The Hindu Business Line : Will the Railway Minister dare to think differently?

New Delhi, Feb. 22 In the run-up to the Rail Budget 2008-09 next Tuesday, the Union Rail Minister, Mr Lalu Prasad, has stoked speculation that it would be people-friendly, provoking media to surmise about how there would be freight rate cuts on select commodities in the name of rationalisation and rebalancing with passenger fares intact and the fare in upper classes likely to be lowered.

That the UPA government has political compulsions when as many as 10 States go to the polls before the end of this calendar year is widely known. This would also be the fifth and final full-fledged Budget the Rail Minister might be presenting to Parliament on February 26, 2008 with next year being a General Election year, precluding the present minister to present a full-blown budget.

Considering the track record of Mr Lalu (he went in for volume and milking the system to ensure effective utilisation of existing assets than the hard option of beefing up finances on a long-term and sustainable basis), there is some irrefutable logic that he would only persist with his wonted popular path of piling up brownie points for electoral gains and not gather up the spunk to rock the system for leaving a lasting imprint.

Pending works

With a view to carry additional freight and passenger traffic in the foreseeable future, Railways have on hand 272 track capacity works, which on completion would add 20,852 km to the broad gauge system. The estimated throw forward cost of these pending works is roughly Rs 55,000 crore.

It also need 62,000 wagons besides inducting 1,800 electric and 1,800 diesel locomotives for carrying the projected traffic in the Eleventh Plan where the revenue earning freight traffic is likely to increase from 728 million tonnes to 1,100 million tonnes in 2011-12, with the corresponding freight output increasing from 475 billion tonne kilometres in 2006-07 to 707 billion tonne kilometres in 2011-12.

With infrastructure activity intensifying in the economy, Railways need to stand by for lending its mite for movement of materials and goods across the major corridors.

With diesel and electricity charges shooting up for which extra provisions need to be made, the Railways is under obligation to keep in reserve Rs 9,000 crore for the Pay Commission. If the system does not resort to fiscal measures to recover cost of operations, it cannot expect much subvention from the general exchequer.

Air competition

As of now, the Railways has been cross-subsidising passenger fares by charging freight earnings. Faced with the competition from cheap fare ladled out by airlines, it is also under duress to bring down its upper class fares periodically which it has been doing.

Official sources indicated to Business Line here that the Railways would be getting a minuscule spurt in their gross budgetary support (GBS) from the Central Plan in the next fiscal, even as the Planning Commission deems the system needs a large Plan which it could find and fund through borrowing.

As the Railways remain severely under-leveraged with so much equity, it can dilute a part of its equity in favour of debt to finance their development activities. Way back in 1996, the Rakesh Mohan Committee suggested a slew of measures to wean the system away from running public sector undertakings, commercialisation of its land and other private initiatives in non-core activities.

In fact, the Ninth Plan suggested that railways develop surplus/vacant land for commercial utilisation to supplement the internal resource generation. The Rail Land Development Authority (RLDA) was constituted effective from November 1, 2006 for proper property development and is yet to brace itself up for action for commercial development of lands vested with the system by prescribing lease charges and tenures for prospective developers.

Marshalling resources

Today the Indian Railways run 10 public sector undertakings that cover several non-core areas and dilution of even minimum equities from these undertakings would help railways marshal enough resources to address its core concerns including financing arrears in rolling stocks and equipping the system with modern technology to ensure comfort and safety of passengers and parcels.

Will the Railway Minister dare to think differently instead of playing safe by reposing his faith in status quo and tokenism year after year?

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