Growing productive capacity, the Gowda way4 min read . Updated: 09 Jul 2014, 12:25 AM IST
The rail budget has taken decisive steps towards increasing track capacity in sectors that contribute substantially to the revenue
If there were one sentence to summarize the maiden railway budget speech of D.V. Sadananda Gowda, it would be: “Let’s grow productive capacity." The circumstances, of course, did not leave him with much of a choice. The operating ratio of Indian Railways for the financial year ended 31 March shot to an unexpected high of 94%, greater than the 88% that the previous budget had estimated.
The railway minister chose to set the stage for the need for reform and realism within the first few minutes itself—he talked of 99 new line projects worth ₹ 60,000 crore sanctioned in the last 10 years, out of which only one project was completed till date. Four of those, he said, were 30 years old.
Populism had to go out of the window. The numbers tell the story—the total number of surveys of new lines proposed is just 28. In the previous budget, the surveys along with proposed new lines totalled 95. Similarly, the number of new express trains proposed in this budget is 58. In the previous budget, they totalled 106.
Doubling, where line capacity is constrained, can drive real benefits. The Golden Quadrilateral contributes 65% of the freight revenue and 55% of passenger revenue. The incremental value on a rupee invested here is far more than for the funds invested in rural and district lines. So it’s almost bye-bye to remote lines that have had very poor return on investment.
Activating the fuel adjustment component in passenger fares could lead to an imposition of ₹ 1,000 crore on the passenger segment almost automatically through dynamic pricing without needing to make periodic formal announcements.
Much like the Japanese philosophy of kaizen, the budget has taken decisive steps towards increasing track capacity in sectors that contribute substantially to the revenue. Clearly, the allusion is to increasing track capacity on the Golden Quadrilateral rather than obscure lines that head into specific parliamentary constituencies or districts. Similarly, the budget has promised to view professionally the experimental halts that have been granted under representation of elected representatives. In 2012, South-East Central Railway found that 80% of the experimental halts fell into this category.
The budget is also realistic in its goal of high-speed travel in the country. It lays the vision of a bullet train between Ahmedabad and Mumbai, but is mum on any other details as these are projects involving large investments and necessarily involve private participation. However, the more realistic and feasible goal that could be achieved through upgrading the current set of tracks has received sufficient attention. These are sectors where by improving track quality as well as by fencing, the tracks speeds in the range of 160-200km per hour could be achieved. A marginal sum of ₹ 100 crore has been proposed for the purpose of initiating studies.
This is one stub in the budget where the influence of members of Parliament (MPs) and other key stakeholders is visible. Nitin Gadkari’s home base is Nagpur, Gowda’s is Bangalore and Prime Minister Narendra Modi is from Gujarat. The lines expected to be developed as high-speed lines are Mysore-Bangalore, Bangalore-Chennai, Ahmedabad-Mumbai, Mumbai-Goa, Nagpur-Bilaspur and Nagpur-Secunderabad, besides Bangalore-Hyderabad.
One of the key factors that led to the success of the Bus Rapid Transit System in Ahmedabad was the stress on the last mile—the customer interface. The trappings of a focus on the last-service mile are clearly visible in this budget. The budget focuses on elevators and escalators on railway platforms along with corporate participation in the upkeep of platforms. It also promises station cars for senior citizens. Mechanized laundry and bio-toilets are also to be seen as measures that will enhance user experience. Clearly a ruse to win consumer confidence in the face of rising user charges.
The other buzzword has been the use of technology and management techniques to prevent over-runs and providing greater transparency to the process. Project management initiatives and enterprise resource planning (ERP) implementations point in that direction.
However, what the budget quite overplays is the failure of the public–private partnership (PPP) model so far. The railway minister makes an honest submission that the ₹ 6,600 crore that were to be mobilized through PPP as targeted in the previous budget could not be mobilized to that extent. The minister also downsized the market borrowing component for the plan outlay this year, an indirect admission of the fact that raising funds was becoming difficult. That raises questions about the efficacy of the proposed foreign direct investment (FDI) in railways.
What is also gladdening is the focus on safety. There are as many as 11,000-odd unmanned crossings to be attended to as well as crack-detection systems for rails point to a very clear drill-down approach to resolving safety-related issues.
In summary, it’s a budget that has set the agenda for the rest of the National Democratic Alliance government’s tenure. Reforms from the word go.
Jai Mrug is a transport analyst and a co-founder of Ypoint Analytics.