New Delhi: The Railway Budget for 2009-10 had a fair share of populist and reformist measures, but it was actually less about populism or reforms and more about a complete disregard for the finances of India’s largest carrier.
Presenting what was her first rail budget as part of the United Progressive Alliance (UPA) and her third overall, Mamata Banerjee, projected a sharp deterioration in the state of the railways’ finances—wherein it will now spend Rs92.50 to earn Rs100—back to levels last seen in 2000-01.
Nor has she done anything to reverse the erosion of the department’s reserves.
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The budget has come smack in the middle of what is a critical phase for the Indian economy as it recovers from the global macroeconomic shocks that sharply reversed growth trends in the last one year. Indian Railways’ freight business reflects this recovery.
“In the first quarter (April-June) of the current fiscal, freight growth was over 5%. In June, it was as much as 9%... There are signs of the economy looking up,” said Railway Board member (traffic) Shri Prakash.
Mamata Banerjee. Ramesh Pathania / Mint
The rail budget was expected to do its bit for the recovery. Instead, it has paid more attention to the “inclusive” credentials of the UPA and Banerjee herself, chief of the Trinamool Congress.
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The minister made her intentions clear in the first lines of her budget speech, with a rhetorical question on whether railway projects were to be measured “only on the scale of economic viability” or whether there was a need “to look at their social viability”.
To be fair to the combative minister, the slowdown in the economy and the legacy of her inheritance crimped her ability to increase expenditure. Banerjee, who has promised a white paper to review the tenure of her predecessor Lalu Prasad, an erstwhile member of the earlier UPA regime, said the drop in the rate of growth of earnings, coupled with the growth in expenses in the years 2007-08 to 2009-10, have deeply affected the railways’ ability to generate investable surplus—which dropped from Rs19,972 crore in 2007-08 to Rs12,560 crore in 2008-09, and is projected to drop to Rs8,631 crore in 2009-10.
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At the same time, Banerjee was as generous as her predecessor in the giveaways. From the madrasa student to the handicapped; from stadia, staff quarters, medical colleges for railway employees to recruitment drives to fill the backlog for scheduled caste and physically handicapped candidates, Banerjee had something for every key constituency.
Ironically, while Banerjee was unabashed in her commitment to socialist ideals, her plans for future expansion are presaged on the ability to leverage private investment through the now fashionable public-private partnership (PPP) model. Her model to get private sector firms to participate in such projects is similar to Prasad’s: Rs1 trillion of the Rs2.5 trillion spending planned in the five years beginning 2008-09 is to accrue from PPP projects.
Banerjee’s budget has envisaged private investment in manufacture of coaches, the creation of nursing colleges, building cold-storage facilities, logistic parks and passenger amenities.
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In addition, her budget seeks to provide private companies access to freight terminals and railway sidings, used by the railways for loading and unloading vehicles, which will help the railways generate more business through the transport of non-bulk commodities.
In a significant move, Banerjee said the Indian Railways would set up a power plant in association with NTPC Ltd, India’s largest power generation utility. This will assure supply of cheap power to the railways, which is the largest consumer of captive power (or power generated by itself) in the country.
In a bid to create an alternative revenue source, the minister also sought to revive the optic fibre cable network project she had proposed in her first railway budget in 2000-01. It was proposed that the railway network should be used as a backbone to create an optic fibre network that can be commercially exploited.
Taking a cue from her predecessor, Banerjee renewed the railways’ commitment to monetize vast land banks to generate resources for the railways and put in place 50 world-class stations, including those at the top metros, which will now host multiplexes.
Conspicuous by their absence in the speech, though, were some large projects proposed by Prasad, such as the two locomotive factories and two coach component factories in Bihar, as well as a coach factory in Kerala.
A railway official, who did not want to be named, said the locomotive projects were likely to be put on the backburner, while pushing for new facilities.
Railway Board chairman S.S. Khurana, however, said a decision on the locomotive projects had not been taken yet.
However, some other board officials acknowledged that the new rail infrastructure corridor could potentially assemble locomotives in the future.
Graphics by Sandeep Bhatnagar / Mint
Asit Ranjan Mishra, K.P. Narayana Kumar and PTI contributed to this story.