The debonair minister needs to pull up the socks to improve operational performance on a war footing before accomplishing engineering marvels
xIndian Railways, headed by technocrat minister Ashwini Vaishnaw, always takes to Twitter to marvel at the technological leaps the system is now taking, and recently showcased the “trial run of train through another engineering marvel: metro rail tunnel and station under the Hooghly river”. Netizens, who react to such stupendous achievements in their own weird ways, sought running of trains on time sans hassles for the travelling public! The minister, not a politician by instinct or intellect, presents himself as a sophisticated person unlike famous rail ministers of the past, including Lalu Prasad Yadav who achieved a turnaround in his tenure by his rustic tactics and techniques that were construed as antics! Cut to the real world of parliamentary democracy: even as the House got disrupted due to several distractions in the second leg of the budget session with even the budget getting passed in a jiffy, a report of the Standing Committee on Railways was laid with warts and all, mostly warts.
The Standing Committee, composed of members of the Lok Sabha and the Rajya Sabha with BJP member and former Minister Radha Mohan Singh as chairman, in the introductory chapter extolled the Railways, claiming that the aim of the government is to make the system the growth engine of the economy. This is borne out by the increasing investments and introduction of modern technology while focusing on safety, speed and services to passengers. This is also evident from the increasing trend of capex (capital expenditure) with infrastructure creation; augmentation and modernisation remain the mantra for the Railways. Decentralisation of functions to zonal heads in recent times, it said, had borne fruit in terms of the delivery of projects such as the pace of construction of railway lines improving from 4 km per day in 2009-14 to 11 km per day currently!
It is interesting to note from the intro that the Railways have made a momentous plan of expansion in infrastructure and network by fiscal 2028 so that freight loading in absolute tonnage of 3000 metric tonnes (mt) could be compassed by fiscal 2030 (Mission 3000 MT). With this all-purpose aim, over 1,200 works have been identified/prioritised to be completed within five years with projected capex of `8.45 lakh crore, which are at various stages of execution. In a written reply to a query in the Lok Sabha on March 29, Vaishnaw said that during 2014-22, across the Railways, 20,628 km sections (3970 km new lines, 5,507 km gauge conversion and 11,151 km doubling) had been commissioned at an average of 2579 km/year, which is 70% more than the average commissioning during 2009-2014 (1520 km/year), dwarfing the achievements of Lalu and Mamata Banerjee’s tenures! More tellingly, the capex has been increased substantially from an average annual of `58,719 crore annually during 2014-15 to `2, 60,200 crore for 2023-24 (budget expenditure). It may be recalled that freight loading ranged from 1159.55 mt in 2017-18 to 1415.87 mt in 2021-22 when the system suffered from the pandemic pangs, both in passenger and in freight earnings. The pity is that though no periodic comparison of rail and road share in total freight movement is done, the modal share of railways in freight was 27%-28% in fiscal 2018-19!
Now that the system is stuffed with a massive flow of funds for a dream run, it is germane to note how the investment is being made. Since 1987-88, the Indian Railways Finance Corporation (IRFC), a public-sector undertaking under the administrative control of the Rail Ministry, has been mobilising market borrowings to finance capital expenditure. Market funds so raised by IRFC constitute extra budgetary resources (EBR) for railway plans and are deployed in rolling stocks and projects which are leased by IRFC to the Railways. But as the ambition of the system got amplified by the Modi government in its first tenure itself, a source of funding, namely EBR (Institutional Finance) or EBR-IF, was introduced from fiscal 2015-16. These long-term funds funnelled from institutions such as LIC are utilised to finance throughput enhancement projects of the railways like doubling and electrification, which are otherwise sparsely funded due to resource constraints. So, under whatever heads investment is made, they are mostly heavily borrowed funds with interest liability staring like the elephant in the room and assets turning into ambrosia after a lag depending on market dynamics.
Yet another arm Rashtriya Rail Sanraksha Kosh (RRSK) was created in 2017-18 for five years to ring-fence funds for execution of works for renewal/ replacement with safety related ramifications with annual contribution of `20,000 crore (`15,000 crore from Gross Budgetary Support (GBS) and `5,000 crore from internal resources of the Railways). The report, while lauding the approval of the government to extend RRSK for another five years beyond 2021-22 with a contribution of `45,000 crore from GBS, did not desist from reprimanding the Railways for not meeting the target of earmarked allocations during the past five years. Thus, in 2017-18, `16,090 crore were spent against the revised estimate of `20,000 crore and in 2021-22 too, the railways have been short of full spending of `25,000 crore and spent only `24,731.53 crore, with its own contribution of `5,000 crore annually shrinking in amount year after year!
Drawing attention to the dismal trend of a gradual shortfall in the generation of internal resources during the past several years, the House panel deplored the resultant increasing reliance on the GBS from the exchequer and extra budgetary support, that is heavy borrowings, which do not redound to the financial health of the system. It illustrated this concern, stating that in 2019-20, actual internal revenue generation was `1,685 crore, which was 1.14% of the total capex. While 2020-21 marked a rising trend of `2,082 crore at 1.33% of the outlay, this dipped to `1,694 crore for 2021-22, which is just 0.88% of the CAPEX. For 2022-23, the revised figure was `4,300 crore, barely 1.71% of the total outlay of `2,45,300 crore; the actual was `1,377 crore or 0.56% of the huge plan size!
While the Railways ascribed the jejune show in internal resource generation to sharp spurts in working and operating expenses, such as staff cost and fuel bills due to higher volumes, the panel rebuked it, noting that this persistent decline was a sign of “internal deficiencies in overall planning and management of the Railways”. So the debonair minister needs to pull up the socks to introspect and improve operational performance on a war footing before accomplishing engineering marvels to delight spectators. In this context, the committee zeroed in on several options such as tapping non-fare revenue such as advertisement at rail stations (hoardings), trains, railway bridges and other assets, monetisation of surplus railway land, setting up of ATMs at railway stations, offering digital content on trains and platforms, and mobile assets.
The decline in generating enough internal resources led the Railways down the dangerous track to fund capital expenditure through EBR and borrowing binges. The Committee highlighted how the Railways procured assets through IRFC on lease, for which total outstanding principal as on March 31, 2022, stood at a staggering `4.3 lakh crore, arising out of rolling stocks worth `1.8 lakh crore and `2.5 lakh crore (raised by IRFC) for infrastructure projects. In order to curb the attendant astronomical cost of borrowings in the system, the committee urged the Railways to avail itself of the enhanced GBS with “strict fiscal discipline and robust monitoring and plug loopholes and keep a vigil on non-remunerative expenditure so that reliance on the borrowing component of EBR is gradually put to a halt”. Brave words to swallow for a suave minister to practice prudence in living within means and making a qualitative difference to the users!
(G. Srinivasan is a senior economic journalist based in New Delhi)