Revision of fares is very acceptable

Notwithstanding the focus on modernisation and safety, the astronomical figures of investment recommended by expert committees and so on, what stands out in the maiden Railway Budget of the railway minister is the financial turnaround.

An operating ratio of 84.9 per cent and net revenue of Rs 22,233 crore suggest the minister has overcome his agnosticism to the railways’ performance in Lalu Yadav’s regime. The 20 per cent-plus hike in freight rates may appear alarming to the industry, but no one can fault the brilliantly nuanced approach in revision of passenger fares. Starting with a feather-touch increase of two paise per km for the second class, the fares have been gradually increased by few more paise, as these span higher classes, sensitive to both — incomes of the travelling public and nature of accommodation provided.

A two to 30 paise per km fare rise is acceptable and a welcome break from populism. Here, I would like to strike a word of caution. A financial turnaround is an ephemeral bubble, unless backed by solid fundamentals. The traffic loading and passenger growth are a mere five per cent. Of course, these parameters depend on the GDP growth. However, the railways have projected an internal generation for the 12th Plan at Rs 2 lakh crore and the starting year projects an internal generation of Rs 25,000 crore. Thus, the asking rate for the subsequent years of the Plan is very high of the order of Rs 45,000 crore. Unless the railways is able to drive down ruthlessly its working and operational inefficiencies and exploit its assets to the fullest by raising revenues, the 12th Plan projections would be a mirage.

By asset utilisation, I mean the less focussed area of passenger traffic — the train load factor. The railways are running 12,000 trains daily. Unless they maximise utilisation of seat/berth every km in these trains, passenger services would continue to be a drain on railways’ resources — and no fault of the passengers.

 

R Sivadasan
Former Financial Commissioner, Indian Railways