New Delhi: Presenting his fifth budget, railway minister Lalu Prasad succeeded in playing, at once, both the old-world socialist and new-age capitalist—and he did this without ruffling too many feathers in the political establishment.
Taking a cue from last year’s rail budget, Prasad accelerated the process of private sector participation in the railways’ big-ticket spending programme over the next five years and announced a blueprint for monetizing its land assets. Of the Rs2.5 trillion the railways requires over the next five years, Rs1 trillion will come from public-private partnership, or PPP, schemes.
In 2008-09, the minister proposes to spend Rs37,500 crore, an increase of more than 18% compared to 2007-08. This number doesn’t include the Rs25,000 crore he is seeking to raise through partnerships with the private sector.
CALCULATED MOVES (Graphic)
To mollify his core constituency, aam aadmi (the man in the street) Prasad has proffered a range of benefits to the rail passenger, including a cut in fares—and thereby preserved his record of having served out his entire tenure without raising fares—and better and cleaner trains and stations.
By doing this, the minister was clearly playing on the growing weariness among passengers towards dirty trains and overcrowded stations.
Prasad has promised elimination of queues for tickets in two years, cleaner and green toilets, special facilities for the old, physically challenged and AIDS patients, electronic display boards that will reflect arrival and departure of trains, multi-level car parking at stations, online reporting of reservation availability, e-tickets even for wait-listed passengers, and 10 new Garib Raths (air-conditioned trains for the poorer sections of the populace).
“The thrust of the budget is in the right area. The aim (of the ministry) was to absorb the costs and pass on the benefits to customers through more efficient use of resources,” said former member (electrical) of the railways’ top management body, Railway Board, Ramesh Chandra.
Chandra also said that PPPs take time to be formed because “they are under intense scrutiny” and that drafting of concession agreements (between the government and the private firm) takes time.
Prasad has invited private firms to develop important railway stations, set up locomotive and coach factories and build logistics parks. In addition, the minister said that Rail Land Development Authority will raise Rs4,000 crore by leveraging surplus land with the railways.
The minister has also proposed turning over lucrative port linkage freight lines to the private sector using the PPP model.
Despite a slowing economy, the railways has managed to sustain its financial performance, providing the basis for the minister to finance giveaways ahead of elections to eight state assemblies this year and a general election in 2009.
The famed turnaround of the railways touched a new milestone on Tuesday with a cash surplus of Rs25,000 crore compared with Rs20,000 crore last fiscal. Operating ratio—a measure of the share of expenses on every rupee earned—has improved to 76.3% from 78.7% last fiscal.
In a press conference, Railway Board chairman C.K. Jena said that the improved performance of the railways this year was once again on account of a better performance of its freight business.
Revenue from freight in 2007-08 crossed Rs47,743 crore and surpassed budget estimates of Rs46,943 crore. Receipts from passenger traffic matched the budgeted estimate of Rs20,075 crore, while gross traffic receipts were projected higher at Rs72,755 crore, compared with the target of Rs71,318 crore.
However, with the railways already operating at peak capacity, the ability to sustain the current growth trends is becoming increasingly difficult.
The annual growth in freight earnings of the railways has decelerated gradually from 15.17% in 2005-06, a year after Prasad took charge. In 2008-09, growth in traffic earnings is projected to grow at 9.4%.
Similarly, growth in freight traffic has slowed from the peak of 9.6% in 2005-06. In the next year it is projected to grow at 7.1%.
Gross traffic receipts for 2008-09 are expected to be Rs81,901 crore. Freight revenues will touch Rs52,700 crore and passenger earnings, Rs21,681 crore.
Even while it has set out an ambitious investment plan to ratchet up its freight carrying capacity with the development of the Dedicated Freight Corridor, or DFC, the railways is also looking at short and medium term fixes.
Jena said that the Railway Board had got the final approval for the DFC from the cabinet.
The Japan Bank of International Cooperation will fund only the western corridor while the eastern arm of the freight line project will be funded through “multilateral agencies” apart from gross budgetary support and internal generation, he added.
The minister also introduced a wagon leasing policy which will allow private firms to lease wagons of superior design and capacity to the railways.
“It is a growth oriented budget and reflects the confidence that IR (Indian Railways) has gained in successfully turning around its operations which is reflected by the Rs25,000 crore profit that they have generated in the current year,” said Rajiv Jyoti, the head of Bombardier’s Indian arm.