With unusual candour Union minister for railways Dinesh Trivedi recently made a welcome, but no less surprising, statement that there should be no political intervention in the running of railways. Coming from a die-hard politician, it provides a whiff of fresh air. It also sets him apart from several former railway ministers who saw nothing wrong in discrediting their predecessors for the various shortcomings in railway’s functioning that came to the public eye. Remember the White Paper that Mamata Banerjee tabled in Parliament, debunking the tall claims of Lalu Prasad for bringing about a turnaround in railway finances.
Trivedi has been advocating for the past several months, that time is ripe to rationalise the passenger fare structure in order to garner additional revenues for the railways and to help arrest its financial decline. The very fact that he has mustered courage to deviate from the opinion voiced by his party chief on the subject is in itself an achievement of sorts.
The minister is piqued at the government turning down his repeated requests to bail out Indian railways. He has appealed to the finance ministry to infuse additional funds in his ministry and prevent presentation of a deficit railway budget next year, lest it may send out wrong signals to potential investors in railway projects.
Politics certainly appears to shape railways’ investment policies. Whereas the central government had refused to oblige Mamata when she asked for a temporary loan of `2,100 crore for meeting the planned expenditure late last year, recent political developments have forced the hands of the government in agreeing to enhance the extra budgetary support in this year’s rail budget by about `5,000 crore.
To bolster the claim for a larger budgetary support, the Sam Pitroda Committee on rail modernisation in its presentation to the Planning Commission last week has recommended a 25 per cent increase in passenger fares and has urged the railways to examine indexing passenger fares and freight with inflation. The committee feels that this will improve railway earnings which could be used for developmental projects, especially when the prospects of internal generation of resources are estimated to be ‘less than zero’. Pitroda is unlikely to find many takers to his suggestions among the political class. For record, passenger fares for lower classes have not been raised for the past seven years. Little wonder then, that the subsidy on passenger services has now reached around `19,000 crore.
In the UK, which has witnessed a long season of discontent, a political storm is brewing over the government’s proposal to raising the season tickets fares by the rate of retail price index inflation plus 3 per cent until 2014, with room for a further 5 per cent increase on some services. Campaigners have warned that such moves will carry ‘economic and political consequences’ for the government. According to the UK opposition parties, the long-term sustainable solution to address passengers’ concerns is to reduce the high cost of running the railways. This may well be true for India too.
Part of the ills of Indian railways stem from the fact that it has an integrated monolithic structure, and the ministerial, commercial and regulatory powers remain vested with one single entity. It is an enterprise integrated with the government, which often leads to its product pricing and costing being determined on non-commercial principles. In order to insulate the railways from political interference, the expert group, under the chairmanship of Rakesh Mohan had recommended a corporate entity with an executive board. It envisaged an independent, corporatised, customer-focused and financially viable railway, to be run along commercial principles. It further suggested that ‘there should be a change in the status for the railways so that it will no longer be required to present a separate budget to Parliament’. As yet, there has been no positive response to these suggestions.
Trivedi has also given a call for framing a national railway policy which can ensure its long-run financial viability and can place it on a continued growth trajectory. While no steps have been taken by the Centre in this direction, a high level National Transport Development Policy Committee was set up in February 2010 ‘to recommend a comprehensive and sustainable policy for meeting the transport requirements keeping in view the comparative resource cost advantages of various modes of transport’. The committee will also assess the investment requirements of the transport sector and suggest measures for greater commercial orientation of transport services. The role that is being envisaged for the railways, as a major component of the transport sector, will also emerge out of the recommendations of the committee — now in the final stages of its formulation — and their acceptance by the government. One can only hope that a more pragmatic approach dictates government’s future transport policies, rather than simply ending up as a political statement.
There is a compelling need to create an awareness among the travelling public that without contributing to the cost of running the railways they cannot hope to get the facilities and amenities in the trains or railway stations as they would like to. Public forums could be set up to educate people of the benefits they can expect to reap by agreeing to a rationalised fare structure with phased increases spread over a period of time. An assurance should also be forthcoming from the railways that the amounts collected through enhanced fares will not be misused or misdirected to other kinds of wasteful expenditure. More private participation in rail operations and maintenance services should be encouraged and seriously pursued.
The contribution of railways to India’s GDP has hovered around 1 per cent for the past two decades or more, and it would be a shame if this premier transport undertaking is allowed to slide down the path of financial ruin, to an extent when it may be too late for its redemption. It is for the government to rally all parties around and devise ways and means to retrieve the situation and prevent the proverbial goose that lays the golden egg for the economy from getting strangulated. The aviation sector has virtually lost Air India. Let the story not be repeated for the Indian Railways.
(Views expressed in the column are the author’s own)
S N Mathur is former MD, Indian Railways Finance Corporation. E-mail: mathur.surendra@gmail.com