Beyond the usual humdrum of reduced train fares in the 2008-09 Railway Budget, Lalu Prasad is furthering private participation in railways quietly without using the privatization word.
Instead of the usual dichotomy of privatization or suffocating state control, Prasad has found a way to beat objections. He has done this by interspersing populist measures with sound economic steps. This has happened in a piecemeal fashion in the last couple of years. The 2008-09 budget is bold: By openly going in for public-private partnerships (PPPs) to the tune?of Rs1?trillion over the next five years, the minister hopes to attract much needed private investment in railways. In the coming financial year alone, PPPs to the tune of Rs25,000 crore are expected.
These are astute moves. Over the next five years the railways plans to invest Rs2.5 trillion. This year the railways has an investible surplus of approximately Rs20,000 crore. (The plan is to invest Rs37,500 crore in 2008-09 alone.) If this performance is repeated in the next five years, that still leaves a gap of Rs1.50 trillion.
In comparison, China is spending a whopping $200 billion (Rs7.98 trillion) on railways from 2006 to 2010.
All this comes when the economy is strong. This performance may or may not take place in the future. Hence the importance of the private sector. Last year, the minister made the first moves towards PPPs. This year he has gone further: He plans to carry out some of the road over bridge/road under bridge projects on a build-operate-transfer basis, a break from the usual way of executing projects by the railways.
In this venture the key issue is sustainability. Perhaps the large size of the railways as an organization and the wide ambit of activities under its roof make such strategizing possible.
Privatization initiatives often founder when it’s time for consumers to pay user charges. Prasad is making good use of such possibilities. Reducing passenger fares while garnering bigger revenue from land development and privatizing service provision takes the wind out of any opposition. In this he keeps his political constituency, the aam admi, happy.
At the same time, there has been no across-the-board hike in freight tariffs, bringing cheer to commercial consumers. In achieving this mix, he’s mastered the formula that has eluded Indian politicians.
Is mixing populism with reforms the right way to push ahead the railways? Write to us at email@example.com