Let it roll

The Indian Railways is well placed to emerge as a commercially vibrant organisation and a veritable growth driver for the economy, if the next government seizes the opportunity and makes it possible for this to happen. To start with, the Railways has already seen its worst days: reserves had depleted from ₹21,682 crore in 2007-08 to minus ₹385 crore in 2011-12. The current fiscal is expected to close with fund balances of ₹8,018 crore, according to the provisional Rail Budget for 2014-15 presented on Wednesday. The organisation has by now managed to absorb the impact of the 6th Pay Commission award, which entailed an extra payout of over ₹1 lakh crore, inclusive of arrears, to employees. The peak disbursals have been discharged, providing some much needed breathing space.

The Railways is also better placed to absorb diesel price hikes than truck operators, who have additionally been hit by high interest rates. This is borne out by the fact that notwithstanding the economic slowdown, the Railways’ freight earnings are slated to increase by 10.25 per cent; also, the loading target of 1,047 million tonnes is set to be surpassed. Its overall improved financial position and the inherent cost advantage of rail over road transport need to be properly leveraged. The new government must set the ball rolling by constituting an independent Rail Tariff Authority for fixing passenger and freight rates based on rational principles. Average passenger fares in India are currently just over a fourth of freight charges, unlike in Korea or China where commuters pay more than movers of cargo by rail. It may seem counter-intuitive, but doing away with cross-subsidisation of passenger fares by freight will benefit ordinary people. Most people travel only occasionally by train, whereas high freight costs have a cascading impact across all items of common consumption and daily use.

Rationalisation of fares is also necessary in order to raise resources. The Railways’ plan spend for this fiscal is estimated at ₹59,359 crore or not even $10 billion. Compare this with China’s $90-100 billion annual investment in rail infrastructure since 2009, which played a key role in combating slowdown pressures following the global financial crisis. Similarly, the Railways can provide an economic fillip in India. The Dedicated Freight Corridor project has made some progress with about 90 per cent of the required land acquisition complete. What is necessary now is to speed up the award of contracts that will give a huge boost to construction activity, apart from halving the Railways’ own transit time for moving coal or containers and releasing existing lines for running more passenger trains at higher speeds. All this is possible if our political masters permit the Railways to operate as a commercial organisation of national importance.

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