You are here: Home » Budget » News » Infrastructure
Business Standard

Budget 2018: Hopes for Railways pinned on growth in other earnings

The Railways has avoided any change in fares affecting the 750 billion unreserved second class and suburban commuter passenger km and also the 280 billion second class reserved passenger km

R Sivadasan 

The Railways appear to be poised to reach its targeted revenues and the working expenses are almost within their expected limits during the year 2017-18. The operating ratio of 96 per cent in 2017-18 too was as expected.

After struggling to reach the target of more than Rs 1.8 trillion in revenues for the last few years the for 2018-19 has somewhat adventurously projected an operating ratio of 93 per cent and a lofty revenue target of Rs 2 trillion.

The passenger kms and freight tonne km throughput of the two core breadwinner businesses of rail infrastructure, which are expected to deliver more transport services riding on the growing capex, are unfortunately virtually static during the last six years and the trend is not showing any signs of change in 2018-19.

The Railways has avoided any change in fares affecting the 750 billion unreserved second class and suburban commuter passenger km and also the 280 billion second class reserved passenger km. Thus the modestly improved ways and means position of Indian Railways for 2018-19, has been balanced to project a surplus of Rs 60 billion. What is more melancholic is the almost static change of less than 4 per cent in the core businesses —passenger and freight revenues, when other modes of competing transport are growing much faster. Instead, all hopes are pinned on a nearly 50 per cent growth in other earnings.

Both in Mumbai and Delhi, the metro users are happy with the on-board comforts in metro services, but strangely did not react to overcrowding, even though metro rail coaches carried more than 300 people per coach, which is a little more than what suburban coaches carry. That was because of the intelligent way the Metro coaches were designed. The Indian Railways tried to change their design and with their obsession for more seating arrangements, could not make commuters happy. Suburban commuters felt that they were not getting the value for even 17 paise per km that they pay on average per journey. At the same time, the commuter never grudged too much against metro rail charging Rs 1.35 per km travelled. This was one reason why unreserved passengers travelling on the Indian Railways, who generate a massive 740 billion passenger km, refuse to pay more.

The Indian Railways could not match better facilities, and are unable to raise fares, at least to recover their operation and maintenance costs. These 740 billion passenger km decide the future of the Railways. The day they become willing to pay the same fare that they pay to metro rails under the Ministry of Urban Development, the Indian Railways will start getting at least Rs 500 billion more. The question is how long will we this stand-off. It is not just an oft-repeated question of freight subsidising the passenger business, it is also a more serious issue about the conflict between the need for appropriate pricing for growth and low pricing for the benefit of society.

The change in approach to finance rail-investments, from the 2004-08 period, when the railways relied on higher internal generation is evident. Now is a period of rising market borrowing. The Board should use this as a justification for deferring several of the unremunerative new line projects, for indefinite periods. Instead, due priorities can be given only for projects that fetch the statutorily mandated returns, capable of servicing the debt that supports the projects. What one has to remember is that a high debt model, that fits well for Chinese way of fast and focused zero time — overrun project implementation strategies, may not be good for the Indian Railways project implementation procedures. The proposed high debt-low self generation model is good for rigidly time bound rail projects, similar to what Delhi metro rail has expertise to handle.


Former financial commissioner (Railways) and ex-officio secretary to the Government of India

First Published: Fri, February 02 2018. 05:23 IST
RECOMMENDED FOR YOU