Pragmatic and populist

Mamata Banerjee's first budget is a mix of pragmatism and populism. By leaving passenger fares severely alone she has won friends all over...

Mamata Banerjee8217;s first budget is a mix of pragmatism and populism. By leaving passenger fares severely alone she has won friends all over the country but will leave the Railway Board seriously worried. Admittedly there was little scope for squeezing more out of first and second air-conditioned class passengers after the steep hikes in Nitesh Kumar8217;s budget last year.

However, the railways were expected to try and improve passenger earnings with modest fare increases on heavily subsidised suburban services and certain long distance and high-speed trains. Given the likelihood of subsidy cuts in other areas, it was probably a political decision to spare passengers higher train fares at this time. But the failure to raise some fares will worsen railway finances. Among the most useful new projects for 2000-1 are those on metro and suburban services in Mumbai, Calcutta and Chennai where passenger traffic has increased enormously and additional capacity creation is long overdue.

Perhaps the estimated rate of return ROR on some of the other new lines does not justify the decision to start them but economic realism is not everything. It should not be forgotten that the railways bring opportunity to backward and neglected regions and the ROR rises after that. Banerjee proved her heart is in the right place by making provision for improved amenities on trains and at railway stations but she was extraordinarily vague about new budgetary provision on safety measures and that is quite unacceptable.

There is a bit of a gamble in the 5 per cent increase in freight charges for all but essential commodities and a reclassified group of other goods, including iron and steel and cement. Some freight is bound to be lost to road haulers as a consequence. But overall it is a gamble the railways should be able to pull off if they act with alacrity to improve their services and introduce and market the new ones mentioned in the budget speech. Among them are a high-speed goods service for perishable and high value goods, a roll-on-roll-off service to make available door-to-door delivery and leasing routes to freight haulers of non-bulk goods. Three promising plans which ought to be at an advanced stage are for warehousing facilities at freight terminals, privately run freight terminals and a real-time, freight information service. A general improvement in freight handling and haulage times, and innovative new services which respond to market demand, will help increase freight traffic.

On the principle that you must deliver more for charging more, the railways will have to earn that extra 5 per cent with more efficiency. The failure to achieve the current year8217;s earnings target is a warning against complacency. As usual the plan outlay for 2000-1 is ambitious but may not be altogether unachievable if 8220;unprecedented8221; capital support from the general budget does in fact materialise. There is also the prospect of lower market borrowing costs in a period of falling interest rates and Banerjee hints at putting some of the railways8217; vast real estate on the market. If new capital investment in track and rolling stock is accelerated and productivity gains are pursued aggressively, there is hope for the railways.