New Delhi: Contrary to expectations and his reputation for caution, minister Dinesh Trivedi has delivered a Railway Budget that shuns the populism of his predecessors, and if implemented in earnest, would put the Railways on the path to revival. The fare hike was necessary. It even has the support of left-oriented railway trade unions, which fear for the financial health of the Railways. But with his party, the Trinamool Congress, so vehemently opposed, is the fare hike a wise move? Evidently not so, Trinamool Congress supremo Mamata Banerjee has already written to the PM, asking Manmohan Singh to replace Trivedi.
The minister has proposed structural changes that will require his stewardship to steer through. The move to appoint two board members, for public private partnership projects and for safety, is bold. It is a departure from the way that the board is currently constituted – along functional lines (electrical, mechanical etc) – which is tailor-made for turf battles. It would be the first step in regrouping the top management along business lines (freight, passenger, rolling stock, tracks) as suits a commercial enterprise. The member in charge of public private partnerships is likely to face a lot of opposition from an inward looking bureaucracy that would rather see the Railways lose ground, than lose hold.
For more than two years, it has resisted awarding contracts for the production of diesel and electric engines, even though multinationals like GE and Alstom are keen, as is the Prime Minister. The proposed independent safety committee would need political support. Railways statistics about declining accident rate does not take into account the number of staff killed while on duty, and the deaths, running into a few thousands, of 'trespassers,' who get killed while crossing the railway network. These casualties are not the liability of the railways but certainly its responsibility. The present commissioner of railway safety, while an employee of the civil aviation department, has limited powers and can be over-ruled by the Railway Board. If the authority gets statutory powers, it could direct the railways and the government to install safety measures and penalise non-compliance.
The proposed companies to replace (killer) unmanned level crossings with over bridges and subways; to modernise stations in private partnership; to develop goods sheds and logistics parks; and to do housekeeping of stations and trains are a change from business as usual. The railways suffer from an 'implementation bug.' Even recommendations made by past safety committees have not been executed. The new purpose-made companies hopefully will get things done within the time given to them.
Those who denounce a fare hike do not realise that it is less inflationary than a hike in freight rates, and therefore kinder on the aam aadmi or the common person. The Railways have budgeted for a 22 per cent increase in freight earnings (Rs 87,000 crore) - a stretch from the 9 per cent growth seen this year. And these earnings come from a six percent increase in volume – lower than the projected GDP growth of 7.5 per cent. Freight rate increases feed prices of essential commodities. Railways journeys on the other hand are not an essential activity. They have to be planned a couple of months in advance. Tickets are seldom available on demand.
The numbers also do not indicate how deep a hole the railways have dug themselves in. On revenue of Rs 1.03 lakh crore this year, it has earned a surplus of just Rs 1,000 crore. This is after a Rs-3,000-crore loan from the finance ministry for safety-related expenditure and an one per cent reduction in the dividend rate (or payment on the government’s preference capital). Insiders say that suppliers have not been paid since November last year. That has depressed expenditure and flattered the surplus. These devices make the Railways look optically solvent, when it is not.
The ten per cent reduction in expenditure (from 95 per cent to 85 per cent) is a grand ambition. The railways have never ever achieved spending reduction on such a scale before. The minister may argue that when you aim for the moon, one is likely to land on the treetop. The Railway Budget has overestimated revenues for the next year and under-estimated expenditure.
The Railways are losing relevance to the economy. Of the 970 million tonnes carried this year, 450 million tonnes is coal. Nearly 200 million tonnes is cement and another 100 million tonnes iron ore and steel. This is a precarious perch. It seems to be losing relevance to passengers too. The revenue from ferrying passengers is a thousand crore less than budgeted. As a result, investment has fallen short of target by Rs 9,000 crore. Under-investment on this scale in new capacity and amenities is sure to drive both passengers and freight providers elsewhere.
A fare hike is necessary. Excluding growth in passenger numbers, assumed at the same rate as this year, it would bring in an extra Rs 3,900 crore. This is no piffle but not an amount that a do-good minister should sacrifice his chair for. There are other less controversial ways of raising funds – like property development and sale of airspace over stations. In politics, survival is a virtue. The minister has made his point – now that he has been pushed to the wall, he must roll back the fare hikes and live to fight another battle.
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