The Hindu Business Line : Railways: A derailed social service

IN THE last few years our leaders have been loathe to raise rail fares. `Railways is a social service' and `poor need protection' are the common excuses given by successive Railway Ministers for their refusal to recover cost-inflation. A closer look at the facts reveals how untenable these excuses are.

In fact, the Railways' subsidises the rich much more than the poor. The best social service one can render today is either create employment opportunities or take services to where people cannot otherwise commercially afford it. On both counts the Railways has been found wanting.

Who benefits more from freight and passenger `concessions' (direct or through non-revision of rates in line with cost increases)?

First, take the freight concessions. Ninety per cent of the freight comes from nine items. It is difficult to see how concessions given for items such as coal, metals, iron ore, finished steel, etc., benefit the bottom (income wise) 70 per cent of the people whose primary (two-thirds) expenditure is on food; these benefit the industry more.

The per capita consumption of cement is miniscule in the rural areas compared to the urban, and richer, areas. Foodgrains move more from the rural (production end) to the urban areas and freight concessions on these hardly benefit the rural people who are at the originating end of the traffic.

Next, let us consider the rationale for non-revision of passenger fares, the reason for which varies from helping the poor to fighting price competition from airlines.

Fares for AC classes have not been raised for years on end. In the approximately 1,500 express trains that ply daily, if we assume that one-third have first A/C coaches at 18 berths per coach the availability comes to 32 lakh berths per annum. Since a person starting from base is likely to return, a maximum of 16 lakh people are likely users, even if we assume that nobody travels twice within a year. Further, it is difficult to apply `protection of the poor' argument to the corporate users travelling on business and railway officials on duty or privilege passes.

So, in actuality, fare-paying passengers would number no more than ten lakhs. Some of these commuters may be able to afford air travel, but choose rail transport for other reasons. If so, then they can hardly be included in the country's poor population and hence again, it is difficult to see how they deserve protection from high costs.

The other argument, as we've mentioned, is that the Railways has to compete against air travel. But if passengers have a better alternative, why should they not use it? Is protecting the crème de la crème against inflation and wooing them with cheap fares where alternatives already exist our definition of social service?

Going with the similar logic, it is possible to show that AC coaches (II, III and chair car) serve, at best, the top 3-4 per cent of the population, ignoring the people whose costs are picked up by corporate entities. And the non-AC sleeper coaches serve at best the top 20-25 per cent.

Irony of ironies, the recovery per coach for the first AC is even less than the II AC and III AC coaches. (see table)

Daily travellers and season ticket holders comprise 73 per cent of passenger traffic, four-fifth of whom reside in one of the four metros. For them existence of facilities in itself is the biggest subsidy. What is the alternative for a Mumbaikar living in the suburbs with the office i? He either has to relocate and pay a higher rent, or take up a job nearer home may be for a lesser salaryor perhaps even remain jobless. A 5-per cent concession (by not increasing the fare) on a monthly season ticket of Rs 165 means Rs 8 per month to him. (For the real poor who earn less than Rs 400 per month, the real deserving, there are specific concessions.) That is even less than the price of a packet of peanuts!

Thus the Railway system serves at best the top about 30 per cent of population. (There will be statistical aberrations, no doubt). The Railways is primarily an urban amenity. Sixty per cent of the express traffic is between lines connecting the four metros. Eighty-two per cent of the local commuters live in these metros. The Railways' presence and reach in the interior rural and tribal areas where the majority of our poor live is negligible.

On to the employment obligations. If the powers that be want to find out the real reason for the job-loss growth they need look no further than the Railways. Between 1990-91 and 2003-04 the real freight traffic has grown by 50 per cent and passenger traffic by 75 per cent. For a real growth of this magnitude, the Railways should ideally have added 11 lakh jobs whereas it has shed 2.62 lakh jobs (by 2002-03). This leaves a huge unemployment burden of 14 lakh jobs to be created, on other sectors.

The Railways web site says that between 1993-94 and 2000-01 its costs went up by 2.3 times but recoveries rose 1.4 times. Had the costs been recovered entirely, the Railways' revenues might be higher now by Rs 15,000-20,000 crore a year - every year. Or, it could have funded the employment of 20 lakh people at Rs 1,00,000 per annum. Today, employment of this magnitude should qualify as the biggest social service — definitely much more than the sundry doles especially to those that are least deserving.

Even if just the loss on non-suburban travellers alone were recovered it would yield Rs 4,500 crore - a sum that can employ 450,000 people. Even if the Railways does not want to expand its payroll, it could always contract out.

There are several opportunities to provide employmentEven if the Railways employs one cleaning person for every two coaches it would create employment for up to 100,000 people.

Train Ticket Examiners in every coach can control ticketless travel; if only hand held devices which communicate with the central computer are given to the TTEs they can easily recover their costs by selling vacant seats in `in-between' stations. This will again employ another 100,000 to 150,000 people. The Railways' strategy of not increasing any tariffs or fares and cutting down on employment, compromising on safety and maintenance, and forfeiting faster expansion of services in the process to absorb the cost of inflation is dubious and, worse, detrimental to its own and passengers' health and safety.

So when `social service' minded ministers follow this method to serve the `poor' they are fooling every stakeholder including themselves. They fool the (real) poor by giving concessions that the beneficiaries can never access. They also dupe the rich by compromising on their safety, making them travel in increasingly filthy surroundings, and with so many encroachers. These encroachers get taken for a ride since a systematic expansion of service would have eased their difficulty and congestion. They impose on industries the mammoth burden of an unemployment backlog. All this takes a tollon reforms, which will sooner or later face rough weather if enough jobs are not created.

(The author is Vice-President, Finance, JK Papers, New Delhi. He can be contacted at swaksha_ad1@sancharnet.in)