The Hindu Business Line : Rail Budget: Long on passengers and short on freight

The Rail Budget has largely confined itself to the passenger segment, ignoring that the Railways’ financial viability largely hinges upon the healthy growth of the freight sector, says VIJAYALAKSHMI VISWANATHAN.

The Rail Budget for 2009-10 presented in Parliament reflects the importance the Government attaches to inclusive growth. So far as the Railways is concerned, the main interface is with the passenger and, hence, the Railway Minister, Ms Mamata Banerjee, has announced a slew of measures which are expected to improve the quality of service provided by this gigantic organisation with a workforce of 1.4 million.

Ticketing services

The ticketing improvements announced in the Budget include introduction of additional PRS locations and a massive expansion of the unreserved ticketing terminals by 60 per cent from the existing 5,000. Computerised tickets can now be bought from post-offices and automatic ticket vending machines. The Budget indicates the introduction of mobile ticketing services too.

Coupled with the priority announced for cleanliness and punctuality, the induction of specially-designed coaches for handicapped passengers and availability of a doctor in long distance trains, the Railway Minister has really tried to live up to the promise of providing a Budget with a human face. There has also been a substantial increase in the allotment for passenger amenities.

Some of the innovative measures such as introduction of double-decker AC services, ladies special, non-stop point-to-point ‘Turant’ trains (similar to Rajdhani of yore), Yuva Express etc., are steps in the right direction to enhance the quality of travel experience of passengers.

Now that the air travel industry is facing a recession, the Railways should capitalise on the opportunity available through value-added services. AC travel is quite competitive and action to improve punctuality, cleanliness and catering will go a long way in strengthening the Railways’ share of this travel segment. However, careful and close monitoring is called for, which has also been fortunately emphasised in the Budget speech.

Boost loading

The Budget, while taking note of the deceleration in the economy, has revised the target for freight loading downwards. But in the wake of diesel price hike and the heavy impact of the Sixth Pay Commission Recommendations, the working expenses are likely to deteriorate. Hence, effective measures were expected to boost the loading; except for an announcement regarding the new policy to allow private terminal, no tariff-related initiatives have been announced.

The Budget banks on its ability to generate additional revenues through commercial exploitation of lands and premium parcel services.

This is a big disappointment as industry badly needs necessary stimulus and fillip to make a turnaround. The necessity arises as the already subsidised passenger sector is likely to put greater pressure on the Railway’s finances in the wake of concessions announced such as Izzat ticket, concession to correspondents, metro concessions, and concession to Madrassa students.

Projects and new schemes

The Railway Budget contemplates setting up of an expert committee to go into projects that are socially desirable but economically unviable. It is well-known that the Railways does not get compensated for the social service obligations unlike many other railway systems of the world.

In the absence of such a compensating mechanism and with Budgetary support which is in the nature of capital in perpetuity with a dividend liability, the Railways would do well to adhere to the norms for financial viability and sustainability while embarking on new projects or introducing services.

Despite the failure to achieve the targeted loading in 2008-09 and a less than 5 per cent growth rate during the year compared to the average of 9 per cent in the preceding 5 years, the Budget has largely confined itself to the passenger segment, ignoring that the Railway’s financial viability largely hinges upon the healthy growth of the freight sector.

The operating ratio, which has been steadily falling over the years from 92 per cent in 2003-04 to 78.7 per cent in 2006-07, has gone up to 90 per cent once again in 2008-09.

The situation called for stringent economy measures with regard to both staff and material, apart from energy conservation measures to reduce the fuel bill. No specific schemes have been announced except the one relating to workshops and setting up of a mega power plant.

The accounting reforms project announced earlier is likely to improve the costing system of the Railways and provide valuable inputs for determination of rating structure. These areas need urgent attention.

Unless mid-course corrections are taken during the financial year in this direction, the Railways may well find itself in an irretrievable situation before long.

(The author is former Financial Commissioner, Indian Railways. blfeedback@thehindu.co.in)

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