The tremendously difficult times, partly of its own making, that the Indian Railways (IR) is passing through are well known. They have been captured in the forbidding financial details contained in the revised estimates for 2011-12 and Budget estimates for 2012-13. Some of the steps announced by Railway Minister Dinesh Trivedi to prevent the Railways from going, in his own words, further “downhill” thus come as a pleasant surprise. The action that needs to be welcomed most is the attempt to, after nearly a decade, raise passenger fares. The extent of the rise may not be enough. But the fact that it has been tried, causing the public displeasure of his party leader Mamata Banerjee, amounts to a show of courage such as has been displayed so far by any of his ministerial colleagues in the UPA. His decision to alter the hitherto unchanging structure of the Railway Board by adding members for public-private partnerships, marketing, and safety is also welcome. This addresses a long-felt need to give top priority to both safety and earnings in an organisation where the prima donnas are the traffic and technical people. By incorporating in the Budget speech a number of suggestions made by the two committees set up to look at safety and modernisation, the minister can be commended for both seeking good advice and acting on it with alacrity. But against this has to be set the inability to get out of an old bad habit – announcing new passenger trains – at a time when both the state of finances and overstretched physical infrastructure should have dictated otherwise.
All this does not take away from the crisis in both the finances and operations of IR. It virtually ran out of cash and had to get a loan of Rs 3,000 crore from the government. The operating ratio, which measures the extent to which operating expenses eat up revenue, has touched 95 per cent, overshooting the Budget estimate by nearly four percentage points. This is despite the fact that there were no pay commission-related arrears to be taken care of. It is a depressing picture on both sides of the account books — revenue targets missed and expense targets overshot. In view of the way in which the revised estimates have gone haywire, the massive improvement – by about ten percentage points – in the projected operating ratio for 2012-13 does not carry credibility. Help will undoubtedly come from the substantial rise in freight rates announced days before the Budget. But that raises the question as to whether IR is not pricing itself out in the one area where it makes money: goods carriage. The difficulty faced in achieving physical targets – those for passengers have been scaled down – raises questions about IR’s ability to go out and get business. Announcing measures on modernisation and safety is one thing; finding the money for them is another matter. Even when budgetary support for the railway plan is increased substantially, the ability to meet internal resources generation targets remains wide open.
The speech makes some good noises on a regulatory commission for tariffs which will take politics out of such decisions, and on passing on automatically any rise in the fuel bill, but this is not enough. The minister has a Herculean task ahead of him to deliver on the good noises he has made — if his party leader allows.