Railways halts its slide

But there's no real plan to turn it around

The Indian Railways has achieved an improvement in its operations in the current year, 2012-13, in terms of seeking to stay within its means. Its net revenue has more than doubled to Rs 15,750 crore compared to the previous year, 2011-12. This has led to a sharp improvement in the operating ratio - revenue taken up by operating expenses - from 95 to 89 per cent. Railway Minister Pawan Bansal has justly taken credit for bringing this ratio to less than 90 per cent after four years. He has also highlighted the fact that the loan of Rs 3,000 crore taken by the Railways in 2011-12 to meet a cash crunch is being repaid along with interest in the current year.

But it is necessary to go behind this overall figure to understand how the operating margin has been improved. Gross traffic receipts have underperformed in the revised estimates by nearly Rs 7,000 crore. It is the ability to keep a tight rein on expenses and other financial allocations that has done the trick, with consequences that do not bode well for the Indian Railways' maintenance, modernisation and future expansion. Provisions for depreciation, the development fund and capital fund have been slashed by almost a third. Track renewals have gone down by 300 km to 3,000 km compared to targets. Construction of new lines is 470 km, when 700 km was targeted. Similarly, wagon procurement is down by 15 per cent compared to the previous year. This is unsustainable. Track renewal is needed for safety; new wagons are needed for freight; and new lines are required to raise capacity and earn more revenue. The annual plan, budgeted at Rs 60,000 crore, was reduced by almost 15 per cent in the revised estimates.  

The minister has announced that freight rates will be revised twice a year to take care of change in the price of energy, which is understandable even though it will further undermine the Railways' competitive edge vis-a-vis the roads sector. What makes it worse is that a similar automatic adjustment in passenger fares wasn't made. Mr Bansal also announced 67 new express trains and 26 new passenger trains. Though more trains are definitely needed, remember the Railways loses money on each new train as long as fares aren't high enough to recover costs. It is, therefore, not surprising that the budget does not hold out any hope for a real turnaround in the performance of the Railways in the coming year. The target for additional freight traffic is 40 million tonnes, compared to 38 million tonnes likely to be achieved in the current year. With no significant growth in freight traffic, passenger fares likely to remain the same and expenses on heads like fuels and pensions being given, the operating ratio has been pegged at what was foreseen for the current year. While this will prevent things from getting worse, what will really harm the long-term health of the Railways is if in a pre-election year the organisation really sticks to the minister's promise to fill 150,000 vacancies. With a staff strength of around 1.4 million, the organisation is already grossly overstaffed. Since the turn of the century, the staff strength has gone down marginally. The aim should be to hasten, not halt, the process.