The Hindu Business Line : Politics on track, economics not

THE Railway Budget 2004-05 did not belie any expectations, because there were none. Considering the track record of the Railways Minister, Mr Laloo Prasad Yadav, in his other role as the arbiter of all that transpires in Bihar, it would have made little sense to hope otherwise.

As usual, a flurry of new passenger trains has been announced. Some others have been extended or their frequency increased. There are already too many trains, from anywhere to anywhere, and many of them run with only a few coaches for lack of adequate passengers. Many have been introduced, in the first place, perhaps, just to stave off a pestering and persistent politician.

Does the Railway Minister realise that cross-subsidisation of passenger services by freight has reached unacceptable levels and, though a full 60 per cent of all trains run on Indian Railways carry passenger traffic, they produce only 28 per cent of the revenue! Further, , more passenger trains mean more coaches being pressed into service, which implies withdrawing them from the maintenance pool, thereby cutting down on safety levels and risking accidents that ought be avoidable.

Not only has the Rail Budget seen the introduction of quite a few passenger trains, it has also completely overlooked the need to charge more fares from both the suburban as well as the non-suburban second-class passengers. This category, though comprising more than 99 per cent of all passenger traffic (yes, upper class passengers comprise only 0.80 per cent), travels on Indian Railways paying only a fraction of what it costs to move them.

Many a Railway Minister's firm resolve to tax this category — at closed-door meetings with his officials — has ultimately floundered at Budget time. This Railway Minister has, however, been merciful to the higher-class passengers this year, which is quite unusual, considering previous Rail Budgets. It is well-known that the gap between air-fares — at least, the so-called Apex fares — and train fares is now perilously close and, in the not-too-distant future, diversion of passenger traffic from rail to air will be quite regular, if the easy way out of increasing just higher-class fares is resorted to.

This over-emphasis on passenger traffic overlooks the fact that the Railways has always survived on freight which, though accounting for only 40 per cent of all traffic, earns 72 per cent of the revenue.

The Budget has also sprung a bit of a surprise by leaving freight rates intact. Freight's price-elasticity of demand is 0.9. As a result of rampant price increases in the past, a lot of traditional railway traffic, such as iron and steel, petroleum products, non-ferrous metals, cement and non-bulk general goods has got diverted to road.

The share of cement carried by the Railways, for instance, has decreased from 60 per cent at the beginning of the 1990sto around 40 per cent at the end of the decade. The excellent work done by the National Highway Development Authority has made the process of diversion even easier though, as a mode of transport, the Railways are more than six times as energy-efficient and six times less costly than comparable levels of traffic, apart from being much more environment-friendly.

This decline of the profit - making railway freight traffic segment is not easy to arrest. Almost 70 per cent of the Railways' traffic is carried by just 25 per cent of the total network, comprising the so-called `Golden Quadrilaterals', connecting the four metros of New Delhi, Mumbai, Kolkata and Chennai. The net result has been that capacity on these routes has been stretched almost to breaking point.

The position has been further compounded by the speed differential between slow-moving freight trains, at 30-35 kmph, and fast mail-express trains such as the Rajdhanis and the Shatabdis, at 110-130 kmph. The Railways has, of late, been procuring every year rolling stock (locomotives and wagons) worth more than Rs 3,000 crore.

This situation has been brought about because investments in infrastructure have fallen far short of requirements over the years. Typically, demand for freight transport grows at 1.5 times of the rate of growth of GDP. Thus, a growth rate of 7-8 per cent of GDP would require a growth rate of 10.5-12 per cent in Railway freight, against its usual rate of 4.5-5 per cent achieved so far.

Admittedly, the growth rate in 2003-04 has been little over 7 per cent, but the growth projected this year, at 580 million tonnes of revenue traffic, has again been pegged down at 4 per cent. Unless there are huge investments directed at capacity generation along the busy freight-carrying routes, the position will not change much. Scarce investment ought to be directed to areas where they will give a reasonable return. Unfortunately, political and other compulsions have seen costly investments being frittered away in areas where returns have been consistently negative. Gauge conversion is one such area.

Metre-gauge, with 23.4 per cent of the total route, generates barely 1.06 per cent of freight and 6.8 per cent of passenger output. Still, through the so-called `Unigauge' programme, thousands of crores of rupees have been spent converting metre gauge to broad gauge, that ought to have gone rightfully in shoring up the creaking infrastructure of the busy routes.

Conversion at such huge expenditure makes even less sense, now that the Government has taken up a massive programme to upgrade the roads which is reportedly progressing satisfactorily.

Similarly, while laying new lines, the Railways should try to go for those that are linked to specific projects, and at least those likely to yield an acceptable rate of return.

As far as the so-called `Developmental Lines' are concerned, which are meant to open up backward areas and are a part of the Railways' social service commitment, it was found after a review in 2001-2002 that 9 out of 10 yielded negative results, the highest being (-)25.8 per cent.

The Railways certainly deserves better. Despite the many constraints in infrastructure, the Railways' operating indices have steadily improved.

Thus, net tonne km per wagon per day, at 2,223 in 2001-2002, was second only to Japanese National Railways and way ahead of SNCF (French National Railways) and DBAG (German Federal Railways). Wagon turnaround, the primary index of operational efficiency, has improved to almost 7 days from 11.5 days in 1990-91.

This has been achieved through various innovations in maintenance patterns enabling the wagon to move longer distances without frequently stopping for maintenance, use of bottom-discharge wagons thus drastically cutting down unloading time of wagons, and use of more powerful locomotives. This good work may be continued only if the right priorities are adopted.

No doubt politicians have their own priorities, especially when an election is looming on the horizon, as in Bihar. Predictably, the Railway Minister has dwelt long on the need to improve safety of passengers — the Opposition was baying for his blood for the series of dacoities in his home State — and has waxed on the utility of mattha and lassi when imbibed in earthen kulhars.

The real issues facing the Railways have really been glossed over. But, then, as they say, as you sow, so you shall reap. `Good politics' in this case will surely turn out to be `bad economics'.

(The author, a former Additional General Manager, South-Eastern Railway, is Professor and Head, Public Systems Management, Indian Institute of Social Welfare and Business Management.)

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