Rail Budget: Populism predominates, economic sense vanishes

The projections in the budget for the next year assume that Rs 700 crore will come through Rail Tel Corporation by the leasing the rights for laying optic fibre cables. The current year's expectation of Rs 500 crore from this source did not materialise. If a consulting firms recommendations, that a strategic partner should be inducted and that the railways and the government should have nothing to do with its management, are to be implemented, which will take time, it is doubtful whether this will materialise fully. Rail Economy
Apart from Rail Tel Corporation the resources are expected from the clearance of Rs 750 crore, from the dues payable by state electricity boards. A provision has been made that Rs 750 crore will come from this source. Last year it was expected that Rs 500 crore will come from this source, but nothing came. Additionally, it is expected that Rs 200 crore can be raised through commercial exploitation of land and air space, Rs 900 crore through bolt schemes, and Rs 100 crore through own-your-wagon scheme. With all these dubious accretions, borrowings through IRFC of Rs 3000 crore, budgetary support of Rs 3540 crore, deferment of dividend for the second year in a row of Rs 1000 crore, and internal resources from appropriations to the four funds on the railways, it is proposed to meet the proposed plan expenditure of Rs 11090 crore.

While the operating ratio, the ratio of expenditure to earnings has been marginally brought down in the current year from 98.8 per cent to 98.5 per cent, it is expected to shoot back to 98.8 per cent in the budget year.
The balances in the four funds are expected to improve marginally to RS 608.51 crore at the end of next year from the anticipated Rs 275.85 crore at the end of the current year. The overall financial position of the railways continues to cause concern. Glimmer of Hope

Recognition on the part of the minister that the dichotomy between public utility aspects and commercial orientation need to be resolved, but she has sought the guidance of the MPs for this.

The suggestion that a new fund could be set up to finance development projects into which contributions should flow from the central and state governments and sponsoring agencies. This was, however, only loud thinking.

That government should bestow greater attention through increased budgetary support and neutralisation of social burdens borne by the railways. This has proved to be wishful thinking so far.

Introduction of a ''congestion charge'' through inflation of distance to secure some additional resources for investment in those sections. This was what was recommended by the Nanjundappa Committee in 1993.

The innovative measures suggested for winning back the share of freight traffic lost by the railways, like delegating powers to zonal and divisional levels to device marketing strategies, continuance of volume discount, fixing of lump sum rates for merry go round movements, roll on roll off package, and so on. These, if implemented faithfully can benefit the railways immensely.

A declaration that no new lines have been included in the budget.

Only marginal adjustments have been made in freight charges to raise Rs 500 crore. Freight charges are already overcharged, and any substantial increase would be counter-productive.

Need for discipline in investments.

The bane of the railways is the mind-boggling unproductive investments undertaken under political compulsion.

The white paper on projects brought out by the railways in July 1998 revealed the shocking picture that around Rs 35000 crore were needed for completing the sanctioned projects yet to be completed, out of which more than Rs 22000 crore were for non-viable projects. Can any commercial undertaking sustain such unconscionably heavy non-productive investments? Even if funds become available for completing these projects, commissioning each of them will only add to the losses of the railways. Therefore, there is nothing to cheer about the support promised by the state governments, unless they also agree to share the losses. The Calcutta Metro was built by the railways with dividend-free funds outside the plan allocation for the railways, but the losses are borne by the railways. Konkan railway is causing an annual liability of Rs 300 crore as the corporation is not able to service its indebtedness. Losses will be added to the railway budget if loss-sharing arrangements are not built into the agreements with the state governments.

The existing sanctioned projects should be subjected to a scrutiny under zero-base budgeting procedures to weed out those that cannot be financially justified if others are to be undertaken the central government or the sponsoring agencies should not only provide interest-free capital but also agree to bear the operating losses, till they become viable.
Reducing the projects will bring another benefit in the form of reduced construction establishments, which are now continued in the hope that funds will become available somehow, and on the excuse that once reduced it will be difficult to build them up easily. Many new surveys have been announced, but these can only add to the expenses incurred by the railways, since there is no scope for undertaking new projects.

NEW TRAINS
Several new trains, extensions to trains have been announced while these will satisfy the passengers, losses will be caused to the railways since fare recoveries are only to the extent of around 67 per cent of cost. None of these new services would have been tested for financial viability, since the rule that all new services should be scrutinised for financial viability has fallen into disuse on the railways. REFORMS
The minister has correctly taken the stand that she will wait for the detailed report of the Rakesh Mohan expert group. She could not have taken any meaning full action on the basis of an ``interim executive summary``.
She has assured the house that railways will not be privatised. Economy measures are to be pursued relentlessly. This would imply downsizing of the railway staff, restructuring of the capital to remove unnecessary flab and so on.
Commercialisation of operations, introduction of proper commercial accounting, revamping the costing system to make the field-level functional staff cost-conscious reforming the depreciation policy on the right lines and so on need urgent attention. There are reports on each of these gathering dust in the Railway Board. If only these are dusted up and honestly implemented many of the ills of the railways can be partially cured. And pursuing economy measures, particularly downsizing, in which railways has achieved some results, and restructuring of capital will put back the railways on the track for recovery of financial health.
Bureau Report