The Railways is looking forward to a budget that seeks to set the agenda for growth.

But, developments over the past four weeks underscore the problems gripping the Railways and the challenges that its Minister Mamata Banerjee faces when she presents the budget of the UPA’s second term on Wednesday.

Nothing could have been worse than Finance Minister Pranab Mukherjee’s plainspeak that Ms. Banerjee had come a bit too late with her proposals and that the Centre did not have the money to fund any of them, including the proposed creation of a special railway safety fund (SRSF), as the budget exercise had been set in motion.

The Central government had issued a directive to all departments dissuading them from presenting any White Paper in Parliament without the approval of the Cabinet, thereby dissociating itself from the one that Ms. Banerjee laid on the table of both Houses without getting it cleared. Did that in any way amount to casting aside even the Vision 2020 document that Ms. Banerjee presented without the approval of the Cabinet?

The option before Ms. Banerjee is to shore up funds for the Railways internally or get private enterprises to support her cause.

The Railways has no money — it is as simple as that. And, hence, taking up any new investment will be a Herculean task. That is what an internal note says, raising fears that the five-year turnaround story may just get halted in its tracks.

The internal note is rather depressing: “The financial position of the Indian Railways is a cause of concern. The progress of earnings and expenditure to end of November 2009 brings out a shortfall of Rs.3,799 crore in resource position of the Railways.”

That is because “the growth of earnings has fallen short of the budgeted target by Rs.1,277 crore.”

It says: “There is an urgent need to contain both revenue and plan expenditure so as to keep them well within the budgeted outlays. No additional allocation would be forthcoming and under no circumstances, the expenditure should exceed the outlays.”

The note points out that the passenger earnings to the end of November 2009 have registered a shortfall of Rs.605 crore and that against the budgeted growth of 10.8 per cent the actual is only 6 per cent. Freight earnings have fallen short of the target by Rs.630 crore, while other earnings fell short by Rs.314 crore.

It is no surprise then that Ms. Banerjee has appealed to private enterprises seeking their cooperation for the journey ahead. She was candid enough to admit that the Railways had no funds and it even lacked vision, appealing to industry captains to come forward with plans and proposals promising to throw open each and every aspect of the Railways for their operation.

At the meeting she held just about a fortnight ago, not a single industrialist present stood up to lend a hand in the construction of any part of the 49,000 km length of track that the Railways intended to lay in the next 10 years. Each one of them just wanted simplification in procedures.

The budget will be an indication of how far Ms. Banerjee is willing to go to execute what she has promised in her Vision Document — the kind of sops she is prepared to offer to woo private enterprises when she has little else to fall back on. That too when they are reluctant to take up difficult works such as construction of track and in projects which do not ensure easy returns.

The Vision 2020 document assessed the need for Rs.14 lakh crore to prepare the Railways as a world-class achiever. The Centre is expected to provide at least Rs.5 lakh crore of this while the rest was to be mobilised internally and extra-budgetary resources — borrowing and private investments.

The other reason why expecting a reduction in passenger fares and freight rates will be far-fetched is Ms. Banerjee’s eagerness to create a second SRSF of Rs.20,000 crore to specially address safety aspects to avoid accidents and save lives and property.

If the Minister goes ahead with her proposal despite Mr. Mukherjee’s refusal to give a Central grant it will only mean a surcharge on tickets which will only pushes fares up by the rate or percentage of surcharge imposed. Accompanying this will be a series of announcements on how the Railways intends to tone up the safety mechanism.

The production of electric locos has been slow and below the target so far during 2009-10 but it remains to be seen if that tempers the Minister from announcing the introduction of new trains.

Draft proposals

Draft proposals awaiting clearance include taking over wagon units of Burn Standard and Braithwaite, granting permission to third party operators for investment in special purpose wagons and formulation of a policy to allow construction and operation of private freight terminals to boost freight business.

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