DV Sadananda Gowda’s Rail Budget for 2014-15 — the first by the new government — may be lacking in ambition in terms of investment plans and projects that would have also helped kick-start an economy-wide revival. Yet, it should be commended for signalling a departure from the beaten track of populism. One may well want the Railways to be a growth driver for the economy in these times. But the fact is the Railways today spends over 90 per cent of its revenues on salaries, pension, fuel, maintenance, lease charges and other working expenses (this ratio was far healthier, at below 76 per cent, in 2007-08). That leaves very little surplus for undertaking any worthwhile investments. The Railways’ total reserves (‘fund balances’) at the start of this fiscal, for instance, were a meagre ₹8,806 crore. The national transporter, in other words, needs to first get its own finances in order to be “the growth engine for India’s development journey”, as Prime Minister Narendra Modi sees it.

This Budget, in a sense, recognises these realities. Gowda has rightly noted how passenger fares have been kept artificially low at less than a quarter of freight rates — as opposed to China or Korea, where commuters pay 1.2 to 1.4 times more than those moving cargo by rail. In 2013-14, the Railways’ social service obligations on account of operating services at below cost were estimated at ₹21,400 crore — more than a third of its Plan investment of ₹59,359 crore. Clearly, this is unsustainable. Gowda did make a beginning by hiking passenger fares by 14.5 per cent even before the Rail Budget. He has also said there will be automatic revision of fares linked to fuel cost escalations. But there is need for further rationalisation to end cross-subsidisation of passenger traffic by goods and enable the Railways raise much-needed investible resources.

Gowda should also be given credit for stating that the Railways will henceforth focus on completing projects rather than sanctioning new ones. His Budget, unlike those of previous Rail Ministers, has very few proposals for new lines or train services. Given the Railways’ scarce resources, it obviously makes no sense to spread these on more projects. Instead, it is better to spend on projects deserving of immediate funding —– for instance, the Dedicated Freight Corridor which has been allocated ₹6,500 crore. Yet, on the whole, one would have expected more from this Rail Budget. There is hardly anything on monetising the Railways’ land bank, which could be a humungous source of revenue. For all the plans of a Diamond Quadrilateral network for bullet trains between major metros, a mere ₹100 crore has been provided under this head. The Budget also lays too much hope on public private partnerships in attracting investments in the rail sector. But these, and also foreign direct investments, will take time to materialise.

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