The Hindu Business Line : Railways: Broad-gauging investments

Though cost-cutting and revenue-raising measures can be continued, the focus should be on the much-needed investment in expanding the capacity of the Railway.

The Indian Railways has served to unify the nation. The rail network has grown from just 34 km in 1853 to 63,465 km in 2004-05, when it moved, on average, 1.65 million tonnes of freight and 14.84 million passengers every day. Yet, a major cause of worry for the Railways in recent years has been its poor financial health. In May 2002, the Railway Ministry issued a Status Paper, according to which, "Until 1998-99, the Railways had been generating net surplus. But owing to the implementation of the recommendations of the Fifth Pay Commission, Railway finances have deteriorated very sharply. The wage and pension liability has nearly doubled to Rs 19,000 crore since 1996-97. Outstandings from the SEBs have grown to Rs 1,865 crore. Simultaneously, lease payments to IRFC have more than doubled to Rs 3,041 crore since 1995-96. As a result, IR had to defer payment of dividend partially during the years 2000-01 & 2001-02."

The Turnaround

While presenting the Budget last year, the Finance Minister, Mr P. Chidambaram, took credit for a turnaround in the Railways' finances. He announced, for instance, that the IR's internal resources, before dividend, would reach a record Rs 11,280 crore, and did not hide the reason for celebration: "... this is the same Indian Railways which, in 2001 had deferred dividend payment, whose fund balances had reduced to just Rs 350 crore ... "

Revenue augmentation

Given that as much as 70 per cent of the Railways' earnings comes from freight, the turnaround is explained by the reduction in wagon turnaround time and additional loading of four-eight tonnes per wagon. As stated in the Budget last year, these improvements have led to an increase of 100 million tonnes in loading capacity and generation of over Rs 5,000 crore in freight revenues. This is a substantial proportion of the difference in total earnings, which amounted to a little over Rs 7,000 crore.

In addition to revenue augmentation, another important aspect of the financial health is the containing of expenses (Table 1) Ordinary expenses, as a per cent of gross traffic receipts, fell significantly in the last couple of years.

Employee strength, now around 1.4 million, has declined over the last 15 years and there may be scope for further rationalisation.

At the time of the formation of the Republic, the running track length was already over 59,000 km (Table 2). Close to 25,000 km was added in 55 years. More people are travelling and greater distances too. The number of passengers in 2005 was 4.2 times that in 1950. In the case of freight, the factor was much higher, at 8.2. It is, thus, natural to focus on wagons and freight corridors when talking about investments.

New Investments

The Railway Minister will be presenting the Rail Budget on February 26. Though cost-cutting and revenue-raising measures can be continued, the focus should be on the much-needed investment in expanding capacity.

The last Budget emphasised the need to improve the wagons with regard to freight traffic and amenities in the case of passengers. On wagons, in addition to noting that RDSO is designing new high capacity wagons, which can take loads of up to 70 tonnes, there is the forward-looking idea that the country must make 25-tonne-axle load wagons to carry loads up to 80 tonnes and whose payload-to-tare weight ratio is around 4:1. In addition, it has been stated that special wagons need to be manufactured to increase the Railways' share in the transportation of commodities such as motor vehicles and petrochemicals. To cope with the increase in the length of passenger trains, platforms have to be lengthened in 250 stations. Modernisation of the railway stations is also proposed.

The idea is to have, in the upgraded stations, such facilities as ATMs, cyber cafes, and so on. Of utmost concern to the passengers is the cleanliness and comfort of the coaches.

The earlier Budget had announced modern coaches and amenities to be introduced only in a few trains. It is time more attention was paid to this. Travel density (travellers-to-total population ratio) is bound to move up in the days to come, thanks to the demographic dividend, increasing longevity, high rates of economic growth and the general increase in travel propensity.

Even in the first-AC coaches, no serious effort is being made to repair toilets, walkways, etc. If the Railways is serious about competing with airlines, it must improve the condition of the first- and second-AC coaches significantlyBetter coaches must be introduced instead of resorting to too much repair.

In the AC sleeper coaches, the degree of comfort varies between the inner four berths and those on the side, though the fare is the same Fares, if necessary, can be raised moderately and the side berths dispensed with in sleeper coaches.

Increasing track length

An important area of investment is in increasing the track length. There are a number of single-line tracks that need to be doubled. Just as the Government has decided to permit private parties to run container trains, with due expansion of track, private passenger trains can be allowed as well.

In fact, it is worth looking at the possibility of allowing private parties to lay parallel tracks on land allotted, on long-term lease basis, by the Railways. Of course, not all improvements need massive investments. For instance, seat selection via the Net should be possible at little or no additional investment. It would allow a passenger to see what seats/berths are available and then decide on travel dates.

(The author, formerly with the National University of Singapore and the World Bank, is Professor Emeritus, GITAM Institute of Foreign Trade, Visakhapatnam. He can be reached at bhanoji@gmail.com.)

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