Usually, a Railway Budget without any increases in passenger fares or freight rates would have been automatically dubbed ‘populist’, aimed at political rather than economic payback. But Railway Minister Suresh Prabhu’s Budget for 2016-17 is anything but that. By delinking fare hikes from the Budget, he has taken another important step in transforming the Railways from a hostage of votebank politics to what it ideally should be — a commercially run enterprise and a critical engine of economic growth. The first was taken last year with the commitment to move towards commercial accounting. The idea of not flogging freight rates to fill the widening gap left by losses sustained on passenger traffic cannot be faulted and should be integral to resource mobilisation. The Railways has been losing market share to road haulage due to ever increasing freight rates as well as infrastructure bottlenecks that have reduced average freight train speeds to around 25 kmph, one of the slowest in the world. The creation of dedicated freight corridors and the increased focus on containerisation will help the Railways move away from overdependence on low yield bulk cargo (currently, just 10 commodities account for 80 per cent of the freight hauled by the Railways) and speed up transit times, enabling it to compete better with road transport. On the passenger side, there is a welcome focus on improving traveller amenities and customer experience.
In a Budget devoid of too many false notes, the proposal for three new manufacturing facilities is an anomaly. This is a sharp deviation from the recommendations of the Bibek Debroy Committee, which had suggested that the Railways should exit all non-core businesses. That one plant is to be located in poll-bound West Bengal and that over ₹2,064 crore has been allocated for projects in Tamil Nadu, another State which will have elections soon, lend a faint political tinge to what is otherwise a pragmatic exercise. While the focus on project completion as opposed to the announcement of a laundry list of new projects is welcome, a question mark remains over the capacity of the Railways to execute such projects on time.
The lacklustre growth in revenues poses the biggest challenge. The Railways missed all major financial marks last fiscal. Revenues — both passenger and freight — were well below target, while the operating ratio — the percentage of revenues accounted for by expenses — was 91.3 per cent compared to the 88.5 per cent hoped for initially, and is set to slip further to 92 per cent this fiscal. This leaves a big question mark over the ₹1.2 1 lakh crore investment targeted for the coming fiscal. Finding the money and implementing his vision remain the Railway Minister’s biggest challenges.