The budget of 2018-19 is possibly going to be the last of the National Democratic Alliance (NDA) government’s regular budgets. Traditionally the fifth year’s budget (in 2019) is going to be a vote-on-account where all big-ticket decisions have to be eschewed. A proper assessment of this budget should hence be anchored on this premise.
The finance minister this year spoke with much more details than last year on allocation of funds for the railways under certain important heads. However, he concentrated more on planned expenditure, especially on safety items, expansion of infrastructure and usage of IT to improve passenger comforts on the system. If one acknowledges that the railways in India should function more as a commercial organization, it is imperative that an eye on growth in its earnings must always be kept. Indian Railways’ earnings have grown this year at 6.2%, a reversal in fortune from the previous year. Probably the fact that this was lower than the budget target of 10% growth dissuaded the FM from mentioning it.
One thing is clear—that the second-class unreserved tickets, which account for nearly 88% of the non-suburban passengers, continue to be cheaper than the price they commanded in 2004. And the same position is likely to continue beyond 2019 as well. Much of the travails of the railways’ poor economic health is rooted on this one factor alone. Flexi-pricing of AC fares is giving a good contribution to the kitty, but a modest increase of only 5% in second-class fares can deliver an even bigger contribution without any contortions associated with flexi-pricing. While subsidies in the oil sector have been completely withdrawn without a murmur from any segment of our society, a resolute effort is called for to gradually reduce the subsidy in this rail segment which has led to high rail freight rates knocking the railways off its perch as the prime mover of freight traffic in the country.
A mismatched rail capacity vis-à-vis traffic offerings has throttled industrial growth. A lot of good work has been initiated by this government to enhance rail capacity in the past three years. Last year, the budget had provided for Rs55,000 crore as gross budgetary support (GBS) , all of which was to go for improving capacity in the system. It was, hence, dismaying to see that the railways could utilize only Rs40,000 crore of it. It is hoped that the Rs53,000 crore of GBS planned, is gainfully utilized to create capacity on congested routes to improve profitability in the coming years.
After a hiatus of two years, the freight on rail is exhibiting signs of buoyancy. If this segment is not used to cross-subsidize the passenger segment, it is possible that Indian Railways may start regaining its lost share of freight in cement, chemicals, foodgrain and certain other high-rated commodities which traditionally moved on rail and disembarked only due to the unpredictability of wagon supplies and poor service, both offshoots of capacity crunch. If gross domestic product (GDP) is expected to grow at 7.5%, the railways should plan for a freight growth of 8.5-9%. In the four years of its reign, the NDA has pumped over Rs3 trillion of capital into the railways. The effect of such investment should be discernible in a healthy freight growth.
A shift in modal share of freight traffic toward rail will not only shore up the railways’ finances, but also assist efforts to curb greenhouse gas (GHG) emissions. Ever since the US has vacated the leadership space in climate change mitigation efforts, the world is looking up to India to show the way. A strong performance by the railways—the best suited mode of transportation to reduce GHG emission—will support India’s claim to occupy that stage.
Establishment of a rail university is a step in the right direction. China has modernized its rail infrastructure on a strong foundation provided by four rail universities that it had established in 1990s. Any modernization parachuted from top is going to be transient in nature. There is a need to link the research wing of the Research Designs and Standards Organisation with this university to create synergy.
On the whole, the railways has done well in the current year, reversing the trend of lacklustre performances of the previous years. The time is ripe. There is a zing in the atmosphere. For the Indian Railways, it is the time to fly.
Vivek Sahai is former Railway Board chairman and distinguished fellow at Observer Research Foundation (Mumbai-Chapter).
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