The Hindu Business Line : Challenge on the tracks

When Mr Lalu Prasad rose to present his fifth and last Railway Budget in Parliament, he was not just recounting the finances of a public utility with one of the largest rail networks in the world; he was continuing the saga of one of the most profitable railways. Since 2002-03, the Indian Railways (IR) has managed to become a hugely revenue-driven undertaking, not through intensive capital injections so much as earnest experiments in the management of wagons and personnel leading to a consistent generation of cash surplus. The Railways’ performance stands out amidst the general gloom of output cutbacks and falling industrial activity. Small wonder that Mr Lalu Prasad has been able to sustain his past practice of not raising passenger fares; just like last year, he has in fact, reduced fares by 2 per cent. No doubt, he must win increased patronage of the trains in this sombre economic scenario if he wants passenger revenue to rise 7 per cent. The question is whether there will be room to accommodate them; the 43 new train services announced add barely 2 per cent to the long-distance capacity. Unlike last year, when he cut freight on diesel and petrol, Mr Lalu Prasad has left them untouched; he could not afford to give up in a hurry the gains from rate increases on many goods carried out in recent weeks.

Just how well the IR has performed under tough conditions becomes evident from fact that it was able to absorb the higher expenses occasioned by the Sixth Central Pay Commission that will add Rs 9,000 crore to staff costs and Rs 4,500 crore more to pension charges compared to last year. Yet, the dividend payable to general revenues has been retained at Rs 4,711 crore. Since 2004, the IR has generated a cumulative cash surplus of Rs 68,778 crore, on average Rs 17,194 crore a year; the interim budget informs us the year is likely to end with Rs 19,320 crore. In fact, the Railway Minister has set ambitious targets for the next fiscal.

With freight loading targets upped some 60 million tonnes to 910 million tonnes, the Railway Minister expects gross traffic receipts of Rs 93,159 crore, that is, Rs 10,766 crore more than the revised estimates for the current year. To achieve that in a year when the economy is widely expected to slow down is the challenge Mr Lalu Prasad leaves to his successor, one that will be the sternest test for the organisation since 2002. And if the next Railway Budget echoes the great revenue-rich story that would truly be one for management schools to ponder over.

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Reduction in passenger fares, freight rates likely

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