Opinion A fine train of thought

The budget on first reading provides an encouraging roadmap for the next five to ten years and in the right direction. On closer examination it provides more of intent and not so much in concrete terms of investments and outcomes. While it promises an investment of Rs 7.35 lakh crore in the 12th Plan,the outlay of Rs 60,100 crore in 2012-13 is only about 40 per cent of the annual average requirement. The Gross Budgetary Support (GBS) is only Rs 24,000 crore against an average annual need of Rs 50,000 crore reflecting an uncertainty regarding government support of the level planned for the Plan period. More worrying is that the internal generation for the year is Rs 18,050 crore against an annual projected figure of approx Rs 40,000 crore for the Plan period. Extra budgetary resources projected are to the tune of approximately Rs 45,000 crore annually,which might only be market borrowings. How the gaps will be filled in this and the coming years is not yet clear. The shortfall in achieving current year’s target does not give much confidence.

What is heartening is the intent on a number of issues. The need for safety,modernisation,capacity augmentation,infrastructure consolidation,modern signalling,station and freight terminal development and new types of rolling stock has been clearly emphasised. The increase in passenger fares after almost a decade is certainly a welcome development and perhaps best reflects the minister’s determination to proceed for the betterment and modernisation of the railway.

The increase in passenger fares of approximately 10 per cent by rough calculation is a bold step and apart from generating additional revenue,will contribute to somewhat insignificant but important lowering of demand. However,the introduction of 75 express and 21 passenger trains does not give the right signals,but perhaps is a political compulsion given the rising demand of the public.

Safety has been given importance and rightly so. The most important long-term step is the announcement to set up an independent Railway Safety Authority. This will go a long way towards an objective analysis of accidents and providing better inputs for improvements.

On the safety front,providing grade separation instead of current level crossings may be easier to do but more difficult to get it used as past experience has shown. Also,there is no guarantee of new crossings developing,specially in rural areas,where tractors now provide easy track crossing capability wherever convenient. It would be important to proceed cautiously in this area and see the results before full scale conversion.

Three more important and welcome announcements in the budget are the need for a revised accounting system,a tariff regulatory authority and the restructuring of the Railway Board organisation. But here also the intent falls short of the need of the day. The accounting system should be separate from the government accounting pattern to reflect a commercial balance sheet if private funding through PPP is sought in any measure. Similarly,rather than setting up a Tariff Regulatory Authority,only the need for it is to be examined. This body is the only way a level playing field can be ensured for private investors which cannot be the case if the Railway Board continues to be the regulator. The restructuring of the Railway Board does not mean going out of government control but restructuring on business lines with definitive targets. Creating two additional members would be more appropriate after this process is finalised.

The most severe problem facing Indian Railways is an acute lack of capacity in specified high density routes which is impacting the ability of railways to keep in tune with economic growth. The Dedicated Freight Corridor (DFC) project is therefore the most important project needing to be completed on top most priority. However the budget only talks of awarding contracts in 2012-13,six years after sanction! When the two corridors will get completed has been left open ended. If any project needs a strong push and support it is this or else revenue generation,safety and almost all aspects of railway working will be negatively impacted.

Since revenue generation to the extent needed has not been projected,reduction of expenditure also assumes greater importance. The fuel bill,which is almost 20 per cent of expenditure,can be severely impacted if crude prices go up or price of diesel is decontrolled. Staff costs are the major chunk of expenditure and the induction of nearly 1,00,000 employees can only increase this burden. The induction should be limited to mandatory requirements and safety posts. Reduction of staff strength commensurate with annual attrition should be considered together with increased outsourcing of activities as recommended by various committees.

There is an ambitious plan to tap PPP for development of stations and freight terminals,both laudable objectives. While an SPV has been identified for this work it may be appropriate if one station each from amongst Tier I and II cities is first taken in hand and completed to serve as a demonstrator. Involvement of local bodies and trade,besides professionals in the field of architecture,will need to be associated to make the project a success.

One must commend the minister for outlining the road ahead for Indian Railways but the devil lies in finding the resources this to be done. The importance of identifying the needs is by itself no mean achievement and one hopes that Indian Railways will now take upon themselves the task to turn it around from the brink.

The writer is director (international relations),Asian Institute of Transport Development,New Delhi