Sustained freight growth required

The passenger fare rise was long due. The move was required to help the railways achieve a healthy growth and meet their targets. But the railways would have to ensure that revenue earned from increased fares is utilised for better passenger services, including platform services and cleanliness in coaches.

Another important aspect of the Budget is the overarching theme of a financial turnaround. In fact, the rail ministry has projected improving the operating ratio from the current 95 per cent to 84.9 per cent by the end of the next financial year and further down to 75 per cent by 2017. It is important to understand that this improvement in finances would not happen unless freight traffic grows at a sustained level of eight-nine per cent for years to come. This, however, seems difficult going by the current situation of freight growth.

Another reason why achieving the projected financial turnaround might be difficult is the increasing pension fund liability for the railways. Indian Railways had appropriated Rs 16,000 crore to pension fund last year. This appropriation increased to over Rs 18,200 crore this year. Next year, this will go up further to Rs 20,000 crore. The pension fund appropriation goes into the calculation of operating ratio and no output comes for the railways from this investment.

If road traffic has to be attracted to rail network, quality of service has to improve at reasonable rates. Nothing has been done in this direction. The dull freight growth scenario, if not tackled, would also make meeting internal generation targets difficult. The railways have projected an internal generation of Rs 18,050 crore for 2012-13. While freight traffic grew at around 10.5 per cent in the first three years after 2004-05, it has settled to less than six per cent since then. This financial year, the railways had anticipated a freight traffic of 993 million tonnes, but this had to be scaled down to 970 million tonnes. The loss of 23 million tonnes of traffic translates to Rs 1,900 crore of revenue loss.

 

Vivek Sahai
Former Chairman, Railway Board