The Hindu Business Line : Rail Budget: Difficult decisions sidelined

THE National Council of Applied Economic Research had constituted an Expert Group on the Indian Railways in 2001. The report says that the Railways faces difficulties in raising funds from all the three major sources. It earns 62 per cent of its income from freight traffic. It is not possible to raise freight because then business would move to the road transport sector. A hike in freight rates leads to less income for the Railways. Upper-class fares have traditionally been increased to raise funds. Now this is also reaching a ceiling because of competition from cheap airfares.

The Delhi-Mumbai fare for Rajdhani A/C II Tier is Rs 2,200 against Rs 3,400 for apex air fares. The First A/C fare nearly equals air fare. An increase in A/C fares would see more passengers using air services. It is reported that the number of air travellers between the two metros is already higher than those travelling by rail. It is not easy to raise the lower class passenger fares because this would affect the sensitive political constituency. The practice so far has been to raise freight and upper-class fares to cross-subsidise lower-class passengers. The Expert Group had, thus, recommended that the lower-class fares may be raised along with improved amenities for the users.

The Railways needs to raise funds urgently. Track renewal, new rolling stock, introduction of high-speed trains, construction of container depots, debottlenecking of high density routes by the installing modern communication and signalling systems, and so on require huge investments.

Support is not likely to come from the Budget due to the government's commitment to reduce the fiscal deficit. The main challenge before the Railways Minister, Mr Lalu Prasad, was to find a way to raise these funds. The only possibility was to raise lower-class fares and improve amenities such as cleaner bathrooms, drinking water and preventing harassment by coolies.

The infrastructure to provide many of these facilities is available but they are not provided because of misconduct of the railway employees. No additional expense has to be incurred by the Railways to improve such facilities. The lower-class passengers can be coaxed into paying more by administrative improvements.

The Expert Group had mentioned that the Uniguage project may be beneficial for the country but is harmful for the Indian Railways. This project requires huge investments without resulting in higher incomes. It used to take 13 hours to reach Gorakhpur from Kanpur. Now it takes only eight hours due to gauge conversion. Passengers use the time saved to do business and that adds to the national income. But there is little gain to the Railways because the passenger pays the same fare as previously.

Similarly, laying of rail lines in the backward areas is beneficial for the economy but not the Railways. Economic development is the job of the government. The job of Indian Railways is to run the trains efficiently. The Expert Group had suggested that the Government should compensate the Railways for the cost incurred in the social projects.

The Railways should pay dividend on the investment made by the Government. Transparency in this give-and-take will tell us the true state of the Railways.

The Railways hides its inefficiency, corruption and misadministration under the guise of social responsibilities. The Expert Group had estimated the 25 per cent of the rail employees were surplus. Now, 31 paise out of every rupee earned by the Railways goes towards the payment of salaries and another 14 paise towards pension. Mr Lalu Prasad should have engaged the employees in a discussion on this issue and made a strategy to improve their efficiency. He, on the other hand, has spoken of manning the level crossing for which he will possibly make fresh appointments. These policies of the Railways Minister are in the opposite direction.

The Expert Group had also suggested that the Railways should exit from production such as that of Rail Neer, catering, security, hotels and so on. These should be contracted out to private providers.

Mr Lalu Prasad should have moved in this direction. The efforts of the Railways Minister to introduce Kullhar and Khadi is commendable though the suitability of the latter needs to be looked at. The Minister has rightly understood that the welfare of the common man cannot be sacrificed on the high pedestal of efficiency. Some increase in cost should be accepted to provide relief to the poor. But this principle is relevant for the whole economy which should have been applied by the Finance Minister.

The main work of the Railways Minister is to run the Railways efficiently. Kullhars are useless if trains do not run to time.

(The author, a freelance writer, can be contacted at bharatj@nda.vsnl.net.in)

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