The Hindu Business Line : Lalu extends concessions, goes for more traffic share

New Delhi, Feb. 26 For the fifth successive year, the Railway Minister, Mr Lalu Prasad, has persisted with his strategy of not significantly tinkering with passenger fares and freight charges, while choosing to play more on volumes and driving down unit costs.

Mr Prasad’s 2008-09 Rail Budget has resorted to fare reductions of five per cent for second class commuters and 4-7 per cent in the top-end air-conditioned (AC) second and first class segments. But the catch is that the five per cent lower tariffs for second class travellers do not apply to the reserved ‘sleeper’ category – i.e., those people who commute long distances overnight.

Similarly, the 4-7 per cent reduction for AC passengers is only for the three ‘lean’ months (February, March and August). In the non-lean season, the fare discounts are only to the extent of 2-3.5 per cent.

Likewise with freight, where Mr Prasad has left charges largely unchanged. While the freight rates on petrol and diesel have been brought down by about five per cent, it will do nothing much for the consumer. Even for the oil companies, the annual cost savings translate to a meagre Rs 90 crore or so.

The latest Budget is being seen by many as more of an exercise to consolidate on the gains made by the Railways since 2004-05 – coincidentally the time when Mr Prasad assumed charge and also when the Indian economy entered an unprecedented high-growth phase.

This, in turn, provided the perfect background for Mr Prasad to adhere to a “no-steep-hike” strategy and focus more on increasing tonnage and traffic share. Further, he has sought to undertake qualitative improvements to attract consumers. In the current Budget, Mr Prasad has proposed increasing the number of automatic ticket vending machines from 250 to 6,000 in the next two years, booking of rail tickets through mobile phones, extending e-tickets to wait-listed passengers and inducting ‘discharge-free’ green toilets in all rail coaches by the end of the 11th Five-Year Plan.

For freight users, too, the Railways plans to manufacture only 22.9 tonne axle load stainless steel wagons from 2008-09, while discontinuing with the existing 20.3 tonne wagons.

This will help increase the payload of an average closed wagon rake from 2,300 tonnes to 4,100 tonnes, thus, increasing the effective ‘yield’ per train. Mr Prasad has also provided Rs 1,300 crore towards a high-speed dedicated freight corridor connecting Delhi to Mumbai in the west and Ludhiana to Dankuni, near Kolkata, towards the west.

Record Cash surplus

The current fiscal is expected to see the Railways post a record cash surplus (before payment of dividend) of Rs 25,065.49 crore and an ‘operating ratio’ (a broad efficiency indicator of the amount spent for earning every rupee) of 76.3 per cent.

These figures may, however, take a small hit due to the Sixth Pay Commission. Although the latter is yet to submit its report, Mr Prasad has provided Rs 4,500 crore towards higher outgo on salaries and pensions.

For 2008-09, the Railways’ gross traffic receipts are projected at Rs 81,901 crore (a Rs 9,146 crore jump over the revised estimate for 2007-08).

While passenger revenues are slated to grow by Rs 1,606 crore to Rs 21,681 crore, those from freight would go up by Rs 4,957 crore to Rs 52,700 crore.

As before, Mr Prasad is betting on a buoyant economy to deliver an extra 60 million tonnes loading – almost the same as the increase in total freight tonnage from 727.75 mt in 2006-07 to 790 mt this fiscal.

The Pay Commission impact would result in a marginally lower cash surplus of Rs 24,782.98 crore and higher operating ratio of 81.4 per cent during 20008.

After forking out a dividend of Rs 4635.88 crore to the Centre, there would still be around Rs 20,000 crore of internal resources to fund a budgeted investment plan of Rs 37,500 crore – the highest in history.

Other financing sources would include Rs 6,907 crore of borrowings through the Indian Railway Finance Corporation, Rs 800 crore through ‘public-private partnership’, Rs 500 crore under the Wagon Investment Scheme and 293 crore to be raised by the Rail Vikas Nigam Ltd.