Rail Budget 2007-08:
What it Reveals and What it Covers Up
“Last time I did a Jadu (magic), this time I have done Tona (witchcraft) and next time around it will be Indrajal”. This was Railways Minister Lalu Prasad Yadav’s self-appraisal regarding rail budget for 2007-08. The new management guru’s remark is based on the Rs. 14869.74 crore net revenue for 2006-07 (revised estimate) and the Rs.16021.99 crore budget estimate for 2007-08. Well, let us go deeper into facts and figures to understand the much-hyped “excellent” economic performance of Indian Railways.
Indian Railways has witnessed a slowdown in the rate of growth of freight traffic in the 1990s. The annual growth rate measured in net tonne-kilometres averaged 5.3 percent between 1981 and 1991 but dropped to 1.86 percent between 1992-99.
TABLE 1 I st. 142 34% 89% 11% 80% 20% TABLE 4 GROUP’A’ 7685 8002 (+) 4.12 |
Reasons behind slow growth in 90s
The growth rate of industry between 1990-91 and 1997-98 was only 6.5 per cent which was significantly below the high growth of 7.6 per cent in the eighties.
The adoption of the unigauge scheme, which has involved large investments during this period, has been particularly harmful to the finances of IR. Investment in electrification has also been excessive compared to the needs of traffic in the newly electrified segments. The expenditure on repairs and maintenance has been declining steadily over the years. There was drastic reduction in procurement of rolling stock; and proportionate outlay on new lines, doubling of existing lines and other traffic facilities was also reduced.
The budgetary support from the general exchequer, in percentage terms, has shrunk and the level of market borrowings has gone up which has imposed increase burden of lease charges (Table 1).
The net result is the loss of marked share is the profitable freight traffic and passengers traffic to the road transport (Table 2).
Expert committees’ views to overcome the situation
The Prakash Tandon Committee of experts set up by the Rail Ministry on 28 April 1993, in its report submitted in March 1994 recommended several changes in organization structure, organisation behaviour and organisation dynamics. A committee chaired by Rakesh Mohan, termed an “Expert group on Railways” was constituted on 31 December 1998 to make a study on rail economy and set its orientation under. The committee submitted its report on July 2001.
These Committees variously suggested corporatisation, ‘private-public partnership’, downsizing of rail staff.
Successive governments have been pursuing some of the recommendations of both the committees, resulting in the recovery of financial health to some extent. This is reflected in Table 3.
It was in this backdrop that Mr. Lalu Prasad Yadav became the Railways Minister.
Factors responsible for the high increase in net revenue
(1)The unigauge project, which was the main thrust in 90s, was mainly responsible for low net revenue. Now the gauge conversion project has started yielding returns. As an indicator of the efficiency of the broad gauge network, we may note that it covers about 70% of total route kilometre in the country but carries more than 95% of freight and 89% of the passenger traffic.
(2) The high growth in the industrial sector for three consecutive years enabled the railways to carry higher freight. Rail freight grew by 10.78% during January to December 2006, while the road freight sector grew by 13.75%.
(3) Drastic reduction in work force and wage bill is the main reason behind maintaining working Expenses at 10% high level. In spite of increase in fuel cost, rolling stock working expenses have not risen to that proportion. (Table 4)
(4) Frequent periodical freight increases by way of reclassification of commodities have resulted in more traffic revenue. In this way, in just one year — from November 2004 to December 2005 — Indian Railways raised freight rates for raw materials like lime stones and dolomites by 33%, of Bauxite by 12%, and so on.
(5)Through outsourcing of regular jobs like ultrasonic flaw detection of rails and welds; supply of bed rolls in trains; washing/cleaning of trains and stations; maintenance of railway tracks, running rooms, railway quarters, departmental catering, passenger reservation terminals; manning un-manned level crossings; and so on. In addition, schemes like leasing of SLRs, Grameen Ticket Booking Sewa, e-ticketing and reservation, etc have also been introduced. Thanks to all these, the Indian Railways have managed to cut its costs down. According to the railway minister, Rs. 1000 crore was saved through privatisation of catering and other services.
(6) Increased efficiency through use of information technology to improve freight loading and operation, use of higher axle load wagon, etc. has enabled railways to carry more goods.
Viewed from this perspective, it becomes clear that here is a budget that dips heavily into the gains of the past. Indian Railways will have to enhance capacity quickly if it is to benefit from rapid economic growth. But this is not being done. In 1950-51, there was a total of 53596 route kilometre of railway line whereas in 2004-05 the total route kilometre was 63465. During 55 years the total thus increased only by 9869 route kilometre. In 1996-97, total route kilometre was 62725 and in 2004-05 total route kilometre was 63465, an increase of only 740 route kilometre (that is 1.8%) in the last eight years.
For growth of railways the problem of capacity shortage of rolling stock and crowded track infrastructure must be addressed immediately which demands huge fund. This fund may come from budgetary support but this year also budgetary support is only 24% of total annual plan.
Pick-pocketing beyond the budget
Lalu Yadav makes a lot of hype about not raising fares. But people are being cheated in more ways than one. A large number of mail and express trains have suddenly been re-designated as ‘super-fast’ without any enhancement in speed and this means paying Rs. 20 or more per ticket as super-fast charges. The charges for cancellation of reservation have been doubled in the sleeper class and massively hiked in higher classes. The tatkal service, which had been introduced to help passengers in a real emergency, has now been generalised with the quota increased at the cost of the general or non-quota pool. You can now book a tatkal ticket even five days earlier by paying the extra charge, which amounts to quite a lot of money, particularly for higher classes. This means the railway authority itself has now started taking the ‘extras’ TTEs used to collect from passengers for allotting berths. And one of crudest tricks done in recent times is that when your booking station is different from the boarding station, you have to pay an extra amount.
Privatisation through private participation
The main thrust of this budget is privatisation through private participation. E-ticketing will be introduced on a larger scale. The railways has already struck a deal with HPCL to launch e-ticketing facility across the country. Negotiations are on with BPCL and IOCL. SBI, Canara Bank, Union Bank of India, ICICI, and UTI will also operate in this field. In future, it seems, the category of Booking Clerk will be rendered almost superfluous.
The main avenues for private-public partnership (PPP) includes the dedicated freight corridor project, world class railway stations, passenger amenities, commercial utilisation of surplus land, special purpose vehicles for manufacturing Locos and other equipments, tourism and catering and the operation of container trains.
Modernisation of 225 railway stations will be done through PPP. PPP will fund a major portion of the dedicated freight corridor and high-speed passenger corridor. GE and Bombardier have expressed their interest in this field. 15 licenses have already been issued to the private operators for the running of container trains. The railways earned Rs. 500 crore as license fees. It expects Rs. 2000 crore revenue per year from this source.
Railways own 4000 hectare of land valued at Rs. 1 lakh crore. It will unlock this huge land bank. The Rail Land Development Authority has already been formed. Auction for private real estate developers in order to build malls, cineplexes and shopping arcades will be done through Rail Land Development Authority.
Railways are basically a public utility service with commercial functions. The budget views the railways as concerned only with commercial functions with more profit. A vast area of our country has not been linked with the railway system but there is no planning for it because it is economically non-viable for the railways There is a huge potential of employment generation in railways but due the reasons cited above, particularly the privatisation process, soon another 3,00,000 posts will be declared surplus and surrendered.
To end with another comment of Lalu Prasad Yadav , “Bus dekhte jayiye, aage kya-kya hota hai. Khel tamasa aage dekho, daria-dil saudagar ka “. Well, Lalu Yadav has truly been daria-dil (large-hearted) to private capital in this budget as well as in the last one while being niggardly to the aam admi. No wonder, therefore, that private capitalists are hailing the budget so loudly.
-- Ravi Sen