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A missed opportunity

Indian Railways has missed an opportunity which it may well rue in the coming years
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First Published: Tue, Feb 26 2013. 07 50 PM IST
The maximum cut of `2,500 crore has come in DRF, which finances replacement of assets, primarily track. Not a very good step when safety is considered paramount. Photo: Ramesh Pathania/Mint
The maximum cut of Rs.2,500 crore has come in DRF, which finances replacement of assets, primarily track. Not a very good step when safety is considered paramount. Photo: Ramesh Pathania/Mint
Updated: Tue, Feb 26 2013. 08 46 PM IST
The railway budget, at first glance, appears to be an exercise in “business as usual”. There are hardly any big-ticket announcements, no vision laid out of where the organization needs to go, no panacea prescribed for taking it to the next level. Sure, it is a matter of relief that fares have not been raised (however temporary that may be), but the imposition of a fuel adjustment component (FAC) of around 5% on freight could be inflationary.
This first railway budget by a Congress railway minister in 17 years, however, shows some measure of fiscal prudence. The minister’s speech actually emphasizes the need for financial discipline. This is a departure from the emphasis in the recent past.
To put the budget in context, the financial backdrop against which it was framed was not quite rosy. In fact, the roll-back of the passenger fare increases in 2012, the reduced freight loading on account of the economic downturn and the shortage of wagons in some areas has forced Indian Railways to cut a hefty Rs.7,648 crore from the combined budget estimates for the depreciation reserve fund (DRF), the development fund (DF) and capital fund at the revised estimates stage.
The maximum cut of Rs.2,500 crore has come in DRF, which finances replacement of assets, primarily track. Not a very good step when safety is considered paramount.
There was also the additional debt burden of Rs.3,000 crore by way of a loan from the finance ministry to cover the gap between receipts and expenditure in 2011-12. Not only has Indian Railways been able to pay back the entire loan, along with interest, in 2012-13, it is hoping to achieve an excess of about Rs.10,400 crore by March-end this year. This is commendable and is a reflection of the tight controls on expenditure exercised by the minister and his officers.
Of course, the books have been balanced by some worrying compromises. Expenditure on signal and telecommunication works is Rs.953 crore less than the budget estimate, on track renewal Rs.661 crore less and on bridge works Rs.124 crore less. All these will have a direct bearing on safety. Also disturbing is the Rs.128 crore reduction of spending under traffic facilities, works which add to the railways’ capacity to carry more traffic. In fact, spending under this plan head should be maximized as Indian Railways desperately needs to increase its capacity.
The dedicated freight corridor (DFC) is one project which will give Indian Railways’ traffic capacity a quantum leap. The progress on it is very patchy. The minister limited his reference to the project only in terms of finalizing some contracts. There was no emphasis on urgency, no desire to take up the project on mission mode. This will ultimately hurt Indian Railways financially. The creation of a railway liability reserve fund (RLRF) is a step in the right direction. However, the basis for appropriating Rs.4,163 crore to it is not explained. In fact, it is time Indian Railways got out of its ad hocism in appropriating amounts to DRF, DF, capital fund and the new RLRF. The ministry will do well to set up an expert committee to go into the mechanics by which railways’ funds should be used.
The budget estimates for 2013-14 throw up some figures that should worry the rail traveller. Appropriation to DRF is only Rs.7,500 crore at a time when there are huge arrears in replacement of assets. So much so that there has been talk for some time that Indian Railways should propose a Special Railway Safety Fund-II to arrange additional money for urgent replacement of assets. Not only are these over-age assets a threat to safety, their presence is also slowing down train speeds as speed restrictions are imposed where the track is suspect, resulting in loss of traffic capacity. The calamitous reduction of appropriation to DF from Rs.9,984 crore (RE 2012-13) to Rs.3,550 crore (BE 2013-14) is unexplainable. DF finances safety and passenger amenities works which will cry for funds next year.
The reasons for these “pragmatic” appropriations are not hard to see. The excess generated by Indian Railways does not leave much room for manoeuvring. The problem lies in the shortfall in raising resources. There has to be greater urgency in setting up the rail tariff regulatory authority so that raising of fares do not fall victim to the politics of the day. Railways’ share of the road cess on diesel must be increased to fund the pending road over bridges and road under bridges projects, as Indian Railways does not have the wherewithal to finance them.
This is not an election railway budget. Neither is it a budget which will usher in a new dawn for the railways. Indian Railways has missed an opportunity which it may well rue in the coming years.
Samar Jha is a former financial commissioner, Indian Railways.
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First Published: Tue, Feb 26 2013. 07 50 PM IST
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