Bansal’s plan for the Railways has no surprises and seems to be an exercise in keeping the system going
It was perhaps unrealistic to expect the last rail budget to be presented by the incumbent government before facing a general election to tread any unbeaten path or introduce revolutionary concepts. To that extent, the maiden budget proposals of Railway Minister Pawan Kumar Bansal are on expected lines. There are no major surprises. However, there are a few issues concerning the future course that this crucial infrastructure behemoth will take that should be of concern to not only the UPA government but any dispensation that may be in power thereafter.
Modest growth rate
Less than a year ago, Mr. Bansal’s predecessor, who presented the previous budget, envisioned an investment of Rs.7.15 lakh crore during the 12th Five Year Plan. The Gross Budgetary Support component out of this was projected as Rs. 2.5 lakh crore. It is rather distressing to note that the 12th Plan approved by the Planning Commission has scaled down the Railway plan to Rs. 5.19 lakh crore with a GBS component of Rs. 1.94 lakh crore. In other words, the government is not in a position to provide for a much higher rate of growth of the railway sector than it has historically done. The long-term implication of this modest growth rate on the economy as a whole needs to be looked into. Such scaling down of growth plans also calls into question the need for formulating grandiose vision plans that have no chance of materialising.
The bettering of the safety target in terms of accidents per million tonne km of traffic (0.13 achieved against a target of 0.17 set for 2013) is creditworthy. There is need for the Railways to analyse how this reduction was achieved so that the feedback can inform safety investment decisions in future.
The announcement of the formulation of a Corporate Safety Plan 2013-14 is a welcome step. It is to be hoped that the plan will be formulated and implemented with the same diligence and consistency as was done in the case of the first CSP.
Heavy haul club
It is a matter of pride that the Indian Railways has joined the select club of world railways moving more than a billion tonnes of freight annually, and is entering into yet another exclusive group of railways moving more than 10,000 tonnes per train. Some concomitant steps that should improve maintainability, reduce maintenance costs and improve staff productivity such as widespread introduction of track friendly/self-steering bogies and doing away with the anachronistic institution of goods guards, have not been explicitly mentioned in the budget. Hopefully, these and other steps will be implemented.
The targets of Rs.1000 crore each for the Rail Land Development authority and the IR Station Development Corporation to be raised through the PPP route and Rs. 4500 crore through scrap disposal during the year are quite ambitious. It needs to be seen how far these are achieved considering the limited success so far, particularly in the area of PPP.
E-ticketing
The Minister’s announcement of a revamp of the E-ticketing system to handle 7,200 tickets per minute from the existing 2000 tickets per minute and to handle 120,000 users at a time instead of the present 40,000 should come as a welcome relief to prospective passengers. This also means that passengers should be prepared for the scenario that seats/berths in popular trains will get filled up that much faster!
As in previous budgets, a resolve to fill 1.52 lakh “vacancies’ has been proclaimed. It needs repeating that if all the vacancies were to be filled immediately, whatever ‘excess’ has been projected in the budget would get wiped out. The average annual cost of one lakh employees is in excess of Rs. 4000 crore. This hard fact is being repeatedly smoothed over. Staff productivity has to improve if the present levels of compensation are to be sustained. There is no mention of this aspect in the budget.
The proposal to impart skills to youth in railway related trades in 25 locations is a welcome initiative.
As in every rail budget in the recent past, this budget also lists a number of manufacturing facilities to be set up either in collaboration with the State governments or through the PPP route, apart from upgrading the existing Railway workshops. It is not clear whether a comprehensive study has been done to see if the expansion of the existing/already planned units will serve the purpose instead of proliferating such units all over the system.
Sixty-seven new express trains and 27 new passenger trains have been proposed to be introduced apart from extending the services of 57 trains and increasing the frequency of 24 trains. No doubt, these are being proposed as a consequence of tremendous public pressure. But the fact that not more than 60 per cent of trains at any moment are on time is a sobering reminder of the extreme pressure to which the system is being subjected. The attitude seems to be: who cares?
Financial performance
It is creditable that an operating ratio of 88.8 per cent is being achieved during the current year 2012-13, even after fully repaying the loan of Rs 3,000 crore along with interest that was taken from the Ministry of Finance, and after setting aside Rs. 9500 crore for Depreciation Reserve Fund (DRF). Against this, the budget estimate for 2013-14 projects an Operating Ratio (OR) of 87.8 per cent with a DRF appropriation of only Rs.7500 crore. This once again highlights the need for a more reliable index of financial performance rather than the present OR, which can be tweaked to suit by appropriately adjusting the DRF allocation. It is hoped that the proposed revamping of the accounting system will look into this aspect.
Additional capacity
The incremental loading of 40 million tonnes projected for 2013-14 vis-à-vis the BE of 2012-13 is far below the projections arising out of the Vision 2020 document of nearly 100 million tonnes. This is an indication of how far the Railways have fallen behind their growth plans projected hardly three years ago. Food for thought at the highest level whether the Railways should lead or lag behind the overall economy’s growth rate.
In this context, the Minster’s announcement that contracts covering 1500 km of the Dedicated Freight Corridors on the Eastern and Western sector will be awarded during 2013-14 is welcome news as the completion and commissioning of these two corridors is essential before the effects of the next Pay Commission deal a fatal blow to Railway finances around 2017-18.
Tariff proposals
The Minister’s announcement for Fuel Adjustment Component (FAC) linked revision of freight tariff, a proposal mooted by his predecessor, with effect from April 1, 2013 is welcome. His reluctance to bite the FAC bullet in the case of passenger fares is understandable, considering that a revision has been done recently. But hopefully this will not once again lead to a long hiatus of passenger fare revision citing various reasons.
It is necessary to institutionalise the revision of freight tariff and fares through the proposed Rail Tariff Regulatory Authority. However, it is doubtful whether a final decision in this regard will be taken during the balance tenure of this government.
Structural reforms
Typically, the budget has skirted the prickly issue of structural reforms. There is no mention in the budget of even the proposal in the last budget to expand the Board to include two members to look after PPP /Marketing and safety/research. The proposal has perhaps been shelved.
Overall, the budget conveys an impression of an exercise to keep the system going very much as it has done in the past, at a modest growth rate. Whether such a rate of growth of this key infrastructure sector will be sufficient to sustain the projected growth rates of the economy as a whole remains to be seen.
A final thought
Does the Railway Minster have to read out the complete list of projects, new lines, etc., in his budget speech, many names of locations or stations unpronounceable depending on which part of the country the Minster hails from? The previous Minister had included all such details in Annexures to the budget speech. It will be a good practice to adopt that convention to save time and embarrassment.
(K. Balakesari is former Member Staff, Railway Board)
Keywords: Pawan Kumar Bansal, Railways Budget, Indian railways, E-ticketing system, express trains, freight tariff, FAC
Excellent analysis by Mr. Balakesari. The budget speech seems to ignore the two most vital aspects of railway working - safety and punctuality. What good is e-ticketing and good food if the train is late? Overcrowding is the third important aspect to be taken care of. Top management ought to be spending more time and thought on these three issues.
Like the many budgets that presented over the years, this rail budget has also got so many Yes's and No's. Its very hard to present a budget that will fulfil the demands of all states. But I reckon this budget has created negative mindset on people longing for an improved infrastructure and quality service. The decision of the Planning commission to scale down the monetary support to Indian Railways was very much distressing. There should be done something to improve the technical glitches like modernizing signalling systems, increasing the power of engines etc.
Railway as peoples wealth runs on the theory of We feed you -You fed us.
It is unfortunate that the stakeholders in the Railway Development
instead of `people to politicians` is now replaced by new stakeholder
`Corporate to Politicians`.
It is decent budget, but I doubt that all the announcement made by the
Railway Minister would come into action as he didn't specify from where
all the money required would come.
Also there is no step on increasing the efficiency of Railway staff. No
firm step on the cleanliness of the Railway tracks and on stations.
Also steps were required to manage crowd at the station. Still a lot of
work is required to be done.
While fully agreeing with the Lead comment, here are some thoughts. The primary
function of the railways is to run a cost effective, efficient, sage Transport system for
People and goods.. They supplement and compliment Road transport. and hopefully
sooner or later by River and Ocean transport. It is a quite a challenge. One needs to
ask why they are running factories, hospitals and there were even some talk of
running hotels. It would be in their and national interest to shed all these and
concentrate on what they know best. Factories can possibly fetch significant FDIs
and Hospitals can attract much private investment. Complete or partial can be case
by case. Railawys then focus on and concentrate on Transportation. There is no
reason why they cannot enter road transportation. Special services such as
Refrigerated vans can transport perishable commodities in bulk. It will save
significant losses and provide for a far better transport condition that what obtains
now.
Railways should be now considered a commercial body and divided into making each zone as a corporate profit center so that the decision making is based on sound commercial principle and not on political expediency. Each railway minister from Bengal or Bihar or Tamil Nadu looked after their own states' interests and not a balanced development such an infrastructure-centric organisation ought to have done. Even now now an independent and professional committee should review all the railway lines and trains (both goods and passenger) now being run and recommend to close down uneconomic and non profitable ventures just as corporates drop unprofitable products mercilessly. Railway Board should get involved in policy making and monitoring while leaving the operational decisions to Zonal corporates. Capital decisions and employee decisions also should be left to the decentralised Zones.
In case of Railway budget (or financial budget) it is well accepted
that not every one could be satisfied. But, as rightly mentioned in
the article the railway minister has at least made an attempt to
abandon the populist path and is making, even if feeble, an attempt to
set things right. On account of compulsions of coalition politics, the
UPA government has wasted many opportunities to set things right and
did almost nothing to put Railways finances on a sound footing during
the last eight years.
Perhaps time has come to convert the Indian railways into a government
company on the lines of Bharat Sanchar Nigam Ltd. Raising long term
funds for expansion and renovation would become much easier if the
Indian railway becomes The Indian Railway Corporation (IRC). IRC must
be given full autonomy with no political interference so that in can
run the railways network on commercial principles. We can then expect
far better service from IRC.
It is not a good augury that the planning commission has reduced the proposed outlay and the budgetary support considerably. Where was the need to set up a separate body like Railway station dev. corpn. Worse still, IR should seek FDI for railway station modernisation. As for PP mode in station development, take care that station are not reduced to a shopping mall spree with little space for passengers movement. Why hasn't the platform ticket been priced upwards? It was an anticlimax to note the minister saying after these six decades and after the creation of a separate north east devl ministry that there is need for better rail connectivity between NE states and the rest of India We wish the minister had tabulated the ongoing projects their status and the new project and their schedule.
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