It is difficult for a single railway budget to address the problems that Indian Railways faces. From troublesome finances to capacity constraints, the railway budget is increasingly becoming irrelevant.
On Friday, railway minister Mamata Banerjee showed few, if any, signs of being perturbed by this situation. Beyond the expected, populist “no fare hike”, one would have expected the minister to begin addressing, even in baby steps, the formidable problems her charge finds itself in. The big question is: where will the money for investment in capacity expansion—for rolling stock (locomotives, wagons and coaches), track expansion and the dedicated freight corridor— come from? While she announced an annual plan for 2011-12 of Rs 57,630 crore, it is notable that only one-fourth of this amount will come from the internal resources of the railways: With the total expenditure in 2011-12 expected to consume nearly 91% of the Rs 1.06 trillion gross traffic receipts, there is more than an air of doubt on this count. To fund the plan, the Indian Railway Finance Corporation will borrow an additional Rs 10,000 crore from the market, this cannot be endless: sooner or later, the railways will have to set its finances in order.
Time may be running out to fix these problems. It has been suggested that the freight vs passenger tariff balance should be readjusted to reduce the subsidy burden on the former. This can only happen if passenger fares are raised for upper class travel, for there is a serious limit to what the poor can pay. But this option is running out: any further increases in upper class fares will bring them close to the low-end fares for air travel. This gap is only going to narrow in the coming years and soon this option may not be practicable.
That is not the end of the troubles in store for the railways. It is doing little to reduce its dependence on hauling a handful of bulk commodities for earning the lion’s share of its revenue. Here the problem is double-sided: on the one hand, there is sufficient traffic demand for such commodities but the railways simply has little money for capacity expansion. On the other hand, there has been a steady loss of traffic to roadways due to changes in the nature of the economy and cost factors. Unless ministers wake up to these realities and provide leadership to confront these problems, the challenges in the years ahead will become difficult and well- nigh insurmountable.
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