While there is no debate that the Indian Railways has been hit by a financial storm called the Sixth Pay Commission, the question is, what next? That, however, is not what is being debated. Instead, a political fight over the balance sheet of the last five years occupies centre stage.
There is no doubt about the dent in finances: Net revenue has crashed from Rs13,431 crore in 2007-08 to an expected (after a dividend payout) Rs2,642 crore in 2009-10. Much of this fall can be attributed to the Rs14,600 crore increase in salary costs due to the pay commission award. As Mint reported on Tuesday, the balances in several railway funds with the Reserve Bank of India are expected to decline from Rs22,279 crore in 2007-08 to Rs8,361 crore this fiscal.
Illustration: Jayachandran / Mint
It has been argued that the magic of the Lalu Prasad years was due to improving efficiency in the use of existing resources. Examples include increasing the tonnage per wagon, and a reduction in the turnaround time for freight trains. This resulted in greater returns for existing investment. But these were one-off gains that came about during a booming economy.
The question that the new minister, Mamata Banerjee, should be addressing is, what next? She is not answering that question. In fact, her budget speech was full of populist measures that had more on the welfare of railway staff and freebies for passengers than fixing the long-term problems faced by the railways.
Most, if not all, problems faced by the railways are structural. These include, to cite two examples, poor earnings from passenger traffic and network congestion.
In 2006-07, the average earning per passenger km was Rs24.75. In contrast, the earning per net tonne km in that year was Rs86.73. The difference between passenger and goods earnings is huge not because of the absolute numbers involved, but because of the mindset in the railway ministry. There is no will to reduce this gap.
Congestion in the railways is another problem: The network is saturated. Yet ministers do not desist from announcing new passenger trains. One solution would be to create dedicated freight corridors meant exclusively for goods trains. Two such corridors have been proposed, in the western and eastern parts of the country. But even if that happens, it will not solve the basic problem: How to increase passenger earning in the absence of political will? In fact, diversion of revenue-generating freight traffic to these corridors may result in loss of revenue on the existing network.
In the railways’ blame game, has Mamata Banerjee lost the bigger picture? Tell us at firstname.lastname@example.org