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Rail freight rates up 5 pc -- Essential commodities, urea spared; No hike in passenger fares

Our Bureau

NEW DELHI, Feb. 25

THE Railway Minister, Ms. Mamata Banerjee, today unveiled a ``populist'' millennium Budget which spares all classes of passengers from fare hikes but could signal financial disaster for the Railways.

Freight rates are, however, proposed to be hiked by 5 per cent in most commodities _ barring essential items and urea _ and parcel rates by 7 per cent to raise Rs. 600 crores in the form of additional resource mobilisation to part-finance the Annual Plan for 2000-01.

With the entire onus of ARM falling on freight, Ms. Banerjee has also chosen to ignore the critical issue of increasing cross-subsidisation of passenger fares by freight rates _ a concern expressed by industry.

The Annual Plan for 2000-01 has been pegged at Rs. 11,000 crores _ an increase of 23 per cent over the revised Plan outlay of Rs. 8,965 crores for the current year.

The financial health of the Railways portends a tough haul ahead as it reflects a steep increase in the operating ratio to an all-time high of 98.8 per cent _ implying that for every hundred rupees earned, the Railways spends Rs. 98.80, leaving just Rs. 1.20 for dividend payment and to meet some segments of Plan expenditure. Besides, for the first time after the mid-eighties, payment of dividend of Rs. 1,500 crores to the exchequer has been deferred in view of the shortfall in internal resource generati on.

The Annual Plan is to be financed through budgetary support of Rs. 3,540 crores and market borrowings of Rs. 3,668 crores. The balance Rs. 3,792 crores is to be met through internal resource generation combined with revenues from non-traditional sources. The year is projected to end with a surplus of Rs. 1,176 crores, after factoring in the deferred dividend liability.

The dividend deferment combined with the erosion of Railway Fund balances to Rs. 253 crores would adversely impact the Centre's fiscal deficit.

The poor quality of service by the Indian Railways has been offered as the rationale for not tinkering with the fare structure. As a result, the social service obligation has been estimated at Rs. 2,916 crores for 2000-01.

Railway Board officials maintained that the freight hike will not have a cascading effect on prices as the average increase works out to around 1-2 per cent in core commodities including iron ore, limestone and dolomite, coal, iron and steel, cement and petro-products whose classifications have been downgraded.

The freight increase works out to a hefty 15-48 per cent for chemical manures _ barring urea _ which have hitherto been enjoying concessional tariff. Similarly, the freight charges for livestock and oilseeds have been enhanced by 28 per cent and 36 per c ent respectively.

An additional Rs. 491 crores is to be raised through the rationalisation of commodity classification, Rs. 79 crores through the 5 per cent tariff hike and Rs. 30 crores from the enhanced rates for parcel and luggage, including motor car rates. Rates for newspaper, magazines and medicines remain unchanged.

Describing the new freight policy as the ``thrust'' of her maiden Budget, Ms. Banerjee said that it would aim at enhancing the market share of rail traffic from 40 per cent to 50 per cent over the next decade. It encompasses recovering non-bulk, high-val ue traffic through marketing efforts, continuing the volume discount scheme, extending the new concept of roll-on, roll-off (RORO), running of fixed schedule freight trains and terminal operations.

The freight target has been fixed at 475 million tonnes as against 450 million tonnes this year on the assumption of buoyancy in industrial production. Nearly 23,000 wagons would be procured to meet the traffic requirements.

Passenger traffic is expected to grow by 5 per cent in the ensuing fiscal. Customer-friendly measures include Internet-based enquiry system and booking through the smart cards facility. Ms. Banerjee also announced a millennium card of Rs. 10,000 valid fo r one year to provide passengers assured reservation on First Class and Second Class A/C coaches.

Keeping in view the Khanna Committee recommendations on safety, outlay for track renewals has been stepped up by 35 per cent and allocation for doubling by 20 per cent. The sops include introduction of 19 new trains _ four of them originating from Sealda h in West Bengal and a significant increase in the outlay for construction of new lines. The allocation for rolling stock has, however, been pruned to Rs. 550 crores from Rs. 800 crores in 1999-2000.

Not to be left behind in the race, the Railways also plans to join the information technology (IT) revolution by laying optic fibre cables to be built up by using right of way and providing a parallel nationwide telecom infrastructure to various telecom operators and Internet Service Providers (ISPs). Ms. Banerjee has projected raising Rs. 500 crores through lease of right of way, Rs. 150 crores from commercial exploitation of land and another Rs. 100 crores through commercial publicity. These estimates were worked out by the high-level task force comprising industry representatives.

The Railways is also banking on the State electricity boards (SEBs) to clear outstanding dues. A target of Rs. 500 crores has been fixed under this head. The special purpose vehicle (SPV) route to finance projects has also been mooted.

The Gross Traffic Receipts for 2000-01 has been estimated at Rs. 36,529 crores, representing a mere 10 per cent increase over the Revised Estimates for 1999-2000. Ordinary working expenses have been budgeted at Rs. 28,115 crores _ up 9 per cent.

The pensionary liabilities are estimated to mount by Rs. 1,220 crores to touch Rs. 5,314 crores in the ensuing fiscal. With the appropriation of Rs. 4,996 crores to the Pension Fund and Rs. 2,441 crores to the Depreciation Reserve Fund, the total working expenses amount to Rs. 35,552 crores.

The net traffic receipts have been estimated at Rs. 977 crores and net miscellaneous receipts at Rs. 815 crores, taking the net revenue to Rs. 1,791 crores. Although the dividend liability works out to Rs. 2,115 crores, the Railways proposes to pay only Rs. 615 crores in 2000-01 and defer the balance amount. The ``excess'' of Rs. 1,176 crores would be appropriated to the Railway Development Fund and the Capital Fund.

The other barometer of capital efficiency _ ratio of net revenue to capital at charge and investment from Capital Fund _ has deteriorated to 4.2 per cent from 7.1 per cent in 1999-2000.

During the current year, despite the Railways meeting the freight target, earnings are estimated to be lower by Rs. 250 crores due to the drop in leads and change in commodity mix, resulting in a decline in Gross Traffic Receipts. The Plan size too has b een scaled down from Rs. 9,700 crores due to shortfall in internal resource generation.

Pic.: The Railway Minister, Ms. Mamata Banerjee, on her way to Parliament to present the rail budget on Friday.