Off track on reform

Railway rollback dents UPA's credibility

Replying on Thursday to the debate on the Railway Budget in the Lok Sabha, the new railway minister, Mukul Roy, rolled back most of his predecessor’s suggested reforms. Dinesh Trivedi had made a start towards repairing the Indian Railways’ straitened finances, by raising passenger fares for the first time in eight years. In addition, he had recognised the urgent need to make improvements to the Railways’ safety infrastructure, which could not happen without the financial reform he had in mind. There was structural reform that Mr Trivedi correctly decided was necessary too. Among those were changes in the Railway Board to bring in those responsible for the Railways’ financial health and its safety aspects, and making a start on taking politics out of fare-setting — by examining the possibility of an independent authority to regulate tariffs. Such measures, though limited, were nevertheless overdue. The Railways, once regularly profitable and with a large cash cushion, had suffered a worsening of its finances, and crucial projects to upgrade facilities were on hold everywhere. Meanwhile, the lack of safety infrastructure was beginning to tell, with the number of accidents rising.  

None of this mattered to Mr Roy. He insisted airily that the Railways would “mop up resources” to increase safety, and rolled back the fare increase anyway. Not on all classes: he exempted First AC — which is, in any case, becoming uncompetitive with airfares. However, Second AC and Chair Car were included in the rollback, making clear that the Trinamool Congress’ definition of the “aam admi” is, charitably, inclusive. But, apart from the fare rollback, his announcement that the other reforms were to be put on hold is even more revealing. There will be no committee examining how to set up a fare regulatory authority. There will be no recomposition of the Railway Board, no member for safety or for public-private partnership projects. This comprehensive negativity about the most basic forward-looking reform reveals the Trinamool Congress’ unwillingness to recognise reality.

However, the blame extends beyond the Trinamool Congress. The leadership of the United Progressive Alliance (UPA) has staked the future of India’s economy, and its own credibility, on its ability to “bite the bullet” and carry out essential reforms that will stabilise the fiscal deficit and reduce government spending. Petroleum prices will need to be increased; subsidies are to be capped at two per cent of GDP. However, Mr Roy’s irresponsible rollback casts a shadow on whether these optimistic Budget pronouncements are even slightly believable. If the UPA has decided to give in meekly to Mr Roy’s party, then what hope for reform of the subsidy regime, the slightest sign of which will be stridently opposed by the Trinamool? The biggest impact of Mr Roy’s speech in the Lok Sabha may not even be on the Railways. It is on the perception of the government’s ability to stand up to those of its allies that have demonstrated an anti-reform attitude. The target for the fiscal deficit in 2012-13 has suddenly begun to look a lot more unattainable.