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Even as Suresh Prabhu was presenting the Railway Budget, it was in fact Sanjay Dutt who stole the thunder. The actor, released from Pune’s Yerwada Central Jail after serving his sentence, was welcomed like a national liberation hero returning from exile.
While Prabhu would think life sucks, he should be reassured his budget does not.
Higher Expenditure
Even though there is a clamour for seats and berths, and passengers are often wait-listed, the railways carried 123 million fewer people this year. The shift has happened mainly over short-distance travel, where 93 million people have stayed away. If air-conditioned fares were raised, the shift would have been sharper.
External factors have also helped the railways cut costs – mainly lower diesel prices. The provision for replacement of ageing assets has been cut by Rs 2,400 crore and will be reduced by the same amount next year. Yet, the share of expenditure in earnings is stuck at 90 percent. In other words, Indian Railways is spending nine out of every ten rupees they earn; perhaps more, because liabilities are not fully accounted for in its book-keeping.
- External factors - like lower diesel prices - have helped the railways cut costs.
- Railways’ share of expenditure in earnings is stuck at 90 percent, meaning it’s spending nine out of every ten rupees earned.
- Seventh pay commision payout of Rs 32,000 crore next year, will put expenditure under further stress.
- Prabhu claims he has awarded double the amount of contracts (Rs 24,000 crore) in 15 months than were given in the previous six years.
- The capital expenditure target of Rs 121,000 crore is quite a leap.
Prabhu Understands Finance
Next year may get worse expenditure-wise because of the seventh pay commission payout of Rs 32,000 crore. The minister expects revenue to rise by 10 percent (up by 7 percent this year) and expenditure to grow by 12 percent. Apart from the tricks mentioned, he will have to be tough on spending.
But the minister means well and works according to a plan. Lalu Prasad during UPA I had been able to boost the finances of the railways. Domestic and global economic conditions had helped him. The ministers who followed were eminently forgettable, with the exception of Dinesh Trivedi, who was a candle in the wind. Without Prabhu’s exertions, the railways would have been in an even worse shape.
Being a chartered accountant himself, Prabhu understands finance. Shunning the conservatism of railway board mandarins, he is willing to borrow ─ and repay from the additional earnings generated. The railways can haul bulky goods over long distances at low cost. This is an advantage that trucks do not have. Nearly 90 percent of railway freight comes from 10 commodities.
But railways lose out to trucks when re-transportation is involved. It intends to set up logistics parks and offer end-to-end services to customers through containers or trucks that roll on to flat-bed wagons and roll-off at railways sidings and proceed to their destinations.
The Good News
The two freight-only corridors between Mumbai, Delhi and Kolkata will be game changers. Once commissioned in 2019, goods traffic will shift, leaving the existing network for faster, frequent and varied passenger services. Prabhu is implementing these corridors in mission mode.
All civil works contracts will be awarded by March-end. He claims he has awarded double the amount of contracts (Rs 24,000 crore) in 15 months than were given in the previous six years. If he manages to stick to the 2019 deadline – which will be quite a surprise in the light of experience – the railways will have to chase freight. From rationing mode, it will have to become marketing oriented.
New freight corridors have been announced between Delhi and Chennai, Mumbai and Kharagpur and Kharapur and Vijayawada. In addition, about 2,000 km of track will be electrified, and 2,800 km of broad gauge track will be laid in the coming year. The capital expenditure target is Rs 121,000 crore, which is quite a leap. It should boost the economy like Prime Minister Atal Behari Vajpayee’s highway development programme when South-east Asian economies contracted.
Raising Money
Prabhu is also tapping funds unconventionally. In February, the cabinet gave approval for the railways’ joint venture with state governments. Apart from bringing in money, they will help erode the monopoly of the railways without raising the hackles of unions. Port connectivity projects are also being implemented on shared cost basis with states.
About 400 high-passenger-revenue earning stations will be developed in private partnership by leasing out real estate and selling outdoor advertising space.
Change is Palpable
Since Prabhu took over in November 2014, there is a visible improvement in sanitation at stations. The minister gets feedback on Twitter which helps him keep a watch on staff. Housekeeping of about 600 trains has been outsourced and another 400 will be added to the list. Vacuum suction toilets were installed for the first time on the Dibrugarh Rajdhani.
During the past few railways journeys, this correspondent has not come across rats and roaches – which is a relief! Feedback about comfort, cleanliness, quality of food and punctuality has been sought through interactive voice response system.
According to officials, the minister intends to bring a bill in parliament’s monsoon session to set up a regulator for tariffs, dispute resolution, market development and promotion of competition. If the bill gets stuck, a truncated regulator might be established through executive order at a neutral venue like the Competition Commission, officials say.
Prabhu has proposed re-organisation of the railway board. Overall, this Budget is a continuation of Prabhu’s previous one. It has a strategy for the railways to lift the economy and not pull it down. Sanjay Dutt may have got the applause but Suresh Prabhu definitely deserves it.
(Vivian Fernandes is editor of www.smartindianagricuture.in)
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