Sources of Finance (Budgetary)
By NageswaraRao M, 9492432160
Source: 7th chapter of IR Finance Code Volume One
What are Budgetary sources of finance?
Sources which are announced / disclosed in the Annual
Budget submitted by the Government to Parliament every year. It may be Capital or Internal Resources or
from other Government Funds.
1. Capital
2. DRF
– Depreciation Reserve Fund
3. DF –
Development Fund
4. Capital
Fund
5. SF –
Safety Fund
6. RRSK
– Rashtriya Rail SanrakshakKosh
7. Debt
Service Fund
Railway Capex 2020-21 Budget
· Capex - Capital Expenditure - 1,61,042Crores
|
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)
Railway Funds (Source of Finance)
- Year established
|
Funds
|
code
|
Established in year
|
Remarks
|
|
DRF- Depreciation Reserve Fund
|
21
|
1924
|
Previous name is Programme Revenue
|
|
D.F – Development Fund
I, II, III & IV
|
23,33,43 & 53
|
1950
|
Previous name is Betterment Fund
|
|
C.F – Capital Fund
|
25
|
1992
|
Established in place of closed Railway Revenue Reserve Fund
|
|
R.S.F – Railway Safety Fund
|
26
|
2001
|
|
|
RRSK
(Rashtriya Rail SanrakshaKosh)
|
29
|
2017
|
Though it is not specified, it is a Second SRSF – Second
Railway Safety Fund
|
8.
Capital
·
Provided from General
Revenues by Govt of India
Debits:
1. The
cost of Land
2. The
first cost of constructions and equipment i.e., New Lines, New Production
Units,
3. Cost
of maintaining a section of the line not opened for working
4. The
cost of any additions to the Line or equipement of line
5. The
Capital component of IRFC Lease charges (only if adequate funds are not
available under Capital Fund)
Credits:
1. The
cost at debit of Capital of an Asset (other than Land) which is abandoned or
disposed of without being replaced.
2. Replacement
of Rolling Stock by another of less tractive power or seating capacity or floor
area
3. Sale
proceed of any land when it is sold or surrendered
4. The
difference between the cost at debit of Capital of a replaced asset (when the
replaced asset is less than the cost at debit of capital)
DRF - Depreciation Reserve Fund
·
The Oldest working Fund in Indian Railways
·
Established in 1924 (April 1st)
·
The predecessor to DRF is “Programme
Revenue”. The expenditure chargeable
till 31.03.1924 was then then shown under DRF from 01.04.1924
·
This
is a Minor Head under the Major Head 8115
- Depreciation / Renewal Reserve Funds
·
DRF
Account will be maintained in the books of the Railway and in the office of the
Railway Board
Debits:
1. The
cost of replacements & renewals (incl: cost of dismantling, handling &
shifting)
2. The
cost of replacement of Ballast (incl: improvement type)
3. The
cost at debit of Capital or DF of an Asset (other than Land) which is abandoned
or disposed without being replaced.
4. Modernization
of Rolling Stock
Credits:
1. The
amount contributed annually from the Railway Revenues (as per the
recommendations of RCC – Railway Convention Committee)
2. The
amount realized from the disposal of the original cost (at the Debit of Capital
or DF)
3. The
amount of Interest earned on the balance of the Fund.
·
Balance will be carried from year to year.
Last Eight years contribution to DRF
|
Year
|
Contribution
to
DRF
(Rs. In Crores)
|
|
2013-14
|
7900
|
|
2014-15
|
7775
|
|
2015-16
|
5600
|
|
2016-17
|
5200
|
|
2017-18
|
1540
|
|
2018-19
|
1000
|
|
2020-21
|
1000
|
|
2021-22
|
800
|
·
The Railways appropriation to DRF on a Need
cum availability basis instead of doing so in a scientific manner duly
considering the historical cost, useful life and salvage value i.e., using the
Depreciation Methods.
·
This negligible appropriations resulted in
creation of SRSF – Special Railway Safety Fund with an amount of Rs. 17000
Crores in 2001 and RRSK – Rashtriya Rail SanrakshaKosh with an amount of Rs.
1,00,000 Crores in 2017-18
Development Fund
·
4 parts – I, II, III & IV - P L U S
Debits: (PLUS)
1. Passenger Amenities and Other Railway Users Amenities
2. Labour Welfare works
3. Unremunerative works (improvement of operational
efficiency)
4. Safety works
Passenger Amenities: Water supply at Stations, waiting halls,
refreshment rooms, retiring rooms, wash rooms, provision of fans in existing
coaches, PRS, Public announcements etc
Other User Amenities:
Facilities in Goods sheds, Parcel offices such water facility, waiting room etc
Labour Welfare works: Provision of New Hospitals, dispensaries,
Schools, Railway Institutes, Recreation rooms, sports facilities, clubs, staff
canteens, rest rooms, water supply, sanitation in Railway colonies, Railway
quarters for Non Gazetted staff,
Unremunerative Works:
Improvement of water supply at Stations for loco traffic purpose, removal of
infringements, converting dead end sidings into through loops, additional loops
at stations, electric lighting at sheds / stations, improvement in signaling
facilities, Provision of guard rails on
Major bridges, telecommunication works, remodeling of stations yards,
workshops, shed, store depots, provision of running rooms, rest houses for
officers and subordinates, firefighting arrangement at stations, washable
aprons on passenger platform lines, approach roads to stations,
Safety Works: All Safety works other than LC Gates /
ROBs/RUBs
Credits:
1. Amount
appropriated from Railway Surplus
2. The
cost at debit of DF of an Asset which is abandoned without being replaced
3. Interest
earned on the balance of the DF
Capital Fund:
·
Createdw.e.f 1992-93 in pursuance of
the recommendation of RCC 1991.
·
Operated as a Minor Head under Major
Head 8118.
·
Established in place of Railway
Revenue Reserve Fund.
Credits:
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)
Debits:
1.
This Fund is utilized to finance
expenditure until now charged to Loan Capital , to the extent of
balance available under this Head.
2.
No separate rules existing for
utilizing this Fund usually charged to all Plan Heads (except Plan Heads 11
& 51).
3.
Capital component of IRFC Lease
charges (if adequate funds are not available, then it is charged to Capital.
4.
All other expenditure as per
allocation projected in yearly Pink Book
5.
The distribution of between Capital
and Capital Fund from 1998-99 onwards is to be done as per allocation indicated
in yearly Pink Book.
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)
· After
merger of Railway budget with General Budget (from 2017-18 onwards), there is
no relevance of dividend impact on Railways
SF-
Safety Fund
Objects: 1. Conversion of Unmanned LC gates into manned LC
gates 2. Conversion of busy manned LC Gates into Grade Separator i.e.,
ROB/RUB/LHS
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 built over level crossings with Train Vehicle Unit (TVU)
more than one lakh provided state government or local body is agreed to share of
Approach Road to Bridge ( around 50 percent cost of the project).
ØAs on 01.04.2013, Indian Railways have 31,254
level crossings out of which,18,672 (60%) are manned and balance 12,582 (40%)
are unmanned. These unmanned level crossings account for maximum number of
consequential train accidents.
RSF created w.e.f., 01.04.2001.
Ø Created based on the recommendations of
RCC - Railway Convention Committee, 1999.
Ø It is Non-Interest bearing Fund.
Ø Credits: 1. Surplus after meeting the
dividend liability in Railway Revenues. 2. Transfer of funds from CRIF -
Central Road Infrastructure Fund by the Central Government.
Ø New
Plan Head 2900 - for conversion of unmanned level crossings into manned level
crossings.
Ø New Plan head 3000 - construction of
ROB/RUB/LHSs in place of manned level crossings.
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 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 8th 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 ACS 128 to Finance
Code II
v However,
for the last few years, there is no appropriation to this Fund due to lack of
sufficient Internal Resources.
RRSK – Rashtriya Rail SanrakshaKosh
Dedicated
fund for Railway Safety.
Established
in the year 2017-18 (announced in Budget speech of 2017-18)
Based
on the recommendations of High Level Safety Review Committee, 2012 headed by
Shri Anil Kakodkar, former chairman of Atomic Energy Commission.
Period
– Five years
Fund
proposed – Rs.1,00,000Crores (i.e., Rs.20,000 Crores for every year)
Rs.20,000Crores
for this year i.e., 2017-18 is proposed to be funded as follows.
|
Central Road Fund
|
Rs.10,000 Crores
|
So far, the amount
goes to RSF
|
|
Ministry of Finance
|
Rs.5,000 Crores
|
Promised
|
|
Railway Internal
Resources
|
Rs.1,000 Crores
|
(from Budget
document 2017-18)
|
|
By collecting Cess
on fares ( proposed)
|
Rs.4,000 Crores
|
|
|
Total
|
Rs.20,000 Crores
|
For FY 2017-18
|
Objects: 1 ) Strengthen the safety measures on the Rail Network
to prevent accidents in order to accomplish the “ZERO ACCIDENT MISSION”
Unique feature of this
Fund is Non-lapsable . That
means the grant allotted for this Fund is not lapsed with the completion of
financial year.
·
2021-22 – Budget
provision for RRSK is Rs.10000 Crores (Rs. 5000 Crores from Internal and Rs.
5000 crores from Budgetary Support)
·
Same allocation too in
the previous year i.e., in 2020-21
Works falling under this Fund category: -
1. Track renewals
&upgradation
2. Bridge
rehabilitation
3. Elimination of LC
gates on BG routes by 2022
4. Construction of
ROBs/RUBs
5. Replacement &
Improvement of Signaling system.
6. Improvement & up
gradation of Rolling Stock.
7. Replacement of
Electrical assets
8. HRD – Human
Resources Development.
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 Managmentpvt 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 BhartiyaNabhikiyaVidyut Nigam Limited (BNVNL) & Uranium Corporation of
India Limited.
6.
Investment
in Indian Railways towards Capital Expenditure.
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
·
Established in 2000 (The Central Road and Infrastructure Act,
2000) Fund Act, 2000he Central
·
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.
******
