The Railway Budget for 2007-08 is a mixed bag. It has some commendable achievements to report and also some progressive features, which bode well for Indian Railways (IR) on the one hand, but also some major concerns which, if not addressed in time, could seriously compromise the current upswing in the fortunes of this national undertaking.
Both physical as well as financial parameters during 2006-07 have registered a remarkable buoyancy which is reflected in the operating ratio coming down to a level below 80% after a very long time. Both incremental tonnage as well as operating surpluses are expected to surpass the Budget estimates. The surplus of Rs20,000 crore projected excludes about Rs4,200 crore each, on account of dividend outgo and depreciation leaving a net surplus of close to Rs12,000 crore, which certainly is no mean achievement. The use of information technology (IT) to bring in customer friendly-features in passenger booking arrangements is another feather in the cap of the railway minister. The reduction in freight rates is another welcome step and could be a valuable anti-inflationary measure.
On the debit side, the proposal to reduce the passenger fares across the board is highly retrograde. While the reduction in fares of AC1 and AC2 classes could be justified in order to meet competition from airlines there is absolutely no justification for reducing the tariffs for II-ordinary, II-sleeper and AC3 classes. This is a populist measure and would in the medium term erode the operating surpluses since scope for raising freight rates will not be possible in future at all due to market forces.
There are, however, certain major concerns which relate to the long-term sustainability of IR in general, and the current upswing in their fortunes, in particular. The most important challenge before IR is to create transport capacity ahead of demand to, at least, match the projected GDP growth rate of 8-9%, if not more. With the special purpose vehicle to build the dedicated freight corridors (DFC) still on the drawing board any quantum increase in capacity is not in sight for another seven to 10 years.
Since the present buoyancy is entirely due to the ability of IR to pick up the traffic on offer to a substantial extent, its sustainability will depend to a large extent on the improved productivity of the available network in the interim period.
Overpowering of freight trains by raising the power/load factor to at least the same level as for express passenger services can raise the average speeds of freight trains from the present level of 30kmph to at least 50kmph with obvious improvement in throughput across congested sections.
This step would require corresponding complementary strategies like making freight rolling stock fit to run at 100kmph and monitoring speed restrictions on critical sections to remain within international norms through improved mechanized maintenance practices.
In addition, line capacity works to decongest the existing network through doubling/tripling/quadrupling should be accorded the highest priority. All operating surpluses should, therefore, be utilized on line capacity augmentation works of the above nature and not frittered away on unproductive investments.
Another concern is that the reduction in unit costs so far is largely attributable to the significant incremental traffic lifted through operating improvements and additional revenues generated due to increase in axle-loads and not due to any spectacular or deliberate strategy to cut costs. This needs to be a major plank to increase the competitive strength vis-à-vis other modes of transport.
A marketing strategy to develop new streams of business-like automobile traffic, parcel traffic and white goods traffic has also not been put in place ahead of the commissioning of the DFC in order to augment revenue generation capacity of the network and needs to be a priority area.
The current euphoria on the significant increase in internal generation of revenues has to be tempered and the government must appreciate that while internal generation and extra budgetary resources should be fully leveraged no railway system in the world can build its basic fixed infrastructure without budgetary support.
(The author is former Member (Traffic) in the Railway Board)