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Railway Minister D V Sadananda Gowda on Tuesday laid bare the rot in the Railways' finances and budgeted conservatively for 2014-15. Having raised both fares and freight rates last month, the 61-year-old Member of Parliament from North Bangalore said he would focus on consolidation of ongoing projects, though he could not resist the temptation of announcing new initiatives like the launch of a high-speed railway network to connect major metros and seeking to allow foreign direct investment in railway infra projects.
Key highlights of the Narendra Modi government's first railway budget were a noticeable fall in the Indian Railways' financial efficiency from an operating ratio - share of total working expenses in gross traffic revenue - of 90.8 in 2013-14 (revised estimates, or RE) to 92.5 in the current financial year, a 23 per cent drop in its surplus from Rs 7,943 crore last year (RE) to Rs 6,064 crore this year and a marked increase in its dependence on public-private partnership projects, whose contribution to the Railways' Annual Plan this year has been projected at Rs 6,005 crore, up from Rs 3,546 crore last year.
The minister, however, said that the actual 2013-14 number for operating ratio was 93.5 and that for the Railways' surplus was Rs 602 crore.
The size of the Annual Plan for 2014-15 was estimated at Rs 65,445 crore, a rise of 10 per cent over the outlay in 2013-14. Significantly, the higher outlay was possible because of a 12 per cent increase in gross budgetary support (Rs 30,100 crore) and a 31 per cent increase in its internal resources (Rs 15,350 crore). The Plan's reliance on market borrowings declined 22 per cent to Rs 11,790 crore.
In an important move at organisational revamp, the policy formulation and implementation functions of the all-powerful Railway Board will be separated. Some old proposals were repackaged, like the high-speed link between Ahmedabad and Mumbai as a bullet train, in Gowda's hour-long speech interspersed with wisdom from Kautilya and D V Gundappa, the Kannada poet-philosopher. Passengers were promised better amenities at stations and inside trains, some provided by the private sector. No new factories were announced in VIP constituencies and poll-bound states.
The deteriorating operating ratio of the Railways, he said, had impacted the Plan outlay on safety, capacity expansion, passenger amenities, infrastructure, etc. Gowda blamed the 10-year rule of the United Progressive Alliance for this situation, which he called the "decade of golden dilemma" - the choice between commercial viability and social spending. Revenue, he said, was "frittered away" and "investments were misdirected" all these years.
While proposing a 10 per cent increase in the Railways Annual Plan outlay for this year, Gowda announced a "near Plan holiday approach", indicating he would focus on consolidating the ongoing projects and desist from launching new ones. His predecessors, Gowda said, "were aware of the precarious situation but fell prey to the nasha (intoxication) of claps in the House when they announced projects".
He said the Railways should focus on adding more capacity on existing profitable lines than blindly laying new lines, many of which might not be commercially viable. The annexure to his speech listed surveys for 18 new lines and capacity expansion (addition of tracks and gauge conversion) on 10 routes. Taking a dig at the UPA, Gowda said, of the 99 new lines announced in its 10-year tenure, only one had been completed so far. So, a project management group at the level of the Railway Board will be formed for the time-bound implementation of projects. To iron out on-ground glitches, a project management & coordination group will be set up with representation from the state government.
Gowda's conservatism showed up in other projections for 2014-15, too. In spite of his anticipation of healthier growth (4.9 per cent higher freight traffic and "small" growth in passenger traffic), the projected gross traffic receipts for 2014-15 (Rs 1,60,165 crore) were 14 per cent higher than 2013-14 (revised estimates) but 0.4 per cent below the projection by Mallikarjun Kharge, then railway minister, in his interim budget in February, in spite of the recent fare and freight increases. The surplus of total receipts over expenditure (which is appropriated to the Railway Development Fun, Capital Fund and Debt Service Fund) for 2014-15 at Rs 6,063 crore is below 2013-14 (Rs 7,942 crore), as well as Kharge's projection of Rs 10,538 crore for the year.
Similarly, the projection for market borrowings by Indian Railway Finance Corporation for investments in rolling stock and projects has been scaled down to Rs 11,500 crore in 2014-15 from Rs 14,688 crore in 2013-14. (Kharge's projection for 2014-15 was Rs 13,300 crore). There is a marginal increase in Rail Vikas Nigam's borrowings to Rs 290 crore from Rs 254 crore, but even that is way below Kharge's target of Rs 500 crore. Like in the past few budgets, Gowda mentioned public-private partnerships several times for upgrade of infrastructure and provision of services. To bridge the investment gap, Gowda talked of leveraging the surplus funds of railway undertakings and channelling private investment (domestic as well as foreign) into the sector.
Funds to the tune of Rs 5 lakh crore would be required over the next 10 years to complete the projects already announced, Gowda said. The task for him is clearly enormous.
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