Prabhu identifies some basic issues

Notes huge burden on the system and that projects have been languishing due to fund crunch

With losses on some rail passenger services for the current year at Rs 34,298 crore, it does beg questions of how to address such problems in the current system. The White Paper, tabled by Railway Minister Suresh Prabhu in Parliament on Thursday, seeks to address some of these problems.

Indian Railways (IR)'s functioning was separated from the government's general finance and the arrangement formalised by the Separate Convention of 1924. That entailed IR's fiscal autonomy, with it contributing a certain dividend to the exchequer for the capital invested in it.

With the economy set to burgeon, the Paper says the IR system is ill-equipped to handle the incremental traffic burden due to line and terminal capacity constraints.

"There is a need for significant investment in the network, especially the high-density network routes. Capacity enhancement works, along with strengthening goods sheds on these routes, is also the need of the hour," said the Paper.

With large swathes of projects pending whose original costs are estimated at Rs 4.9 lakh-crore, there is also a need to prioritise works in line with the development requirement. The Paper states this will ensure a sustained flow of funds for such projects, ensuring early commission and completion.

To increase the efficacy of extant lines, it proposes capacity enhancement through longer trains, by augmenting the number of coaches and reducing stoppages. "The former will reduce the unit cost of operation and increase earnings. Increased number of stoppages results in direct revenue loss and eats into line capacity," said the Paper.

With additional demands for new lines on a constant basis for remote area connectivity, construction of these is important. The financial viability of such projects, however, is subject to question. The burden of losses falls on IR, for execution and maintenance.

"A large number of socially desirable projects have been sanctioned in the past, resulting in huge throw-forward liability, amid thinning funds. To give impetus to execution of such socially desirable projects, partnering with state governments is the way forward," says the Paper.

In 2013-2014, IR reported loss of Rs 21,391 crore. To that amount, net suburban losses in Chennai, Kolkata and Mumbai on the running of electric train and other services contributed Rs 2,852 crore. Particularly after the Sixth Pay Commission, there has been a downside in the finance of IR.

To that end, the White Paper proposes "some new modelling of generation of finances, so that paucity of resources does not impinge upon the investment planning".

Suresh Prabhu, in his maiden rail Budget speech, talked about the need to raise finances from public and private entities, Indian Railway Finance Corporation and internal resources.

The White Paper also speaks about the plethora of projects languishing for years due to lack of assured funding. With delay in project execution, it leads to time and cost overruns. "This has an impact on the viability of the projects once they are completed. The available resources have to be spread out thinly over the sanctioned projects," it states.

In the current year, the Paper mentions, projects have been prioritised and funding assured for all those that can be taken up for early completion.