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For an innovative railway budget

For an innovative railway budget
With barely two weeks to go for the presentation of the Rail Budget in the Parliament, expectations are high this time round. The Railway Ministry is in the capable hands of Suresh Prabhu, who has proven his caliber to set things right and launch the carrier on the path of growth. Given his unobtrusive style of functioning, the Railway Minister had hit the ground running from the day he assumed office, after the exit of his predecessor Sadanand Gowda. The minister lost little time in putting in place a process of reengineering through greater delegation to zonal and divisional managers, besides ensuring greater transparency and accountability.

With an annual turnover of Rs 1.4 lakh crore and a staff strength of a staggering 1.4 million, the Indian Railways (IR) have the dubious reputation of being subject to a raft of Committees and Commissions that periodically go into its functioning to identify the faults. Plans to fix them include making it a board-managed corporate entity at least within the given constraints of being a government-run company. Successive political masters, however, have remained impervious to any market-savvy strategy to reform the largest mode of public transport in Asia.

One the one hand, despite liberalisation of the economy and part-privatisation of some non-core areas in the railways, the upshot has not been commensurate with even modest expectations. On the other hand, safety standards in the system do not provide any comfort to the travelling public. The sanitary conditions in and around the stations and within the train is pathetic, besides poor food.
For the user, the system remains pathetically outmoded and it is small wonder that road transport has edged past the railways in terms of haulage of materials.  With diesel prices down, the competition from the road is bound to be brisk and the railways run the risk of losing more share to the former if it does not get its act together.

Diesel, which constitutes around 70 per cent of its total fuel bill, fell from Rs 60.08 a litre in June last to Rs 50 now. The savings that arise from lower prices could be deployed to improve basic amenities for the user and the forthcoming budget should at least take some baby steps in this regard.        

Undoubtedly, the Indian Railways (IR) remains by far one of the world’s largest networks with 65,436 route kilometers, spanning the length and breadth India. It serves as a crucial nexus and linchpin locomotive for the movement of men and materials. IR runs 12,617 trains to carry 23 million passengers per day, connecting more than 7172 stations spread across the sub-continent. It hauls more than 7241 freight trains, carrying about three million tonnes of freight every day. For the IR, there is no dearth of reports about its multi-faceted functions over the years so much so that the system is cluttered with suggestions and recommendations, most of which remained pigeonholed for want of purposeful political will and a competent management team.

In fact, more than a decade ago, the Expert Group on Policy Imperatives for Reinvention & Growth, headed by a distinguished transport economist Rakesh Mohan, who subsequently became Deputy Governor of the RBI, had suggested the functioning of the IR on commercial lines. The Mohan Committee of 2001 as well as Expert Group on Modernisation of Indian Railways headed by Sam Pitroda, as recently as 2012, had recommended setting up a Railways Tariff Regulatory Authority to fix fares, for both passenger and freight, in consonance with ground realities and competitive pressures being exerted by other modes of transport. These steps, according to the Expert Group, would bring in a fair element of rationality and reasonableness to the rickety finances of the railways. But it was only in January 2014 that the previous government approved RTA as an interim body, while the new government appointed Bibek Debroy Committee recently suggested in its report modalities for implementing the existing Cabinet decision on setting up an RTA!

The overarching need for aligning cost to service assumes grave importance in the light of a raft of damning reports by the Comptroller and Auditor General (CAG) of India. The CAG report on Railways Finances laid in Parliament last December rapped the management for “not following its own rules and regulations laid down in the Financial Code and Engineering Code for efficient execution of projects and for proper accounting of financial transactions”. Taking a serious note of accounting subterfuges, it gave the instance of how a positive balance in Capital Fund was compassed in 2012-13 by “diverting payment of lease charges to IRFC (Indian Railways Financial Corporation) from Capital Fund to Capital received as general budgetary support from the Government of India”. This obviously deprived the Railways of additional investments that could have been made on other capital works, including maintenance of rolling stocks to keep the system spic and span. It is altogether another unedifying saga that how the IRFC set up as the borrowing vehicle to run the system has become an albatross around the Railways’ neck over the years as its interest rate is aligned to market rates.

According to another CAG report on the management of goods trains, the Railways disbursed a massive Rs 10,349.14 crore (Rs 4299.21 crore for wagons and Rs 6049.93 crore for locos) during 2008-2103 for payments towards principal component of lease charges to IRFC. What is rather disconcerting is that this payment, which was made from Capital Fund till 2011-12 and thereafter payment of Rs 5514 crore, was made from capital for which the Railways had incurred additional dividend liability of Rs 221 crore.

Going forward, a reputed auditor himself, Prabhu should not let any such mistakes manifest to dress up the brittle finances of the system when he presents the Rail Budget on February 26 in Parliament. Instead, he must chart a refreshingly new course with service to stakeholders as his mantra and mission.      
 
G Srinivasan

G Srinivasan

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