There was much hype and expectation from Suresh Prabhu’s rail budget. It was being widely believed this will be a path breaking budget and a game-changer for the Indian Railways. Over several years, its financial health has been deteriorating, leaving precious little in the kitty, after meeting its financial commitments, for financing development projects. The new railway minister had the reputation of a reformer, and the public was looking forward to him to unveil new ideas that can turn the fortunes of the national transporter.
The budget speech was grandiloquent, covering in its vast sweep all activities connected with the railways. There was so much on the plate that one was not able to fully digest all that was served. The speech went on at a frenetic pace, the minister explaining at length each of the 11 major thrust areas that he has planned to cover in the coming year. These ranged from customer services to cleanliness, safety, augmenting capacity and to better rail connectivity, et al.
One must, nevertheless, acknowledge that it showed a strong intent to building up rail capacity, improving the speed of transportation of goods and passenger traffic and to this end filling up technology gaps, wherever necessary. As the high-density networks are overstrained due to congestion, it has affected the movement of essential commodities like coal, steel and cement to destinations. Decongestion of these routes will bring in its wake higher average speed of trains, improved punctuality of passenger trains and increase in carrying capacity. These are laudable objectives that must be pursued until realised. Gauge conversion and doubling/quadrupling of tracks will also improve line capacity.
Further, it is contemplated to expand the freight handling capacity alongside freight carrying network capacity. There is a proposal to provide end-to-end logistics solution at select railway terminals through public-private partnership (PPP) and to develop multimodal logistics parks. It is also planned to introduce bar-coded tracking of parcels and freight wagons, automated parcel warehouses, and an integration of train control and asset management applications. All these are laudable ideas.
It was also heartening to note that no new big-ticket projects have been announced in the budget. Last year’s budget mentioned that as many as 359 projects had remained incomplete and which would require nearly `1,82,000 crore to get completed. The emphasis should, therefore, rightly be on early completion of these projects rather than addition on the drawing board. The minister needs to be complimented on avoiding the temptation to adding new projects merely to please the political parties.
Another notable feature is that passenger amenities have been accorded a very high priority, and rightly so. Some of the proposed amenities are SMS alerts for train timings, availability of Wi-Fi at 400 stations, e-catering on trains, on-board entertainment facility on Shatabdi trains, addition of general-class coaches on trains, and provision of more bio-toilets and vacuum toilets. These should attract more passenger traffic.
Uncharacteristically, the text of the main budget document does not carry details of the railways’ financial and physical performances during 2014-15 and 2015-16. Surely the public looks forward to be informed of the break-up of revenues—goods and passengers—during the previous and the current year and what has been the achievement in terms of targets that were set out for the growth in goods and passenger traffic in the previous year’s budget estimates. The minister simply mentioned that the financial data is available in Annexure II of the budget, for which one needs to wait till the budget papers are formally placed in the public domain.
A PIB release had, however, said the railways has carried 906.36 million tonnes of revenue-earning traffic between April 2014 and January 2015. It showed a 4.64 per cent increase over the corresponding period in the previous year. But, the December 2014 financial review of the ministry of railways indicated that when compared to the budget estimates, the actual earnings on the passenger segment were lower by 2.15 per cent and on the freight side by 3.03 per cent, and after accounting for the ordinary working expenses, the net earnings were down by almost 4 per cent. These trends and measures to overcome them taken so far should have been explained in the budget. The budget speech, however, said the targeted operating ratio was 91.8 per cent in 2014-15, but it will improve to 88.5 per cent in 2015-16, which will be the best financial performance in nine years. The minister has claimed the savings thus achieved in expenditure would help in financing the railways infrastructure development plan which will require an investment of `8.5 lakh crore over the next five years.
Prabhu was candid enough to admit not much financial assistance can be expected from the ministry of finance as the Union government’s financial resources are overstretched. However, he expects internal generation of resources will pick up once the rail reforms start and GDP growth occurs. But these are highly uncertain factors and to depend on them for additional finances during the course of the year will be wholly unrealistic. He also expects assistance from the multinational development agencies and pension funds, but again for that to happen, the agencies will have to be assured of adequate return on investments. Surprisingly, the budget papers have made no mention of the high-level committee headed by former secretary to government of India D K Mittal that was constituted in December 2014 to identify factors, issues and avenues for improving the financial health of the railways, though it is reliably learnt the committee has already submitted its report.
In his budget speech for2014-15, the rail minister had suggested three principal measures for resource mobilisation: placing the investible surplus of rail PSUs into railway infrastructure projects; private investment in rail infrastructure through domestic and FDI funding; and through PPP. It would have been desirable if progress made on each of these in the current year could have been mentioned, if for nothing else than to assure the public that the commitments made in the earlier budget were not empty promises.
Overall, this year’s budget can be rated as good and progressive and one replete with ideas on how the deficiencies in the present railways system can be plugged for higher efficiency and profitability. Resource mobilisation, however, holds the key to affecting the proposed turnaround in railways’ fortunes.
The author is a former MD of Railway Finance Corporation.
E-mail: mathur.surendra@gmail.com