New Delhi: Presenting her third railway budget and the first of the new government that took over in May, rail minister Mamata Banerjee surprised many people when she flagged the sharp fiscal deterioration in the department—a flashback to her first stint at the job, when Indian Railways hit a financial crisis forcing it to default on its annual dividend payments to the Union government.
Banerjee said that her ministry would soon bring out a “white paper”, or study, explaining the state of the department’s finances.
Drawing down: Mamata Banerjee. Rajkumar / Mint
While Banerjee hasn’t set a deadline for the presentation of the white paper, the minister has already blown a hole in the claim of her predecessor, Lalu Prasad, that he had rescued the railways from fiscal ruin and also set it on the path of a sustained recovery.
In fact, as Mint had reported on 6 June, portions of Banerjee’s budget speech that were edited out provided data to back the new rail minister’s claim.
One such paragraph said that the balances in several railway funds parked with the Reserve Bank of India were projected to decline from Rs22,279 crore in 2007-08 to Rs8,361 crore by 2009-10.
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“To fund our massive network expansion programme, completion of capacity enhancement works and timely replacement of overaged assets, the Plan Expenditure has been sustained in the two years of 2008-09 and 2009-10 through draw-down from our accumulated fund balances, which may not be possible in the future,” the version of the speech which was not read said.
The Lalu Prasad years
The story of the railways till Prasad took charge was that of a bloated and direction-less public sector undertaking. However, the five years Prasad was at the helm saw a dramatic turnaround in the organization’s basic financial metrics. When he took charge, the railways was spending Rs91 to earn Rs100—often referred to as the operating ratio, or the proportion of expenses to income. Just before he demited office in 2009, the railways was spending Rs88.30 to earn Rs100, leaving the country’s biggest transporter with a tidy surplus. In his interim budget, Prasad projected that this would slip, but marginally to Rs89.90.
But, as Banerjee found out, the projections were conservative and she has now estimated that the number will rise to Rs92.50—the worst since 2002-03.
The debate, consequently, has shifted to how Prasad effected the improvement.
According to Sudhir Kumar, the officer on special duty who is credited with spearheading the strategy to transform the railways, it was managed by “focusing on what works”. In his book Bankruptcy to Billions: How the Indian Railways Transformed (co-authored with Shagun Mehrotra), Kumar claims that the organization went from near banktruptcy to $6 billion (Rs29,640 crore) in surplus.
Lalu Prasad could not be reached for comment and Kumar did not respond to a call made to his office.