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Populism on iron wheels

Populism on iron wheels
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First Published: Thu, Feb 25 2010. 12 17 AM IST

Illustration: Jayachandran/Mint
Illustration: Jayachandran/Mint
Updated: Thu, Feb 25 2010. 12 17 AM IST
Railway budgets are often high noise to signal ratio events. In the hoopla about new trains, no increase in passenger fares and sundry other “social obligation announcements”, hard realities are lost sight of. Suspension of disbelief has, perhaps, become a defining feature of this ministry. Mamata Banerjee’s 2010-11 budget should be seen in this light.
Can Pranab present a magical budget? Find out on Livemint.com’s Budget 2010 microsite. (Click here)
Her budget speech makes for a depressing read. Out of a total of Rs94,765 crore Indian Railways expects to earn in 2010-11, expenses will end up eating an estimated 92.3% of that money. This leaves a paltry Rs3,173 crore as surplus.
Illustration: Jayachandran/Mint
In marked contrast, the ministry has an ambitious annual plan of Rs41,426 crore, roughly 13 times the amount of the surplus money (“excess” in railway parlance). How will this mismatch be taped? By borrowings and “internal resources”, of course. It’s another matter that these internal resources are not all that visible.
This is a tale that has been repeating itself over the years. Low passenger fares that are seldom raised (it was seven budgets ago that a small increase was effected), competition from road transport that eats away at freight earnings and little money left for investment. Banerjee should know better. Barely two months ago, the White Paper issued by her ministry showed how expansion projects are on the verge of financial asphyxia. Less than a year ago, some 286 such projects (mostly addition of new lines, gauge conversion and doubling) required an astounding Rs79,462 crore for completion. Yet, instead of doing something to complete these pending tasks, the minister wants to chew more. She has announced her ministry’s intent to add an additional 1,000km of rail track this year. Good luck. This is not all. Railway assets are ageing fast. The huge increase in the depreciation reserve fund in 2010-11 to Rs7,600 crore from Rs4,500 crore last year tells this story in stark terms.
It will take a lot more to bring the railways back on track. India badly needs railway capacity expansion. Our track addition has been stagnant for decades. This leads to infrastructural bottlenecks that have economic consequences. Changing this will require serious curbs on frivolous expenditure and generating more revenue. A railway minister will not let that happen. Banerjee is not alone in this. The problem is primarily political. Here it is appropriate to say that there are good arguments for an independent railway regulator. The minister often exercises tariff-fixing powers in an arbitrary manner. This power ought to be handed over to a depoliticized regulator who will fix tariffs based on economic grounds and not some phoney, and ultimately unmet, social objectives.
Does India need an independent railway regulator? Tell us at views@livemint.com
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First Published: Thu, Feb 25 2010. 12 17 AM IST