A ban on new projects, to begin with, is a good idea
Railways minister DV Sadananda Gowda has done well to indicate he plans to go slow on new railway lines, that these will be put up only if states agree to share costs—in Andhra Pradesh and Karnataka, he said in an interview, the land is provided for by the states who also bear half of the project cost. Given that, as the minister himself has said, there are already R5 lakh crore of announced projects by various ministers in the past, Gowda would do well to announce a complete freeze in new projects, both in this budget as well as the next few ones as well. Not only are new projects—with highly subsidised fares—playing havoc with railway finances, fed up of the poor quality of service, even railway passengers have slowed down their usage; as compared to a budgeted R42,210 crore in FY14, passenger earnings were R37,500 crore.
In macro terms, to cite one number from the Rakesh Mohan committee on the transport sector that submitted its report a few months ago, between now and 2032, the transport requirements for just power and steel are likely to grow from 900 million tonnes to 3,700 million tonnes. With losses in passenger services rising 5-fold between FY02 and FY13, and the FY14 operating ratio worsening to 90.8% as compared to the targeted 87.8%, the Railways are in a real fix. Even a politically infeasible 50% hike in passenger fares, for instance, will fetch the Railways just R15,000 crore as compared to its needs of around R14 lakh crore for capacity expansion of even the most basic kind by 2020. And, of this, R1 lakh crore is required, yesterday, for addressing safety concerns—according to the Kakodkar committee, the 52kg/m tracks used are unsafe as are 43,000 ICF coaches.
In which case, while the nitty-gritty of this year’s budget is important, the minister needs to come out with a larger roadmap of how the private sector is increasingly going to be involved in the sector. It may be a good idea to revisit the plans by one of his predecessors Dinesh Trivedi who had envisaged 30% of annual revenues coming from non-traffic segments like hotels and restaurants—the way Trivedi envisaged it, railway stations would look much like modern-day airports, with hotels, restaurants and shopping arcades an intrinsic part of them. That the model New Delhi railway station never took off despite being conceptualised several years ago tells you how the Railways bureaucracy is opposed to any meaningful privatisation. Getting privatisation on track will require not just the government’s commitment, it will require having an empowered regulator which can ensure private players’ concerns are taken care of. It will also require a relook at the current concession structure where, once the contracts are signed, the government takes little responsibility for upholding its side of the bargain, whether on acquiring land or getting requisite clearances. Given prime minister Modi’s thrust on infrastructure, the Railways really need to get their act together.