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Tuesday, 26 February 2013 02:14
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Railway budget will decide UPA's reform credentials

Railway minister Pawan Kumar Bansal surprised when, out of the blue, he announced a 10-12% hike in passenger fares, a few months after taking over when the Trinamool Congress vacated the ministry along with the government. Perhaps the UPA was, the popular view went, really serious about reforms—after all, it hiked Railway fares quite soon after it got back control of the ministry; more so, considering Dinesh Trivedi was sacked from the job by party chief Mamata Banerjee for attempting a smaller hike. Problem is, around half the hike got neutralised when, a week after the hike was announced, the UPA raised prices of bulk diesel by 27%. This then left the Railways where it has been for a long time—a tired, antiquated and unsafe organisation, creaking at the seams, unable to go any direction except backwards.


Take any Railway fund you can think of—the Depreciation Reserve Fund or the Capital Fund, for instance—and the story is the same of rapidly depleting funds, of various Railway ministers such as Mamata Banerjee just refusing to contribute to the funds in a spurious attempt to try and balance the books. The Depreciation Reserve Fund, for instance, dipped from R7,100 crore in FY09 to R4,600 crore the next year—while the FY13 Budget planned on raising this by around a third, the chances of this happening are bleak given the Railways missing its revenue targets. The Capital Fund, used for creating new revenue-generating assets, similarly, got depleted to nearly a third in FY09, got reduced to zero the next year—from a mere R942 crore in FY12 (see story on page 1 today), the Budget hopes to raise this to a mind-boggling R5,000 crore this year.

While the Railways needs at least R14 lakh crore of funds over the decade for modernisation, it has no plausible way to access these funds. Indeed, things have got so bad, the Railways is likely to lose R25,000 crore on R36,000 crore of budgeted passenger revenues this year. As a result, it overcharges on freight—the passenger-fare-to-freight earnings ratio has fallen from 0.31 in FY01 to 0.25 in FY13 (this ratio is 1.3:1 for China)—and then loses on freight revenues since this makes freight rates among the most expensive in the world. In FY12, when nominal GDP grew 15%, freight traffic grew just 6%. This year may not be much better.

Nor is it just a matter of the money, important as that is. According to the Kakodkar panel on Railway safety, around a fifth of safety-related posts in the Railways are vacant; the 52 kg/m rail tracks used, the panel says, are “not prudent to use” and around 43,000 ICF coaches used “are no more safe at the present operational speeds”. In a situation like this, the only feasible solution lies in dramatically hiking the involvement of the private sector—R2.3 lakh crore is to be mobilised through PPP in the current Plan period—but there has been no progress on this so far. While nothing has been heard of the grand plan to make the New Delhi Railway Station into a three-level modern airport-like facility and, as the column on the Reflect page points out, four years after the Cabinet approved a programme for an electric loco to be made on a PPP basis, the Railways have modified the proposal in a way that makes PPP more difficult—even irrelevant. Mr Bansal’s performance today will be the first peek into the UPA’s new reformist credentials


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