It is unfortunate that the Rail Minister, Pawan Kumar Bansal, has let slip the opportunity to make the Railways an engine of growth of the broader economy, in his anxiety to put its finances in order while presenting the >Rail Budget for 2013-14. What makes it all the more galling is that the two objectives, far from being at conflict, can actually complement each other quite nicely. The Railways with a sharply enhanced capacity for hauling passengers and cargo is the best guarantee of its own future financial health. In the event, a capital expenditure plan of Rs 63,363 crore represents a level of investment that is not only devoid of ambition in the wider economic context, but also a lack of recognition of the Railway’s own existing capacity constraints. Going by the investments in the first two years of the current Plan period (2012-13 to 2016-17), the Planning Commission’s target of Rs 5.19 lakh crore for the Railways now seems impossible to meet.
This comes at a time when the Railways’ worst financial crunch is over. One indicator of this is its fund balances or reserves, which, after falling from Rs 21,682 crore in 2007-08 to a mere Rs 343 crore by 2010-11, are poised to touch Rs 13,000 crore by the close of next fiscal. That is, of course, thanks to former Rail Minister Dinesh Trivedi’s recourse to a 20-25 per cent freight hike just before last year’s Budget, and Bansal also doing the same for passenger fares in January. Thus, an opportunity for additional resource mobilisation — this time, not for plugging a financial hole as much as to give a big push to investments — has been squandered. Bansal’s Budget has actually reduced allocations on new lines, track renewals, gauge conversion, doubling, rolling stock and signalling. Only the Dedicated Freight Corridor (a worthwhile project, no doubt) has received the necessary funding support, with awarding of construction contracts already happening.
Clearly, it is the prospect of upcoming elections that has led Bansal to play it safe and not mobilise additional resources through passenger fare increases on top of last month’s pre-Budget hike. While the proposal allowing the Railways to automatically pass on fuel cost increases to customers is welcome, confining it to only freight would only reinforce cross-subsidisation of passenger traffic by goods. By Bansal’s own admission, even a 5-6 per cent annual increase in fares over 10 years is good enough to generate Rs one lakh crore of additional resources for the Railways — apart from reducing the losses on its passenger operations (Rs 24,600 crore this fiscal) that are now cross-subsidised by freight. But expecting good economics to prevail may be too much in the current circumstances.