Thursday, March 3, 2011

Railway Budget and the question of Resources

Indian Railway
Finally presentation of this year's railway budget (2011-12) is over. Just like previous years this year also railway minister refrained from increasing the ticket rates. She also tabled an ambitious (highest ever) investment plan of 57,650 crore INR and proposed 56 new express, 3 new Shadabdis and 9 new Duronto trains. According to the budget estimates Railways are expecting 16.5% increase in passenger earnings (to 30,456 crore) and 9.8% growth in freight earnings (targeting 993mn freight carriage) in the next fiscal year. And for the first time in the history of Indian Railway total revenue will cross one lack crore.

But the prime question arising out of the budget is, who will fund the massive investment plan of 57,630 crore? According to the budget, only 14,219 crore is going to come from the internal resources of Railways. That means rest has to come from outside sources. According to the budget expectations 1041 crore will come as diesel cess, 22000 crore will come from Union budget and the rest 20,954 crore in the form of market borrowings.

It is a well known fact that, passenger section of IR is not profitable. Railways are able to cover this loss from through cross subsidies (earnings from the freight division) and support from Union Budget. The only chance to increase the ticket rate and thereby increase the revenue is in the early years of the five year term. No government will dare to increase the ticket rate in the last or last two years of their term. If the minister is not ready to take the hard decisions in these early years of UPA II, then when they are going to do it?

Moreover funding close to 36% of plan outlay through borrowing from market is not a sustainable way, today or tomorrow IR has to return this money with interest.

The other problem related to IR is its adventures in to unrelated fields like generating electricity (700MW gas power plant at Thakurli, Maharashtra). Is it necessary for the railways to invest in a non-core area like power production? If they really want to do something like that, then isn't it better to collaborate with NTPC? Railways should focus more on their core own area and try to expand their network with safe and quality service instead of building power plants. A lot of places in India still don’t have any access to the railway networks.

And what is the logic for reducing the age of women to qualify for senior citizen from 60 to 58? All over the world governments are increasing the pension age to save money. How women become senior citizen at the age of 58 and men have to wait two more years? What is the reason for providing subsidies to media persons and his/her family?

We can only hope that, at least next time minister will focus more on revenue generation. If IR is not ready to increase the ticket rate then they should go for alternate source of income otherwise the vision of IR becoming a major engine in Indian industrial growth will remain as a vision only. Connecting seaports to industrial areas, dedicated freight corridors, high speed rail networks for faster passenger and freight movement etc requires massive investments. For these funds they should not always look forward the union budget or borrowing from the market. Either they should raise the fund from internal resources by investing in their area of competence or have to look towards the participation with private sector. Still the allocation of funds for Dedicated Freight Corridors and the proposal for 1300km new lines in the next year are appreciable decisions.

Last time when I went to Shravanabelagola, I saw a railway line to this pilgrimage point partially covered in grass. Later I came to know that Railways built this line some years back and send their test train once. After that  - to this day – these tracks didn’t get a the chance to see another train.


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