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G. Srinivasan

Rail users wait for Nitish's flag.

FOR THE travelling public, inured to endure rising fare with no commensurate amenities, the second Railway Budget to be presented by Mr Nitish Kumar on February 26 may not hold much surprise either way — if the fare goes up in the name of reducing cross-subsidisation or if not so as to pamper people as nine States go to the hustings before the year is over. Indications from Rail Bhavan are that the Minister will rationalise the freight rates, an exercise he began last year to attract value-added commodities for the Railways and tinker with passenger fares to garner a few crore rupees for maintaining the operational viability of a gargantuan transport system carrying 15.45 lakh people on its roster.

A status paper on the Indian Railways tabled in Parliament last May by Mr Nitish Kumar blamed ad hoc selective increases in passenger fares for the distortions in the overall and relative fare structure. An attempt to remove these distortions was made in the 1999-2000 Budget and again picked up in 2002-03. Hence, one can be sure that Mr Nitish Kumar will persist with the removal of distortions by proposing some modest hike in fares and perhaps couch it behind some lofty motives. There is also a need to improve the profitability of passenger business by bringing the user charge as close as possible to the cost of the service. The Railways concedes that passenger services constitute nearly 60 per cent of the transport output but contribute only 32 per cent to its revenue. In 2000-01, losses due to passenger and other coaching services were a whopping Rs 4,875 crore.

The rationalisation of freight rates is required because as much as 89 per cent of the freight traffic is contributed by eight major commodities — coal, fertiliser, cement, petroleum products, foodgrains, finished steel, iron ore and raw material to steel plants — comprising the core sectors. The balance 11 per cent moved being `other' commodity moving in bulk and in containers. It needs to be noted that the freight structure was rationalised to end the anomalies by smoothening the taper; reducing the classes of commodities for charging from 59 to 32, and the ratio between the freight rate for the highest class and that for the lowest class has been brought down from a high of 8 to 3.3 times in the 2002-03 Rail Budget.

For a mammoth public utility, garnering funds for its development programme, including maintenance and expansion of existing lines, track renewals, modernisation of signalling and telecommunications for safe running, remains a great challenge. On top of this, the trends in road freight charges and the stiff competition posed by the development of the national highways particularly during the last five years have intensified the competition for the Railways. As the system has limited capacity for internal resources generation and with budgetary support from the Government too shrinking, there has been increased recourse to market borrowings through its arm, the Indian Railway Finance Corporation (IRFC) to bridge the growing investment chasm and for procurement of rolling stock. But this option is not deemed a sustainable option as it would suck the system progressively into an internal debt trap.

Besides withdrawal from Depreciation Reserve Fund (DRF), replacement of assets has disquietingly been financed with borrowings made through the IRFC in recent years, over and above credits obtained by disposal of scrap. The total plan expenditure on replacement of assets in recent years has been in excess of Rs 5,000 crore per annum. Despite this huge outgo on a vital component which keeps the wheels and axles moving, the arrears of track renewals at the start of the Ninth Plan was 10,957 km (BG). This was five years ago. Hence, to carry out the safety-related works, a Special Rail Safety Fund with a corpus of Rs 17,000 crore was set up to wipe out the arrears of renewal of vital safety assets. The safety surcharge gleaned from tickets for all classes is used for the safety fund which will get a contribution of Rs 12,000 crore from the Centre and Rs 5000 crore from the Railways over six years.

As admitted by the status paper, maintenance of rolling stock, with its impact on reliability of assets, has become a cause for serious concern. Due to paucity of resources for Plan expenditure, the actual investment in machinery and plant (M&P) in railway workshops and sheds has been declining vis-à-vis investments in rolling stock from a level of 17.93 per cent in the Sixth Plan to 6.40 per cent in the Ninth Plan. With over-aged assets not being properly maintained for want of the wherewithal, rail accidents have become frequent, shaking the confidence of the travelling public on its safety record. Probably in view of almost a dozen rail accidents both major and minor that dotted the rail line in the current fiscal, Mr Nitish Kumar is well advised to focus on the nitty-gritty of how to forestall such mishaps as they entail loss of valuable human lives and avoidable erosion in Railways precious resources.

No doubt, the Railways has been in an unenviable situation, discharging the dual obligation of their social responsibility as also running the system as a viable commercial entity.

As a monolithic organisation, the railways natural monopoly has invested it with immense potential to tap resources in an innovative and rational way. For this to supervene, the management ought to be veritably board-managed and freed from political interference in the garb of setting right regional imbalances and removing backwardness.

That this will never happen was amply borne out by the creation of 16 zonal railways out of the existing nine. Though the ostentatious objective was to improve efficiency, the estimated cost of setting of the new zones is of the order of Rs 620 crore to be incurred over a five year span, including Rs 58 crore already incurred and Rs 29.77 crore earmarked for this fiscal. In fact, the creation of new zones out of existing ones only provoked political bickering and unseemly fight for fiefdom among regional satraps, spilling into the mainstream with no apparent benefit to the system.

In this context, it is germane to recall the latest status paper that corporatisation of the multifarious activities of the Railways, which commanded only "peripheral attention", has fortunately led to the robust process of building the requisite expertise in these spheres.

Examples abound which include RITES for consultancy in transportation, IRCON for construction, Concor for container operations, IRCTC for catering and tourism and Railtel for telecom. Nonetheless, the privatisation of some of the core areas continued to be dogged by controversy with private sector reluctant to stake its neck out in long-gestation and capital-intensive railway projects.

Mr Nitish Kumar would do a signal service to the Indian Railways if he could get around the Government and the political dispensation about the overwhelming need to whittle down their stranglehold on it so that the system could breathe freely and productively by pursuing objectives that could optimise its earnings, generate additional employment and contribute to the country's best eco-friendly mode of transport in the years to come.

Use of surplus lands vested with the Railways for commercial exploitation, pioneered by Mr Jaffar Sharief during the Narasimha Rao Government in the first flush of sweeping economic reforms in the early 1990s, remains in the limbo all through the years even with the creation of a separate Land Management Authority to exploit the potentials identified.

It is not for nothing that the status paper proclaims that an effective control over operation and maintenance costs by bringing about changes in methodologies and an efficient costing system have become increasingly imperative to attract private participation in railway projects.

That is the nub of the matter and if Mr Nitish Kumar displays the necessary gumption and grit, he could go down in the annals of the Railways as the true saviour of the system which is in crying need of a root and branch reform in every area of its multiple operations to bring about a measure of coherence and common benefit to all the stakeholders.

Will he deign to do this or merely temporise to the popular demand of no adjustment or perfunctory adjustment in fares and freights without rooting for an overhaul of the system is to be known on February 24, when he presents the Rail Budget?

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