Persisting on populist track

The Railway Minister, Ms Mamata Banerjee's Budget for 2011-12 is largely on expected lines. Despite the massive financial crunch facing the behemoth, she has preferred to persist on her populist track with her eyes firmly fixed on the forthcoming West Bengal elections. The much-needed structural reforms and measures to raise revenues have been shelved once again.

Despite losses rising steadily, the passenger fares have been left untouched for the eighth year in a row with scant regard for the mounting deficit of the system. The operating ratio, which was brought down to 75.9 in 2007-08, had touched 94.7 in 2009-10, according to revised estimates and it is now inching close to 100. The system is expected to incur a loss of Rs 3,500 crore in 2010-11.

POPULIST MEASURES

That has not deterred the Railway Minister from announcing a spate of new passenger trains, including nine Duronto, three Shatabdi and 56 new express trains. Several new manufacturing units, including a new metro coach factory near Singur in West Bengal, a bridge factory in Jammu and Kashmir, a gas-based power plant near Thakurli in Maharashtra have also been announced.

These announcements have come even as none of the 16 new rail factories for West Bengal announced in the last year's Rail Budget have taken off the ground so far. The same has been the fate of other projects announced last year such as the setting up of Kendriya Vidyalayas, hospitals, diagnostic centres, water bottling plants, and so on.

There is also a proposal to create a fund for socially-deserving projects, a socially-desirable line in Jharkhand and a new coach factory to be set of in Kolar in this year's Budget. Nobody knows from where the funds will come for all these projects, which clearly fall outside the core activities of the Railways.

Surprisingly, the Budget also aims at setting up 700 km of new railway lines every year but is expected to add only 180 km of lines in 2011-12. This appears some wishful thinking amid the all-pervading populism.

With the slowdown in the freight haulage despite the booming economy, the freight target for the current fiscal has been reduced by 20 million tones to 924 million tones; the original target was 944 million tonnes. The freight loading target for 2011-12 has been fixed at 993 million tonnes, but given the various constraints facing the Railways, the achievement of this target also appears doubtful.

The working expenses of the Railways have been rising at a much faster pace than the gross traffic receipts. The budget estimates for 2010-11 had projected them at Rs 87,100 crore, but they are likely to exceed this figure since the railway finances have entered the red zone this fiscal.

Yet, the working expenditure for 2011-12 has been pegged to an unrealistic figure of Rs 87,000 crore. In the nine months from April to December 2010, an unprecedented 10 out of 16 zonal railway networks have spent more to earn less. On an average, all the Zonal Railways spent close to Rs 115 to earn Rs 100 during this period.

The Railway administration has attributed 97 per cent of the increase in expenditure to the implementation of the Sixth Pay Commission Report. Yet, there has been no effort at reducing the excess manpower in the system over the past several years. A few years back, some expert studies had estimated the excess manpower at around 40 per cent of the 1.4 million staff.

With huge increases in salaries and pensions, efforts were needed to improve the productivity of the railway employees. Yet, it should come as a shock and surprise that now there is talk of addressing the jobs backlog of nearly two lakh persons, including 16,000 ex-servicemen to be given jobs.

ANNUAL PLAN

It may be recalled that sometime back, Ms Mamata Banerjee had requested the Finance Minister to increase the Budgetary support for the Railways Annual Plan for 2011-12 to Rs 39,600 crore from Rs 15,875 crore in the previous year. However, she managed to get the budgetary support of only Rs 20,000 crore for the next fiscal.

Even so, she has raised the size of the Annual Plan for 2011-12 to Rs 57,630 crore from Rs 41,426 crore in 2010-11, a massive increase of Rs 16,204 crore. Apart from the Budgetary support of Rs 20,000 crore, she has proposed a market borrowing of Rs 20,594 crore and raising Rs 10,000 crore via tax-free bonds. It is indeed a bold move but will require some innovative measures to succeed.

The earnings of the Railways are projected to exceed Rs l lakh crore during 2011-12 and the operating ratio has been pegged at 91.1 per cent. However, unless serious efforts are made to cut costs and raise lower class and suburban passenger fares, there is a danger of the Railways going deeper into the red in the coming months.

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