          Credits: Proceeds from disinvestment of CPSEs - Central Public Sector Enterprises.  Initially the proceeds are kept under Public Account of India.

·          Corpus(Amount) of NIF - Permanent nature.  That means  the money with the NIF is permanent in nature and is professionally managed to provide returns (income) to the Government without depleting its value (corpus) 

·         Managed by : Professional Managers such as SBI Funds Managment pvt ltd, UTI Asset Management Company ltd, LIC Mutual Fund Asset Management Company ltd.

·         NIF income- utilised for the following purposes.

1.       Subscribing - shares being issued by the CPSE on Rights basis or Preferential allotment of shares as per SEBI regulations  ( to ensure 51% ownership by the Govt)

2.       For capital infusion in Public Sector Banks & Public Sector Insurance companies to meet BASEL III norms.

3.       Investments in Regional Rural Banks/NABARD- National Bank for Agriculture & Rural Development/EXIM Bank - Export - Import Bank/IIFCL - India Infrastructure Finance Company Limited.

4.       Equity infusion in Metro Projects

5.       Investment in Bhartiya Nabhikiya Vidyut Nigam Limited (BNVNL) & Uranium Corporation of India Limited.

6.       Investment in Indian Railways towards Capital Expenditure.

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CRIF - Central Road & Infrastructure Fund

CRIF - Central Road & Infrastructure Fund

·         One of the Sources of Finance under Capital Expenditure (Capex) of Indian Railways

·         Rs. 18,500 Crores - allocated to Capex of Indian Railways in 2020-21 Budget (Rs. 15,250 Crores in 2019-20) - Usually spend on LC Gates and ROB/RUBs under Plan Heads 2900 & 3000 through RSF - Railway Safety Fund.  CRIF is the main source for RSF.

·         Established in 2000   (The Central Road and Infrastructure Act, 2000) F

·         Old name is CRF - Central Road Fund

·         Managed by Dept of Economic Affairs (DEA) under Ministry of Finance. (Previously it is under Ministry of Road Transport & Highways)

·         Source of Fund -  Levy & collect by way of Cess, a duty of excise and duty of customs on Petrol and Diesel  (in 2018-19 - Rs. 1,13,000 Crores collected).  It is approximately Rs. 10 per liter of Diesel / Petrol.

·         Object: To finance infrastructure projects such as Railways, Inland Waterways, Roads & Bridges, Ports, Shipyards, Urban Public Transport, Energy, Water & Sanitation, Communication & Social infrastructure (educational institutions)

   

·         Ministerial panel on CRIF - 4 Ministers (of Finance, Railways, Road transport & Highways, HRD) - for allocation of funds under CRIF

·         The 15-member sub-committee has Secretaries from different Ministries - Examine and evaluate proposals received from Ministries on infrastructure projects.

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Capex - Capital Expenditure of Indian Railways - 2019-20

CAPEX – INDIAN RAILWAYS 2019-20

Source of Finance	Amount  (Rs. In Crores)	Amount (Rs. In Crores)	Percentage
1. Capital	35587
2. RRSK	15000
3. Central Road Fund (Railway Safety Fund)	15250
Gross Budgetary Support (GBS)  - Total	65837	65837	41 %
1.Capital Fund	3000
2. DRF	1000
3. Development Fund – DF	1500
4. RRSK	5000
Internal Resources – Total	10500	10500	7 %
1. IRFC	55471
2. PPP	28100
Extra Budgetary Resources – EBR	83571	83571	52  %
Grand Total		159908	100  %