Finance custodians courting danger

Rail operations managers brought glory to Rly minister by reaching the earnings target.

Rail operations managers brought glory to the railways minister by reaching the earnings target,unlike finance managers who messed up. Their excuses are simple.

One is the resurrection of the Pay Commission ghost to mask their inefficiency in containing Indian Railways runaway costs. Another is that carrying a passenger over one km costs the Railways 47 paise,but they collect only 26 paise,generating losses of R19,000 crore. And since ministers are against fare hikes,these finance managers invent only one remedy: ask for more budgetary support and subsidies.

Railways ministers know India better. Only 160 million of the 1,060 million population belong to the consumer class. Of the remaining,400 million are BPL and travel at the lowest fare. Ministers avoid adding insult of a fare hike over the injury of overcrowding.

Moreover,Planning Commission deputy chairman Montek Singh Ahluwalia wants railways to improve efficiency in any index that seeks to link increase in input prices to higher fares. Herein lies a twist. Railways actually does not want a fare hike. A fare hike would drive passengers out,leaving 3,600 daily ordinary passenger trains with abysmally low load factors.

Instead of concentrating on train load factor efficiency,non-ticket revenues or cost reductions,custodians of finance are busy courting danger. They are out to kill the depreciation reserve fund,the only fund for railways critical safety works. DRF is today gasping for R9,000 -10,000 crore appropriations.

Ignoring Mamata Banerjees plea for rehabilitation of safety critical works in her Budget speech of 2002,these accountants have robbed DRF of R1 billion. The bridges and tracks,upgraded by Nitish Kumar,were over-sweated with higher axle loads in Lalu Prasads period,and are aging fast.

Their modus operandi is to under-contribute R2,000 crore to DRF,depress total working expenses,artificially maintain operating ratio,divert the same DRF money to inflate net surplus and rollover the same diverted money to pay up IRFC lease payments principal,thereby covering up for the inadequacy of operating surplus to service debt. As IRFC borrows on the strength of Railways balance sheet,there is a likely danger of IRFCs credit rating agencies seeing through this game. Are we dancing to the rhythm of satanic accounting choreography?