RAIL BUDGET 2014-15

A decade on the rails with UPA

A rise in freight earnings was celebrated as management wizardry when in reality,it was an emergency one-time measure that boosted earnings over a limited period

When the Railway Minister presented the ‘Vote-on-Account’ in Parliament on February 12, for the first time in more than three decades, Indian Railways (IR) would have completed almost 10 years under one political dispensation, albeit a coalition. How far has this decade of relative political stability impacted positively (and negatively) on the performance of the Railways? Further, at a time when most of the major political parties must be honing their election manifestos ahead of the election in April/May 2014, are there any lessons for the new government that will be in power after the general election this year?

IR’s performance has become closely linked to the personality of its political head, namely the Minister of Railways. Continuity at that level therefore becomes crucial for any meaningful enunciation of long-term goals and implementation strategies. While the tenure of the first incumbent lasted the full term of UPA-1, thereafter the turnover has been rather rapid for various reasons, progressively reducing from two years to an average of about seven months each for the four ministers that followed. One minister was unceremoniously sacked in the midst of a budget session for daring to raise passenger fares. Another had to step down in ignominy under a cloud of corruption charges; surely not the ideal way a crucial economic ministry and the country’s premier transport organisation should have been handled. Any future government needs to treat the railways portfolio with greater seriousness and certainly not as a sop for managing coalition pressures.

Impressive performance, but…

Despite the relative turbulence at the top, particularly over the last five years, the physical performance of IR has not been inconsiderable. Compared to 2004-05, originating freight loading is set to increase by 74.4 per cent in 2013-14, freight net tonne km by 62 per cent and passenger km by 93.9 per cent. 712 trains were extended and frequencies of 306 trains were increased. All this while the track km increased by 38 per cent and the route km by only 3.1 per cent, indicating a thrust on doubling rather than new lines. The number of accidents dropped sharply by 48 per cent from 234 during 2004-05 to 121 in 2012-13 and 87 up to December 2013.

The performance appears impressive, yet when viewed against Railways’ own Vision 2020, it lags far behind (except in the case of accidents). For example, Vision 2020 had projected an originating freight loading of 2,165 MT by 2019-20, which means an ‘asking rate’ of about 150 MT incremental loading annually from now till 2020 — a virtual impossibility. The case was similar for other performance parameters.

The decade that has gone by has perhaps seen a record number of reports by various Committees and sundry other documents. Starting with the One Man Committee (2004) on the Godhra train fire (Disclosure: this writer was one of the technical experts that assisted that Committee) whose final report (2006) has never seen the light of the day, there was Vision 2020 (2009), a White Paper (2009) to clean up the accounting legerdemain of the previous regime, the Kakodkar Committee Report on rail safety (2012), closely followed by the Sam Pitroda Committee on modernisation of Railways (2012). Going back a few years, there was the Rakesh Mohan Committee Report on organisational restructuring and the report of the Railway Safety Review Committee (Khanna Committee) around the turn of the millennium, apart from a clutch of Status Papers and White Papers. All the wisdom necessary is available in these reports.

Lesson for any new government: Do not appoint any more committees and waste public funds. Also never appoint a committee to score political points.

Nothing exposed the influence of politics’ recent popular lore as the ‘turnaround miracle’ of the organisation, roughly spanning the period 2005-2008. A spurt in the freight earnings by loading wagons beyond their marked carrying capacity was celebrated as a revolutionary breakthrough and management wizardry, instead of seeing it as what it essentially was: an emergency one-time measure that boosted freight earnings over a limited period. Unfortunately the “success” of this initiative also spawned some very imaginative accounting practices that culminated in projecting a cash surplus of almost Rs.90,000 crore at the beginning of 2009. It is another matter that the regime that followed commissioned a White Paper exposing the discrepancies in the accounting procedures.

Further, amidst the euphoria generated, two important factors that helped the ‘turnaround’ were ignored (i) the fact that the extra loading would have been unthinkable had the huge backlog of track renewals not been overtaken by that time, helped to a large extent by the extra funds made available through the Special Railway Safety Fund, a singular initiative of the preceding administration and; (ii) the wholly fortuitous circumstance of a booming economy.

The fickleness of the ‘turnaround’ was quickly exposed once the impact of the Sixth Pay Commission began to be felt accompanied by a downturn in the global economy. An oft-repeated promise made, but never fulfilled (fortunately) by successive Railway ministers, was “to fill all vacancies” within a particular time frame, say one year. It may be relevant to mention that the increase in traffic over the last decade referred to earlier was handled even as the staff on roll reduced from 14.2 lakh in 2004-05 to 13.1 lakh by March 31, 2013, a reduction of more than 1 lakh.

Why is it that despite a fairly impressive performance in physical terms there is a persisting dissatisfaction with the Railways performance amongst the public?

There are several reasons: Poor quality of service in terms of cleanliness, punctuality, promptness, courtesy and disaster management; inadequate capacity on the passenger front, which hopefully will ease somewhat with the commissioning of the Dedicated Freight Corridors; and the eagerness to introduce new train services, which has stretched the Railways’ resources literally to breaking point. While it may be politically inexpedient to put a total embargo on new trains (as recommended by the Kakodkar Committee), it will be a wise policy for the new government to restrict the number to the bare minimum each year with the condition that a new service will be introduced only after a corresponding withdrawal of poorly patronised train services.

Three recent reports that deal with investments are the Vision 2020 (2009), the Kakodkar Committee Report (2012) on rail safety and the Sam Pitroda Committee Report on modernisation. The first two reports envisage an annual Gross Budgetary Support (GBS) from central exchequer of Rs.60,000 crore. With the highest GBS received so far (2013-14) being a little over Rs.27,000 crore (less than 50 per cent of the projected figure), the impracticality of the projections made in these two reports should be obvious.

The looming crisis

Finally, a note of warning for the immediate future: gear up for a major financial crisis in the Railways around 2016-17 when the effects of recommendations of the 7th Commission will kick in. While the Dedicated Freight Corridor projects need to be progressed on top priority, it is highly unlikely that the boost in freight revenues therefrom will be available in time to neutralise the effects of the 7th Pay Commission recommendations. So, prepare right now for a bail-out package, as was done through the Special Railway Safety Fund more than a decade ago.

61 escalators planned; AC EMU to be launched in Mumbai

Among the other passenger-friendly initiatives announced by Railway Minister Mallikarjun Kharge in his interim Railway Budget, 61 escalators will be installed and an air-conditioned EMU service will be launched in Mumbai in July.

The Mumbai-Ahmedabad corridor is likely to roll out after the completion of the joint feasibility study for a high-speed corridor. Semi-high speed trains on select routes are also on the anvil.

Arunachal Pradesh and Meghalaya will be put on the rail map with the completion of the Harmati-Naharlagun and Dudhnoi-Mehendipathar new lines by March. The northeast will also benefit from the conversion of the 510-km Rangiya-Murkongselek section to broad gauge.

Two premium trains have been planned from Delhi and Chennai to the northeast to cope with the rush.

Concerned at the recent incidents of fire, the Railways intend to go for a multi-tier protection for electric circuit and portable fire extinguishers on AC coaches, locos, guard vans and pantry cars, and replace LPG cooking appliances with electric induction. Mr. Kharge was as cursory in summing up the UPA government’s achievements as he was in outlining the course of action for the 12th Plan period with an impassioned plea to “take a serious note of its urgent investment and other needs…it is critical for the Railways itself to be restored to a more central place in the national planning.” Most of the targets for 2013-14 were missed, but for freight earnings.

A formal exercise

Being an interim budget and a vote on account for four months, Railway Minister Mallikarjun Kharge’s maiden budget could not have gone farther than it has. It was only a holding operation to enable the Indian Railways to spend for the first four months of the next financial year, till a new Railway Minister presents a full-fledged budget for 2014-15. Like the Union government, the Indian Railways has been on autopilot for some time, given the scandals and crises that have confronted UPA-II. Despite these limitations, the Railways have done reasonably well, considering the slowdown in the economy. Freight loading and operations have done well, but there has been a dent in passenger traffic, more so in terms of earnings. Mr. Kharge appears confident of finishing the current fiscal year with a surplus of about Rs.8,000-plus crore. One has to wait and see if the current trend is sustained and if that becomes possible. All that the Minister could announce were 73 new trains, extension of rail linkages to the Northeast, 24 surveys for new lines or doubling projects, and a new generation of superfast trains with ‘dynamic fares.’ He has taken a leaf out of the airlines to introduce this concept of dynamic pricing, where passengers could get tickets at a premium price, depending on demand.

The Railway Minister has projected an annual plan of Rs.64,305 crore, of which Rs.30,223 crore will come from Central budgetary support. There will be no increase in freight or passenger fares. Now that a Railway Tariff Authority will become functional in the coming year, any change in the fare structure will be handled by it, taking the difficult political decisions out of the hands of the Minister or the government. Unfortunately, the operating ratio is still hovering around 90 per cent, creating serious concerns about efficiency. As for the political leadership, unlike UPA-I, where one Railway Minister — Lalu Prasad — continued through the innings, UPA-II has seen a huge turnround of Railway Ministers on account of coalition politics. After 18 years, a Congress Minister has presented the budget, even though it is an interim budget. Given the importance of the Indian Railways, it is to be hoped that the next government would ensure continuity in terms of policy and administration. Mr. Kharge has announced a few ‘green initiatives,’ but expects the private sector to chip in by means of corporate social responsibility programmes. But there have to be innovative plans for the private sector to invest in the railway system. Any future public-private partnership in the Railways will depend on what is on offer, and a careful strategy to attract investments needs to be worked out.