The Hindu : A dangerous signal

Online edition of India's National Newspaper
Saturday, Feb 16, 2002

Opinion

Opinion - Editorials

A dangerous signal

BEHIND THE OFFER made by the Railway Minister, Nitish Kumar, to privatise un-remunerative railway lines lies the story of the deteriorating financial health of India's largest business organisation. If the Railway Minister is today pushed to consider this option, it is a result of successive mistakes in policy and decision making which have diluted the purpose of this massive governmental exercise of linking the country. The plummeting finances of the Railways in recent years should not come as a justification for it to embark upon exercises such as privatising un-remunerative branch lines. This approach has the danger of the Railways abdicating one of its important social service obligations. As such a move will have far-reaching consequences on creation and distribution of wealth, the larger argument for a re-definition of the economic role of the state runs the risk of losing acceptability. For, even a fleeting review of the evolution of governmental involvement in economic activities makes it evident that it is conceptually based on the inability of the private sector to carry out certain operations. The Railways, including the uneconomic segments of its services, is a prime example.

That the Railways requires considerable re-shaping is now accepted. If Mr. Kumar hopes to meaningfully commence this process, the starting point lies elsewhere; not on the tracks that cut across the country but within the Government. Much of the present malaise can be traced to the skewed policies, particularly those relating to gauge-conversion, the resort to populism and the abuse of the system for political mileage. The deeper consequence of these misdirected decisions has been a gradual erosion of finances. Therefore, if the once-healthy organisation is now forced to look at the possibility of selling away a part of its core business, the causes are not far to seek. The Railways should aim at improving upon its core strengths by focussing on better utilisation of its assets, not parting with them. In the same breath, it is important to recognise that the fault for the financial mess does not lie entirely with the Railways. The mood of budget preparation also provides the setting for bringing into focus serious extraneous issues that have contributed to the deceleration of the system.

One result of the economic reforms process has been the lower level of dependence on the Government as an economic player and the declining role of the public sector. By implication, the Railways is now less dependent on the state for its resources. This lower dependence on the state and the added competition from the road sector has meant that the Railways will have to redefine its marketing strategy to regain its glory. The interplay between the finances of the Railways and the country's general exchequer has also had its effects on the system. Conceptually, the separation of finances of the Railways from the general budget, made in 1924, was to provide some stability in estimation and flexibility to the organisation in the administration of its finances. The Railways, however, is expected to continue with its dividend obligations to the general finances. Given the financial slide and the recent tendency to defer the payment of dividends, it will be appropriate if this issue of a continuous obligation is resolved formally, an issue raised during the last budget. The Railways has a genuine concern in that it is not paid for its services rendered by the other wings of Government for its social service obligations, one of which is running the uneconomic branch lines. For the Railways to continue performing a vital economic and social role in India's development, it is important that it is given its due and not allowed to slide down the ruinous track.

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