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Mamata’s train to nowhere

Mamata’s train to nowhere
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First Published: Thu, Feb 25 2010. 12 15 AM IST

Updated: Thu, Feb 25 2010. 12 15 AM IST
New Delhi: Railway minister Mamata Banerjee presented her budget for the next fiscal year, laying down grand ambitions without explaining how they would be paid for, tacitly admitting that she was up against an insurmountable fiscal barrier.
The minister restricted her revenue generation options by keeping passenger and freight rates unchanged. The subsidy on passenger fares is estimated at Rs19,121 crore in the current year. She also had to dip into accumulated savings, a practice that Banerjee had previously condemned when her predecessor Lalu Prasad did the same.
Also See Numbers Game (Graphics)
While the minister’s Vision 2020 document, issued in December, envisages an investment expenditure of Rs14 trillion, or Rs1.4 trillion every year for the next decade, revenue in 2010-11 is estimated at Rs97,722 crore. With Rs88,000 crore absorbed by operational expenses, this leaves less than Rs10,000 crore for investments, well short of the desired amount.
The failure to implement Vision 2020 will hobble the expansion plans of the Indian Railways, which at the least would act as a drag on the country’s ability to sustain 9%-plus growth. The development strategy of the Congress-led United Progressive Alliance (UPA) government depends critically on growth to generate the necessary resources to fund social investments.
At the end of a speech that was was constantly interrupted and lasted a little over two hours—of which long periods were taken in reading out the names of new trains or stations—core issues of funding remained unaddressed, with the minister preferring instead to hold out hope that the private sector would step in to bridge the gap.
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Passenger and freight fares remained untouched even as the financial condition of the national transporter continued to be weak, with the the railways generating a surplus of only Rs951 crore in 2009-10, against its expectations of Rs2,642 crore. A railways official who did not want to be named said the railways had underestimated the impact of the Sixth Pay Commission’s recommendations by as much as Rs14,000 crore.
Meanwhile, the operating ratio or the amount of money the railways spends to earn every Rs100 in revenue rose from the budgeted Rs92.5 last year to Rs94.70.
While freight revenue in 2009-10 increased 9.88% over the year ago period, that from passenger fares rose 9.69%. The Plan outlay has been increased 2.83% to Rs41,426 crore, of which Central support amounts to more than one-third, while borrowings account for 25%.
Passengers travel in an overcrowded train in Patna on Tuesday. Krishna Murari Kishan / Reuters
Interestingly, much of the minister’s pronouncements in the budget are contingent on the actions of others, especially the private sector. A survey of 114 “socially desirable” but financially unviable projects announced in the rail budget depend on final approval by the Planning Commission, which in recent times, has been critical of the ministry’s penchant for announcing unprofitable lines.
Banerjee also proposed the setting up of five rail wagon factories, a rail axle factory and a refrigerated container factory, among others, to be part funded by the private sector. The ministry also said—without giving any details—that it was open to the private sector setting up new railway lines.
A railway official, who did not want to be named, said the 25,000km of new lines announced by the minister in her vision would come at an average cost of Rs7 crore per kilometre, or a total of Rs1.75 trillion.
The railways so far has not been successful in attracting private investment, something Banerjee blamed on red tape. To address this, she set up a task force to clear investment proposals within 100 days.
“We want to speed up projects,” she told reporters after her budget speech.
To be sure, Banerjee did follow through on some of her promises in Vision 2020, budgeting for steep increases in railway lines, electrification and gauge conversion.
Experts were sceptical about the budget’s scope.
“Some of the announcements appear to be tall orders, given the IR’s bureaucracy and administrative sloth,” Jay Shankar, chief economist, Religare Capital Markets Ltd, said in an email. “These include the roll-out of 1,000km of new tracks in FY11, formulation of a special task force to clear business proposals in 100 days, and plans to ensure that every rail crossing is manned in the next five years.”
She continued with her focus on projects located in West Bengal, her home state, which will head for assembly elections next year. She also announced special trains, the setting up of cultural and heritage centres and concessional fares for the transport of kerosene and foodgrains.
Banerjee also announced her intention of setting up a National High Speed Rail Authority as well as proposals for a dedicated passenger corridor to be called the Golden Rail Corridor. She added 101 new suburban services, 54 new trains and extended 21 others.
She also announced the setting up of 522 hospitals and diagnostic centres and 50 Kendriya Vidyalayas (central schools) in partnership with the ministries of health and human resources development.
Banerjee also promised a modified scheme for investment in wagons and 10 automobile and ancillary hubs.
Graphics by Yogesh Kumar/Mint
rahul.c@livemint.com
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First Published: Thu, Feb 25 2010. 12 15 AM IST