Banerjee inherits stress, faces a tough balancing act today

Banerjee inherits stress, faces a tough balancing act today
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First Published: Fri, Jul 03 2009. 12 30 AM IST

Limited options: Officials and analysts say existing capacity has been utilized to the hilt; growth now will depend on higher capacity creation. Kamal Kishore / PTI
Limited options: Officials and analysts say existing capacity has been utilized to the hilt; growth now will depend on higher capacity creation. Kamal Kishore / PTI
Updated: Fri, Jul 03 2009. 10 45 AM IST
New Delhi: Mamata Banerjee must hate the pay commission, much as she professes her love for the railway family that she administers as railway minister.
Limited options: Officials and analysts say existing capacity has been utilized to the hilt; growth now will depend on higher capacity creation. Kamal Kishore / PTI
In 1999-2000, when she oversaw the ministry for the first time, the Indian Railways was reeling under the combined effects of increased salary costs resulting from pay commission recommendations and static freight earnings. That forced cuts in outlays for essentials such as rolling stock.
Ten years later, Banerjee, 54, finds herself having to present the 2009-2010 railway budget with a bloated wage bill because she has to spend between Rs12,000 crore and Rs14,000 crore extra on this after the pay commission recommended a hefty salary raise.
And critically for Banerjee, it coincides with a steep fall in the growth rate of the railways’ main earner—freight traffic—as economic growth slows. In May, earnings from freight were Rs4,642 crore, a less than 1% increase from the year-ago period, despite a 2.44% increase in freight loading. Earnings in April were similarly lower than the year-ago period. Provisional numbers for freight loading in fiscal 2008-09 are 833 million tonnes, well below last year’s projection of 850 million tonnes.
Moreover, Banerjee inherits a ratio of operating expenses to revenue that is likely to be over 90%, which is what her much feted predecessor Lalu Prasad started out with before his team reduced it to 76.30% in 2007-08.
“Whatever gains he made, he has squandered,” said Akhileshwar Sahay, a former railway employee who heads government and multilateral advisory services at infrastructure consultancy Feedback Ventures Pvt. Ltd.
The previous railway minister had already made enough announcements to account for the investment projected under the 11th Plan, Sahay said. “The DFC (dedicated freight corridor) hasn’t taken off, manufacture of rolling stock hasn’t taken off, track doubling hasn’t taken off,” he said.
Railway officials and analysts agree that with finances already strained by a reduction in freight growth and successive fare cuts announced by Prasad, Banerjee does not have the leeway to reduce passenger fares much.
However, they are unanimous on one point—the national transporter has utilized existing capacity to the hilt. Any further growth must be on the back of higher capacity creation, something that was often lacking in the Prasad years. A railway official, who did not want to be named, said the budget was likely to unveil small incentives on the transport of non-bulk commodities.
The other points the speech is likely to make are more predictable. The dedicated freight corridor, which has seen little more than several announcements and the award of small works contracts, is likely to get a mention, considering it is a national priority project.
Several officials confirmed that connectivity to Jammu and Kashmir and the north-east—high on the priority list for the United Progressive Alliance administration—may also be addressed in the budget. But Banerjee’s more immediate problem is where to find money.
“There will be a dip in the capital fund, in which we park the money for development works. But this is normal, considering the recession. Unfortunately, whenever there is a pay commission recommendation, it coincides with an economic downturn,” said a former railway official, who didn’t want to be named.
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First Published: Fri, Jul 03 2009. 12 30 AM IST