Comment: Abhaya Agarwal

The Budget presents a fair set of medium-term goals

The railway Budget for the coming financial year follows the usual approach of appeasing all sections of the society by providing new passenger services and not raising fares. Being the engine of our growth story, the Indian Railways needs to make huge investments, create capacity and cut operating cost. In a refreshing move, the minister had presented the Vision 2020 document before the parliament in December 2009, which proclaimed to shed the incremental approach of the railways and present a bold vision for the coming decade.

Even with all its shortcomings, and as critics felt the vision fell short of India’s image as the next economic powerhouse, it presented a fair set of medium-term goals for the railways. This was the second railway Budget after the Vision document and some follow-up action would have been a welcome step. The document envisaged an investment of Rs 14 lakh crore by 2020, which translates to Rs 1,40,000 crore a year. After touching 98 per cent in 2000-01, the operating ratio (expenses divided by the income) came down to 76 per cent in 2007-08. It has shown a sharp increase in the past two years and touched 92.1 per cent in the present year, showing the perilous health of railway finance and its inability to generate surplus for the targeted investment.

A big positive of this Budget was the commitment to complete the eastern and western corridors of the Dedicated Freight Corridor (DFC). The project is akin to the National Highway Development Programme and will provide huge benefits to freight traffic, apart from generating surplus capacity on the most congested routes of the railways.

With India’s geographical and demographic features, the railways will always be the most economic, eco friendly and convenient mode of travel and transport. Though it is late in the day, railways should seriously consider revising passenger fares to cover inflationary pressure, thus generating surplus for reinvestment. Modern India, as showcased by the highways and other sectors, doesn’t mind paying for better services.

Abhaya Agarwal
Executive Director & PPP Leader, Ernst & Young